Principles and Practices of Management and Organizational Behavior [1 ed.] 1032634243, 9781032634241

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‘A truly comprehensive textbook on management and organization behavior. I was very pleased to see separate sections on history of management and how the management gurus perceive the future of governance’. Jagdish N. Sheth, Charles H. Kellstadt Professor of Business, Goizueta Business School, Emory University, USA ‘The second edition of Principles and Practices of Management and Organizational Behavior by Singh and Khatri offers extensive case-based learning and best practice guidance on every large-scale activity a modernday manager and leader may engage in. Ranging from planning to staffing and controlling, to strategic decision-making, the case studies in the book incorporate Porter’s five forces and other modern management models to allow any organization’s competitive environment to be assessed and analyzed. The book then formulates a set of best practices for organizational sustenance using modern management techniques. The book also explains the key concepts and practices of effective leadership styles at all levels and goes on to distinguish these using the Hersey–Blanchard model. Under organizational behavior, this book lays emphasis on the electronic form of organization, its evolution and subsequent maturation and incorporation of action research models in the development of such organizations. Through multiple case studies and examples, developmental interventions and resistances to change within organizations are dealt with. Case studies with respect to organizational sustenance and ethical organizational culture, in alignment with changing business conditions and market scenarios, are presented to help the practitioners, researchers and management students at graduate, postgraduate and doctorate levels understand and adopt strategies, concepts, principles and practices. The authors have also included a discussion on organizational power and polity to enable the reader to understand their significance, exercise control and institute relevant organizational ethics for behaving politically and helping to co-create a healthy organizational culture as a stakeholder’. Saurabh Sinha, Deputy Vice Chancellor, Research, and Internationalization, Professor of Microelectronics, University of Johannesburg ‘A good pick! Not only for students and faculty, but also for new managers in organizations. The content is focused on connecting the basic theories of management, the principles, the concept and the structure, insights into the ever evolving organization culture and incorporating the modern-day best practices and formulation of organizational behavioral strategies. Each chapter includes real-life case studies that make the read even more interesting, relatable and easy



to understand. The strength of the book lies in adherence to the tagline: The Complex Concepts Simplified Through Case Scenarios’. Amlan Chakrabarti, Professor & Director, A.K. Choudhury School of Information Technology, University of Calcutta and Head, IT & Tech. Innovation Cell, Department of Higher Education, Government of West Bengal. ‘Chandrani Singh and Aditi Khatri’s book, Principles and Practices of Management and Organizational Behavior (2nd ed.), is a complete package of management concepts, practices and organizational behavior including management tips from gurus of yesteryear as well as modern times. Emphasizing functions and approach, it critically evaluates real-life business scenarios using strategic management and covers the behavioral aspects of an organization from people’s perspectives. I am sure it will be of immense use to the students, academic fraternity and budding professionals’. Surbhi Dahiya (née Bhalla), IAMCR Faculty Ambassador, Professor, Department of English Journalism, Indian Institute of Mass Communication ‘This book offers a unique amalgamation of two significant academic concepts, that is, “Principles and Practices of Management” and “Organizational Behavior.” Institutes offering niche programs often struggle with incorporation of these two as separate courses owing to their specialized focus on specific domains. This title addresses this problem and gives optimum as well as effective understanding of basic concepts related to principles and practices of management and organizational behavior in a single text’. Nilesh P. Gokhale, Associate Professor, Symbiosis Institute of Media and Communication, Pune, Mentor, Brand Communication Practice, Marketing Society

PRINCIPLES AND PRACTICES OF MANAGEMENT AND ORGANIZATIONAL BEHAVIOR

This book offers perspectives, insights, techniques, and approaches for efficient and contemporary management practices in an organization. It provides a comprehensive insight into the traditional and contemporary approaches of organizational behavior and their impact on organizational performance in the global era. Ranging from planning to staffing, and controlling to strategic decisionmaking, the case studies in the book incorporate relevant modern management models and correlate practices of management from organizational perspectives to allow any organization’s direction and environment to be evaluated with suggested recommendations. This textbook consists of two broad parts. The first deals with management trends and functions ranging from the traditional era to the contemporary world. The second part explores the behavioral trends of organizations across domains to analyze the measures taken for improved productivity and sustainability. Drawing theories from psychology, sociology, and economics, this book probes into the interrelation between behavior and holistic management by examining the impact of teamwork, motivation, organizational power, and polity, instituting relevant organizational ethics and strategies to create healthy organizational culture. This book will be useful to students, academicians, management researchers, and industry professionals from the field of general management and organizational behavior. It will also be useful for scholars interested in management studies, behavioral studies, business and development, developmental studies, sociopsychology, management, and business strategies.

Chandrani Singh, currently pursuing postdoctoral studies in information technology, is working as Director and Placement Head of Management and Computer Applications at Sinhgad Institute of Management, Vadgaon, Pune. She has also been entrusted with the responsibility of overseeing the operations of the entire STES Sinhgad Data Centre. She is a researcher, industry-institute collaborator, educationist, author, content writer, and sports enthusiast with a passion to ideate, innovate, and implement. She has been awarded the India Independence Award 2019 as distinguished director/principal by the International Association of Research and Development Organization and has also been selected to participate in the fully funded Conference of Asia Europe Meeting by the German Academic Exchange (Deutscher Akademischer Austauschdienst) that has 51 member nations. She is also the editor and author of several books and research journals for eminent publishing houses, such as Taylor & Francis, Springer Nature, and IGI Global, and she is also on the editorial board of prestigious international and national conferences. She is a recognized ATAL Faculty Development Program speaker and is associated as a consultant with a few scientific and research organizations. She owns copyrights from the Indian government for her software and has served as a facilitator, speaker, and contributor for several knowledge exchange programs at the national and international levels, including the Institute of Electrical and Electronics Engineers Women in Engineering. She has also been an academic advisor to many universities and institutions at the national and international levels. Aditi Khatri is a freelance Human Resources (HR) Consultant and a Soft Skills Trainer and has worked with TACO Composites Ltd (a Tata Enterprise), Pune, as an HR assistant manager, and Tricon Infra Buildtech Pvt. Ltd, Pune, as HR head, where she has been instrumental in developing HR policies and processes. She joined the Sinhgad Institute of Business Administration and Research, Pune, in the year 2012, in the capacity of assistant professor and training placement officer and served the institute for a year-and-a-half, carrying out during this tenure several academia–industry interaction initiatives. Ms. Khatri then went on to set up her own venture by the name of Focus Consultants, through which she has imparted training to 5,000+ students and professionals and has earned the repute of being a proactive trainer and a public speaker. She has presented a number of papers at national-level conferences and successfully coordinated various induction and training programs across the country. She is also a member of the Board of Studies (Language and Communication Studies) at one of the renowned colleges. Apart from being a freelancer, Ms. Khatri also plays a crucial role in managing the business of modular furniture owned by her father. Ms. Khatri has a very optimistic approach toward life and has a go-getter attitude. She is a very creative person, and her creativity is reflected in both her hobbies and her work.

PRINCIPLES AND PRACTICES OF MANAGEMENT AND ORGANIZATIONAL BEHAVIOR

Chandrani Singh and Aditi Khatri

Designed Cover Image: Getty Image First published 2024 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2024 Chandrani Singh and Aditi Khatri The right of Chandrani Singh and Aditi Khatri to be identified as author of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-1-032-50905-1 (hbk) ISBN: 978-1-032-63424-1 (pbk) ISBN: 978-1-032-63425-8 (ebk) DOI: 10.4324/9781032634258 Typeset in Times New Roman by Deanta Global Publishing Services, Chennai, India

I would like to dedicate this book to my parents and my brother, who have nurtured me with great care and commitment, helped and supported me during my formative years, and bestowed unconditional love upon me. I am privileged to have been born to such wonderful parents. To my life partner, for providing me with a robust support system. To my in-laws for their constant encouragement and support. To my sister-in-law and my nephews, Archishman and Abhigyan, who hold a place very close to my heart. Last but certainly not least, my pious indebtedness to my precious gems, my kids, Shaurya and Shreya, who have consistently provided constructive criticism to help me deliver better. —Chandrani Singh This book is dedicated to my parents, Meera and Dilip Chavan, who have always been my pillars of support and have inspired me in my endeavor to learn and disseminate knowledge for societal benefits. To my husband, Mahesh Khatri, for his constant support and motivation. To my dear sister, Nikita, for making me believe that nothing is impossible. To my sweet little distracting kids, Aarvi and Raghav, and my entire family. Last but not least, to my teachers, who have always guided me to work toward excellence. —Aditi Khatri



CONTENTS

List of Figures xi List of Tables xv Foreword xvii Preface xviii Acknowledgments xxi List of Abbreviations xxiii   1 Introduction to Management

1

  2 Evolution of Management Thought

28

  3 Planning

65

  4 Organization

98

  5 Staffing, Training, and Development

147

  6 Directing and Controlling

182

  7 Decision-Making

216

  8 Strategic Management

257

  9 Organizational Behavior

295 

x Contents

10 Understanding and Managing Individual Behavior

324

11 Group and Group Dynamics

355

12 Team and Teamwork

383

13 Leadership

404

14 Motivation

440

15 Conflict Management

481

16 Organizational Development and Culture

515

17 Change Management

559

18 Stress Management

598

19 Power and Politics

619

Bibliography 635 Index 641

FIGURES

1.1 Extent of Administration across Various Levels of Management 9 1.2 Types of Managers 11 1.3 Managerial Skills 13 1.4 Scope of Management 17 1.5 Process of Management 19 1.6 Environmental Factors Affecting Business 21 2.1 F.W. Taylor 38 2.2 Henry Gantt 41 2.3 Henri Fayol 43 2.4 Max Weber 45 2.5 George Elton Mayo 47 2.6 Mary Follett 51 2.7 Peter F. Drucker 53 3.1 Organizational Structure—Himalayan Cycles 66 3.2 Types of Planning Premises 73 3.3 Steps in Planning 78 3.4 Process of Benchmarking 82 3.5 Reasons for Implementation of Benchmarking 82 3.6 Scenario and Contingency Planning Overview 83 3.7 Use of Scenario and Contingency Planning 84 3.8 Bactrac Inventory Process 87 3.9 Manpower Planning—Blaze Star 90 3.10 Employee Administration System Project Team of QUITO 92 3.11 Employee Administration System Project Schedule Plan (2008–2009) 93 4.1 Human Relations Approach: Types of Needs 109 4.2 Steps in Organizing 116 

xii Figures

4.3 Formal and Informal Organizations 4.4 Functional Structure for Business Entity 4.5 Functional Structure for a Hotel 4.6 Functional Structure of a College 4.7 Matrix Organizational Structure 4.8 Network Organizational Structure 4.9 Line-and-Staff Organization 4.10 Tall Organizational Structure 4.11 Flat Organizational Structure 4.12 Centralization of Authority 4.13 Decentralization of Authority 5.1 Process of Staffing 5.2 Steps in HR Planning 5.3 Process of Recruitment 5.4 Process of Selection 5.5 Steps in Sensitivity Training 5.6 Ego States 5.7 Performance Appraisal Methods 6.1 Elements of Directing 6.2 Steps in Control Process 6.3 Types of Control 6.4 Favorable Variance 6.5 Adverse Variance 6.6 Control Techniques 6.7 Network Diagram 7.1 Inventory Pattern 7.2 Graph Showing Optimized Inventory Cost 7.3 Decision-Making Using Force Field Analysis Tool 7.4  Decision Tree to Calculate Entry Fee 7.5 Decision Tree to Generate Feedback Percentage Given by Students 7.6 Pareto’s Analysis of Causal Effect 7.7 Graphical Representation Showing the Problem-Centric Area 7.8 Time Estimates 7.9  Network Diagram 7.10 Gantt Chart 8.1 Process of Strategic Management 8.2 PEST Analysis 8.3 BCG Matrix 8.4 SWOT Framework 8.5 Porter’s Five Forces Model 8.6 The Balanced Scorecard 8.7 RBGE Case Using Balanced Scorecard 9.1 Levels of Analysis 9.2 Contributing Disciplines of Organizational Behavior

122 124 124 124 127 128 130 132 133 137 138 150 153 155 158 165 165 167 186 194 197 201 201 202 209 230 232 237 239 239 243 244 245 249 249 262 271 274 275 278 282 284 297 298

Figures xiii

9.3 Major Components in Study of Organizational Behavior 300 9.4 Organizational Behavior Goals 301 9.5 Elements of Organizational Behavior 302 9.6 The People Element of Organizational Behavior 303 9.7 The Structure Element of Organizational Behavior 304 9.8 The Environment Element of Organizational Behavior 305 9.9 Models of Organizational Behavior 307 9.10 Trends in Global Business Strategies 311 10.1 Components of Attitude 327 10.2 Types of Reinforcements 332 10.3 Perceptual Process 333 10.4 Factors Influencing Perception 335 10.5 Big Five Personality Traits 339 11.1 Group Characteristics 357 11.2 Classification of Groups 358 11.3 Stages of Group Development 364 11.4 The Punctuated Equilibrium Model 367 11.5 External Factors Impacting Organizational Behavior 376 12.1 Process of Teamwork 389 12.2 Types and Classification of Teams 391 12.3 Performance Dimensions 397 12.4 Problems of Underperforming Teams as per McKinsey’s Report 398 13.1 Leadership Styles 409 13.2 A Graphical Representation of the Managerial Grid 412 13.3 Hersey–Blanchard Situational Leadership Model 414 13.4 Vroom–Yetton Contingency Model 425 13.5 Decision Tree to Be Implemented in the Vroom, Yetton, and Jago Model426 13.6 Components of Transformational Leadership 427 13.7 Dimensions of Transactional Leadership 429 14.1 Cycle of Motivation 442 14.2 Maslow’s Hierarchy of Needs 447 14.3 Herzberg’s Two-Step Approach 449 14.4 McClelland’s Learned Needs Theory 452 14.5 Relation between Maslow’s Hierarchy of Needs and ERG Theory 453 14.6 Self-determination Theory 455 14.7 Expectancy Theory of Motivation 461 15.1 Process of Conflict 485 15.2 Intrapersonal Conflict 487 15.3 Crossed Transaction 489 15.4 Complementary Transaction 490 15.5 Ulterior Transaction 490 15.6 Diagrammatic Representation of Johari Window 491

xiv Figures

15.7 Life Positions 15.8 Pooled Performance 15.9 Sequential Task Interdependence 15.10 Reciprocal Task Interdependence 15.11 Conflict Management Styles 16.1 System Model of Action Research Process 16.2 Phases of Organizational Development 16.3 Levels of Organizational Culture 16.4 Ethics and Organizational Culture 16.5 Edgar Schein’s Model 16.6 Hofstede Model 17.1 Lewin’s Three-Stage Model 17.2 Kotter’s Model 17.3 Hard and Soft S of the McKinsey Model 18.1 Three Stages of the General Adaption Syndrome 18.2 Relation between Stress and Performance 18.3 Types of Stress 19.1 Sources of Power 19.2 Factors Contributing to Organizational Politics 19.3 Ethics in Politics

492 493 493 494 497 521 523 536 543 545 549 575 579 582 601 603 605 622 627 629

TABLES

1.1 Differences between Administration and Management 8 1.2 Major Functions across Levels of Management 11 3.1 Example of Simple Forecast 81 3.2 Sales Pipeline with Variations in Ratings 89 4.1 Comparison between the Classical and Neoclassical Approaches110 4.2 Katz and Kahn’s Approach to a Systems Approach 111 4.3 Companies that Follow the Three Approaches: Classical, Neoclassical/Human Relations, and Systems 113 4.4 Formal and Informal Organizations 123 4.5 Mechanistic and Organic Organizations 125 4.6 Divisional Structure Based on Product, Market, Location, and Process 126 5.1 On-the-Job versus Off-the-Job Training 166 6.1 Performance Comparison between Actual and Standard 195 6.2 Corrective Action to Be Taken Comparing Actual Performance with Standard 195 6.3 Actual versus Budgeted Variance 202 7.1 Scenario Representing Decision-Making 218 7.2 Decision-Making under Certainty 219 7.3 Decision-Making Using Maximax Approach 219 7.4 Decision-Making Using Maximin Approach 219 7.5 Decision-Making Using Laplace Approach 220 7.6 Decision-Making Using Hurwicz Approach 220 7.7 Decision-Making Using Minimax Regret Criterion 221 7.8 Regret Matrix 221 

xvi Tables

7.9 Decision-Making under Risk 7.10 Decision-Making Using EPPI 7.11 Inventory Data 7.12 Decision-Making Using Cost–Benefit Analysis Tool 7.13 Decision-Making Using Grid Analysis Method 7.14 Tabular Representation of the Feedback 7.15 Decision Table 7.16 Paired Comparison Analysis I 7.17 Paired Comparison Analysis II 7.18 Pros and Cons Method Decision Style 7.19 Decision-Making Using Pareto’s Analysis 7.20 Break-Even Analysis 11.1 Formal versus Informal Groups 12.1 Teams versus Groups 13.1 The Differences between a Leader and a Manager 13.2 Leadership Style and Maturity Level 13.3 Leadership Management Style 14.1 Examples of Maslow’s Five Basic Needs 14.2 Expectancy Theory: Components of Motivation and Their Range 14.3 Theory X and Theory Y of Motivation 17.1 Techniques to Overcome Change

222 222 231 236 238 240 240 241 241 242 243 244 361 387 410 415 418 447 460 464 571

FOREWORD

The second edition of Principles and Practices of Management and Organizational Behavior offers perspectives and insights, techniques, approaches, and directions to the implementation of best practices on every activity that a modern-day, prospective manager envisages to be undertaking in his career sojourn. Ranging from planning to staffing, and controlling to strategic decision-making, the case studies in the book incorporate Porter’s five forces and relevant modern management models to allow any organization’s direction and environment to be evaluated with suggested recommendations. This book is written with the objective of providing a unique blend of management concepts and methods, succeeded by conventional and contemporary approaches to organizational behavior and culture. The various styles of leadership and relevant models are used to explain an organization’s culture, processes, environment, workplace behavior, etc. Through numerous case-lets and case studies, productivity, growth, and people interactions and interventions, resistance to change within the organization are explained and discussed. Case studies with respect to organizational ethics, changing business conditions, and market scenarios are presented to help the practitioners, researchers, and students to relate, refine, and incorporate strategies, concepts, principles, and practices with respect to the electronic form of organization, its evolution and subsequent maturation, and incorporation of action research models in the development of such organizations. The authors have also included a discussion on organizational power and polity to enable the reader to exercise control, institute relevant organizational ethics and a positive political approach, and help co-create a healthy organizational culture.



PREFACE

This book is written for students, academicians, management researchers, and industry professionals with the objective of providing a unique blend of management concepts, methods, and practices, unified with conventional and contemporary approaches to organizational behavior in ever-changing business and market scenarios, in an era that is largely dominated by competition and antagonism. In today’s world, business organizations are provisioned with a wider scope to operate, execute, strategize, and diversify, which ultimately calls for the implementation of new and dynamic strategies and concepts of management practices to help organizations evolve and grow in a manner that ensures their sustenance. The exemplary and case-based approach of the book, together with the inclusion of modern organizational and management concepts and practices, is vital for the readers who ensure facilitation by imbibing principles and approaches from these two domains in order to create and establish the desired outcome and subsequent impact within their organizations. From the students’ perspective, this comprehensive textbook helps management students obtain a complete and packaged solution to the management practices and organizational behavior that are both conventional and contemporary in nature. The chapters have been meticulously planned with multiple case studies and numerous examples. To date, no book addresses the above two broad topics in their entirety. The emphasis of this book lies mainly on clarifying the concepts of management with a detailed coverage of various management functions such as planning, directing, decision-making, controlling, and staffing, and their application to leadership and motivation strategies, which are very crucial to the formation of organizational culture and have a huge impact on the organizational environment. 

Preface xix

This book consists of 19 chapters of which the first 8 chapters deal with the management trends and functions ranging from the traditional era to the contemporary world, and the remaining 11 chapters explore, ascertain, and implement behavioral trends that are key to the organization’s productivity and sustainability. Chapters 1 and 2 deal with the introduction and evolution of management over a period of time, with inputs and guidelines from the management gurus of yesteryear and the modern age as well. Chapters 3–7 emphasize on individual management functions, traditional and contemporary in approach, with detailed coverage on the benefits, characteristics, importance, processes, and models to give the reader clarity, visibility, and the desired learning for implementation that can render the necessary impact. Chapter 8 helps the reader integrate and apply knowledge gained through the usage of design thinking and analytical tools in the formulation, implementation, and management of strategy and critically evaluates real-life business scenarios using strategic management. Chapter 9 revolves around organizational behavior, accompanied by its nature, scope, dimensions, approaches, and related models. Chapters 10–13 mainly cover the behavioral aspects of an organization from people’s perspectives. Since people are the main assets of the organization, the chapters suggest that there is a dire need to understand human psychology and supporting disciplines, which provide insights into human behavior and their adaptability and congruence to many behavioral theories. Chapter 14 talks about the motivation of employees from an organizational perspective and also delves deeper to address issues and build resolution with respect to multicultural and multi-personality environments. Chapters 15 and 18 on conflict and stress express the need to address such issues for the prevalence of harmonious organizational culture and to improve profitability, productivity, and inventiveness. Since an organization comprises human beings who are key assets of a company, a substantial chunk of information on behavioral trends projects issues related to people. For example, if stress is being addressed, it is because of the people factor; if conflict is being resolved, it is again because of the people with differences in views, ideas, and opinions; and if leaders are being created, then the focus is on the people aspect of the organization. Needless to say, this task is being carried out successfully with the incorporation of new concepts, ideas, and models, only to help organizations thrive well in this competitive world. Groups and teams formed within an organization always work toward organizational goals. Therefore, the dynamics have to be very proper for a consensus to carry out the organizational activities. Two chapters extensively deal with the same. Chapter 16 deals with organizational development in continuum, which has a significant impact on culture, especially the multicultural climate within the organization, for which various models, as in Cooke’s and Handy’s models

xx Preface

mentioned, are necessary to be deployed in improvising the organizational robustness for a better future. Chapter 17 emphasizes the significance of adaptability to change within an organization so that there is an increased chance of sustenance with changing market and business scenarios. It also enables entities to see change as an opportunity for self-productivity and innovation. Chapter 19 on power and politics enables readers to have a clear understanding of the appropriate use and abuse of power, the causes and consequences of political behavior, and the relevant polity ethics that needs to be incorporated into organizations. The ‘Chapter at a Glance’ feature appended at the end of each chapter has been designed with the aim of providing a concise content repository for student groups for effective and efficient coverage of the course and for interested readers who can, using abridged versions of the chapters, let their knowledge, rationale, and imagination work wonders in creating their own perspectives on particular topics and content.

ACKNOWLEDGMENTS

First and foremost, we would like to thank God for giving us the strength and fortitude it took to complete this project holistically. We are highly indebted to the management and behavioral scientists whose contributions to this literature in the past and present enabled us to explore the depths of this science and helped us put forth to the audience a readily interpretative version of the complex theories, concepts, and practices of management and behavioral sciences. We have been most fortunate in receiving the patronage of spiritual and professional mentors from all quarters, those who helped us improve our literary skills by providing relevant and deeper insights into the topics. We are indebted to SAGE for having made the book available to the critics who helped us by providing prized inputs to improve the quality of this literature from various aspects. We would also like to thank the reviewers, whose crucial suggestions and comments helped us in developing the content of the book, especially Dr. Durba Pal, Department of Management Studies, National Institute of Technology, Durgapur; Dr. Monika Srivastava; Dr. Gauri Hari Singhania, Institute of Management and Research, Kanpur; and Dr. J. Sathyakumar, Thiagarajar School of Management, Madurai. We are privileged to have received advance praise from the Management and Technology stalwarts of this era, Dr. Jagdish Sheth, Prof. Saurabh Sinha, Prof. Amlan Chakrabarti, Dr. Surbhi Dahiya, and Dr. Nilesh Gokhale and convey heartfelt gratitude to all these eminent personalities, who have played a key role in motivating us for authoring and including topics in alignment to modern-day management and organizational practices.



xxii Acknowledgments

We profusely thank the staff of our institution who have been a source of constant motivation and inspiration for us. The publication of this book would not have been possible without their constant support. We acknowledge each other’s contributions and the effort we put forth. We acknowledge the fact that we stood strongly by each other at times when the path to completion seemed to be complex and unachievable. Thank you all!

ABBREVIATIONS

ADKAR BCG BJP CEOs COOs CPM CSR CSS CTOs DST ERP FDI GE HR ICT ICU IT KRAs LPC MBO MBTI MCA PERT RBGE

Awareness, desire, knowledge, ability, and reinforcement Boston Consulting Group Bharatiya Janata Party Chief executive officers Chief operating officers Critical path method Corporate social responsibility Computerized customer service Chief technology officers Design Services Team Enterprise resource planning Foreign direct investment General Electric Human resources Information and communications technology Intensive care unit Information technology Key result areas Least-preferred co-worker Management by objectives Myers–Briggs Type Indicator Master of computer application Project evaluation review technique Royal Botanic Garden Edinburgh



xxiv Abbreviations

SAP SBU SWOT TMT TQM

Systems, applications, products Strategic business units Strengths, weaknesses, opportunities, and threats Temporal motivation theory Total quality management

1 INTRODUCTION TO MANAGEMENT

An Opening Vignette Although great deeds of human accomplishment, such as the Egyptian pyramids, the Great Wall of China, the Colosseum in Rome, and the Taj Mahal in India, show evidence of expert management in primeval times, the research on management as a scientific concept began in the late 19th century. Considering the example of Henry Ford and his car model by the name of T, which saw huge customer acceptance in a period of 12–15 years with Henry Ford sitting on a capital of $600 million in a short tenure. It was said that at that point in time, the T model had become the symbol of wealth and luxury, and Ford saw to it that greater volumes of production of the T model at a low/reasonable cost helped him reach out to the masses and amass wealth from them. When workers started to grumble, he showered them with rewards and high compensation, but the success was short-lived because soon came General Motors, who strategized to satisfy the customers in a different manner. It is said that as Ford focused on low-cost models and timely delivery of the same, he was more of a technology persona who put emphasis on the construction part of the car rather than on analyzing the acceptance of the same across various segments. Therefore, when GE Motors came up with different alternatives for different segments of customers, the T model started losing its sheen to its rival, and Ford’s management ideas and theories were stamped as imperfect. He concentrated more on producing the T model, which he thought would be the best, without actually understanding the needs of various customer segments. His way of managing business had a flaw in it. From then on, many management theories and concepts by experts started to acquire prominence, DOI:  10.4324/9781032634258-1

2 

Introduction to Management

which led to the formulation of management as a field of study and research. In this chapter, the reader gets a generic view of management before exploring it in depth at a later stage.

1.1 Introduction

Every individual is a member of several groups such as family, school, college, military, some sports teams, and corporate firms. This is because every individual has numerous needs and wants that cannot be satisfied individually. Hence, they prefer to operate in groups. Also, man is a social animal and likes to live with other people. It is by living and working together in organized groups and establishments that people satisfy their financial and societal needs. When people are operating in a group, their efforts must be controlled, coordinated, and directed toward a common goal. This is nothing but management. Like the brain controls the entire functioning of the human body, management controls the functioning of an organization. 1.2 Definitions

Management is defined as the process by which a cooperative group directs action towards common goals. —Joseph Massie The above definition of management can be better explained as a team of employees/departmental units who work in collaboration toward a specified departmental/organizational goal, such as improving the quality of services/goods, reducing operational costs, and achieving targets in terms of revenue and sales. To manage is to forecast and to plan, to organize, to command, to coordinate and to control. —Henri Fayol Management is a distinct process consisting of planning, organizing, actuating and controlling performed to determine and accomplish the objectives by the use of people and resources. —George R. Terry (Source: https://www​.economicsdiscussion​.net​/ management​/definition​-of​-management​/31854) The definitions by Fayol and Terry of management revolve around its functional aspects. For example, if a small event has to be managed, whether it is business or general, then the first step requires a plan to be drafted for the same, followed by

Introduction to Management 3

the organization of the event, executing it, and during execution, controlling it to accomplish specific objectives. The same set of steps is applicable to any project (software, construction, insurance, and so on) undertaken by any firm. Management is a multi-purpose organ that manages a business and manages managers and manages worker and work. —Peter Drucker Peter Drucker’s definition of management is both people- and task-centric. Management is defined as the creation and maintenance of an internal environment in an enterprise where individuals working together in groups can perform efficiently and effectively towards the attainment of group goals. —Koontz and O’Donnell (Source: Massie, J.L. (1971), Fayol Henri (1949), Drucker, P. (2017), Koontz, H., O’Donnell, C., & Weihrich, H. (1982)) This definition puts emphasis on the fact that management is a goal-oriented process where people in a team/department/organization work toward designing and creating new products/services, improving the productivity of people, reducing time and cost, and adhering to quality. 1.3 Nature of Management

The term ‘management’ is viewed from different perspectives and holds various features or characteristics, discussed in the following subsections.

• Management as a Process

Management is seen as a process as it involves performing a series of interrelated functions to achieve the desired result. Some of the major functions involved in management are planning, organizing, directing, coordinating, and controlling. As a process, management has the following implications: • Continuous process: Management is not a one-time process. It is an ongoing process. It deals with recognizing the problem and taking suitable steps to solve it. Thus, it is a never-ending process. • Social process: Management consists of interactions among people. For an organization to achieve its goals, the management has to develop and maintain cordial relations among the people in the organization. • Integrated process: Management plays a significant role in bringing financial, human, and physical resources to achieve the centralized organizational goals. For example, if we consider management as a process, then we can readily take the example of a project management process within an organization that starts

4 

Introduction to Management

with initiating the project; planning for the project in terms of schedule, cost, and resources; executing the project in accordance with the plan; and finally initiating the closure of the project. Management as a process is continuous because it deals chiefly with the resolution of issues and is integrated since it involves balancing three key aspects—people, time, and cost—to achieve the project/organizational goals. • Management as an Activity Like several other activities performed by humans, such as walking, reading, listening, and cooking, management is also an activity. Management as an activity helps the managers to get things done and includes the following: • Informative activities: These include the collection and dissemination of information and so on, for example, collecting information on the products’/ services’ market value or the growth chart of its competitors. • Interpersonal activities: These include activities such as employee performance feedback and training. • Decisional activities: These include taking decisions on production plans, advertising campaigns, and so on. • Management as an Art and Science There is always an argument about whether management is an art or a science. However, the fact is that management is both an art and a science. It is considered to be an art since it requires that a person possess various managerial skills, which can be categorized as conceptual (understanding the cause and effect of a particular problem), human (to lead and control groups), and technical skills (to be adept in some technology/platform). In addition, it is considered to be science because various laws and principles are framed and followed where and whenever required when group activities are being coordinated. It consists of simulating flight paths and managing satellite transmissions and simpler tasks such as managing the flow of water in dams. • Management as a Group Management as a group signifies a group of people responsible for planning, guiding, and coordinating the efforts of other individuals working in the organization. Individuals in the group are referred to as managers, and they function at various levels of the organizational hierarchy, such as top, middle, and lower/ operating levels. Management as a group can be viewed in two different ways: • Group of all managers taken together: These managers can be anybody from chief executive officers (CEOs), chief technology officers (CTOs), and chief operating officers (COOs), who are involved in setting long-term goals, to those at the operational level, who are entrusted with minor decisionmaking authority like sanctioning a leave or scheduling an employee for a shift, and so on. • Group of only the top-level managers: These managers are involved in strategic decision-making and are commonly termed as the board of management or the management body of the organization.

Introduction to Management 5

• Management as a Discipline

Management has developed as a specialized branch of knowledge. It encompasses principles and practices for the efficient and effective management of establishments. Management has become a very widespread arena of study, as is evident from the increase in the number of individuals opting for specialization in management studies. For example, during the initial years, a business school graduate gets a generic view of the various subjects under management and then goes on to specialize in areas such as human resources (HR), information technology (IT), sales, finance, and marketing. • Management as a Resource Organizations attempt to achieve their set objectives with the help of various resources, such as materials, money, manpower, machinery, and so on. All the efforts will go in vain if these resources are not coordinated and managed effectively. Thus, we can say that management is a crucial resource that plays a vital role in the success of an organization. • Management Orients toward Organizational Goals Every managerial activity is directed toward the achievement of the predetermined goals and objectives of the organization. For example, an organization had set its long-term goal to cross a billion dollars in revenue by 2020, or suppose India, as per Hon’ble Dr. A.P.J. Abdul Kalam, had set its goal to double food production and agricultural products by 2020, resulting in improved food security for people by that time. To set a goal and work toward achieving it is what management is all about because all factors such as people, resources, budget, schedules, costs, and core competence have to be managed to achieve the goal. • Management Is a Universal Process Management is an indispensable constituent of every organization, irrespective of its size or the nature of the operation. In fact, management exists everywhere in the universe and in all types of activities, whether social, political, commercial, and so on. For example, managing poverty, illiteracy, and political turbulence while managing the economy of a nation depicts how management can be a universal process. 1.4 Objectives of Management

Consider the case of the company QUITO. The organization has set as its objective to increase its profit margin by 4 percent year on year so that it can have a 20 percent margin by the end of five years. It is aggressively trying to increase sales of its IT-enabled insurance services and has made a five-year plan to be the largest market player in this sector. In addition to its existing IT and IT-enabled services, QUITO is also looking to diversify into business areas such as outsourcing and infrastructure management services in the Asia Pacific region for growth and expansion. The employees of QUITO, from its debut years, have actively been involved in seeking customers’ faith and trust while doing business by providing

6 

Introduction to Management

them with quality services. Suppose we want to decipher the organizational objectives of QUITO, then the following objectives are brought into the limelight.

• Organizational Objectives

Every organization exists to achieve certain objectives. Thus, it is essential that every managerial activity be directed in such a manner that it facilitates the accomplishment of these predefined organizational objectives. Some of the organizational objectives are as follows: • Profit maximization • Growth and expansion • Goodwill of customers It was said that the employees of QUITO harbored a culture of aligning their personal goals with organizational goals. They had individual performance and productivity targets to attain, which a majority of the employees solicitously did since their expectations of receiving performance rewards and bonuses were taken care of by the HR section of QUITO. Biannual appraisals were done to provide the employees with feedback on their performance; at the same time, they provided more growth opportunities to employees with strong feedback.

• Personal Objectives

Several people are working in the organization to achieve the organizational objectives, but, at the same time, these people also have their own objectives as follows: • Fair remuneration with rewards and bonuses for employees • Unbiased and healthy working conditions with a transparent communication process across the management levels • Growth opportunities for the staff of the organization • Job security for the employees with continuous projects in the pipeline

• Social Objectives

Along with the organizational and personal objectives, management must also take care of the social objectives. These could be: • Providing quality goods and services to the consumers • Conservation of environment and natural resources as a part of corporate social responsibility (CSR) • Timely payment of taxes, such as sales tax, income tax, service tax, valueadded tax, and professional tax • Honesty in dealings with customers, suppliers, or vendors

1.5 The Importance of Management

• Optimum Utilization of Resources

Managers identify the requirements for numerous factors of production such as workforce, money, machinery, and material. They then ensure that these

Introduction to Management 7

resources are available in an adequate amount for the accomplishment of their organizational goals. They also ensure that the resources do not exceed the requirements, as this may lead to losses. Managers also train and guide employees so that they can complete the work effectively and efficiently, leading to the optimum utilization of resources. • Achievement of Group Goals Several people work in an organization. Every individual may work on a specific task or function. However, to achieve the desired organizational goals, it is necessary that all efforts be directed in one direction. This can happen only when managers create a conducive environment wherein people in the organization work as a team. • Cost Reduction In modern times of intense competition, none of the business firms can prosper unless they can supply the necessary goods and services at the lowest possible price. Management guides routine actions in such a way that all waste is shunned. By decreasing prices and improving efficiency, managers empower an enterprise to be capable of dealing with competitors and thus to make profits. • Growth and Survival These days, the business environment changes rapidly. There is a constant change in the demands of the market and society. Management forecasts these changes and enables the organization to face the challenges of the changing environment. The changes in the business environment may create opportunities or threats. It is efficient management that helps to identify opportunities, leading to not only survival and stability but also the growth of the enterprise. Having stressed the importance of management, now the prime focus will be on distinguishing administration from management, since functionally, management focuses on the execution of tasks, whereas administration focuses on decision-making. The strategic, tactical, and operational decisions taken by management come under the administrative function, whereas plans are designed after taking decisions and executing the design as per the plan. For example, a decision is taken (administrative aspect) by the defense sector of the Government of India to build roads across the borders, for which an extensive plan is designed by the civil engineers of the defense sector, or it is outsourced to some roadway construction company. They design the plan, consisting of the materials, manpower, and cost required to build the road across the terrain. If the plan is approved, then the construction company executes it, and that becomes the management aspect of the decision taken. Hence, the reader must be quite clear about the distinction between administration and management, and the illustrations in the next section bring out more differences between them. 1.6 Difference between Administration and Management

The differences between administration and management are given in Table 1.1.

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Introduction to Management

TABLE 1.1  Differences between Administration and Management

S. No. Points

Administration

Management

1

Definition

‘Management is concerned with the execution of the policy, within the limits setup by the administration and the employment of the organization for the particular objects before it’. (Oliver Sheldon)

2

Nature

3

Type of work

‘Administration as a function is concerned with the determination of the corporate policy, the coordination of finance, production and distribution, the settlement of the compass (i.e., structure) of the organization, under the ultimate control of the executive’. (Oliver Sheldon) Determinative or thinking function Concerned with determination of policies and procedures Top-level function

4 5

6 7 8 9 10

Executive function

Concerned with implementation of policies Level Mostly middle- and lowerlevel function Decision-making Decision-making is influenced Decision-making by external forces such as public is influenced by opinion and government organizational policies and procedures Functions Major administrative functions Directing and controlling include planning and controlling are the prime functions incorporated into it Skills Human and conceptual skills Human and technical skills Process Administration decides on what Management decides on is to be done and when it is to who should do it and how be done should they do it Applicability Government and public sector Business firms Direction of Not directly concerned with Concerned with direction human efforts direction of human efforts of human efforts in execution of plans

Figure 1.1 shows that management is more of a middle-level or lower-level function, whereas administration is a higher-level function. For example, strategic decisions such as mergers are taken by the top management of the organization, which otherwise signifies administration, and to create a road map for the acquisition, plans are formulated and executed by the lower and middle management, which is management in general. 1.7 Levels of Management

Levels of management denote the line of separation among the various managerial positions within an organization. The number of levels in the managerial

Introduction to Management 9

FIGURE 1.1  Extent

of Administration across Various Levels of Management

hierarchy largely depends on the number of people employed in the organization, the nature and scale of business operations, and the size of the business firm. Each level of management enjoys a different amount of authority and status. Also, each level holds a different amount of responsibility and has specific roles, functions, and relationships with the other levels. The levels of management can be classified into three broad categories (discussed in the following subsections). 1.7.1 Top-Level/Strategic-Level Management

The top-level management includes the board of directors, CEO, CFO, CTO, and so on. This level of hierarchy has the highest authority and responsibility. Some of the key functions of top management are as follows:

• To prepare a business-level plan for the organization, including all areas of • • • • • • •

operation To identify the matters that are important for the existence, growth, and profitability of the organization, such as using advanced technology and setting up a new unit To set up the organizational goals and objectives To design strategies to achieve the predefined organizational goals To decide on the organizational structure, hierarchy, and various positions to be created and relations between these positions To control and coordinate activities of all the functional departments To select people to fit into the vital positions in the organizational structure To act as a liaison between various external stakeholders and the organization

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Introduction to Management

1.7.2 Middle-Level Management

Middle-level management acts as a link between the top-level management and the operational-level management. This level includes departmental managers, deputy managers, assistant managers, and so on. Some of the major functions of middle-level management are as follows:

• To prepare a departmental plan aligned with the organizational plan • To identify the department-level goals and objectives and frame strategies to achieve the same

• To carry out all the managerial activities necessary for the smooth functioning of the department

• To issue orders and guidelines to the operational level of management and also

to control and coordinate their activities • To act as a liaison between the top-level and lower-level management, for example, explaining the policies and procedures prepared by top-level management to the lower-level management • To report to the top-level management 1.7.3 Lower/Supervisory/Operative-Level Management

According to R.C. Davis, ‘supervisory management refers to those executives whose work has to be at large with personal oversight and direction of operative employees’. It consists of supervisors, foremen, and so on. This level of management is responsible for issuing guidelines to perform routine activities. The people at this level guide, control, and coordinate the efforts of the line workers. The lower level of management performs the following functions:

• • • • • • •

Planning the routine activities Assigning tasks and issuing orders to the workforce Supervising and guiding the workforce Creating and maintaining a cohesive environment among workers for teamwork Reporting to the middle management Evaluating the performance of the workers Managing the grievances among workers

Table 1.2 shows the functions based on the levels of management and the positions accorded to the employees based on the level they are working at, and their associated roles and responsibilities based on the functions allotted to the specific levels. The table clarifies the complexity of tasks allocated to managers at all levels and sums up whether they are to be carried out daily as routine activities at the operational level or monthly, quarterly, comprising budget or resource allocation,

Introduction to Management 11 TABLE 1.2  Major Functions across Levels of Management

Major Functions • • • • • • • • • •

Set objectives Scan environment Plan and make decisions

Levels

Designations/Positions

Top

•

Develop and implement activities Middle Supervise first-line managers Report to top management Allocate resources Carry out routine work Lower Supervise employees Coordinate activities of line managers

• • • • • • • •

Board of directors CEO, CFO, and CTO President Vice president Functional manager Deputy manager Assistant manager Foreman Supervisor

half-yearly or yearly, or whether they are tasks that accrue to a five-year plan generally undertaken by the top level. 1.8 Types of Managers

Managers are categorized into three types based on level or position in the hierarchy, role—direct or indirect—specialization, and functions (Figure 1.2).

FIGURE 1.2  Types

of Managers

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Introduction to Management

1.8.1 Based on Level or Position in the Organization 1.8.1.1 Top Managers

The top-level managers fall into the top level of management. They decide the organizational goals and formulate strategies to achieve them; hence, they are also called strategic managers, such as president, vice president, CEO and so on. 1.8.1.2 Middle Managers

The middle-level managers act as a link between the top-level management and the operational-level management. The middle-level managers are responsible for communicating the organizational policies and procedures and ensuring that they are implemented, for example, manager, deputy manager, assistant manager and so on. 1.8.1.3 First-Line Managers

Individuals at the lowest level of management who are accountable for the work done by others are called line managers. The duties of first-line managers are to guide, control, and supervise the workforce. First-line managers are responsible for the routine work carried out in the organization. First-line managers are also known as first-level managers who are assigned titles like the following: Shift supervisor, Store Manager, Foreman, etc. 1.8.2 Based on Role: Direct or Indirect 1.8.2.1 Staff Managers

Staff managers utilize special technical/subject knowledge to guide and support the efforts of their workforce. Staff managers are not directly concerned with revenue generation. Examples are HR and finance managers, who have staff responsibilities. 1.8.2.2 Line Managers

Line managers are accountable for activities that lead to direct influence on the output of the organization. The organization’s profitability will have a negative effect if the managers fail to fulfill their responsibilities. The examples are vice president (operations) and manager (marketing). 1.8.3 Based on the Scope of Activities Managed 1.8.3.1 Functional Managers

Functional managers handle a single department or activity in the organization, for example, finance manager, HR manager, purchase manager, and so on.

Introduction to Management 13

1.8.3.2 Specialist Managers

Many organizations these days are interested in appointing specialist managers to handle various tasks. A specialist manager is the one who is responsible for handling a single area within a specific functional domain, for example, a training manager, recruitment manager, payroll manager, and so on. 1.8.3.3 General Managers

General managers are responsible for complex multi-functional units of an organization (i.e., the whole company or a subsidiary). 1.9 Managerial Skills

With increasing complexity and competition, the management of the business is becoming more and more challenging. Possessing a wide range of skills has thus become mandatory for successful management. The skills that a manager should possess are classified further (Figure 1.3). 1.9.1 Technical Skills

Technical skills refer to an individual’s aptitude, knowledge, and understanding of handling equipment, procedures, and techniques involved in carrying out any activity. In short, this skill relates to expertise in the technicalities of a specific job. The ability to handle computer numerical control machines is an example of a technical skill. Technical skills are most important for lower- or supervisorylevel management since this level works closely with the workforce and is also

FIGURE 1.3 

Managerial Skills

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Introduction to Management

responsible for guiding and supervising them in operational tasks. The importance of this skill decreases as we climb the hierarchy. 1.9.2 Human Skills

Human skills refer to an individual’s ability to work with people. Having human skills is very essential as it fosters teamwork and helps in the accomplishment of organizational goals in an effective manner. Human skills help managers to communicate with and understand their subordinates as well as find effective ways to motivate them. Unlike technical and conceptual skills, the importance of human skills remains the same throughout all the levels of management as one must deal with people irrespective of the position in the hierarchy. 1.9.3 Conceptual Skills

Possessing conceptual skills enables one to view an organization as a whole unit. It refers to the ability to view the entire situation in totality. It helps to analyze the environment and the factors governing the situation. Thus, an individual can come up with an appropriate solution to the problem. For example, consider the marketing and production departments of the same company. Although both departments belong to the same firm, their individual goals are different. However, the top-level managers see these individuals in a manner wherein the individual goals of the departments are directed toward achieving the goals set by the company. Conceptual skills include the ability to think creatively, forecast, strategize, communicate, and debate on various aspects. Conceptual skills are important for the top level of management since this level is responsible for planning, policymaking, and formulating strategies. The importance of conceptual skills decreases as we move down the hierarchy. 1.10 Managerial Competencies

Over the years, management researchers, studying the behavior of managers at various levels of the organization and in organizations of diverse types, have come to the conclusion that successful managers possess the following competencies. 1.10.1 Effective Communication Skills

Managers who can communicate clearly and precisely either verbally or in writing and disseminate information according to the needs and characteristics of the audience are said to be effective managers. These managers mold themselves with regard to the employees’ styles and personalities and listen and respond to each of them.

Introduction to Management 15

1.10.2 Conflict Management and Resolution

Managerial competence aims at resolving conflicts among teams or individuals by creating common agreements and settling disputes. 1.10.3 Implementing a Strong Feedback Mechanism

Successful managers believe that to keep employee performance high, there should be a mechanism to monitor employee performance on a continuous basis in order to motivate them and to instill in them a sense of responsibility and ownership for every task they undertake. 1.10.4 Aligning Organizational Goals to Performance-Oriented Goals

This is done by managers through effective planning, organizing, and allocating roles and responsibilities to people for the smooth execution of tasks. 1.10.5 Remake of Organizational Structure for Employee Retention across Levels

A manager is said to be competent if they can change the structure of the organization from time to time in order to retain the best talent across the industry. 1.10.6 Focus on Employees’ Growth

A manager’s competency can be demonstrated by emphasizing and implementing a career development plan for their employees, which paves the way for growth and learning opportunities of an individual within an organization. 1.10.7 Strategic Planning and Decision-Making

A competent manager is a great visionary who can see the prospects and future of the organization from a long-term perspective, along with issues that the organization can face in the future. They also ensure that their departmental goal becomes a key constituent of the organizational goal, which is in general a summation of the individual unit’s goal. The manager knows how to get things done through the formal channels and the informal network. 1.10.8 Focus on Relationship Building and Diversifying

A competent manager accomplishes work goals through collaborative relationships, appreciates the insights of other employees, and takes appropriate actions to increase diversity in the workplace.

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Introduction to Management

Here goes the story of a general manager of a manufacturing firm who, after patiently hearing the issues faced by the marketing and sales head, production head, and research head, went on to implement an integrated planning system across all the units in order to ramp up sales, promote productivity, and increase research and development activity within the organization. For this purpose, he directed the engineering support group to help the sales unit by assisting in the demonstration of the products to prospective customers. He also addressed the need for more budget for the marketing of the product. He, on the production head’s verbatim, obtained the sanction from the finance department for two new assembling units, which had undergone substantial wear and tear and were taking a lot of time to finish assembling the television sets. Within three months, the sales of the television sets soared up and demand from the customers could be met with a continuous supply of models for customers across segments. The research unit, after having heard to the delivery of the anecdote, from the general manager, became extremely eager to try out new features for the light-emitting diode and plasma display panels. 1.11 Scope/Functional Areas of Management

The functional areas of management can be categorized as follows (Figure 1.4). 1.11.1 Financial Management

Financial management deals with the procurement and utilization of funds within the business firm. Some of the activities included in financial management are listed below:

• • • • • •

Estimating the amount of fund required to run the business Ensuring the availability of funds at the right time Deciding on the most appropriate sources of funds Ensuring optimum utilization of the financial resources Maintaining the financial records Managing the earnings

1.11.2 Human Resource Management

Personnel management revolves around managing the human resources employed in the organization. Some of the key functions of the personnel department include:

• • • • •

Human resource planning Recruitment and selection Training and development Performance appraisal Career planning

Introduction to Management 17

FIGURE 1.4  Scope

• • • •

of Management

Promotions and transfers Compensation and benefits Maintaining employee records Employee superannuation or resignations

1.11.3 Production Management

Production management includes all the activities, right from forecasting the requirement of raw materials to the production of the finished goods. The major activities include:

• Deciding on the layout of the plant • Forecasting the raw material needs

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Introduction to Management

• Timely maintenance • Inventory management • Design and development of products 1.11.4 Marketing Management

Marketing management deals with recognizing consumer needs and providing quality goods and services at the right time and in the right quantity. Some of the basic activities included are as follows:

• • • • •

Identifying the requirements of the consumers Developing the products and services that suit the consumer’s requirements Deciding on pricing and pricing strategies Selecting the appropriate channel of distribution Carrying out activities related to advertising and branding of the product or service offered

1.12 Functions/Processes of Management

Suppose a construction company has decided to undertake a new project. For the project to move in the right direction and turn out to be successful, it is necessary that the company has a plan wherein tasks like identifying location, phases of execution, and most profitable sources of raw materials, sources of investment, manpower required, machines and tools required, and so on are carried out. This is nothing but planning. After detailed planning is carried out in this respect, the next step would be to organize the execution. Simply put, planning deals with decision-making on paper, whereas organizing deals with the actual execution of the decisions made. Once all the necessary planning is done, the company begins with the next crucial phase of organizing, which includes making the land available for the project, arranging for the funds, purchasing the required machinery, tools, and equipment, arranging for the raw materials, and so on. All these resources must be made available at the right time so that things move as per plan. If in any case, things do not move as per plan, adjustments are made so that the final outcome is not affected. After providing the 3Ms, which include machines, methods, and money, the next challenging step for the company would be to employ the required manpower to complete the project. First, the company would begin to identify how many internal people can be shifted to take care of the new project, after which, if there were any shortfalls, the company would recruit people external to the organization. Staffing deals with the employment of not only permanent employees but also the contract labor. Once the human and non-human resources are made available, the company starts training and providing instructions to its employees regarding how the work

Introduction to Management 19

is to be executed. However, the task does not end here. In order to complete the work as per the plan, the employees need to be supervised and motivated continuously. All the methods and techniques to be followed are presented to the employees so that there is no discrepancy in the execution. All this is nothing but directing. The company has put in a huge investment, and a single work step or unforeseen event can result in huge losses. Therefore, the company sees to it that the actual work and the plans are compared from time to time, and in the case of any discrepancy, timely corrective actions are taken. This is called controlling. Whether it is a big or a small project, management of the same is required everywhere. The process of management involves carrying out a series of functions as stated in Figure 1.5. 1.12.1 Planning

According to Koontz and O’Donnell, ‘planning is an intellectual process, a conscious determination of a course of action, the basis of the decision on purpose, facts and considered estimates’. Planning is basically anticipating the future and deciding the future course of action. This function also deals with the systematic planning of the various human and non-human resources required by the organization to accomplish the predetermined objectives. Without planning, all the efforts go in vain. 1.12.2 Organizing

According to Henri Fayol, ‘to organize a business is to provide it with everything useful for its functioning, that is, raw materials, tools, capital and personnel’.

FIGURE 1.5  Process

of Management

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Introduction to Management

Once the entire planning has been done, the next step is organizing, which means making available all the resources that would help in achieving the organizational goals. Organizing involves the process of recognizing and grouping the activities to be executed, defining and allotting responsibility and authority, and establishing relationships among various positions so that the objectives can be achieved. 1.12.3 Staffing

According to Koontz and O’Donnell, ‘staffing involves manning the organization structure through the proper and effective selection, appraisal and development of personnel to fill the roles designed for the structure’. No organization can work without human resources. In addition, the activity of staffing needs to be performed very carefully as it decides the success or failure of the organization. The people employed in the organization should be capable of understanding the purpose of the organization and have the ability to work toward the objectives of the organization. To summarize, we can say that staffing is employing the right kind of person at the right time and in the right position. 1.12.4 Directing

According to Human, ‘directing consists of a process or technique by which instruction can be issued and operations can be carried out as originally planned’. Directing is considered to be one of the most important functions of management since it enables the realization of the plans. Directing includes supervising, motivating, and providing leadership to people to accomplish the desired result. 1.12.5 Controlling

According to Theo Haimann, ‘controlling is the process of checking whether or not proper progress is being made toward the objectives and goals and acting, if necessary, to correct any deviation’. Controlling refers to measuring the actual output against the desired and taking corrective actions for deviations if any. Controlling is performed through a series of activities such as:

• • • • •

Setting the standards Measuring the actual performance Comparing the actual performance with the established standards Taking corrective actions Providing feedback

Introduction to Management 21

1.13 Types of Environments and Their Influence on Business

Every organization operates within an environment. No organization can exist independently. All organizations depend on the external environment for inputs, that is, resources required to carry out various functions. All these forces, which influence the operations and are external to the organization, are called external factors. These factors are also referred to as uncontrollable factors as they are beyond the control of the organization. The other environment is the internal one, which can be defined as all the forces and conditions within the organization that influence its behavior. Thus, the environment can be broadly classified into the internal environment and the external environment (Figure 1.6). 1.13.1 External Factors

All the forces and conditions that influence the operations of the organization and are external to it are referred to as external factors. These factors are said to be uncontrollable factors as they are beyond the control of the organization. The external environment is further categorized into macro- and micro-environments. 1.13.1.1 Macro-environment

The macro-environment includes the following factors: Economic factors: Economic factors include economic conditions and economic policies that have an impact on business operations, such as inflation, recession, and growth rate. Social factors: Social factors have a considerable impact on the performance of the business. Thus, it is essential for every organization to study these factors

FIGURE 1.6  Environmental

Factors Affecting Business

22  Introduction to Management

carefully. Social factors include customs, traditions, preferences, values, demographics, level of education, etc. Political–legal factors: Political factors include government rules and regulations, policies, legal frameworks, and so on that largely affect the functioning of a business. Technological factors: It is very essential for an organization to keep up with technology for long-term survival. Technological factors basically deal with the use of modern machines and equipment, the Internet, e-commerce, social media, electronic media, and so on to carry out business operations. 1.13.1.2 Micro-environment

The micro-environment includes the following factors: Suppliers: The success of an organization depends largely on its ability to provide timely and quality goods and services to its customers. For this purpose, the organizations depend on the suppliers who provide them with the necessary inputs. Competitors: In order to outsmart their competitors and be ahead in the competition, organizations are required to keep a close eye on the market situation and formulate their plans accordingly. Customers: It is essential for the organization to consider the choices and preferences of the customers since they are the ones who decide the success or failure of products or services. Marketing intermediaries: Marketing intermediaries assist the company to promote, sell, and distribute the goods and services to the end users. Hence, marketing intermediaries are considered an important link between businesses and customers. Financial institutions: Most business organizations depend on third parties for their financial needs. Financial institutions fulfill these needs of the business organization. Internal Factors Internal factors are the conditions and situations within the organization that affect the business operations. These factors are also referred to as controllable factors. Internal factors include the following: Value system: It refers to the internal cultural framework of the organization. Every business determines plans and policies and expects its employees to act within this framework. Mission and objectives: Businesses decide their operational strategies depending on the mission and objectives. Physical resources: Physical resources such as money, materials, and machines also influence the functioning of the business to a large extent.

Introduction to Management 23

Human resources: If the employees of the organization are skilled and qualified, it would benefit the organization; else it would have a negative impact. Also, the decision-making ability plays a crucial role in the success of the organization. Marketing and research and development: If an organization is good at its marketing strategies and has a strong research and development department, it ensures longevity of the business. Summary

This chapter gives the reader an overview of the concepts, principles, practices of management, functions of management, and types of management skills required to operate the business processes within the organization and elaborates on the environmental factors affecting the business processes and how effective management can resolve the turmoil and turbulence in businesses. The chapter focuses on the following:

• • • • • •

Definitions of management by eminent management gurus Perspectives on management and its nature Importance of management Functional approach to management Management levels Environmental factors affecting business in an organization.

Exercise Objective Questions

1.

Management is • Ongoing process • Social process

• Integrated process • All the above

2. Which of the following approaches is used to study management? • Art • Science • Process • Profession 3. Which objective of management takes care of the conservation of the environment and natural resources? • Organizational objectives • Social objectives • Personal objectives • None of the above 4. Which level of management includes departmental managers, deputy managers, and assistant managers? • Strategic-level management • Operative-level management • Middle-level management • None of the above

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Introduction to Management

5. Which is the correct order for the process of management? • Planning, organizing, staffing, directing, and controlling • Planning, organizing, directing, staffing, and controlling • Planning, organizing, staffing, controlling, and directing • None of the above 6. Which managerial skill refers to the ability to view the entire situation in totality? • Technical skills • Conceptual skills • Human skills • None of the above 7. Are line managers accountable for activities that have a direct influence on the organization’s output? • True • False 8. Who among these comes under the specialist manager? • Training manager • Purchase manager • Finance manager • HR manager 9. Which of the following are the environmental factors affecting business? • Suppliers • Physical resources • Customers • All of the above 10. Planning is • A social process • An intellectual process

• An integrated process • None of the above

Discussion Questions (The answers to the questions should necessarily cite relevant examples, if not explicitly mentioned, during discussions) What are the different skills and functions of a manager? Define management and list its functions. What is meant by ‘management process’? Explain the basic functions of management. Do they differ from industry to industry? Discuss. Define management and explain the functions involved in the process of management. Explain the meaning, need, and scope of management. Explain the nature of management. What do you understand by the systems approach? Explain the management information system contingency approach of management. Management is not administration. Discuss using an exemplary approach.

Introduction to Management 25

CASE STUDY Critical Thinking In the year 1998, Nokia became the world’s number one mobile maker by giving a tough competition to the telecom company Motorola. It produced high-quality and user-friendly mobile phones, with its efforts concentrating on wireless Bluetooth and wireless technology. The company’s products were further divided into four major categories: mobile phones (data devices for business and personal use and wireless voice), multimedia (mobile gaming devices and home satellite systems), networks (wireless switching), and enterprise solutions (wireless systems for business). Nokia was the best in the market and its products were considered to have value for money. It was the best until the launch of the first iPhone. Later, Samsung realized the power of Google Android and began the transition to Android OS. Nokia had failed to adopt this environmental change and truly capitalize on the market. Nokia started losing its customers and failed to attract them. Later, to have more market share, Samsung launched a variety of smartphone segments with different prices and also launched tablets to attract customers. By the first quarter of 2012, Samsung became the world’s number one mobile maker and Nokia was completely out of the market.

Questions 1. Which environmental factors played a major role in losing business for Nokia? 2. What strategy should Nokia come up with to return to the phone market?

Critical Thinking Questions How open-minded are you to the ideas of other team members? What are the steps that you have taken to get the work done by your subordinates? Give an example of how social factors have influenced businesses. How do you keep yourself and your team motivated as a manager?

Chapter at Glance Introduction to Management

When people are operating in a group, their efforts have to be controlled, coordinated, and directed toward a common goal. This is nothing but management.

26 

Introduction to Management

Features of Management

• Management as a process (continuous process, social process, and integrated process).

• Management as an activity (informative activities, interpersonal activities, and • • • • • •

activities that enforce decision-making). Management as an art and science Management as a group Management as a discipline Management as a resource Management is goal-oriented Management is a universal process

Objectives of Management

• Organizational objectives • Personal objectives

• Social objectives

Importance of Management

• Optimum utilization of resources • Achievement of group goals

• Cost reduction • Growth and survival

Levels of Management

• Top-level/strategic-level

management • Middle-level management

• Lower/supervisory/operative-level management

Functional Areas of Management

• Financial management • Personnel management

• Production management • Marketing management

Functions/Process of Management

• Planning • Organizing • Staffing

• Directing • Controlling

Managerial Skills

• Technical skills • Human skills

• Conceptual skills

Introduction to Management 27

Types of Managers

Managers are categorized into three types as follows: Based on Level

• Top managers • Middle managers

• First-line managers

Based on Role

• Staff managers

• Line managers

Based on the Scope of Activities Managed

• Functional managers • Specialist • General managers Environmental Factors Affecting Business

• External factors • Macro Factors: Economic, legal, political, social, and technological factors • Micro factors: Suppliers, customers, competitors, marketing intermediaries, and financial institutes

• Internal factors • Value system, human resources, physical resources, marketing research and development, mission, and objectives

2 EVOLUTION OF MANAGEMENT THOUGHT

An Opening Vignette The evolution of management came into existence in the days of Chandragupta Maurya. In his book Arthashastra, Kautilya, minister during the king’s regime, stressed the need for good governance and stated that the book is an ideal repository for those entrusted with the power to govern. Surprisingly, the current trends in management practices are also described in this famous book in the form of organizational vision, mission, and objectives, which were incorporated by the 20th-century management guru Peter F. Drucker. Kautilya insisted that Chandragupta, the founder of the Maurya dynasty, should acquire more power by conquering the states of India one after the other and should unify most of the states. The emperor’s acquisition of the Indian subcontinent extended from Pakistan in the west to Bengal in the east and the Himalayas in the north to the Deccan Plateau in the south, except in Tamil Nadu and Orissa. As per Kautilya’s directives, Chandragupta acquired power and authority over the entire Indian subcontinent, which by common management principles aligns with setting the objectives and working toward their effectiveness by identifying the potential. On the execution front, Kautilya believed that running such a vast territory required excellent leadership skills, improved resource capital, and a sound organizational hierarchy with a king as the head; a prime minister, who looks after the operational aspect of the state machinery using ministers of the state legislature; and the leaders who are allotted responsibility at a micro level. Alignment in the thought of Kautilya and 20th-century management guru Peter Drucker concerning the organization being a ‘social dimension with business and economic objectives and with a proper hierarchy, exuding power and authority’ is very evident from their work DOI:  10.4324/9781032634258-2

Evolution of Management Thought 29

considering the above citations. Kautilya also focused heavily on the human resource unit of the organization and advised Chandragupta to lay out plans for the resources, motivation, development, and satisfaction, which form the basis of organizational development and also identify resource potential across levels. The other aspects of management approaches, as instilled by Kautilya and aligned with Drucker’s principles, are as follows: Studying the impact of external factors affecting the organization, that is, the strength of other kingdoms, their ambitions, and threats anticipated from these arenas Setting up realistic targets, that is, modernization of cities, acquisition of states, and effective administration of the same Diversification of the economy, that is, forest reserves, mines, agriculture, trade, fisheries, land and water, minerals and metals, and so on Formulation of policies and procedures which are lawful and justified for the organization Investment provision for the sustainable growth of any organization, that is, the kingdom of Chandragupta Maurya Decentralization of power by appointing state heads to rule their own states, as is being done in modern-day organizations The other areas of management on which Kautilya laid emphasis were as follows: crisis management, risk management, strategic management, acquisition and mergers, establishing connections, developing a network, and creating an information system framework, which has been instilled in modern management approaches of today.

2.1 Introduction

Since the early days, the concept of management has come into existence. Whenever effort had to be expended by a team, it was extremely important that the team had to be managed. Therefore, a group of two or more individuals had to be managed by an entity in the early days. The principles of management were first laid down by Kautilya in his book Arthashastra, which emphasized the fact that no person can single-handedly achieve something. Hence, the art of management has come into existence to ensure there needs to exist collaboration among individuals and teams, a proper road map, and necessary monitoring and control mechanisms to achieve certain goals and objectives. 2.2 Historical Perspective

Management has been considered a formal discipline since the late 19th century. Most modern management thoughts evolved during the 20th century. The

30  Evolution of Management Thought

use of management principles surfaced in 2900 BC in Egypt, where more than a hundred thousand men were utilized for 20 years in a continuum to build the pyramids. Other famous ancient structures which heavily evoke and implement managerial concepts and practices are the Middle Eastern Ziggurats, the Great Wall of China, the Persian roads, and so on. Management concepts were implemented from the time of Moses and through the Greek and Roman eras to the usage of assembly-line techniques for fitting warships in a 10-hour duration in the 15th century in Venice. This was the period of dictatorship, punishment, and fear of God weighed by human management. In the 16th century, management principles and terms started evolving, such as mass approval, leadership ability, power and authority, and so on. From a managerial perspective, the power and authority were allotted to an individual, organization, or group for administering their responsibility toward others. These crude approaches were later refined by designing theoretical and conceptual frameworks to be called management principles. Furthermore, the Enlightenment and Renaissance Age brought massive changes concerning managerial skills, abilities, and perceptions. With the advent of the industrial era, with setting up of warehouses and factories in the early 19th century, evolved other concepts such as costing, management, production lines, schedules, and so on. 2.3 Approaches to Management 2.3.1 Classical Approaches

Classical management theory evolved as a result of the Industrial Revolution and constituted the traditional school of management approaches such as scientific management, administrative principles, and bureaucratic organization with a special emphasis on the economic rationality of management, that is, the maximization of monetary rewards, implying that employees work for the monetary benefit and to get work done from employees, managers should entice them with rewards. Classical theorists felt that these emotions could be controlled using logical and rational job structuring. The classical approach to management emphasizes the fact that employees do have physical and financial needs and do not possess social needs or needs for job satisfaction. It is characterized by centralized decision-making and profit maximization. The classical approach existed from 1900 to 1920, with a strong focus on economic efficiencies. The major contributors to the classical approach were Frederick Winslow, Frank Gilbreth, Henri Fayol, and Max Weber. This approach comprises scientific, administrative, and bureaucratic management. Scientific management entails the best way of doing a job, whereas administrative management focuses on basic managerial functions and bureaucratic management focuses on forming rules, procedures, and workload distribution.

Evolution of Management Thought 31

2.3.1.1 Scientific Management

Frederick Winslow Taylor (1856–1915), the father of scientific management, had many followers, such as Henri Gantt, Frank Bunker Gilbreth, Lillian Gilbreth, Harrington, and Emerson, who became management gurus later and were innovators of various management concepts and principles. Together with Taylor, they revolutionized management thinking. Scientific management emphasizes proficiency and systematization in management. 2.3.1.2 Administrative Management

While scientific management theorists tried to determine the best work practices, administrative management theorists explored ways of executing the jobs together and operating an organization efficiently. This school of thought is also called administrative management. Henri Fayol (1841–1925), a French industrialist and architect, developed the administrative management theory. The other experts were Chester Barnard and Colonel Lyndall Urwick. 2.3.1.3 Bureaucratic Organization

Organizations grow in size with increased functional specialization resulting in strategic, tactical, and operational layers of management coordinating the organizational effort. A result is a bureaucratic approach to organizational structure. With an emphasis on the removal of managerial discrepancies and the usage of unwanted power, Max Weber advocated some strategies to provide a solid basis for systematizing group efforts. It is stated that an organization’s cultural values align mostly with the application of bureaucracy. For example, Japanese managers emphasize communication processes, interdepartmental relations, and a paternalistic approach, whereas American organizations highlight managerial styles, decision-making, and control machinery. The Japanese perspective increases employees’ commitment by producing a legitimate order with illogical power of authority, whereas the American perspective leads to the formation of an in-house labor market in which managers can divide and exploit workers. 2.3.2 Human/Behavioral Approach

According to this approach, management is the process of getting things done by people, and the crucial aspect of it is to understand human psychology. The two important factors which play a key role in increasing productivity are motivation and good employee relations. Furthermore, the approach states that, apart from the impact of organizational factors such as attitude, changes in the cultural environment and pressure also have a major impact on an individual and should thus be considered considerably. Behavioral management emphasizes individual attitudes, behaviors, and group processes and recognizes the importance

32  Evolution of Management Thought

of behavioral processes in the workplace. Major contributors to this approach are Elton Mayo, Mary Follett, Douglas McGregor, Chris Argyris, and Abraham Maslow. Theories by Douglas McGregor and Abraham have been discussed in detail in Chapter 13. 2.3.3 Contingency/Situational Approach

The contingency approach, which describes the organizing of the 21st century, has two prominent models: the Burns and Stalker model and the Lorsch and Lawrence model. Burn and Stalker talked about the mechanistic organization, that is, the rigid form of organization and organic organization, which is flexible in structure and adaptable to change, and concluded that successful organization in stable situations was mechanistic in design, and unstable situations, those organizations that were successful were organic in design. Lorsch and Lawrence state that every organization should attain equilibrium between differentiating forces and integration factors, that is, the tendency among managers to think and act differently and strong collaboration between different subunits to achieve a common goal. The Lorsch and Lawrence model concluded that organizations fail under complex environmental conditions due to high differentiation and less integration and that organizational integration can be achieved through formal hierarchy, departmentalization, organizational policies and rules, and cross-functional culture. The contingency approach explores the optimal ways of doing things where the performance of one subunit is reliant on its surroundings and has a direct or indirect association with other units or subunits. Thus, performance within an organization is dependent on the situation, and if a change is anticipated within the organization, then the manager must try to change the situation influencing it. In other words, contingency theory states that there is no single best way to manage an organization because what suits one organization may not suit the other organization. Contingency approaches are framed to depict organizational design situations. Contingency design adapts an organization and its units to situations that describe environmental uncertainty. Environmental uncertainty comprises social, political, and economic pressures on the organization, on technological breakthroughs, resource and supplier consistency, and consistency in demand for products and services of the organization. 2.3.3.1 Features

Managers must present the objectives and prepare strategies, formulate organizations, and instill mechanisms to adapt to changes in the surroundings. Managers should have adequate human relations skills and leadership styles to incorporate changes and bring steadiness.

Evolution of Management Thought 33

2.3.3.2 Impact

This approach does not adhere to strict management principles and practices and mostly follows what the environment (political, social, economic, and technological) requires. The management of the organization is more creative than being mechanistic. The contingency approach could be considered a practice-based approach. An example of the contingency aspect a manager is facing is the non-availability of a web designer till the end of October for their six-month project scheduled to be over by the end of December. The manager now has to inform their unit head either to allocate them a resource from other teams or to reschedule the project by adding a month extra to their project calendar. This decision can be taken by the manager based on the additional cost incurred in the project due to delay in schedule and resource feasibility, that is, the commitment of the substitute in other projects. 2.3.4 Operational Approach

The operational approach to management emphasizes management functions and principles involved in performing these functions. The emphasis on several management functions changes from organization to organization and from level to level. The operational approach to management focuses on planning, directing, organizing, staffing, and controlling. These functions cannot have a static form, as an organization has to function in a dynamic mode. This approach, also known as the management process approach, views management as a social process where actions are initiated to accomplish ­ objectives.

• The operational approach offers a broader scope of management across organizational levels and types.

• This approach suggests that management is a universal phenomenon irrespective of the type of organizations or levels of an organization.

• The approach gives a practical perspective by providing a classification of man-

agerial functions at the first level into planning, organizing, staffing, directing, and controlling. However, the operational approach has been criticized on the following grounds.

2.3.4.1 Criticisms

In this approach, there is no universal acceptance of management functions, expressions used are not usually shared, and every approach has some shortcomings.

34  Evolution of Management Thought

2.3.5 A Systems Approach

This approach came into existence around the year 1950, and the pioneer of the systems approach was Wiener, followed by many systems theory specialists. Basically, this approach helps in studying the functions of complex organizations and correlates planning, organizing, directing, staffing, and controlling with each other and also with the problems associated with the same. The approach in itself cannot be applied to any type of organization to a deeper extent as there are no specific tools and techniques for implementing this approach. In 1960, a unified approach evolved, which was known as the ‘systems approach’. Its early contributors include Ludwig Von Bertalanffy, Lawrence J. Henderson, W.G. Scott, Daniel Katz, Robert L. Kahn, W. Buckley, and J.D. Thompson. System theorists believed an organization to be a flexible and open system, constituting subsystems as a whole, with every unit working in sync with every other unit. The system might comprise a hierarchy of subsystems such as the Indian government system/machinery, which comprises the state government machinery or the Indian economy, comprising various industries such as agriculture, construction, oil, pharmaceuticals, metals and minerals, and so on, which constitute various companies who have various units such as manufacturing, production, IT, accounting, and sales and marketing machineries. 2.3.5.1 Features of the Systems Approach

• This system has the following features: • A system acts as a single unit consisting of subcomponents and inputs, output, processing, feedback, and so on.

• The various subsystems within the system should not be studied in isolation. • The system is defined by an appropriate boundary. • An organization is susceptible to changes in the environment. In the systems approach, the focus is on the overall effectiveness of the system. If an organization is considered to be a system, then all of its functional units are the subsystems of the organization. The systems approach is considered for both general and specialized systems. The general systems approach is a concept related to sociology, psychology, and philosophy, and a specific management system includes the investigation of administrative structure, information, planning and control mechanism, job design, and so on. The systems approach considers the quantitative and behavioral approaches as subsystems and may succeed where the process approach to management has failed and where the organization is considered to be an open system. Chester Barnard used the system concept of management for the organization and stressed the need for effective leadership by balancing conflicting forces.

Evolution of Management Thought 35

2.3.5.2 Evaluation of the Systems Approach

The systems approach supports modern types of organizations, such as project management organizations, where planning, organizing, directing, and controlling are interrelated. This approach is not concrete as it is not applied to big and complex organizations. Moreover, it does not offer any tools and methods for managers. 2.3.5.3 Examples of the Systems Approach to Management

The systems approach to management states that organizations are flexible and open systems, consisting of subsystems as a whole, where every unit is working in sync with every other unit, and the system has to adapt to changes in the political, economic, and social environment. In addition, the systems approach to management considers a system as a unit with input, output, process, and feedback. We consider some examples which better describe the systems approach. A healthcare system consists of several levels of care or subsystems as follows:

• • • • •

Intensive care unit (ICU) Extended care unit Normal care unit Outpatient care unit Homecare unit

The above subsystems can also be treated as levels of healthcare, and based on the status of patient’s health, they are shifted across the levels. If a patient is ill but does not require hospitalization, they are treated in the outpatient department; otherwise, they are admitted to the normal care unit. From the normal care unit, they can be shifted back and forth to the ICU based on the criticality of their condition. The other subsystems of healthcare are as follows:

• State legislation on health (under the influence of the political environment). • Health insurance, Mediclaim, and accidental insurance (under the influence of the economic environment).

• Management as a subsystem of healthcare organizations (autocratic, collabora-

tive, and so on). • Organization as a subsystem, that is, primary and secondary healthcare or individual, group, or health centers as organizational entities of healthcare. • Healthcare infrastructure as a subsystem comprising health and hygiene institutes, hospitals, blood donation camps, emergency service units, mobile healthcare, and so on. • Support systems comprise medical institutions where training for health cures is imparted and industries that manufacture drugs to cure health.

36  Evolution of Management Thought

Do these subsystems interact with each other? Yes, they do. When a patient’s status changes from ill to critically ill, they are transferred to the ICU. The output of the normal care unit in the form of medical reports and diagnosis of that individual becomes the input to the critical care unit, which is a subsystem in itself. If healthcare is considered as a system in whole, the inputs to the system are the patients whose health must be cared for, the output is the patients who have been cured, and the feedback is the standard or the quality of healthcare rendered to the patient. The boundaries of the healthcare system can also be defined, such as funding for healthcare organizations, and where an institute is not set up within the operational boundaries of the healthcare system, the funding for setting up an institute should be taken care of by financial institutions. Another example can be Pizza Hut and Domino’s Pizza, which operate within their boundaries, though they are the same businesses. The healthcare system is an open system and has to operate within its boundaries and has to follow government rules and policies related to insurance schemes, Mediclaim, drug directives, and so on. Closed systems can be attributed to organizations that operated way back in the 1960s, where external factors were ignored by managers while making decisions about regulatory compliance, market trends, and political and economic issues. 2.3.6 A Mathematical/Quantitative Approach

The mathematical/quantitative approach gives a basis for decision-making and believes that management consists of mathematical models and processes. This discipline is called ‘operations research’. It uses scientific techniques to provide a quantitative basis for managerial decisions. The exponents of this school view management as a system of logical processes. Different mathematical and quantitative techniques or tools, such as linear programming, non-linear programming, transportation, job scheduling, and queuing, have found applicability in all areas of management. The quantitative approach paved the way for the mathematical approach. The mathematical approach has imbibed a culture of critical thinking among managers and can only be treated as an analytical tool in managerial practice. 2.3.6.1 Limitations

• This approach provides solutions only for problems that can be solved mathematically and analytically.

• Human behavioral aspects are not computationally solvable. • This approach is not realistic because decision-making is not always

model-based. • Management has many other functions than decision-making, such as planning, directing, controlling, and so on. • Mathematical models most often do not contain the entire knowledge base; hence, they might not help in accurate decision-making.

Evolution of Management Thought 37

Harold Koontz also observed that ‘it is too hard to see mathematics as a separate approach to management theory. Mathematics is a tool rather than a school’. 2.3.6.2 Example of Quantitative Approach to Management

This approach applies mathematical models and statistical techniques to management decision-making. Some examples are as follows:

• Determining the critical path for the development of the web-enabled food

waste management system, including the delays which have been accounted for by the specific vehicle company. • Determining the percentage of wheel-and-axle alignment errors that have been accounted for the specific vehicle company. • In the area of operations management, the quantitative approaches reduce delivery timelines, streamline production processes, and assist in forecasting inventory and raw materials for future needs. 2.4 Contribution by Different Theorists 2.4.1 F.W. Taylor’s Theory of Scientific Management (1856–1916)

F.W. Taylor started his career with a US-based steel company and rose to the position of chief engineer in a span of 10 years. During his days with the steel company, he continuously monitored the performance of managers and workers. Taylor observed that these managers and workers did not understand nor implement systematic workload distribution or task execution, though he could feel that such types were highly required for improved productivity and consistency in growth. His ideas and observations proved to be highly effective in areas such as production planning, task breakdown, allocation of tasks, cost–benefit analysis, and so on.​ 2.4.1.1 Concept

Taylor invented the concept of scientific management in which he described mathematical methods to select and train professionals, distribute workload, map task allocation to skill using these techniques, introduce the concept of a wage system, and reward those who performed well. Taylor stressed the need for appropriate working conditions like well-lit-up areas, adequate ventilation, hygienic sanitation, canteen facilities, and recreation areas. He could clearly distinguish planning from execution and emphasized that a manager should plan, schedule, guide, and control his staff. He believed that efficient management could cater to employers’ getting the highest returns and employees’ getting a good wage.

38  Evolution of Management Thought

FIGURE 2.1  F.W. Taylor.

https://en​.wikipedia​.org​/wiki​/Frederick​_Winslow​_Taylor

2.4.1.2 Principles

• Scientific methods outweigh rules of thumb: Clear definition of roles and • • •

•

responsibilities; fair workload distribution; following appropriate work standards; and implementation of appropriate compensation schemes. Creating group harmony: Incorporating scientific approaches in employee selection, training, and mapping roles and responsibilities can bring harmony within the team or group. Cooperation: Workers and management should facilitate each other by working in unison and aligning them to organizational goals. Maximum output: Maximum output is achieved through appropriate workload distribution and undertaking responsibility and execution of the responsibility by both the management and the employees. From the employer’s side, there should be a rightful delegation of tasks, and from the employee’s side, the tasks should be executed ideally. Improved work procedures: The management should see to it that workers get the opportunity to improve in their work area not only for their self-development but also for the growth of the company and to bring in the required productivity and output.

Evolution of Management Thought 39

2.4.1.3 Key Features

• Separation of planning and execution functions: Taylor observed that plan-

ning for any task or activity should be done by an individual who is not involved in executing that task. The best way to manage tasks is that an individual, usually a manager, does the planning for his team and execute that task. • Scientific structuring of task: Taylor emphasized that task allocation and dayto-day distribution of tasks should be such that an average worker under normal conditions should be able to complete the task in a stipulated period and on working days. • Scientific categorization across work, methods, motion, and time: Taylor refers to the categorization of work by efficiency required to perform the work, and the efficiency required for the type of job varies from one to the other. In terms of the methods, Taylor observed that different methods were used to perform different types of tasks, so he distinctly felt the need to improve and refine the methods. For example, Walmart, an established chain of stores, lost millions in business due to server downtime for an hour a few years ago, so it improved its method of scientifically replicating the database onto some other servers so that in case of an emergency during a particular server’s downtime, the others are up and working. In terms of motion, if the job involving man and machine is scientifically sequenced, then unnecessary movements are eliminated, and the time required to perform the job is optimally reduced, and it can be performed more efficiently. In terms of time, Taylor observed that different jobs required different periods; hence, it was extremely necessary to categorize jobs as per time and schedule. In terms of fatigue or stress, Taylor observed that employees needed relaxation time to preserve their health and efficiency after performing their duties and responsibilities, so the concept of leave and holidays was taken into consideration under scientific management.

• Scientific wage allocation: Taylor observed that wages should be given to the

workers according to their task description and complexity. In addition, a differential piece-rate wage system was formulated by Taylor, which acted as an incentive for lazy workers. • Standardization of work: Standard procedures related to work should be made with respect to tools, working hours and conditions, production costs, and so on. • Scientific selection and training: Taylor observed that the workers should be selected based on skill sets, experience, and qualifications. Moreover, workers who do not have the required skill sets should undergo the required training for the task assigned to them.

40  Evolution of Management Thought

• Pay incentives: Pay and reward schemes motivate workers to work produc-

tively, and Taylor observed that with a rise in efficiency, the wages of the workers should also rise, which further motivates them. • Economy: Taylor observed that profit-making from a product could be earned if resources used are optimum and the cost is controlled. • Mindset transformation: To implement the concept of scientific management, Taylor observed that it required the management and the employees to change their mindset with responsibility toward producing the largest possible surplus and substituting the old rule of thumb with scientific justifications. For example, McDonald’s applies scientific management principles in their operations by establishing performance-oriented incentives and rewards for employees, and they have also come up with scientific training methods for which a special worldwide management training center by the name of Hamburger University has been set up in Illinois. 2.4.1.4 Critics

The concept of scientific management was well received immediately after it was laid down by Taylor, but later it was criticized during the first quarter of the 20th century. The assessment was that Taylor had formulated a scientific approach to management rather than embedded science into it.

• It was concluded that scientific management principles did not consider the physical, mental, and emotional well-being of the worker.

• Critics observed that Taylor laid more emphasis on production management than on other verticals.

• Another observation was that with the aid of tools, equipment, and materials, a worker had to perform the task, and for the task execution, he was instructed by the foreman or supervisor at every step, which, according to the expert’s opinion, constrained the thought process of the workers and did not give them a chance to utilize their own brains. • The critics’ study of scientific management suggested that the concept emphasized the need for excellent workers for the highest productivity, but the reality was something different. • Another point raised was that increased productivity of workers increased the yield of the company, but wages did not increase proportionately as per the increased yield. • This approach was also criticized for time, fatigue, and motion studies, which could not be scientifically measured.

Evolution of Management Thought 41

• Critics observed that the implementation of scientific management required a

considerable amount of time; hence, it disrupted the smooth functioning of the organization.

2.4.2 Henry Gantt’s Ideology on Management

Henry Gantt was a US citizen, originally a mechanical engineer by profession, and was a pioneer of scientific management since he was an associate of F.W. Taylor. Henry Gantt was the inventor of the famous progress-tracking tool known as the Gantt chart. Gantt wrote several books, such as Work, Wages and Profits and Industrial Leadership, and published research papers on various concepts of organizational management. He founded the Gantt Task and Bonus Plan, wherein rewards were given to those who were highly productive, a refinement of Taylor’s differential system of wage payment. Implementing his concept, the wage of an individual was calculated as follows:​

• Substandard productivity—wages based on time rates • Productivity as per the standard norms—accorded a 20 percent bonus • Productivity above standards—high differential rates Henry Gantt paid special attention to the person in general engaged in work and also imbibed the concept of motivation among individuals.

FIGURE 2.2  Henry

Gantt. https://en​.wikipedia​.org​/wiki​/Henry​_Gantt

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2.4.3 F. Gilbreth and L. Gilbreth

Frank and Lillian Gilbreth did not focus on time and motion study to perform tasks in the best possible time. Time and motion studies and piece-rate incentives were developed by scientific management theorists and are used even today. The piece-rate incentive system defines income as proportionate to the productivity of an individual. Scientific management theorists focused on scientific employee selection and training; proper design of work and sub-tasking; introducing work’s best practices; developing a comprehensive approach to solving organizational problems; and a professional approach to management. F. Gilbreth formulated 18 basic tasks and spent a considerable amount of time analyzing the best and quickest methods of performing each task. His wife, L. Gilbreth, a psychologist and a management expert by profession, continued preaching her husband’s management dictions and even penned down books such as The First Ambassador of Management in 1960. Workers at Monsanto use time and motion study to perform tasks in the best possible time frame. 2.4.4 Henri Fayol’s Thoughts on Management (1841–1925)

Henri Fayol’s principle states that all business activities can be categorized into six functions:

• • • • • •

Production Sales and purchase Finance Security Accounting Management

The activities of management, as stated by Fayol, include:​

• • • • •

Planning Organizing Directing Coordinating Controlling

2.4.4.1 Managerial Traits

As identified by Henri Fayol, the traits of a manager should be as follows:

• The individual should possess the right vigor. • The individual should possess the ability to make decisions, learn, and understand.

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FIGURE 2.3  Henri

Fayol. https://en​.wikipedia​.org​/wiki​/Henri​_Fayol

• The individual should be willing to take responsibility and also take initiative as and when required.

• The manager should possess more awareness and his general knowledge should also be good.

• The function performed by the manager should be aptly known by him, whether it is the production function or accounting function.

• The manager should have appropriate work experience in the domain which he handles.

• Fayol was a French industrialist in the 20th century who coined the ‘Principles of Management’ in French, which was later translated to English.

2.4.4.2 Fayol’s Principles of Management

Fayol has set forth the following principles:

• Division of work: The total workload should not be allocated to a single individual. Work, whether technical or managerial, should be distributed so that a person specializes and produces output. • Authority and responsibility: The most important aspect of management is allocating work to others. Whoever allocates work has the authority over others and simultaneously shoulders the responsibility of getting the work done.

44  Evolution of Management Thought

• Discipline: Discipline is mandatory at all levels of management and is obtained by applying stringent rules and regulations.

• Unity of command: Command is exhibited by only one individual over others across levels.

• Unity of direction: A manager of any unit or group is expected to look after the activities of that group.

• Alignment of individual interests to group interests: On no account should an individual’s interests be over the organization’s interests.

• Employee wage and compensation: An employee should be given some • • • • • • •

amount of remuneration for the task carried out by them, and the wage should be directly proportional to the task allocated. Centralization: Control of decision-making should be in the hands of top management. In other words, centralization is where top management retains decision-making power. Scalar chain: Every organization should follow a scalar chain which relates to the chain of superiors from top to bottom within an organization, and communication flow should happen via the scalar chain. Order: There should be a proper order or rule by which the resources are allocated to the right place and the right job. Equity: The managers should equally treat all the members of the organization so that there exists harmony in the relationship between the boss and the subordinate. Job security: Security of the job brings stability for an individual and also for the organization. Therefore, unless an employee is not performing properly, they should not be terminated from the job. Initiative: The second nature of the manager is to take initiative. While doing that, the manager should actively take suggestions from the subordinates and execute those initiatives. Esprit de corps: All the employees within the organization should be grouped to work for a common cause and achieve the desired objectives.

Incorporating Fayol’s principles of management, it is seen that many call center agents are authorized to perform one-time fee reversals without taking permission from the supervisor. Companies are paying a percentage of the salary as a performance bonus to employees every year and are absorbing in-house employees with the objective of retaining employees with a specific skill set, thereby cutting training and recruitment costs and appointing a human interface between the compliance unit and other business units for effective communication. 2.4.5 Chester Barnard

Chester Barnard (1971), former President of New Jersey Bell Telephone, laid out his ideas about management theory concepts and practices in his book The

Evolution of Management Thought 45

Functions of the Executive. His focus was mainly on team collaboration and cooperation of employees, and he believed that with effective cooperation and contribution from each employee and with rewards to each employee, a manager could easily attain the organizational goals. 2.4.6 Max Weber’s Principles of Management

Weber framed rigid management rules to eliminate inconsistencies and stressed the need for a bureaucratic form of management, which is based on rationale, order, and lawful ability and accrues to public benefits. The features of the bureaucratic form of management are the following:​

• Work breakdown structure: Work is divided into tasks, and each task is assigned to separate personnel who are proficient in that task.

• Levels of authority: Levels of authority should be maintained to closely monitor and supervise employees to ensure that they are performing the tasks properly and as per the directions laid out. • Policies and procedures: Weber believed that the organization’s policies and procedures had to be in place to govern the work behavior and maintain consistency among the employees. • Rights and responsibilities: Weber believed that every employee should be allocated rights and responsibilities within the organization and proper guidelines should be laid down for performing the job regularly.

FIGURE 2.4  Max Weber.

https://en​.wikipedia​.org​/wiki​/Max​_Weber​_bibliography

46  Evolution of Management Thought

• Technical expertise: As per Weber, the candidate with the right skill set and

expertise should be allocated a job, and the appraisal of that candidate should happen, subject to their performance in that job. • Content management: Weber stressed the need for an effective content management system pertaining to databases, documents, and other written records of the organization. • Impartial assessment: Weber stressed the need for an impartial assessment of employees where their family relations or having kith or kin does not influence the assessment or even functioning of the organization. 2.4.6.1 Weber’s Notion of Bureaucracy

Weber favored a bureaucratic form of organizational structure, which has many layers of management, right from senior executives to supervisors who work alongside frontline employees. A decision taken by a bureaucratic organization has to pass through many management layers for approval. Refund decisions, for example, may have to pass from frontline employees, through shift supervisors, to store managers for a retail outlet in a bureaucratic company. 2.4.6.2 Advantages of the Bureaucratic Form of Organization

• • • • • • •

Division of work and labor Allocation of appropriate roles and responsibilities Approved policies and procedures Greater exercise of control over organizational strategic decisions Standardization and work best practices aptly followed Democratic form of ruling Optimally utilized resources

2.4.6.3 Disadvantages of the Bureaucratic Form of Organization

• Alignment to market triggers is slow: A stringent series of authorities with built-in controls slows down decision-making.

• Loss of communication, both internal and external to the organization:

Internally, since a group is addressed with their decision-making, the group as a whole resists to change. Externally, customer feedback never reaches top management; hence, operational changes in the organization are slow. • Loss of creativity: Employees at the lower level might lose their creative or innovative attitude as they become increasingly aware that their opinions are not heard by the top management. • Loss of competitive advantage: Firms with a bureaucratic form of organization have to go through a lengthy formal process of supplier selection and

Evolution of Management Thought 47

assessment, purchase and sales approvals, which directly affects the organization and results in a loss of competitive edge against others. 2.4.7 George Elton Mayo’s Principles

During his time as a researcher at The Wharton School of the University of Pennsylvania in the USA, Elton Mayo established certain principles that emphasized human relations and the importance of workers’ desires, attitudes, and feelings. Elton Mayo, in later years, conducted several experiments on Hawthorne Plant workers of Western Electric Company, the results of which are published under six volumes, such as Human and Social Problems of Industrial Civilization, Expectations of Industrial Worker, Leadership in Industrial Civilization, and Management and Morale. The experiments were conducted from the years 1924 to 1932 in the following phases:​

• Experiments on the effects of changes in illumination in the production

environment: Two groups were formed: one that worked under constant lighting conditions and the other where lighting conditions were varied at time intervals. The observations were recorded, and the results showed that productivity was affected when the lighting was not adequate, but otherwise, the productivity remained the same. • Experiments on the effects of changing work conditions: In this, changes with regard to employee suggestions were implemented. Changes were made in the following areas:

FIGURE 2.5  George

Elton Mayo. https://en​.wikipedia​.org​/wiki​/Elton​_Mayo

48  Evolution of Management Thought

• • • • •

The group bonus incentive scheme Change in employee relaxation time The start of refreshment schemes for employees Elimination of Saturday as the working day The other changes were abolished, and only the fourth one remained. The main results derived from the study were that productivity increased due to socio-psychological factors such as employees’ getting the desired attention, recognition, encouragement to participate, formation of small workgroups, and supervision with minimal directives. • Interviews: This program was conducted to understand the behavioral patterns of employees toward company benefits, insurance options, compensation, and salaries. Because the number of employees interviewed was large, the implementation of an unstructured form of interview gave many interesting insights into understanding people’s behavioral patterns. Some of the most interesting observations were as follows: • Supervisors knew about the workers’ expectations. • Alignment of male workers toward the financials was significant. • Lack of cooperation was the key to variance in emotional attitude. • Employee satisfaction bore a direct correlation to his expectations from the company. • Group behavior influenced individual behavior. • It was found that a worker rose in status when they gained both internal and external experience. • An important revelation with regard to the management of an organization was that it always had its objective set on cost optimization and increase in efficiency while workers’ objectives revolved around logic and sentiment. • Experiments on group influence versus conducive financial offerings • Conducted between 1931 and May 1932. • A group of 14 male workers was identified for experimenting. • The main aim was to analyze how a group could influence a worker to restrict their output even if they were paid more incentive/bonus for a larger output. • The hourly rate of wages was fixed, and the overall group’s additional benefits depended upon the average output of each worker and that of the entire group. • It was assumed that workers would produce more output, and in addition to that, they would help each other. • The companies had not improved their working conditions for this experiment and were not responsible for the analysis of the results derived from the experiment. • However, a general observation was made about an entity’s behavior and the impact of group behavior on the entity.

Evolution of Management Thought 49

• Under this experiment, it was found that workers failed to achieve the com-

pany’s target due to the following reasons: ⚬ Job loss: Workers felt that if they generated more, a few of them would be put out of employment. ⚬ High performance standard: Most of the workers did not want the management to set higher work standards iteratively. ⚬ Protection of less-skilled employees: Workers had maintained coordination among themselves to protect the less-skilled employees. ⚬ Approval of executives: Workers were confident that management would accept lower production and not take any punitive measures for the same.

2.4.7.1 Conclusions from the Experiment

• Decisive factor for human behavior–informal relationship. • Resolution of management–employee conflicts were achieved through counseling.

• Common among all organizations was the existence of the informal organization.

• The group had a fixed average productivity of their own only because of public demands.

• Productivity could not increase even if they were paid more incentives/ bonuses.

2.4.7.2 Major Findings and Conclusions of Hawthorne Experiments

• Communal factors: Communal factors are responsible for deciding the level

•

• • • •

of productivity. According to Elton Mayo, a business organization is ‘a social system, a system of rituals and a mixture of logical, non-logical and illogical behavior’. Group influence: Employees created groups which were dissimilar from official groups to beat the inadequacy of official relationships. The norms of a particular group were different, and workers were free to change their group according to the norms. Therefore, management could not deal with workers independently as group behavior influenced individual behavior. Production level: There was no direct association between the manufacturing level and the operational environment. Motivation: Workers are merely motivated by financial benefits. Conflicts: The goals of management differed from those of workers’ objectives. Leadership: A superior is accepted as head if his method is in agreement with the human relations approach. The essence of leadership was to direct group behavior and not exert pressure for production.

50  Evolution of Management Thought

• Cordial relationship: Employees believed in sustaining good associations • • • •

with others at the cost of their own incentive or bonus due to which production got hit often. Behavior of workers: More often workers exuded group behavior. Supervision: It was found that productivity was not affected because of the existence of friendly relationships between superiors and workers. Communication: Workers could clarify their views and feelings related to a particular action. Problems faced by workers could be simply identified and solved as they were open to conversing with each other. Reaction of workers: Complaints and disapproval by workers were indications of deeper contentment.

2.4.7.3 Criticism of the Hawthorne Experiments

• De-recognition: The researchers did not give credit to the forces accountable for output in the workplace.

• Workers’ bias: Elton Mayo concluded that management always used logic, • • • • • • • • •

whereas workers were largely driven by emotions, which was not the ultimate truth. No logical enquiry: Hawthorne’s experiment lacked scientific enquiry. Absence of universalism: Research was conducted on The Western Electric Company only. Negligible consideration of social factors: Elton Mayo omitted the impact of social factors on workers’ behavior and organizations’ environment. Research constraints: Experiments were not conducted in accordance with labor laws and trade union activities. Treatment of employees: Employees were forced to accept management goals. Less importance on observation: Valid results were not arrived at due to fewer observations. No proper validation: Small experiment set gave inconsistent results. Excessive weightage to employee satisfaction: Researchers gave much importance to workers’ satisfaction, which, when measured, was more than their productivity. Nil origination of new facts: The findings were not new, and Mayo did not unearth any new point regarding the significance of group in communal life.

2.4.7.4 Evaluation of the Hawthorne Experiment

The Hawthorne experiment proves to be a milestone in the domain of behavioral findings and has made an important contribution toward human interest in the arena of industrial psychology and individual sociology.

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FIGURE 2.6  Mary

Follett. https://en​.wikipedia​.org​/wiki​/Mary​_Parker​_Follett

2.4.8 Mary Follett’s Management Principles

Mary Follett was thought to be a pioneer in the field of HR management. She believed that human psychology played an important role in the management and nurtured the passion to study human characters at various levels of the organization. Mary Follett wrote several books on areas such as business management, dynamic administration, and so on. Follett’s views on management were as follows:​

• Conflict resolution: Follett stated that resolution to a conflict does not happen

by dominating others who have different views on that issue or by compromise. It is best resolved by integrating the opinions of both the teams. • Authority: Follett stated that authority should be of the role and not designated to a person as it spoils the relationship when the concept of subordination comes into play. Moreover, the employee and employer relationship should be based on cooperation rather than on status. • Group formation and member participation: Follett stated that apart from a group’s behavioral impact on an individual, it is the motivation created by group leaders and management that inspires every member within the group to participate and take ownership in executing tasks. • Leadership: Follett believed that enhanced leadership abilities enhance the power of guiding and also being guided by the group, thereby formulating decisions accordingly.

52  Evolution of Management Thought

• Coordination: She believed that proper coordination accrues through better planning and decision-making and is a continuous process.

2.4.9 Chris Argyris’s Theory of Adult Personality

Chris Argyris believed that if managers treated the employees of their team as adults or as mature individuals and believed that the individual would take up the responsibility, then the organization could surely proceed toward its goals quickly. Also, Chris explored management practices and the needs and capabilities of adults. He showed a sharp contrast between mature and immature theories and believed that people needed less structure because it created more limits. He stressed the need for the following:

• • • •

Clearly defined tasks for better productivity Boss–subordinate relations should be sober Allocation of more responsibility ensured better productivity A friendly environment in organizations ensured rapid growth

Chris also talked about human behavioral transitions from the stage of immaturity to a mature adult state, which consists of the following traits:

• • • • • • •

Passive to active Dependence to independence Transition to multiple ways of behaving Shallow interest to deeper interests Short-term perspective to long-term perspective Lack of self-awareness to be aware and be in control Subordinate to a superordinate position

2.4.10 Peter F. Drucker and His Principles of Management (1909–1974)

Peter F. Drucker laid down certain management principles and was never a staunch supporter of scientific management and its rationale for the same. Peter Drucker was a management guru of the early 20th century, and his contributions were as follows:​ According to Drucker, management encompasses the concept of innovation, which includes the development of new ideas, the adoption of ideas from various domains, and so on. As a discipline, management has separate tools, techniques, approaches, and skills which are used for innovation.

• Drucker stated that management has no existence of its own and starts with an institution or an organization. The existence and functions of management are concurrent with the existence and functions of a manager.

Evolution of Management Thought 53

FIGURE 2.7  Peter

F. Drucker. https://en​.wikipedia​.org​/wiki​/Peter​_Drucker

• Drucker’s principle emphasizes that an effective organizational structure has

the following three characteristics: • Should have a smooth performance • Contains a minimum number of managerial positions • Provides the youth with a platform to prove their worth • The Drucker principle emphasizes a hybrid of centralization and decentralization processes followed by top- and middle-level management, which includes decisions taken for the department being shared mutually between two parties. • Drucker introduced the concept of management by objectives (MBO), which includes planning methods, setting standards and procedures, appraising performances, and motivating the employees to achieve specific objectives. • Drucker envisaged continuous changes in society and stressed that human attitudes should be open toward change and further developments. 2.4.10.1 Management by Objectives (MBO) by Peter Drucker

The above concept underlines organizational objectives and enforces that employees should align themselves with the said objectives. The essence of the above concept lies in setting goals, choosing a course of action, and making decisions.

54  Evolution of Management Thought

2.4.10.2 Characteristics of MBO

• It is said that there should be adequate involvement of senior- and middle-level

management in decision-making, implementation of decisions, and incorporating required changes for organizational effectiveness. • The goals set should be in accordance with all the members of the group, and the organization should work toward attaining the maximum result from the available resources. It is also seen that short- and long-term goals are realistic and attainable. • The main feature of management by objective is that both superior and subordinate focus more on what has to be accomplished rather than how it has to be done. • Support from the superior to his subordinate in achieving realistic short-term goals is one of the key points that is focused on using this framework. 2.4.10.3 Steps in MBO Planning

• Setting of goals: The first step is to set the organizational objectives and make

• • • •

these objectives known to everybody within the organization. Once these goals are established, they should be made known to all the members, along with the results that have to be obtained. Superior–subordinate participation: At this phase, the goals of the individual units and employees are finalized. Matching goals and resources: The management must make certain that the subsidiaries are provided with the required instruments and resources to accomplish these goals. Implementation of the plan: After the establishment of objectives and allocation of necessary resources, the subordinates can implement the plan. Performance appraisal: Reviews on the progress of the manager and the subordinates are done at this stage. Such reviews would unearth either the favorable or problematic situation occurring without delay. Performance appraisals are based on rational and measurable standards.

2.4.10.4 Advantages of MBO

• Result-centric philosophy: MBO is characterized by result-centric philoso-

phy. It provides support to staff in terms of opportunities, tools, and resources to achieve those goals. • Formulation of realistic goals: MBO facilitates the speedy progress of an organization by achieving attainable goals. • Facilitates objective appraisal: MBO promotes management by self-control, replacing management by domination, thus resulting in appraisals becoming more intentional and impartial.

Evolution of Management Thought 55

• Employee morale boost: Employee involvement, participative decision• • •

•

making, and two-way handshakes between employees encourage honest communication. Effectuating organizational planning process: MBO helps in developing action plans, allocating resources as per plan, envisaging the risks, and taking preventive actions for the attainment of goals. Motivates the employees: MBO gives employees the occasion to use their imagination and inspiration to achieve the mission. Facilitates effective control: Continuous assessment is a crucial characteristic of MBO which helps in exercising control over employees and processes within an organization. Performance is measured against the standards and deviations are calculated. Facilitates leadership: Leadership skills can be accentuated and are useful for the efficient management of the activities of a business unit. Therefore, a manager has a better chance to climb the corporate ladder.

2.4.10.5 Limitations of MBO

• Time-consuming: MBO is a time-consuming process with clearly defined • •

• • • • • •

roles at each level and reviews of progress happening at regular intervals. Promotion/demotion technique: MBO punishes employees with substandard performance and rewards those who exude superior performance. Increases documentation: The MBO program introduces extensive documentation in the form of training manuals, newsletters, instruction booklets, questionnaires, performance analytics, and reporting to the organization to have a rigid control and status tracking of the organizational activities. Creates organizational problems: MBO can create an absolute mismatch in the targets created by the subordinates and superiors of the organization. Added to this, the program excessively controls employee performance. Intra-organizational conflicts: Sometimes, departmental goals and objectives might be totally different, wherein every unit will work toward accomplishing its own goals and fail to align itself with the organizational goals. Lack of coordination: Difficulties are encountered while coordinating organizational objectives with individual and departmental objectives. Lacks consistency: Marginal benefits often diminish year after year, and opportunities are lost because individuals stick to conventional goals. Common problems with goal setting: These include (a) absence of measurable goals, (b) inflexible and rigid goals, (c) greater weightage to quantifiable and easily calculable results, and (d) emphasizing short-term goals over long-term goals. Lack of appreciation: Occasional failure of the top management to communicate the principles of MBO to the entire staff and motivation across all levels is inadequate since managers and subordinates are always working under pressure. This creates difficulties in the execution of the MBO program.

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2.4.10.6 The Essential Conditions for Successful Implementation of MBO

• • • • • •

Support from all employees of the organization Acceptance of the MBO program by managers Training of managers on MBO philosophy Organizational commitment Allotment of time and resources Provision of a continuous feedback system

2.4.11 Pyramid Concept by C.K. Pralahad

C.K. Pralahad, along with Stuart L. Hart, introduced the bottom of the pyramid concept, which states that billions of people live on less than $2 per day, in line with what the theory of economics states. They stressed the idea of fortune at the bottom of the pyramid. The pyramid concept explains how large corporations can serve low-income groups profitably. The gurus further state that there is accessibility as well as money at the bottom of the pyramid markets and the consumers readily accept advanced technologies. Only the capacity to consume has to be created along with the need. There is a huge market potential with four to five billion underserved people and an economy of $13 trillion. C.K. Pralahad and Stuart stated that the philosophy for developing products and services would be based on:

• Small unit packages • Low margin per unit • High volume and high return on capital employed The principles around which the bottom of the pyramid should revolve for economic growth opportunities are as follows:

• • • • • • • • • •

Competitive prices Operational scalability Innovations Eco-friendliness Functionality identification Process conceptualization Customer education Customer accessibility Infrastructure and interface design Innovative product delivery process

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2.5 Recent Trends in Management

The management and the managers have to keep themselves adept with the changing times, technology, innovation, development, increased globalization of markets and competitors, changing demographics, new political environment leading to increased complexities, short product life cycles, and market fragmentation forcing the companies to be decentralized, downsized borderless and flat. Along with these changing trends, an organization has to deal with radical changes and inventions in processes and concepts in the management domain as a whole. A few of the recent trends have been discussed in the following subsections. 2.5.1 Six Sigma

Six Sigma is an approach to improving the quality of process output by recognizing and eliminating the causes of faults and reducing inconsistency in manufacturing and business processes. It uses quality management techniques and crafts a unique infrastructure of employees within the business (Black Belts and Green Belts) who are specialists in these methods. Each Six Sigma venture follows a defined succession of steps and has targets such as price reduction or revenue increase. The term ‘Six Sigma’ originated from the statistical modeling of manufacturing processes. The maturity of a manufacturing process can be described by the percentage of defect-free products it creates. A Six Sigma process is one in which almost 100 percent of the products manufactured are statistically free of defects (3.4 defects per million). Motorola aimed at obtaining ‘Six Sigmas’ for all of its manufacturing operations, which has now become a buzzword for every organization. 2.5.2 Knowledge Management

An organization’s competitive benefit gyrates around its most advanced ability, that is, the knowledge workers who resolve difficult problems, build novel products, and set new directions for businesses and organizations that want to protect these assets. Hence, knowledge management is all about capturing, storing, and sharing expertise across organizations, which revolves around a specific life cycle comprising the following:

• • • • • •

Create Store Find Acquire Use Learn

58  Evolution of Management Thought

The ultimate gain through knowledge management is that when experts collaborate, progress can be made much faster than any one employee working alone. There are various knowledge management tools and techniques and a specific architecture for managing knowledge effectively. 2.5.3 Knowledge Process Outsourcing

It is a concept in which knowledge- and information-related work is performed by employees working in the subsidiary of a parent organization, either in the same state or in a different state, and is focused more on knowledge-intensive business processes catering to business expertise. It is a major industry shift where instead of standardized processes, the implementation of highly complex and customized processes happens, requiring skilled analytical, technical, and judgmental capability. Some knowledge process outsourcing services are data analytics and market research; these services aim mainly at cost reduction. 2.5.4 Retail Management

Retail management aims at bringing customers to the stores to fulfill their buying needs. It revolves around substantial time consumption and gives access to customers to locate the product they desire. The hype of retail in India is due to its ability to provide infrastructures such as post offices, public distribution systems, the khadi and village industries, and canteen stores department. 2.6 What the Management Gurus Have to Say about the Current Trends in Management 2.6.1 Globalization

Reduced boundaries between nations and their increasing flow of resources and knowledge have led to a change in the world order that has had a great impact on global business. Management gurus have concluded that the rising expectations from business and society with global competencies, combined with the increasing complexity, command the attention of business organizations around the world. 2.6.2 Technology

If the profound flow of globalization has been the potential force behind the farreaching and dynamic changes in business, then the prominence of information technology cannot be denied. In most innovative companies, businesses are technology-driven; customers are courted; supply chains are managed via websites, social media, and email; and marketing, manufacturing, and distribution processes are managed by information systems.

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2.6.3 Sustainability and Corporate Social Responsibility

Along with good and profitable business, our planet has to be sustainable. Businesses have realized this need and have taken this responsibility in recent times, and now there is an increasing focus on solutions to multifaceted social issues such as ecological sustainability, power security, and access to healthcare. This also underlines the need for increased knowledge interaction and its impact on business management. 2.6.4 The Study of Psychology

With technological advancements and the globalization of businesses, the study of human psychology—particularly cognition, motivation, behavior, and performance—has become an important part of organizational management. 2.6.5 Business Ecosystems

The most prominent trend in management has been the rise of business ecosystems. The key focus areas of modern management are working knowledge and experience, creativity in ecosystems, cross-organization knowledge flows, modular architectures, and good support for legacy systems. Summary

This chapter revolves around the evolutionary stages of management and has collated the perspectives of various management gurus on the genre of management studies. It also addresses the recent trends in management. Exercise Objective Questions

1. Classical management theory evolved as a result of • Industrial Revolution • Political revolution • Socio-economic revolution • None of the above 2. Scientific management was led by • Henri Fayol • Henry Gantt

• F.W. Taylor • Max Weber

3. Frank and Lillian Gilbreth focused on time and motion study. • True • False

60  Evolution of Management Thought

4. Which of the following is a disadvantage of the bureaucratic form of organization? • Approved policies and • Work’s best practices aptly procedures followed • Democratic form of ruling • Alignment to market triggers is slow 5. Mary Follett was thought to be a pioneer in the field of • Market analysis • HR management • Human psychology • Finance 6. Which approach acts as a single unit composed of subcomponents, inputs, output, processing, and feedback? • Quantitative approach • Operational approach • Contingency approach • Systems approach 7. MBO was introduced by • Peter F. Drucker • Elton Mayo

• Henry Gantt • Max Weber

8. Which of these helps us improve the quality of process output by recognizing and eliminating the causes of faults and reducing inconsistency in manufacturing and business processes? • Knowledge process outsourcing • Six Sigma • Retail management • Knowledge management 9. Who conducted several experiments on Hawthorne Plant workers? • Peter F. Drucker • Henry Gantt • Elton Mayo • Max Weber 10. Which approach explores the optimal ways of doing things where the performance of one subunit is reliant on its surroundings? • Contingency approach • Quantitative approach • Operational approach • Systems approach Case Study

The Zenibeth Factory, which manufactured Quasar television sets, was taken over by a Japanese company in the USA in the 1980s. After overtaking the company, it was decided to make changes in the way the factory operated, which resulted in drastic changes. The company implemented the Sig Sigma business practices to improve its environmental footprint and sales. After the implementation of Six Sigma, the factory sensed a decrease in waste generation. The company now

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had more improved processes; it became more productive by reducing waste, and therefore, it doubled its revenue. Questions

1. What is your opinion on how Six Sigma helped the company to reduce the defects? 2. Justify how the company may have doubled its profit by implementing Six Sigma. Critical Thinking Questions

1. Describe your experience where you have developed a good rapport with your peers and supervisors. 2. Describe your experience where you have used creative ways to solve a problem. 3. Tell us about a time when you had to implement a change in your area of work as you had the responsibility for it. Chapter at a Glance The Evolution of Management Thought

Whenever effort had to be expended by a team, it was extremely important that the team had to be managed. Therefore, a group of two or more individuals had to be managed by an entity in the early days. Approaches to Management

• Classical approach • Scientific management—entails the best way of doing a job • Administrative management—focuses on basic managerial functions • Bureaucratic management—focuses on forming rules, procedures, and • • • • •

workload distribution Behavioral approach HR approach Contingency approach Operational approach Systems approach

Taylor’s Principles of Scientific Management

• Scientific methods outweigh the rule of thumb • Creating group harmony

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• Cooperation • Maximum output • Improved work procedures Fayol’s Principles of Management

• • • • • • • • • • • • • •

Division of work Authority and responsibility Discipline Unity of command Unity of direction Alignment of individual interests with group interests Employee wage and compensation Centralization Scalar chain Order Equity Job security Initiative Esprit de corps

Major Findings and Conclusions of Hawthorne Experiments

• • • • • • • • • • •

Communal factors Group influence Production level Motivation Conflicts Leadership Cordial relationship Behavior of workers Supervision Communication Reaction of workers

Bureaucratic Organization

Organizations grow in size with increased functional specialization, resulting in strategic, tactical, and operational layers of management coordinating the organizational effort. The result is a bureaucratic approach to organizational structure. Features of the Bureaucratic Form of Management

• Work breakdown structure • Levels of authority

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• • • • •

Policies and procedures Rights and responsibilities Technical expertise Content management Impartial assessment

Mary Follett’s Management Principles

• • • • •

Conflict resolution Authority Group formation and member participation Leadership Coordination

Modern Approaches to Management

• • • •

Contingency/situational approach Operational approach Systems approach Mathematical/quantitative approach

Peter F. Drucker and His Principles of Management

• • • • •

Setting of goals Superior–subordinate participation Matching goals and resources Implementation of the plan Performance appraisal

Recent Trends in Management

• Six Sigma: Six Sigma is an approach to improving the quality of process out-

put by recognizing and eliminating the causes of faults and reducing inconsistency in manufacturing and business processes. • Knowledge management: Knowledge management is all about capturing, storing, and sharing expertise across organizations and revolves around a specific life cycle that comprises the following: create, store, find, acquire, use, and learn. • Knowledge process outsourcing: It is a concept in which knowledge- and information-related work is performed by employees working in a subsidiary of a parent organization, either in the same state or in a different state, and is focused more on knowledge-intensive business processes catering to business expertise.

64  Evolution of Management Thought

• Retail management: Retail management aims at bringing customers to the stores to fulfill their buying needs.

Current Trends in Management—by Management Gurus

• Globalization: Rising expectations from business and society with global •

•

•

•

competencies, combined with increasing complexity, command the attention of business organizations around the world. Technology: In most innovative companies, business is technology-driven; customers are courted; supply chains are managed via websites, social media, and email; and marketing, manufacturing, and distribution processes are managed by information systems. Sustainability and CSR: Along with good and profitable business, our planet has to be sustainable. Businesses have realized this need and have taken this responsibility in recent times, and now there is an increasing focus on solutions to multifaceted social issues such as ecological sustainability, power security, and access to healthcare. The study of psychology: As a result of the impact of technology and globalization on business, the study of human psychology—particularly cognition, motivation, behavior, and performance—has become an important part of organizational management. Business ecosystems: The most prominent trends in management have been the rise of business ecosystems. The key focus areas of modern management include working knowledge and experience, creativity in ecosystems, crossorganization knowledge flows, modular architectures, and good support for legacy systems.

3 PLANNING

An Opening Vignette Business Plan for a Manufacturing Company—Executive Summary Himalayan Cycles, keeping in view the road conditions, manufactures normal and mountain bikes for the Indian and Himalayan roads. The Indian population in the last few years has shown strong enthusiasm for mountain and sports biking, and with the Government of India taking better initiatives for excellent road conditions and roadways interlinking cities, there is more and more enthusiasm among the common mass to travel using this mode of transport. Based on market projections, Himalayan Cycles concluded that the increased enthusiasm was also due to growing traffic congestion and rising fuel prices. To meet this demand, Himalayan Cycles is trying to set up two more manufacturing units with a 7 percent rise in employee strength. Its sales are expected to grow 7 percent year on year, with a revenue growth of 12 percent by the end of the second financial year. Overview of the Business Himalayan Cycles was started in the year 2008 by two friends, Hiren and Naren, in a small workshop on the outskirts of Faridabad, very close to Nainital. Initially, they started by manufacturing small parts of the bicycle, such as brake pads, seat saddles, and so on, and then within two years, they started with the customization of normal cycles. Initially, they appointed three people and bought two second-hand machines to start with the production, DOI:  10.4324/9781032634258-3

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but as the demand grew, they employed ten more people to design, build, and test each new bicycle frame. In 2010, they obtained a contract from a team of mountain cyclists to build light, rigid, responsive, and racing cycles and came upon an industry survey that said that the sale of mountain bikes is expected to increase by 12 percent every year over the next five years.​​ Organizational Structure Figure 3.1 shows the organizational structure of Himalayan Cycles. Market Data (Author’s Assumptions on Figures) According to a study carried out by the Department of Transportation, approximately 2.5 million bicycles are purchased every year, of which 2 percent are high-end, custom-built bicycles that cost an average of ₹25,000. As per the industry survey, sales of sports cycles after the Commonwealth Games in 2010 rose by 4.5 percent. The bicycle enthusiasts were mostly from the towns of North India, in the age range of 24–35, with male enthusiasts surpassing females. At the same time, there was a significant rise in the sale of women’s cycles in comparison to the previous years. Currently, five eminent manufacturers of bicycles in India—Hero, Hercules, BSA, Atlas, and Firefox—have 75 percent of the market share, and Himalayan Cycles is not one of them. However, if the company can expand production to meet the current demand, the projected sales indicate that Himalayan Cycles will also experience an increase in sales of mountain bikes within the next three years. This increase in sales is attributed to the fact that Himalayan Cycles is customizing cycles to road conditions in plains and hilly areas of the country. Marketing Strategy Himalayan Cycles is currently selling its bicycles through distributors and retailers, and now it plans to do it through electronic media as well. Therefore, it is planning to hire Hiren (Managing Director), Naren (Director of Marketing

FIGURE 3.1  Organizational

Structure—Himalayan Cycles

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and Sales), Shirish (Director of Operations), and Maharshi (Director-Finance) and is aggressively designing a website to display its products, which is estimated to cost ₹75,000. However, at the same time, Himalayan Cycles is targeting typical Internet users and is anticipating that it will get an additional 5 percent growth in sales and revenues. In addition, it will promote the brand by sponsoring three racing events in the Himalayan region. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis Strengths of Himalayan Cycles

Good sales and after-sales services Innovative approaches used to design and build the framework of the cycle A flexible work environment to try out and experiment with different components and geometries with less human intervention Rigorous designing and testing strategies used by the company to reduce defect density Very less production and throughput delays Weaknesses of Himalayan Cycles

Not a large-scale organization Absence of a brand name Constrained resource availability and chances of scalability Threats

Competition with eminent market players Growth of the industry is subject to the government’s initiative to plan for good roadways and road connectivity across cities External players can also pose a threat with regard to the exclusive product range since manufacturing such items (high-end ones) incurs more expense and less profit Opportunities

With the government focusing on smart cities, the scope of development of better and smart roadways and opportunities for Himalayan Cycles are limitless. With increased resource availability in terms of infrastructure, machinery, and financials, Himalayan Cycles has a chance to grow exponentially. With professional cyclists, consenting to test ride their bikes, it could be an easy climb for Himalayan Cycles toward promising business activities.

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Also, with so many firms like Infosys starting intra-campus commutes using bicycles, Himalayan Cycles has opportunities to tie up with these corporate honchos for mass dealings. Himalayan Cycles can also encash tourism opportunities and tie up with the tourism industry for cycle tour offers as well. It can also connect with the healthcare industry for better prospects. Inventory and Construction Costs and Capital Expenditures Unit Price

The list price for normal bikes is in the range of ₹7,000 to ₹30,000. Mountain bike costs are in the range of ₹20,000 to ₹115,000, and the prices are not expected to change year on year. Production Cost

The following are the components of the production cost: Computer-aided design Cast iron, mold, and graphite composite for the frame Shaping and painting the frame Assembling the parts, packing, and shipping They together cost an average of ₹10,000 for the two categories of bikes, accounting for about 12 percent of the total revenue. Inventory Costs

The inventory costs of finished goods, raw materials, and parts accrue per annum to 10 percent of the revenue. Labor, Machinery, and Maintenance Costs

The labor, capital, and maintenance costs to date sum up to 27 percent of the Himalayan Cycles revenue. Therefore, if the company starts two other units, then the cost would go up by 50 percent in the initial year. Infrastructure Cost

The current infrastructure cost in lease mode is 15 percent of the total revenue, and additional investment would upscale it to 25 percent, and Himalayan Cycles has to consider the possible scenarios of Leasing additional space nearby Moving the whole workshop to a larger but remote facility.

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Leasing the unit that is adjacent to the present workshop is a favorable option because it will be relatively easy for Himalayan Cycles to transport designer builders and materials between the adjacent units. Also, moving the graphite inventory from the warehouse to the adjacent workshop, which was larger and more cost-effective because the construction was temporary though robust, was a major cost-saving option. The second alternative was quickly dismissed because of the indirect costs associated with it. Accordingly, the first option was the best because it would not disrupt the builder-designers’ workflow for the Himalayan Cycles and was available at a cheap price.

3.1 Introduction

Planning is a vital activity in the management of an organization. Planning is necessary not only for an organization but also in every walk of life for an individual. Once an event or an activity is planned, many aspects of the said event or activity become discrete. First of all, with the planning process, the objectives become clear, and it can be determined how best to achieve these objectives. 3.2 Meaning

Planning, as can be simplistically defined, is a type of activity that encompasses what, when, where, how, and by whom an activity is to be done. It is an approach that helps one decide on the path to achieving the set of objectives an individual, an organization, or a group of people have. It is a trait possessed by an intellectual characterized by thinking before doing. From an organizational perspective, it should be a process followed by every manager to achieve better performance. 3.3 Definition

The definitions by some management gurus are as follows: Planning is the selecting and relating of facts, and the making and using of assumptions regarding the future, in the visualization and formulation of proposed activities, believed necessary to achieve the desired result. —George Terry Planning is that function of the manager in which he decides in advance what he will do. It is an interactive process in which creative thinking and imagination are essential. —Haynes, Massie and Wallace

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Planning is an intellectual process, conscious determination of course of action, the basing of decision on purpose, facts and considered estimates. —Koontz, Donnell and Weihrich Planning is an attempt to anticipate the future in order to achieve better performance. —Hodge and Johnson (Source: Terry, G. R. (1977), Haynes et al., (1975), Koontz et al., (1982), Hodge et al., (1970).)

3.4 Features of Planning 3.4.1 Centralized Authority

Planning means determining the future course of action; this is what makes the entire planning process complex and difficult. This requires not only centralized efforts but also a centralized authority. A centralized authority is considered to be key to effective and successful planning. The two prime responsibilities of this authority include formulating a plan and preparing a blueprint. For example, in a manufacturing firm, it is not the marketing department that sets the target but the centralized planning department that does this task and also suggests the measures to achieve the set target. 3.4.2 Goals and Objectives

Setting the goals and objectives is the first task before planning begins, just like planning is the first task before the execution of any task. Planning without defining the goals and objectives would be just like driving a car without knowing the destination. Thus, every plan has to be built on the foundation of predefined objectives set by the central authority. The plan may have single or multiple objectives; prioritization of objectives becomes essential if the plan has multiple objectives. The objectives can be bifurcated into short term and long term depending on the time frame in which they need to be achieved. Objectives could be economic, social, or political. For example, if a company strives to increase its market share, it has an economic objective, whereas if it is carrying out various awareness programs for the general public, it has a social objective. 3.4.3 Deterministic Time Schedules

Planning is accompanied by fixed time schedules. If there is a plan, then it is accompanied by a timeline by which the plan has to be implemented. A plan can be any of the three types: short-term, medium-term, or long-term plans. Because

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organizations’ goals also fall into these categories, plans are designed and put into action to achieve the goals. 3.4.4 Comprehensive and Social

Planning can be viewed from a bigger dimension and can go to the level at which the entire government of a country is involved in planning to bridge economic inequalities for achieving a socio-economic objective. Planning, when done by the government, should be comprehensive in the sense that it should address all the sectors such as finance, production, economic resources, and so on for the entire nation to accrue benefits. 3.4.5 Regulations and Controls

Regulations and controls comprise a vital element of planning. If a country has a planned economy, which is continuously regulated and controlled by proper controls on production, consumption, exchange (export and import), and labor wages, it is less impacted by economic downturns. 3.5 Nature of Planning

The chief characteristics or nature of planning are as follows. 3.5.1 Planning Is a Creative Process

If followed, this process enables an individual to think about the future and plan the required course of action to be taken. There can be many alternatives available for the course, but using experience, intuition, and knowledge, the best possible course of action has to be taken. 3.5.2 Planning Helps in the Fulfillment of Objectives

An organization sets its own goals and objectives. To help achieve the goals and objectives, the top management and the middle-level managers have to formulate plans. For example, when Tata Consultancy Services developed ORCA Financial Software, a standalone product, its chief objective was to establish the company as the best global organization for the large-scale deployment of financial management software solutions on the Caché platform. As a result, the steps that could help achieve the company goals were as follows:

• To establish a fully object-oriented, component-based application that will enable to deliver robust software quicker and more efficiently than any competitor.

• To ensure that customers can operate their business software solutions on infrastructures that match their needs.

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In order to fulfill the above objectives, quality planning for the large-scale flexible manufacturing system, human resource planning (for developing and maintaining the software), risk planning, and planning for the commercials had to be done by the senior managers. Similarly, a large-scale implementation plan had to be made by the concerned project head to achieve the desired objective. 3.5.3 Planning Is the Core Function of Any Organization

Planning is succeeded by other management functions, such as organizing, controlling, and directing. These functions are interconnected and interlinked. For example, a mobile company wants to improve the sale of its products. In order to do so, the manager has to focus on the increase in advertising and marketing of the product, competitive pricing of the product, and quality of the product, for which a detailed plan engulfing all of the above areas has to be formulated. After the plan, the manager needs to organize the team so that tasks are allocated and authority is granted to achieve the objective. To achieve an increase in sales, the manager might need to recruit, select, train, and develop employees. This function of management is otherwise known as staffing. Along with the task of staffing comes the task of motivating, communicating, guiding, and solving people’s problems. Controlling is the last step; a manager should necessarily monitor the tasks set. Having set the objectives for ORCA financials, the Tata Consultancy Services business head should monitor whether alignment to the specified objectives is happening or not. 3.5.4 Planning Helps to Improve an Organization’s Efficiency

Planning leads to maximum output with minimum expenditure, and proper planning helps allocation of appropriate task and authority to the individuals and keeps the individual or the group motivated. 3.5.5 Planning Is an Ongoing Process and Helps to Identify Constraints

Planning is a continuous activity, and plans made by managers have to be revisited time and again for modifications. It involves incessant collation, evaluation, and choice of data; scientific exploration and investigation of the probable courses of action; and the selection of the best option. 3.5.6 Planning Is Always Accompanied by Implementation

A plan that has been designed has no significance until and unless it has been put into action. For example, until a budget is formulated, expenditures are planned, and expenses are done according to the plan, there is no significance associated with the plan. Therefore, a plan should be accompanied by action.

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3.5.7 Planning Also Promotes Unity and Consistency

Planning involves the unity of employees in the organization because it forces employees to assist in decision-making and give valuable suggestions while the plan is being made, and once made, the plan is effective uniformly for every individual within an organization. Plans should be prepared, reviewed, updated, and presented to the concerned authorities for implementation. Plans change and get revised frequently or are merged with other sub-plans and appraised for their effectiveness under changing business scenarios. 3.6 Planning Premises

Planning is always made for the future, and a plan is designed and developed through scientific forecasting of future events. The assumptions are made from the forecasting and are used in planning. A term that got eventually coined is the planning premise. According to Koontz O’ Donnell, this term can be described as few anticipated environments where the plans get executed. Planning premises chiefly include assumptions or forecasts for the future and prevailing conditions that can or will impact the planned course. The items that get impacted are prevailing policies and the currently existing plans. Planning premises provide a plan and action framework even when the business environments have great uncertainties. The frameworks, in addition, have stipulated assumptions and predictions. The premises for planning are established based on relevant forecasting, correct knowledge, and choice. A change in the planning premise results in plan modifications. Planning premises are indispensable to the success of planning as they render relevant facts and future predictions such as population trends, economic conditions, manufacturing costs and prices, competitive traits, capital and material availability, and control by the government forces and components which respond to the business economy. It is the responsibility of a manager to select proper planning premise, based on certain strategic and crucial factors. The types of planning premises can be classified as follows (Fig. 3.2).

FIGURE 3.2  Types

of Planning Premises

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3.6.1 Internal and External Premises

Internal premises refer to predictions and setting up of organizational policies, capital investment in plant and equipment, resources, and organizational capability in the form of machines, money, and methods. Suffixed with it are impressions, actions, ethics and values of the owners and employees of the organization that validate the predictions and help crafting the policies. For men as in managers, desirable are the ability and the skill of the working class. External premises relate to the business environment that is external to the organization, and the examples for the said are as follows: product and money market, population growth, government regulation and policies, commercial cycles, and scientific changes. External premises may be categorized into three groups:

• Enterprise environment • Factors that determine the requirement for the products of the enterprise • Factors that impact the enterprise’s resource availability These external premises may include the following:

• • • • • • •

Business and economic environment Scientific and technological changes Government guidelines and policies Population growth Political constancy Sociological factors Requirement for industry’s product

3.6.2 Tangible and Intangible Premises

The tangible premises are measured quantitatively. They can be quantified in terms of money, time, and units of production. Intangible premises relate to the reputation of the businesses, public relations, motivation for employees, esprit de corps of employees, political stability, sociological factors, business and economic environment, attitude, philosophies, and behavior of the owners of the organization. For planning, both tangible and intangible benefits are to be taken into consideration. 3.6.3 Controllable, Semi-controllable, and Uncontrollable Premises

Controllable premises constitute factors such as material, money, and equipment over which the management has maximum control. The management can decide on the policies, procedures, rules, and strategies to be followed for achieving the organizational objectives.

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Semi-controllable premises incorporate futuristic assumptions which are under the partial control of a business entity. Examples of such premises are demand for the product and trade union relations. Uncontrollable premises correlate to government rules and regulations, transnational trade agreements, wars, natural disasters, innovative breakthroughs, inventions, and so on—those which cannot be foreseen or controlled. These factors disturb the planning with respect to men, money, and material. The uncontrollable premises can be categorized under the intangible premises as factors like human behavior also come under uncontrollable premises. 3.6.4 Constant and Variable Premises

Constant premises constitute men, materials, and money, which do not change or behave in the same manner regardless of the action taken. Variable premises are those which vary in relation to the course of action. It is expected from the management to consider these factors while planning. For example, the volume of sales or purchases for the inventory can be controlled to some extent by the management, but in the case of supplier-based raw material, shortage or longer turnaround times from the supplier’s production units are instances that cannot be controlled. Forecasting gives the manager an idea of knowledge of their variations. 3.7 The Importance of Planning

• Planning greatly helps in the reduction of uncertainty in the future. This is

•

• • •

• •

because of the continuous advancements in the fields of science and technology, changes in government rules and regulations, changes in the habits and habitats of people, and so on. With proper planning, material, and human resources are optimally procured and utilized. Delegation of tasks, roles, and responsibilities happens effectively; there is no duplication of effort; and the assigned work gets completed in the allocated time. With proper planning, organizations’ goals and objectives are also achieved, thus increasing organizational effectiveness. Planning helps in selecting the best solution or alternative for a particular problem attainable at minimum cost. Planning and implementation of any plan enables a manager to monitor whether a project is going according to plan or not. Effective planning ensures proper control, which means understanding the deviations encountered while implementing the plan. Planning enables the managers to come up with innovative ideas and also have an appropriate mechanism for facing emergencies. Effective planning can give a competitive edge to any industry/organization because it involves expansion in the scope and capacity of the services rendered

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by the organization, changes in the working culture, changes in the quality of services delivered, and also the technological changes which the organization goes through with proper planning. 3.8 Limitations of Planning 3.8.1 Planning Does Not Render Flexibility

With predetermined rules, regulations, policies, and procedures, the freedom to do tasks differently is not possible. Planning does not encourage experimentation, and an individual needs to adhere to rules and policies. 3.8.2 Planning Is a Time-Taking Process

To plan for something, one needs the required information. After having collected the information, it is required to analyze the same, derive results, and then narrow down to a certain alternative. For example, when planning for the cost that will be incurred for a business tour for a project team, an organization should collect information on flight fares and flight details, available accommodation options, accommodation rates, and local transport facilities and rates and then narrow down to the best possible alternative. All these require quite a lot of time. 3.8.3 Planning Is Not Deterministic

Planning is futuristic and incurs risk because the future is not known. Hence, with time, the plan might become obsolete since it is based on an estimation process or an activity. If an organization or an individual is dependent on a plan, then it can be dangerous because nobody can be certain about the future. 3.8.4 Planning Can Secure the Future in a Deceptive Form

Detailed planning can make a manager rely excessively on the plan and give them a sense of satisfaction for having followed the plan closely. In this case, if the results of following the plan are negative, then it becomes disastrous. 3.8.5 Planning Is Costly

Collation and analysis of information are costly in terms of money, effort, and time. 3.8.6 Susceptibility of Planning Planning is also susceptible to the following:

• Political scenario • Changes in science and technology

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• • • •

Competitive environment Natural disasters Price fluctuations Trend changes

3.9 Types of Planning 3.9.1 Long-Term Plans

These are formulated by the senior management. To formulate long-term plans, a manager has to see through the future and best forecast the futuristic estimates, keeping in mind the current scenarios—financial, social, economic, political, and technological—of their organization and the country. For example, a fashion designer has to formulate long-term plans up to a tenure of two to three years because trends in fashion change inevitably by that time, whereas for the technology industry, it might span a duration of five to seven years to develop, promote and market a new product. For any individual, a long-term plan is an investment plan. Long-term plans can also include expanding the business across the globe. Initially, long-term plans could seem impossible to achieve. 3.9.2 Short-Term Plans

Short-term plans are made to achieve objectives within a short tenure. Examples of short-term plans are to design a website for any organization within a span of two weeks or publish a bi-yearly research journal planned by the research cell of any university or college. Short-term plans are devised by the managers who work at the operational or tactical level of the organization. 3.9.3 Medium-Term Plans

These plans are made keeping in mind the tenure of one to a maximum of three years. These plans are devised by the senior management with a strong focus on organizational growth and include increasing the product line with a few new products to be released into the market in a span of two to three years or diversifying to bring out a complete solution. For example, Fuji earlier used to develop film rolls, but later it started developing photography paper instead of procuring it from third parties. 3.9.4 Operational Planning

Operational planning is the planning of the day-to-day activities or schedules. For example, the departmental head took a meeting to state that until the budget for the next financial year is released, an employee has to plan for his upgradation by participating in the forthcoming training program.

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3.10 Steps in Planning

The various stages of the planning process have been discussed in the following subsections (Fig. 3.3). 3.10.1 Set the Target

An organization works toward achieving certain targets. For example, Accenture had been helping Unilever to meet its growth targets by establishing global systems, applications, and products (SAP) platform for doubling the revenue and size of the company. The target of any organization should be clear, concise, and measurable in terms of schedule, budget, or resources. The targets are set based on the opportunities visualized by managers and are influenced by the organization’s mission, values, and beliefs. Once a target is set, a plan can be worked out to accomplish it. Target can be from the perspective of an organization, a department, or a unit. 3.10.2 Defining the Assumptions and Conditions

There should be clearly defined assumptions and conditions before a plan is finalized. For example, if a production company is laying down plans to produce a specialized product, then the assumption made is that it will require extensive training sessions for its staff to produce that product. Another consecutive

FIGURE 3.3  Steps

in Planning

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assumption can be that for training, the resources, duration, and funding will be required appropriately. Assumptions can be indirectly seen as forecasts, which are events or activities that will happen in the future and are factual. Assumptions are vital to the success of planning and are revised with changes in the business environments. Alternate plans may be prepared as a fallback if some set of plans does not work with the set of assumptions. 3.10.3 Identifying and Reviewing Constraints

Constraints act as a barrier and restrict the smooth execution of a plan. For example, a production company may face constraints such as building and machinery capacity; labor quality, adequate supply of parts and raw materials; optimum production schedule; and healthy cash flows with changes in demands. Hence, a SWOT analysis has to be performed before actually designing a plan. 3.10.4 Deciding the Tenure of Planning

Once the targets, assumptions, and constraints are laid down, the next step is to decide on the tenure of planning. The tenure depends on time to obtain the capital for the business venture, the future availability of raw or semi-finished products, and the time taken to develop, market, and sell the product. 3.10.5 Formulation of Policies and Strategies

After the target is defined and assumptions are identified, management can formulate policies and strategies to achieve the target with the involvement, views, and ideas of middle management. Intuitiveness, far-sightedness, and experience are required among the top- and middle-management employees of the organization to formulate the most appropriate policy for the organization and also to design alternatives. If more than one alternative is good, then various alternatives may be combined in action. For broadband Internet access, customer agreement of Verizon states that an individual has the right to send and receive the lawful content of their choice. 3.10.6 Preparing Plans for Execution

The plans which are designed to achieve the targets consist of method, time, and capital planning, which help in long-term planning for budget, procurement, resources, schedule, and quality to achieve the desired target and so on. Business plans should also envisage the timing and sequence of activities to ensure continuity in business.

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3.10.7 Amalgamation of Plans

Different plans must be combined, reviewed, and revised before being put into operation and should be communicated to those who will be shouldering the responsibility for putting them into practice. The plans, once designed, go through a series of version changes, and these plans should be evaluated and appraised to identify the gaps under changing business scenarios. 3.11 Planning Tools and Techniques 3.11.1 Forecasting

Forecasting is an essential concept in business as it is based on the business activity happening in the present and that has happened in the past and for which expectations for the future are set. Once the expectations for the future are set, plans are devised to satisfy the business needs. According to Henri Fayol, ‘Business forecasting includes assessing the future and making provisions for it’, while Neter and Wasserman state that ‘Business forecasting refers to the statistical analysis of past and current events in a given time series to obtain clues about the future pattern of movements’. 3.11.1.1 Forecasting as a Process

Accurate forecasting is possible if any business has strong foundations. This means that any business is assessed over some time. Its strengths and weaknesses are identified and then the estimation for the future is done. If the estimate varies or deviates more from the actual, then the forecast has to be refined. For example, Airbus’ Global Market Forecast stresses the need for aircraft ranging from 100-seat aircraft to the largest A380 based on factors such as demographic and economic growth across countries and continents; tourism trends; oil prices; and the development of new and existing routes and destinations. 3.11.1.2 The Benefits of Forecasting

Forecasting helps in the growth of the business. Business plans are devised and executed based on forecasts, ensuring better productivity, optimized usage of resources, and effective cost. There are two broad methods of forecasting, that is, the qualitative and quantitative methods. 3.11.2 Qualitative Method of Forecasting

The method is based on human judgment or opinion and is non-mathematical. It can also instill bias, which can make the forecast inaccurate. This method can consider the latest changes in the environment. The methods consist of executive methods, market research, and the Delphi method.

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3.11.3 Quantitative Method of Forecasting

This method is mathematical, consistent, and data driven. The accuracy of the forecast is based on the data quality. The methods consist of extrapolation, regression, time series, and causal/econometric models. 3.11.3.1 Application Areas of Forecasting

The application areas of forecasting range from political, social, technological, and economic to market prominence and labor supply. 3.11.4 Example

The simplest type of forecast is the naive forecast, which uses the actual demand from the past as the demand for the future, ensuring that the past will repeat. For example, the sales forecast represented using a naive forecast for the month of May will be 45 metric tons since it is anticipated that the pattern will repeat. Using the averaging concept, it will be (25 + 35 + 56 + 45)/4 = 40.25. 3.11.5 Benchmarking

Benchmarking is the process of identifying the industry’s best practices across various businesses, which may be operational, procedural, or product specific, and is a measure to improve the performance of any business or industry by cross-referencing the indicators. A comparative study of the product and internal and external processes of the organization is done by managers to understand their strengths and weaknesses in the aforementioned dimensions. The objective of benchmarking is to identify best performances or practices and incorporate the best practices into their own by innovating rather than imitating. 3.11.5.1 Benchmarking Process

The benchmarking process is shown in Figure 3.4. TABLE 3.1  Example of Simple Forecast

Month

Actual (Metric Ton) Forecast (Metric Ton)

January February March April May

25 35 56 45

25 25 35 56 45

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FIGURE 3.4  Process

of Benchmarking

3.11.5.2 Use of Benchmarking

Companies use benchmarking to achieve the objectives shown in Figure 3.5. 3.11.6 Scenario and Contingency Planning

Scenario planning compels the executives to examine various courses of action based on a variety of operating policies and financial conditions as envisaged by the company. Contingency or situation planning is based on monitoring the impact of sudden changes in market scenarios or disruptions in trade. Scenario and contingency plans do not encourage one-dimensional thinking, and by testing

FIGURE 3.5  Reasons

for Implementation of Benchmarking

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a variety of situations and doing causal analysis, managers can challenge the assumptions and then decide the course of action. Plans are implemented, and pressure so that the company can handle any situation. 3.11.6.1 Scenario and Contingency Planning Processes

The steps of the process are shown in Figure 3.6. 3.11.6.2 Use of Scenario and Contingency Planning

Companies use scenario and contingency planning to achieve the goals enumerated in Figure 3.7.

FIGURE 3.6  Scenario

and Contingency Planning Overview

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FIGURE 3.7  Use

of Scenario and Contingency Planning

EXAMPLE ABC’s initiative to meet customer demands is through a consistent product supply. This supply is ensured through the invocation of proper contingency plans, which include backup manufacturing plans based on the level of inventory and the production schedules.

Process

•

• •

ABC maintains strategic associations with the suppliers, to be the receiver of raw materials and packaging, and they, in turn, have business process recovery plans to diminish or reduce shortages. ABC also had the approval to purchase from other suppliers if the current supplier could not meet their demands. Also, ABC ensured that, if necessary, the production of finished goods could also happen at the production units, and for that, they maintained a list of backup contract builders and so on. ABC ensured that failure of machinery would call for immediate replacement of machines or disposition of products to another construction facility.

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3.11.7 Use of Staff Planners

Staff planners plan for the organization as it grows in size by units, and they are skilled in incorporating planning processes and using effective planning tools and techniques for streamlined planning. However, it has been perceived that there is a communication gap between staff planners and line managers. They should collaborate very often to implement the plan, which may lose effectiveness.​​ 3.12 The Essentials of a Good Plan

• A plan, if designed, should assist in better utilization of the resources, whether

• • • •

• • • • • •

material or human resources. With planning, allocation of tasks, roles, and responsibilities to the required resources happens effectively, duplication of effort is reduced, and resource operations become smoother and faster. A good plan should help achieve an organization’s goals and objectives if the plans made are realistic and enable every employee of the organization to have a direction for the same. A good plan should optimally utilize resources and inventory, produce the right quantity of products at the right time, and remove any redundant activities carried out in the organization. A good plan helps in locating and identifying future uncertainties, which can be avoided by a minimal percentage with the help of a good plan. A robust plan helps in the growth of an organization. Planning to launch a new line of products or adding new products into a product family and bringing changes in the quality of products or services can help the organization to be more competitive. A good plan encourages appropriate control measures to be taken to see whether the activities are going according to the plan or not. A good plan motivates the employees because they are also involved in making decisions and giving suggestions for improvements to the plan. Employee cooperation is also enhanced by effective planning. A good plan initiates innovation and creative thinking among senior management because, after a lot of rational brainstorming, a plan shapes up and is put up as a blueprint. A good plan saves a lot of effort and time for people, who are at the operational level in an organization because, with a good plan in place, they only need to execute according to the plan. Planning helps managers cope with changing scenarios; therefore, a good plan should be closely aligned with future events such as changes in political, economic, social, and technical scenarios. A good plan can brave bad weather, that is, anticipate risks and can help in using effective business continuity planning approaches despite the turbulent market and political conditions.

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3.12.1 Planning Made Exemplary

Planning, an essential function of management, involves mapping tasks to goals. The term ‘planning’ can be better explained with the help of an example. EXAMPLE An organization wants to ramp up its sales. The sales manager first needs to decide the steps necessary to accomplish that goal. The steps are converted into a plan. When the plan is in place, the manager can follow it to accomplish the goal of improving company sales. Company: Bactrac Financial year: 2012–2013 Short-term goal: To improve sales of the company for this financial year Tasks to be accomplished to achieve the goals:

• Establish a network: Bactrac has tapped Syncap Corp., which will use its plat-

•

• • • •

form to create integrated social-marketing programs across Facebook, Twitter, and Google+ for more than 20 Reckitt Bactrac products, including garment cleansing agents, kitchen cleaners, toilet cleaners, and so on. Increase marketing and advertising of the product: To lift sales, Bactrac is investing an additional £100 million in main brands such as toilet cleaners more of its marketing spending from television ads to digital media and consumer education campaigns. Product innovation: Bactrac’s first-quarter sales growth was driven by ‘continued excellent performance’ in emerging markets and product innovations in various categories of cleansing agents. Increase inventory of the finished goods: For this, Bactrac’s inventory process always maps supplies with demand. Increase in marketing and sales staff: To promote business, Bactrac increased its marketing and sales staff by 2 percent across geographies. Tapping emerging markets: Bactrac announced its robust growth in emerging markets and reiterated its full-year financial targets. Total second-quarter net revenue, at constant rates, increased by 3 percent. Growth trends in both developed and emerging markets were similar to those in the first quarter of 2012. There was an improving trend in health, with the hygiene power brands of antiseptic lotions and cleansing agents. At constant rates, total net revenue increased by 4 percent in the first six months. Growth was driven by an extraordinarily strong performance in America, except in North America, most of the northern and southern regions of Asia and Russia, the Middle East, and Africa,

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FIGURE 3.8  Bactrac

Inventory Process

with controlled results in Europe. Here, weak market conditions and consumer sentiment continued to prevail. • Promote activities: This includes upselling, discount offers, customer rewards, and free samples. • Excerpts from Bactrac for advertisement of free samples: Bactrac India has been offering a price discount on its liquid soap brand and also upselling its cleaning agent with a small antiseptic soap pack. To be eligible for the free sample kit, an individual must be (a) an Indian citizen and (b) 18 years of age or older at the time of registration. Registration will be exclusively online at www​ .bactracdettolpro​ductcat​.com and must include first and last names, complete mailing address, and numbers. The limit is one sample per person per household. The offer is subject to availability. • Track cold calls and appointments and identify prospects: Bactrac is trying to enhance its prospects through mergers and acquisitions to build a better

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business. It has the required resources to fund such acquisitions and has the management capability to absorb, integrate, and manage such acquisitions within its existing structure. • Track the sales pipeline, Bactrac uses a moderately low sales cycle time, i.e., the time required to close sales with the prospect as well as referrals with variation in the ratings. The company also effectively monitors the sales pipeline with variations in the ratings as can be seen from the example below. • Soften and resolve internal and external causes: Bactrac’s strategy during the recession time accompanied by an economic downturn was to use the media extensively to announce their products, categories, and prices to a bigger customer base at deflated costs for achieving long-term goals. • Keeping track of non-sales tasks such as documenting or report writing: Along with the activities undertaken for sales to become effective, Bactrac’s strategy was to also invest a certain portion of their time in the documentation of the activities and reporting of the effectiveness of the planning strategy undertaken to ramp up the sales. This was done to archive in the knowledge base, the sales strategy adopted for future references. EXAMPLE: MANPOWER PLANNING BY BLAZE STAR Blaze Star Company set an expansion agenda intended to double its product output within five years. For this, the company faced the following manpower issues:

• Organization that was originally designed to operate one asset and has not evolved to handle two

• Maintaining the high-performance record and low-cost structure currently in place

An agency was engaged to assess the impact of the growth on the manpower needs and develop a road-map to achieve the manpower plan. Planning for manpower requires the execution of the following three steps:

• Creating a baseline using current manpower and attrition rate • Understanding level of business, expansion/resizing, and market condition • Mapping action drivers, trade standards, and top-down estimates against these

parameters and elements to approximate existing and potential manpower demand

The agency established manpower demand for the current business and also projected future requirements based on the following:

Customer

1 Adinath Chopra 2 Ashotosh V. 3 C. Singh Total

ID

Title

Category

Probability (%)

3 Nov 2012 80 15 Nov 2012 80 23 Nov 2012 80

Rating Est. Closed Date

A. Jai Sales rep (1) Category Warm T. Suri Sales manager (1) Category Cold A. Jai Sales head (2) Category Hot

Emp

TABLE 3.2  Sales Pipeline with Variations in Ratings

10,000 5,000 50,000 65,000

Est. Revenue (in $)

8,000 4,000 40,000 52,000

Forecast Value (in $)

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FIGURE 3.9  Manpower

Planning—Blaze Star

• Calculation of resources per activity or task in line with industry standards • Project team structure or format • Estimation of resources top-down per organizational entity Also, current and expected future gaps in manpower requirements were identified. The analysis highlighted significant under-staffing in core functions, though there was strong sharing and utilization of resources. Then, with the agency’s recommendation, the company formulated task-based and event-based manpower planning, which rendered several benefits, such as

• Increasing production by closing its gaps in manpower demand • Enabling the company to maintain its low-cost structure and standards This chapter underlines the importance of planning and its relevance to management and highlights the essentials of a good plan. It justifies that good management requires concrete planning and goes on to exemplify to give the readers more clarity on its being the first and most important function of management.

GLOBAL IMPLICATIONS Lidl, a German grocer with big expansion plans in the US, is planning to open 100 stores in the USA by next year and thereby posing a great threat to US grocer giant Publix. Lidl’s stores are based in Germany, similar to Aldi’s, and have

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strong chances of capturing the US market. The stores offer selected grocery items, the majority of which are its private labels, offered at a discount to most other grocers. The recent trends show customers’ inclination to buy more restaurant food and meal-kit delivery services offered by Lidl, which also has the potential to take in the market share of the other grocers. Bilcare Research Plans Capacity Expansion in Germany: Bilcare Research AG, a part of the Pune-based Bilcare Ltd based out of Maharashtra, India, and a global producer of rigid films and foils, is venturing for extensive capacity planning in Botzingen, Germany, to meet the growing demand for pharmaceutical packaging films in the European market. Bilcare is simultaneously trying to strengthen its presence in the Asian market. For that, Bilcare Research is investing approximately 50 million and envisions that this expansion will greatly change the quality aspect of films and foils, such as how it will enhance workplace safety, hygiene, and environmental protection worldwide. Bilcare Research, with a focus on research and development, operates at seven sites across the globe. Besides polyvinyl chloride film production, the company is also involved in the coating, stenting, and lamination of films.

3.12.2 Case Study

The following team structure will depict the resource plan required for assigning roles and responsibilities for developing the Employee Administration System Project for a company named QUITO, which will look after employee satisfaction, grievances, and mitigation mechanisms through the software. Summary

The chapter focuses on the importance of planning and justifies why planning is an essential management function, which is continuous in nature and done at all levels and from various organizational perspectives. The chapter also summarizes the essentials of a good plan and describes the robust features of the planning tools, such as benchmarking, forecasting, and contingency planning, which are highly effective for organizational planning and decision-making.

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FIGURE 3.10  Employee Administration

System Project Team of QUITO

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FIGURE 3.11  Employee Administration

System Project Schedule Plan (2008–2009)

Exercise Objective Questions

1. Planning is an approach which helps us decide on the path to achieve the set of objectives an individual, an organization, or a group of people have. • True • False 2. Planning is a process followed by every ______ to achieve better performance. • Employee • All • Manager • None 3. Planning is an ______ process. • Ongoing • Autocratic • One-time • None of the above 4. Which of these is being devised by the managers? • Long-term plans • Medium-term plans • Short-term plans • None of the above 5. With proper planning, material and human resources are optimally procured and utilized. • True • False

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6. Planning is accompanied by ________ schedules. • Flexible time • Both • Fixed time • None of the above 7. Planning does not render flexibility. • True • False 8. Planning is also susceptible to • Political scenario • Price fluctuations • Changes in science and • All of the above technology 9. Executive methods, market research, and the Delphi method are examples of • Quantitative method of • Benchmarking forecasting • None of the above • Qualitative method of forecasting 10. Contingency planning assesses what effect sudden market changes or business disruptions might have on a company and devises strategies to deal with them. • True • False 11. ________ can be described as a few anticipated environments where the plans get executed. • Forecasting • Planning premises • Planning • None of the above 12. __________ is not a type of planning premises. • Tangible and intangible • Constant and variable • Foreseeable and unforeseeable • Forecasting and controlling Case Study

Tevica Private Limited was the largest company set up for the sale of packed food items. It was involved in a variety of food products such as chips, butter cookies, breads, and many more. Mr. Somesh is the CEO of this company and says that the company has exceptionally good brand value and is among the first five players in the packed food market. He keeps a close eye on the market trends and environmental changes happening around the company. There are various foodpackaging units entering the market these days. To maintain the same brand value, Mr. Somesh plans to come up with the following ideas:

• Expand his unit to various other locations • Provide promotional offers during festive season • Go global on the market by selling the food packets online

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Questions

1. Discuss the opportunities, strengths, and weaknesses available for the company. 2. What strategy would you suggest to Mr. Somesh to continue with its brand value in the market? Critical Thinking Questions (To be answered citing relevant examples)

1. 2. 3. 4. 5.

Planning is an intellectual process. Comment. What could be the barriers to planning? How can a plan be made effective? Suggest some practices to implement effective planning. Discuss planning premises in detail

Chapter at a Glance Planning

Planning is an approach that helps us decide on the path to achieving the set of objectives an individual, an organization, or a group of people have. From an organizational perspective, it should be a process followed by every manager to achieve better performance. Features of Planning

• • • • •

Centralized authority Goals and objectives Deterministic time schedules Comprehensive and social Regulations and controls

Nature of Planning

• • • • • • •

Planning is a creative process. Planning helps in the fulfillment of objectives. Planning is the core function of any organization. Planning helps to improve an organization’s efficiency. Planning is an ongoing process and helps to identify constraints. Planning is always accompanied by the implementation. Planning also promotes unity and consistency.

Planning Premises

• Internal and external • Tangible and intangible

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• Controllable, semi-controllable, and uncontrollable • Constant and variable • Foreseeable and unforeseeable Importance of Planning

• Planning greatly helps in the reduction of uncertainty in the future. • With proper planning, material and human resources are optimally procured and utilized.

• With proper planning, organizations’ goals and objectives are achieved, thus • • • •

increasing organizational effectiveness. Planning helps in selecting the best solution or alternative for a particular problem, attainable at minimum cost. Planning and implementation of any plan enables a manager to monitor whether a project of any kind is going according to the plan or not. Planning enables managers to come up with innovative ideas and also have an appropriate mechanism for facing emergencies. Effective planning can give a competitive edge to any industry/organization.

Limitations of Planning

• • • • •

Planning does not render flexibility. Planning is a time-consuming process. Planning is not deterministic. Planning can secure the future in a deceptive form. Planning is costly.

Types of Planning

• Long-term plans: These are formulated by the senior management. To for-

mulate long-term plans, a manager has to see through the best forecast and the futuristic estimates, keeping in mind the current scenarios—financial, social, economic, political, and technological—of their organization and also the country. • Short-term plans: These are made to achieve objectives within a short tenure. Short-term plans are devised by the managers who work at the operational or tactical level of the organization. • Medium-term plans: These are the plans made keeping in mind a tenure of one to a maximum of three years. These plans are devised by the senior management with a strong focus on organizational growth. • Operational planning: Planning the day-to-day activities or schedules.

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Steps in Planning

• • • • • • • •

Set the target. Define the assumptions and conditions. Identify and review the constraints. Decide the tenure of planning. Formulate policies and strategies. Prepare plans for execution. Amalgamate plans. Assess and provide feedback.

Planning Tools and Techniques

• Forecasting: This includes assessing the future and making provisions for it. • Benchmarking: This improves performance by identifying and applying best-

demonstrated practices to operations and sales. • Scenario and contingency planning: Scenario planning allows executives to explore and prepare for several alternative futures. • Use of staff planners: As organizations grow, there is a corresponding need to increase the sophistication of the planning system itself. Essentials of a Good Plan

• A plan, if designed, should assist in better utilization of the resources, whether material or human.

• A good plan should help achieve an organization’s goals and objectives. • A good plan should optimally utilize resources, for the right quantity of prod• • • • • • • •

ucts at the right time and remove any redundant or ineffective activities carried out in the organization. A good plan helps in locating and identifying future uncertainties, which can be avoided by a minimal percentage with the help of a good plan. A robust plan helps in the growth of an organization. A good plan encourages appropriate control measures to be taken to see whether the activities are going according to the plan or not. A good plan motivates the employees. A good plan initiates innovation and creative thinking among senior management. A good plan saves a lot of effort and time for operational people. Planning helps managers cope with changing scenarios. A good plan can brave bad weather, that is, anticipate risks and can help in using effective business continuity planning approaches.

4 ORGANIZATION

An Opening Vignette Effect of Macro Factors on McDonald McDonald’s as an organization is a global player in the fast-food category with the mantra of enhancing ‘quality’, ‘service’, ‘cleanliness’, and ‘value’. The organization, since its inception, has been engaging in massive product promotion and aligning the customers’ preferences and experiences to their organizational goal for quick growth, turnover, and scalability. As an organization, it is focused on keeping its key assets, the employees, satisfied by providing opportunities, nurturing talent, delegating authority, enhancing leadership abilities, and forming diverse groups for experiential learning. The business model of McDonald’s comprises contributions from owners, suppliers, and employees and is a robust and balanced model. Inculcating the right business ethics, making a profit in business, and giving back a better life to the customers are the main mantras of McDonald’s. Organizational structure has a crucial impact on the organization’s ability to handle contingencies, provide a competitive edge, manage diversity, and indulge in continuous innovation, which, as an organization, McDonald’s has been phenomenally successful in attaining. How, as an organization, McDonald’s survived the changes in the environment and how a range of factors affected the business of the organization is a very interesting study in itself. Given below are some of the macro factors which affected the organization in some way or the other. In times of turbulence, McDonald’s was able to handle contingencies and manage diversities largely due to the matrix structure of the organization. McDonald’s organizational structure is a hybrid of the DOI:  10.4324/9781032634258-4

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functional structure of the corporation, divisional structure for restaurants, and geographic (location) structure of the global market. Political Factor

Depending on business rules, regulations, and laws of various nations, McDonald’s has to tune its operations, services, products, and strategies accordingly since it is a global player. At one point, the management of McDonald’s decided to reduce the salt content in its products by 14 percent (He, F., Brinsden, H. & MacGregor, G. Salt reduction in the United Kingdom: a successful experiment in public health. J Hum Hypertens 28, 345–352 (2014). https://doi​.org​/10​.1038​/jhh​.2013​.105) in the UK following a report from the Scientific Advisory Committee on Nutrition, which confirms that a high level of salt intake leads to a rise in the frequency of occurrence of heart disease. Economic Factor

Headquartered in the USA, a country with a strong economic background, McDonald’s has to keep a very competitive pricing strategy to win its way through a greater customer base across nations. In Russia, Big Macs are sold cheaply, and in India, a burger has been ordained even as a McAloo Tikki at a very low price. Sociological Factor

Because McDonald’s products are said to enhance cholesterol levels, which once upon a time had affected a large base of health-conscious customers, its management immediately introduced many healthy supplements to its existing product range. Technological Factor

With the advent of technology and the Internet, McDonald’s could reach out to millions through its online presence, marketing, and advertisement. With the advent of the Internet, even a small incident goes viral in no time, and McDonald’s has in the past confronted such issues and solved them. Environmental Factor

Hazards to the environment due to the slaughter of animals and birds or imbalance is a criminal offense, and McDonald’s had to fight against such issues in the past. Legal Factors

As an organization, it has to abide by the health, legal, and safety frameworks of various nations along with strong labor and employment laws. For

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McDonald’s, a safe product means a check of the product across 70 points, and then only the health of that food product is ascertained by the organization as good.

4.1 Introduction

An organization is a social unit of people, systematically structured and managed to accomplish a task or to achieve collective goals continuously. The organization is the basis upon which the whole structure of management is built. It is associated with developing a framework where the overall work is divided into manageable constituents in order to enable the accomplishment of objectives or goals. Thus, an organization is a structure that enables living things to work collectively. In a static sense, an organization is an arrangement staffed by a group of individuals who are working toward a common goal. Examples of organizations are Corporations, governments, non-government organizations, armed forces, non-profit organizations, and so on. The term ‘organization’ is used in four different senses:

• The organization as a framework of relationships: Organization refers to

the structure and interactions among various job positions that are created to realize certain objectives. • The organization as a process: Organization is viewed as an active process, forecasting the utilization of a company’s resources. • The organization as a system: Organization is also viewed as a system. System concepts diagnose that organizations are made up of constituents, each of which has exclusive properties, abilities, and reciprocated associations. The constituent elements of a system are linked together in such a complicated manner that actions executed by one individual have far-reaching effects on others. • The organization as a group of persons: Organization is very often viewed as a group of persons contributing their efforts toward certain goals. 4.2 Definitions

Organizations may be defined as a group of individuals large or small that are cooperating under the direction of executive leadership in accomplishment of certain common object. —Keith Davis An organization is a system of cooperative activities of two or more persons. —Chester Barnard

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Organization is the form of every human association for the attainment of a common purpose. —Mooney and Reily The organization is a harmonious adjustment of specialized parts for the accomplishment of some common purpose or purposes. —Haney In its broadest sense, the organization refers to the relationship between the various factors present in the given endeavor. Factory organization concerns itself primarily with the internal relationships within the factory such as responsibilities of personnel arrangement and grouping of machines and material control. From the standpoint of the enterprise as a whole, the organization is the structural relationship between various factors in an enterprise. —Spriegel (Source: Davis, K. (1977), Barnard, C.I. (1971), Mooney, et al., (1939), Haney, L.H. (1934), Spriegel et al., (1953)). 4.3 Need/Importance of Organization

When Andrew Carnegie, a renowned industrialist of the USA, sold his company, the United States Steel Corporation, he showed his confidence in the organization by saying, ‘take away our factories, take away our plants, our avenues of transportation, our money, leave nothing but our organization and we shall establish better factories’. The organization has played a significant role throughout ages and in all walks of life. The importance of organization is as follows: A tool for achieving objectives: Organization is an important tool in the hands of management for accomplishing the objectives of an enterprise. Facilitates administration and management: A sound organization increases efficiency, avoids the duplication of work, avoids delays in work, improves managerial skills, and motivates employees to perform their duties. Ensures optimum use of human resources: Good organization establishes individuals with diverse interests, knowledge, skills, abilities, and viewpoints. Enhances creativity: A well-conceived and comprehensive organization is the source of creative thinking and the origination of new thoughts. Prevents corruption: Enterprises that lack sound organization most of the time have a problem with corruption. Sound organization helps to prevent corruption by raising the morale of the employees. As a result, employees are encouraged to work with greater efficiency, commitment, and honesty. Fosters the growth of enterprises: Good organization plays a key role not only in growth but also in the expansion and diversification of an enterprise.

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Eliminates overlapping and duplication of efforts: In a situation where the distribution of the work is not visibly identified and the work is done in a disorganized manner, there will be duplication and overlapping of efforts. As a good organization requires that the work be clearly assigned among employees, overlapping and duplication must be eliminated. Coordination: Various jobs and positions are linked together by a structural relationship within the organization. The organizational process exercises its due and balanced emphasis on the coordination of different activities. 4.4 Nature of Organization

An organization is characterized by a set of features that help us in concluding the nature of the organization. The set of features are as follows. Process: This process refers to defining, arranging, and grouping the enterprise’s activities and establishing authority relationships among participants who carry out the aforementioned activities to attain a specific objective. It is commonly stated that organization is a process by which the chief executive of a unit, who is in the leadership position, groups the employees to get the work done. Structure: The allocation of duties and responsibilities to individuals and units assigns a specific structure to the organization and it constitutes a series of relationships at all levels of authority, that is, from senior executives to workers. Dividing and grouping of activities: The division and grouping of activities are carried out among units, sections, and so on, as well as between employees of the organization who secure the benefits of division of labor to attain a common goal. The definition of the organization as laid by L. Urwick constitutes the determination of the activities that are necessary to be undertaken and arranging them so that each individual within the group is assigned a specific task. Achievement of goals or objectives: An organization’s structure is built such that a rational pursuit of goals and objectives can be carried out. Haney defines ‘an organization as an agreeable adjustment of specialized components and elements for the achievement of some common purpose or purposes’. Authority–responsibility relationship: An organization’s structure constitutes authority–responsibility relationship to meet specific purposes and goals. Human and material aspects of the organization: The two components, that is, the human and material resources, play an important role in accomplishing specific tasks within an organization. Henri Fayol said that human and material organizations need to be suitable for an organization and that one should ensure material and human order with precision. Further to the above, from a static perspective, an organization is a structure that assigns tasks to people for the attainment of a common goal/objective. From a dynamic angle, the nature of the organization is the allocation and execution of tasks by people or groups to serve a specific purpose and is characterized by the following in the succeeding figure.

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4.4.1 Characteristics of the Organization’s Nature

Association of people: Since an organization consists of people who interact with each other at work, for smooth operation, mutual understanding, and cooperation are extremely necessary. Common goal: Efforts expended by employees within an organization working toward a common goal help in creating a synergy between all. Every organization is goal oriented to render service in one form or another, and it is achieved by allocation and distribution of tasks to be completed by individuals or by a team. Work allocation: Each task is assigned to different individuals based on their skills, capability, and experience, which in due course enables the development of the concept of specialization among the employees and contributes to enhancing efficiency and productivity. Coordination and collaboration: According to Louis A. Allen, ‘Organization has enabled men to increase their teaches far beyond the dreams of the wealthiest potentates of old by making effective use of a potent multiplier-meshing, power, and mechanized tools’. Organizations are formed when several participants in communication and relationship are willing to contribute toward a common endeavor. Coordination among employees and units integrates the efforts for consistency in the performance of an organization. Social composition: An organization can be also described as a social unit that exists to serve the needs of people, keeping in view the norms and values of society. People in the organization interact with each other as part of social relations in workplaces and ensure dignity and equity for mutual benefits. Hierarchical structure: The hierarchy of authority can be assigned based on responsibility and accountability held by that individual and follows a topdown/bottom-up approach for the execution of tasks. Managerial function: An organization has managerial intervention and combines human and physical resources for realizing organizational goals. Planning, directing, and staffing functions within an organization need to be organized and performed effectively. It is a permanent process that requires management’s commitment to reorganize and restructure their setup regularly or at intervals of time. Environment: The external environment of an organization comprises the political, economic, sociocultural, and technological conditions and is not under the control of the organization. But the internal environment, including the objectives, policies, structure, resources, and internal culture, remains under the control of the organization and can be modified and amended as needed. Adaptive to change: An organization’s structure is so created that it always remains open and adaptive to changes, and those changes, internal or external, are incorporated into the organization’s structure. Thus, the organization becomes an ongoing process, and the category of activities, the organization size, and the link between employees make it more circumstantial.

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4.5 External Environment of Organization

Organizations must adapt to the changes in both internal and external environments in the realm of demand and prospects. The type, magnitude or dimensions, scope, place, objective, and mission of an organization should continuously meet the requirements and the contingencies of the external environment for the longterm sustenance and growth of the organization. 4.5.1 Technological Factors

With the advancement in technology, businesses can benefit from these innovations and discoveries or face challenges in competing with the continued advancements. For example, a business that produces only GPS devices for cars might face a sharp decline in its business unless it does not diversify because the integration of GPS application in mobile devices is a common feature nowadays. Other businesses, such as healthcare service providers, use cloud applications to collate patients’ information, keep patients’ records, and extract sensor-based health statistics of the patients to streamline patient care. 4.5.2 Economic Factors

The economic factors play a significant role in every aspect of a company to thrive and focus on its sustainability. With the economic condition exhibiting a downward trend, businesses have to bring in rapid transformations in their approaches, concepts, and strategies to continue earning revenue while ensuring employees’ productivity and diversity in acquiring skill sets. On the other hand, when the economy exhibits an upward trend, organizations should be consistent in their drive toward bringing innovation in their methodologies, products, and services to create the necessary competitive edge. 4.5.3 Political and legal Factors

Policies about regulations and guidelines, enforcement, legal aspects, and legislative bills of the companies/organizations need to be closely aligned to the following factors. Policies that can impact companies or organizations in the long run substantially include these factors.

• • • • • •

Tolls, levy, and taxation Tariffs Regulations pertaining to employment Competition regulation Restriction and duties, import, export Laws and rights pertaining to Intellectual Property

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Companies that comply with new laws and rules are more sustainable in their business. 4.5.4 Demographic Factors

Successful products and services organizations assess the statistics of their target customer segment and the market to ascertain they satisfy the requirements of those who profit from their offerings. Many offers, promotions, and tests are performed to assess how well they serve their customers. This helps them to provide improvised services to their loyal customers and also attract the new ones. Demographics that impact business decisions and procedures involve the following:

• • • • • • • • •

Age Gender Race Nationality Belief system Marital status Occupation Income Level of education

For example, kids-only, mild sunscreens from Lotus Herbals have been promoted by many schools in India. Similarly, products and services that were purchased by and for adults exhibit new market trends in India. Like their buyers, these marketplaces are small-scale, but they are promising and growing steadily. 4.5.5 Social factors

Social factors include the personal values of people, their socioeconomic status, and the purchases they make giving answers to why they purchased, what they purchased, and from where. Businesses consider social factors while developing and selling products, and many organizations rely on situations, movements, and societal issues to request from consumers. For example, an apparel business’s marketing team may introduce a campaign that promotes customers to buy more than one pair of socks with each extra pair of socks being donated to the front-line workers or homeless people. As an outcome the business labels itself as socially responsible, attracting customers who value social obligations and want to work for the benefits of the community. 4.5.6 Competitive factors

Businesses can create a competitive edge and increase their market share by continually innovating. They can determine and evaluate successes and state of affairs

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through continued knowledge acquisition and items to incorporate into their processes and aim at reduction in loss of revenue. They can also use the information to ideate product innovation and development, and relaunches. According to Harvard Business Review, the three core values that distinguish a business from the competition are as follows:

• Excellence in operations • Relationship with customers to a considerable degree • Product leadership Major industry leaders have created a differentiator across one of the disciplines while conforming to industry norms in the other two. For example, Walmart creates an edge over its customers by offering lower prices. Amazon, an e-commerce giant, as a part of operational excellence combines powerfully featured software with excellent logistics to create an on-time experience for its customers. The company’s inventory manages products arbitrarily, keeping track of each item in the warehouse. Multiple pieces of the same item are there simultaneously across several locations, making the product pick-up quicker, that reduces the turnaround time considerably in the logistic unit. As a result, Amazon Prime customers can accept a package in two days. 4.5.7 Global factors

Organizations that do business internationally have to keep themselves aligned with domestic and business issues. Varying social issues, cultural measures, user trends, and economic status force organizational leaders to provide relevant training for their teams. This helps them to develop products or offer services that satisfy international buyers by rendering solutions to the obstacles they face as buyers. 4.5.8 Ethical factors

The concept of ethics and morality varies from one individual to another, and how the employees handle their social media accounts can reflect on their employers and can sometimes hurt their businesses. Managers of an organization can address such issues by taking measures such as establishing guidelines for providing classified information and taking disciplinary measures whenever and wherever required. 4.5.9 Natural factors

Growing environmental awareness has made consumers realize the impact of business processes on the planet. Hence, companies and consumers have, in many cases, resorted to recycled packaging of products, reducing carbon footprints and

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enhancing the use of solar energy. By paying attention to these, businesses are striving to be eco-friendly, which has helped them shield the natural environment, retain consumers, and improve income. 4.6 Organizational Approaches 4.6.1 Classical Approach, Human Relations Approach, and Systems Approach

An enterprise exists to display outcomes in terms of profits. It has the owner and other employees who cooperate, collaborate, and contribute to the success of the business. A transition from an owner-managed business to a board of management for an organization brings to the surface the key elements of the organization. An organization can then be termed as an entity where the division of work and task allocated to the people help in achieving a specific objective. Hence, if recalled, there are four pillars around which the organizational theory revolves, and they are as follows:

• Division of labor • Scalar and functional process with chain of command and assignment of authority and the later orienting toward the division of organization into several units and regrouping them to facilitate achievement of goals and objectives • Assignment of structures or a position for each individual to perform a task • Span of control, that is, the allocation of the team to a manager

Organization, in other words, is termed as an open system, and this system interacts with the environment, that is, takes input and produces output. Organization, as an open system, must constantly adapt itself to changes in the environment. The statement of objectives chiefly focuses on the survival and growth of an organization. The type of work allocated to an individual constitutes of physical labor, mental activity, and decision-making. Division of work happens only when an individual is unable to cope with the volume of work while coordination among people is established due to task distribution. Work breakdown structure, allocation of tasks to individuals, and decision-making by individuals or authority surface when tasks are allocated to a group. With the implementation of the division of the work, there has evolved three approaches: the classical approach, the human relations approach, and the systems approach. 4.6.2 The Classical Approach

The classical approach is based on ‘machine theory’, where the organization is considered to be a machine built to rigid specifications and prescribed division of responsibility. The classical approach enlists resistance rather than adaptability and an effective allocation of tasks and responsibilities. Machine theory majorly

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focuses on the specialization of tasks. Efficiency is the outcome of the subdivision of tasks and their execution based on the individual’s skill sets. Specialization enables performance to achieve a desired level and be standardized. Where standardization of tasks is not possible as in the case of research, design, and management, uniformity of practice is the answer to the said process. Company-wide consistent practices are specified in areas such as negotiation, wage structure, and external contracts. Standardization of performance and uniformity of practice bring to the fore central direction, constituting unity of command and centralization in decision-making, with specialization incorporating greater efficiency and coordination. Machine theory still finds its existence in the product-based organization, where production is on a mass scale. In the 1930s and the 1940s, attempts to accomplish the classical idea led to a great hustle and bustle in work measurement, job definition, and organizational structuring. In the late 1940s, the inflexible, perpetual organization, with its fixed permanent work conditions, was replaced by flexibility for which there was a rising demand from the employees. The real forces within the organization as envisaged were changed, and conflict and interaction among the individuals increased. In brief, the classical approach conforms to a preordained order where the manager defines the tasks to be performed and allocates the tasks to the employees in order to be carried out. The advantages and disadvantages of the classical structure can be summarized as follows. 4.6.2.1 Advantages

• Widespread acceptance among business owners • Adaptability to change is considerable • Easily applicable, implementable, and executable 4.6.2.2 Disadvantages

• • • • •

Purely mechanical and does not take into consideration the human aspect Is assigned a structure and hence to a certain degree is not flexible Formal directives and procedures put a constraint on the communication Innovation is hindered considerably Jobs are paid rather than resources and encourages the creation and execution of work • Exercises a greater degree of control • Incompatible goals and not an advanced concept aligned to this era Despite the shortcomings of the classical structure, this approach still prevails. The most predominant organizational structure for many years was the pyramid (classical) structure.

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4.6.3 The Human Relations Approach

The machine concept of organization anticipates the availability of material. A major portion of organizational material includes human resources. Human resources cannot be expected to work like machines. The human relations approach follows the dictum ‘organization is what its people are’. While designing an organizational structure, people are primarily considered. People’s behavior within an organization and their productivity in collaboration in achieving the organization’s objectives is the key to the success of an organization. The human relations approach emphasizes on the needs and values that an individual brings with them when they get associated with an organization. The specific needs of individuals can, however, be classified into physical needs, safety, and self-actualization. According to the human relations approach, people prioritize their needs and wants. Once an individual’s satisfaction is rendered, there is a need to actualize the full potential. The various needs that an individual has within an organization are shown in Figure 4.1. 4.6.4 Types of Needs

Broadly speaking, the demeanor has created the requirement for showing greater care for people who are being organized, and this approach is more attitudinal than the former, and the needs and values of people are taken into discussion and merged with the needs and values prescribed by the organization’s objectives. The neoclassical theory brings to the fore certain concepts such as the following:

• The existence of informal organizations within the formal ones. • Motivation is a compound process, and socio-psychological determinants play an important role to inspire human beings at work.

FIGURE 4.1  Human

Relations Approach: Types of Needs

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• Conflicts in goals (individual and organizational) do exist which should be resolved.

• Human behavior can be predicted by social factors at work, and humans are not always rational.

• High productivity is ensured through teamwork. • Communication is the key to many work-related issues. 4.6.4.1 Advantages

• Flat structure with a widespread span of control • Decentralization and autonomy • Informal organization 4.6.4.2 Disadvantages

• A solution acceptable to all is not always right. • A particular organizational structure is not suitable for all. • Lacks unified approach of the organization. 4.6.5 Comparison between Classical and Neoclassical Approach

Table 4.1 depicts the differences in the classical and neoclassical approaches followed in organizations before the 1970s. Post-1970s came the modern management approach that instituted the systems and the contingency approach.

TABLE 4.1  Comparison between the Classical and Neoclassical Approaches

Item

Classical

Structure of Impersonal organizational system Main focus of work Workers Rationality Order and rationality Organizational behavior Authorities

Product of rules and regulations Elaborated rules

Employee satisfaction Employee motivation

Less Less (as wages only)

Adoption Managerial skills

Easily adopted Scientific skills

Neoclassical Social Small groups Personal and social requirements, feelings Product of feelings Democratic, involvement of employees More More (employee incentives and considerations) Shows some resistance Scientific and personal skills

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4.6.5.1 The Systems Approach

A system comprises interactive and interdependent parts which together in consolidation and collaboration perform some function. Any system can be a subsystem of a larger system. The systems approach views an organization as a system constituting the following:

• • • • •

Input Process Output Feedback Environment

While the machine approach focuses on the conversion of money, materials, and labor into output of goods and services, the systems approach lays emphasis on the inadequacy of this as the basis. An organization is essentially an open system, and quoting Katz and Kahn, the systems approach envisages it to be like an entity where a structuring of events or happenings occur rather than being considered as physical parts in a machine and, therefore, has no structure apart from its functioning. Its contrast with the classical approach is then pretty obvious. Katz and Kahn’s approach to a systems approach concerning the division into sub-systems is as follows. Sub-systems within an organization enable work to be carried out effectively and efficiently along with adapting to change. Organizations with open systems have an established feedback mechanism. Feedback consists of information not only about the system’s performance but also about the environment and the effect the system has on the environment. The receipt of feedback enables the organization to modify and reiterate or revamp its processes. The systems approach assists in organizational planning by paying attention to the environmental factors that impact the achievement of the objectives. It necessitates that an organization should be designed to alleviate decision-making. Decision-making is said to rely heavily upon the principles of

TABLE 4.2  Katz and Kahn’s Approach to a Systems Approach

Technical Sub-system

Supportive Sub-system

Maintenance Sub-system

Adaptive Sub-system

Managerial Sub-system

Concerned Procurement, Allocating or Concerned with Direction, with the discard or scrap, assigning organizational adjudication, work that and within the responsibilities transformation and control gets done organizational to people of many relations sub-systems

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feedback, and feedback in turn can be obtained by having robust communication channels. In other words, decisions taken to achieve the said objectives and the communication channels necessary for making those decisions determine the relevant organizational structure. The interaction and the relationships between the parts of the organization contribute to the ease of decision-making. According to the old model, people, tools, tasks, and resources lay subordinate in the structure, but in the systems model, a change in any part may bring in modification to other parts as well and these parts may be capable of adjusting to the required changes.​ 4.6.5.2  Contingency Approach

The systems approach offers models which may not suit organizations of all types. The contingency approach suggests that a structure will be appropriate if and only if it is tailor-made for an enterprise. It is said that factors such as the technology, environment, people, and size of operations impact a decision for the selection of suitable organization of an enterprise (Table 4.3). Case Study on General Motors: The Transition from a Closed to an Open System The Background

General Motors, from its foundation through the early 1960s, operated in a closed system mode. It was only the management of General Motors which strategically decided on the products it wanted to trade, finalized new products for production, and offered them to various segments of customers. They, for many years, were the prime seller of cars and were doing quite well in the automobile segment. General Motors assumed that any of its proposition would be accepted by the customers and for decades, it proved to be correct. The government was unresponsive to such strategies, and consumer–advocate groups were not in existence or had very little impact. The top management of General Motors ignored the impact of the environment as it was not affecting the company’s performance. The Strategic Decision and Implementation

But the firm could not stay insulated for long from the external environment owing to changing government regulations, actions on consumer groups, stockholders, and strong foreign competition that forced General Motors to adapt to the external conditions. This led to transitioning to a more open system. The early years saw very few automobile makers and automobiles in the USA. An auto show in New York around the year 1900 aroused interest and fascination among the citizens in

Organization 113 TABLE 4.3  Companies that Follow the Three Approaches: Classical, Neoclassical/Human

Relations, and Systems

Name of the Company

Approach

Description

Costco Corporation

Classical

Wages and health benefits are good, and it delivers very high levels of customer satisfaction Lead industries by leading and managing their workforces

Nucor Steel, Classical Costco, and Miller Coors University of Systems thinking California San Diego In2: In Thinking Network

Systems thinking

Nike

Flat/Neoclassical

McDonald’s Corporation

Divisional organizational structure/ Neoclassical Centralized approach

Burger King

To cultivate simple and effective ways to fully assimilate and build ways to lead organizations using the approach of collaboration and cooperation Individuals and organizations move to the stage of managing relationships for effective teamwork and organization’s productivity Unique for legacy companies with maximum transparency and agility, minimizing bureaucracy and deployment time for new ideas Each unit handles an operation and aligns itself to the unit’s set of objectives Exercise control and increase management’s involvement and engagement. The company has envisaged growth after the reorganization, indicating that the current structure is the right fit for the organization

the USA which resulted in General Motors becoming the leading manufacturer. The vision of being the world’s best car manufacturer enabled General Motors’ management to come up with innovative designs, technologies, and features. By transitioning from a closed to an open system, it defeated the demerits of closed systems, which are as follows: obstacles in growth, the restrained flow of information from the external environment, increased prices, and foreign competition. While General Motors had a closed system, an unprecedented downscaling of automobiles across all General Motors vehicle lines was experienced. In the early 1980s, General Motors’ profits took a dived due to the recession. However, its profits rebounded when it started following an open approach through careful analysis of the environment in terms of innovations introduced by organizations and the

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demands placed by consumers. In regard to the innovative strategy used, General Motors had downsized its product line and capitalized substantially in automated manufacturing which led to a rebound in profits. Conclusion

The solution is that, during changing times, organizations need to be more OPEN and adapt to the changing environment, while when change is not envisaged, organizations can follow a CLOSED approach. Questions

1. How did General Motors operate using a closed system approach? 2. Why did General Motors feel the need to shift from a closed to an open system? 3. Give one example of the environment interaction of General Motors. 4.6 Principles of Organizing

Every organization must adopt some techniques or principles for the timely and systematic completion of work. Thus, these principles would be the deciding factor for the success or failure of an organization. 4.6.1 Principle of Objective

All enterprises, whether large or small, set certain central objectives. Every element of the organization and the organization as a whole should be aligned with the central objectives identified by the enterprise. 4.6.2 Principle of Specialization

A clear-cut division of labor enables specialization. According to this principle, the division of work among the employees should be based on their knowledge, skills, abilities, capabilities, and interests. This would lead to specialization, which would in turn lead to efficiency, quality, and the elimination of wastage of resources. 4.6.3 Scalar Principle

This principle is sometimes referred to as the chain of command. There must be clear lines of authority running from the top to the bottom of the organization and linking all the individuals in the organization.

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4.6.4 Principle of Authority

Authority is an important ingredient of the organizational structure. It is a tool by which a manager can create an environment where an individual can perform with greater efficiency. 4.6.5 Principle of Span of Control

This principle states that there is a limit to the number of subordinates who report to one superior. Supervision of too many people can lead to trouble and confusion. Also, the superior will not be able to spare time to supervise each of his subordinates. It will also lead to increased complexity in the organizational structure. The span of control depends on several considerations. It is easy to supervise a large number of subordinates involved in routine jobs and working in the same room, whereas it is difficult to supervise highly diverse and specialized personnel scattered widely. The ability of the employees, their willingness to assume responsibility, and the attitude of the management toward delegation and decentralization should also be analyzed in detail while deciding on the span of control. 4.6.6 Principle of Unity of Command

This principle is basically about avoiding dual reporting. It states that every employee working in the organization should be kept under the supervision of only one boss. This principle eliminates the possibility of conflicts in instructions and fosters a feeling of personal responsibility for work. 4.6.7 Principle of Definition

Each individual in the organization should be made aware of their responsibilities, duties, authorities, and relations with the other job positions in the organizational structure. 4.6.8 Principle of Unity of Direction

The basic motive for the existence of an organization is the attainment of certain objectives. Major objectives should be split into functional activities, and there should be one objective and one plan for each group of people. 4.6.9 Principle of Parity of Authority and Responsibility

The responsibility for the execution of work must be accompanied by the authority to control and direct the means of doing the work.

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4.6.10 Principle of Supremacy of Organizational Objectives

The organizational goals and objectives should be given wide publicity within the organization. The people contributing to it should be made to understand that an enterprise’s objectives are more valuable and significant, and one should give higher priority to the organization’s objectives in comparison to personal motives. 4.7 The Process of Organizing

From Figure 4.2, it is clear that organizing is a process involving multiple activities. The details of all these have been discussed in the following subsections. 4.7.1 Fixing the Objectives of the Organization

The top-level management holds the responsibility of fixing the overall objectives of the organization, whereas the middle-level management fixes the departmental objectives and the lower-level management fixes the day-to-day objectives. The objectives decided by each level of management should be both specific and realistic. 4.7.2 Finding Activities Must for Achieving Objectives

Once the objectives are fixed, the strategic level of management determines different activities that are required to be performed in order to accomplish the same. This is a crucial stage as it helps to eliminate duplication, overlapping, and wastage of efforts.

FIGURE 4.2  Steps

in Organizing

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4.7.3 Grouping Similar Activities

All the activities that are similar in nature are grouped together to form departments. This is also termed ‘departmentalization’. This leads to specialization. Example

All the activities that are directly or indirectly related to the management or development of human resources, such as training, performance appraisal, and recruitment, are grouped together and form the HR department. Defining the Responsibilities of Each Employee

In this step, the responsibilities of all the individuals working in the organization are clearly defined. This would ultimately lead to the selection of the right candidate for the right job. This brings about efficiency since each individual is aware of what they have to do. Delegating Authority to Employees

In a situation where two or more individuals are working together for a common purpose, it becomes necessary to clearly define the authority relationship among them. Each subordinate should know to whom they have to report. Also, each superior should be aware of the authority they have over their subordinates. Providing Employees with the Required Resources

After defining authority relationships, the employees must be provided with all the resources required to achieve the objectives of the organization. Coordinating Efforts of All to Achieve Goals

This is the last and most important step in the process of organizing. Here, the efforts of all individual employees, groups, and departments are brought together and coordinated toward the mutual objective of the organization.

EXAMPLE Let us consider a simple example where a company has decided to have a oneday picnic for its employees. Here, it is clear that the objective is to arrange the picnic. The HR department would then list all the activities to be carried out for the successful execution of the picnic. These activities would then be

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grouped based on similarity, for instance, arranging for breakfast, lunch, and dinner on the day of the picnic. Each member of this committee would in turn be assigned a particular responsibility, such as selecting the menu and so on. Each member will also be given authority with the assigned responsibility for efficient execution. Once formed, each committee (like the refreshment committee) will then be allocated a budget to enable it to carry out the assigned duties. Also, most importantly, the efforts of all the committees or individuals must be coordinated to meet the central objective, that is, the successful arrangement of the picnic.

4.8 Organization Structure

CASE STUDY: AN ORGANIZATION WITH NO STRUCTURE Four classmates started a tour and travel service for senior citizens and women. Their objective was to do something good for the weaker section of society, and profit was not their main motto. They used to work in collaboration with each other, and every member monitored every task right from taking in customers to making their travel plans, booking accommodations, tickets to visa processing, and also into the food habits of these customers since they were all senior citizens. Within the first few months, they were able to win 40 customers as they carefully customized the tours as per the requirements of the citizens at an affordable cost. Since they were new in the business, they designed the tours according to customer preferences to the minutest detail. They even provided customers with useful information such as nearby hospitals, clinics, and medical stores available in and around the location while on a tour. The four friends made it a point to meet once a week to discuss the issues they were facing and areas in which they could improve. They continued putting in the same amount of effort and started thinking of new ways to expand their business. After a year or so, they took on lease a small office and appointed a helpdesk person to receive calls and take in customer requirements. Initially, they used to plan tours for citizens within India, but as their business grew, they started providing services outside of India. However, as they started overseas operations, they realized that things were getting out of control. They needed additional manpower to handle the activities and tasks about tour planning customization, visa processing, ticket booking, accounting and finance, auditing, and so on. With the induction of additional manpower, including persons in the finance and administration departments, there arose a requirement to create an

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organizational structure with proper organizational objectives and the allocation of roles, responsibilities, and tasks to every individual. At the same time, the tasks of structuring information flow, designing extensive growth plans for the organization, and setting up discrete lines of authority and decision-making were being carried out. Roles were being allocated to some employees on the customer side, comprising of marketing, sales, and customer service and some on the supplier side for the negotiation of deals and partnerships. Every member within the organization worked as a team, collaborating, cooperating, and encouraging the implementation of new ideas to steer the organization to success. In other words, it is evident from the case that as an organization grows, there arises an increased need for a proper organizational structure with clearly defined authority and effective team dynamics to support the organization. An organizational structure specifies the various job positions and depicts how they are formally divided, grouped, and coordinated. It provides an appropriate framework for authority relationships. It is a means to help the management achieve the organizational objectives. It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. An organization can be structured in many different ways, depending on its objectives. The structure of an organization will define how it functions and executes. An organizational structure allows the expressed allocation of duties for different functions and processes to different entities, such as branches, departments, workgroups, and individuals. The organizational structure affects organizational action in two major ways. First, it provides a basis on which the standard operating procedures are rest. Second, it determines which individuals get to participate in the decisionmaking process and thus to the extent their views shape the organization’s actions. There are several reasons why designing an organizational structure is such an important aspect. Organizational structure has a crucial impact on the organization’s ability to

• • • •

Deal with contingencies Achieve a competitive advantage Effectively manage diversity Increase its efficiency and ability to innovate new goods and services

4.8.1 Formal Organization

The formal organization refers to the structure that is designed and prescribed by the management of the enterprise. It is defined as a ‘hierarchical concept of

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subordination of entities that collaborate and contribute to serve a common goal’. A formal organization has its own set of rules and regulations that are to be followed by each individual in the organization. It depicts clear lines of authority and the superior–subordinate relationship. Also, each of the individuals is assigned specific duties and responsibilities. In a formal structure, there are predefined objectives, and individual efforts are diverted toward achieving these objectives. According to Barnard, ‘Any organization shall be considered formal at the stage when the activities of two or more persons are coordinated consciously to achieve the definite objective’. Example: A college, hospital, company, etc. 4.8.1.1 Features of a Formal Organization

• • • • • •

Authorities and responsibilities are clearly defined. It does not consider the emotional aspect. It is predetermined and purposefully created. It is based on the delegation of authority. It provides for the division of labor. Organizational charts are followed.

4.8.1.2 Advantages

• It promotes discipline in the organization. • It provides a basic structure for the division of work and responsibility. Without • • • • •

such a structure, it becomes very difficult for employees to agree among themselves on the duties and responsibilities of every individual. It gives a clear-cut idea of the authority and responsibility of the individuals. Thus, a formal structure reduces confusion and brings clarity in working. The dependency is not on a single person. It decreases the possibilities and occasions of conflict. The formal organization helps to keep the firm operating despite the changes in the workforce. It eliminates duplication of work, which in turn leads to effective utilization of resources.

4.8.1.3 Disadvantages

• At times, the formal organization causes reduction in the initiatives of the person working in the organization.

• It does not consider the emotional aspect. • It may cause delays in work.

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4.8.2 Informal Structures

This is a shadow organization made up of informal, but often critical, relationships between members of the organization. The informal structure has its presence in all the formal structures. Informal structure depicts the way in which individuals communicate and relate themselves with others beyond the formal structure. The informal structure develops through frequent instances like having regular interaction, lunch, and coffee with colleagues. For example, most IT companies have an informal organization to promote innovation among their employees. According to J.L. Massie, ‘Informal organization is any human group interactions that occur spontaneously and naturally over long period of time’.

• • • • •

Informal organizations are not depicted in the organizational chart. They do not have any particular structure. They denote human relationships beyond the formal organizational structure. They are the outcome of voluntary associations. They develop out of personal preferences, beliefs, habits, and understanding.

4.8.2.1 Advantages

• Informal organizations are an effective channel of communication in certain cases.

• They develop a sense of belongingness among the individuals. • They can fill the gaps and deficiencies that exist in formal organizations • The members of informal organizations help each other in case of unforeseen events or emergencies.

• An informal group forces the manager to plan and act more carefully than they would otherwise.

• An informal organization is a check and balance on unlimited use of authority by a manager.

4.8.2.2 Disadvantages

• Informal organizations operate based on group psychology. • The interests of the formal and informal groups may clash, leading to conflict and making the job of managers difficult.

• They may fall prey to rumors. • They may cause problems by resisting change at certain occasions. 4.8.3 Difference between Formal and Informal Organizations

The difference between formal and informal organizations is presented in Table 4.3 and Figure 4.3.

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4.8.4 Mechanistic Structure

A mechanistic structure, also known as a bureaucratic structure, is based on an official, centralized network. The structure is ideal for organizations that function in a steady and consistent atmosphere. A mechanistic structure is very rarely changed since this type of structure acquires stability. There is a well-defined hierarchy, and the strategic decisions are taken by the top management of the organization. Subordinates work under the direction of the management, and communication follows a top-down approach. The mechanistic form of organization ensures that there is allocation of the task to each individual, which is stable in nature, and integration between various functional units is less since the organization has achieved a desired level of stability. The mechanized structure is characterized by

• • • • •

Decisions taken by management Information flow through a chain of command Highly specialized tasks Low level of integration between departments Low degree of change or change over the years is very slow

Examples of mechanistic structures include healthcare, universities, and governmental organizations. 4.8.5 Organic Structure

Organic structures are characterized by unstable and dynamic environments and are subjected to frequent changes. When the situation changes, the organization must be able to congregate, process, and distribute information at a very fast pace, or else it might lose its competitive edge. Communication is quick and does not

FIGURE 4.3  Formal

and Informal Organizations

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follow a top-down hierarchy. Because there is a high level of integration between functions and departments, the information flow is effortless. The rapid pace at which information flows helps the organization quickly adapt to the changes in the external and internal environment. Organic organizations exercise dual specialization, and employees work in unison to execute and coordinate complex tasks of large projects. Decision-making in organic structures is a complex process. It involves many teams from all levels of the organization. For organic structures, as there are no standardized processes, authority can also be allocated to lower-level employees. For example, a team may contain sales, accounting, research and development, and production representatives. When decisions have to be taken, it is the responsibility of one of these members, as there are no clearly defined roles and responsibilities allocated to the members, to decide on any point and see that it is complied with by other members of the team and subordinates beneath them. 4.8.6 Difference between Mechanistic and Organic Organization

The difference between mechanistic and organic organization is shown in Table 4.4. 4.9 Types of Organization Structures 4.9.1 Functional Structure

The concept of the functional organization was proposed by F.W. Taylor. In functional structures (Figures 4.4–4.6), individuals having identical skills and performing similar tasks are grouped into formal work units, generally called departments. Members of functional departments share technical know-how, interests, and responsibilities. Employees within the functional division of an organization tend to perform in areas of their expertise. The functional structure may differ according to the major functions of a business. TABLE 4.4  Formal and Informal Organizations

S. No. Basis

Informal Organization Formal Organization

1 2 3 4 5 6 7 8

Undefined Personal relations For social satisfaction Flexible Voluntarily chosen Fast Sentimental Group of trekkers

Structure Relations Purpose Dynamism Leader Communication Nature Example

Predefined Formal relations To achieve organizational objective Rigid Manager Slow Official Departments in the organization

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FIGURE 4.4 Functional

Structure for Business Entity

FIGURE 4.5 Functional

Structure for a Hotel

FIGURE 4.6 Functional

Structure of a College

4.9.1.1 Advantages

• Specialization: Organizational efficiency increases as each employee performs the task as per their specialization.

• Reduced workload: As each functional head is responsible for only one function, the workload is reduced.

• Flexibility: It is easier to accommodate a change with little or no difficulty. • Improved control: As each employee is in charge of only one function, it is easier to spare time to supervise all their subordinates.

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• Mass production: Due to specialization and standardization, it becomes feasible to go for large-scale production.

4.9.1.2 Disadvantages

• Complex relationships: An individual has several superiors due to which • • • •

accountability for results cannot be easily fixed. In addition, cross-functional relationships create confusion. Inefficient administration: As the same groups are controlled by various specialists, there is inefficient administration. Expensive: As a large number of specialists need to be hired, it leads to an increase in cost. Ineffective coordination: Each of the functional managers is bound to think only from the perspective of his/her department rather than from the perspective of the whole organization. Delay in decision-making: Because several functional specialists are involved in the process of decision-making, decisions may be delayed.

4.9.2 Divisional Structure

In the divisional structure, the organization is organized into various divisions based on four criteria: product, market, process, and location (Table 4.5). Thus, the divisional structure is most suited for organizations having a wide range of TABLE 4.5  Mechanistic and Organic Organizations

Mechanistic

Organic

Individual specialization, with employees working on only one task and specialize in that task only Integration among units is low and the hierarchy structurally defined Decision-making is done by the top management and mechanistic organization follows a centralized approach with vertical lines of communication Use of standard operating procedures Communication is mostly penned down Status accorded as per the size of the organization Organization is a collation of tasks and people who perform a specific task

Dual specialization, with employees working together on multiple tasks High level of integration with authority allotted to task teams as well Decision-making is done by teams across the hierarchy with communication being lateral and decentralization of power and authority There are no standard operating procedures Evidence of verbal communication Status based on perceived ability Organization is the collation of teams with people working in different capacities together over a period of time

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products, areas of operation, work processes, or customers. Each of the divisions is self-contained and has its own set of functional units such as marketing, manufacturing, finance, HR, and so on. 4.9.2.1  Advantages

• Highly flexible: The divisional structure can respond more quickly to the changing environment.

• Specific: Expertise is focused on a specific product, market, process, or location.

• Coordination: The divisional structure leads to better coordination across functional departments.

• Clear accountability: Divisional structuring provides a clear correlation

between the expense and profit of the individual divisions. Business objectives across functional units can be more objectively formulated, and expectations can be better agreed upon. • Ease of operation: Greater ease to modify the size by adding or deleting divisions. 4.9.2.2 Disadvantages

• Reduced economies of scale: Duplication of efforts across divisions leads to an increase in operating and administrative costs.

• Rivalry: Divisional structures may also result in rivalry as the divisions compete for resources.

TABLE 4.6  Divisional Structure Based on Product, Market, Location, and Process

Type

Emphasis

Product

Goods provided/services catered

Example GM Beverages

Market

Target customers/clients

Glassware

Sr. Manager Personal

Location At which activities are carried out

Institutional President

North Zone

Process

Activities of the same process

South Zone VP

Recruitment

Training

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• Divisional affiliations: Employees feel more affiliated to their respective divi-

sions but lack affiliation with the organization as a whole. • Supremacy of divisional goals: The divisional goals may have priority over the organizational goals. 4.9.3 Matrix Structure

The matrix structure comes into existence when one organizational structure is superimposed on the other. In this structure, an employee is answerable to two immediate supervisors: a functional supervisor and a divisional supervisor. The functional supervisor is in charge of overseeing employees in a functional area, such as marketing or engineering. A divisional supervisor manages specific projects. They absorb employees from various functional areas to complete their project teams. Figure 4.7 depicts the absorption of employees from operations, finance, and marketing for projects A and B. These employees report to both managers then.​ 4.9.3.1  Advantages

• Flexibility: Increased flexibility in adding, removing, or changing activities to meet changing needs.

• Motivation: If it is identified that a particular project is lacking proper motivation, then it is provided to the concerned department.

• Development of skills: Since cross-functional teams are formed, it leads to the development of the skills of the employees.

• Better service: There is always a product or project manager answerable to the queries.

• Improved strategic management: Top-level managers are relieved from routine tasks to focus on strategic issues.

FIGURE 4.7  Matrix

Organizational Structure

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4.9.3.2  Disadvantages

• Power struggle: Conflicts occur as there is an overlapping of responsibilities and authorities.

• Slow decisions: The speed of decision-making retards as there is shared deci-

sion-making in the matrix structure. • Increased confusion: As there is dual reporting in the matrix structure, it leads to confusion. • Increased administrative and managerial overhead: Due to duplication of routine activities, administrative costs increase, and as specialized managers are hired for each project and function, managerial costs also increase. • Professional development sidelined: Professional development is not given priority due to the time constraints of the project; therefore, employees forgo opportunities to develop and improve. 4.9.4 Network Structure

A network structure is a cluster of various organizations that coordinate their actions through agreements and contracts instead of a hierarchy of authority. Rather than hiring individuals to perform all of its business activities, a company using the network structure depends on outside companies. Organizations using a network structure own only the core or essential components of the business and outsource the rest. It may, for instance, hire an outside advertiser to advertise its products. The network structure reduces costs and brings in flexibility because it utilizes external help as and when required. Creating a network-based company, however, means losing control over whatever processes the company has outsourced (Figure 4.8).

FIGURE 4.8  Network

Organizational Structure

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4.9.4.1  Advantages

• Flexible: The most important advantage of network structure is that it can

quickly respond to the changing environment. As the business grows, organizations can enter into new partnerships and vice versa. • Cost-effective: As only the essential part of the business is owned by the company and the other operations are outsourced, fewer individuals need to be hired, leading to a reduction in overheads. • Efficiency: The overall efficiency of the organization increases as the tasks are outsourced to an expert organization. 4.9.4.2  Disadvantages

• Coordination problems: As the business functions are outsourced to different companies, sometimes it becomes difficult to coordinate all of these activities.

• Loss of control: There is always a fear of losing control over the core activities, which would lead to uncertainties in the relationship.

• Political pressure: Changes in the political scenario affect organizations with network structure to a large extent.

• Increased pressure: If there are problems with unemployment in the parent

company due to outsourcing, there is likely to be pressure on the government to effect policy changes in this respect.

4.9.5 Line-and-Staff Organization

The oldest and simplest form of organization is line organization. Line functions have direct responsibility for achieving the objective of the venture. In this form of organization, a supervisor exercises direct control over a subordinate. Authority flows from top to bottom of the organization. Here, the chief executive heads the organization. This type of organization is also called a scalar organization. The concept of staff organization was developed by F.W. Taylor. The objective of a functional organization is to offer specialist services to the organization. Under this plan, specific functions common to all the departments are placed in the hands of an expert in that function. The line-and-staff organization combines the line organization with staff departments that support and direct line departments. Most medium- and large-sized firms exhibit line-and-staff organizational structures. The distinguishing characteristic between simple line organizations and line-and-staff organizations is the multiple layers of management within line-and-staff organizations (Figure 4.9). 4.9.5.1  Advantages

• Top managers relieved from routine work: In this organization, line authorities focus on the execution of work and are relieved from thinking function.

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FIGURE 4.9 

Line-and-Staff Organization

• Expert advice: Line authorities are not autocrats because they must take advice from the expert or staff position.

• Efficiency: This results in greater efficiency as the line managers spend much

of their time on line functions. The line managers function more efficiently as they get support from staff positions. • Easy coordination: This organization ensures coordination automatically as the line managers work along with staff officers. 4.9.5.2  Disadvantages

• Confusion: Line-and-staff organizations are ambiguous in terms of organizational relationships, responsibility, and authority.

• Conflict: Conflicts are common in line-and-staff organizations owing to the unclear definition of authority the structure entails.

• Ineffective and erroneous decision-making: It is common for line managers to feel threatened by the advice of staff members. In this case, line managers are liable to make decisions without staff member consultation. Such decisions are not always successful. • Slower decision-making: Decision-making is slower in a line-and-staff organization due to its complexity and layers. • Costly: Most of the line-and-staff executives are experts in their fields, and their appointment leads to heavy expenditure. 4.9.6 Virtual Organizations

A virtual organization is a network of independent enterprises, suppliers, and customers linked by information technology. For example, LiveWire Projects is a virtual IT platform that is used by IT companies and professionals to develop their business applications and products on the cloud. Virtual organization networks are usually temporary. The significant attributes of virtual organizations are as follows:

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• Technology: The geographically dispersed partners connect to each other via electronic networks.

• Flexibility: It offers flexibility as the partners can link up as and when required. The structure evaporates as soon as the requirement is over.

• Efficiency: As each partner brings in their core proficiency, the overall efficiency of the organization is bound to increase.

• Borderless: The boundaries that traditionally separate a firm from its customers, competitors, and suppliers are eliminated.

4.9.6.1 Advantages

• Boundaryless: They are appropriate for affinity groups that are geographically dispersed.

• Suitable for short-term initiatives: They are suitable and tailored for shortterm initiatives with clearly defined objectives.

• Flexible: Virtual organizations are highly responsive to changing environment. • Cost-effective: As there is no physical existence, there is little or no organizational overhead.

4.9.6.2 Disadvantages

• Dependency on technology: As virtual organizations depend on information technology for coordination and interaction, their efficiency may be affected by the limitations and problems inherent to these technologies. • Difficult to manage: Since there is no physical existence, it becomes difficult to manage virtual organizations in some situations. 4.9.7 Tall Organizational Structure

Organizations that require close monitoring of all their business activities opt for tall organizational structures. In such a structure, the decision-making authority is the top-level management. This results in a long chain of command similar to that of military organizations. As the organization expands its operations, the levels of management also increase, which ultimately results in a tall organizational structure. In tall organizational structures, the span of control is narrow (Figure 4.10). 4.9.7.1 Advantages

• Improved performance and discipline: The quality of performance increases as the tall structure facilitates close supervision of activities being carried out. Similarly, discipline in the organization is also maintained.

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FIGURE 4.10  Tall

Organizational Structure

• Cordial relations: As there is a narrow span of control, superiors get time to

interact with their subordinates and solve their problems. As a result, the superior–subordinate relations improve. • Narrow span of control: The narrow span of control facilitates easy supervision and control. • Easy coordination: The efforts of subordinates can be easily coordinated. • Development of staff: Tall organizations encourage the development of their staff. As there is a narrow span of control, the superior can easily identify the areas in which the subordinate lacks and arrange for training for their development. 4.9.7.2 Disadvantages

• Delay in decision: As there are several levels of management, it causes delays in the decision-making process as well as distortion in communication.

• Cost inefficiency: As there are increased levels of management, the tall structure adds to the cost of administration.

• Coordination problems: As the structure grows taller, it leads to coordination problems.

• No freedom: There is strict supervision. Thus, the subordinates have no freedom at all.

• Dominance: Managers may become more dominating, leading to a loss of loyalty in subordinates.

4.9.8 Flat Organizational Structure

Organizations that require more autonomy and self-control have a flat organizational structure. In this structure, there are fewer levels of management. The flat organizational structure is usually adopted by small business firms. Here, the management shows confidence in the decision-making capability of the employees. It focuses on empowering the employees rather than following the chain of command. In this organizational structure, the span of control is wide (Figure 4.11).

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FIGURE 4.11  Flat

Organizational Structure

4.9.8.1 Advantages

• Cost-effective: This structure proves to be cost-effective as compared with tall structures since there are fewer managers.

• Decision-making: Quick decision-making is possible as there are fewer levels of management.

• Communication: The flat structure facilitates easy and fast communication as there are fewer levels.

• Suitability: It would be suitable where routine and standardized jobs are performed.

• Freedom: Subordinates enjoy some amount of freedom as there is no strict supervision, as seen in the case of a tall structure.

4.9.8.2 Disadvantages

• Loose control: As there are a large number of subordinates reporting to a

superior, there is loose control. Maintaining discipline also becomes difficult at times. • Coordination problems: It becomes difficult to coordinate the activities of a large number of subordinates. • Suitability: It may not be suitable for organizations having a complex structure. • Decreased quality of performance: As there is no close monitoring, it can lead to decreased performance. 4.10 Span of Control 4.10.1 Definitions

Span of control refers to the number of people that a manager can supervise. —Louis Allen The span of control is the number and range of direct, habitual communication contacts between the Chief Executive of an enterprise and his principal fellow officers. —Marshall Dimock (Source: Allen, L. A. (1958)., Dimock, M.E. (1958))

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Span of control refers to the number of subordinates a superior has. The greater the number of people reporting to a manager, the broader the span of control and vice versa. This concept emphasizes that there should be an appropriate number of individuals reporting to one manager since a large number would lead to confusion and difficulties. According to management experts, the span of control should not exceed 1:6 at the top level and 1:20 at the lower level. However, these are only theoretical figures. The span of control depends on the following various factors:

• • • • •

Capability of the superior Capability of workers Nature of the task to be performed Geographical dispersion Other tasks to be handled

The span of control can be either narrow or broad, each of which has its own pros and cons, which are as follows. 4.10.1.1  Advantages of Narrow Span of Control

• It facilitates better communication between the boss and their subordinates. • Supervising a smaller number of people requires fewer managerial skills. • Subordinates get an opportunity to discuss their problems and provide feedback to their superiors.

• Managers can exercise better control over subordinates. 4.10.1.2  Disadvantages of Narrow Span of Control

• It tends to raise the levels, making it difficult for top-level managers to be in touch with ground realities.

• It creates a problem of coordination. • It may reduce the morale of employees as they operate under a tight control. • It causes communication distortion when communication occurs at various levels of management.

4.10.1.3  Advantages of Wide Span of Control

• • • •

It is cost-effective since fewer managers are appointed. There is less confusion. Less control and supervision can encourage employees to be more positive. It creates a more entrepreneurial culture by allowing employees to take ownership of their jobs.

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4.10.1.4  Disadvantages of Wide Span of Control

• Fewer promotional opportunities can be demotivating. • Managers with a wide span of control may get overloaded with work. • Loose control over subordinates. 4.11 Centralization and Decentralization of Authority 4.11.1 Aligning Organizational Structure with Corporate Strategy: A Case Study of Adobe Systems Inc.

Adobe Systems Inc. is a global firm established in 1982 and is an industry leader in digital media and digital marketing business segment offerings. The company’s vision encapsulates continued growth in these two major areas with a focus on elevating end-user value and the establishment of exclusive relationships with past and present customers for increased subscriptions. Therefore, it decided to shift from continuous licensing to a subscription-based model. This was a very critical step for Adobe Systems Inc. 4.11.2 Centralized and Decentralized Decision Approach in Adobe

In the case of Adobe, it was necessary to implement a centralized approach in its management of operations to guarantee reliable, universal end-user know-how with the organization’s digital media assets. However, in the sales vertical for selling the cloud solutions, it was required by the company to go for a decentralized mode of execution to other businesses, which showed an inclination to exercise greater control over asset management and marketing campaigns. 4.11.3 Aligning Organizational Structure with Strategy

The strategy adopted by Adobe to align its corporate strategy with the organization’s structure includes setting up performance metrics to be achieved by all members of the organization, right from top management to the lowest level. Adobe’s acquisition of Behance and Neolane to enhance digital media and marketing platforms is evidence in itself that the company is aligning its digital media business solutions with functional and process activities for an increased subscriber base. With 500 new features to its creative cloud service, Adobe is receiving top rankings for offering accurate forecasting services for marketers. 4.11.4 Inference/Lessons Learned

Adobe’s strategy to align its task force with the functional and process aspects of business activities to attain a long-term vision has become extremely successful and is aligned with the organization’s culture, structure, ethics, values, leadership,

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and business solutions. Deciding on allocating authority and responsibility to decision makers inside and outside of the organization and matching corporate strategy to structure, Adobe has come out as the finest player in its domain and the competitive advantage gained by it is at its peak. 4.11.5 Definitions

Centralization is systematic and consistent reservation of authority at central points within an organization. Decentralization applies to a systematic delegation of authority in an organizational context. —Allen Everything which goes to increase the importance of the subordinate’s role is decentralization and everything which goes to reduce is decentralization. —Fayol (Source: Allen, L.A. (1958), Fayol, H. (1987)).

4.11.6 Centralization

Centralization is a process where the concentration of decision-making is in a few hands. All the decisions and actions at the lower levels are dependent on approval by the top management. Under centralization, vital and significant decisions are taken by the top management, and the other levels implement the decisions according to the instructions of the top management. 4.11.7 Example

Suppose 1, 2, 3, 4, and 5 are subordinates of A, and X, Y, and Z are subordinates of 4. Here, X, Y, and Z depend on 4 for the decisions to be made, and 4 in turn depends on A. Neither X, Y, and Z nor 1, 2, 3, 4, and 5 can make decisions without consulting A. This is called centralization of authority (Figure 4.12). 4.11.7.1 Advantages of Centralization

• Reduced costs: Standardized processes and techniques help in a considerable reduction of costs incurred. The significant reason for this reduction is the specialization of activities to be performed. • Flexibility: In situations of emergency or crisis, standardization of activities requires minimal effort to revise all the activities at once. This guarantees a greater degree of flexibility in an organization.

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FIGURE 4.12  Centralization

of Authority

• Avoids replication of work: Centralized training and standardization of work

leave no possibility for replication of tasks or actions. This eliminates additional expenditure on excessive labor and duplication of work. • Better coordination: Centralization accelerates better coordination among different operations. Direct control and supervision are facilitated, which minimizes the possibility of conflict of authority and duplication of work. 4.11.7.2 Disadvantages of Centralization

• Delay in work: Centralization results in man-hours lost and delay in the execu-

tion of work because of the transmission of records from and to the central room. A quick decision is not possible, which also causes delays in the execution of work. • Dictatorship: An employee is always expected to work by what has been dictated to them. In the absence of the lead, no employee at the subordinate level is given the authority to take a decision on any issue. This causes psychological reluctance, and the employee sees no growth or motivation within the organization, which would sometimes result in disloyalty. • High level of dependency: The success of an organization depends totally on the proficiency and decision-making ability of the top management, which might prove to be risky at times. 4.11.8 Decentralization

Decentralization is the systematic delegation of authority at all levels of management. In decentralization, authority is retained by the top management for taking major decisions.

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4.11.9 Example

Large multinationals follow a decentralized structure because of geographical dispersion and often include redundant executive positions for each region, rather than allowing a single executive team to make decisions across all geographies. 4.11.10 Example

Suppose 1, 2, 3, 4, and 5 are subordinates of A, and X, Y, and Z are subordinates of 4. Although X, Y, and Z are supervised by 4, they can take decisions on routine matters and depend on decisions to be taken by 4 only in the case of important issues. A similar relationship exists between 1, 2, 3, 4, and 5 and A. Here, 1, 2, 3, 4, and 5 and X, Y, and Z also enjoy some part of authority apart from A. This denotes distributed authority. This is called decentralization of authority (Figure 4.13). 4.11.10.1 Advantages of Decentralization

• Reduced burden on top executives: Decentralization of authority frees top

executives from routine work and minor issues so that they can concentrate on more important functions, such as preparing policies and procedures, making strategic decisions, coordination and control, and so on. As the company expands to the level that it goes beyond the reach of the few top-level executives, decentralization becomes indispensable. By delegating authority, the top management can extend its leap over a giant enterprise. • Quick and better decisions: Decentralization fosters prompt and more accurate decisions because decisions are made by those who are aware of all the realities of the situation. Decisions can be made near the point of action without

FIGURE 4.13  Decentralization

of Authority

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•

• •

•

•

•

consulting higher levels or waiting for approval of top executives over minor matters. Growth and diversification: Decentralization enables growth and diversification of products and markets. Under decentralization, each area of operation is treated as a different division so that it can respond quickly to the changing demands of its market. Better communication: Decentralization improves the level of efficiency and communication within the organization as there are fewer levels of authority. Development of executives: Decentralization provides an opportunity for subordinate managers to take initiative and acquire leadership qualities. Executives at lower levels learn to manage by exercising delegated authority. A pool of promising managers becomes available, which simplifies management succession and provides support to warrant the continuity of management. Motivation and improved morale: Decentralization increases job satisfaction and the morale of subordinates. Providing an occasion to make decisions offers a sense of belonging and satisfies the need for power, prestige, status, and independence. A competitive environment is generated. High motivation and morale help in improving output and working relationships. It also helps make better utilization of talents at lower levels. Effective supervision and control: Decentralization results in effective supervision because managers at lower levels have the authority to make changes and recommendations. It also promotes effective control through a comparative evaluation of performance and clear-cut accountability for results. Democratic management: Decentralization leads to democratic management and flexibility of operations. Necessary changes can be accommodated without dislocating the entire structure.

4.11.10.2 Disadvantages of Decentralization

• Suitability issues: In cases where the training, experience, education, and so • • • •

on of the employees is/are inadequate, decentralization of authority would be harmful to the enterprise. Not desirable for small enterprises: Decentralization is not suitable for small enterprises because it would be easier and more economical to administer the enterprise on a centralized basis. Problematic in case of emergency: Decentralized administration is ineffective in an emergency. It is costly and time-consuming to control an emergency that affects a vital business area under a decentralized plan. Lack of uniformity: There might be a lack of uniformity and inconsistent procedures as each department might have the authority to formulate its own policies and procedures. Coordination problems: As each department/division enjoys substantial autonomy, it might lead to coordination problems.

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4.12 Impact of IT on Organizational Structure

Processes of communication are restricted to computer and communication systems with the quick diffusion of information and reception at national or global offices. Modification in telecommunications means that there is no requirement for support staff at the main production units, and individuals can work using their personal workstations from their own homes. Computer-based information and decision support systems impact choices such as distribution of work and individual tasks and changes in customer choices rapidly and effectively. Technological advancements have pushed organizations to enhance operating efficiencies, ameliorate communication, decrease prices, increase their worldwide existence, and gain a competitive edge through the enforcement of IT systems. Implementing IT has changed business processes, reduced processing time across all functional units, and created more possibilities for employees and management. Information system has helped most of the organizations redesign their structure that is defined by open channels of communication, adaptability, decentralization of authority, and seamless information flow. The debut of IT beyond any doubt transforms the nature of work and the criterion of employment. Research is now being carried out to probe probable health hazards such as eye fatigue, backache, general tiredness, and tetchiness. The psychosomatic and societal effects of technical change should not be seen by the staff as potential pressures and the managers need to ensure the compliance of the staff by making use of new technology. Managers are required to cultivate more agile skills in the organization. Another technological advancement is that digitization is diminishing face-toface communication between sellers, business partners, and their clients. Easier entree to the Internet has allowed many personnel to become teleworkers. Collaboration tools and technologies enable organizations to conduct ‘virtual meetings’ from remote locations. Participants can make changes to the designs using a virtual whiteboard in a shared mode. The overall IT infrastructure embraces the computer and communication network and the shareable soft utilities, platforms and tools, and hard infrastructure. The infrastructure supports a firm creating a competitive edge, by improving cycle time, cross-functional, and cross-selling, processes and opportunities. The new technology saves time resulting in, greater volumes handled in a short span of time, with constrained resources, excludes manual tasks, and transforms the human resource unit by proving a chance to upskill and use technology for greater productivity and lesser turnaround time. But such advancements create more pressure on the people within the organization as the employees have to deal with the increased workload and competitive pressure that technology creates.

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In a digital age where speed is key to competition, the penalties of a wrong decision, say an error by a developer, can impact the organization just as severely as an error by senior management staff. Aligning with the impregnation of IT, the requirement for increased security, task force management and impetus, and having costs under control in ever-changing technology-driven markets are important. To stay aligned in a technology-enabled business environment, managers must ensure that IT reorients with their overall strategy. Summary

This chapter takes the reader through the types of organization and highlights the perspectives of centralization and decentralization concerning the authoritative initiative in an organization. It also elaborates on various organizational structures; their advantages and disadvantages; fundamental principles and processes in organizing; how structuring the organization is aligned with strategy formulations; decisions taken by the top and middle management; and the impact these have on organizations. This chapter also talks about the approaches to the organization and the impact of changing technology on the functioning and structures of the organizations. Exercise Objective Questions

1. Organization is viewed as a/an ________ process and a management activity, which is crucial for predicting the consumption of a company’s resources. • Active • Intermediary • Passive • None of the above 2. A sound organization • Prevents corruption • None of the above • Enhances creativity • All of the above 3. Which of these is a hierarchical approach of subordination of individuals that work together and contribute to serve a common goal? • Formal organization • Functional structure • Informal structures • Divisional structure 4. In which of these is an employee accountable to two immediate overseers: a functional overseer and a divisional overseer? • Formal organization • Functional structure • Informal structures • Matrix structure 5. The ________ networks are usually temporary in nature. • Line-and-staff organization • Virtual organization • Network organizational • Tall organizational

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6. Span of control denotes the count of people that a__________ can supervise. • Manager • CEO • Leader • All of the above 7. A narrow span of control does not aid better communication between the superior and the subordinates. • True • False 8. Which of these operates on group psychology? • Formal organization • Functional structure • Informal structures • Divisional structure 9. Which of these is a process where the concentration of decision-making is in a few hands? • Span of control • Decentralization • Centralization • None of the above 10. Decentralization results in effective • Supervision • Faster operation • Coordination • None of the above 11. The external environment of the organization includes: • Technological factors • Demographic factors • Economic factors • All of the above 12. Three core value disciplines that distinguish a business from the race: • Operational excellence • Product leadership • Customer intimacy • All of the above 13. The __________ approach is based upon machine theory. • Systems • Contingency • Human relations • Classical Case Study

Neliphen Hitech Ltd. is a large-scale private-sector manufacturing company that has been running with a huge profit for the past 13 years. It has an exceptionally good sales force and marketing network all over the country. It has divided its market into five regions: east, west, north, south, and central. Abhay Patil is entirely responsible for marketing in the eastern region. Abhay, a very dedicated and committed worker, is a competent person in the organization. As a marketing manager, he keeps himself engaged with the problems of the sales and marketing teams. He periodically conducts market research to understand the fluctuating market environment. He also tries to obtain feedback on product quality, price, and design to improve the processes. Abhay is very competent in developing marketing strategies compared with other territory managers. He has been recognized for his efforts. He heads around eight middle-level managers and five junior-level managers. He ensures that he conducts a biweekly performance meeting with the managers reporting to him. Because the span of management was manageable for Abhay in the eastern region, he could achieve better sales and profit.

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Vineet Mehta, a marketing manager for the southern region, resigned recently because of a better opportunity. The southern region started to run into losses. The situation became critical for the company. To manage this critical situation, the management asked Abhay to take up the dual responsibility of managing the southern region as well. Because the southern region is much bigger than the northern region, the task was challenging for Abhay. Since the management needed one month for the selection of a manager for the northern region, Abhay agreed to the management’s decision. He started managing two regions. Therefore, all the subordinate managers from both regions started reporting to him and taking his guidance. He found that he was not able to have regular follow-up meetings with the middle-level and junior-level managers and the sales teams for the regions. Because there was a delay in becoming aware of the marketing problems in the new and existing regions, he failed to take strategic decisions for both. The situation later reached such a state that he could not control either his region or the new one. A periodical review of all regions happened, and the top management realized that the regions under Abhay had fallen drastically within a period of two months. Abhay was called by the top management for an explanation of the poor performance. Abhay explained that he took up the additional responsibility of the new division for only one month so that the organization would have sufficient time to recruit a new manager. However, since there was a delay in appointment, both regions became unmanageable for him to handle. Moreover, the span of control was broad to manage singly. Within a week, the organization appointed a new marketing manager for the northern region and relieved Abhay. Abhay was satisfied with the decision because now he could focus on the performance of his region. Questions

1. The company could have avoided the loss. Comment. 2. Higher levels of management can lower the communication and flow of information with subordinates. Comment. 3. How does a span of control affect managerial control at the operation level? Critical Thinking Questions (Relevant examples need to be given for better comprehension)

1. Why is decentralization becoming a more prevalent practice in modern-day organization? 2. From an employee’s perspective, state the advantages and disadvantages of the matrix structure. 3. Which organizational structure would you prefer to work on as an employee? Least preferred? Why?

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4. Develop a different organizational structure for your company or college. What would be the advantages of the newly suggested structure over the existing organizational structure? 5. Discuss the impact of IT on organizational structure. Chapter at a Glance Organization

An organization is a social unit of people, systematically structured and managed to accomplish a task or to achieve collective goals on a continuous basis. Organization Viewed in Four Different Senses

• As a framework of relationships • As a process

• As a system • As a group of persons

Importance of Organization

• • • •

A tool for achieving objectives Facilitates administration Optimum use of HR Enhances creativity

• • • •

Prevents corruption Fosters the growth of enterprise Eliminates overlapping of work Fosters coordination

Nature of Organization

• • • •

Process Structure Dividing and grouping of activities Accomplishment of goals or objectives

• Authority–Responsibility relationship

• Human and material aspects of the organization

External Environment of Organization

• • • • •

Technological factors Economic factors Political and legal factors Demographic factors Social factors

• • • •

Competitive factors Global factors Ethical factors Natural factors

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Organizational Approaches

• • • •

The classical approach The human relations approach The systems approach The contingency approach

Principle of Organizing

It includes the principles of objective, specialization, authority, span of control, unity of command, parity of authority and responsibility, supremacy of organizational objectives, and the scalar principle. Process of Organizing

• • • • • • •

Fixing the organizational objectives Finding activities that are a must for achieving the set objectives Grouping similar activities Defining the responsibilities of each employee Delegating authority to employees Providing employees with the required resources Coordinating efforts of all to achieve goals

Formal Structure

This is a hierarchical concept of subordination of entities that collaborate and contribute to serve a common goal. Informal Structure

Informal organization is any human group interaction that occurs spontaneously and naturally over a long period of time. Types of Organizational Structure

• • • • • • •

Functional structure Divisional structure Matrix structure Network structure Line-and-staff organization Virtual organization Tall and flat structures

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Span of Control

‘Span of control’ refers to the number of people that a manager can supervise.

• Narrow span of control • Broad span of control Centralization and Decentralization of Authority

Centralization: Centralization is the systematic and consistent reservation of authority at central points within an organization. Decentralization: Decentralization refers to the systematic delegation of authority in an organizational context.

5 STAFFING, TRAINING, AND DEVELOPMENT

An Opening Vignette Case Study: Recruitment at Futuristic Futuristic is a reputed multinational company with locations across the globe. The company believes in aligning its recruitment process with other company processes to make it more effective. The company follows the selection process for middle-level management as follows: Preliminary interviews: These are designed to verify the roles and responsibilities undertaken by the professional along with their skills and competencies. The preliminary interview goes on for a few minutes, generally taken by the HR director of the company. If they find the candidate’s profile suitable, then the subsequent rounds of interviews are conducted. 2. Application forms: Professionals clearing the preliminary interviews are required to fill in the application form to collect data related to the qualifications, experience, skills, personal details, and so on of the candidates. 3. Employment interviews: These involve one-on-one technical sessions between the interviewer and the interviewee. This interview generally is taken by the top-management personnel and continues for an hour or more, during which the candidate’s expertise, approach, and depth are evaluated. Some of the important aspects, such as salary, duties, and responsibilities, are also discussed during these interviews. 1.

DOI:  10.4324/9781032634258-5

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Final selection: The final selection process of Futuristic is quite elaborate with two rounds of interviews, one taken by the Board of Management and one final with the global head—Asia Pacific. This stage consists of two aspects: the discussion panel and the final interview. All the selects are given a high-level problem scenario in advance and told to put forth their view. The time frame for the brainstorming session is around 45 minutes, followed by an evaluation by the board. The board evaluates the candidates using the precision of thought and judgment, eloquence of expression, acceptance of others’ views, and leadership qualities. The personal interview, which is subsequently conducted by the global head, is chiefly for salary negotiation, finalizing location preferences, and so on, followed by the release of the appointment letter. 4.

Questions 1. 2. 3. 4. 5.

Comment on the selection process adopted by the company. Why are application forms important? What is the basic objective of the preliminary interview? What should be the size of a group for final selection? What is the significance of the final personal interview?

Solutions 1. The selection process adopted by the company is systematic and integrated with standard procedures and unbiased methods of soliciting information about potential employees. 2. Application forms describe the eligibility of the candidate for the role, and hence they are important. 3. The basic objective of the preliminary interview is to make certain whether the candidate’s experience possesses validity for the current profile he is being interviewed for. Preliminary interviews are also a filtration technique to remove candidates’ profiles that do not match the current job roles and responsibilities and are a mechanism to optimize the cost and time of any HR unit of an organization. 4. For the final selection, the size of the group should be limited to about six to seven applications for a senior manager’s role. 5. A personal interview is a one-on-one with a management professional to round up the final process of appointment by finalizing the job profile and ensuring his/her readiness for the same.

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5.1 Meaning

Like planning, organizing, directing, and controlling, staffing is one of the essential managerial functions. Staffing deals with manning the organization structure by selecting efficient individuals and training them to perform the assigned tasks in the best possible way. 5.2 Definitions

Staffing involves manning the organizational structure through the proper and effective selection, appraisal, and development of personnel to assign the roles so designed. —Koontz and O’Donnell Staffing is concerned with the placement, growth, and development of all those members of the organization whose function is to get things done through the efforts of other individuals. —Haimann Staffing is the whole personnel function of bringing in and training the staff and maintaining favorable conditions of work. —Luther Gidick (Source: Koontz et al., (1964), Haimann et al., (1977), Gidick et al., (1937))

5.3 Nature of Staffing Function 5.3.1 A Significant Managerial Function

Staffing is one of the essential managerial functions. Staffing is a managerial function that provides the required manpower to carry out other managerial functions like planning, organizing, directing, and controlling. 5.3.2 Pervasive Activity

The staffing function is said to be a pervasive activity since it is carried out by the managers of all the business units, whether big or small, profitable or at break-even. 5.3.3 Continuous Activity

Staffing is considered to be an ongoing process as it continues throughout the lifespan of the organization. This is because staffing deals with selection as well as transfers and promotions.

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5.3.4 Efficient Management of Human Resources

Staffing consists of procedures such as recruitment, selection, orientation and placement, training and development, and remuneration of employees. If all these procedures are managed properly, it helps in the efficient management of HR. 5.3.5 Right People at the Right Place at the Right Time

Every organization requires people with different qualifications, skills, and competencies to handle different positions in the organization. This can be done by following proper staffing practices so that the organizational structure can be filled with the right kind of people at the right time. 5.4 Process of Staffing 5.4.1 Manpower Requirements

The process of staffing starts with determining the manpower required to run the organization smoothly. Once the requirement is identified, the next step is to match the requirement and supply. It not only deals with the current manpower requirements but also future requirements (Figure 5.1).

FIGURE 5.1  Process

of Staffing

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5.4.2 Recruitment

After analyzing the manpower requirement, the next step is to invite applications for various positions as per the requirement. Based on the requirements, invitations are sent to the prospects whose profiles match the requirements. 5.4.3 Selection

This is the screening phase in the staffing process wherein the solicited applications are screened out and suitable candidates are appointed as per the requirements. 5.4.4 Orientation and Placement

After the selection is done, the candidates are introduced to the various departments and work environment through the orientation program. According to suitability, the employees are then placed in the appropriate departments. 5.4.5 Training and Development

Keeping in mind that training the employees helps them perform better as well as motivates them, the organization arranges various training programs. 5.4.6 Remuneration

It is a kind of compensation provided in terms of money to the employees for the work done. Remuneration to be given is decided based on the nature of the job, that is, skilled, semi-skilled or unskilled, physical or intellectual, and so on. 5.4.7 Performance Evaluation

The staffing function also deals with monitoring the performance of the employees to keep track of their dedication and efficiency shown in the assigned jobs. The outputs of performance evaluation play a key role in deciding promotions, training needs, and remuneration of employees. 5.4.8 Promotion and Transfer

Promotion is a non-monetary incentive in which the employee moves up in the organizational hierarchy. Transfers deal with moving an employee from one unit or department to another.

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CASE STUDY—HR STAFFING Company Profile XYZ Incorporation is the largest wholesale distributor of construction and waterproofing materials and grills for doors and windows. Since they started in the year 2000, XYZ spans the nation with more than 38 branches across 12 states, ₹2 crores in sales, and over 2,000 employees working across the nation.

Business Situation XYZ’s immediate requirement was a workforce (on contract) on an immediate basis to meet their staffing demands for a new project in the subunit of the Ahmedabad branch. These positions included warehouse supervisor, general laborers, clerical staff, purchasing and accounting and material maintenance staff, as well as some chemical engineers for their dyeing and waterproofing unit. The recruitment of staff had to be done in two weeks, and the number of resources required was 45 in total.

Solution The HR department of XYZ started by analyzing the resource requirements, in which their main objective was to ensure that while recruiting in bulk, they were not compromising on resource quality. Since there were different job profiles for which resources had to be acquired, they had to carefully lay down a resource acquisition plan comprising of the time, budget, and process to be carried out for recruiting the resources. So, the HR department posted an advertisement on prominent Indian job hotspot sites and invited applications from eligible candidates. They received around 1,700 applications and had to go through a strenuous task of candidate filtration based on resumes. After that process, they set up an interview date, and along with the Vice President-HR and Vice President-Sales, the HR team conducted 530 interviews in seven days, with each interview spanning 10 minutes on average, using appropriate rating scales. The day after the interview, the selected 60 candidates were called and scheduled for job-specific testing, reference and background checks, and medical examination so that offers for jobs could be made. Of the 60 candidates, 5 failed medical checks, 10 candidates sent regret notifications, and 8 candidates said that they did not prefer Ahmedabad as their job site. So, to fill the remaining eight positions, the HR department then contacted in-house employees and used employee referrals, word of mouth, and a walk-in to XYZ, from which they recruited the ones who culturally fit the organization.

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The Results The HR department of XYZ Incorporation within a span was able to recruit a total of 45 employees during this challenging time. It was not only the count of workforce-on-contract but also the quality that they were able to deliver with 10 percent of new inductees working for additional 20 hours per week. The project went on for about a year until the production slowed down, and approximately eight candidates were hired for permanent roles by the company depending on their contribution and performance that was rated with the critical incident method.

5.5 HR Planning

HR planning is also called manpower planning. This deals with putting the right number and type of people in the right place at the right time. HR planning consists of the steps discussed further (Figure 5.2). 5.5.1 Analyzing the Existing Manpower Inventory

Before making a forecast for future manpower requirements, the manager needs to know the current status of manpower available within the organization. This generally depends on factors such as the nature of work carried out in the organization, work complexity, size of the organization, number of departments, and so on.

FIGURE 5.2  Steps

in HR Planning

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5.5.2 Making Future Manpower Forecasts

Once the current manpower inventory is analyzed and the factors affecting requirements are studied, the next step is to make future manpower forecasts. Various techniques are used for this purpose, such as workforce analysis, trend analysis, expert forecasts, workload analysis, and so on. 5.5.3 Developing Employment Programs

Various employment programs such as recruitment, selection, and placement procedures have to be designed and developed after comparing the current HR inventory with future requirements. 5.5.4 Developing Training Programs

After selecting suitable candidates and placing them in the appropriate departments, the next phase is to train so that the employees can carry out their work in a more efficient manner. 5.6 Recruitment

Recruitment is the process of searching the candidates for employment and stimulating them to apply for jobs in the organization. —Edwin B. Flippo Source: Flippo, E.B. (1976) Some of the definitions of recruitment are as mentioned below:

• Recruitment is a continuous process whereby the firm attempts to develop a

pool of qualified applicants for future HR needs even though specific vacancies do not exist. Usually, the recruitment process starts when a manager initiates an employee requisition for a specific vacancy or an anticipated vacancy. • A process of finding and attracting capable applicants for employment. The process begins when recruits are sought and end when their applications are submitted. The result is a pool of applications from which new employees are selected. • Recruitment of candidates is the function preceding selection, which helps create a pool of prospective employees for the organization so that the management can select the right candidate for the right job from this pool. The main objective of the recruitment process is to expedite the selection process. • It is the process of discovering sources of manpower to meet staffing, schedule requirements and to employ effective measures to attract manpower in adequate numbers, and facilitate the selection of an efficient working force.

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5.7 Process of Recruitment

The process of recruitment has been shown in Figure 5.3. 5.7.1 Recruitment Planning

The first step is to devise a recruitment plan, which consists of drafting the job description for open positions and including the responsibilities to be undertaken, the skills, experience, and qualifications needed, the compensation and benefits for that role, the bond/probation period, the location where an individual has to serve, and so on. 5.7.2 Recruitment Strategy Formulation

The strategy for any recruitment to be done can be internal or external to the organization, which means that first the talent pool within the organization can be considered through promotions, retirements, departmental transfers, and so on. If the requirements are not met or are based on specific terms and conditions, then candidates external to the organization can be hired. The strategy might consist of telephonic interviews, face-to-face interviews with practice managers/heads, HR managers/heads, and so on after advertising for positions through electronic media. Other extensive methods that can be a part of the selection process under recruitment strategy include resume screening, conducting written tests, technical interviews, group discussions, providing a letter of intent, getting the candidate’s acceptance and medical examination, and making a final offer.

FIGURE 5.3  Process

of Recruitment

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5.7.3 Source Identification

This step involves understanding which source to focus on while looking for the right candidate/candidates. There are the following two sources:

• Internal sources • External sources 5.7.4 Candidate Screening

An integral part of the recruitment process is the screening of the prospective employee based on qualification, technical, and domain-specific knowledge, years of experience, and so on, based on the job specifications. The screening of the prospective employees’ resumes is done after the initial process of placing advertisements and inviting resumes from applicants is over. The techniques used for screening candidates depend on the source of supply and methods used for recruiting, which consist of resume filtration and first-level screening of the candidate through a deselection test or interview round. 5.7.5 Recruitment Process Control and Evaluation

Since the recruitment process is associated with a cost, its evaluation is mandatory, and the cost of the recruitment process revolves around

• Compensation of the recruiters • Cost in terms of giving advertisements for the job after preparing a job description

• Administrative expenses • Cost of recruiting personnel through third-party • Cost incurred in improper selection 5.8 Types of Recruitment

Recruitment is classified into two major types: internal and external. Depending on the nature of recruitment, the firm may decide to go for internal or external recruitment. 5.8.1 Internal Recruitment

As the name suggests, this type of recruitment takes place within the organization. This means that the positions can be filled by people who are already working in the organization. Internal sources of recruitment are readily available to an organization. There are primarily two sources of internal recruitment, which are as follows.

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5.8.1.1 Promotions

Here, employees are appointed to handle the jobs that are highly responsible and more crucial. 5.8.1.2 Transfers

Here, employees may be transferred from one department to another or even from one unit of the organization to another. Internal recruitment proves to be advantageous as it acts as a motivational factor since the employees can get better opportunities within the organization itself. Also, it saves both time and money for the organization. But a drawback of internal recruitment is that it provides a smaller base for the selection of suitable candidates. 5.8.2 External Recruitment

External sources of recruitment are those which are external to the organization. This method proves to be beneficial since the organizations can choose suitable candidates from a large pool of prospects. But it is time-consuming, and organizations have to spend a lot of money. The external sources of recruitment include advertisements, employment exchanges, employment agencies, educational institutes, labor contractors, recommendations, and so on. 5.9 Selection

It is the process of putting the right person in the right job. It deals with satisfying the HR requirements of the organization with suitable qualifications and skills of prospects. The success of an organization is largely affected by the selection of the most suitable candidate for the required job. It may also play a major role in the reduction of issues such as employee turnover rate and absenteeism. An effective selection procedure helps to identify the potential candidates from the available pool and saves both money and time for the organization (Figure 5.4). Some of the common steps involved in the selection process are as follows. 5.9.1 Application Forms

Candidates clearing the preliminary interviews are required to fill in the application form. An application form is a document that enables the organization to collect data related to the qualifications, experience, skills, personal details, and so on of the candidates.

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FIGURE 5.4  Process

of Selection

5.9.2 Preliminary Interviews

These are designed to verify the eligibility of candidates. The candidates who do not meet the basic eligibility criteria are eliminated after the preliminary interview round. It also includes examining the educational and family background, hobbies and interests, skills, and competencies and checking the candidate’s knowledge of the company. 5.9.3 Written Tests

Written tests may or may not be conducted depending on the vacancies being filled. These are generally framed to test the candidate’s aptitude, intelligence, reasoning ability, emotional quotient, personality, and so on. 5.9.4 Employment Interviews

These involve one-on-one interaction between the interviewer and the potential candidate. During this interview, the candidates undergo a series of questions put

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forth by the interviewer. These questions test the knowledge, skills, and competencies of the prospects. Some of the important aspects like salary, duties, and responsibilities are also discussed during these interviews. 5.9.5 Medical Examination

Since employing unfit people can put the organization in a problem, most organizations opt to conduct a medical examination before actual employment. 5.9.6 Appointment Letter

Final appointment letters are issued to the candidates after making the referral checks. The organization may perform verification on its own or appoint a third party to do so. 5.10 Selection versus Recruitment

The points of differentiation between recruitment and selection are as follows:

• Recruitment aims at searching the candidates for employment and encouraging

•

• • • •

them to apply for vacancies in the organization. Selection is the process that involves a series of steps through which the candidates are screened so that suitable candidates can be appointed against the vacancies. Recruitment is the process that enables the creation of a talent pool to facilitate the process of selection of the best candidates by motivating more and more prospects to apply for jobs. Selection involves choosing the right candidates to fill various vacant positions in the organization. Recruitment is a simple process, whereas selection is complex. Recruitment involves a positive approach, whereas selection involves a negative approach. Recruitment is concerned with identifying the sources of HR, and selection is concerned with putting the candidates through various tests and interviews. Recruitment involves less time and money compared to selection.

5.11 Orientation and Placement

Once the candidates are selected, the next step is to ensure that the selected candidates have the right positions based on their skills and qualifications. This is called placement. Proper placement of candidates is an essential and tough task since it can decide the success or failure of the organization in the long run. In other words, if a less-competent person is placed to handle a more complex job, they will not be able to perform well, and on the other hand, if a more competent person is placed to handle a less-responsible job, they may feel underemployed and quit the job. In both these situations, the organization would suffer since a

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less-competent person might not be able to make proper decisions, and the organization might also lose out in terms of money (paying a heavy salary). In the second situation, the employee might quit the job, and the organization would lose a competent employee. After placing these candidates in the appropriate positions, the next task is to make them aware of the duties they have to perform. This is usually done by arranging an orientation program for the newly appointed candidates. The general layout of an orientation program consists of introducing the employees to the following:

• • • • • • • •

Company’s mission Company’s vision Company’s goals Departmental goals Operations of the organization Organizational structure Rules and regulations Code of conduct

An effective orientation program can facilitate the creation of a healthy relationship between the newly appointed employees and the organization. It can also facilitate the development of confidence and trust among the new employees so that more productive results can be reaped. The importance of conducting an orientation program is well understood, and today, every organization, whether big or small, conducts an orientation program may be in a formal or informal manner. 5.12 Training

The organized procedure by which people learn knowledge and skill for a definite purpose. —Dale S. Beach Training is the act of increasing the knowledge and skill of an employee for doing a particular job. —Edwin B. Flippo Source: Beach, D.S. (1975), Flippo, E.B. (1976) Once the employees are informed about the duties they have to perform, the next step is to train them to do their jobs in the best possible manner. Training is not a one-time process, as it goes on throughout the entire employee life cycle. Training is imparted to both new and experienced employees. Training is the process by which the organization tries to enhance the skills, capabilities, and knowledge of the employees so that the organizational goals can be achieved with ease and efficiency.

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5.13 Importance of Training 5.13.1 Improved Morale of Employees

Training enables employees to perform their jobs in a better manner, which leads to higher confidence, job satisfaction, job security, and pay hike, all of which contribute to improved morale and a positive attitude toward the organization. 5.13.2 Increased Productivity

Training increases the skills and knowledge of the employees and facilitates efficient performance, leading to higher productivity. 5.13.3 Reduced Employee Turnover and Absenteeism

Training employees helps them improve their performance and increases the chances of growth within the organization. Acting as a motivating factor, it in turn leads to lower employee turnover and absenteeism. 5.13.4 Less Supervision

If the employees are well-trained in the assigned jobs, they can perform efficiently and require little supervision, saving both time and money. 5.13.5 Lower Accident Rate

A trained employee is aware of the job and safety measures to be taken while performing a particular task, which leads to fewer accidents. 5.13.6 Cost Reduction

A trained employee knows how to perform the task efficiently with the least wastage of resources, which helps in reducing operational costs. 5.14 Training Types

Training imparted in the organization is basically of two types: on-the-job and off-the-job training. On-the-job training comprises coaching, mentoring, or changing job roles and responsibility at specific intervals, apprenticeship, job instruction technology, or understudy. Off-the-job training comprises lectures and tutorials, conferences, simulation studies, T-group and transactional training, and training using prototypes.

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5.14.1 On-the-Job Training Methods

On-the-job training comprises hands-on training under the supervision of peers or managers performing the job and trying to reproduce their way of task execution. These methods are less costly and possess more certainty since the trainee gets hands-on experience in a similar environment. Some of the most commonly used methods are as follows. 5.14.1.1 Tutoring

Coaching is training given to an individual in which weaknesses are identified instantly and offers the benefit of practice-based learning. In India, most automobile mechanics, carpenters, and masons are coached through this method. 5.14.1.2 Mentoring

Mentoring is focused on the development of attitude. It is used for lower- and middle-management employees where a senior employee within the organization works as a mentor. 5.14.1.3 Allocation of Different Job Roles

Allocating different job roles to employees where skills and experience of an employee are aligned to the particular job is a way of imparting training to an employee and also removing redundancy from delivery. 5.14.1.4 Job Instructional Technique

It is a stepwise sequence of instructional delivery where a trainee has an overview of the job, its purpose, and the targets to be achieved. The trainer then demonstrates the task to the trainee and allows the trainee to show the demonstration, upon which feedback is given by the trainer to the trainee. Training materials are provided to the trainee, and such types of training give a discreet report on the trainee’s learnability. 5.14.1.5 Apprenticeship/Internship

Apprenticeship is a method of training that is in vogue in trades, crafts, and technical fields and which requires a long tenure to achieve the desired expertise and supervision of experts. These trainings are expensive, and the objectives of the training include making craftsmen of high caliber. 5.14.1.6 Understudy

This type of training involves a film director–assistant relationship where the assistant learns through experience and observation by actively participating in

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the day-to-day schedule of his senior. Later, the assistant assumes the full responsibilities and duties. 5.14.2 Off-the-Job Training Methods

Off-the-job training methods include extensive learning and not performing on the shop floor workshop during training. These methods are not practice-based. The types of off-the-job training are as follows. 5.14.2.1 Lectures and Instructional Delivery

Training, mostly in academic institutions, is in the form of lectures. The trainers, in this case, should try to create interest among the students. The trainer should possess a considerable depth of knowledge to effectively train the students through lectures and seminars. 5.14.2.2 Training Using Prototypes (Vestibules)

In this type of training, trainees are trained on the prototype or simulated version of the product or service, and other working conditions are similar to the actual workshop conditions. An example can be taken from the Second World War, where soldiers/workers were trained in a noticeably short time using this approach, and since trainees work on prototypes, it remains very cost-effective because original systems (work conditions of cabin crew airliner) are not used. 5.14.2.3 Mock/Simulation Training

Training imparted consists of learning through management games, case study sessions, role-plays, and learning through memos, reports, SMS, and so on. 5.14.2.4 Management Games

This type of training encourages critical thinking; enhances analytical, logical, and reasoning capabilities, time management, and team collaboration; and enriches communication and leadership capabilities. It is sometimes highly effective for managing stress. They tend to be application-based and can also be used for training the top management of an organization. 5.14.2.5 Case Study Sessions

Case studies depict various problem scenarios and call for handling these scenarios by applying theory to practice using the candidate’s logical and analytical abilities.

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Through this concept, people are trained to work in groups and communicate and collaborate to generate ideas. 5.14.2.6 Role Enactment

The training imparted to the trainees through role-plays focuses on multiple choices to do a particular task and encourages the trainees to pick up one of the best ways to do it. For example, those who are into people management and administration have multiple ways of motivating their team and keeping them productive but come across situations that require careful handling when they play the role of a manager or an administrator. The steps involved in role-playing include defining objectives, choosing context and roles, introducing the exercise, trainee preparation/research, role-play, concluding discussion, and assessment. 5.14.2.7 In-Basket Training

Here, the trainer provides instructional material such as whitepapers and reports to trainees to gain knowledge from and for a particular task. 5.14.2.8 T-group Training

Sensitivity training is also known as laboratory or T-group training. This training increases tolerance levels in people for themselves as well as others and also looks at situations from others’ perspectives by developing employees’ social sensitivity and behavioral flexibility. It reveals information about commonality in behavior among the members of the group and helps them to react suitably to a situation. A group’s trainer refrains from acting as a group leader, attempting instead to make precise the group processes using events or situations to clarify general points or provide feedback. For example, in Crosby’s organization development career, he has used T-groups in numerous business culture change and performance improvement initiatives, most famously during the Philadelphia Electric Company nuclear turnaround following the shutdown of Peach Bottom Atomic Power Station for human performance issues by the Nuclear Regulatory Commission in 1987. The sensitivity training program comprises three steps (see Figure 5.5). 5.14.2.9 Transactional Analysis

It provides trainees with guidelines for analyzing and understanding the behavior of other team members. In social dealings, motivation is provided by an entity and received and reacted upon by another, which is otherwise known as a transaction.

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FIGURE 5.5  Steps

in Sensitivity Training

Transactional analysis can be interpreted by considering the ego states of every individual, whether a child, parent, or adult (Figure 5.6). 5.14.2.9.1 Child

While dealing with transactional analysis, one has to deal with child ego states, which consist of behavior that comes naturally to an individual and which evokes spontaneity, intensity, and anxiety. While communicating verbatim, words such as ‘I suppose’ are more pronounced. Non-verbal communications consist of giggling, shyness, seeking attention, and so on. 5.14.2.9.2 Parent

It is a collection of recordings in the brain of an individual instilled during their years as a child and emanates the characteristics of over-protectiveness, seclusion, constraints, and being autocratic to a considerable degree. The parental ego state comprises verbal clues with the use of words such as ‘always’, ‘should’, and ‘never’, and non-verbal clues such as raising eyebrows and so on.

FIGURE 5.6 

Ego States

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5.14.2.9.3 Adult

This ego state comprises more decision-making, rationality in thought, and testing out the knowledge and concepts already learned. An individual in this ego state tests the learning derived from the child’s and parent’s ego states. All of us show behavior from one ego state which is responded to by the other person from any of these three states. During training, individuals in both on-thejob and off-the-job modes, the trainer and the trainee exude different ego states during these knowledge exchange programs. In the workplace, examples of transactional analysis can be found between supervisors and employees, among team members, and between unit heads of an organization. 5.14.3 Comparison of On-the-job and Off-the-job Training

A comparison of on-the-job and off-the-job training has been shown in Table 5.1. 5.15 Performance Management and Evaluation

Performance management is an ongoing process of accomplishing organizational goals by the employees, their subordinates, and their supervisors, such as setting targets, providing feedback, and reviewing results. An effective performance

TABLE 5.1  On-the-Job versus Off-the-Job Training

On-the-Job Training Training is imparted in the actual work environment. On-the-job training consists of delivery by the trainee from the initial stage.

Off-the-Job Training

Training is imparted outside of the work environment. Here, actual hands-on experience and performance by an individual come after the training. Best practices are adopted during training for that The generic form of training focuses specific job. on learning initially. Industry-specific training is imparted by This type of training is imparted by experienced professionals. academicians. Training cannot happen in bulk and should Many trainees can attend the be carefully monitored if anticipated as training, and it does not involve hazardous. risks. This training is cost-effective since it happens in Training requires the hiring of the real setup. setup, infrastructure, and experts as well. Imparted mostly in manufacturing and production Imparted at training institutions sectors, where trainees are made hands-on and schools and consists of experts through job rotations and practicesimulation exercises. based learning.

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management process is the alignment of an employee’s efforts to the organizational goals and is achieved by the following:

• Setting performance expectations, thereby resulting in the successful completion of the job.

• Eliminating the redundant efforts taken for a particular job through the use of standard procedures and policies.

• Encouraging meetings and discussions that include project or work status

reporting, providing reviews and feedback on the work done, and using alternate methods if the current strategy does not meet the expectations. • Ensuring that performance management is an ongoing process rather than a one-time event and summarizes the output of the entire dialogue and discourse between the team members and managers, which, if effective, leads to success. 5.16 Performance Appraisal Methods

Performance appraisal methods consist of methods specific to organizations based on their working culture, the work they do, the objectives and goals they have set, and so on. The methods comprise broadly the two types:​

• Past-oriented / Traditional Methods • Future-oriented / Modern Methods

FIGURE 5.7  Performance Appraisal

Methods

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5.16.1 Past-Oriented Methods 5.16.1.1 Rating Scales

They help in rating an individual based on responsibility, ownership, innovative aspect, attitude, attendance, and so on across a scale ranging from poor to excellent, after which summation of the scores helps in understanding the individual’s performance. The advantages of this method are the following: it is cost-effective, reliable, easy to use, and every type of job, and employee can be evaluated using this evaluation scale. The disadvantage of the same method is its human bias. 5.16.1.2 Checklist

Performance-based questions are posed for which a yes or no is required and are sent by the manager to HR, who then evaluates employees’ performance. The advantages of this method are that it is standardized, easy to use, and economical. The disadvantages of the same are its human biases, usage of improper weights and scales, and that it disallows an HR to give relative scores. 5.16.1.3 Forced-Choice Method

The sequence of statements for an employee concerning his performance forces the rater to rate it as true or false, and the HR department does the actual evaluation. An advantage of this method is that it eliminates personal bias because of force, and a disadvantage is that statements can be wrongly framed for employee evaluation. For example, a manager is asked whether an employee comes early, works late, is ready to work in a team, and has leadership capabilities. 5.16.1.4 Forced-Distribution Method

In this method, employees are clustered around a high point on a rating scale, and the manager is forced to follow the normal distribution of performance of all his employees. An advantage of this method is that it is based on a mathematical framework, whereas a disadvantage is that it does not consider the mean error rates. 5.16.1.5 Critical Incidents Method

The approach identifies the critical behavior that acts as a differentiator in evaluating the performance of an employee, wherein managers record such events and report them to the HR team. An advantage of this method is that actual employee behavior is predicted during the job. A disadvantage of the method is that appropriate events specific to jobs might not get reported, and this method might result

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in very close monitoring of the subordinate by his manager. For example, an employee was badly abused by his senior, causing resignation tendered immediately by the employee. 5.16.1.6 Field Assessment Method

This method requires an appraisal to be done by the HR team. An advantage of this method is the chance of less bias, which is useful for management-level promotions when there are quite a few employees to be appraised for the same position and where comparative assessment is required, but the disadvantage is that the rating is done by a person or group external to the department where actual observation is not possible. 5.16.1.7 Performance Assessment through Tests

The tests might be written or verbal and should be apt to rate an employee based on his knowledge and skills. An advantage of the method is the knowledge of an employee is thoroughly tested, but on-job performance, testing cannot be done using this scheme. 5.16.1.8 Personal Records

This performance evaluation technique is used mostly by the government where parameters such as collaboration, leadership capability, attendance, technical and analytical, and logical abilities are considered, along with attitude and expression for work. The method is highly confidential, and feedback is reported back to the individual in the event of some adverse issues. The method, though confidential, can inculcate highly manipulated ratings as evaluations result in promotions. 5.16.1.9 Descriptive Method

In this method, the evaluator writes a descriptive text constituting the employee’s capabilities, strengths, and weaknesses related to his job, the need for mentoring/ counseling, and his overall performance. An advantage of this method is that it connects the dots when information on performance shows discontinuity, but the disadvantage is that it is dependent upon the assessors’ writing skills. 5.16.1.10 Return on Investment Method

Here, performance is evaluated by, the monetary returns a candidate makes to their organization, in comparison to the cost incurred by the company in keeping the individual as their employee.

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5.16.1.11 Comparative Assessment Method

Here, the comparison is done with the co-workers, and it consists of the two methods discussed as follows. 5.16.1.12 Ranking Methods

A manager ranks his employees from best to worst based on merit. It is relatively easy to implement this method, as it does not describe the reason for crediting the employee as the best or worst. 5.16.1.13 Paired Comparison Method

The paired comparison method from Chapter 7 (Decision-Making) can be referred to obtain a better idea of how the performance of an individual can be deduced using this method. 5.16.2 Future-Oriented Methods 5.16.2.1 Behaviorally Anchored Rating Scales

These are determined by statements of effective and ineffective behavior. The employee’s performance is accounted for by their behavior and is to be stated by the evaluator. A positive impact is that it helps in solving rating errors efficiently, and a major drawback is that it suffers from the falsifications present in most rating techniques. For example, a rating of four may coax medical practitioners to show sympathy to patients, while a rating of six may require practitioners to show higher levels of sympathy across all dealings with the patient. 5.16.2.2 Management by Objectives

It means that employees’ performance should align with the objectives set by the management. The MBO process is as follows:

• • • •

Establish goals and set performance standards Set expectations from employees based on the above goals Compare between planned goals and actuals achieved Set new goals or unachieved goals for the next business year

An advantage of this method is its alignment to a managerial position, but it does not apply to all jobs. A disadvantage is that employees might fail to view longterm goals if performance is rewarded based on merit pay. For example, the sales head might set a target of increasing sales by 15 percent over the course of a year. Such goals and objectives adhere to the performance of the organization as well as the individual.

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5.16.2.3 Psychological Appraisals

These appraisals are based on extensive interviews and tests and focus on the employees’ responsive, rational, motivational, and other personal characteristics affecting their performance. This approach is unhurried and costly and may be useful for talented individuals on whom the psychological tests are performed. 5.16.2.4 Evaluation Centers

Using this technique, first developed in the USA and the UK, the individuals to be assessed are requested to participate in in-basket exercises, work groups, computer simulations and role-playing to measure their performances, about their assertiveness, innovativeness, ability to communicate, planning, and organizational ability, self-confidence, stress handling and enthusiasm level, energy level, decision-making, administrative ability, mental alertness, and so on. An advantage of this is that if assessment centers are rated high, then there is a strong chance that they can provide better forecasts of employees’ future performance and can ensure no wrong hiring is done. A disadvantage includes that it is costly, and employees might not be comfortable with an outside agency assessing them. 5.16.2.5 360-Degree Feedback

This technique is used by the modern-day industry and is a mechanism where an individual is evaluated by their peer subordinate, boss, supplier, or customer and is rated on communication, collaboration, customer handling, and so on. The advantage is that, feedback comes from all ends, but a disadvantage is that feedback from all lots can be intimidating at times when the assessor is not aware of the reporting norms. 5.17 Compensation Management

It is a method of providing fiscal and non-fiscal aid to employees, which includes payments such as performance bonuses, profit sharing through stock and equity, overtime pay, recognition rewards, and commission. They can also be non-fiscal, such as accommodation and transportation options, with the underlying objective of motivating employees. 5.17.1 Benefits of Compensation Management

• A good compensation scheme is essential for every business organization, which is shown as follows:

• Return on employees’ contribution • Motivates employees to perform better and achieve standards • Retains the workforce for a longer period and keeps them satisfied

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• Helps to achieve realistic standards since compensation encourages employees to perform

• Less dispute among management and employee unions as it complies with labor acts

• Promotes the morale and efficiency of employees and also provides growth opportunities for them

5.18 Types of Compensation

• Direct compensation: It comprises salary, pay scales for different roles and

responsibilities, and also health benefits. Direct compensation is at par with industry standards, and employer does not have to fear losing their staff. • Indirect compensation: It includes administering staff development courses to employees, inter-departmental transfers, promotions, preferred location changes, public recognition, flexibility in work schedules such as the workfrom-home concept, and so on. 5.19 Components of Compensation

• Wages and salary: Wages are hourly rates of pay, and salary is the monthly

rate of pay, which is annually incremented. A salary has a basic pay component in it. • Allowances: In addition to basic pay, there are the following components in the salary: • Dearness allowance: It is paid as a percentage of basic pay to protect income from inflation. • House rent allowance: Employers who do not provide living accommodation pay a house rent allowance to employees. This allowance is calculated as a percentage of basic pay. • City compensation allowance: The city compensatory allowance is generally a fixed amount per month, which differentiates a metro city from a normal city where the cost of living is low and sums to 30 percent of basic pay as per the Indian government rule. • Transport allowance/conveyance allowance: Industries pay a fixed sum as transport allowance/conveyance allowance to the employees. • Incentives: This is a performance-linked pay to inspire employees to put in more effort. Bonus, profit sharing, and commissions are some examples of incentives or compensation that is paid to an individual or a group. • Fringe benefits/perquisites: These include employee benefits, such as provident fund, gratuity, medical care, hospitalization, accident insurance, health and group insurance, mess facilities, uniforms, entertainment, and so on.

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5.19.1 Conclusion

In recent years, compensation systems have gone beyond just money. There has been a considerable increase in the use of performance-linked pay for management professionals, especially for executive management and senior managers. To sustain creativity among individuals, rewards and compensation help in a great way by attracting a quality workforce, ensuring employee satisfaction, ensuring a high degree of retention, and motivating employees for higher productivity. 5.20 Global Perspectives on Employee Staffing

Many perspectives on staffing have come up in recent times, with companies operating across global boundaries and adopting the best practices in staffing. Some of the terminologies and practices adopted by organizations of international stature comprise the categorization of employees on an international platform. They are as follows: Expatriate: They are people working in a foreign country for a company whose headquarters is in the country of which they are a citizen. For example, Ramesh works in Singapore for a company that is headquartered in India, of which they are a citizen. Host country national: Renae, working in the same company as Ramesh’s secretary, is a Singaporean citizen based in Singapore. Third-country national: If Tudor, a citizen of France, is working in the same company in which Ramesh works in Singapore, and the company is headquartered in India, then he will be regarded as a third-country national. There are some global staffing norms as well, which are as follows. 5.20.1 Ethnocentric Staffing

This practice involves staffing the senior-level positions with expatriates, who are often believed to look after the offices on foreign shores for better alignment with home headquarters. Ethnocentric staffing reduces communication barriers by reducing language and cultural barriers because the positions are held mostly by people of the same nationality in foreign offices. The disadvantage is that the company may lose out on gaining perspective from the point of view of the locals in the country of operations. There may also be high expenses incurred because expatriates tend to be more expensive than locals, and also an increase in the number of expatriates may create local resentment of foreign subsidiaries.

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5.20.2 Polycentric Staffing

In polycentric staffing, a company hires nationals only from developed countries, such as European countries, Canada, Australia, and Japan, where a greater number of trained resources are available. The advantages are that the company gets a clear view of local market conditions, politics, laws, culture, and the country, and customers get assurance of the company’s commitment to them. Also, relocation expenses and compensation are minimized. A disadvantage is that the company’s broader goals and objectives might get suppressed in front of the local interests. 5.20.3 Regiocentric Staffing

Regiocentric staffing is the staffing practice where company offices and facilities are grouped into regions and work as a single unit with autonomous status from the home headquarters. These regions have their own HR policies, and there is the regional transfer for employees. The advantage is that, since they have autonomy, they are free to set their objectives and goals. The disadvantage is that being regiocentric does not enable the company to envisage a bigger picture, and many a time, it can so happen that the goals and objectives of the company get shrouded by regiocentric goals and objectives. Summary

The chapter takes a reader through staffing, its concepts, strategies, and benefits and elaborates on the HR plan, the aspects of recruitment and training, the training types, the performance evaluation process, the compensation benefit plan, and the employee remuneration process, along with the global perspectives on staffing. Exercise

Objective Questions 1. The staffing function is said to be a ___________ activity. • Persuasive • All of the above • Continuous • None of the above 2. Which of these is the process of putting the right persons in the right job? • Internal recruitment • Selection • External recruitment • Placement 3. Off-the-job training is imparted outside of the work environment. • True • False

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4. Which of these is also called T-group training? • Role enactment • Sensitivity training • In-basket training • Simulation training 5. Recruitment involves less time and money as compared to selection. • True • False 6. Mentoring is focused on which of the following? • Development of attitudes • Job instructional technique • Tutoring • Understudy 7. Which of these is a method of providing fiscal and non-fiscal aid to employees? • MBO • Compensation management • Psychological appraisals • None of the above 8. The piece rate system is not suitable where the nature of work is repetitive, and quantity is emphasized more than quality. • True • False 9. Which of these includes employee benefits such as provident fund, gratuity, medical care, hospitalization, accident insurance, health and group insurance, mess facilities, uniform, entertainment, and so on? • Wages and salary • Incentives • Allowances • Fringe benefits/perquisites 10. Which of the following is incorrect? • MBO means that employees’ performance should align with the objectives set by the management • 360-degree feedback is a mechanism where an assessee is evaluated by his peer subordinate, boss, supplier, or customer • The field assessment method does not require an appraisal to be done by the HR team • None of the above

CASE STUDY Esicizo Technologies manufactures a wide range of hydraulic products. It has a workforce of 2,700, which includes 297 supervisors and executives. A performance appraisal for these supervisors and executives is conducted by their respective superiors yearly. The company has a dual rating. Performance appraisal is based on the following factors: goals, skills, involvement in CSR, team-building skills, dependability on subordinates, sense of responsibility, and potential to take higher positions. All these factors are given equal weightage. In 2011–2012, some of these supervisors and executives were not given any increments, because they could not meet a few of the performance appraisal standards such as dependability on subordinates and CSR. These supervisors reported their complaints about not getting the increment and claimed that

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the performance appraisal was faulty. These supervisors were against CSR activities and dependability on subordinates as part of the performance cycle. These factors should not be considered to be parameters for increments and timely promotions. They had asked for the increment for that year and believed that the system should be more focused in terms of delivering quality at the right time.

Questions 1. As an HR manager, how will you decide on the performance appraisal scheme? Would you make changes to the current scheme? If so, what would be the changes? 2. Should these supervisors and executives be given an appraisal? 3. Justify your thoughts on the inclusion of CSR activities and dependability on subordinates as a part of performance appraisal.

Critical Thinking Questions (To be discussed with relevant examples)

1. How can you evaluate the effectiveness of training? 2. Comment on whether external sources of recruitment such as advertisements, employment exchanges, employment agencies, educational institutes, labor contractors, recommendations, and so on will speed up the recruitment. 3. How will you review your subordinates’ performance regularly and provide them with feedback about their work? 4. According to you, which is the best among on-the-job and off-the-job training? Chapter at a Glance Staffing, Training, and Development

Staffing deals with manning the organization structure by selecting efficient individuals and training them to perform the assigned tasks in the best possible way. Staffing is concerned with the placement, growth, and development of all those members of the organization whose function is to get things done through the efforts of other individuals. Nature of Staffing Function

• A significant managerial function • Pervasive activity

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• Continuous activity • Efficient management of HR • Right people at the right place at the right time Process of Staffing

• • • • • • • •

Manpower requirements Recruitment Selection Orientation and placement Training and development Remuneration Performance evaluation Promotion and transfer

HR Planning

It deals with putting the right number and type of people in the right place at the right time. It is also called manpower planning. This HR planning consists of the following steps:

• • • •

Analyzing the existing manpower inventory Making future manpower forecasts Developing employment programs Developing training programs

Recruitment

Recruitment is the process of searching for and stimulating employment opportunities for candidates in an organization. It is also defined as the process of finding and attracting capable applicants for employment. The process begins when recruits are sought and ends when their applications are submitted. The result is a pool of applications from which new employees are selected. Recruitment Process

• • • • •

Recruitment planning Recruitment strategy formulation Source identification Candidate screening Recruitment process control and evaluation

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Types of Recruitment

Recruitment is classified into two major types: internal and external. Internal Recruitment: As the name suggests, this type of recruitment takes place within the organization. This means that the positions can be filled by people who are already working in the organization. There are primarily, two sources of internal recruitment: • Promotions • Transfers External Recruitment: External sources of recruitment are those which are external to the organization. This method proves to be beneficial since the organizations can choose suitable candidates from a large pool of prospects. But it is a time-consuming process, and organizations have to spend a lot of money. The external sources of recruitment include advertisements, employment exchanges, employment agencies, educational institutes, labor contractors, recommendations, and so on. Selection

It is the process of putting the right person in the right job. It deals with satisfying the HR requirements of the organization with suitable qualifications and skills of prospects. An effective selection procedure helps to identify the potential candidates from the available pool and saves both money and time of the organization. Some of the common steps involved in the selection process are as follows:

• Preliminary interviews • Application forms • Written tests

• Employment interviews • Medical examination • Appointment letter

Selection versus Recruitment

The points of differentiation between recruitment and selection are as mentioned below:

• Recruitment aims at searching the candidates for employment and encouraging

them to apply for vacancies in the organization. Selection is the process that involves a series of steps through which the candidates are screened so that suitable candidates can be appointed against the vacancies. • Recruitment is the process that enables the creation of the talent pool to facilitate the process of selection of the best candidates by motivating more prospects to apply for a job. Selection involves choosing the right candidates to fill various vacant positions in the organization.

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• Recruitment is a simple process, whereas selection is complex. • Recruitment involves a positive approach, whereas selection involves a negative approach.

• Recruitment is concerned with identifying the sources of HR, and selection is concerned with putting the candidates through various tests and interviews.

• Recruitment involves less time and money as compared to selection. Orientation and Placement

Once the candidates are selected, the next step is to ensure that the selected candidates have to be fitted in the right positions based on their skills and qualifications. This is called placement. The general layout of an orientation program consists of introducing the employees to the following:

• • • •

Company’s mission Company’s vision Company’s goals Departmental goals

• • • •

Operations of the organization Organizational structure Rules and regulations Code of conduct

An effective orientation program can facilitate the creation of a healthy relationship between the newly appointed employees and the organization. It can also facilitate the development of confidence and trust among the new employees so that more productive results can be reaped. Training

Training is the act of increasing the knowledge and skill of an employee for doing a particular job. Training is not a one-time process as it goes on throughout the entire employee life cycle. Training is imparted to both new and experienced employees. Training is the process by which the organization tries to enhance the skills, capabilities, and knowledge of the employees so that the organizational goals can be achieved with ease and efficiency. Importance of Training

• • • • • •

Improves the morale of employees Increased productivity Reduced employee turnover and absenteeism Less supervision Lower accident rate Cost reduction

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Employee Remuneration

Time rate method: Under this method, the remuneration is decided based on time spent by the employee on his job. The amount to be paid to the employee is decided in advance, and it is paid either on an hourly, daily, weekly, or monthly basis irrespective of their performance. Piece rate method: The piece rate system is more suitable where the nature of work is repetitive and quantity is emphasized more than quality. This method of remuneration focuses on the number of units or pieces produced by an employee Training Types On-the-Job Training Methods

On-the-job training comprises coaching, mentoring, changing job roles and responsibilities at specific durations, apprenticeship, job instruction technology, or understudy. The on-the-job training types are as follows:

• Tutoring • Mentoring • Allocation of different job roles

• Job instructional technique • Apprenticeship/ Internship • Understudy

Off-the-Job Training Methods

Off-the-job training methods include extensive learning and not performing on the shop floor or workshop, and it is not practice-based. The off-the-job training types are as follows:

• Lectures and instructional delivery • Training using prototypes (vestibules)

• Mock/simulation training • Management games

• • • • •

Case study sessions Role enactment In-basket training T-group training Transactional analysis

Performance Management and Evaluation

Performance management is an ongoing process of accomplishing organizational goals by the employee, their subordinate, and their supervisor with supporting activities such as setting targets, providing feedback, and reviewing results.

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Performance Appraisal Methods

Performance appraisal methods consist of methods specific to organizations based on their working culture, the work they do, the objectives and goals they have set, and so on. The methods are broadly of two types: past-oriented methods and future-oriented methods. Compensation Management

It is a method of providing fiscal and non-fiscal aid to employees, which includes payments such as performance bonuses, profit sharing through stock and equity, overtime pay, recognition rewards, and commission. Types of Compensations

Direct compensation: It comprises salary, pay scales for different roles and responsibilities, and also health benefits. Indirect compensation: It includes administering staff development courses to employees, inter-departmental transfers, promotions, preferred location changes, public recognition, flexibility in work schedules such as the workfrom-home concept, and so on. Components of Compensation

• • • • • • • •

Wages and salary Allowances Dearness allowance House rent allowance City compensation allowance Transport allowance/conveyance allowance Incentives Fringe benefits/perquisites

6 DIRECTING AND CONTROLLING

An Opening Vignette The following is the Microsoft CEO Satya Nadella’s letter to employees, which invokes the sense of direction being imparted by the CEO to his employees (Times of India Tech, 26 June 2015). Direction on Mission, Worldview, Strategy, and Culture Nadella’s belief: Shared mission, clear strategy and culture bring out the best in employees, individually and collectively. Shared mission: The mission is to empower every person and every organization on the planet to achieve more. Taking things globally and making a difference in lives and organizations in all corners of the planet. Worldview: Mission should be in sync with the world in which we live and the future we strive to create. Focus on a mobile-first, cloud-first world to align ways of doing businesses or transform the processes, centering chiefly around the mobility of experiences that, in turn, are orchestrated by the cloud. Strategy and Ambitions: The strategy is to build best-in-class platforms and productivity services for a mobile-first, cloud-first world that will harmonize the interests of end users, developers, and IT better than any competing ecosystem or platform. Culture: Perhaps the most important driver of success is culture. A culture is founded on a growth mindset with the belief that everyone can grow

DOI:  10.4324/9781032634258-6

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and develop. People need to always be learning and insatiably curious. They need to be willing to lean into uncertainty, to take risks and move quickly after making mistakes, to recognize failure that happens along the way to mastery, and to be open to the ideas of others, where the success of others does not diminish our own. The final takeaway: Take the opportunity to exercise the growth mindset every day in three distinct areas: Customer-obsessed, diverse, and inclusive—One Microsoft.

PART I: DIRECTING 6.1 Introduction

Directing is the function of management in which the managers guide, instruct, and administer the performance of the employees to attain the predetermined objectives. All the planning, organizing, and staffing would be in vain without directing supervision. Thus, directing is said to be a vital process in management. Directing is an incessant process following a top-down approach through the organizational hierarchy. 6.2 Definitions

Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned. —Haimann and Scott Directing concerns, the manner in which a manager influences the actions of his subordinates. It is the final action of a manager in getting others to act after all preparations have been completed. —J. L. Massie Directing is telling people what to do and seeing that they do it to the best of their ability. It includes making assignments, corresponding procedures, seeing that mistakes are corrected, providing on-the-job instruction and of course issuing orders. —Earnest Dale Directing is the guidance, the inspiration, the leadership of those men and women that constitute the real core of responsibilities of management. —Urwick and Brech

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Directing deals with the steps a manager takes to get subordinates and others to carry out plans. —William Newman, Charles Summer, Kirby Warren Source: Haimann, T., et al. (1970), Masie, J.L. (1984), Dale, E. (1969), Urwick, et al. (1954/1994), Newman, et al. (1967)

6.3 Nature of Direction 6.3.1 Function of Management

Direction, being an important management function, helps in attaining synchronization among multiple processes of the company. The purpose of planning, organizing, and staffing is achieved only when there is a certain direction to the plan. Operating with proper procedures and coordinating effectively is a by-product of good managerial directing. 6.3.2 Generality of Direction

Direction is a function that exists at every stage, location, and operation throughout a company. The direction function must be performed by every manager across the levels of the organization. For instance, the CEO of an organization delegates authority to the managers across the organization’s structure and provides direction to achieve the objectives and policies of the organization. The manager then instructs other managers and subordinates beneath them, guiding them at every step to attain the goals. 6.3.3 Ongoing Process

Directing is a continuous activity where the manager must incessantly administer the instructions given to the subordinates by them and also motivate their subordinates. A manager has to continue to dedicate substantial time to the direction function. For example, the CEO of a manufacturing company has to direct the top management to continuously adapt to modern manufacturing industry best practices, such as agile and lean manufacturing, ISO 9000 and ISO 14000, process analysis and simulation, supply chain management, statistical process control, and statistical quality control, in order to be at par with market competitors. 6.4 Need/Importance of Directing 6.4.1 Initiates Action

All the planning of the organization goes in vain if efforts are not made to actualize these plans. The actualization of plans starts when the function of directing

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begins. It starts with directing the employees to make them understand what they are supposed to do in the organization. 6.4.2 Effective Utilization of Resources

Directing assists in making all employees’ duties and responsibilities clear. Thus, the scope for duplication and overlapping of work is reduced to a great extent, leading to the effective utilization of all the resources. 6.4.3 Motivation

One of the important elements of directing is motivation. The employee is not only made aware of the tasks to be performed but also motivated for better performance. Managers may employ monetary (incentive or bonus) and non-monetary (promotion or allocating more power/authority) as alternatives. 6.4.4 Helps to Achieve Organizational Objectives

Under the directing function, the manager guides, motivates, and supervises the subordinates. It ultimately helps to achieve organizational goals. 6.4.5 Responding to Change

Every organization is affected by the changes in the environment (both internal and external) in which it operates. It is human nature to resist change. In such circumstances, the manager utilizes the element of communication to make the subordinates utilize the benefit of change. This is how the directing function helps respond to a change. For example, in some circumstances, the company might require to change from the current technology and adopt a new one to stay in the market. Here, the employees need to be convinced about the changeover. 6.4.6 Organizational Stability

The four elements of the directing function—leadership, communication, supervision, and motivation—provide stability in the organization and maintain organizational balance. Thus, the organization exists for a long period, and its divisions/ departments work in an efficient manner. 6.5 Elements of Directing

Elements of directing are shown in Figure 6.1.

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FIGURE 6.1  Elements

of Directing

6.5.1 Supervision

Day-to-day relationship between an executive and his immediate assistant and covers training, direction, motivation, co-ordination, maintenance of discipline, etc. —Newman and Warren Source: Newman et al. (1967) Supervision implies the process of overseeing the work of subordinates. It is the responsibility of every superior to supervise their subordinates to ensure that they perform their tasks as desired. It is one of the important elements of the directing function. Supervision is significant, specifically at the operating level of management. Each organization has some objectives, and this element of the directing function ensures the accomplishment of these objectives. 6.5.2 Communication

Communication is the transfer of information from one person to another person. It is a way of reaching others by transmitting ideas, facts, thoughts, feelings and values. —Newstrom and Davis Source: Newstrom et al. (2002) Communication is an indispensable element for an organization to exist. In simple words, no organization can exist without communication. Communication is the process by which individuals exchange ideas and information for mutual understanding. The prime responsibility of the manager is to foster two-way communication within the organization to attain better understanding and coordination.

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6.5.3 Leadership

Leadership is the ability to awaken in others the desire to follow a common objective. —R. T. Livingston Source: Livingstone, R.T. (1949) Leadership is a trait that an individual possesses to influence the behavior of their employees or teammates to work eagerly to accomplish goals and objectives set by the organization or the team. It is an indispensable factor for the success of an organization. Effective leadership is a major attribute that differentiates a successful organization from an unsuccessful one. 6.5.4 Motivation

Motivation is the process whereby needs instigate behavior directed towards the goals that can satisfy those needs. —Joe Kelly Source: Kelly, et al. (1988) Motivation means inspiring subordinates to work willingly and more efficiently toward organizational goals. Motivation is the core of management. Motivation is a complex process that depends on motive and motivation. The manager may choose to motivate their subordinates through various techniques, for example, financial (performance bonus) and non-financial (appreciation emails/letters). 6.6 Principles of Directing

Directing is a complex management function since it requires the manager to understand the motives, needs, and attitudes of their subordinates. Different strategies have to be formulated based on the circumstances and individuals. The following are the principles that could prove to be useful for the manager while directing. 6.6.1 Principles Relating to the Purpose of Directing

• Principle of maximum individual contribution: The growth and development of an organization depend largely on the efforts of the individual employees working for the organization. Thus, the technique of direction that enables maximum individual contribution should be adopted by the management. • Principle of harmony of objectives: Every organization exists to achieve its predefined objectives. Also, all the employees working in the organization have their objectives. In such a case, it becomes very important for the management

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to direct the employees in such a manner that would lead to the accomplishment of both the organizational and individual objectives. • Principle of efficiency of direction: The sense of belongingness and commitment of the employees increase when they are allowed to participate in the decision-making. This would also lead to the easy implementation of the decisions and an increase in the performance of the subordinates. 6.6.2 Principles Relating to the Process of Directing

• Principle of comprehension: The employees must be communicated about

•

• •

•

•

what is to be done and the way in which it should be done. But more important is the extent of understanding by the subordinates. If the subordinates are unable to understand even after being informed, the entire directing function goes in vain. Principle of unity of command: This principle states that a person in an organization should only receive instruction and get directions from one superior. If directions are received from more than one source, it creates misunderstanding, clash, and disorder in the organization. Principle of communication: One of the prime responsibilities of managers is to communicate policies, procedures, plans, and responsibilities to the subordinates. Principle of the appropriateness of direction technique: Selecting the directing technique depends on various factors, such as the degree of the complexity of the situation, knowledge of the subordinates, and so on. The managers can select from the three available techniques: authorization, participation, or free rein. Principle of follow-through: Directing is not a one-time activity but an ongoing process. This principle states that only issuing the orders is not sufficient, and the managers should also supervise their subordinates to ensure that the instructions or orders are being followed and guide them as and when required. Principle of effective leadership: While guiding the subordinates, superiors should exercise good leadership as it can encourage the subordinates positively without initiating disappointment among them.

EXAMPLE ABC’s CEO has his style of directing where he directs people in the marketing and sales departments to contribute maximally to the marketing of the surveillance camera, which is an exclusive product of the company and has to be promoted hugely by the team. He also sees to it that his entire team is aligned with the objective of achieving sales growth by 10 percent in the current financial year, and for this, he has taken up the responsibility of being the one

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in command for the next two years. He believes that communication is the major key to success and that his team should be updated from time to time with the contracts being taken, deals being made, and possible expansion plans of the company. To ensure connectivity and transparency, he meets with his team once a week or once a fortnight and uses a Participative style where he lets employees come up with new product ideas and new strategies to capture the market in the security domain. He also tries to abide by the principle of follow-through for points discussed in the meetings and sees to it that they have been implemented. Recently, the Area Sales Manager of the company proposed that they not only look at other businesses who would like to install security cameras on high priority but also propose the requirement of cameras to housing societies as well, for enhancing the security aspect where control will lie partly with the security personnel and partly with the machinery. This will not allow any unauthorized person to enter through the gates unless he shows the smart card at the entrance. The CEO, having liked the concept, adopted the practice of follow-through to understand whether the housing societies are being given a free demonstration of the product or not.

6.7 Techniques of Directing

• Autocratic technique: In this technique, the superior issues orders to their

subordinates without prior discussion with them. Here, the subordinates have no scope to take any initiative or put in their creativity. In simple words, it can be referred to as ‘do what I say’ style. • Consultative technique: This technique implies that the instructions are issued after consulting the subordinates. It does not conclude that the superior is inefficient or incapable. This technique is used to identify different alternatives to a problem. Though the superior consults their subordinates, they are free to take their own decision. The success of this technique lies in the cooperation of the subordinates. Increased employee morale is the outcome of this technique. • Free-rein technique: This technique can be used when the subordinates are well-qualified and efficient. It emphasizes encouraging the employees to work independently once the task is assigned. 6.8 Characteristics of Directing

• Directing is required at all levels of management. Every superior provides guidance to their subordinate.

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• It commands, motivates, communicates, and supervises the employees and controls the organization.

• Directing is not a one-time activity but a continuous process. • Directing function unearths the complexity in human behavior, mainly the unpredictability, thus increasing its level of significance.

• It facilitates securing the cooperation of the subordinates to achieve goals of the organization.

• Directing function initiates action, converting plans into performance. • It also provides the necessary leadership in the business. PART II: CONTROLLING 6.9 Introduction

Controlling is another important managerial function that, if not exercised properly, can drastically impact the organization from every aspect. Each of the organizations strives to achieve the predefined objectives. To measure the performance, the management sets some standards against which the actual performance can be measured. It is the controlling process that deals with setting up the standards and taking corrective action whenever the performance deviates from the stated standards. 6.10 Definitions

Control is checking current performance against pre-determined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance. —E.L.F. Breach Control of an undertaking consists of seeing that everything is being carried out in accordance with the plan which has been adopted, the orders which have been given, and the principles which have been laid down. Its objective is to point out mistakes in order that they may be rectified and prevented from recurring. —Henri Fayol Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished. —Koontz and O’Donnell Control means to guide something in the direction it is intended to go. —Louis Allen

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Controlling is the process of ensuring that actual activities conform to the planned activities. —James Stoner Source: Brech, E. (1965), Fayol, Henri (1949), Koontz, et al. (1964), Allen, L.A. (1958), Stoner, et al. (2006)

6.11 Need for Controlling

Even the best plans tend to fail if not controlled. This is the prime reason why controlling is required in the organization. The other reasons why control is required in the organization are as follows:

• Optimum utilization of resources: Control helps the organization to make •

•

•

•

optimum utilization of all the available resources. This ultimately results in increased profit. Minimizes deviation: From the definition of controlling, it is clear that control means keeping track of the deviations from the set standards and take corrective actions, resulting in minimal deviations. The project manager of an IT company kept strict control of the deviations in cost and schedule of the project so that they could show a 30 percent net profit from the project after its successful delivery. Increased efficiency: Proper utilization of resources and minimal deviations due to the corrective measures bring about efficiency in the organization’s processes. Also, as the manager controls the tasks done by the subordinates, individual performance increases. Thus, the overall efficiency of the organization rises. Coping with the changes: There are continuous changes in the social, legal, political, and technological environment in which the business operates. For an organization to survive in the market, it is essential to cope with these changes. Control is a management function that helps managers to respond to these changes as and when required. Value addition: An organization that attempts to survive through competition should be able to add value to products or services so that customers prefer them over those offered by the organization’s rivals. In most cases, this added value takes the form of above-average quality achieved through usage of quality techniques. For example, students and staff of a particular institution are encouraged to attend courses and workshops which can add value to their existing skill sets and area of expertise. Recently, android, Hadoop, and Python Django are the technologies with brighter prospects in the coming years.

192  Directing and Controlling

• Facilitates delegation and teamwork: In modern days, with the participative

style of management, the nature control process has undergone a prominent change. In initial times, managers used to set the standards and methods of performance, whereas today, managers just specify the standards and allow the individual and teams to utilize their creativity to solve a problem. Thus, the control process assists the manager to monitor their subordinates without impeding their creativity.

6.12 Characteristics of Control

• A function of management: The management function comprises planning, •

•

•

•

•

•

organizing, staffing, directing, and controlling. Hence, control is an effective function of management. Exercise of control is futuristic: A manager can take remedial action only for the forthcoming operations. The past is important because, based on previous events, it is easy to find the wrong and correct it in the future. For example, based on the current financial status of an organization, it is possible to formulate a budget for the forthcoming financial year. Control at every level of management: People at lower, middle, and uppermost levels of management have to exercise control as per their role, responsibility, and authority, and the forms of control exercised would be strategic (top management), tactical (middle management), and operational control (lower management). For example, at the departmental level, the unit heads exercise controls on purchases, sales, and budget. Control is a constant process: Control has to be continuously exercised, and whatever plans have been devised and standards have to be adhered to need continuous monitoring, as so do the activities and events in alignment with changes in the external environment or internal processes and procedures. For example, the Reserve Bank of India is trying constantly to reduce the inflation rate and also make housing affordable for everybody in India. Alignment of control to planning: Planning and controlling are interrelated or very closely related. An organization has its mission, vision, goals, objectives, policies, and procedures, and control is exerted to understand whether each activity undertaken or task executed is conforming to the said norms of the practices adopted or objectives set. For example, once a plan for the project schedule is made, control is exercised to let it not deviate majorly. The planning can be strongly correlated to a flight simulation activity where the source and the destination are already mapped to the flight path, and the controls about speed, height, temperature, and cabin pressure are adjusted before take-off, and any alteration/deviation in the above can initiate control and subsequent actions from the air traffic control department. Exercise of control to achieve the goal: Control is exercised to achieve the long- as well as short-term goals of the organization, where individuals work

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in teams together and expend their effort to achieve the organizational goals. Control is exercised on cost, schedule, quality, resources, processes, and quality to achieve organizational productivity. 6.13 Steps in the Controlling Process

CASE STUDY ON THE PROCESS OF CONTROLLING Sohail has business goals for his newly launched company, and to achieve those, he spends substantial time defining company policies, procedures, and standards to measure performance in all aspects, whether services, assets, employees, and so on. His net target turnover (financial objective) for the current financial year was 1 crore from providing IT-enabled services for total quality management (TQM) to his two new customers. This could be achieved as per Sohail’s understanding by providing excellent services to the existing customers so that they are willing to take up the financial service offering in addition to the TQM services as well from Sohail’s company, Bridet India. Enhancing customer satisfaction was also the company’s goal for that fiscal year. With all of the new goals that Sohail set, the next step remains to execute these tasks to achieve each of these goals. Sohail had devised ways to ensure people’s productivity and performance. He announced that he would be offering rewards and stock options of 50 shares each of the current 10,000 shares from his company portfolio to the 10 most productive employees of his company if they could achieve the above goals. This was the form of managerial control exercised by Sohail in terms of employee performance and productivity and the attainment of organizational goals. For the IT-enabled financial and TQM service offerings which he could showcase to his customers, he developed a customer satisfaction survey that would help him get ratings for his services from a two-page questionnaire to understand their needs and their honest evaluation of the company’s offerings. Sohail was hell-bent on controlling quality for fast response and benefits, and for this, he held a meeting with his employees to make them understand the strategic aspect of implementing stringent quality control and performance monitoring norms. Sohail desperately wanted to expand and diversify into other business areas as well, and he could do this only by satisfying his current customers, introducing new service offerings, making employees productive by the clan control approach, and incorporating market research by using feedback from small focus groups. These control strategies were adopted by Sohail to steer his company toward growth and productivity.

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The steps involved in the control process are explained in detail with examples as follows (Figure 6.2).

• Establish standards and performance measures: A standard is a benchmark

against which the actual performance is measured. The standards that can be defined and measured easily are called quantitative standards, for example, the number of units manufactured, the number of units sold, and so on. Also, the standards that cannot be defined and measured easily are called qualitative standards; for example, the effect of training on the individual’s performance and so on. The standards should be such that they can be understood both by superiors and subordinates. For example, the marketing department has established a standard that 1,000 units of product ‘A’ should be sold in the east region, 2,000 units in the north region, and 1,500 units in the south region per month. • Measure performance: After the establishment of standards, the managers should make sure that the subordinates receive all the required resources to

FIGURE 6.2  Steps

in Control Process

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carry out the given task. The next important task of a manager is to guide, direct, and motivate their subordinates to perform the job. The next step is to measure the actual performance of the subordinates. For example, after one month, it was observed that 700 units were sold in the east region, 2,200 units were sold in the north region, and 1,500 units were sold in the south region. These are actual performance outputs of the respective regions. • Compare actual performance against established standards: Here, the actual performance is compared with the standard to identify the deviation, if any, so that necessary action could be taken. For example, Table 6.1 shows the performance comparison between actual and standard. • Corrective action: Comparing the actual performance with the established standards makes it clear whether corrective action has to be taken. For example, Table 6.2 shows the corrective action to be taken. 6.14 Resistance to Control

Many people are resistant to the concept of control for the following reasons:

• In today’s era, there are organizations whose structures are organic, and these

allocate authority to the teams to self-manage their tasks, thus empowering them with authority and decision-making and allowing them to be more receptive and compliant to be in sync with the changing environment. • Some think that with a change in the nature of the organization, the nature of control exercised by the management should also change. In fact, according to many, if an organization exercises too much control, then it affects the productivity of employees. TABLE 6.1  Performance Comparison between Actual and Standard

Type of Deviation

Deviation?

Sold (Actual)

Target (Number of Units)

Region

Negative Positive None

Yes Yes No

700 2,200 1,500

1,000 2,000 1,500

East North South

TABLE 6.2  Corrective Action to Be Taken Comparing Actual Performance with Standard

Examples of Corrective Action

Corrective Action Type of Region Required? Deviation

More advertising, training the sales executive, or establishing new standards No action required No action required

Yes

Negative

East

No No

Positive None

North South

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• Some management experts now prefer the term ‘coordinating’ over ‘controlling’ since it has a pessimistic undertone, that is, it sounds dominating and heavy. • Many times, control often leads to a reduction in freedom/autonomy, crunching innovativeness, and giving rise to the feeling of insecurity. 6.15 Design of Effective Control System

Controlling is one of the most essential ingredients in the success of an organization. An effective control system ensures that the organization is working as per the plan. Thus, designing an effective control system is the most essential and crucial task to be performed by managers.

• Objective-oriented: Each organization has some predefined objectives which

•

•

•

• •

• • •

it strives to achieve. To realize these objectives, various tasks are to be carried out. Also, these tasks need to be monitored at each phase. Thus, a control system should be designed based on these organizational objectives if it is to function as an effective control system. Suitability: The organization can frame the control system depending on its requirements. To design a control system, it is essential to know the internal environment, the nature of the business, employee requirements, and so on. Flexibility: The business environment is dynamic and undergoes changes continuously. While designing the control system, this should be kept in mind, and a system capable of accommodating all the changes or failures in plans should be prepared. Quick action: When the management of an organization receives information about deviations in schedules, quality, and performance standards from various line managers or supervisors, then it is the responsibility of the management to advise the planner to take preemptive actions as exercising effective control can happen with immediate action. Economical: The control system must be economical. In simple words, the cost of the control system should not go beyond its benefits. Capability to foresee: The control system should be designed in such a manner that it helps the managers in maintaining control of the operation in advance. If errors and flaws can be determined in advance, it would reduce the occurrences of deviations, leading to the smooth functioning of the organization. Enables feedback: An effective control system provides reliable feedback so that future activities can be planned accordingly. Provides suggestions: A control system that only identifies deviations is of no use. It should be capable of suggesting alternative actions. Timely revisions: With the change in the organizational objective, the control system should also undergo revision to upkeep with the changing requirements.

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• Employee participation: The benefits of an effective control system can be

reaped only when it is implemented in the organization. For this reason, the active participation of employees is a must not only while implementing but also while designing the control system.

Control systems are designed based on suitability and feedback, and these should be object-oriented. For example, a company sets a target for each sales representative to achieve a target of half a million in one financial year, and if 20 percent of the representatives fail to achieve the target, then they are provided feedback on their performance by the director and given an ultimatum to achieve the same in the next quarter, failing which they will have to face subsequent actions. 6.16 Types of Control

Controls can be of numerous kinds. These may be classified based on (a) timing, (b) designing systems, (c) management levels, and (d) responsibility as shown in Figure 6.3. 6.16.1 Based on Time

Controls are classified into three different types depending on the time at which they are brought into action. These types are explained as follows:

FIGURE 6.3  Types

of Control

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• Feed-forward control: In an organization, before performing any task, plan-

ning is done. An attempt that is made to anticipate the deviations that can occur while realizing the plan is called feed-forward control. Thus, it has a close association with planning. The manager tries to identify problems before the actual operation starts. Also, the alternatives to overcome the anticipated problems are evaluated. For example, some of the sugar industries have an additional manufacturing line apart from those operating daily. This extra line is set up so that the production can continue even if any of the lines are under maintenance. • Concurrent control: It is an attempt to control the tasks while they are being performed. This type of control ensures that the work is being performed as per the plan, if not, corrective actions are taken. For example, a supervisor on the shop floor of a manufacturing unit monitors continuously that the tasks are being performed as per the predefined methods and standards. If any deviations are noticed, corrective actions are taken by the supervisor. • Feedback control: On completion of a task, a review is conducted to identify if the anticipated results are accomplished or not. In short, feedback control provides information stating whether the organizational goals are met. It is the basis on which further movements of the organization can be decided. For example, if it is observed that the target was not met because some employees were not able to complete the tasks efficiently, then the organization could plan to carry out a training session for these employees. 6.16.2 Based on Designing Control Systems

The three approaches under this category include market control, bureaucratic control, and clan control. However, most organizations do not depend on just one of them.

• Market control: This control is based on establishing a competitive approach

in terms of price and market share. Different units are converted into profitmaking entities, and their performance is evaluated by revenue, turnover, profit, and market share. Using market control, managers take decisions in line with the market forces. • Bureaucratic control: Bureaucratic control focuses on power, policies, and procedures, and it has been adopted by most of the Indian public sector undertakings. For example, a hospital cannot issue medicine unless prescribed. • Clan control: It focuses on the organizational culture through shared goals, objectives, norms, policies, and procedures and exercises appropriate control. For example, for teleworkers, clan control can be used by their managers to exercise control over them for the organization’s benefit. It is suitable for organizations where technology changes very quickly.

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6.16.3 Based on Management Levels

According to the pyramid structure of the organization, people at various levels of the pyramid have different planning responsibilities, and as a result, they tend to control whatever they plan. Controls can be categorized as operational, structural, tactical, and strategic:

• Operational control: The day-to-day control process at the lowermost level of

the organization which also includes financial and quality control and is part of the operational control activities. Otherwise known as transactional control, these controls are exercised on daily production, sales, purchases, reporting activities of the organization, and so on. • Structural control: Structural control refers to the organization’s structure and hierarchy where every individual is accorded a role and responsibility, and progress in tasks assigned is monitored for each individual, thereby exercising control. Two important forms of structural control that exist are bureaucratic control and clan control. • Tactical control: Tactical control implies meeting the departmental objectives, and the controls are exercised by the middle management of the organization. • Strategic control: Strategic control implies the effectiveness of corporate, business, and functional strategies helpful for organizations to meet their goals. Strategic control is exercised by top-level management. 6.16.4 Based on Responsibility

Control can be internal or external. Internal means that a person is self-motivated to exercise discipline. External control means that the control is in the hands of the manager, and control is exercised using a formal approach. 6.17 Budget

A budget is a financial plan that is used to estimate the revenue and expenses over a specified future period. A budget can be made for a person, family, group of people, business, government, country, multinational organization, or just about anything else that makes and spends money. The budgeting process is carried out to identify whether the person/organization can continue to operate with its projected income and expenses. The budget should be objective-driven. It means that the expected revenues and expenditures of each department will ultimately be based on the organizational objective. 6.17.1 Budgeting Process

The task of budgeting and monitoring budgets is an ongoing process. Monitoring involves checking the targets, providing feedback, and so on. The budgeting process involves the following procedures:

200 

i.

ii.

iii. iv. v. vi.

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Define the Objectives of the Organization First, the management tries to set organizational objectives. These would include identifying the profits, market share, and other targets to be achieved. The targets should be realistic and be made after studying the potential of the organization and the market situation. Set Production, Marketing, and Financial Budget There are three major functional budgets, and each is dependent on the organizational objectives. • Production budget: It is expressed in quantitative terms only and is geared to the sales budget. It involves costs of raw materials, direct labor costs, costs of purchasing components, and so on. This is an expenditureonly budget. • Marketing budget: It is a combination of both income and expenses. It involves revenue from sales forecast and expenses involved in actualizing the marketing strategy. • Financial budget: The financial budget depicts the projected cash flow. It helps to identify if the funds are in a proportion to cover the expenses or not. If not, the management can find alternatives to raise additional funds. Fragmentation of Budget Each of the above-stated budgets is then broken down so that there could be different budgets such as training budgets, sales budgets, and so on. Budget Monitoring Procedures Must Be Established As per the business objectives and the internal environment of the business, appropriate budget monitoring procedures must be established. Identify Variances Any variances in the projected budgets must be identified and responded to. Feedback The experience and knowledge gained while setting the budget for one period must be utilized while deciding on the budget for another period.

6.17.2 Advantages of Budgeting

• • • • • •

It helps to monitor and control operations. It provides a framework for delegation. It creates a sense of responsibility among the managers. It can improve the communication system within the organization. It promotes forward thinking. It helps in the coordination of different departments and aligns them toward shared objective.

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6.17.3 Limitations of Budgeting

• It can demotivate employees if they do not get an opportunity to participate in • • • •

the budgeting process. It is difficult to estimate all the revenues and expenditures in advance. It can result in building perceptions of unfairness. If budgets are inflexible, then they fail to reflect the necessary changes. Budgeting might result in competition among the departments for resources.

6.18 Variance Analysis

Variance analysis is the investigation of the difference between actual and planned behavior. For example, if the budgeted sales are worth ₹100 lakhs and actual sales are worth ₹80 lakhs, then variance analysis yields a difference of ₹20 lakhs. Variance analysis helps to identify the difference between planned and actual results and their effect on the performance of the organization. Variance analysis can help to identify certain types of tasks that regularly overrun their budgets, while other tasks may be seen to frequently come under their budgets. The variance can be either favorable (F) or adverse (A) (Figures 6.4 and 6.5). The variance can be said to be favorable when

FIGURE 6.4 

Favorable Variance

FIGURE 6.5 

Adverse Variance

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• The expenditure is less than expected • The revenue is greater than expected The variance can be said to be adverse when

• The expenditure is greater than expected • The revenue is less than expected For example, Table 6.3 shows the actual versus budgeted variance. 6.19 Control Techniques

Control techniques are broadly divided into the following two categories (Figure 6.6):

• Non-financial control techniques: In this technique, there is no requirement for financial data, and it includes rewards or punishments, stringent recruitment

TABLE 6.3  Actual versus Budgeted Variance

Variance (in ₹) Cost of raw materials 150,000 (F) Labor cost 5,000 (A) Sales revenue 800,000 (A) Total variance

FIGURE 6.6 

Control Techniques

Actual (in ₹) 850,000 550,000 4,200,000

Budgeted (in ₹)

1,000,000 500,000 5,000,000 655,000 (A)

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and retirement norms, training, management by exception, project progress control, production and inventory, and quality control. • Financial control techniques: In this technique, the availability of data in terms of profits, costs, turnovers, or revenues is shared so that managers can control costs, sustain liquidity, and maintain a balance between assets and liabilities. This can be possible through elaborate cost plans, budgets, accurate estimates of income and expenditure, detailed break-even analysis, and sound account maintenance and audit. 6.19.1 Financial Controls

Managers of any organization exercise financial controls to monitor performance and calculate growth to achieve financial goals for the organization. Financial goals are achieved using the following methods. 6.19.1.1 Financial Audits

Financial audits are done in sync with financial policies, procedures, and laws. Audits may be internal, that is, conducted by an auditor of the organization, or external, that is, conducted by chartered accountants and management audit by specialists. 6.19.1.2 Financial Statements

Financial statements are used by the stakeholders of a company to identify the financial stability of an organization. The stakeholders might include the employees, shareholders, financial institutes, investors, unions, customers, and so on. These statements facilitate monitoring the liquidity, general financial condition, and profitability of the organization over a given period. For example, the balance sheet, profit, and loss account, and so on. 6.19.1.3 Ratio Analysis

Financial ratio analysis consists of five groups: structural, liquidity, profitability, turnover, and miscellaneous. Under structural ratio, there is funded debt to total capitalization, debt to equity, net fixed asset to funded debt, and funded debt to working capital. Under liquidity, there is a current ratio (current assets to liabilities) and acid test ratios. Under profitability, there is an operating ratio, operating profit to sales, net profit to sales, and so on.

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Under turnover, there is an asset, capital, receivable, and inventory turnover. Each of these has its mathematical formulas, for example: Inventory � turnover =

Cost � of � goods � sold � Averageinventory �

6.19.1.4 Budgetary Controls

Budgetary control is the formulation of budget, comprising the expenditure forecast across item categories and then comparing actual expenditure to the planned expenditure. A budget requires revision under changed scenarios. Budgetary control is applicable to all functional areas that take the help of budgetary control in order to keep a check on the overall spending. Budgeting could be categorized as follows: (a) managers prepare the budget and consult with their colleagues, (b) budgets are made by the lower level management and given to the higher management for approval, (c) zero-based, which is the allocation of funds based on activities or goals, or (d) flexible budget options, which is the allocation of funds based on the requirements, budget is allotted. 6.19.1.5 Break-even Analysis

It determines the point at which revenue received equals the costs associated with receiving the revenue. The break-even analysis calculates the safety margin, that is, the point above which the revenue is greater than the cost. This is the amount that revenues can fall while still staying above the break-even point. The break-even analysis only analyzes the costs of the sales. For example, if it costs ₹50 to make a box of crackers, then this box is sold at ₹200. If fixed cost associated is ₹2,000, then the break-even point would ₹2,000/ (200 – 50) = 2,000/150 = 13.5, and if it is sold at ₹300, then it will be: ₹2,000/ (300 – 50) = (2,000/ (250)) = 8.5. This example shows that the break-even point comes fast with the increased price and decreased demand. 6.19.1.6 Accounting

Accounting is the measurement, processing, and communication of financial data about commercial units. Accounting can be categorized as follows: financial accounting, management accounting, tax accounting, and auditing. Financial accounting emphasizes

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an organization’s financial report and information for stockholders, controllers, and dealers, which includes bookkeeping and consists of financial summaries. Management accounting focuses on the processing, analysis, and reporting of information to be used by top and middle management of the organization. A tax audit happens when the income tax department examines the tax returns and verifies that the income and tax deductions are correct. 6.19.1.7 Return on Investment

This technique is generally used by large organizations. Return on investment helps to identify the returns earned on the investments made. The investments include assets and capital. Return on investment gives a clear picture of the financial performance of the company and its divisions or departments. Return on investment (ROI) is calculated using the following formula: ROI =

Net � income � Sales X� Sales Total � investment

6.19.2 Non-financial Controls

The controls exercised on the non-financial front have been discussed as follows. 6.19.2.1  Market Research

Market research is focused on gathering target customer information. It is a very significant constituent of the business plan. Market research aims at gaining a competitive edge over competitors. Market research analyzes the market’s needs, size, and competition. It can be categorized based on the size, for example, a customer service representative may ask a group of 6–10 people known as focus groups whether they would be interested in a new type of chicken burger combo, and if so, how much they would like the price to be, based on which the companies might narrow down to limited choices of production based on the acceptance rate of the customers. Further, there are phone surveys where a bank may conduct many phone surveys based on the questionnaire designed to enable customers to rate the banking services on a scale of 1 to 5 and would use this to make improvements in customer service. Similarly, Pizza Hut might use five local restaurants as a test bed to introduce a special type of chicken pizza and monitor customers’ acceptability of the same. A one-on-one interview is about a software tool designed by a company and showcased by a sales and marketing representative to a person to understand their views on the same.

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6.19.2.2 Test Marketing

It is a tool used by companies to project the market success of a new product through an effective marketing campaign. Test marketing evaluates the performance of the product, product acceptance, and product distribution for full launch. 6.19.2.3  HR Control

Non-financial control attributes to control on HR, which are the performing assets of the organization for the overall company’s productivity. Common controls include performance appraisals and training programs. 6.19.2.4  Production Control

To control production in the form of managing schedules, deadlines, quality, and inventory, the techniques include inventory control, that is, economic order quantity (EOQ), and job instructional technique, and quality control, that is, inspection and parameter-based quality check. For example, under production control, the parameters on which control is exercised are the following:

• • • • • •

Stock error rate Late delivery Slippage in the production schedule Out-of-stock situations Purchase order errors Inventory turnover rate

6.19.2.5  Direct Supervision and Observation

This is the oldest control technique. In this type, the manager or the superior monitors and controls their subordinates. Thus, the manager is aware of the entire situation. Their presence also influences the behavior of their subordinates. This technique proves to be effective, especially in cases where the subordinates are not capable of identifying the issues and controlling them. 6.19.2.6  MBO

MBO is a technique applied primarily to employee management. It involves goal formulation for individual employees, deciding the time frame during which the goals are to be achieved, recording the performance, and then monitoring it. 6.19.2.7  Self-control

Some behavioral scientists state that control is more effective when it is selfdirected. This technique is considered to be very effective in the modern era. It increases employee morale since the employees are free to set their targets and

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there is no close supervision. Using this technique, the superior can control the entire situation without enforcing any control on their subordinates. Nowadays, modern management and control techniques have been implemented by various organizations across the nation for effective governance of their organizations. 6.19.2.8  Management Audit

Management audits are becoming popular in recent times since they deal with controlling the overall performance of the organization. It is an effective tool that can be used to examine the efficiency and effectiveness of various organizational processes. It is an internal audit wherein an expert team reviews the quality of management. The management audit is intended to serve the interest of the organization as a whole. For example, though it is said that management audit is intended to serve the purpose of the organization, even top management can also commit fraud if they are under pressure to meet the expectations of market analysts, debt covenant requirements, and/or to comply with tightly performance-based compensation program. In that case, they do so by falsifying journal entries and recording transactions at the wrong time, overstating revenues, profits, and assets, and understating expenses, losses, and liabilities. So, there are auditors who do a total financial audit about the number of facilities, the number of customer accounts, the number of employees and their turnover, and the number of products. This example appropriates the fact that there exists control over the top management as well. 6.19.2.9  Management Information System

For the process of planning and decision-making, the information available must be reliable so that the performance or output can be evaluated. To provide such information readily and speedily, available management information system is installed in the organizations. This would in turn help the managers to take decisions without a waste of time. 6.19.2.10  Critical Path Method and Project Evaluation Review Technique

• The critical path method (CPM) and project evaluation review technique • • • •

(PERT) are techniques used to plan, schedule, and control many tasks associated with projects. There are six steps common to both PERT and CPM. The procedure is as follows: Identify the tasks and activities of a new or an existing project. Sequence the tasks such that there is a start time and an end time to complete every task and also the project. Draw the network connecting all of the activities or tasks as per the predecessor and successor sequence.

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• Allocate time and/or cost to each activity or task. • Compute the longest path through the network, that is, the maximum time a project will take to come to closure; the path is called the critical path.

• Use the network diagram to help schedule, observe, and manage the project. Example

Given the following information regarding a project’s activities and estimates of the optimistic, most likely, and pessimistic times in days for the completion of various activities

• Draw the PERT network diagram. • Identify the critical path. • Find the expected duration and variance for each activity. What is the expected project length?

• What is the probability that the project will be completed in 40 days? Activity → 1–2 time ↓ estimates (days)

1–3

2–4

2–5

3–7

4–6

5–6

6–8

7–8

Optimistic (to) Most likely (tm) Pessimistic (tp)

1 5 15

6 12 30

2 5 8

3 9 27

5 11 17

3 6 15

1 4 7

4 19 28

4 7 16

Solution: Using the given data, we calculate the expected time and the variance for activity. Activity Time Estimates (in days) Optimistic to Most Likely tm 1–2 1–3 2–4 2–5 3–7 4–6 5–6 6–8 7–8

4 1 6 2 3 5 3 1 4

7 5 12 5 9 11 6 4 19

Expected Time t  4t m  t p Pessimistic tp t e  0 6

Variance

16 15 30 8 27 17 15 7 28

4 49/9 16 1 16 4 4 1 16

8 6 14 5 11 11 7 4 18

 t t  2   p 0    

2

• The project network is shown as follows:​ • The critical activities are 1 → 2, 2 → 4, 4 → 6, and 6 → 8. Hence, the critical path is 1 → 2 → 4 → 6 → 8.

• The expected duration of the project is 37 days.

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FIGURE 6.7 

Network Diagram

The variance of the project length is the sum of the variances of the critical activities. ⸫ σe2 = 4 + 16 + 4 + 1 = 25 ⸫ Variance of the project length = 25 days ⸫ σe = 25 = 5

• Probability that the project will be completed in 40 days is calculated using the below formula. The standard normal deviate is given by z

Due � date  Expected � dateof � � completion Variance

z

40  37 3   0.6 5 25

⸫ P (z ≤ 0.6) = 0.5 + ɸ (0.6) = 0.5 + 0.2257 = 0.7257 Hence, the probability that the project will be completed in 40 days is 0.7257. Summary

This chapter discusses directing and controlling the essential functions of management and deals with both functions separately, justifies the necessity using examples and scenarios, and gives a deep insight into the various traditional and modern control techniques that businesses use in today’s era.

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Directing and Controlling

Exercise Objective Questions

1. The purpose of planning, organizing, and staffing is achieved only when there is a certain _____________ to the plan. • Actions • Control • Directions • None of the above 2. Directing is a complex management function since it requires the manager to understand the motives, needs, and attitudes of their subordinates. • True • False 3. Which of the principles of directing states that all the employees working in the organization have their objectives? • Principle of maximum individual contribution • Principle of efficiency of direction • Principle of harmony of objectives • Principle of comprehension 4. ________ if not exercised properly can drastically impact the organization from every aspect. • Actions • Control • Directions • None of the above 5. Which of these statements is incorrect? • Control is at every level of management • Control is exercised to achieve only the long-term goals • Control is a constant process • Exercise of control is futuristic 6. When an attempt is made to anticipate the deviations that can occur while realizing the plan, it is called feed-forward control. • True • False 7. Which of these controls focuses on organizational culture through shared goals, objectives, norms, policies, and procedures and exercises appropriate control? • Market control • Concurrent control • Clan control • Bureaucratic control 9. Which of these promotes forward-thinking? • Controlling • Budgeting • Directing • None of the above 10. To take others’ opinions and finally take their own decision are a part of which technique? • Autocratic style • Free rein • Consultative style • None of the above 11. Variance analysis helps to identify the difference between planned and actual results and its effect on the performance of the organization. • True • False

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CASE STUDY Koudran Engineering Company is a multinational company that manufactures automotive and hydraulic parts. It has manufacturing locations in Nasik, Nagar, Pondicherry, and Hyderabad. The company gives more importance to production expenses. The budget is allocated to every manufacturing operations based on the analysis done on production facilities and operation. The manufacturing locations at Nasik, Nagar, and Pondicherry are working properly and are on the right track of the budget. However, the Hyderabad location was not able to maintain its budget target. Mr. Anderson was transferred from the Nagar location to Hyderabad as plant manager. Mr. Anderson did a preliminary investigation into the Hyderabad plant and made some changes to the plant’s working. He instructed all the departments to strictly follow the budget allocated and adhere to it so that profits could be achieved. He monitored the operations of the plant after implementing the changes. There were a few supervisor terminations during this time for not adhering to the budget targets. With all the efforts, the Hyderabad location was back on track. Within the next six months, he found that profit then increased by 10 percent. After setting the Hyderabad plant right, the management decided to call Mr. Anderson back to the Nagar location. However, shortly after Mr. Anderson left, the productivity of the Hyderabad location fell below the earlier level, and the budget was again in trouble.

Questions 1. Analyze the organizational climate created by Mr. Anderson at the Hyderabad plant. 2. Why was there a drop in budget level after Mr. Anderson left? 3. Did Mr. Anderson have an autocratic style of directing?

Critical Thinking Questions (Relevant examples should be cited in the discussion)

1. Comment on whether understanding human behavior helps in directing. 2. You are the chief financial officer of a restaurant. How will you use the current year’s financial statement to set the budget for the next operating year? 3. Can an organization function without control? Comment.

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Chapter at a Glance Directing and Controlling

Directing deals with the steps a manager takes to get subordinates and others to carry out plans. Need of Directing

• • • • • •

To initiate action To utilize resources To motivate people To help the organization achieve the objective To bring organizational stability To continuously manage change

Elements of Directing

• • • •

Supervise Communicate Motivate Lead

Principles of Directing

The principles of directing are dealt with from the aspect of purpose and process. Under the purpose concept, the focus is chiefly on individual contribution, the harmony of organizational objectives, and efficiency in direction. From a process perspective, it would center on the principles of comprehension, unity of command, communication, and appropriateness in direction, follow-through, and leadership. Techniques of Directing

• Autocratic style: ‘Do as I say’. • Consultative style: To take others’ opinions and finally their own decision. • Free rein: Giving independence to experienced employees. Characteristics of Directing

• • • • •

It is a continuous process. It has significance because of the complexity of behavioral traits. It facilitates securing the cooperation of the subordinates. It helps to transform plans into performances. It provides leadership in business.

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Controlling is the process of ensuring that actual activities conform to the planned activities. Need of Controlling

• • • • • •

Optimum utilization of resources Minimized deviation Increased efficiency Coping with the changes Value addition Facilitates delegation and teamwork

Control Process Steps

• • • •

Establish standards and performance measures. Measure performance. Compare the actual versus the planned measures. Take corrective action.

Design of Effective Control Systems

The control system should be flexible, suitable, action-oriented, and economical, be able to forecast, enable feedback and timely revisions, and, for its total effectiveness, should call for the active participation of employees. Types of Control

• Feed-forward control: It is an attempt that is made to anticipate the deviations that can occur while realizing the plan.

• Concurrent control: This type of control ensures that the work is being performed as per the plan; if not, corrective actions are taken.

• Feedback control: Feedback control provides information stating whether the organizational goals are met. It is the basis on which further movement of the organization can be decided.

Budget

A budget is a financial plan that is used to estimate the revenue and expenses over a specified period. Budgeting Process

• Define organizational objectives. • Set production, marketing, and financial budget.

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• • • •

Directing and Controlling

Fragmentation of budget. Processes should be established for monitoring the budget. Variance identification. Provide feedback.

Advantages of Budgeting

• • • • • •

It helps to monitor and control operations. It provides a framework for delegation. It creates a sense of responsibility among the managers. It can improve the communication system within the organization. It promotes forward thinking. It helps in the coordination of different departments and aligns them toward shared objective.

Limitations of Budgeting

• It can demotivate employees if they do not get an opportunity to participate in • • • •

the budgeting process. It is difficult to estimate all the revenues and expenditures in advance. It can result in building perceptions of unfairness. If budgets are inflexible, then they fail to reflect the necessary changes. Budgeting might result in competition among the departments for resources.

Variance Analysis

Variance analysis helps to identify the difference between planned and actual results and their effect on the performance of the organization. Control Techniques

These are categorized as financial control and non-financial control techniques. Financial control comprises the following:

• • • • • •

Financial audits Financial statement Ratio analysis Budgetary control Break-even analysis Accounting

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Non-financial control comprises the following:

• • • • • • • •

Market research HR control Production control Direct supervision and observation MBO Management audit MIS PERT/CPM

7 DECISION-MAKING

An Opening Vignette Decision Making and Policy Formulation by Aditya Birla Group of Companies Let us take the case of the Aditya Birla Group of companies led by Kumar Mangalam Birla. After Kumar Mangalam Birla stepped in, several changes in organizational reporting structures, retirement policies, and recruitment strategies happened as a result of his decision-making. He also implemented the following policies for organizational effectiveness:

• • • • • • •

The implementation of ‘economic value-added model’ focusing on profitability, asset productivity, and growth. Establishment of Aditya Birla Management Corporation Limited, for ensuring best practices across the Group companies. Reduction of the Group’s dependence on fiber-based business and a shift to non-ferrous metals as there was less competition in the market then. Introduction of a 360-degree feedback program with an expectation list from employees. Promoting excellence among students’ community to cultivate the leaders of tomorrow with organization culture centering on people, performance, energy, and enthusiasm. Implementation of an employee satisfaction index for increased retention of talent pool. Instituted a performance appraisal system and implemented performance management systems to bring meritocracy.

DOI:  10.4324/9781032634258-7

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Implementing changes to the reporting structure, thereby increasing accountability and autonomy. Outcome

• •

•

The turnover of the Aditya Birla Group of Companies increased from $2 billion in 1995 to $45 billion today due to the incorporation of valueadded models. The company’s expansion has skyrocketed because of organizational restructuring and changes in reporting structures made by K.M. Birla, and now, it operates across 41 countries with an employee potential of 120,000 with increased meritocracy. The company has made 31 acquisitions in 20 years, a never-before-seen growth by an Indian multinational, and this was due to the incorporation of modern management approaches.

Summing up the case in the context of decision-making, it is said that an incorrect decision can ruin an organization or make an organization fail, whereas correct decisions across all levels might enrich the organization in terms of growth, profit, and opportunities, as can be seen from the Aditya Birla Group of companies. In the following section, we now explore the concepts associated with decision-making.

PART I: ORGANIZATIONAL DECISION-MAKING 7.1 Decision-Making Concepts

The managers of any organization are allocated the responsibility of taking decisions related to various aspects of the organization. The decisions can be operational decisions such as sanctioning leave for any employee, tactical decisions like formulating the budget for their unit, or strategic decisions like mergers and acquisitions or organization diversifying into other business areas. For such decisions, the chief elements of decision-making comprise alternatives, states of nature, and payoffs, where alternatives are courses of action, states of nature are possible future conditions, and payoffs are profit or loss earned from each combination of alternative and future state. According to Henry Sisk and Clifton Williams, a decision is the selection of a course of action from two or more alternatives, and decision-making is a sequence of steps leading to the selection of that alternative. Herbert Simon’s model for decision-making states that there are three stages to decision-making—intelligence, design, and choice—each accompanied by a feedback phase. In the intelligence phase, the problem for which the decision has to be made is identified, followed by a design phase where alternatives are constructed, and then in the choice phase, the most feasible alternative is chosen

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TABLE 7.1  Scenario Representing Decision-Making

Identification of the Problem

To Buy a House

Decision conditions based on collection and analysis of relevant information Allocating weights to decision conditions Generating alternatives

Price, size, layout, location, accessibility, amenities, house conditions, repair options, available home loan options, legal aspects, and so on

Analyzing alternatives Choosing an alternative Implementing the alternative

10, 9, 8, 7, 6, 5, 4, 3, 2, and 1 Option 1: Moderately priced, good size two-bedroom resale apartment in Kalyaninagar with accessibility to railway station, airport, and bus terminus with minor repairs to be done and attractive home loan options from a nationalized bank with clear legal documents. Option 2: A spacious new property less priced downtown. Option 1 has been rated higher by Meera Meera chose option 1 Meera bought the two-bedroom apartment in Kalyaninagar

and implemented as a decision. To make aspects of decision-making clear to the reader, let us take an example. A decision has to be taken about buying a house by Meera. The steps to be followed while making a decision are depicted in Table 7.1. As observed by Peter Drucker, an alternative is evaluated based on the following:

• Risk associated with each alternative • Cost, time, and effort which have to be spent for each alternative • Limitations of financial, human, and material resources Generally, a decision-maker (manager) while taking a decision chooses an alternative based on experience, experimentation, research, and analysis. 7.2 Decision-Making Environment

The decisions made by managers are sometimes taken under certainty where the outcome is known, and sometimes they are taken under uncertainty where the outcome is not known. When decisions are taken under risk, there can be several outcomes with probability that each outcome might occur. For example, let us consider a situation where a decision is taken under certainty. 7.2.1 Decision-Making under Certainty

• The consequence of every alternative is known as shown in Table 7.2. • Usually, there is only one outcome for each alternative.

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The solution to such problems can be found out using linear programming problem (a method to achieve the best outcome, such as maximum profit or lowest cost), assignment models, sequencing models, and so on. From Table 7.2, it is seen that the decision to invest in policy II is the most optimal solution. 7.2.2 Decision-Making under Uncertainty

• All the possible states of nature or outcomes are known as shown in Table 7.3. • The probabilities of the possible outcomes are not known. When a decision is made under uncertainty, some criterion is followed. The first is the Maximax criterion, which has an optimistic approach. It depicts the maximum value of the maximum outcome for each row. Table 7.3 portrays decision-making using an optimistic approach. The decision is to choose option II using the Maximax criterion. Under uncertainty, decision-making is also done using a pessimistic approach, which is known as the Maximin criterion. Table 7.4 clearly illustrates decision-making using the pessimistic approach. This approach uses the maximum value of the minimum outcome for each row. TABLE 7.2  Decision-Making under Certainty

Alternative

Outcome

Invest in policy I Invest in policy II Invest in policy III

200,000 250,000 225,000

TABLE 7.3  Decision-Making Using Maximax Approach

Alternatives

States of Nature Market Acceptability Poor

Good

Excellent Row Maximum

Shampoo I 8,000 10,000 12,000 Shampoo II 5,000 10,000 15,000 Shampoo III 2,000 7,000 10,000

12,000 15,000 10,000

TABLE 7.4  Decision-Making Using Maximin Approach

Alternatives

States of Nature Market Acceptability Poor

Good

Excellent Row Minimum

Shampoo I 8,000 10,000 12,000 Shampoo II 5,000 10,000 15,000 Shampoo III –2,000 7,000 10,000

8,000 5,000 –2000

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When a decision is taken by narrowing alternatives whose payoffs are equally likely, then the approach followed is known as the Laplace approach. So, the approach in Table 7.5 depicts alternative I or alternative II as the most feasible alternative. Hurwicz criterion: This criterion is a compromise between an optimistic and a pessimistic decision and is also known as the criterion of realism. The coefficient of realism if close to 1 allows the decision-maker to be optimistic, and if it is close to 0, it allows them to be pessimistic. Using the above criterion, one has to find out the maximum and minimum payoff for every alternative. The expected payoff is calculated as: Expected payoff = α × (maximum payoff) + (1 – α) × (minimum payoff) Here, α = 0.8; 1 – α = 0.2, the expected payoff is calculated as Expected payoff = α × (maximum payoff) + (1 – α) × (minimum payoff) (Shampoo I) 0.8 × 12,000 + 0.2 × 80,000 = 11,200 (Shampoo II) 0.8 × 15,000 + 0.2 × 5,000 = 13,000 (Shampoo III) 0.8 × 10,000 + 0.2 × –2,000 = 7,600 So, using the Hurwicz criterion, the best option is to choose the second alternative (shown in Table 7.6). TABLE 7.5  Decision-Making Using Laplace Approach

Alternatives

States of Nature Market Acceptability Expected Payoff = Sum of the Poor Good Excellent Payoffs Number of Future States

Shampoo I Shampoo II Shampoo III

8,000 5,000 –2,000

10,000 10,000 7,000

12,000 15,000 10,000

10,000 10,000 5,000

TABLE 7.6  Decision-Making Using Hurwicz Approach

Alternatives

Market Acceptability Poor

Good

Row Row Expected Maximum Minimum Payoff Excellent

Shampoo I 8,000 10,000 12,000 Shampoo II 5,000 10,000 15,000 Shampoo III –2,000 7,000 10,000

12,000 15,000 10,000

8,000 5,000 –2000

11,200 13,000 7,600

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Minimax regret criterion: The minimax regret approach requires the construction of a regret table. For each state of nature, the difference between each payoff and the largest payoff for that state of nature is calculated. The maximum regret for each possible decision is listed. The decision chosen is the one corresponding to the minimum of the maximum regrets. The regret matrix shows shampoo I or shampoo II as the alternative. The Payoff Matrix: Refer Table 7.7. The Regret Matrix: Refer Table 7.8. 7.2.3 Decision-Making under Risk

• All the possible states of nature or outcomes are known. • The probabilities of the possible outcomes are known. The decision-making criterion used for decision-making under risk is the Expected Monetary Value (EMV). This is the best expected value among alternatives to determine the expected payoff of each alternative and choose the alternative with the best expected payoff. EMV (for ith alternative) = (payoff of 1st state of nature) × (probability of 1st state of nature) + (payoff of 2nd state of nature) × (probability of 2nd state of nature) + ... + (payoff of last state of nature) × (probability of last state of nature). Hence, the decision was to choose the second option as shown in Table 7.9.

TABLE 7.7  Decision-Making Using Minimax Regret Criterion

Alternatives

Shampoo I Shampoo II Shampoo III

Market Acceptability (States of Nature) Poor

Good

Excellent

8,000 5,000 –2,000

10,000 10,000 7,000

12,000 15,000 10,000

TABLE 7.8  Regret Matrix

Alternatives

Shampoo I Shampoo II Shampoo III

Market Acceptability (States of Nature) Poor

Good

Excellent

0 3,000 10,000

0 0 3,000

3,000 0 5,000

Row Maximum

3,000 3,000 10,000

222  Decision-Making TABLE 7.9  Decision-Making under Risk

Probabilities Alternatives

Poor 0.2 Good 0.3

Excellent 0.5

Expected EMV

Shampoo I Shampoo II Shampoo III

8,000 5,000 –2,000

12,000 15,000 10,000

10,600 11,500 6,700

10,000 10,000 7,000

TABLE 7.10  Decision-Making Using EPPI

Probabilities Alternatives

Market Acceptability (States of Nature) Poor 0.2

Good 0.3

Excellent 0.5

Shampoo I Shampoo II Shampoo III

8,000 5,000 –2,000

10,000 10,000 7,000

12,000 15,000 10,000

Expected profit with perfect information (EPPI): The decisions taken by managers are more accurate when proper information is available. Also, the information should be available on time and be accurate, relevant, and understandable. Perfect information would tell us with certainty which outcome is going to occur. Having perfect information before making a decision would allow choosing the best payoff for the outcome. If the proper information is available, an individual would be able to select the best payoff for every state of nature. The EPPI is given as follows: EPPI = (Best payoff of 1st state of nature) × (probability of 1st state of nature) + (best payoff of 2nd state of nature) × (probability of 2nd state of nature) + (best payoff of 3rd state of nature) × (probability of 3rd state of nature).​ EPPI = 8,000 × 0.2 + 10,000 × 0.3 + 15,000 × 0.5 = 12,100. Expected value of perfect information (EVPI): It is the increase in the expected profit that would result if one knew with certainty that if the alternative was chosen, it would give the highest payoff. EVPI = EPPI – EMVmax, where EPPI = expected profit with perfect information EMVmax = maximum EMV. For this example, we have EVPI = 12,100 – 11,500 = 600. 7.3 Types of Decisions 7.3.1 Programmed Decisions

When managers take decisions on simple and straightforward problems (structured problems), the decisions are known as routine or programmed decisions. The

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programmed decisions adopt solutions from the past. Some of the routine decisions which come under programmed decisions result in an increase in pay for the employees or performance rewards and sanctioning leave requests made by employees. 7.3.2 Non-programmed Decision

When managers have to take decisions that are not routine but unique in nature for unstructured problems and are not supported by proper information and bear certain risks, such types of decisions are known as non-programmed decisions. These decisions are generally customized for specific types of situations. The senior management mainly takes such types of decisions involving the choice of strategies and objectives in situations of uncertainty. For example, after the Satyam fiasco, the strategy of Tech Mahindra to go for a Mahindra–Satyam merger is an example of a non-programmed decision. Here, the solution timeframe is relatively long. 7.3.3 Strategic Decisions

The decisions taken by the top-level management to fulfill organizational goals and objectives are said to be strategic decisions. It involves a business expansion or diversifying into other business areas. Strategic decisions are generally nonprogrammed decisions. 7.3.4 Tactical Decisions

Tactical decisions are taken by the middle-level management and constitute the allocation of roles and responsibilities to employees as well as formulating the budget for the department. These are generally programmed in nature. 7.3.5 Major and Minor Decisions

Some examples of major decisions include acquisitions of organizations, mergers, or diversifying into other business areas, and minor decisions might range from granting leave to an employee to preparing a monthly budget for the unit’s expenditure. 7.3.6 Individual and Group Decisions

Group decision-making generally outperforms individuals who make decisions in isolation, but in some instances, individual decision-making can work wonders in an organization when a group fails to arrive at a consensus. 7.4 Decision-Making Models

There are decision-making models which stress on the approach of decision-making, and these models have specific assumptions. For example, the classical model

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of decision-making assumes that managers are logical and they will work for the best interest of the organization. This scenario in business organizations is really infrequent, so the next-generation model which gained popularity was the rational decision-making model.

• Classical model: The classical model states that managers have access to all

possible types of information to make a decision. If there is more than one alternative, the manager ranks the alternatives. He implements the best alternative, and it is assumed that the manager knows what is best for the organization. In reality, it is that most of the time, the manager does not have all the information they require. This model is otherwise known as the rational model. • Rational model: This model assumes that there exists a problem, for which a decision has to be taken by first understanding the problem, then identifying alternatives constrained by legal and ethical norms as well as technology, resource, and budget constraints. An evaluation of these alternatives is done by considering the feasibility, satisfaction, and affordability parameters and the consequences of implementing the alternative. The steps in rational decisionmaking are as follows: • Identify the problem • Find out the criteria for the decision • Attach weights to the criteria • Generate alternatives • Rate each alternative on each criterion • Compute the optimal decision • Implement the decision • Evaluate the outcome All these steps have been already explained by taking an appropriate example under the section ‘Decision-Making Concepts’.

• Administrative model: This model explains why the classical model is not

used by managers while making decisions. The reason being that most of the time, a decision taken is accompanied by risk and uncertainty, mainly due to incomplete or ambiguous information. On the other hand, information may be costly and not available on time, or managers may not have time to explore all possible alternatives. For each problem, there are so many solution alternatives that it is not possible for the manager to consider all of them. Further decisions are limited by people’s cognitive limitations and are known as bounded rationality, which means that leaders tend to take decisions based on choosing solutions that meet minimum requirements and are good enough. • Political model: According to the political model, an individual seeks to take decisions with the aim of satisfying their own or an organization’s interests or goals, and these individuals are the stakeholders of the company. The tilt in the outcome of the decision is always in their favor. Collation of data and searching

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for relevant information happens with the perspective of obtaining individual paybacks in commercial dealings. 7.4.1 Herbert Simon’s Model of Decision-Making

Herbert Simon states that decision-making consists of intelligence, design, and choice phases. According to Herbert A. Simon, the decision-making process is basically divided into three branches:

• Intelligence • Design • Choice 7.4.2 Intelligence Phase

The first step in decision-making is the intelligence phase or otherwise known as the primary quantitative process. In the intelligence phase, raw data are collected and processed to generate information, which, in turn, is analyzed to generate intelligence. General intelligence consists of proper analysis of problems. Analysis consists of identification of problems, types of problems, proper understanding of problems, and patterns of problems. Analysis is done on the basis of data or the facts that are presented. It also depends upon the available information related to the problem. But only analysis is not helpful in problem-solving. Proper analysis and knowledge to solve a problem is equally important. Also, consideration of the situation, constraints, priorities, feasibility, objectives, and alternatives are also necessary.

• Problem identification: It depends on managerial scenes and abilities to pro-

duce ideas (brainstorming). Problem identification also depends upon the visualization, structuring, and clarification of ideas. • Problem definition: In this step, managers have to create the correct business case for any problem scenario. • Problem classification: Here, managers classify the problem based on the degree of complexity and on the analysis performed on it. • Structural modeling: Structural modeling encompasses objective functions, such as profit maximization/cost minimization, explicit and implicit constraints, outcomes, and conditions of invariance, all of which can be portrayed using a model. The example includes a small segment of organization producing a product for the same customer segment of the same demographic zone. The model assumes profit maximization, production, and quality assurance functions and the demands they face. Also, the amount of information they have about each other and their focus on different variables like price, quantity, or quality can be represented using the structural model to denote the scenario.

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Decision-Making

7.4.3 Design Phase

This is the next step after the analysis phase. After proper understanding and analysis, effective steps are designed to solve the problems. The action on problem-solving is present in the design phase. The model of decision-making is constructed, tested, and validated. Modeling contains the abstraction of problems and their relationship among variables as well as an alternative course of action. In designing, decision-making variables like situation, time, people, and schedule are considered. The decision models designed in this phase clearly depict managerial situations and decision variables and identify performance measures that reflect the objectives of decision-making. 7.4.4 Choice Phase

It is a direct act of the decision-making process and is correlated with finding the optimal solution to the problem with decision modeling. Actual action is performed in this phase. The decision is taken in this phase only. If the person has some choice to solve some problems, it means that the person is making a decision to move in one direction. Choice makes the direction of a decision. And it depends upon the previous understanding of the problem or perceptions. 7.5 Common Difficulties in Decision-Making

Decision-making becomes difficult due to the following reasons:

• When the information is inadequate or incomplete. • When there is a lack of information on political, social, and economic variables. • To arrive at a rational decision, it is mandatory for a decision-maker to be an expert in the respective domain, be highly intelligent, and have farsightedness for future situations, which generally is a rare occurrence. • Decisions should be impartial and closely align with the organization’s goals and objectives. Individual preferences and attitudes often get in the way of decision-making. • Decisions taken by managers are always accompanied by compromise and adjustments. For example, a compromise on the cost of a service delivered can directly bring in a compromise on the benefits obtained from that service so that decisions are balanced. 7.6 Decision-Making for Organizational Effectiveness

Decision-making needs to be done for organizational effectiveness because the effects of poor and slow decision-making can generate negative ripples throughout

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the organization. Hence, decision-making needs to be defined and refined at frequent intervals. Decision-making is closely related to control and is used for managing trading issues that require organizational decision-making. Decisionmaking encompasses cataloguing critical decisions that must be made, identifying appropriate authorities who have the relevant information that will help them make these decisions, and keeping evidence of who will be ultimately accountable for decisions made. Effective decision-making empowers individuals to make the right decisions at the right time. 7.7 Decision-Making Styles

• Autocratic

The leader takes up the entire responsibility of making the decisions and will be held responsible for the outcome being good or bad. Generally, managers who imbibe an autocratic style do not take suggestions from others. An autocratic style results in quick decision-making, which is an advantage, but the disadvantage is that it solely depends on the decision-making ability of that individual who weighs the pros and cons of each and every alternative and finally implements the same. If the outcome is negative, then the leader loses their image as the team or people from that team feel that they could have come up with a better solution. • Participative In the participative style, the leader involves members of their team to take the decision, though the total control resides with them. They make the teams feel like they are actually taking ownership of finding a solution to the problem. If the leader is a good listener and open-minded, then they can use the information collected to make better decisions, but the disadvantage of the participative style is that it is a slow and time-consuming process and is somewhat less secure. • Consultative Consultative decision-making is when a leader gives up total control of decision to team. Now, if the entire team agrees with the decision, then the decision is said to be made by consensus; however, if some members agree and others do not, the style becomes democratic. The advantage of this is that if the group consensus is 100 percent, everyone has a stake if the outcome is successful. Also, the decision is more accurate because the skill and the brain of every individual are best utilized. This style is strenuous because a lot of effort is put in getting the employees to collaborate and work together. • Democratic In this style of decision-making, a leader allows their team to vote for a decision. The alternative that gets the majority of the votes is taken as the final alternative. The decision-making is faster in this case, though responsibility is not accorded to any individual for the outcome of implementing the alternative to that decision.

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PART II: QUANTITATIVE TECHNIQUES FOR DECISION-MAKING Business managers depend on their knowledge and intuition to make robust decisions. They show substantial interest in analytics derived from the interpretation of the data. In this age of big data, quantitative techniques used by analysts provide strong proof to show management decisions on production, distribution, marketing, and personnel management. These methods also help managers to project future business conditions, enabling them to adjust their strategies as needed. The first technique, which is useful for managers to take decisions on levels of inventories or optimize inventory carrying costs for big manufacturing organizations is explained as follows. This model, which is deterministic in nature, is known as the economic order quantity (EOQ) model. There are also some probabilistic models. Inventory refers to idle goods or raw materials that are kept by any organization for future use and consists of components, subassemblies, work in process, finished goods, and so on. Thus, inventory acts as a buffer when the demand level varies at the customer’s end or at the organization’s end. The cost associated with inventory can run into the millions of dollars. To optimize cost, the following two aspects need to be considered:

• Monitoring and accounting for the re-ordering of the level of goods for replenishing

• Time interval kept on record for order to be replenished The purpose of this topic is to show how quantitative models can assist in making these above decisions and to understand that one has to have a brief idea about the following models:

• Deterministic or EOQ model (rate of demand is constant) for satisfying consistent demand

• Probabilistic model (rate of demand fluctuates) for satisfying variations in demand • Material requirements planning model for managing inventories • Just-in-time model for managing waste

We will limit our study with respect to the first model since the sole intention is to make the readers understand how the inventory model works and how the decision-making by the managers is aided with the help of this model. There are other models which are probabilistic in nature, and the just-in-time models are the material requirements planning model.

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7.8 Deterministic or EOQ Model

Let us consider the situation faced by Red Herring, a cosmetic company. Red Herring is the distributor of lipsticks, nail polish, deodorants, and perfumes. From a central location in Basel, Germany, Red Herring supplies to nearly 1,000 retail stores with cosmetic items. The total inventory for the cosmetic company for perfumes averages approximately 50,000 units with an average of $10 per unit. The total inventory carrying cost is estimated at $500,000. Since the carrying cost is an exceptionally large amount, the head of inventory decided to do a detailed study of the inventory costs associated with the purpose to arrive at how-much-toorder and when-to-order decisions that will result in deriving the lowest possible total cost. So, they started collecting demand figures from the inventory manager. Let the average demand per week be 412 units of shampoo. Based on the model, the demand is seen to be constant, an impossible situation under business conditions. Now, to compute the number of units to be ordered, the manager has to make the following decisions:

• Keep small inventories and order frequently (high ordering costs) • Keep large inventories and order at long intervals (high inventory costs) So, to find an optimal compromise between the two, the total cost is taken into account, which comprises the ordering cost and the holding cost. Holding costs include the cost associated with maintaining or carrying a given level of inventory (small/large); these costs depend on the size of the inventory and are usually calculated on a percentage basis. There are a number of other holding costs, such as insurance, taxes, breakage, pilferage, and the unit’s overhead, that also depend on the value of the inventory. The total holding cost, as calculated by Red Herring, amounted to 20 percent of each unit (shampoo) cost, that is, $2. Ordering costs, which are fixed, cover the preparation of the voucher and the processing of the order, including payment, postage, telephone, transportation, invoice verification, receiving, and so on. It has been seen that Red Herring spends an average of $20 per unit of shampoo, irrespective of the quantity ordered. For the usage of the EOQ model to answer questions such as how much and when to order, we now have three values in hand and we need to find the value of Q, that is, how much to order. The inventory level for Red Herring will have a maximum value of Q units when an order of size Q is received from the supplier and will come to 0 units in a week’s time, and then the next lot will arrive. On an average, Red Herring will have Q/2 inventory level across the months, as shown in Figure 7.1 for a constant demand situation.

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FIGURE 7.1 

Inventory Pattern

Now, the holding and ordering costs have to be calculated annually to get the yearly predictions of how much to order and when to order for the correct inventory level. Let I = annual holding cost rate, C = unit cost of the inventory item, and Ch = annual cost of holding one unit in inventory. The annual cost of holding one unit in inventory is Ch = IC. Then for the Q/2 inventory level, the total annual holding cost is as follows: Annual holding cost = (Average inventory) × (Annual holding cost for one unit) CAH = (Q/2)Ch Annual Ordering Cost = (Number of orders per year) × (Unit order cost) = (D/Q)C Let D be the annual demand and Q units are ordered every time, and the number of orders per year equates to D/Q. Let the cost per order be C. So total ordering cost = (D/Q)C. Thus, the total annual cost, denoted by TC, can be expressed as follows: Total annual cost = Annual holding cost + annual ordering cost = (Q/2) × CAH + (D/Q) × C = (Q/2)$2 + ((412 × 52)/Q) × C = Q + 428,480/Q

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The weekly demand is 446 as calculated previously, and for 52 weeks, C being $20, the total cost of the inventory becomes Q + 428,480/Q. Above is the general total-cost equation for inventory situations in which the assumptions of the EOQ model are valid. 7.8.1 The Decision: How Many Units

In order to minimize the total inventory cost, different values of Q have to be put in the equation and the cost has to be found. It is seen that cost becomes minimum for the inventory level of 650 units using a trial-and-error approach for different values of Q (Table 7.11 and Figure 7.2). The disadvantage of the trial-and-error scheme is that it does not provide the exact minimum-cost order quantity. So, a more appropriate formula can be obtained using differential calculus, so that the value of Q* that minimizes the total annual cost is given by the following formula:

Q* 

2 DC0 , that is,  2  412  52  20  / 2  654.58 units ch

Figure 7.1 Inventory Pattern Time = Q1/2Q0 Average inventory level Inventory pattern for EOQ inventory model Inventory is used at the constant demand rate of 412 units per week

TABLE 7.11  Inventory Data

Inventory Level

Holding Cost

Ordering Cost

Total Cost

350 400 450 500 550 600 650 700 750 800 850 900 950 1,000 1,050 1,100

350 400 450 500 550 600 650 700 750 800 850 900 950 1,000 1,050 1,100

1,224.228571 1,071.2 952.1777778 856.96 779.0545455 714.1333333 659.2 612.1142857 571.3066667 535.6 504.0941176 476.0888889 451.0315789 428.48 408.0761905 389.5272727

1,574.229 1,471.2 1,402.178 1,356.96 1,329.055 1,314.133 1,309.2 1,312.114 1,321.307 1,335.6 1,354.094 1,376.089 1,401.032 1,428.48 1,458.076 1,489.527

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FIGURE 7.2  Graph

Showing Optimized Inventory Cost

7.8.2 The When-to-Order Decision

Total demand placed in one year or 52 weeks = 412 × 52 = 21,424. Inventory level considered is 654.58 units. So, the total number of orders considered is (21,424/655) = 32 orders. Suppose the company has 6 working days per week, so the cycle time for the order will be (52 × 6) /32 = 9.75 days (considering only Sunday as a holiday). But if the company is operational for 300 days per year, only then is cycle time given by 300/32 = 9.3 days a year. The when-to-order decision is taken as the number of operational days of the company/D/Q*. So, the manager has to order the inventory every nine days to optimize the cost. Two other simple examples have been given for easy reading and understanding by the reader in the context of the decision-making to be done by the manager.

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EXAMPLE Demand for a commodity is 15,000 units/year. The holding cost per year/unit is ₹1.20, and the cost of one procurement is ₹300. Find EOQ.

Solution: EOQ = =

2DC 0 Ch 2 X15,000 X300 1.20

= 2738.61units The ideal order level is 2738.61 units. At this level, we can minimize order and carry costs.

EXAMPLE A company uses 75 units of an item per month. Each unit costs ₹25. Cost of putting through each order and the inventory carrying cost charges per month are computed at ₹36 and 1.5 percent of average inventory investment, respectively.

Solution D = 75 unit/month (note that D should be in years) =75 × 12 = 900 number/year Co = ₹36 (Note that Co is not for a month. It is per unit because when you calculate EOQ, you get the best quantity that you have to order, say it is 900 units. Then for ordering these 900 units, you have to pay charges to hold them. In this case, it is ₹36/month.) I = 1.5 percent = 0.015 (note that ‘I’ is Inventory) Ch = C × I = 25 × 0.015 = 0.375 × 12 = ₹4.5 / number/ year.

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7.8.3 Just-in-Time Manufacturing

It is also known as ‘lean manufacturing’, which refers to the manufacturing of products that are ordered and paid for by companies that have successfully implemented just-in-time manufacturing, which includes companies such as Toyota and Dell. The objective behind implementing the just-in-time concept is to control unnecessary wastage as follows:

• • • • • • •

Avoid Reduce Reuse Recycle Recover Treat Dispose

Let us consider the case of Toyota in the context of the just-in-time production strategy. The Toyota production strategy is highlighted by the fact that raw materials are brought to the production floor only when an order is received, and the product is ready to be built. Neither the raw material nor the subparts are ordered until a requisition is received. This philosophy has allowed Toyota to keep a minimum amount of inventory, thus reducing the inventory capital. This also means that Toyota can adapt quickly to changes in demand without having to worry about disposing of expensive inventory.

• Small amounts of raw material inventory are kept at each node in production for use.

• Precision forecasting is important for implementation of the just-in-time concept, and Toyota has acquired the desired precision.

Then there is the case of Dell, which has also leveraged the just-in-time concept to make its manufacturing process a success. Dell’s approach to the just-in-time concept is to delegate responsibility to its suppliers to implement the just-in-time concept, resulting in short lead times on components so that products can be assembled by Dell quickly and then shipped to the customer. The model on which Dell operates has become successful due to strong supplier support and seamless demand projection of material or semi-finished products by Dell to its suppliers. 7.8.4 Material Requirements Planning

Material requirements planning, a computer-based inventory requirement planning, is used to manage manufacturing processes.

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7.8.4.1  Objectives of Material Requirements Planning

• Ensures material availability for production to avoid shortages • Reduces waste by maintaining the lowest possible product levels in stock • Helps manufacturing companies with planning, scheduling, and controlling inventory for raw materials and products

7.8.4.2  Benefits of Material Requirements Planning

• Helps to identify what is required, when it is required, and the quantity of raw • • • • •

materials Helps to reduce purchasing costs, freight costs, manufacturing costs, and so on Helps to reduce lead time Helps in reducing inventory levels Helps in enhancing customer service Improves productivity

7.8.4.3  Disadvantages of Material Requirement Planning

• Dependency on forecasts • Costly implementation • Time consuming 7.9 Decision-Making Tools

It is said that organizational effectiveness comes with effectiveness in decisionmaking, which is a trait to be compulsorily possessed by managers taking strategic, tactical, and operational decisions within organizations. To take decisions, these managers use various decision-making tools, some of which are explained using examples for better understanding and also to get a practical insight into how a decision is arrived at. 7.9.1 Cost–Benefit Analysis

This is a technique in which the values of the benefits of a course of action are added, and the costs associated with it are subtracted to determine the net result. The senior management of a small organization is deciding whether or not to invest in a new computerized customer service (CSS) system. The management implemented the CSS, realizing the potential of the system to reach a large number of customers and provide more efficient customer service. The senior management carried out the cost–benefit analysis, and it was inferred that the system would pay for itself within the second year of operation (Table 7.12).

Item

Total

Training Maintenance (yearly) Others

Sales lost during transition and hiring people for technical support

CSS software Updating and support

LAN infrastructure

Material Resources Workstation CSS Software Server

Category

Costs

5 60,000

30,000 40,000

630,000

60,000

150,000 40,000

50,000

50,000

1

Benefits Per Annum

Electronic Advertisement Lead Conversion Customer retention and enhancing customer base Data accuracy Process Improvement

Total ( ₹) Category 100,000 150,000 80,000

Price ( ₹)

5 20,000 5 licenses 150,000 1 80,000

Quantity

TABLE 7.12  Decision-Making Using Cost–Benefit Analysis Tool

330,000

25,000

120,000 85,000 60,000

Total ( ₹)

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In this example, we see that the costs incurred sum to an amount of ₹630,000. This is a one-time cost except for the maintenance cost, which is to be incurred by the company year on year. The benefits to be incurred every year would sum up to ₹330,000, which makes it evident that in subsequent years, the company would incur a profit if the system is implemented. 7.9.2 Force Field Analysis

This is a technique for looking at all the forces for and against a decision. It differs from the pros and cons method by identifying ways to strengthen the forces that support the decision and reduce the impact of the opposing decision on it. The earlier example can again be considered. Since total forces for change (value 13) are less than the forces against change (value 14), senior management should not go ahead with the decision of buying the CSS Solutions. This is actually what happens when we use the pros and cons technique. But using force field, we can think of certain forces which can act against the final result. For example, if management decides to buy two licenses of the software instead of five, trains two people instead of five, and also uses in-house staff, having done some technical support jobs in the past, then the cost–benefit analysis would incline more toward benefit with the cost going down. So, the purchasing and training costs would get a low score, and acquiring people for technical support would also be scoreless, thus bringing down the total score for forces against change (Figure 7.3).

FIGURE 7.3  Decision-Making

Using Force Field Analysis Tool

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Decision-Making

TABLE 7.13 Decision-Making Using Grid Analysis Method

Factors

Role and Responsibility

Salary Structure

Company Profile

Location Category

Other Benefits

Weights First insight Bitwise Persistent

4 3 4 4

5 3 3 4

3 2 3 4

2 4 4 4

2 2 3 4

CONTD.

Factors

Role and Responsibility

Salary Structure

Company Profile

Location Category

Other Benefits

Weights First insight Bitwise Persistent

4 12 16 16

5 15 15 20

3 6 9 12

2 8 8 8

2 4 6 8

Total

45 54 64

7.9.3 Grid Analysis Method

It is a technique for doing analysis for each of the options based on the factors used to arrive at a decision. The grid analysis table (Table 7.13) lists options as rows of a table and the factors as columns of the table. Weights are allocated to show the factors, and these are multiplied by the ratings for each of the options. Then, the highest-scoring option is chosen. For example, a student of a certain institute in Pune got three offers from three Pune-based companies. He used the grid analysis method to decide which company to join after getting an offer. The immediate inference is that the student should take up the offer of persistence from the three. 7.9.4 Decision Trees

A decision tree is a way of representing various decisions and their combinations for specific situations and aims mainly to represent action sequences. The decisions taken are based on the conditions, and then actions are executed. To understand or draw a decision tree, follow or draw the ‘branches’ of the tree, the ‘branches’ being the lines that connect the process to the conditions and actions. Figure 7.4 shows a decision tree used to calculate the entry fee for an amusement park. In the example, children under 5 years of age are to be admitted free of charge, children 5 years and over but under 12 years are charged ₹5, children between 12 and 18 years are charged ₹8 (carrying a student identity) and ₹10 (without identity),

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FIGURE 7.4  

Decision Tree to Calculate Entry Fee

FIGURE 7.5  Decision

Tree to Generate Feedback Percentage Given by Students (Aggre_per, Aggregate Percentage)

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TABLE 7.14  Tabular Representation of the Feedback

Cumulative Feedback Between 45 and 50 Between 40 and 45 Between 35 and 40 Between 30 and 35 Less than 30

Comment Comment Comment Comment Comments

Excellent Very good Good Satisfactory Poor

respectively, and the individuals over 18 but under 50 years of age are charged ₹5. Senior citizens over 50 years are charged only ₹8. The next (Figure 7.5) is another example of a decision tree generated using a tool. This decision tree shows that out of a sample of 2,000 students, how many gave feedback categorized as excellent, very good, good, satisfactory, and poor based on the rules as shown in Table 7.14. 7.9.5 Decision Table

A decision table represents all possible conditions and actions. Table 7.15 comprises the conditions, actions, and rules. Rules may be represented with ticks and crosses or with YES/NO symbols or words. To see which action to take, the user locates a tick or YES (true) in a row corresponding to a condition. If the column is traversed down to the lower section which displays the action, a tick in the row equivalent to an exact action indicates the act to be carried out. The complexity of decision tables is greater than that of the decision trees.

TABLE 7.15  Decision Table

Conditions

Rules

< 5 years 5–12 years 12–18 years with student identity 12–18 years without student identity 18–50 years > 50 years Actions Free entry Entry fee of ₹5 Entry fee of ₹8 Entry fee of ₹10 Entry fee of ₹15 Entry fee of ₹8

 × × × × ×

×  × × × ×

× ×  × × ×

× × ×  × ×

× × × ×  ×

× × × × × 

 × × × × ×

×  × × × ×

× ×  × × ×

× × ×  × ×

× × × ×  ×

× × × × × √

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7.9.6 Paired Comparison Analysis

This technique is useful when our priorities are not discrete, the core data on which the decision has to be taken is missing, or there are too many options that have to be ranked. It helps us to determine the various possible options, and since it is a subjective, opinion-based technique, it is useful in situations where precise cause-and-effect relationships are difficult to measure. Let us understand it with the help of a specific example. To select from a pool of students who can be nominated to anchor a specific event. The nominations stood as follows: Pramod, Richa, Manpreet, Priyanka, Makarand, Arpit, and Abhinav (Table 7.16). The first row compares Pramod with everyone else. So Richa exceeds Pramod by 2 points, Manpreet by 2 points, Makarand by 2 points, Arpit by 1 point, and Pramod scores over Abhinav by 1 point. Similar operations are performed for the second through sixth row. Next, using a mathematical framework, we evaluate the total scores of each (Table 7.17). Inference: Richa has scored the highest, followed by Manpreet and Makarand in second and third places, respectively.

TABLE 7.16  Paired Comparison Analysis I

Options

Pramod

Pramod Richa Manpreet Makarand Arpit Abhinav

Richa

Manpreet

Makarand

Arpit

Abhinav

R,2

Man,2 R,1

Mak,2 R,1 Man,1

A,1 R,2 Man,2 Mak,1

P,1 R,2 Man,2 Mak,1 Ab,1

TABLE 7.17  Paired Comparison Analysis II

Candidate

Preference Value

Difference Value

Percentage of Totaled Difference

Rank

Pramod Richa Manpreet Makarand Arpit Abhinav Total

1 5 4 3 1 1

1 8 7 4 1 1 22

4.5 36 32 18 4.5 4.5

4 1 2 3 4 4

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TABLE 7.18  Pros and Cons Method Decision Style

Pros

Cons

Professional course (+4)

Three-year PG degree course (–2)

Benefits/Loss

Skill sets will include proficiency in programming languages (+2) Job opportunities are Graduate engineers and Salary of fresh recruits is 0.3 moderate (+3) MCAs are considered million per annum (+3) at par (–3) Course approved by Investment for the Considered to be at a second AICTE and universities course is 0.45 million grade in comparison to across India (+4) per annum (–4) engineering courses (–3) +11 –9 2

7.9.7 Pros and Cons Method with Benefits

This technique allows one to check whether or not a course of action will actually improve the situation and is worth taking. So along with pros and cons to a particular decision, there are benefits aligned with the decision. An example (shown in Table 7.18) will make the scenario clearer. A student wants to opt for a master of computer applications (MCA) course. The option should be to pursue MCA course by the student. 7.9.7.1  Pareto’s Analysis

Pareto’s analysis is a tool to find out all the root causes of the problem and also find the ones that have the greatest frequency. Pareto analysis also states that 80 percent of the problems originate from 20 percent of the causes. Pareto was an economist and sociologist of the 19th century whose analysis was used to identify problems in different business situations. Steps conducted to identify the problems and their causes are defined in Figure 7.6. This sequence of steps can be clearly depicted using an example about customer satisfaction for a Web-deployed application used by 250 customers (Table 7.19 and Figure 7.7). 7.9.8 Break-Even Analysis

The break-even analysis helps business managers to take decisions related to goal setting, achieving targets in terms of revenue, production, sales, cost optimization, and so on. A break-even analysis is the analysis of total cost versus total revenue for a business. If the total cost equates to the total revenue, then the business has achieved its break-even point.

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FIGURE 7.6  Pareto’s Analysis

of Causal Effect

TABLE 7.19  Decision-Making Using Pareto’s Analysis

Problem

Cause

Not so user-friendly

Graphic user interface 98 was made by people with less experience Dedicated server was 57 not used Functionality still on the 29 make Due to slow website 14

Website was slow ‘Add to Cart’ was not working for multiple items Saving data into the database was not happening through front-end application for some number of forms

Score Cumulative 98 155 184 198

The calculation can be applied to the business entity as a whole or to the sales, product, or business unit. For a new business, the break-even point refers to sustaining its own expenses and paying from its own pockets instead of taking loans from other entities. Therefore, from a business planning perspective, the cash reserves of the business should be sufficient to stay buoyant till the break-even point is exceeded. Business costs can be categorized as fixed or variable. The total costs will vary based on the expenses incurred and also depend on factors, such as seasonal demands, the market scenario, and so on.

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FIGURE 7.7  Graphical

Representation Showing the Problem-Centric Area

TABLE 7.20  Break-Even Analysis

Fixed cost

Variable cost Sales Profit/loss statement Number of months required to extract the machine cost from the profit earned

Machinery cost (₹) Electricity cost per month (₹) Transport cost per month (₹) Packaging cost per month (₹) Price of 500 kg wheat at ₹20 per month (₹) 500 kg flour at ₹50 per month (₹) Per month profit (₹)

100,000 5,000 2,000 2,500 10,000 25,000 5,500 100,000/5,500 = 18.18 months

A margin of safety is achieved by businesses that have traded beyond their break-even point and will only tend to incur a loss if their revenue starts falling drastically. In other words, expenditure is greater than revenue. The concept of break-even analysis becomes clearer after considering a simple example. A shopkeeper sells flour at the rate of ₹50 per kg. He uses a flour grinding machine to grind the wheat, which he buys for ₹20 per kg and requires 500 kg every month. Let the grinding machine cost be ₹100,000, which he had invested at the onset of the business, and the monthly electricity amount to ₹10,000. If he can sell 500 kg of flour monthly, then the estimated time in which he will achieve break-even is given in Table 7.20.

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From the above example, it is seen that after 18 months, the trader will come to a break-even (no profit/no loss scenario) since he would have extracted ₹100,000 of the machine cost by then, and after 18.18 months, he will start making a profit assuming all other conditions are stable. Program evaluation and review technique (PERT) is a quantitative decisionmaking tool that allows the decision-maker to take decisions under conditions of uncertainty. It is based on the probabilistic approach. However, CPM considers the uncertainty of project durations. If the durations of the activities in a project are uncertain, then the scheduling is done using the expected values of the durations. In other words, under the conditions of uncertainty, the estimated time for each activity for the PERT network is represented by a probability distribution. This probability distribution of activity time is based upon three different time estimates made for each activity. These are as follows: to = the optimistic time; it is the shortest possible time to complete the activity if all goes well. tp = the pessimistic time; it is the longest time that an activity could take if everything goes wrong. tm = the most likely time; it is the estimate of the normal time an activity would take. If only one time was available, this would be it. Otherwise, it is the mode of the probability distribution. The to, tm, and tp are combined statistically to calculate the expected time te of an activity. The fundamental assumption in PERT is that the three-time estimates form the end points and mode of Beta distribution. The range specified by the optimistic time (to) and pessimistic time (tp) estimates supposedly must enclose every possible estimate of the duration of the activity. The most likely time (tm) estimate may not coincide with the midpoint (to + tp)/2 and may occur to its left or to its right, as shown in Figure 7.8. It may be justified to assume that the duration of each activity may follow beta (b) distribution with its unimodal point occurring at tm and its end points to and tp.

FIGURE 7.8 

Time Estimates

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Decision-Making

In beta distribution, the mid-point (to + t p)/2 is assumed to weigh half as much as the most likely point (t m). Thus, the expected value of the activity duration can be approximated as the arithmetic mean of (to + t p)/2 and 2t m. Thus, we have

1 te   2tm  to  t p  / 2  3



 te 

t0  4tm  t P 6

Since almost (99%) all values of random variables fall within ±3 standard deviation from the mean or fall within a range of approximately 6 standard deviation in length, the interval (to and tp) is assumed to enclose about 6 standard deviation of a symmetric distribution. Thus, if s denotes the standard deviation, then 6σ = tp – to ∴ σ = (tp – to)/6 The variance, therefore, is σ 2 = [(tp – to)/6]2 Remark: In the PERT analysis, a beta distribution is assumed because it is unimodal, has non-negative end points, and is approximately symmetrical. 7.9.8.1  Probability of Meeting the Scheduled Time

PERT enables us to determine the probability of completing a contract on schedule. The scheduled dates are expressed as a number of time units from the present time. Initially, they may be the latest times (Li) for each event, but after a project is started, we shall know how far it has progressed at any given date, and the scheduled time will be the latest time if the project is to be completed on its original schedule. The probability distribution of times for completing an event can be approximated by the normal distribution due to the central limit theorem. Thus, the probability of completing the project by the scheduled time (Ts) is given by

  T Prob  z  S Te   e  

The standard normal variate is given by

Z�  �

TS  � Te e

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where Te = expected completion time of the project and σe = number of standard deviations the scheduled time lies from the expected (mean) time, that is, the standard deviation of the scheduled time. Using the cumulative normal distribution tables, the corresponding value of the standard normal variate is read off. This will give the required probability of completing the project on the scheduled time. 7.9.9 Example: PERT

Given the following information regarding a project’s activities and estimates of the optimistic, most likely, and pessimistic times in days for completion of various activities. Activity → Time Estimates ↓(Days) Optimistic (to) Most likely (tm) Pessimistic (tp)

• • • •

1–2 2 5 14

1–3 9 12 15

2–4 5 14 17

3–4 2 5 8

3–5 6 9 12

4–5 8 17 20

Draw the network diagram. Determine the critical path. Determine the expected project completion time and its variance. What is the probability that the project will be completed in 30 days?

Solution: Using the given data, we calculate the expected time and the variance for each activity. 7.9.10 Example: PERT Activity Time Estimates (Days)

1–2 1–3 2–4 3–4 3–5 4–5

Optimistic to Most Likely tm

Pessimistic tp

2 9 5 2 6 8

14 15 17 8 12 20

5 12 14 5 9 17

Expected Time t  4t m  t P te  0 6

Variance

6 12 13 5 9 16

4 1 4 1 1 4

The project network is as follows (refer to the figure below): The critical activities are 1 → 2, 2 → 4, and 4 → 5.

 2   t p  to  / 6 

2

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Decision-Making

Hence, the critical path is 1 → 2 → 4 → 5. The expected duration of the project is 35 days. The variance of the project length is the sum of the variances of the critical activities.  e 2  4  4  4  12 ∴ Variance of the project length = 12 days  e  12  3.464 The probability that the project will be completed in 30 days is given by the standard normal deviate, that is, z

Due date  Expected date of completion Variance

z 

30  35 12

5   1.44 3.464



 P  z  1.44   0.5 1.44 

 0.5  0.4251



 0.0749  from normal table  . Hence, the probability that the project will be completed in 30 days is 0.0749.​ 7.9.11 Gantt Charts

A Gantt chart is a matrix or an essential production control tool which helps in planning, tracking, and controlling specific project tasks. The chart lists on the y-axis all the tasks to be performed. Each row contains a single task and the work breakdown structure consists of a number and a name. The horizontal axis indicates the estimated task duration or skill level needed to perform the task and the name of the person assigned to the task, followed by one column for each period in the project’s duration. Each period may be expressed in hours, days, weeks, months, and other time units.

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FIGURE 7.9  

Network Diagram

FIGURE 7.10 

Gantt Chart

The Gantt chart consists of a horizontal bar for each task connecting the start and end of a time period. A set of indicators are used to indicate the estimated and actual start and end of a time period. The name of each person is assigned to the task on a separate line. This becomes possible by using blank rows between tasks. When the project is progressing, this row is used to indicate the progress, indicated by a second bar which starts in the column where the actual start date of the task is specified and continues until the task is actually completed. Comparison between estimated start and end and actual start and end should indicate project status on a task-by-task basis. A simple type of Gantt Chart is represented for a typical software project on a specific h/w platform as shown in Figure 7.10.

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Summary

This chapter summarizes the concepts of decision-making and provides an exemplary approach to the usage of various decision-making tools and stresses the need of decision-making, a core function of management. Exercise Objective Questions

1. Which of the following is a programmed decision? • Buying your favorite toothpaste or shampoo at the supermarket • Acquire another organization • Formulating the budget for the department • Toyota launching new car 2. Which one of them is not a decision-making tool? • Force field analysis • Grid analysis method • Pros and cons method with benefits • Carrot and stick approach 3. In which of the following situations decision-making is easy? • You have complete information • You are new to a domain • You are an expert in a domain • Market is fluctuating 4. Which of the following is the decision style where a leader gives up total control of a decision to their team? • Autocratic • Consultative • Participative • Democratic 5. Which decision-making style is useful when our priorities are not very discrete? • Force field analysis • Paired comparison analysis • Pros and cons method with benefits • Decision trees 6. In which model does an individual seek to make decisions with an aim to satisfy their own or an organization’s interests or goals? • Administrative model • Political model • Statistical model • Classical model

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7. Is the grid analysis method a technique for doing analysis for each of the options based on the factors used to arrive at a decision? • True • False 8. Which decision-making tool allows one to check whether or not a course of action will actually improve the situation and is worth taking? • Force field analysis • Pros and cons method with • Grid analysis method benefits • Carrot and stick approach 9. Which among the following is the correct order for Herbert Simon’s model of decision? • Intelligence, design, choice phase • Design, intelligence, choice phase • Choice, design, intelligence phase • None of the above 10. In which decision-making environment are the consequences of every alternative known? • Decision-making under risk • Decision-making under uncertainty • Decision-making under certainty • None of the above Make a Choice

1. You promised your grandparents to spend the coming weekend with them for the whole day, but in the meantime, your office team outing is planned. What will you do? 2. Pretend that you are playing cricket in your society and you break the window of a nearby house. The owner of the house hears the window break and comes running to see. What will you do? 3. You have one more test question left to answer and time is about to finish. You know the answer, but you just could not recall it at that time. What would you do? Would you ask your neighbor to show you the answer or would you leave it unanswered? Case Studies Case 1

Sanjana has been taking violin lessons since she was eight. Now a teenager, she misses other fun activities because of her hectic schedule, as she has to practice

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violin lessons every day after school. She wants to quit violin lessons, but her parents do not allow her to do so. What are the options that Sanjana would take to handle this scenario? Would she make a compromise? Case 2

There are already huge websites available to resell used goods like furniture, home appliances, machinery, and many more. You decide to start with a similar kind of website. What decisions would you make to get more traffic on your website? Case 3

The Foodpanda group is a worldwide mobile food delivery marketplace headquartered in Berlin, Germany. It was launched in March 2012. It allows you to select from local restaurants and place orders via the mobile application as well as the website. Customers order food by entering their postcodes on the site and browsing for food from a list of restaurants. Customers create meals by browsing restaurant menus and selecting items they want to order before entering an address and proceeding to payment. Restaurants receive these orders and then deliver them to customers. Foodpanda sends an SMS to confirm orders and to inform them about the estimated delivery time. Foodpanda is growing through acquisitions. It acquired Room Service in Malaysia and Singapore, City Delivery in the Philippines, EatOye in Pakistan, Koziness in Hong Kong, and TastyKhana and Just Eat in India. Just three months after acquiring Pune-based competitor TastyKhana, the global online food delivery marketplace, Foodpanda, has bought one of its biggest rivals in India, Just Eat. Just Eat was first launched as Hungry Bangalore, but was changed to Just Eat in 2011 when it was acquired by the international brand which competes with Foodpanda worldwide. Just Eat has now received a minority holding in Foodpanda as a part of the deal, and the management will be kept on as it is. In Bengaluru, Just Eat has over 800 partner restaurants, and the business has already achieved success. Chains such as Pizza Corner, Kati Zone, and Vasudev Adigas and restaurants like Birinz are the top clients of Just Eat in Bangalore. According to the Managing Director of Food Panda, Mr. Chadda, the two companies will continue to operate independently. That is, the Just Eat brand will continue to exist separately. The acquisition has made Foodpanda the largest player in the food ordering market in India.

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Questions

1. Discuss Foodpanda’s increasing business through acquisition. 2. The decision to keep Just Eat as a separate brand name is reasonable. If so, justify it. Survey-Based Questions

Determine by circling the number that you think applies to you. 1. 2. 3. 4. 5.

Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

1. 2. 3. 4.

Do you consider your team’s welfare while making a decision? Do your team members work in a collaborative style? Do you consult others, if required? Do you feel communication between members is open enough when they arrive at a particular decision? 5. Do you remain calm when you have to make a quick decision? 6. Do you make decisions after considering all the pros and cons of them? 7. Do you prefer to avoid making decisions if you can? 8. Do you plan well ahead? 9. Do you carry on looking for something better even if you have found a course of action that is just about OK? 10. Do you find it difficult to think clearly when you have to decide something in a hurry?

1 1 1 1

2 2 2 2

3 3 3 3

4 4 4 4

5 5 5 5

1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5

Critical Thinking Questions

1. Tell us about any past critical situation in which you had to make an immediate decision. 2. What process do you follow to make decisions for these different circumstances, and are you satisfied with the results? 3. What would happen if you do not decide on the issue immediately? 4. Whom will this decision affect most? 5. What are the positive and negative consequences of this decision?

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Chapter at a Glance Decision-Making

A decision is the selection of a course of action from two or more alternatives, and decision-making is a sequence of steps leading to the selection of that alternative. There are three stages to decision-making—intelligence, design, and choice— each accompanied by a feedback phase. In the intelligence phase, the problem for which the decision has to be made is identified, followed by a design phase where alternatives are constructed, and then in the choice phase, the most feasible alternative is chosen and implemented as a decision. Decision-Making Environment Decision-Making under Certainty

• The consequence of every alternative is known. • Usually, there is only one outcome for each alternative. Decision-Making under Uncertainty

• All the possible states of nature or outcomes are known. • Probabilities of the possible outcomes are not known. Decision-Making under Risk

• All the possible states of nature or outcomes are known. • Probabilities of the possible outcomes are known. Types of Decisions

• Structured decision • Unstructured decision • Programmed decisions

• Non-programmed decision • Strategic decisions • Tactical decisions

Decision-Making Models

• Classical model • Administrative model

• Political model

Decision-Making Styles

• Autocratic • Participative

• Consultative • Democratic

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Decision-Making Tools

• Cost–benefit analysis: This is a technique in which the values of the benefits • • •

• • •

of a course of action are added, and the costs associated with it are subtracted to determine the net result. Force field analysis: This is a technique for examining all of the forces supporting and opposing a decision. Grid analysis method: This is a technique for analyzing each option based on the factors used to make a decision. Decision trees: A decision tree is a way of representing various decisions and their combinations in specific situations with the primary goal of representing action sequences. The decisions taken are based on the conditions and then actions are executed. Decision table: A decision table represents all possible conditions and actions. The table comprises the conditions, actions, and rules. Paired comparison analysis: This technique is useful when our priorities are not very discrete, the core data on which the decision has to be made are missing, or there are too many options to rank. Pros and cons method with benefits: This technique allows one to check on whether or not a course of action will actually improve the situation and is worth taking.

Herbert Simon’s Model of Decision-Making

According to Herbert A. Simon, the decision-making process is basically divided into three branches.

• Intelligence • Design • Choice Steps in Rational Decision-Making

• • • • • • • •

Identify the problem. Find out the criteria for the decision. Attach weights to the criteria. Generate alternatives. Rate each alternative on each criterion. Compute the optimal decision. Implement the decision. Evaluate the decision.

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Common Difficulties in Decision-Making

• When the information is inadequate or incomplete. • When there is a lack of information on political, social, and economic variables.

• A decision-maker should be an expert in the respective domain and highly intelligent and have farsightedness to arrive at a rational decision.

• Individual preferences and attitudes often get in the way of decision-making. • Decisions taken by managers are always accompanied by compromises and adjustments.

8 STRATEGIC MANAGEMENT

An Opening Vignette Strategic Management at Highway Connect Strategic decision-making based on political, economic, social, technological, environmental, and legal factors by Highway Connect—a transportation company. Highway Connect is the largest road transportation company having more than a lakh of employees. It has a fleet of more than 5,000 buses carrying around 7–10 lakh passengers across 20 major towns and cities. The student passengers on Highway Connect are around three and a half lakh. Highway Connect is said to make a mark of having dependable, safe, progressive, and sustainable transport services. Highway Connect operating nationally across southern and western regions of India aims to be local in its approach to focus on solutions that can cater to people region-wise. The complexity in operations would have been simpler if the focus was chiefly on determining routes, timetables, fares, and operating and maintaining the buses. But Highway Connect also has to take external factors into consideration and that which can affect the business in general like new legislations on road transport, toll taxes, road safety, etc. Considering the political, economical, social, technological, environmental and legal (PESTEL) factors like political, economic, social, technological, environmental, and legal factors, those being external to the organization and not in the control of the company Highway Connect needs to be updated with regard to ever-changing government legislation and advancement in technology that can extend to social changes and may bring in opportunities. For example, DOI:  10.4324/9781032634258-8

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environmental impacts such as enhanced carbon dioxide (CO2) emissions can be a concern for Highway Connect Operator, and lessening the negative impact of harmful emissions from the vehicles through the use of technology can pose an opportunity for the management to make their fleet pollution free, hygienic, and safe. Similarly, Highway Connects can formulate strategies and follow and implement new transportation models with respect to even the political and economic factors as discussed below. Political and Economic

With respect to the political and economic factors, Highway Connect is impacted positively by the government’s initiative of privatizing the bus services and allowing private firms to compete to run bus services at competitive pricing both at the local and national levels. This has helped Highway Connect formulate local strategies by rendering services to local schools and planning more bus routes for elderly people and the disabled. From the economic aspect, there have been favorable taxation policies at the state level with high taxes and other surcharges on the fuel enabling people to be more dependent on bus services across the southwest than using personal and professional car services. Social

With respect to several social factors, market research showed that parents and students wanted safe and clean buses with safety features integrated such as seat belts, additional escape hatches, and security cameras. The same is also true in the case of senior citizens. Technology

With respect to technological factors, much is being promoted and encouraged by the government. A good example of this is the provision for buses that lower the floor for better accessibility to the physically disabled and senior citizens. Highway Connect has invested majorly to meet the government’s targets for the provision of low-floor buses and has set up extensive operational plans to route these buses through senior citizen zones. For the disabled, it has set up free routes across certain regions. From the technology aspect, apps related to bus information have been launched and prepaid smart cards to make payment on buses easier and faster have been introduced by Highway Connect to sustain and be competitive. Environmental

From the environmental perspective, the government’s initiative and encouragement to send children by bus has helped Highway Connect to deploy more buses

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for the primary and secondary school children in order to diminish carbon emissions by a significant percentage. Suffixed by such initiatives of the local, state, and the central governments are key features that need to be incorporated for environmental balance for improving the fuel efficiency of its vehicles such as purchasing vehicles with greater fuel efficiency, using electric and gas vehicles, and training drivers to conduct tours with maximum fuel efficiency. Legal

Many of these laws are applicable nationally, for example, the public transport agency responsible for providing or regulating bus services has to follow legal norms as mandated by the central and regional public transport development authorities. In conjunction with the above-stated fact, a road agency responsible for road construction and maintenance or an agency providing towing services for vehicles has to work in alignment with the national legal road infrastructure/maintenance or traffic guidelines. A detailed PESTEL analysis helps Highway Connect to make strategic plans and decisions to rise to the challenges of a changing environment, move aggressively, and grow by complying with the conditions.

8.1 Introduction

Strategic management is the process of planning, executing, observing, analyzing, and evaluating all requirements of an organization, which are needed to meet its goals and objectives. With continuous modifications in business environments, the organizations will require to consistently evaluate their strategies to sustain and grow. The strategic management process helps organizations to consider present scenario, devise strategies and implement them, and examine the potency of the enforced management strategies. Strategic management constitutes five basic strategies and can disagree in enforcement based on the circumferential environment. Strategic management constitutes decisions and actions which a manager in an organization undertakes and those which determine the outcome of the firm’s performance. The manager must conduct a SWOT analysis to identify and utilize the areas of strength, reduce the organizational weaknesses, explore relevant business opportunities, and take cognizance of the threats perceived. Strategic management is applicable to small, mid-sized, and large organizations to sustain in this competitive age. This deals with making and enforcing decisions on the road map of an organization. Developing a strategy is a continuous process that moderates a specific business, evaluates its competitors, and designs and develops strategies to understand the course of implementation and its outcome.

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Strategic management helps the employees of an organization to objectively determine how their job and role map to the organization’s endeavor and subsequent growth. Strategic management ensures maximizing the power of achieving business objectives. The employees become more responsible, more pledged, and more contented as they can correlate well with each organizational task. They can understand the impact of environmental changes on their jobs and can effectively face the changes. One of the major outcomes of strategic management is the integration of various functional areas so that they can work in harmony in alignment with goals and objectives of the organization. Strategic management also extends to managing the organization’s resources for optimal resource utilization. A prescriptive approach to strategic management throws light on how strategies should be developed, whereas for the descriptive approach they are like general guiding principles. Business culture, the skills and abilities of employees, and organizational structure are factors that impact how an organization can accomplish its declared objectives. Companies that are not flexible and adaptable may find it arduous to succeed in the changing market scenario. While the upper management of an organization needs to undertake the responsibility to initiate and implement the action, ideas, and the well-chalked-out plans majorly come from the mid-level management. The leaders of an organization concentrate on learning from previous experiences and investigating the environment to ensure that the whole organization is moving forward. 8.1.1 Example of Strategic Management

For example, a professional organization wants to enroll new students and add new divisions for the next three years. The purpose is to increase revenue from student fees and state support based on current market demands for the course or program. For this, the hard and soft infrastructure needs to be upscaled along with induction of qualified resources. The institute also needs to invest in marketing and recruitment and implement student retention strategies. 8.2 Meaning and Definitions of Strategy

The derivation of the word ‘strategy’ has happened from the Greek language, the word being stratçgos: stratus (meaning army) and ago (meaning leading/ moving). Strategy can be characterized as a road map for an organization, and its constituents to accomplish and achieve the goals, taking into consideration its future outcomes. This is done by integrating organizational activities and employing and

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assigning the organizational resources to meet the objectives, taking into account all relevant stakeholders. Strategy is what matters for the effectiveness of the organization, the external point of view, which stresses the relevance of the objectives against the environment, in terms of internal stresses, the balanced communication between members of the organization and a willingness to contribute towards actions and the achievement of common objectives. —Barnard Strategies are forward-looking plans that anticipate change and initiate action to take advantage of opportunities that are integrated into the concepts or the mission of the company. —Newman and Logan Strategy is the mediating force between the organization and its surroundings, focusing on decisions and actions that come naturally. Strategy formation is not limited to intentional processes, but can occur as a pattern of actions formalized or otherwise. —Mintzberg, Ahlstrand, and Lampel Source: Barnard C.I. (1971), Newman et al. (1971), Mintzberg et al. (2009)

8.3 Features of Strategy

Strategy is significant, and without specific foresight, the firms are not ready to deal with the uncertainties with respect to business situations and conditions in the present and also in the future. Strategy deals with long-term developments, with a chance of innovation, new production methodologies, or emergence of new markets. Strategy takes into consideration, the behavior of customers, competitors, and employees. Strategy defines the overall mission, vision, and direction of an organization suffixed by sustainable growth. Strategy acts as the road map for ‘where we are’ and ‘where we want to be’. 8.4 Process of Strategic Management

An organization has well-defined aims and objectives and a clear assessment of its strengths and weaknesses and internal and external environments. It can then strategically plan and implement the said plan and ensure that necessary outcomes

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FIGURE 8.1  Process

of Strategic Management

can be derived from them. Figure 8.1 shows various steps involved in the process of strategic management. 8.4.1 Strategic Intent

Strategic intent describes the course that an organization must take to accomplish the company’s vision. Strategic intent helps management to accentuate and focus on the priorities and make use of the organization’s resources and competencies to accomplish the unachievable in the competitive business scenario. A focus on organizational win, inspiring people by letting them know the essence of setting the target, encouraging individual and team participation, and direct apportioning of resources are a few pointers to drive home strategic intent. 8.4.1.1 Mission Statement

The mission statement is the statement which describes how strategies are formulated and the present capabilities of the organization and the stakeholders that the organization serves and the service that the organization renders. A mission statement describes an organization’s endeavor to achieve long-term goals through refinement of the scope and activities, continuously improvising the product/service offerings, and technology advancement and innovations. For instance, Microsoft’s mission is to help people and businesses unleash their full potential, whereas Walmart’s mission is ‘to make it possible for ordinary buyers to procure like the rich’. Once the mission statement is developed, it suffices to achieve the long-term goals, but with the passage of time, it may become evasive with organizational innovations and need to be redefined. Features of a mission

• • • • •

Should be feasible and achievable Should possess clarity Should inspire staff Should be precise, unique, and distinct Should be analytical and credible

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8.4.1.2 Vision

A vision statement narrates the dreams and aspirations for the future. Microsoft’s vision is people’s empowerment by means of software, applications, and tools, whereas Walmart’s vision is to be the biggest retail chain. Vision is the organization’s ability to view things ahead of them. Vision contributes to decision-making and business planning and incorporates a shared understanding of the organization’s direction. An effective vision statement must have attributes as follows: Unambiguous, Clear, and Resonate with the organization’s culture and values, be Rational and realistic, and have greater precision in the Structure. 8.4.1.3 Goals and Objectives

A goal needs to be accomplished by organizations, and realization of the goals makes the mission more outstanding and factual. The goals in general have certain attributes, and they are as follows:

• • • • •

Have precision and are measurable Ability to solve critical and significant issues Are based on facts and are complex in nature Have a specified deadline or timeline Comprise of fiscal components and tangible and intangible benefits

Objectives are characterized as goals that an organization wants to accomplish over a stipulated time. Plans are developed so as to accomplish these objectives. Effective objectives have the following features:

• They are short-term and long-term. • Are flexible, realistic, operational, and feasible 8.4.2 Importance of Vision and Mission Statement

Vision and mission statements establish the intent of the organization toward the services offered or the products developed or manufactured and help inculcate in the employees a sense of belonging and identity. They are also called statements of creed. The vision and mission statements help to transform the objectives of the organization and help delegate tasks to the groups that are accountable for executing them. Effective vision and mission statements enable the translation of objectives into actions, that incur time, effort, and cost, are measured against certain performance metrics, help achieve the desired milestones, and convey the justification and meaning for working in an organization. Hence, organizations expend their effort in shaping their vision and mission statements.

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8.4.3 Environmental Survey

This is key to strategic planning as an organization has to ensure the type of environment in which it has to work. The second aspect of the strategic planning process is the environmental analysis. The environmental analysis involves collecting pertinent information, interpreting its futuristic impact on the working of the organization, and determining opportunities and threats for the organization. The information can be collected from sources such as publications, word of mouth, tracking, and forecasting. The environmental macro and micro analyses can be an intrinsic part of strategic planning. 8.4.3.1 Macro Determinants

The demographic, sociocultural, economic, political, and legal entities fall under the macro environmental factors. Macro determinants include emerging trends in the industry, the industry structure, the nature of the competition, and possibilities of invasion by product categories. 8.4.3.2 Micro Determinants

This is the procedure of assessing an organization’s abilities and resources, strengths and weaknesses, core competencies, and competitive advantages. The organization has to create a competitive advantage over others. Capability gap identification can be a determinant for exploiting the opportunities. 8.4.4 Strategy Formulation

From the environmental analysis, an organization should align opportunities to its strengths while addressing its weaknesses and external threats and creating a competitive edge over its rivals. Few generic strategies have been designed and developed by Michael Porter. These strategies in due course have been put into action. Several factors that are essential for enforcement are developing and motivating organization’s employees to take up the tasks, designing effective control and information systems, apportioning of resources, and so on. The most critical job is to explicate the corporate strategy. The effectiveness of the total strategic planning procedure of an organization is tested and substantiated by the corporate strategy. While objectives are aligned to the organization’s destination, the strategy provides the design. The primary function of the corporate strategy is to provide strategic direction to the organization and evaluate the firm’s business health. Corporate strategy ensures an organization’s total growth, and thereby the firm’s forthcoming and overall prospects. It also denotes the firm’s product–market posture. It is the road

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map selected for maneuvering the company through all the fluctuations and the disorders it may face. 8.4.5 Strategy Implementation

The selected strategy is enforced by means of programs and budgets. Implementation helps in motivating the staff to achieve the desired objectives. In a large organization, the resources who formulate the strategy and those who implement it are not the same. For this reason, employees should be briefed about the reason for adopting the strategy and how to adapt to the new changes after the implementation of the strategy. 8.4.6 Evaluation and Control

The monitoring of the strategy and alignment to the plan are necessary and need to be substantiated along with ensuring environmental compatibility of the strategy as well as internal realities. Evaluation and control consist of the following steps:

• • • • •

Parameter definition Enlisting the target values for the attributes Evaluating the performances Comparing measured results to the pre-established standards Incorporating the recommended modifications

The results of enforcement can be compared with the set objectives, and control initiatives become operational. If there exists a deviation in results and objectives, an analysis is needed to discover the reasons for the disparity and appropriate actions are taken to solve the problems. This may also necessitate a modification in the strategy and puts the designate at the opening point. 8.5 Types of Objectives and Their Overall Hierarchy

There are four commonly known objectives which are given as follows. Primary objective: These are the objectives for which a company has been instituted or formed. Earning of profits from the sale of goods and services is the primary objective of the company. Secondary objective: To ensure continued growth of an organization, new products and services are added to the existing assortment for which a new plan needs to be formulated and implemented. This can be treated as a secondary objective that can help support the primary objective.

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Individual objective: These are the objectives set by an individual to elevate their performance and productivity using their skills, time, and resources and help achieve financial and non-tangible rewards. Social objective: Social objectives of any business include working toward a communal cause or providing goods and services to people taking into consideration their physical and mental health. 8.5.1 Organizational Goals 8.5.1.1 Definition

V.H. Vroom in 1960 and A. Etzioni in 1964 defined goal as ‘desired future state of affairs’. Goals can be defined as objectives or aims that are to be attained by a firm over a specific period of time. They are a result of planning and are futuristic in terms of attainment. Bertram M. Gross defines mission as a term that incorporates idealism that denotes an impossible aim. For example, organizing the unorganized is the key mission of the labor unions. For example, a government may annunciate its mission in terms of eliminating poverty and unemployment, economic and social differences, and so on. Mission generally denotes long-term engagement or commitment of a firm. An objective, on the other hand, may be production of goods or services with skillfulness. Whereas goal is specific and has a micro perspective than the objective. An increase in production may be the objective, but when the firm’s objective is stated with respect to a particular criterion or standard, it becomes a goal. 8.5.2 Organizational Goals and Their Importance

Organizational goals are necessary to modulate and control the activities of individuals and groups, both internal and external to an organization. The importance of these goals has been described as follows. Expending efforts by individuals and organizations for specific activities to attain an objective: The course of action followed by individuals and groups can help accomplish the organization’s goals. Ensuring legitimacy of action by members: Based on the course of action, an individual’s or group’s actions and decisions would appear to be more legitimate and justified. Serves as a benchmark of performance: Goals provide a measure of an individual’s or group’s performance. They may help the organization’s members to evaluate the level of their performance with respect to the organization’s goals. Affect the structure of the organization: Organizational goals and structure closely correlate. Based on the organizational goals, authority and responsibility need

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to be decided. In other words, the organization’s work or task proposition directly correlates to the structure of the organization and the structure will help in realizing the goals. Identifying the nature and character of the organization: The nature and character of an organization may be concluded from its goals, for example, transitioning from customer satisfaction to delight with a focus on customer service quality may help an organization get great reviews from the customer with respect to its nature. 8.5.3 Nature of Goals

Organizational goals may be divided into the following three categories. Official goals: Official goals mostly represent the policy statements of the organization. For example, the official goal of an Edtech organization can be to establish itself across 22 countries by 2022. Operative goals: Operative goals are more realistic and can be envisaged as increasing the production rate by 10 metric tons per day by a medium-to-largesized organization. The realistic aspect of setting the goal is based on resource constraints, in terms of manpower or material resources, or external factors such as legal and political guidelines. An operative goal has a greater relevance than an official goal. Operational goals: Operational goals are actually implemented once there is a consensus among all with respect to activities and programs that need to be undertaken to realize the said goals. Means for such goals should be made available and should be acceptable by the members of the organization. These goals may either be operational or non-operational. Few goals can act as subgoals and help achieve other goals in general. 8.6 Management by Objectives 8.6.1 Introduction

Management of Objectives (MBO) is a strategic management model that intends to amend the performance of any organization by intelligibly defining objectives that are in concordance with both the stakeholders, i.e., employers and employees. MBO further states that participating in the goal setting and action plans encourages ownership and commitment among the employees, as well as positioning of the objectives across the organization. An example of MBO in action would be an organization that has a half-yearly operational goal to earn 20 percent of overall revenue from their marketing endeavors. To accomplish the same, the following steps were taken:

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• The digital marketing team has to secure three new marketing clients for the quarter.

• Team performance is continuously monitored to ensure how they progress and achieve their personal goal.

• Performance bonus is given to those who achieve and realize their goals. 8.6.2 Process and Practice

MBO outlines the five necessary steps and they are as follows:

• Revise the organizational objectives which are extrapolated from the organization’s vision and mission

• Translate the objectives that are specific, measurable, acceptable, realistic, and time-bound

• Align employees’ individual objective to organizational objective • Monitor the progress of the employees based on measurable objectives that are met

• Evaluate and reward the progress of the employee 8.6.3 Benefits of MBO

• MBO helps employees to be aware of their on-the-job role and responsibility. • The key result areas (KRAs) that are formulated are employee specific, based on their area of interest, qualification, and domain of specialization.

• The MBO approach ensures a higher degree of collaboration and cooperation. • The goals of each employee are set and the tasks allocated are aligned to the individual goals. With goals set, the employees develop ownership and trust.

• Managers help ensure that team member’s goals are strongly aligned to the objectives of the organization.

8.6.4 Limitations of MBO

• MBO often disregards the organization’s current attributes and work environment.

• Emphasis is laid on the goals and targets. The managers exert continual pres-

sure on the team members to fulfill their goals and ignore the usage of MBO for participation, willingness to impart, and maturation of management. • The managers overemphasize the setting of the targets. • The MBO approach does not accentuate the importance of the context that ranges from asset availability and skillfulness to relative buy-in from stakeholders. • MBO is mistakenly considered as a total system and the overdependence imposes problems on the MBO system, which are difficult to deal with.

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8.7 Max E. Douglas’s Model for Writing Effective Objectives

Max E. Douglas, of Indiana State University, crafted a model that supports immensely in writing effective objectives. It comprises the following: (a) the word ‘to’ that is succeeded by (b) a verb that signifies action, (c) a statement denoting the specific outcome that is achievable and measurable, and (d) a target date. A few examples of strategic objectives are shown as follows. 8.7.1 Objective Writing Model

(a) To + (b) verb that initiates action + (c) Outcomes that are specific and measurable + (d) Target date Gurukul: (a) To + (b) establish + (c) offices in 22 countries (d) by 2022 Netflix: (a) To +(b) acquire+ (c) 10 million customers (d) by the end of year 2017 ABC Publishing: (a) To + (b) publish + (c) the second edition of PPMOB book It is said that an effective objective should satisfy three essential and three desirable criteria as the former are used for writing specific objectives and the latter are needed to understand whether the requirements are met by reading the objective. Three essential criteria that effective objectives should have are: single, result, specific, measurable, and target date. Three desirable criteria are: Difficult to achieve (but realistic), Acceptance and Commitment, and Participative set. Few pointers to be kept in mind and examples that enable the audience to have the desired clarity and that make the objective effective are as follows:

• • • •

Written objectives are specific, measurable, attainable, and realistic. A deadline is decided for achieving the result. Specific objectives denote the level of performance desired. Ineffective objectives denote vague targets such as profit maximization without percentage disclosure, where ‘how much’ is not specified. • Effective objective—to earn a profit of $5 million by the end of 2023. • Target date is the date set for accomplishing the objectives. It is also more effective to set a specific date than to give a duration. The desirable objectives mentioned above can be described as follows for readers to understand and comprehend the criterion that improvises the standard of writing objectives. Difficult but achievable (realistic): Research studies have shown that individuals accomplish better when objectives are difficult yet achievable, rather than objectives that are too complex or too easy. Too difficult objectives lead to showcasing unethical behavior to achieve them.

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Participative set: Groups that contribute to setting the objectives overlook groups that are allocated the objectives to be met. Acceptance and commitment: Aligning to the objectives and remain committed to achieving them. Objectives can only be accomplished if employees are committed to achieving them. 8.7.2 Using Design Thinking to Support Strategic Planning

In the year 2005, the SAP Design Services Team (DST) got formalized to modify the SAP Software Solution’s design and build, help the organization, and enhance the design thinking procedure. Design thinking crafts a specific pathway for problem-solving. Beginning with problem understanding, customer requirements, the environment available for the end users, the social factors, market conditions, and emerging scenarios, design thinking process implements heterogeneity and makes use of different prototypes and tools to analyze, synthesize, and yield visual perception. The interdisciplinary aspect of design thinking justifies and portrays innovation to be a mix of dimensions: technology, business, and human dimensions. Project war rooms are created by the teams, and pictures, diagrams, sketches, video clips, photos, and other artifacts are used to create environments that are immersive and that enable the teams to gain insights on their users’ needs. The iterative model enables the teams to build prototypes that are presented to the end users and other stakeholders for evaluation and feedback. The team uses the capabilities of the technology and the artifacts to express ideas, and the deliverable is a prototype that can be used for communication to render lucidity and opacity during the creation of the solution. 8.7.3 Design Thinking Strategy Formalization

The design thinking team of the organization began to apply the same in strategic development and conveyance. Design thinking installed a method for creating ‘tangible strategies’ by introducing the use of prototypes in the strategic process. The organization developed new products and solutions and go-to-market and channel strategies to propel initiatives and redesigned processes and policies using design thinking. The design thinking team of the organization incorporated needsdriven innovation involving the customers’ requirement in the offered solutions. The use of prototypes of the DST of the organization allows the stakeholders to experience the strategy in a manner similar to that of employees, analysts, and customers of the organization. The augmentation of the design thinking tools lessened the time to execute a given strategy by accelerating the quality of the strategy and minimizing misrepresentations. With the incorporation of design thinking, the stakeholders could formalize concepts with the customers and analysts. Quality prototypes incorporating design thinking increase and impact discussions regarding partnerships and strategies inclusive of revenue models, manufacturing, and portfolio alignment.

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8.8 PEST Analysis 8.8.1 What Is PEST Analysis?

PEST analysis is an analytical framework that is used to evaluate the macro determinants that can impact the business along the political, economic, social, and technological dimensions. Figure 8.2 shows the four factors of PEST. 8.8.1.1 Political Factors

The political factors refer to the government policies, regulations, and actions that may affect the economy as well as the segment or the sector of a specific business. They include the following:

• • • • •

Taxations and their categories Trade agreements, regulations, and tariff rules Labor laws Laws on Environment and Energy Elections and prevalence of uncertainties due to diverse opinions on economic regulations from political parties

8.8.1.2 Economic Factors

Economic factors such as economic growth rates, variable interest and exchange rates, inflation, and other indicators as reported by the central banks and, government agencies are external to the organization and are considered to be of extreme importance. 8.8.1.3 Social Factors

These correspond to the cultural patterns and demographic trends of the society. Social values and societal norms and conditions are primary attributes to determining a society’s consumerist behavior. The social factors are as follows:

FIGURE 8.2 

PEST Analysis

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• • • • •

Cultural diversity and inclusion Health awareness and longevity Population growth and death rates National Age Index Career aspects and learning trends

8.8.1.4 Technological Factors

Technological factors have linkages to innovation outside as well as within the nation state/organization for the rise of the overall economy. These include the following:

• R&D activities • Automation of processes and systems • Technology advancements and initiatives

PEST ANALYSIS: A CASE STUDY OF STARBUCKS Starbucks is said to be facing the challenge of the US consumers adhering to social and environmental norms which means that the products they buy need to conform to the social and environmental norms as well at the manufacturing stage.

Political The key political issue faced by Starbucks is that procurement of raw materials has drawn the attention of western bureaucrats and diplomats, and in the countries from where it sources its raw materials and, hence, the organization is moving toward adopting sourcing strategies that align with the ‘fair trade’ processes and practices and that have gained consensus among global corporations and the developed and developing economies. In addition, it needs to adhere to the legal policies and implications of the country from where the material is sourced and the regulatory guidelines of its home country.

Economic The primary external challenge that Starbucks is facing is the ongoing global economic recession due to the onslaught of the pandemic, which has dented the profitability of Starbucks significantly. The lower-priced alternatives as sought by many consumers at this point of time are an opportunity for Starbucks moderated by low labor costs.

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Sociocultural Pricing has to be competitive as Starbucks considers including consumers from every segment of the society. Also, within a few years, Starbucks would have to look for tapping the young customer base as part of its strategy.

Technological The organization has introduced Wi-Fi facilities at its food joints, so that consumers can have a resto-office environment, enhancing the consumer experience.

Legal Starbucks has to ensure that it does not go against the legal rules from sourcing countries as well as the home market.

Environmental Starbucks has to gain several environmental advocacy groups’ trust to continue operating their business smoothly.

Conclusion The above discussion proves that Starbucks is operating in a comparatively steady external environment and with the onslaught of the pandemic, the task before Starbucks is to lower costs for consumers so that it can retain and extend its consumer base.

8.9 BCG Matrix

Boston Consulting Group (BCG) matrix is a 2 by 2 matrix developed as a tool that performs corporate portfolio analysis and enables any organization to examine its multiple businesses on the basis of their rate of growth and relative market share. The tool performs a two-dimensional analysis of the management of strategic business units or in other words the ‘SBU’s’. Based on the environmental evaluation the business potential of the organization is inferred. The two dependent variables as denoted in the below matrix can be computed using the below equations: Relative market share = SBU’s sales in the current year / Leading competitor’s sales in the current year. Market growth rate = Industry sales in the current year – Industry sales in the previous year.

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The analysis requires that the above metrics be computed which will assess the comparative advantage indicated by market dominance. BCG matrix can be plotted, taking into consideration the relative market share on the horizontal axis and the rate of market growth across the vertical axis. The mid-point of relative market share is set at 1.0. If all the business units are from the same industry, the average growth rate of the industry is used. If the units belong to different industries, then the mid-point that is 1.0 is set such that it shares at the growth rate of the economy. Resources are assigned to various business units, and the four different cells of the matrix are named as stars, cash cows, question marks, and dogs. Each of these cells represents a specific category of the business (Figure 8.3). Stars: Stars represent business units belonging to the fast-growing market, with huge investments and high net cash flows. Cash cows: Cash cows indicate mature, slowly growing, and stable strategic business units that are the core of the organization. These SBUs are the organization’s core business centers and key sources of cash. Question marks: Question marks represent business units requiring huge cash flow and fall under emerging markets. They undertake the assessment of a venture’s viability. They cater to new goods and services for which expansion strategy can be adopted. Most businesses start as question marks.

FIGURE 8.3 

BCG Matrix

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Dogs: Dogs represent businesses that have debilitated market shares where the business units face a penalty in terms of high cost. Downsizing techniques are adopted for firms to gain their market share. The business units have high costs of operation, dis-satisfactory quality, ineffective marketing, and so on. Usually, they should be liquidated if operating costs of such units are high. 8.9.1 Limitations of BCG Matrix

The BCG matrix allocates resources among different business units to perform a comparative analysis. However, it rates business units across low and high dimensions only and there is the absence of a moderate dimension. High market share can lead to higher costs. Growth rate and relative market share are not the only indicators of growth and profitability. In certain instances, dogs may support other businesses to gain competitive advantage and have the potential to earn more than the cash cows. This approach is considered to be less complex. 8.10 SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths (S) and weaknesses (W) are considered to be internal factors, whereas opportunities (O) and threats (T) are external factors over which control cannot be exercised (Figure 8.4).

FIGURE 8.4 

SWOT Framework

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SWOT analysis evaluates the overall strategic position of a business and its environment. The tool identifies strategies that will reorient an organization’s resources and potentiality with respect to the external and internal environments in which the firm operates. The four factors are explained as follows. Strengths: Strengths are the capabilities that enable an organization to accomplish its mission. The strengths can be realizable or intangible. For example, the traits and qualities possessed by the employees of the organization and the unique features such as advanced process capacities and capabilities, modest turnovers and revenues, broad products and services line, customer satisfaction and loyalty, strong brand presence, no debt, and others give the organization a consistency and continuity in growth. Weaknesses: Weaknesses are the attributes that prohibit an organization from fulfilling the mission. The attributes may be depreciating machinery, insufficient research and development infrastructure, range of product/products is narrow, poor decision-making, substantive debates, improper utilization of raw materials, and so on. Opportunities: Opportunities are presented by the external environment to gain competitive advantage by making use of them. The factors are market condition and competition, and avenues of growth in the industry/government and technology segment. For example, advancement in telecommunication accompanied by deregulation in that sector can be considered as an opportunity for new businesses in the TELECOM space. Threats: Threats arise when conditions in the external environment threaten the dependability and profitability of a firm’s business. Examples of threats are employee attrition and dissatisfaction, technology advancements, increasing number of market players and competition, price wars, and others. 8.10.1 Advantages of SWOT Analysis

• Can be the source of information and help formulate objectives for strategic • • • • •

planning Can strengthen organizations and reverse the weaknesses Can ensure opportunity maximization Core competency identification Futuristic endeavor promotion In a competitive market, provide relevant information to synchronize the firm’s resources and potentialities

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8.10.2 Limitations of SWOT Analysis

There are certain limitations of SWOT analysis and they are as follows:

• Issues with prioritization • Clarity not rendered adequately considering that a factor poses both a strength and a threat as the SWOT tool does not have an underlying mathematical/statistical base to consider the factor based on computation of its weight. • SWOT Analysis is majorly subjective and restricts objective inputs. • Suffers from multi-opinion as input and constraints in addressing them. Internal limitations of SWOT analysis include:

• • • •

Poor research and development infrastructure N standardized quality control measures resulting in faulty products Poor relations between the industries Scarce availability of skilled human resources

8.11 Michael Porter’s Five Forces Analysis 8.11.1 Michael Porter’s Five Forces Analysis

Michael Porter, a researcher from Harvard Business School of Management, has designed and developed several frameworks on the organization’s strategy. Of these the model that gained maximum popularity and that which determines industry structure is the five competitive forces model (Figure 8.5). According to Porter, an industry faces competition across different dimensions, which are as follows:

• • • • •

Threat from potential entrants in the industry space Rivalry between the competitors from the industry Threat from alternate products/services that are developed or manufactured Bargaining power of suppliers Bargaining power of buyers

The prospective of these forces varies with the industry and their profitability as they define the price range, the costs that the organizations can bear, and the investments required to contend for, in this segment and sector. The strategic decisions taken up by the management, or the managers who are entrusted with the said task, use the five forces framework. Also known as Porter’s five forces model, the said framework can be elaborated as follows. Risk of entry of potential competitors: Potential competitors denote the future competition in an industry. The new players or the entrants increase the

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FIGURE 8.5  Porter’s

Five Forces Model

industry’s potential and work for contention in the market share, and their entry influences the present-day costs. The danger of debut by prospective competitors is primarily a function of the magnitude of barriers, to entry. The various barriers to entry are as follows: • Economies of scale • Loyalty for the brand • Government regulations • Customer switching costs • Absolute cost advantage • Ease in distribution • Strong capital base

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Rivalry among current competitors: Rivalry refers to the competition for the share in the market among organizations providing the same set of services and products. Extreme rivalry leads to threats in profitability. The impact of rivalry among the competitors is a function of the factors given below: • Extent of exit barriers • Fixed cost amount • Competitive structure of the industry • Global customers and their presence • Magnitude and presence/absence of switching costs • Rate of growth of the industry • Volume of demand The bargaining power of buyers: Buyers generally consume the product, and the bargaining power of customers refers to the potency of buyers to lower the prices charged by the companies belonging to the same segment or to demand for improved quality and service of the product. Strong buyers as individuals/ industry can earn profits by reducing the prices and increasing the products’ costs when they buy in bulk. They have deep insights into the product, and the market, lay huge emphasis on the quality of the product, and are considered a credible threat of backward integration. The bargaining power of suppliers: Suppliers refer to the organizations, groups, and individuals who provide raw materials, resources, and services to the industry. The bargaining power of the suppliers refers to the capability of the suppliers to elevate the prices of the inputs, or in other words, the organizations incur costs in multiple ways. A supplier’s products have few alternatives, and they are unique and entail high switching costs. Their product indirectly addresses the quality of the buyer’s product and poses a threat on the forward integration. Threat of substitute products: Substitute products/alternatives refer to the products having the potential or the power of satisfying customers’ needs. Substitutes can put a cap on the prices that companies can bill for their products in an industry. An increase in the count of relevant alternatives, the lesser is the possibility for a firm to increase its product prices and have a high-profit margin based on other conditions. Porter’s five forces are a powerful determinant of the profitability of any firm of an industry as they affect the prices, the costs, and the capital investment necessary for existence and competition in the industry. They help in developing strategies, as the above model is used by the management to ascertain the industry’s competitive structure. A sixth significant force not included in Porter’s model is the complementariness that refers to the dependence that gets built among the organizations,

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those whose products work in combination. The last force is the role of innovation, which is not there in the model. 8.11.2 Porter’s Five Forces Analysis and Its Benefits

The five forces analysis enables organizations to realize the cause affecting the gain in a specific industry and can provide information on the following:

• Entry into a specific industry is viable or not? • Option to increase capacity in that space • A strategy devised for creating a competitive edge 8.11.3 Actions to Take/Do’s

• The model should be used when there is a minimum of three competitors. • The model should be used for analysis where there is a governmental impact on that industry.

• The industry evolution and the life cycle stage. • Changing dynamics of the industry. 8.11.4 Action Not to Take/Dont’s

• The model should be used for an industry and not an individual. 8.11.5 An Analysis of Porter’s Five Forces Model with Respect to Indian Market Scenarios

Of the Porter’s five forces, the first force describes the threat of new competition and emerging economies of the world like the Indian subcontinent generally exude reluctance to give opportunities to new players or their policies are such that there is too much intervention leading to hindrances. In recent times, with Qatar Airways announcing its plans to set up an airline in India and the government’s new foreign direct investment (FDI) norms, that is, 100 percent FDI in scheduled airlines, it is said that the Government of India will have very little visibility and that which will have consequences on the nation’s security. Also, as per the Federation of Indian Airlines, the decision to allow foreign carriers owning an airline in the country will create a very inequitable competitive environment for the national carriers. Porter’s second force is the bargaining power of suppliers. In the Indian context the Indian companies oscillate between two extremes, either there are no suppliers for the potential products or there is very less reliability, of suppliers overcrowding the Indian market. The next force is the bargaining power of buyers. Taking the country’s growing mobile phone market, for instance, customers pay for a 4G service substantially

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more than what the operator has to pay either because they are ignorant or the service is so very necessary for them. The fourth force is the availability of substitute goods. The story of Munch and Dairy Milk showcases that the Indian consumer’s choice is influenced more by the cost than by nutritional value or quality. The fifth force is competition within industries. In India, two or three top players can be seen even when a sector seems to be flooded with competitors just because of the flexible tax regime. Porter’s five forces model uses a performance measurement tool called a balanced scorecard that evaluates the financial health of an industry and the nonfinancial attributes such as number of clients, an organization’s internal processes, and the learning and growth needs. 8.12 Balanced Scorecard

The balanced scorecard concept was invented by Robert S. Kaplan and David P. Norton to monitor financial and non-financial performance of an organization. The balanced scorecard establishes correlation between financial perspective (outlook of shareholders), the customer’s perspective, the internal business situation (areas in which the organization can excel), and innovation and learning perspective (i.e., Whether continuous improvements can happen) within the organization. As a result, the strategic vision translates into necessary and concrete actions. With strategy at the core, the balanced scorecard can be used to align metrics for actions and rewards, for ongoing initiatives and a new initiative and work on them. Balance scorecard can be configured as per the needs of the industry. Tesco’s ‘Steering Wheel’ includes five perspectives, the level of commitment shown by employees, in addition to the financial, client, operations, and people aspects. The scorecard can be used by non-governmental organizations and public sector undertakings, and the top management of the organization should be convinced of the benefits to be received, post the scorecard implementation. The balanced scorecard is shown in Figure 8.6. 8.12.1 Balanced Scorecard Benefits

The balanced scorecard provides a means to elucidate and convey the strategy and integrates with the dashboard, to convey the result. Relevant metrics can be used to show how the non-fiscal aspects of performance, such as customer satisfaction, enhance the performance of the organization. The tool is a motivation for employees to drive long-term financial goals. To implement a balanced scorecard, the following necessary conditions have to be met:

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FIGURE 8.6  The

Balanced Scorecard

Source: Kaplan and Norton (1996).

• There should be sufficient buy-in from top management. • Management should be committed to the organizational change effort required for deployment.

• The extent to which current management information systems (MIS) of the • • • •

organization should be able to accept and assist in the implementation of the Balanced Scorecard. The costs and benefits of making these changes. Existing processes and metrics that can be incorporated into the scorecard. Necessary modifications to be done to processes and measures. Preparedness for generating reports using the balanced scorecard.

8.12.2 Actions to Take/Do’s

• Involvement of senior management. • Manager involvement or engagement in reporting using the scorecard process.

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• Setting ambitious long-term goals using the Balanced Score Card. • Utilization of the scorecard to enforce strategy as a consistent and continual process.

• Sequencing objectives with measures and initiatives, for example, increase • •

• • •

•

sales by p percent, introduce m number of new products in a year, and subsequently launch new product development and market strategies. Use standard metrics to correlate strategic success to long-term performances. Find and make use of the best key performance indicators for each perspective. Creation of a mix of lead and lag, for example, customer satisfaction can be a lead for sales; the count and quality of customers’ calls handled are metrics to evaluate efficient customer management. Let the scorecard be a key component for all business and functional units. Each business or functional unit’s scorecard should be aligned to corporate goals and should steer action plans. The scorecard should be linked to compensation and should not be used to control and command the target-setting process. • The hardship associated with the implementation of the scorecard should not deter the management team from using it. The scorecard should not be populated with too many metrics. • Attempting to develop the business or functional unit’s scorecards can make the performance evaluation highly complex.

CASE STUDY Balanced Scorecard Implementation and an Alternative Costing Model at the Royal Botanic Garden Edinburgh RBG Edinburgh has a research and education wing that is instrumental in making a vital scientific contribution by engaging the public and collating their solutions. The noteworthy costing outputs are advancements in the fields of science, horticulture, visitor services, and education. It is observed that science and horticulture staff are making epochal contributions to education and visitor services. Aligning sub-unit objectives to the corporate strategy would enhance the performance and productivity of employees of RBGE. Below adapted from the original case of RBGE using Balanced Scorecard is the comparison between traditional vis-a-vis objective costing model. The comparison between traditional and objective costing models, adapted from the original case of RBGE, using balanced scorecard is shown in Figure 8.6.​ If carefully observed, it is seen that while the traditional costing model encompassed science, horticulture, visitor services, and education as the chief costing outputs, the corporate services were replaced by governance

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FIGURE 8.7  RBGE

Case Using Balanced Scorecard

and resource management using the objective costing model of the Balanced Scorecard after subsequent revisions. This revision of corporate governance and resource management strategy entailed alliance between the RBGE’s ‘impact’ and ‘activity’ perspectives. The objective costing model was linked to an existing performance management system that enhanced the monitoring of performance against strategic objectives in areas of managing resources and rating the leadership outcomes. Here, the effort of staff was identified to be getting expended regardless of his/her position or hierarchy or functional unit in the organizational structures (e.g., Science staff made significant contributions to education and visitor services and were highly productive). Hence it can be well inferred that aligning each sub-unit’s strategy to the organizational strategy with regard to resource management entails productivity and performance and accounts for the fact that organizational restructuring is not required.

Strategic Management and Its Benefits The benefits of strategic management include determination, setting precedence, and investigation of possibilities. For instance, newer products, new markets, and diversification of business are possible if and only if the organizations engage in strategic planning. Strategic management enables the organizations to conduct a cost–benefit analysis to ascertain the profitability of the organization in terms of assessing the strategic alignment of the business with its goals and priorities.

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Financial Benefits Organizations that engage in strategic management are more economically sound, as firms’ involvement in future planning and having a re-look at their priorities is a dire necessity in the swiftly evolving business landscape in the 21st century. Estimation of more than one lakh businesses failing in the US every year due to lack of strategic planning and management has been recorded in recent years. High-performing firms make data-driven decisions based on both shortand long-term after-effects and orient their strategies accordingly, while those who do not do so fail miserably.

Non-financial Benefits Organizations that engage in strategic management have a precise understanding of the external factors such as threats to their organization and their market competitor’s strengths and weaknesses and focus on strategically increasing the employee productivity and their performance across every functional unit be it design, production, marketing, and sales. They adapt to changes that the external environment or market brings along. The major benefit is that problem-solving and pre-emption capabilities of the organizations are amplified through strategic management. Strategic management enables rationalization and actualization of change and helps in incorporating discipline in the organization’s internal and external processes.

Summary

In recent years, organizations have realized the value and significance of strategic management. However, planning and implementation of strategic management activities differ across organizations. It ensures the long-term viability and success in the marketplace. Benefits can be tangible and intangible. A strategic management process helps an organization and its leadership to chart out a road map for its future sustenance and orients the organization toward growth. Using effective strategic management, organizations can plan, monitor, and test their activities, resulting in enhanced operational efficiency, market valuation and share, as well as productivity and profitability.

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Exercise Objective Questions

1. Which of the following is not a feature of strategic management that is contrary to other types of management? • Interdisciplinarity • External focus • Internal focus • It concerns about the present direction of the organization. 2. Identify the issue considered in developing corporate strategies. • The current business(es) that the organization is in • The direction in which the organization is moving • The resources utilized for the implementation of the strategies • The prospective road map of the current businesses 3. ________________ is the foundation of blue ocean strategy. • Innovation • Value innovation • Value creation • Value cost trade-off 4. Assessment of strategy at the _____________ level incorporates qualitative and quantitative performance metrics for each functional area. • Organizational • Functional • Production • Operational 5. Political factor has a sizeable impact on: • Formulation and implementa• Implementation and evaluation tion of strategy of the strategy • Strategy formulation and • Formulation, implementation, assessment and assessment of strategy 6. External evaluation is conducted in which phase of strategic management? • Strategy formulation stage • Strategy evaluation stage • Strategy implementation and • Strategy formulation and evaluevaluation stage ation stage 7. Organizing encompasses employees putting efforts toward the achievement of the same goal. It is essential during: • Assessment of environmental • Strategy implementation • Strategy formulation • Strategy evaluation 8. The balanced scorecard concept was invented by: • Robert S. Kaplan and David P. • Michael Porter Norton • Peter Drucker • Boston Consulting Group 9. In BCG matrix, _______ have high market growth rate and high relative market share. • Stars • Cash cows • Question marks • Dogs

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10. In SWOT analysis, __________ originate in the external environment and are helpful in achieving the organizational objectives. • Threats • Opportunities • Strengths • Weaknesses

CASE STUDY Google Suspended TechNxt’s AdWords Account: Strategy Formulation and Implementation Google suspended TechNxt Technologies’ AdWords account to promote its own Google Helpouts product. The service added a revenue stream for the company in the form of transaction fees from providers. Google enlightened that the accounts were suspended because of a violation of Google’s usersafety policy, without issuing any notice or any prior information, according to the records. Google later made the suspension permanent. Later, a few governments of other countries initiated an inquiry after it was known that it was done to promote its own services. The company was fined for not providing the required information and had additional allegations of abuse of controlling the market when searched online. Impact: Before the closing of TechNxt Technologies’ AdWords account with Google, the company netted a huge profit which at a later stage declined drastically. Futuristic Steps by TechNxt Technologies It has opted for offering 24 × 7 support for its newly launched software zePro and shifting a key resource to the USA with offshore support at Gurgaon. Focus on business development through channel partner programs and technical collaboration, and implementation of non-conventional payment methods would be part of the future business strategy of the company.

SWOT Analysis Strength: 24×7 fabulous customer support service, robust infrastructure, strong development and testing team, and their own ERP software. Weakness: Business development capabilities, non-conventional payment processing solutions, and limited funds. Opportunity: Untapped potential in Southeast Asian market and funding options through venture capitalists and investors. Threat: Robust competitors and new entrants.

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Questions 1. Is it a right decision taken by the company to seek capital investment from some venture capitalist to grow its market in Southeast Asia? 2. Which all business development and marketing strategies should be adopted by TechNxt to grow into a big business? 3. In your opinion, what are the available avenues for TechNxt to grow its customer base and business development?

Critical Thinking Questions

1. Define a strategy. Strategic management is a process. Justify the statement. 2. Corporate planning is not synonymous with long-range planning. Why? Discuss. 3. Explain the types of factors that shape a company’s strategy. 4. Discuss good and bad strategies with the help of an example. 5. Discuss the process of devising a strategy for competitive advantage. Give an example. 6. Investigate to understand whether the BCG matrix has been used in recent times as a planning tool. Chapter at a Glance Introduction

Strategic management is the process of planning, executing, observing, analyzing, and assessing all requirements of an organization which are needed to meet its goals and objectives. With continuous changes in business environment, the organizations are required to consistently evaluate their strategies to sustain and grow. Meaning and Definitions of Strategy

Strategy can be defined as ‘a general direction set for the company and its constituents to accomplish a sought-after state in the future by integrating organizational activities and employing and assigning the organizational resources to meet the objectives, taking into account all relevant stakeholders’. Features of Strategy

Strategy is significant, and ideally, their incorporation helps in long-term developments, innovation of new products or services, implementation of new production methodologies, or help build road maps to facilitate the growth of emerging

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markets, remains aligned to the customers, competitors, and employee expectations. A strategy formulated by the top management within the organization is aligned to the overall mission, vision, and direction of an organization. A strategy also features growth and sustainability and denotes the road map for ‘where we are’ and ‘where we want to be.’ Process of Strategic Management

• Strategic Intent

Helps management to focus on the priorities and make use of the organization’s resources and competencies to accomplish the unachievable in the competitive business scenario. Focus on organizational win, inspiring people by letting them know the value of the target, encouraging individual and team participation, and methodical apportioning of resources for enhanced productivity. • Mission statement: Mission statement is the statement which describes how strategies are formulated and the present capabilities of the organization and the stakeholders that the organization serves and the service that the organization renders. • Vision: It contributes to decision-making and business planning and incorporates a shared understanding of the organization’s direction. • Goals and objectives: A goal is a state in the future or objective that has to be accomplished by the organization and it makes the mission more outstanding and factual. • Environmental Survey This is key to strategic planning as an organization has to ensure the type of environment in which it has to work. The second aspect of the strategic planning process is the environmental analysis. The environmental macro and micro analyses can be an intrinsic part of strategy planning. • Macro determinants: The demographic, sociocultural, economic, political, and legal entities fall under the macro environmental factors. • Micro determinants: This is the procedure of assessing an organization’s abilities and resources, strengths and weaknesses, core competencies, and competitive advantages. Strategy Formulation

From the environmental analysis, an organization should align opportunities to its strengths while addressing its weaknesses and external threats and create a competitive edge over its rivals.

• Strategy Implementation

The selected strategy is enforced by means of programs and budgets. Implementation helps in motivating the staff to achieve the desired objectives.

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• Evaluation and Control • • • • •

Evaluation and control consist of the following steps: Parameter definition Enlisting the target values for the parameters Measuring the performances Comparing measured results to the pre-established standards Incorporating the desired changes

Organizational Goals and Their Importance

Organizational goals are necessary to modulate and control the functioning of individuals and groups internal and external to an organization. The importance of these goals has been described under the following heads.

• Expending efforts by individuals and organizations for specific activities to • • • •

achieve an objective Ensuring legitimacy of action by members Serves as a standard of performance Affect the structure of the organization Identifying nature and character of organization

Nature of Goals

• Official goals • Operative goals • Operational goals Benefits of Management by Objectives

MBO helps employees be aware of their on-the-job role and responsibility. The KRAs that are formulated are employee-specific, which is based on their area of interest, qualification, and domain of specialization. Limitations of MBO

MBO often disregards the organization’s current attributes and work environment. The managers exert continual pressure on the team members to achieve their goals and ignore the usage of MBO for participation, willingness to impart, and maturation of management. Max E. Douglas model for writing effective objectives: Max E. Douglas, of Indiana State University, crafted a model that supports immensely in writing effective objectives. It comprises the following: (a) the word ‘to’ that is succeeded by (b) a verb that signifies action, (c) a statement denoting the specific outcome

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that is achievable and measurable, and (d) a target date. A few examples of strategic objectives are shown as follows. Objective Writing Model

(a) To + (b) verb that initiates action + (c) Outcomes that are specific and measurable + (d) Target date Gurukul: (a) To + (b) establish + (c) offices in 22 countries (d) by 2022 What is PEST analysis: PEST analysis is a strategic framework used to evaluate the external environment for a business along political, economic, social, and technological factors. BCG Matrix

Boston Consulting Group (BCG) matrix is a 2 by 2 matrix developed as a tool that performs corporate portfolio analysis and enables any organization to examine its multiple businesses on the basis of their rate of growth and relative market share. The tool performs a two-dimensional analysis of the management of strategic business units or in other words the ‘SBU’s. Based on the environmental evaluation the business potential of the organization is inferred, using the below equations: Relative market share = SBU’s sales in the current year / Leading competitor’s sales in the current year. Market growth rate = Industry sales in the current year – Industry sales in the previous year. The analysis requires that the above metrics be computed which will assess the comparative advantage indicated by market dominance. BCG matrix can be plotted, taking into consideration the relative market share on the horizontal axis and rate of market growth across the vertical axis. SWOT analysis evaluates the overall strategic position of a business and its environment. The tool identifies strategies that will reorient organization’s resources and potentiality with respect to the external and internal environments in which the firm operates. The four factors are explained as follows. Strengths: Strengths are the capabilities that enable an organization to accomplish its mission. The strengths can be realizable or intangible. For example, the traits and qualities possessed by the employees of the organization and the unique features such as advanced process capacities and capabilities, modest

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turnovers and revenues, broad products and services line, customer satisfaction and loyalty, strong brand presence, no debt, and others give the organization a consistency and continuity in growth. Weaknesses: Weaknesses are the attributes that prohibit an organization from fulfilling the mission. The attributes may be depreciating machinery, insufficient research and development infrastructure, range of product/products is narrow, poor decision-making, substantive debates, improper utilization of raw materials, and so on. Opportunities: Opportunities are presented by the external environment to gain competitive advantage by making use of them. The factors are market condition and competition, and avenues of growth in the industry/government and technology segment. For example, advancement in telecommunication accompanied by deregulation in that sector can be considered as an opportunity for new businesses in the TELECOM space. Threats: Threats arise when conditions in the external environment threaten the dependability and profitability of a firm’s business. Examples of threats are employee attrition and dissatisfaction, technology advancements, increasing number of market players and competition, price wars, and others. Porter’s Five Forces Model Michael Porter’s Five Forces Analysis

According to Porter, an industry faces competition across different dimensions, which are as follows:

• • • • •

Threat from potential entrants in the industry space Rivalry between the competitors of the industry Threat from alternate products/services that are developed or manufactured Bargaining power of suppliers Bargaining power of buyers

The prospective of these forces varies with the industry and their profitability as they define the price range, the costs that the organizations can bear, and the investments required to contend for, in this segment and sector. The strategic decisions taken up by the management, or the managers who are entrusted with the said task,use the five forces framework. Also known as Porter’s five forces model, the said framework can be elaborated as follows. Risk of entry of potential competitors: Potential competitors denote the future competition in an industry. The new players or the entrants increase the industry’s potential and work for contention in the market share, and their entry

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influences the present-day costs. The danger of debut by prospective competitors is primarily a function of the magnitude of barriers, to entry. The various barriers to entry are as follows: • Economies of scale • Loyalty for the brand • Government regulations • Customer switching costs • Absolute cost advantage • Ease in distribution • Strong capital base Rivalry among current competitors: Rivalry refers to the competition for the share in the market among organizations providing the same set of services and products. Extreme rivalry leads to threats in profitability. The impact of rivalry among the competitors is a function of the factors given below: • Extent of exit barriers • Fixed cost amount • Competitive structure of the industry • Global customers and their presence • Magnitude and presence/absence of switching costs • Rate of growth of the Industry • Volume of demand The bargaining power of buyers: Buyers generally consume the product, and the bargaining power of customers refers to the potency of buyers to lower the prices charged by the companies belonging to the same segment or to demand for improved quality and service of the product. Strong buyers as individuals/ industry can earn profits by reducing the prices and increasing the products’ costs when they buy in bulk. They have deep insights into the product, and the market, lay huge emphasis on the quality of the product, and are considered a credible threat of backward integration. The bargaining power of suppliers: Suppliers refer to the organizations, groups, and individuals who provide raw materials, resources, and services to the industry. The bargaining power of the suppliers refers to the capability of the suppliers to elevate the prices of the inputs, or in other words, the organizations incur costs in multiple ways. A supplier’s products have few alternatives, and they are unique and entail high switching costs. Their product indirectly addresses the quality of the buyer’s product and poses a threat on the forward integration. Threat of substitute products: Substitute products/alternatives refer to the products having the potential or the power of satisfying customers’ needs. Substitutes can put a cap on the prices that companies can bill for their products

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in an industry. An increase in the count of relevant alternatives, the lesser is the possibility for a firm to increase its product prices and have a high profit margin based on other conditions. Balanced Scorecard

The balanced scorecard concept was invented by Robert S. Kaplan and David P. Norton to monitor financial and non-financial performance of an organization. The balanced scorecard establishes correlation between financial perspective (outlook of shareholders), the customer’s perspective, the internal business situation (areas in which the organization can excel), and innovation and learning perspective (i.e., whether continuous improvements can happen) within the organization.

9 ORGANIZATIONAL BEHAVIOR

An Opening Vignette Case Study on Organizational Behavior Selena was running a manufacturing company which made television lamps and bulbs. The company was headquartered in Noida and was a supplier to local TV manufacturers. Selena wanted to expand across China, Japan, and Korea. To do this, she had to enthuse her employees to work aggressively across all sectors, including marketing, sales, production, delivery, and logistics. To date, her approach was custodial, which means that she used to pay her employees well and make employees feel more secured. She also used to reward them in the form of bonuses and additional perks, health insurance benefits, and accommodation allowances. Employees were happy and worked hard to improve organizational productivity. However, with aggressive growth plans to seize the deals from international TV manufacturers, she set out to follow a mix of autocratic and supportive models, a hybrid of authoritative and supportive for new ideas, innovations, and opinions from the employees. Selena started working rigorously from the day she set her goals. She told the marketing head to come up with new strategies to advertise and market the product and instructed the quality head to attain a defect-free scenario for the lamps and bulbs, making them more durable and, at the same time, consuming less power when in an active state. She also requested the production head to track down on employees and eliminate all idle time, thereby eliminating delays and ramping up production by 5 percent. She gave the sales head the freedom to choose his sales strategy as she knew that he would come up with dazzling sales figures. In a few months, because of a carefully laid down production and marketing plan, Selena observed that she had received an order of 1 million TV DOI:  10.4324/9781032634258-9

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lamps from the biggest player in Asia. She was too excited and announced that she would soon float an initial public offering wherein every company person would be allotted a percentage of shareholding based on their performance. The employees became self-motivated and started their own in-house mentoring and training programs with the managers in the lead role, working after office hours to arrive at the designated milestones and carrying out effective supplier engagements for the raw material arrival. All in all, it was a wave of motivation in the internal environment of the company.

9.1 Introduction

The study of organizational behavior is both interesting and challenging. It relates to individuals or a group of people working together in an organization to achieve a common goal. With the situational factors interacting with each other, the study tends to become more complex. Organizational behavior is a branch of study which has a special focus on behavior within an organization pertaining to individuals, groups, and structure. This knowledge is used to make organizations work more effectively. Organizational behavior aims at increasing group/individual productivity, reducing attrition and absenteeism, and increasing job satisfaction. Organizational behavior draws input from behavioral science, psychology, sociology, and cultural anthropology. The areas on which organizational behavior focuses are individuals who will often be working within groups, the interrelationships, and how these individuals within the organization function with each other to get the job done. Organizational behavior encompasses mostly human behavioral traits such as personality, attitudes, motivation, interpersonal behavior, team and group dynamics, leadership traits, organizational structure and design, decision-making, conflict resolution, and stress management. 9.2 Definitions

Organizational behavior is a field of study that investigates the impact that individuals, groups and structure have on behavior within organization for the purpose of applying such knowledge toward improving an organization’s effectiveness. —Stephen P. Robbins Organizational behavior is the study and application of knowledge about how people—as individuals and groups—act within organization. It strives to identify ways in which people can act more effectively. —Keith Davis

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Organizational behavior can be defined as the understanding; prediction and management of the human behavior affecting the performance of the organizations. —Luthans The study of application of knowledge about human behavior related to other elements of an organization such as structure, technology and social systems. —L. M. Prasad A field that seeks knowledge of behavior in organizational settings by systematically studying individual, group and organizational processes. —Baron and Greenberg Source: Robbins S.P. (2001), Davis K. (1977), Luthans F. (2011), Prasad L.M. (2020), Baron et al. (1990) 9.3 Levels of Analysis

Organizational behavior involves the study of organizations’ behavior across levels (Figure 9.1) as follows: Micro-organizational behavior refers to an individual’s behavior or group behavior. Macro-behavioral theory studies organizations as a whole, their adaptability, and the policies, structures, and possibilities that guide them.

FIGURE 9.1  Levels

of Analysis

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Organizational Behavior

Meso-scale organizational structures involve control, culture and people network, and the analysis of people’s interaction within the organization. Organizational behavior, whose focus area is majorly people’s behavior and interaction among them, can play a significant role in organizational development, enhancing organizational performance and enhancing the performance of the individual or group, as well as their level of contentment and dedication. 9.4 Organizational Behavior and Its Contributing Disciplines

Organizational behavior is an applied field of behavioral study and has evolved from the following fields discussed further (Figure 9.2). 9.4.1 Psychology

It is the study of the behavior and mental processes of a human being that are affected by physical, mental, and environmental conditions, which can impede the work performance of an individual because of fatigue, boredom, stress, and unfavorable working conditions. Other factors included within modern psychology with respect to behavioral traits in professional environments include learning, attitude, insight, personality, sentiments, guidance, leadership abilities, motivation, job satisfaction, decision-making, performance appraisals, recruitment, and so on. 9.4.2 Political Science

Political science is the study of behavioral sciences in political environments and focuses on disputes within the group and intra-organizational politics and authority issues.

FIGURE 9.2  Contributing

Disciplines of Organizational Behavior

Organizational Behavior 299

9.4.3 Sociology

This discipline contributes significantly through the study of group behavior in complex and recognized organizations. 9.4.4 Social Psychology

Social psychology integrates sociology and psychology and discusses the barriers and acceptance across groups or individuals within and across organizations. 9.4.5 Anthropology

Anthropology focuses on comparative attitudes, values, and cross-cultural analysis, which have a lasting impact on organizational culture and surroundings. 9.5 Organizational Behavior: Span and Nature

An organization is nothing but a group of people working together for some common purpose within a predefined structure. A group is formed when individuals come together to work for a purpose. Thus, we can conclude that organizational behavior deals not only with the behavior of individuals but also with interpersonal and organizational behavior. As mentioned earlier, organizational behavior is the study of the behavioral aspects of individuals within organizations. Organizational behavior comprises the study of intra-personal behavior, interpersonal behavior, and organizations. Intra-personal behavior comprises the study of aspects like personality, attitude, motivation, and perception. Interpersonal behavior covers group dynamics, team management, conflict management, and so on. In addition, the study of an organization covers aspects like its structure and formation, interaction sequences between the various organizational entities and the organizational goals. The study of organizational behavior is summarized as follows (Figure 9.3):

• Organizational behavior is not based on only theoretical frameworks and guidelines and hence cannot be considered only as a discipline.

• It is an interdisciplinary approach since it has evolved from various disciplines and knowledge from them has been integrated into a form well suited for the study of human behavior in the professional environment. • This field of study comes under the applied sciences, where human behavioral sciences are researched to solve problems at the organizational level. • According to research findings and analyses, organizational behavior takes a prescribed form, and better methods for implementing it can be used to increase organizational productivity.

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FIGURE 9.3  Major

Components in Study of Organizational Behavior

• Organizational behavior deals with inner thoughts and feelings, of human resources and states such that, the common human approach is creative, independent, and productive, and given favorable work conditions, they put in their utmost effort toward organizational growth.

9.6 Goals of Organizational Behavior

Organizational behavior, which is a scientific field of study, focuses on the following points (Figure 9.4):

Organizational Behavior 301

FIGURE 9.4  Organizational

Behavior Goals

Applying leadership skills and knowledge to understand people’s behavior, demarcating those which are not conducive to the organization, and appreciating rudiments of behavior which positively impact the organization. Aspects of good behavior can also be set as norms or standards to be followed by other employees within the organization.

• Goals of organizational behavior strongly accentuate the responsibility of a

leader in relation to behavioral aspects and a proper reporting structure of the organization. An organization has three elements: • People • Structure • Technology For managing these elements, an appropriate organizational structure is extremely important, together with the incorporation of management principles such as the principle of unity of command, delegation of power and responsibility, and formulation of objectives to achieve contentment, since people’s value and faith build an organization. In addition, leaders should be equipped to handle people within the organization and should have the following skills.

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• They should be able to describe people’s behaviors, attitudes, and nature and

identify team members’ reactions so that appropriate measures can be taken for productive workers (concept of rewards and so on) and punitive measures for disruptive workers. • They should be able to carefully identify an employee’s behavior, which will help the leader channelize the employee’s actions productively. Other responsibilities include exercising control in the form of • Upgrading team’s skill sets through training for improved performance • Aligning unit’s/individual’s objective to organizational objective • Promoting a conducive environment in the unit and organization, which should be appropriately aligned to the external environment for effective handling of contingencies 9.7 Managing the Elements of Organizational Behavior

The four vital elements of an organization are people, infrastructure, technology, and the environment in which the organization operates. There is a continuous interaction among three elements—people, structure, and technology. It is technology and structure that facilitate individuals to come together and work toward a common goal. Also, the environment in which the organization operates plays a significant role since it has an impact on the other three elements (Figure 9.5). 9.7.1 People

• Groups may be small, large, formal, or informal and work together to achieve organizational objectives.

• Characterized by their personal goals and aligning personal to professional goals and group goals.

• Effective collaboration with team members and healthy relationships with superiors and subordinates to accomplish long- and short-term goals.

FIGURE 9.5  Elements

of Organizational Behavior

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FIGURE 9.6  The

People Element of Organizational Behavior

• Interest of various stakeholders constituting the people element of organiza-

tional behavior who play a dominant role in the society and are important from the perspective of a business (Figure 9.6).

9.7.2 Structure

There are two types of organizations: formal and informal. Attributes of formal organizations are as follows (Figure 9.7):

• Objectives are concrete. • Organization is hierarchical or flat in nature. • At each level of organization, people work toward a specific organizational objective.

• Organizational efficiency is dependent on effective communication, con-

crete information flow, well-laid-out rules, policies and procedures and system, which is known as operational, transactional, tactical, and strategic level management. • The organization’s system being in place, the leader can design plans for improved productivity, attain job satisfaction, and ensure that their employees are content. 9.7.3 Technology

Technologies, such as machineries, equipment, and work procedures, are the resources with which people work, and these also affect the tasks that they

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FIGURE 9.7  The

Structure Element of Organizational Behavior

perform. The technology used has a substantial impact on working relationships. It enables people to do an increased amount of work, and that too, in an effective manner. Procuring the latest technology, installing, operating, and maintaining it is very crucial for organizational effectiveness. The technology and the system in place should be compatible with one another. Job design and HR requirements are based on technology. Adequate attention should be paid to the service industry. For example, in an institute, a web-enabled student and staff information system will constitute student attendance, admission, examination, and accounting records as well as staff workload records, leave records, research records, and so on for quick retrieval, update, search, reporting, and analytics. Various processes required to regulate these functions form an important part of the education industry. 9.7.4 Environment

Every organization has its internal environment and operates within an external environment. There is always an interaction of the organization with the larger system comprising other organizations and the government, which mutually affect each other in a multidimensional manner across economic, cultural, social, legal, political, government policies and procedures, and demographics. Accurate prediction of human behavior happens when all the factors governing the external environment are taken into consideration, such as

Organizational Behavior 305

• • • • • •

Market scenario Competitors analysis Raw material availability Latest technology Availability of skilled resources and Cultural climate.

Having considered the above parameters, the manager realizes the impact of these factors on the individuals and their reaction toward the same, some of which can be very productive for the organization. Also, a realistic approach ensured by the manager will help their team prepare for contingencies such as changing political climate and government rules (Figure 9.8). 9.8 Importance of Organizational Behavior

Organizational behavior provides guidelines for management about the way in which human elements of behavior should be emphasized in order to achieve organizational objectives. Organizational behavior provides an opportunity for the management to analyze the behavior of individuals and suggest a direction. It not only analyses the behavior of individuals at different levels, such as intrapersonal, interpersonal, inter-group, and inter-group levels, but also answers questions like why and how human beings behave in a particular manner, which in turn helps in building cordial relations in the organization.

FIGURE 9.8  The

Environment Element of Organizational Behavior

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Organizational behavior teaches managers how to understand the behavior of their subordinates and select the most effective method of guiding and controlling them so that organizational goals can be achieved with little or no resistance. It also helps managers to select the most effective style of leadership depending on the behavior of individuals within the organization. It also helps in effective conflict management, better decision-making, commitment to ideas, teamwork, and so on. 9.9 Approaches to Organizational Behavior

The four major approaches to organizational behavior are discussed further. 9.9.1 HR Approach

This approach recognizes the fact that human resources are the greatest assets of any organization and is concerned with the growth and development of people toward higher levels of competency, certainty, and fulfillment. This enables employees to perform in a better way. The HR approach is also called the supportive approach. 9.9.2 Contingency Approach

According to this approach, the methods or behavior that works in one situation will not necessarily work in all situations. Therefore, the identification of the variables that are effective and efficient is necessary. 9.9.3 Systems Approach

This approach considers the organization as a system that consists of various interrelated parts. Any activity performed by any of the interconnected parts affects the whole system. Hence, it is necessary to make sure that every part of the system is working in coordination. 9.9.4 Productivity Approach

Productivity is the ratio of the unit of output to the unit of input. Generally, it is calculated using mathematical expressions. The higher the value of the ratio, the higher the efficiency. 9.10 Models of Organizational Behavior

Models of organizational behavior have been shown in Figure 9.9.

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FIGURE 9.9  Models

of Organizational Behavior

9.10.1 Autocratic Model

The features of the autocratic model are as follows:

• The control of the organization lies with the management, which can direct and exude authority over the employees of the organization.

• Key decisions lie with the top management of the organization. • Lower-level employees have little expertise/control over the work function. • The top management of the organization has substantial expertise and the middle- and lower-level management are fully guided by the top management.

• This model was used in factories during the Industrial Revolution. 9.10.1.1 Disadvantages

• Management has to give adequate time to handle minor issues as decisionmaking does not rest with the employee base.

• This model is highly disadvantageous in today’s era because there are poten-

tial resources at each level of the organization who have required skill sets or decision-making power. • Employees do not acquire job satisfaction and do not feel valued, which results in their performance degradation.

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9.10.2 Custodial Model

• This model promotes financial security for the employees by incorporating reward, and benefit program for keeping the employee motivation high.

• Other benefit programs include health insurance benefits, accommodation

allowances, company vehicles, stock options, and so on to retain worthy staff. • Using this model, organizations want to keep intact, skilled resources with good knowledge and expertise. 9.10.2.1 Disadvantage

• This model revolves around allocating wages and benefits to employees, and employees who do not perform well are also facilitated.

• Also, every organization is constrained by its own work culture and the ser-

vices it provides or the products it designs; therefore, a potential resource may remain tied to the organization for the benefits received and will not explore opportunities to exploit their own potential.

9.10.3 Supportive Model

• This model focuses on promoting leadership traits among individuals. • It works in opposition to the autocratic model, as it requires that employees are

self-motivated, have sufficient knowledge and decision-making power and, apart from being in an operational role, can create, innovate, and implement ideas.

9.10.4 Collaborative Model

• It is a collaborative model where every employee is a colleague of the other. • It does not consider the status and designation of the employees, though hierar-

chy is maintained and every individual is encouraged to contribute to building a better organization. • The role of the manager is to encourage teamwork, create a positive work environment, and make all the members of the team perform well. • This is very advantageous for organizations that have to work constantly on innovation, creation and finding new approaches, that is, research and development, designing new services, and so on. 9.10.5 System Model

• This model ensures that an individual’s goal is aligned with the goal of the organization, and that every individual partners with the organization or team work toward a common goal.

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• It considers that individuals have varying potential, skills, and talent. • Positive factors of this model which impact the individuals are good remuneration, job security, and a positive work culture in which the organization provides value-added services to its customers.

9.11 Current Trends in Challenges and Opportunities of Organizational Behavior 9.11.1 Upgrading Employees’ Skills

The skills can be broadly categorized as follows:

• Technical skills: These include technology-based skill sets and are acquired

by people at the operational and transactional levels, and training programs are arranged to refine the skills. • Managerial skills: These include planning, organizing, motivating, leadership, and decision-making skills, which can be refined and updated by conducting a series of training programs and workshops. Today, because technological and environmental changes are happening at a quick pace for various businesses, there is a strong need to equip employees with the required skill sets so that organizational goals can be achieved. Designing an appropriate performance appraisal system with embedded training programs will align managers appropriately with the ever-changing business scenarios. As for technical skills, the operational and staff at the transactional level are required to be trained in technology and domain as per the requirements of the organization. 9.11.2 Enhancing Value and Output

Enhancing value or, in other words, quality is to achieve a minimal defect or defect-free situation and attain a stage where customers’ needs and expectations are surpassed in relation to product or service quality or value. For example, a customer who wants to purchase a mobile phone might look for features such as fast response time, good sound and picture quality, faster download, and so on. If their expectations are met, then they perceive that the product is of good quality, and if not, they will perceive the quality of the mobile phone as poor. The parameters of quality are as follows:

• • • • •

Performance Features Conformance Reliability Robustness

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• Maintenance • Aesthetics • Reputation Nowadays, managers are working toward Total Quality Management (TQM) in order to improve quality, which also requires extensive employee participation. 9.11.2.1 Total Quality Management

It aims at continuous customer satisfaction through incessant enhancement of all organizational processes and quality, measurements with precision and empowerment of employees. For example, TQM was implemented at Ford Motor Company in the 1990s to provide increased customer satisfaction, a stable work environment for the employees, and profitability for the company. For this, it joined hands with ChemFil, a PGP group of industries, for quality paint designs since that was foremost in their TQM approach. Ford, along with ChemFil, structured the entire production process based on surveys from the customers. 9.11.3 Business Process Re-engineering

Business process re-engineering is a methodology that reduces work processes to their core optimum and dramatically improves performance. Both functional and cross-functional processes are assessed through workflow investigation and event-based pricing. With the advent of new technology and industries, best practices will be developed and attain maturity through re-engineering. Its implications for the managers or the management are as follows:

• • • •

Continuously strive for quality Management intervention at all levels Extensive training programs imparted to all employees Effective communication across all levels

For example, Ford’s account payable process was slow and inefficient. Now, it has a faster and more efficient account payable system. 9.11.4 Managing Workforce Diversity

For greater employee retention and productivity, employee mix can be across multiple traits, and managing a heterogeneous collection of employees is a challenge for managers. It must be done very efficiently by addressing their needs, views, and work styles. The heterogeneity in employee base is found across the following various parameters:

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• • • • • • •

Gender Region Religion Background Age Community Disabled

Organizations have a dire need to induct employees from across regions and countries in order to tap the best of their talent and potential, promote innovation, improve decision-making, and maintain synergy between diverse groups of employees. Mismanagement of workforce diversity might lead to high turnover and interpersonal conflicts. 9.12 The Impact of Globalization

Today’s business is not constrained to a specific region or locality and spans across the globe, where it finds greater market potential (Figure 9.10). This has been possible because the product and the service providers have got a platform that ensures greater connect and access through mobile marketing, electronic marketing (Internet) to spread their existence and research on the customer requirements

FIGURE 9.10  Trends

in Global Business Strategies

Source: Korea Herald (http://www​.koreaherald​.com​/view​.php​?ud​=20130618000630)

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of that zone. Many new businesses and business models have come into existence along with intra- and inter-industry partnership venture. Lower costs and competitive pricing have tremendously encouraged businesses to spread across the globe. For example, a French wine seller can sell wine online at a lower price and to a greater audience. Similarly, more German, Japanese, and Korean car companies sell various car models across the globe, and this has become easier because of high visibility, flexible EXIM strategies, and faster modes of transport. 9.12.1 Empowering People

The main issues are delegating more power and responsibility to the lower-level cadre of employees and assigning more freedom to make choices about their schedules, operations, procedures, and the method of solving their work-related problems. Encouraging the employees to participate in work-related decisions will enhance their commitment at work. Empowerment is defined as putting employees in charge of what they do by eliciting some sort of ownership in them. Managers are going considerably further by allowing employees full control of their work. An increasing number of organizations are using self-managed teams where workers operate largely without a boss. Due to the implementation of empowerment concepts across all the levels, the relationship between managers and employees has taken a different shape. Managers will act as coaches, advisors, sponsors, and facilitators and help their subordinates do their tasks with minimal guidance. The concept of empowerment is all about reshaping the relationship between the manager and the employees in an organization. A manager must encourage employees to participate in work-related decisions, which may also enhance the commitment of the employees to work. Implementation of the empowerment concept has resulted in a positive change in the relationship between managers and employees, where managers act as coaches, advisors, sponsors, and facilitators and help their subordinates to perform their tasks with minimal guidance. 9.12.2 Coping with Temporariness

In recent years, one thing that everyone in the organization faces permanently is temporariness. Whether it is the manager or employees of the organization, everyone must learn to cope with the constant changes happening by developing their skills and continually updating their knowledge. The concept of continuous improvement implies constant change. 9.12.3 Stimulating Innovation and Change

In today’s world, to be successful, an organization must come up with various innovative ideas. To survive in the competitive market, the organization must maintain

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flexibility and improve the quality of their products and services. Managers need to stimulate employees’ creativity and tolerance for change. 9.12.4 Emergence of E-organization 9.12.4.1 E-commerce

Electronic commerce (e-commerce) is the electronic exchange of information pertaining to various businesses using electronic data interchange and associated technologies. The other way to visualize e-commerce is that it facilitates digitally enabled commercial transactions between and among organizations and individuals. Students who are familiar with electronic mail (email), computer bulletin boards, online funds transfer, and electronic payments (e-payment) will have a better understanding of e-commerce and associated activities. E-commerce systems have replaced manual and paper-based business transactions with faster, cheaper, more efficient, and more robust communications between machines. Electronic data interchange commerce is the most recent e-commerce technology. E-commerce is the smartest way to do business. It puts more work on customers, right from viewing the product details, filling in the order form online, and checking the order and delivery status, so that huge costs in terms of money and time can be saved and, at the same time, customers are happy. 9.12.4.2 E-commerce versus E-business

Electronic business (e-business) is one stride ahead of e-commerce. E-commerce is all about using information and communications technology (ICT) for various types of transactions, whether between organizations or business-to-consumer transactions, focusing mainly on the following:

• Marketing and selling of products and • Buying of products and services over the Internet In e-business, ICT is used to enhance one’s business performance with a view toward improving service and reducing costs. The processes enhanced using ICT are as follows:

• Production processes: These include material procurement, ordering, and replenishment of stocks (that is, inventory control), processing of e-payments and online association with suppliers and vendors. • Marketing and selling processes: These include promotional and marketing strategies for making a sale of the product over the Internet, processing of customers’ purchase orders and payments, and customer support.

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• Internal organizational processes: These include employee services, training, internal information sharing, video-conferencing, recruiting sales people, and training them to improve productivity.

9.12.4.3 Growth of E-business

The concept of e-business has become prominent in the last 10 or 15 years and has been growing at a rapid pace, with 40 per cent of the total worldwide Internet users buying and selling goods using the Internet. This concept facilitates the following:

• Reduction in operating, administrative, inventory and procurement costs • Increase in customer satisfaction • Improved and efficient interaction with employees, vendors, customers, and strategic partners

• Productivity, competitiveness, and growth • Reduction in business environment barriers • Reduction in poverty E-business can be accelerated by implementing the following changes:

• Continued reforms in ICT infrastructure, trust and security regulations, and policy reforms.

• Government-to-business ventures to reduce transaction costs and expand growth.

• Training programs to enrich knowledge on e-business. • Inclusion of micro-business firms for doing better business by reaching out to low-income groups.

EXAMPLE For example, Tortas Peru, an organization in Peru, is doing e-business in the segment of bakery products. This organization is reaching out to groups of women in Peru who have proficiency in cake baking and dessert making and establishing a larger chain of suppliers. It now caters to eight provinces in Peru, and the products are mainly consumed by Peruvian emigrants. The e-business functions carried out by this team are as follows:

• • • •

Web-based marketing Online bakery store with item display Online ordering Online payment

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Business Growth

•

Fifty orders per day, now with a client base of 500 customers.

Employment

•

Fourteen female employees.

Wages and Profitability

•

Twice the minimum wages with a profit margin of 30 percent.

Intangible Benefits

• • •

Technological advancement for women groups Exposure to global processes Financial independence

9.12.5 E-organizations/E-governance: The Government in Focus

E-organization/e-governance is the arrangement of state governance based on electronic tools for collecting, processing, and disseminating information and providing government services to all groups of the population and businesses using electronic tools. For this purpose, the e-governance model provides a road for guaranteeing governmental organizations to accomplish their endeavor of providing centralized, accessible, on-time, total, and accurate information to personnel, business organizations, and people. E-governments offer government services through the Internet, phone, fax, public access centers, wireless devices and other communication facilities. Implementation of e-governance is a complex organizational, economic, social, and technological process that requires substantial financial and administrative efforts. 9.12.5.1 Impact on Managers

Managers should be open to accepting ever-changing technology and refining their skills and knowledge with the technological changes, ensuring that the team also complies by adopting and learning technological innovations. The paradigm of e-governance is to make it citizen-centric; hence, the manager and their team, in charge of development and implementation, are exposed to a large base of customers, much larger than private customers or clients. Therefore, to make such

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government projects successful, the management has to carefully steer their team through all phases of the project. 9.12.5.2 Citizen-centric Governance

Among the successful implementations of e-government practices, one of the most successful attempts has been the implementation of eSeva in Andhra Pradesh, which has become a success story because of the deft handling of change management issues. Some other examples where e-government solutions have become successful are municipalities like the Ahmadabad Municipal Corporation, where appropriate e-governance solutions have been used to increase revenue generation by a phenomenal 125 percent. The Kalyan Dombivli Municipal Corporation has used e-governance to create a highly successful online citizen service with the objective of making each citizen’s interaction with the Kalyan Dombivli Municipal Corporation easy, simple, and efficient while ensuring accountability and transparency. 9.12.6 Code of Ethics

Employees should follow a code of ethics while executing their tasks. For example, should the chemical company’s employees report to appropriate authorities that discharging its untreated sewage into the river is contaminating its water resources? Are managers biased toward some subordinates they like and evaluate their performance accordingly? Following unethical practices has become common; for example, people who use insider information for personal financial gain as in the case of the American, Indian, and companies who are involved in massive cover-ups of defective products such as the Volkswagen emission rigging scandal. Ethical issues lie with employer–employee, company–customer, company– shareholder, company–society, and employee–employee relationships. Gallup, in its book on ethical behavior, has put forth the opinion polls of the community, which state that ethical codes of conduct are highest for pharmacists and lowest for car salespersons. In another report, it has been found that the USA ranks at the top in inappropriate codes of conduct. 9.12.6.1 Impact on Managers

Managers must mentor their employees on the code of conduct by organizing seminars, workshops, and training programs to improve upon. Hiring consultants, lawyers, and voluntary service organizations to assist the companies in dealing with ethical issues will guarantee positive ethical behavior, keeping the organization’s productivity flying and not incurring a controversial reputation for any unethical deed.

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CASE STUDY: OVERCOMING ABSENTEEISM AT SANDHAR AUTOMOTIVES, DHUMASPUR Sandhar Automotive (mirror division) is a manufacturing unit belonging to the Sandhar group of companies located at Dhumaspur, Gurgaon, Haryana. This company was started by Mr. Jayant Davar, an engineer. The company has its own technical collaboration with Honda Lock manufacturing company, Japan division. Its rear-view mirror manufacturing division started operations in 1993, initially only for two-wheelers manufactured by Hero Honda and TVS–Suzuki. The current unit at Dhumaspur was established in 1999 with manpower of 160 employees, supplying mirror assembly consignments only for a single customer, Hero Honda Motors Ltd. New business opportunities were explored, and in 2004, fresh orders from four-wheeler segments were placed, for example, Tata Motors Ltd, Eicher Motors Ltd, Ashok Leyland, and so on. Despite the above-mentioned growth, the high rate of customer returns and in-house rejections were some of the never-ending problems. After a thorough analysis of the facts, the company found poor commitment levels among employees and workers and a lack of ownership over activities, machines, and processes in general as reasons for these problems. A lack of motivation among employees resulted in high rates of absenteeism, thereby affecting aspects like quality and productivity. At the beginning of 2007, Sandhar Automotive received an invitation from UNIDO and ACMA to join their business partnership program, and also received technical support in implementing a company-wide process of continuous improvement based on lean manufacturing principles and total employee involvement tools. Accepting the invitation, they entered into the program, but their concerns were less involvement of employees in improvement activities, high absenteeism rates, and quality issues. To minimize these hurdles, a methodology was developed under the guidance of a counselor, and the following steps were taken:

• • • •

An increase in the number of technical and behavioral training programs for employees across all levels. Alignment of individual roles and responsibilities with respect to the company’s goal. Frequent meetings with top- and middle-management employees to address issues and concerns of the employees. Performance-based awards to employees and the announcement of various beneficial schemes for employees by the CEO.

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The main objectives were to make it interesting and simple. Employees started to realize their self-worth and the importance of working as a team for a common goal. Things started making sense to them, such as transparent communication, ownership of tasks/processes/machines, public appreciation, and family gatherings. Apart from methodology, the following initiatives were taken:

• • • • •

Creating a conducive atmosphere within the company and organizing Friday dinner for informal interaction and communication among the employees. Sending birthday greetings via mail to employees and celebrating the occasion with company-sponsored snacks. Covering employees and their medical expenses through various schemes. Organizing company-sponsored yearly meet with employees and their families to promote social acceptance and relation. Team-building activities with certain management games for stronger collaboration.

In addition, employees were briefed on emergency control procedures in the wake of fire, accidents, scrap dissolution, and quality control procedures such as targeting zero-defect situations for the products in particular.

9.12.7 Key Results

• • • •

Employee participation increased significantly. Trainings happened frequently, though the cost of training increased, so did profitability. Employee attendance turnover became low. Inventory costs went down, and so did customer return and internal rejections.

Summary

This chapter focuses on organizational behavior and its nature, scope, benefits, and approaches, with a special focus on models of organizational behavior and their case-specific, industry-level implementations. The chapter also revolves around modern trends in organizational behavior with emphasis on TQM, business process re-engineering, managing the employee mix, and the impact of globalization on organizational behavior, which will enable the reader to get an extensive idea of the current behavioral trends of modern-day organizations.

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Exercise Objective Questions

1. The four vital elements of the organization are • People, structure, technology, and environment • People, infrastructure, technology, and resources • People, property, technology, and resources • None of the above 2. Anthropology does not focus on comparative attitudes, values, or cross-cultural analysis. • True • False 3. According to which approach, method or behavior which works in one situation will not necessarily work in all situations? • HR approach • Systems approach • Contingency approach • Productivity approach 4. Which approach is also called the supportive approach? • Systems approach • HR approach • Contingency approach • Productivity approach 5. The custodial model promotes financial security for the employees by incorporating rewards and benefit programs to keep the employee motivation high. • True • False 6. Which model is focused on promoting leadership traits among individuals? • Autocratic model • Supportive model • Custodial model • System model 7. Which of these is a methodology that reduces work processes to their core optimum and dramatically improves performance? • TQM • Managing employee mix • Business process re-engineering • Globalization 8. Which of these aims at continuous customer satisfaction through incessant enhancement of all organizational processes and quality? • TQM • Managing employee mix • Business process re-engineering • Globalization 9. Which of these is the electronic exchange of information pertaining to various businesses using electronic data interchange and associated technologies? • E-business • E-commerce • E-organizations

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CASE STUDIES Case 1 Mr. Mandar was appointed general manager of the Krishna Manufacturing Center. He had joined the company around three years ago. Prior to joining this one, he had served another company for two years. He did his MBA at IIM, Bangalore. He considered himself a major contributor to driving the results. After being promoted as general manager, three departments—raw material, warehouse, and sales—started reporting to him. Each of these departments had a manager. As Mr. Mandar was promoted at a very young age, these four managers and their team considered him a junior executive. The new general manager made some changes to the existing operations. He started weekly meetings with all four managers. However, these managers barely responded during any of the meetings. At a later stage, Mr. Mandar started receiving quality complaints, so he decided to visit these departments. He found that the raw material being used for manufacturing was not of defined quality standards. He also had a word with the raw material supervisor. When the four managers knew that Mr. Mandar had visited the departments and queried a few employees, they called a meeting. With discussion, they concluded that the general manager did not have confidence in them. This manager could not even discuss this with top-level management as he was hired by them. So, they all decided they would continue the current work the way they were doing it and, start looking for the other opportunity, and the meeting ended.

Questions 1. 2. 3. 4.

Discuss the problems in this case. Explain the reason for the behavior of managers. What action should have been taken to prevent the problems? Propose a solution so that managers can continue with their jobs in the organization.

Case 2 Vishwajeet Vas left for Delhi for official work on 4 September, by 3:50 pm train. On 5 September in Delhi, he received a call from his colleague saying that his family had met with an accident. He immediately called his home to let them know about his family. He flew back to Bombay the same evening. Vishwajeet stays in a house provided by his office. The day before he left for Delhi, he had asked the office car to pick up his family from the station.

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The driver picked up Vishwajeet’s family at 7:54 pm, and half the way, the car met with an accident. A truck hit and damaged the car. The driver and Vishwajeet’s mother received minor injuries, while Vishwajeet’s sons and wife were badly injured. A nearby RTO officer took the driver and Vishwajeet’s family to the police station. From there, Vishwajeet’s son told one of his uncles about the accident, who then took them to the hospital for treatment. The next day, on 5 September, Vishwajeet’s brother called the company’s administrative department to inform them about the accident and to ask where Vishwajeet could be contacted, but there was no proper response. After reaching the office, Vishwajeet complained about the lack of concern by the administrative office for the accident. The administrative officer had not taken any action against the driver. He also gave more details about the accident. The chief executive took this issue to the employee association of the company on 6 September. On the same day, he received a memorandum from the association about the inaction of the administrative officer concerning the accident.

Questions 1. What kind of behavioral change is required on the part of the different levels involved? 2. Was the problem to be dealt with in a more formal way?

Chapter at a Glance Organizational Behavior

Organizational behavior can be defined as the understanding, prediction, and management of human behavior that affects the performance of organizations. Levels of Analysis

• Individual-level analysis • Group-level analysis • Organizational-level analysis Disciplines of Organizational Behavior

• • • • •

Psychology Political science Sociology Social psychology Anthropology

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Elements of Organizational Behavior

The four vital elements of the organization are as follows:

• People • Structure

• Technology • Environment

Nature and Scope of Organizational Behavior

• Organizational behavior is the study of the behavioral aspects of individuals within the organizations.

• Organizational behavior comprises the study of intra-personal and interpersonal behavior and organizations.

• Intra-personal behavior comprises the study of aspects like personality, attitude, motivation, and perception.

• Intra-personal behavior covers group dynamics, team management, conflict management, and so on.

• The study of organization covers aspects like its structure and formation. Importance of Organizational Behavior

• Provides guidelines for the management about the way in which human elements should be emphasized.

• Provides an outlook to management to analyze behavior of individuals and suggests a direction.

• Answers to questions like why and how human beings behave in a particular manner, which in turn helps in building cordial relations in the organization.

• Gives an insight to the managers to understand the behavior of their subordinates. • Helps the managers to select the most effective style of leadership. • Helps in effective conflict management, better decision-making, commitment to ideas, teamwork, and so on.

Approaches to Organizational Behavior

• HR approach • Contingency approach

• Systems approach • Productivity approach

Models of Organizational Behavior

• Autocratic model: In this model, key decisions lie with the top management of the organization.

• Custodial model: It promotes financial security for the employees by incorporating rewards and benefits program.

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• Supportive model: This focuses on promoting leadership traits among individuals.

• Collaborative model: This model states that every employee is a colleague of the other.

Current Trends in Organizational Behavior

• • • • •

Upgrading employee skills Enhancing value and output TQM Business process re-engineering Managing employee mix

• • • •

Globalization Empowering people Coping with temporariness Stimulating innovation and change

E-commerce

E-commerce is the electronic exchange of information pertaining to various businesses using electronic data interchange and associated technologies. E-business

In e-business, ICT is used to enhance one’s business performance with a view toward improving service and reducing costs. E-organization/e-governance is the arrangement of state governance based on electronic tools for collecting, processing, and disseminating information and providing government services to all groups of the population and businesses using electronic tools.

10 UNDERSTANDING AND MANAGING INDIVIDUAL BEHAVIOR

An Opening Vignette ABC Group of Hotels Outlook on Employee Behavior and Performance The ABC Group of Hotels who focus on high quality of service provision for customers by retaining their existing staff, emphasize on the selection and recruitment of human resource personnel with right attitude and professional code of conduct. The ABC Group operates three types of hotels, namely budget, comfort, and luxury, catering to different customer segments and wants to take its customer service to the next level. For this, it implemented a performance management system for the organization as well as the employees, with a motive to promote organizational productivity as for hotel industries; maintaining high customer service levels is considered vital. According to the chief managing director of the company, the success of the hotel industry depended a lot on the etiquette and the behavior of the employees. With the new behavioral and goal-oriented performance management system in place, both the self and managers’ online feedback are taken once every quarter via a scoring system that rates an individual a good performer if they have scored above 75 on a 100-point scale and a poor performer if scored below 50. Individuals discuss and match the results with their managers, and in case of any discrepancy, well-documented reasons act as the guidelines to take appropriate actions. This activity makes it easier for the Group to compare the performance of employees across the hotel chain. DOI:  10.4324/9781032634258-10

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Since the performance system was implemented, the non-performers have also become aware of their performance projections being exposed to the senior management and have started working with passion, dedication, and attitude. The main challenge was to educate and train the employees on the new evaluation system, not all of whom were Internet savvy, by encouraging them to use it. Another breakthrough that the ABC Group achieved using this performance management system was that it was able to conduct an online test for the new hires and a scenario was given to the prospective recruits to provide solutions. The decision to hire was taken on the basis of the behavioral analysis of the candidate. So even if the candidate did not possess the right set of skills, the hotel group hired them as they had the right attitude and were more willing to go the extra mile for customers. Also, the organization could foresee a modest retention capability, if these candidates were hired.

10.1 Meaning of Attitude

Attitude can be described as a trend to react positively or negatively to a person or situation. Thus, attitude comprises inclination and direction of inclination and has been defined as a mental state of readiness. The Encyclopedia of Social Sciences describes attitude as a comparatively enduring organization of interrelated beliefs that describe and evaluate the action with respect to an object or a situation, with each belief having a cognitive effect and behavioral components. Each of these beliefs is a predisposition that results in some preferential response toward the object or the situation. The concept of attitude originated in the USA. 10.2 Definitions of Attitude

An attitude is a mental and neural state of readiness, organized through experience, exerting a directive or dynamic influence upon the individual’s response to all objects and situations with which it is related” (p. 810). Thus, the early references to posture and readiness were featured in Allport’s definition. —G.W. Allport GW Attitudes are learned predispositions towards aspects of our environment. They may be positively or negatively directed towards certain people, services or institutions. —N.L. Munn

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A relatively enduring organization of beliefs, feelings, and behavioral tendencies towards socially significant objects, groups, events or symbols. —Hogg and Vaughan (Source: Allport, G. W. (1938), Munn, N. L. (1966), Hogg, M. A., & Vaughan, G. M. (2005)). 10.3 Types of Attitudes

Attitude can be referred to as a combination of emotions and thought processing. It represents the degree to which an individual likes or dislikes a person, place, job, thing, or an event. Attitudes are of three types: positive, negative, and neutral. If someone has a positive approach about anything, for example, toward their job or an individual, then it is a positive attitude, else it would be considered as a negative attitude. Positive attitude: An inclination that brings out a desired output for persons and organizations can be referred to as a positive attitude. Individuals with positive attitudes generally believe that there is a good opportunity in every situation. In other words, these people are optimistic. In order to encourage such kind of attitude among individuals, a positive attitude is often rewarded. Negative attitude: The inclination of a person that leads to an undesirable result for individuals and organizations can be described as a negative attitude. People with negative attitudes are pessimists, who feel that they are often surrounded by problems and difficulties and view all individuals and situations as unfavorable. Negative attitudes are punished in order to discourage the same action in the future. Neutral attitude: People with a neutral attitude do not feel like giving suggestions with respect to an event or feel that a change needs to be instantiated with respect to the happening or event. 10.4 Components of Attitude

Every attitude has three components that are represented in what is called the ABC model of attitudes: A for affective, B for behavioral, and C for cognitive (Figure 10.1). Although every attitude has these three components, any particular attitude can be based on one component more than the other. In other words, each component can also be the answer to the question: Where does an attitude come from? There are affect-based attitudes, behavior-based attitudes, and cognition-based attitudes. 10.5 Attitudes and Behavior 10.5.1 Individual Attitudes and Behaviors

Attitudes and behaviors correlate to a considerable extent. A person possessing a positive attitude spreads positivity in the environment for their colleagues. Such

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FIGURE 10.1  Components

of Attitude

a person is always active as well as productive and performs better. Similarly, a person with negative attitude may affect the environment in a negative manner and show less efficiency and productivity. 10.5.2 Organizational Attitudes and Behaviors

Attitudes can have a significant impact on the behavior of individuals and those around them. Organizations must therefore create a conducive work environment, job satisfaction, some type of reward or bonus, and code of conduct among the employees in an organization. An individual’s behavior can be changed by keeping organizational attitudes consistent to which everyone in the organization needs to be committed. Some employees might be affected by the change, while others might not. So, management might devise certain strategies to change the behavior across the organization and take into consideration the diversity inherent in any group. 10.6 Classification of Attitudes

Attitudes of people are said to have implications on the individual’s behavior and govern them accordingly. Daniel Katz classified attitudes into four different groups based on their functions.

• Utilitarian: This refers to the attitude of an individual that has been created through self- or community interest and a classic example can be a hike in pay, which exudes a positive reaction and attitude of an employee, which in turn impacts the environment positively. • Rationale and knowledge: Understanding the rationale behind why a task is being allotted to a particular individual or a group or why the organization

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has devised a specific type of strategy is another means by which people form attitudes, which are positive dispositions about the firm and are better for the organization’s environment. • Ego defensive: Usage of attitude to protect the ego results in a negative attitude. For example, a manager’s criticism of an employee’s work without offering suggestions for improvement can evoke a negative response from the employee. So, it is mandatory for the managers to offer guidance along with identifying the problem or the issues in the work of the employee. • Value expressive: People develop central values over time and it is the responsibility of managers to understand the importance of values from the employees’ perspective. The managers then can align the organizational vision with individual values, thereby creating enthusiasm among the task force. 10.7 Impact of Attitudes on Workplace

Workplace attitudes have an impact on every person in the organization, right from the lowest level staff to the highest-level stakeholder. Workplace attitudes aim at developing employee confidence, efficiency, and team-building abilities. Understanding the impact of positive and negative workplace attitudes aims at creating a harmonious environment in the organization. Following can be the impacts of workplace attitudes.

• Validation: Workplace attitude contributes substantially to the events that hap-

pen within the organization. For example, if there is a sales drop in a particular product of an organization, then an organization with a negative attitude will try to be defensive about the same, while the one with a positive attitude will immediately find out the causes behind the sales drop. The sense of optimism among the workforce sometimes works wonders for the organization. • Competition: Attitudes, in general, boost the competitive environment in the workplace. A negative attitude is responsible for creating mistrust among employees, whereas in a workplace with a positive attitude, inducing competitiveness is taken positively, which inspires employees to perform better. • Inventiveness: Innovation has always remained an important aspect for business of any kind and a positive workplace attitude encourages inventiveness because employees feel that their ideas will contribute toward the achievement of organizational goals. A negative attitude restricts inventiveness as employees do not feel obliged to contribute to company growth. • Withholding: Employee retention is impacted by the attitude in the workplace. An organization with a positive attitudinal environment makes the employees feel that they have a big role in the contribution toward organizational success. A negative attitude leads to the loss of experienced employees, which degrades the company’s growth.

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10.8 Changing Attitudes in the Workplace

Negative attitudes within the workplace impact customer satisfaction and decrease employees’ morale, leading to lack of productivity and efficiency. It is extremely crucial to exhibit positive attitudes at the workplace so that they lead to a healthy business environment.

• Set example: The mindset, thought process, and communication with the man-

•

•

•

•

•

ager often set the tone of the unit or the office, and displaying a positive attitude is the primary responsibility of the manager or the company’s stakeholders. While it is not possible for every individual to be positive almost all the time, one can directly try to implement the same most of the time keeping a note of the fact that a positive attitude is essential for improved productivity of the organization. Identify motivators: There are people in the organization who are motivated by either goals or rewards. The management should identify them and find out what works best for each individual so that the workforce remains positive and motivated. Eliminate troublemakers: An employee with a bad attitude can ruin the atmosphere of the organization and inject negativity among the people and their attitudes. It is highly recommended that these employees should be encouraged to participate in attitude-building workshops, and if they respond negatively to such strategies, then it is better to eliminate them from organizations. Proper ambience: Neat and clean office surroundings contribute to building positive attitudes among employees in the organization. Also, the office decor contributes a lot to the building of attitude through the use of wall color, artwork, and modern furniture or equipment. Recognition: Employees should be praised and encouraged for good attitude and rewarded for promoting enthusiasm among others, and such groups should be steered to work toward the company’s goals and objectives and their deeds should be well acknowledged by the company and its managers. Employees should have a feeling that they are appreciated by the top management. Support: Offer support to employees going through difficult times. When employees bearing positive attitudes exhibit negative behavior, there should be a mechanism and communication channel where they can discuss their problems with the managers of the organization. Many companies set up an employee counseling service to help employees going through troubled times.

10.9 Definitions of Learning

Any process through which experience at one time can alter an individual’s behavior at a future time. —Peter Gray

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Learning associated with changes in a person’s behavior with respect to some situation caused by repeated experiences while handling such situations, and where changes in behavior happen implicitly and experiential learning lead to maturity in behavioral responses. —Hilhard Bower A relatively settled change in behavior that occurs as a result of training or experience. —Morgan Learning is a change in personality self-described as a new pattern of reactions in the form of skills, attitudes, habits, intelligence or an understanding. —Wetherington (Source: Gray, P. O. (2010), Bower, G. H., & Hilgard, E. R. (1981), Morgan, H. (2004), Wetherington, C. L (1979)). 10.10 Learning Theories 10.10.1 Classical Conditioning

This theory of learning was developed by Ivan Pavlov, a Russian physiologist. He performed an experiment in which he tried to relate a dog’s salivation to the ringing of a bell. He made efforts to teach a dog to salivate in response to the ringing bell. He used a simple surgical procedure while conducting his experiment. The dog started to salivate as soon as Pavlov gave it a piece of meat. But when he rang the bell, the dog did not salivate. Pavlov then tried to relate the meat and the ringing of the bell before presenting meat. He noticed that after a few days, the dog started to salivate as soon as the bell rang, even though no food was offered. Through this experiment, it was evident that the dog had learned to respond (to salivate) to the ringing of bells. This theory includes four concepts which are as follows:

• Unconditioned stimuli: The meat being offered to the dog was unconditioned stimuli that forced the dog to act in a specific manner.

• Unconditioned response: The response to unconditioned stimuli is referred to

as unconditioned response. In this experiment, the unconditioned response was increased in salivation. • Conditioned stimuli: The ringing of the bell was a conditioned stimulus. • Conditioned response: The response of the dog in reaction to ringing the bell alone is known as a conditioned response. 10.10.2 Operant Conditioning Theory

This theory was developed by B.F. Skinner. It is also known as instrumental conditioning. This theory states that behavior is a function of its consequences.

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According to operant conditioning, behavior is expected to be repeated if consequences are favorable and vice versa. Therefore, the connection linking actions (behavior) and consequences is the core of operant conditioning theory. The word ‘operant’ means an organism that helps generate a consequence. According to B.F. Skinner, individuals learn to behave in a particular manner in order to achieve or avoid something. Operant behavior refers to learned behavior. Skinner states that the creation of favorable consequences can help to bring about the desired behavior pattern or to increase the repetition of a particular behavioral pattern. This should be done because a desired behavior will lead to a reward. For example, even in our daily lives, we tend to repeat past behavior if it leads to a favorable outcome and try to avoid the behavior that leads to an unfavorable one. Operant conditioning theory of learning is used in educational research, control of alcoholism, and control of deviant children in a classroom. 10.10.3 Reinforcement

The meaning of the word ‘reinforce’ is to strengthen. This term has been used in operant conditioning to refer to any stimulus that helps strengthen or increase the possibility of a particular response. For example, if you want a monkey to perform somersaults on demand, you may give it a treat every time it does so. The monkey will ultimately realize that performing a somersault on order will result in a reward (treat). This reward (treat) is reinforcing as the monkey likes it and will tend to perform somersaults as and when instructed in the future. This theory is applicable to our day-to-day lives, a few examples of which are stated as follows:

• A child may tend to study harder for the next time if they realize that the teacher appreciates good marks.

• An employee tends to refrain from doing a particular action if they have been punished for doing so in the past.

Reinforcers may be either primary or secondary.

• Primary reinforcer: It is any reinforcer that does not need to be learned. It

occurs naturally. A few examples of primary reinforcers include air, food, water, and so on. • Secondary reinforcer: It is also known as a conditioned reinforcer. It is a learned reinforcer. For example, a hike in salary for good performance. Reinforcements are of four types: positive, negative, punishment, and extinction (Figure 10.2).

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FIGURE 10.2  Types

of Reinforcements

10.11 Learning and Behavior

As we get to know things, we change our ways of perceiving our environment and the way of interpreting the incoming stimuli, thereby resulting in the way we behave or react to a situation. This process, which leads to a relatively permanent behavioral change or potential behavioral change, can be termed as learning. John B. Watson (1878–1958) first studied the effects of the learning process on our behavior and established the psychological school of behaviorism. Behaviorism basically focuses only on an individual’s observable behavior, which is worthy of research. Unlike behavior, the other abstractions such as a person’s mood or thoughts are too subjective. This belief was dominant in psychological research in the USA for a good 50 years. One of the most well-known behaviorists, B.F. Skinner (1904–1990) very much followed Watson’s research and findings. His belief that the internal states could influence behavior just as external stimuli resulted in him being considered as a radical behaviorist. However, these days it is very much believed that both internal and external stimuli influence our behavior. Behavioral psychology aims at finding behavior results from the stimuli both in the environment and within an individual. They go to the minute details of the behavior exhibited while controlling as many other variables as possible, and this has helped understand the behavior of human beings, what effects the environment has on the behavior of humans and what motivates individuals to change their behavior or show consistency in the behavior.

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10.12 Perception

Perception can be defined as a process by which individuals select, organize, and interpret their sensory impressions so as to give meaning to their environment. Perception is a multifaceted cognitive process and varies from one individual to another. Perception is the process in which individuals receive a wide range of information about their surroundings through all five senses, assimilate them, and then interpret them. The same information can be perceived differently by different people. Perception plays a vital role in identifying how an individual behaves in the organization. 10.13 Perceptual Process

The perceptual process consists of six phases that have been explained in detail as follows (Figure 10.3):

• Receiving: The process of perception begins with the reception of stimuli from the environment. These stimuli may be received by different sensory organs. The sensory organs receive data regarding both physical and non-physical objects. • Selection: It deals with separating the significant and insignificant data so that the relevant data can be processed further. The selection phase is influenced by external and internal factors.

FIGURE 10.3 

Perceptual Process

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• External factors: These include size, intensity, motion, repetition, location, familiarity, and so on.

• Internal factors: These include age, personality, motivation, learning, and so on.

• Organizing: Once data are selected, these are organized systematically to be

meaningful. There are two magnitudes of perceptual organizing mentioned as follows: • Figure background: This principle states that the correlation of an object to its background influences perception. According to this principle, the object stands out separately from its background. • Perceptual grouping: The principle of grouping includes the following: ⚬ Similarity: The greater the similarity of stimuli, the more would be the tendency to consider it as a group. ⚬ Proximity: It refers to considering the factors that are close to each other as a group. ⚬ Closure: It means to perceive the whole part when nothing exists. ⚬ Continuity: It refers to an individual’s ability to perceive continuous lines or patterns and their capability to perceive some features of an object as remaining constant, regardless of variations in the stimuli. • Interpreting: Once data is received and organized, the perceiver interprets the information. In other words, this is the phase in which the perceiver assigns meaning to the information. There are three major factors that affect the process of interpretation. These include the perceiver, the perceived, and the situation. • Checking: The next phase checks whether the interpretations made are right or wrong. To check the consistency of the interpretation, an individual can put up a series of questions to themselves or others and try to get answers to these questions to verify if the interpretation was correct. • Reacting: The last phase of the perceptual process is reacting. In this phase, the perceiver takes an action in response to the perception. The action taken is influenced by the perception made. It means that the action will be positive if the perception is favorable and negative if the perception is unfavorable. 10.14 Factors Influencing Perception

Perception is an individual’s experience of the surroundings. This includes receiving and responding to the environmental stimuli. Through the perceptual process, we get to know about the properties and elements of the environment that are critical to our survival. Three major factors that tend to shape or distort perception are explained as follows (Figure 10.4):

• The perceiver: The personal characteristics of the perceiver play a crucial role

in the process of interpretation. Some of the personal characteristics of the

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FIGURE 10.4  Factors

Influencing Perception

perceiver, which influence the process of perception, include their personality, attitude, values, beliefs, habits, and so on. The interpretation of any target of an individual perceiver is heavily influenced by their personal characteristics. For example, if one expects military personnel to be strict, teenagers to be rude or individuals holding office to be corrupt, they may perceive them as such, regardless of their cultural traits. • The perceived (object): Characteristics of the object or target being observed also influence a person’s perception. No object is perceived in isolation. Since every object has a relationship with its background, it is a factor that plays an important role in perception. The targets are not looked at in isolation; the relationship of a target to its background also influences perception and the tendency to group close and similar things together. Characteristics of the target being observed affect what is perceived. People who are vocal are more likely to be noticed in a group than the quiet ones, as are extremely attractive or unattractive individuals. For example, generally people working in the same department are seen as a group. If two people working in the marketing department resign at around more or less the same time, people tend to assume a link between these resignations, although they might not be related at all. • The situation: The physical, societal, and organizational settings of a situation also dominate a person’s perception. The situation in which the interaction between the perceiver and the target takes place has an influence on the perceiver’s impression of the target. For example, there would be a difference in your approach toward the same sales executive of a furniture showroom who talks to you about space-saving furniture during a party and the showroom.

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10.15 Perception and Decision-Making

The behavior of a person is based on their perception of what reality is, which may actually not be the reality itself as it is not necessary that when two persons see the same thing, they interpret it the same way. Based on the above, the following are some factors that affect perception and the process of decision-making:

• Selective perception: People interpret what they see only on the basis of their

interests, backgrounds, experiences, and attitudes, which does not allow them to draw an accurate picture. This may lead to people’s decisions impaired by wrong perceptions. • Halo (horns) effect: People draw a general impression about an individual based on a single characteristic and not considering other factors, which may lead to wrong decisions. • Contrast effects: It is the evaluation of a person’s characteristics based on comparison with other people who may rank higher or lower on the same characteristics that affects the quality of decisions. • Stereotyping: It involves making decisions on the basis of the perception of the group to which a person belongs. This helps in faster decision-making and simplifying a complex world. It affects the decision-making process. • Rationality: The decisions using rationality means people decide to use an acceptable or reasonable solution to a problem rather than an optimal one which is a defined prescriptive model. This is not effective enough in making the best decision. • Bounded rationality: Individuals make decisions by constructing simplified models that carry only the essential features and not all their complexity. It helps in making decisions that are satisfactory and sufficient. They choose the first acceptable solution rather than the optimal one. • Intuitive decision-making: In higher level of uncertainty, intuitions are often used; there is little precedent to go on when predictions of the variable in question are less. When there are limited facts, they do not lead you in one particular direction. Similarly, data are of little use when there are several plausible choices and time pressure. • Overconfidence bias: When intellect and interpersonal abilities are poor, we tend to be overly optimistic, which leads to a wrong decision because of wrong perception. • Anchoring bias: At times, our mind appears to place a disproportionate amount of emphasis on the first information it receives, which leads us to focus on the initial information only, which in turn does not help in making an optimal decision. • Confirmation bias: When we avoid the information that contradicts our past decisions, it leads to the uncertainty that it is the optimal solution.

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• Availability bias: This means the tendency of people to make decisions on • • • • • • •

the basis of the information readily available to them without doing further research on it. Representative bias: The inclination to evaluate the probability of an event happening by drawing similarities and speculating about similar situations will lead to weak decision-making. Escalation of commitment: An increased commitment to a previous decision even after getting negative information also leads to wrong decisions. Randomness error: Making decisions based on the random events that happened is not an effective way to get an optimal solution. Hindsight bias: After the outcome is actually known, we tend to believe falsely that we would have accurately predicted the outcome of an event. Personality: Many special characters such as thoroughness and self-respect may affect insight and, hence, affect the decision-making process. Gender: The fact that women tend to analyze decisions more than men will lead to more accuracy in making decisions as well as taking more time to make a decision. Cultural differences: There are differences in focusing on the problem areas, analytical depth, importance of judgment and reasonableness, and penchant for individual versus group decision-making.

EXAMPLES Job Interviews Interviewers’ perceptual judgment in selecting a candidate might result in wrongful hiring.

Performance Appraisals The performance evaluation of an individual is done based on the standard parameters set by the organization. However, the process and decisions taken are largely affected by the perceptions of both the appraiser and the appraisee. In order to eliminate this predefined conception of the appraiser and the appraisee and to increase the accuracy of the performance appraisal, organizations conduct trainings for both the concerned parties.

Case: Perception of Employee toward Automation A furniture company used to function with the help of labor and only a few machines. However, due to the increasing opportunities in the market, the

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company decided to go for automation of several activities that were done manually. According to the management, automation would increase the production rate as well as the precision with which work was done. The company had decided to train its employees on the new technology that was going to be installed. Hearing about the company’s decision, two groups of employees were formed in the company: one perceived the change to be positive (Group A) and the other negative (Group B). Group A perceived automation as an opportunity for self-development, since they would learn new technology, whereas Group B perceived it as a threat to their job. Question: How would you manage to change the perception among the employees of Group B?

• • •

•

Make a quick survey of the category of employees showing a positive attitude toward this change and those who exude negativity. Communicate continuously with the employees in a face-to-face mode, joint sessions, and open conversations to understand their fear. Make the peers interact with the group and convince them that they will be adequately trained prior to using the computerized systems and that managers will actively support them by providing continuous help without retaliation. Conduct a formal workshop in association with other companies where these companies also bring in their employees and discuss the benefits of automation across various levels of employees, which can induce a competitive spirit among the employees of the furniture company and make them well convinced of the benefits when they hear from employees at the same level in other organizations.

10.16 Personality: Definitions

A stable set of characteristics and tendencies that determine those commonalities and differences in the psychological behavior and that may not be easily understood as the sole result of the social and biological pressures of the moment. —Maddi Personality is the set of psychological traits and mechanisms within the individual that are organized and relatively enduring and that influence his or her interactions with, and adaptations to, the intrapsychic, physical, and social environments. —Larsen and Buss

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Personality is that which permits a prediction of what a person will do in the given situation. —Cattell (Source: Maddi Salvatore, R. (2013), Larsen, R., & Buss, D. (2023), Cattell, R. B. (1946)). 10.17 Factors Influencing Personality

The factors influencing personality are mentioned as follows:

• Biological factors: Biological factors are primary determinants of personal-

ity. These include heredity, physique, physical stature, nervous system, and so on. According to psychologists and geneticists, heredity is one of the most crucial factors that shape an individual’s personality. The physical stature and makeup of the nervous system also play a major part in influencing an individual’s personality. • Family and societal factors: Family and societal factors are also responsible to a great extent in the formation of an individual’s personality. The size of the family and relations among the members of the family may be a major factor in deciding the personality of a person. Apart from the family background, society leaves a mark on the personality of an individual. • Situational factors: A person’s personality is also influenced by situational factors. The effect of the surroundings on personality is fairly strong. Mostly, the actions of a person are influenced by a situation rather than their behavior. Therefore, the situation may potentially have a very big impact on the actions and expressions.​ 10.18 Big Five Personality Traits

Extraversion and introversion: These terms were popularized by Carl Jung. People who are talkative and like to be surrounded by people are referred to as extroverts. People who prefer being alone and are not interested in what is going on around them are referred to as introverts. People scoring high on extraversion like to party and be a part of social gatherings and vice versa. The

FIGURE 10.5  Big

Five Personality Traits

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extraversion trait includes characteristics such as talkativeness and assertiveness, whereas the introversion trait includes characteristics such as shyness, reservedness, and nervousness. Agreeableness: This trait refers to a person’s ability to adjust in all situations and the non-reluctance to change. They accept the changes wholeheartedly and try to overcome problems and help others. Individuals scoring high on this trait are friendly and accommodating than those scoring low on this trait. This trait includes characteristics such as faith, selflessness, sympathy, and friendliness. • Conscientiousness: Individuals with this trait think in detail before acting or coming to any decision. These people are extremely cautious and follow their conscience. Common characteristics of this trait include attention to detail, proactive, disciplined, goal oriented, and so on. Individuals scoring high on this trait are more methodological and thoughtful and strive to accomplish their goals within a set time frame. • Neuroticism: People high on this parameter have a pessimistic view about life. They tend to see only the negative things in life and often suffer from depression. People with this trait are likely to experience anxiety, emotional instability, misery, and so on. • Openness: People with this trait have a liking for creativity and are active. These people prove to be good at learning due to their readiness to learn and experience new things. People scoring more on this parameter are broad-minded as compared to those who score low on the same parameter. Some of the characteristics of this trait include imagination, creativity, insight, and so on.

10.19 Myers–Briggs Type Indicator

The Myers–Briggs Type Indicator (MBTI) is used to identify a person’s personality type, forte, and preferences. Isabel Myers and her mother, Katherine Briggs, designed the questionnaire based on their work with Carl Jung’s theory of personality types. Based on the answers to the questionnaire, the personality of the people can be correlated to one of the 16 personality types, refer to Figure 10.6. The goal of the MBTI is to allow respondents to explore further down the levels of their own personalities, including their likes, dislikes, strengths, weaknesses, career choices, and compatibility with other people. The MBTI tool does not portray any dysfunctionality in the personality of an individual, rather it helps to learn more about oneself. The questionnaire is made up of four different scales. Extraversion (E)–Introversion (I): The extraversion–introversion dichotomy was first explored by Jung, describing how people respond and interact with the environment around them. Extraverts are the types who display action in an

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outward fashion, enjoy more recurrent social collaborations, and feel energized and motivated after communicating and collaborating with people. Introverts, on the other hand, are speculative, tend to be thought-oriented, enjoy deep and meaningful exchange of communication, and feel motivated after spending time alone. Human beings possess one of the traits over the other. Sensing (S)–Intuition (N): This is a scale that acknowledges how people gather information. According to the MBTI, people who prefer sensing pay substantial attention to reality and learn from their senses. They tend to focus on facts and details and enjoy getting hands-on experience. People who are intuitive pay considerable attention to patterns and impressions. Their thinking revolves around possibilities, and they think of the levels of abstraction. Thinking (T)–Feeling (F): This scale elaborates on people’s decision-making ability based on the information gathered from sensing or intuition and emphasizing facts and objective data. They tend to be consistent, logical, and impersonal when making and weighing a decision. Those who prefer feeling, consider people and emotions when coming to a conclusion. • Judging (J)–Perceiving (P): The final scale involves how people are dealing with the external world and those who lean toward judging prefer structure and stable decisions. People who lean toward perceiving are more open, flexible, and adaptable. These two scales interact with the other scales, and the judging–perceiving scale helps describe whether an individual is an extrovert when they are sensing and intuiting or making decisions. Each type is then listed by its four-letter code. For example, ISTJ, ISTP, INTJ, and ESTJ. According to the Myers & Briggs Foundation, all four measures are equally important and every type has value. When working in groups in college, for example, recognizing one’s own strengths and understanding the strengths of others can be very helpful. When working toward completing a project with other members of a group, one might realize that certain members of the group are accomplished and gifted at performing certain tasks. By recognizing these traits, the manager can better assign tasks to the group members and work together on achieving their professional and personal goals. 10.20 Values

Values offer a vital basis for understanding the personality, attitudes, and perception of an individual. Values contain a judgmental element as to what is right and wrong, good and bad, favorable and unfavorable, or desirable and undesirable. Values consist of two attributes: content attributes and intensity attributes. The content attribute refers to what is important and the intensity attribute refers to the degree of importance. An individual’s value system can be recognized when the values are ranked based on intensity. Each individual has a hierarchy of values that forms their value system. The value systems are unique to each individual.

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The value system is a major influencer of a person’s personality, attitude, behavior, and perception. Thus, a study of values can be very useful in identifying appropriate motivation techniques and leadership styles and managing conflicts. 10.21 Definitions of Values

An enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence. —Milton Rokeach The concept of the desirable, an internalized criterion or standard of evaluation a person possesses. Such concepts and standards are relatively few and determine or guide an individual’s evaluations of the many objects encountered in everyday life. —Ronald D. White and David A. Bednar The constellation of likes, dislikes, viewpoints, should, inner inclinations, rational and irrational judgments, prejudices, and association patterns that determine a person’s view of the world. —Edward Stranger (Source: Rokeach, M. (1973), White, Donald D.; Bednar, David A. (1991), Spranger, Eduard (1914)). 10.22 Types of Values

The six different types of values identified by G.W. Allport and his associates are as follows:

• Economic: The emphasis is on usefulness and practicality. • Theoretical: It has high significance for the discovery of truth through a cru• • • •

cial and rational approach. Aesthetic: The highest value is of form and harmony. Political: The emphasis is on the attainment of authority and influence. Social: The highest value is of the love of people. Religious: It is concerned with the unity of experience and understanding of the universe as a whole.

10.23 Values at Workplace

The formation of an individual’s value system is based on several internal as well as external factors such as family, society, customs, culture, and traditions. The values that a person possesses play a vital role in their workplace. It would be

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highly impossible for an organization to employ or continue the employment of any individual whose values are against the norms of society. An organization should try to encourage positive values and discourage negative values so that it leads to the creation of a healthy work environment. If an individual has a set of moral values, then these will decide the way in which they behave with others and conduct themselves. There would be a reflection of unethical behavior when the person does not have such basic moral values and this can put the organization in a problem. In order to maintain a cordial work environment, every organization has to strive to understand the value system of each of its employees. Although this is a very difficult task, the outcome would be of huge help. Depending on the outcome, the organization can frame various strategies to handle the employees. Summary

The chapter presents various aspects of attitudes and their organizational impact. It also emphasizes how an individual’s positive attitude can work wonders for the organization, various personality traits of an individual and collectively of a group can actually help in promoting the productivity, efficiency, and growth of the organization. The chapter also throws adequate light on the assessment tools to assess the characteristics that a person possesses and whether their traits will help the company achieve the desired performance. Exercise Objective Questions

1. _______ can be referred to as a combination of emotions and thought processing. • Attitude • Behavior • Learning • Values 2. _________ refers to the attitude of an individual which has been created through self or community interest. • Rationale and knowledge • Value expressive • Ego defensive • Utilitarian 3. Proximity does not refer to considering the factors that are close to each other as a group. • True • False 4. A negative attitude is not responsible for creating mistrust among employees, whereas in a workplace with a positive attitude, inducing competitiveness is taken positively which inspires employees to perform better. • True • False

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5. Operant conditioning theory of learning is used in educational research, control of alcoholism, and control of deviant children in a classroom. • True • False 6. ___________ can be defined as a process by which individuals select, organize, and interpret their sensory impressions, so as to give meaning to their environment. • Attitude • Behavior • Learning • Perception 7. The perceptual process consists of six phases: • Receiving, selecting, organizing, interpreting, checking, reacting • Receiving, organizing, interpreting, selecting, checking, reacting • Receiving, interpreting, checking, selecting, organizing, reacting • Receiving, selecting, organizing, checking, interpreting, reacting 8. Overconfidence bias will lead to wrong decisions. • True • False 9. Characteristics such as talkativeness and assertiveness belong to: • Agreeableness • Extraversion • Introversion • Conscientiousness 10. Social values emphasize the attainment of authority and influence. • True • False

CASE STUDY Firoz, a 28-year-old woman, works in a mental hospital as a technician for the last three years. In the beginning, she found the job interesting and value added. As time passed, the environment began to affect Firoz in a negative manner. As a medical technician, she was not given the opportunity to utilize the skills and knowledge she possessed as she had experience in social service for four years. At the start, Firoz was allowed to chart on the patients and to engage in conversation with the patients. These interactions helped Firoz to make her believe that she is making a difference to somebody. After one year, a new policy was implemented where only the licensed staff could prepare the charts. There was also a change in the job of a technician; they were now only supposed to visit patients and keep track every 15 minutes. Firoz was most affected as she was underutilized and needed to not use her experience and skill. Even after she completed her bachelor’s degree, the hospital did not increase her pay. Also, the yearly hikes were very low and all the employees in the hospital were told that they all were lucky to have the job during slack. In contrast, the hospital continued to make improvements in its infrastructure. The mentor was difficult to deal with, as he was unpredictable and maintained distance believing that the staff have minimal skills. Firoz noticed that her attitude toward work

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has become negative. She gets up in the morning, goes to work, and never smiles while she is in the office. She was affected by the work and was often feeling boredom. She followed the hospital policies and found that her stress level and negative attitude toward the job have started affecting her personal life. About two months ago, a job offer for a counselor training was there in a nearby clinic. Firoz did not want to go for a job change at that time. Still, she went for the interview and was selected. After getting the new job, her stress level decreased and she started feeling good and regained positive attitude. She again started working at her best at the work. Firoz was now able to have one-on-one sessions with the patients and felt that her skills were being fully utilized. This was extremely satisfying and her pay was much better than that of the previous job. As the supervisor was cooperative and kind, Firoz was very comfortable and could really begin to build her career in the new job.

Questions 1. Does individual behavior always follow from attitude? Explain. 2. What are the negative and positive attitudes being observed in Firoz? 3. What are the personality traits you see in Firoz?

Critical Thinking Questions

1. Does behavior always follow from attitude? 2. Explain the factors that influence an individual’s perception. 3. How does the workplace influence an individual’s behavior? Chapter at a Glance Meaning of Attitude

Attitude can be described as a trend to react positively or negatively to a person or situation. Types of Attitude

Attitudes are categorized into three types. Positive attitude: An inclination that brings out a desired output for persons and organizations can be referred to as a positive attitude.

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Negative attitude: The inclination of a person that leads to an undesirable result for individuals and organizations can be described as a negative attitude. Neutral attitude: People with a neutral attitude do not feel like giving suggestions with respect to an event or feel that there is a need to change. Components of Attitude

Every attitude has three components that are represented in what is called the ABC model of attitudes: A for affective, B for behavioral, and C for cognitive.

• Affective: It refers to the emotional aspect of attitude that influences the feel-

ings of an individual. For example, ‘I am afraid of snakes’. • Behavioral: It refers to the behavioral part of attitude. The behavioral component consists of an individual’s tendency to behave in a particular way toward an object or a person. For example, ‘I will scream if I see a snake’. • Cognitive: It refers to the opinion or belief part of attitude. When a person makes an opinion or judgment on the basis of available information, it is called the cognitive part of attitude. For example, ‘In my opinion, snakes are dangerous.’ Attitudes and Behavior

• Individual attitudes and behaviors: Attitudes and behaviors correlate to a

considerable extent. A person possessing a positive attitude spreads positivity in the environment for their colleagues. These people are always active as well as productive and perform better. • Organizational attitudes and behaviors: Attitudes can have a significant impact on the behavior of individuals and those around them. Organizations must therefore create a conducive work environment, job satisfaction, some type of reward or bonus, and code of conduct among the employees in an organization. Classification of Attitudes

Attitudes of people are classified into four different groups based on their functions.

• Utilitarian: This refers to the attitude of an individual which has been created through self or community interest.

• Rationale and knowledge: Understanding the rationale behind why a task is

being allotted to a particular individual or a group or why the organization has devised a specific type of strategy is another means by which people form attitudes that are positive dispositions about the firm and are better for the organization’s environment.

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• Ego defensive: Usage of attitude to protect the ego results in negative attitude.

For example, a manager who criticizes an employee’s work without offering suggestions for improvement can evoke a negative response from an individual. • Value expressive: People develop central values over time and it is the responsibility of the managers to understand the importance of values from the employee’s perspective. Impact of Attitudes on Workplace

Workplace attitudes have an impact on every person in the organization. Workplace attitudes aim at developing an employee’s confidence, efficiency, and team-building abilities.

• Validation: The workplace attitude contributes substantially to the events that

happen within the organization. For example, if there is a sales drop in a particular product of an organization, then an organization with a negative attitude will try to be defensive about the same, while the one with a positive attitude will immediately find out the causes behind the sales drop. • Competition: Attitudes in general boost the competitive environment in the workplace. A negative attitude is responsible for creating mistrust among employees, whereas in a workplace with a positive attitude, inducing competitiveness is taken positively which inspires employees to perform better. • Inventiveness: Employees feel that their ideas will contribute toward the achievement of organizational goals. A negative attitude restricts inventiveness as employees do not feel obliged to contribute to company growth. • Withholding: Employee retention is impacted by the attitude in the workplace. An organization with a positive attitudinal environment makes the employees feel that they have a big role in the contribution toward organizational success. A negative attitude leads to the loss of experienced employees, which degrades the company’s growth. Changing Attitudes in the Workplace

Negative attitudes within the workplace impact customer satisfaction and decrease employees’ morale, leading to lack of productivity and efficiency. It is extremely crucial to exhibit positive attitudes in the workplace so that they lead to a healthy business environment.

• Setting example: The mindset, thought process, and communication with

the manager often set the tone of the unit or the office, and displaying a positive attitude is the primary responsibility of the manager or the company’s stakeholders.

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• Identify motivators: There are people in the organization who are motivated

•

• • •

•

either by goals or rewards. The management of the company should identify them and find out what works best for each individual so that the workforce remains positive and motivated. Eliminate troublemakers: An employee with a bad attitude can ruin the atmosphere of the organization and inject negativity among the people and their attitudes. It is highly recommended that these employees should be encouraged to participate in the attitude-building workshops, and if they respond negatively to such strategies, then it is better to eliminate them from the organizations. Proper ambience: Neat and clean office surroundings contribute to building positive attitudes among employees in the organization. Also, the office decor contributes a lot to the building of attitude. Recognition: Employees should be praised and encouraged for good attitudes and rewarded for promoting enthusiasm among others and such groups should be steered to work toward the company’s goals and objectives. Support: Offer support to employees going through difficult times. When employees bearing positive attitudes exhibit negative behavior, there should be a mechanism and communication channel where they can discuss their problems with the managers of the organization. Learning: Learning is a change in personality self-described as a new pattern of reactions in the form of skills, attitudes, habits, intelligence, or understanding.

Learning Theories

• Classical conditioning:

This theory includes four concepts mentioned as follows: • Unconditioned stimuli • Conditioned stimuli • Unconditioned response • Conditioned response

Operant conditioning theory • According to operant conditioning, behavior is expected to be repeated if consequences are favorable and vice versa. Therefore, the connection linking actions (behavior) and consequences is the core of operant conditioning theory. • Operant behavior refers to learned behavior. Operant conditioning theory of learning is used in educational research, control of alcoholism, and control of deviant children in a classroom. • Reinforcement • Reinforce is to strengthen. This is used in operant conditioning to refer to any stimulus that helps strengthen or increase the possibility of a particular response. • This is applicable in our day-to-day lives. A few examples of which are stated as follows:

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⚬

A child may tend to study harder for the next time if they realize that the teacher appreciates good marks. An employee tends to refrain from doing a particular action if they have been punished for doing so in the past.

Reinforcers may be either primary or secondary. • Primary reinforcers: It is any reinforcer that does not need to be learned. It occurs naturally. A few examples of primary reinforcers include air, food, water, and so on. • Secondary reinforcers: These are also known as conditioned reinforcers. It is a learned reinforcer. For example, a hike in salary for good performance. Reinforcements are of four types. • Positive reinforcement: Involves the addition of something to increase a response. • Negative reinforcement: Involves removing something in order to increase a response. • Punishment: Punishment refers to adding something aversive in order to decrease behavior. • Extinction: When you remove something in order to decrease behavior, this is called extinction. Learning and Behavior

As we get to know things, we change our ways of perceiving our environment, and the way of interpreting the incoming stimuli, resulting in the way we behave or react to a situation. This process, which leads to a relatively permanent behavioral change or potential behavioral change, can be termed as learning. Behavioral psychology aims at finding behavior results from the stimuli both in the environment and within an individual. Perception

Perception can be defined as a process by which individuals select, organize, and interpret their sensory impressions, so as to give meaning to their environment. Perceptual Process

• Receiving: The process of perception begins with the reception of stimuli from the environment. These stimuli may be received from different sensory organs.

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•

•

• • •

The sensory organs receive data regarding both physical and non-physical objects. Selection: It deals with separating the significant and insignificant data so that the relevant data can be processed further. The selection phase is influenced by external and internal factors. • External factors: The external factors influencing the selection of data include size, intensity, motion, repetition, location, familiarity, and so on. • Internal factors: The internal factors influencing the selection of data include age, personality, motivation, learning, and so on. Organizing: Once the data is selected, it needs to be organized systematically so that it becomes meaningful. Following are the magnitudes of perceptual organizing. • Figure background: This principle states that the correlation of an object to its background influences perception. According to this principle, the object stands out separately from its background. • Perceptual grouping: The principle of grouping includes the following: ⚬ Similarity: The greater the similarity of stimuli, the more would be the tendency to consider it as a group. ⚬ Proximity: It refers to considering the factors that are close to each other as a group. ⚬ Closure: It means to perceive the whole part when nothing exists. ⚬ Continuity: It refers to an individual’s ability to perceive continuous lines or patterns. It refers to an individual’s capability to perceive some features of an object as remaining constant, regardless of variations in the stimuli. Interpreting: In this phase, the perceiver assigns meaning to the information. There are three major factors that affect the process of interpretation. These include the perceiver, the perceived, and the situation. Checking: The next phase checks whether the interpretations made are right or wrong. Reacting: The last phase of the perceptual process is reacting. In this phase, the perceiver takes an action in response to the perception. The action taken is influenced by the perception made. It means the action will be positive if the perception is favorable and negative if the perception is unfavorable.

Factors Influencing Perception

• The perceiver: The personal characteristics of the perceiver play a crucial role in the process of interpretation. Some of the personal characteristics of the perceiver that influence the process of perception include the perceiver’s personality, attitude, values, beliefs, habits, and so on. • The perceived (object): Characteristics of the object or target being observed also influence a person’s perception. No object is perceived in isolation. Since

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every object has a relationship with its background, it is one factor that plays an important role in perception. • The situation: The physical, societal, and organizational settings of the situation also dominate a person’s perception. The time at which an object or event can influence attention are light, heat, location, or any number of situational factors. Perception and Decision-Making

Because people’s behavior is based on their perception of what reality is, not on reality itself, it is possible that two persons can see the same thing and interpret it differently. Based on the above, the following are some factors that affect perception, thereby affecting the decision-making process.

• Selective perception: People selectively interpret what they see on the basis

• •

• • • • • •

of their interests, backgrounds, experiences, and attitudes. This factor allows people to speed-read others, but not without the risk of drawing an inaccurate picture. Hence, people’s decisions will be impaired by wrong perceptions. Halo (horns) effect: People are drawing a general impression about an individual on the basis of a single characteristic. This will negatively affect their decisions. Contrast effects: It is an evaluation of a person’s characteristics that is affected by comparisons with other people recently encountered, who rank higher or lower on the same characteristics. This factor also affects the decision’s quality. Stereotyping: It is judging someone on the basis of one’s perception of the group to which that person belongs. This will affect the decision-making process. Rationality: People are usually content to find an acceptable or reasonable solution to a problem rather than an optimal one. Bounded rationality: Individuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity. This may not ensure the best decisions. Intuitive decision-making: Intuition is often used when there is a high level of uncertainty. It may be used in the decision-making process when all given factors are ambiguous. Overconfidence bias: We tend to be overly optimistic, especially when our intellect and interpersonal abilities are low. This wrong perception will lead to wrong decisions. Anchoring bias: It is the tendency to focus on initial information as a starting point. This occurs because our mind appears to give a disproportionate amount of importance to the first information it receives. This results in not making the optimal decisions.

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• Confirmation bias: We tend to selectively seek out information that reaffirms • • • • • • • •

our past choices and we discount information that contradicts our past judgments. This could happen even if we are not sure that this is the optimal choice. Availability bias: The tendency of people to base their judgments on information readily available to them, irrespective of whether this information is enough to make the best decisions or not. Representative bias: The tendency to assess the likelihood of an occurrence by drawing analogies and seeing identical situations in which they do not exist. This will lead to making the decisions on a very weak base. Escalation of commitment: An increased commitment to a previous decision in spite of negative information that often creeps into the decision-making process. Randomness error: We tend to create meaning out of random events which is not enough to ensure the optimal decision-making process. Hindsight bias: We tend to believe falsely that we would have accurately predicted the outcome of an event after that outcome is actually known. This will confirm the situation even if we believe that it was a wrong decision. Personality: Many personal characteristics such as conscientiousness and selfesteem may affect perception and, hence, the decision-making process. Gender: Women tend to analyze a decision prior to and after the fact. This difference in the length of thinking about a problem will lead to more accuracy as well as more time in making the decision. Cultural differences: There are differences in what problems to focus on, the depth of analysis, the importance of logic and rationality, and the preference for individual versus group decision-making.

Personality: Definition

Personality is a set of psychological traits and mechanisms within the individual that is organized and relatively enduring, influencing their interactions with and adaptations to the intrapsychic, physical, and social environments. Factors Influencing Personality

The factors influencing personality are as follows:

• Biological factors: Biological factors are the primary determinants of person-

ality. These include heredity, physique and physical stature, the nervous system, and so on. • Family and societal factors: Family and societal factors are also responsible to a great extent for the formation of an individual’s personality. The size of the family and relations among the members of the family may be a major factor in

Understanding and Managing Individual Behavior 353

deciding the personality of a person. Society leaves a mark on the personality of an individual. • Situational factors: A person’s personality is also influenced by situational factors. The effect of the surroundings on personality is fairly strong. Mostly, the actions of a person are influenced by the situation, rather than their behavior. Big Five Personality Traits

• Extraversion and introversion: People who are talkative and like to be

•

• • •

surrounded by people are referred to as extroverts. People who prefer being alone and are not interested in what is going on around them are referred to as introverts. Agreeableness: This trait refers to a person’s ability to adjust in all situations and the non-reluctance to change. They accept the changes wholeheartedly and try to overcome problems and help others. Individuals scoring high on this trait are friendly and accommodating than those scoring low on this trait. This trait includes characteristics such as faith, selflessness, sympathy, and friendliness. Conscientiousness: Individuals with this trait think in detail before acting or coming to any decision. Neuroticism: People high on this parameter have a pessimistic view about life. They tend to see only the negative things in life and often suffer from depression. Openness: People with this trait have a liking for creativity and are active. These people prove to be good at learning due to their readiness to learn and experience new things.

Myers–Briggs Type Indicator (MBTI)

The MBTI is a self-inventory designed to identify a person’s personality type, strengths, and preferences. The questionnaire itself is made up of four different scales.

• Extraversion (E)–Introversion (I): Extraverts are ‘outward-turning’ and tend

to be action-oriented, enjoy more frequent social interaction, and feel energized after spending time with other people. Introverts are ‘inward-turning’ and tend to be thought-oriented, enjoy deep and meaningful social interactions, and feel recharged after spending time alone. • Sensing (S)–Intuition (N): People who prefer sensing tend to pay a great deal of attention to reality, particularly to what they can learn from their own senses. They tend to focus on facts and details and enjoy getting hands-on experience. Those who prefer intuition pay more attention to things such as patterns and

354  Understanding and Managing Individual Behavior

impressions. They enjoy thinking about the possibilities, imagining the future, and abstract theories. • Thinking (T)–Feeling (F): People who prefer thinking place a greater emphasis on facts and objective data. They tend to be consistent, logical, and impersonal when weighing a decision. Those who prefer feeling are more likely to consider the people and emotions when arriving at a conclusion. • Judging (J)–Perceiving (P): The judging–perceiving scale helps describe whether you are an extrovert when you are taking in new information (sensing and intuiting) or when you are making decisions (thinking and feeling). Values

Values offer a vital basis for understanding the personality, attitudes, and perceptions of an individual. Values contain a judgmental element as to what is right and wrong, good and bad, favorable and unfavorable, or desirable and undesirable. Values consist of two attributes:

• Content attributes • Intensity attributes Types of Values

There are six different types of values stated as follows:

• Economic: The emphasis is on usefulness and practicality. • Theoretical: There is high significance for the discovery of truth through a • • • •

crucial and rational approach. Aesthetic: The highest value is of form and harmony. Political: The emphasis is on the attainment of authority and influence. Social: The highest value is of the love of people. Religious: It is concerned with the unity of experience and understanding of the universe as a whole.

11 GROUP AND GROUP DYNAMICS

An Opening Vignette Case Study on Group Behavior and Dynamics The opening vignette is about the concept of forming a formal group within an organization with proper reporting structures and assigning tasks to the group based on the skill sets of the members of the group to attain high productivity and keeping an open work culture and high level of group cohesiveness. Once two men, who were supposedly friends, thought of starting an organization on advisory services and giving a formal structure to it. By mutual consent, one took up the leadership role and the other took up the position and the role next to him. In their organization, they desperately wanted to implement the buddy model and accordingly started reaching out to their mates from yesteryears to join their organization. The idea was to induct people by offering salaries at par with their present salaries and later when the business would pick up, they would do the profit sharing with reference to employees’ contribution and effort. The people who were inducted at the senior management level had considerable years of experience and were focused on achieving the organization’s growth. Each of them formed their own group to head projects across continental Europe. The formal groups so formed composed of satisfied employees because of flexible work culture, transparent inter- and intra-group communication, and tremendous support from the organization’s top management in terms of implementation of a group member’s idea for increasing productivity to working for very big clients such as Lufthansa and Turkish Airlines. Since the group size was small, every member was given a chance to face the clients, DOI:  10.4324/9781032634258-11

356  Group and Group Dynamics

which boosted the members’ confidence. Also, the company ensured that employees had a yearly gathering at some picturesque location to give them a feel-good factor, and this benefit was also extended to the family members. So, the project groups constituting the top management, the senior members, and the team were very closely united, and a consensus decision-making style was adopted in which every individual could feel that they were important to the group and that their ideas were valued motivating them to contribute further. With strong employee support and excellent business strategies, the organization’s turnover in a span of two years reached $400 million.

11.1 Introduction

Group dynamics are the dominant deeds, methods, and transformations that take place within and between groups. Groups come in all forms and their objectives are several and of a vast range, but their impact is widespread. The affinity to bond with colleagues in groups is often the solitary and crucial trait of individuals and the practices that open up within this crowd make a permanent impression on their associates and on the public. To recognize the populace, one should recognize groups and the dynamics of that group. 11.2 Definitions

A group is defined as a number of individuals who join together to achieve a goal. People join groups to achieve a goal that cannot be achieved by them alone. —Johnson and Johnson A group consists of any number of people who:

• interact with each other • are psychologically aware of one another • perceive themselves to be a group

—Schein

Group dynamics is referred to as the field of inquiry dedicated to advancing knowledge about the nature of groups. —Cartwright and Zander (Sources: Johnson et al. (2016). Schein, E.H. (2000), Cartwright et al. (1968))

Group and Group Dynamics 357

11.3 Meaning of Group

A group is defined as a minimum of two or more than two people who in collaboration undertake tasks to achieve certain goals. These individuals come together either via an organization or through some societal bodies. The groups can be categorized into formal and informal groups and have common ideas, principles, and goals. In a group, the individuals can be given a collective identity. The group size can be in dyads or triads. The members of a group react to any situation differently than they would do it on an individual basis. For example, various religious groups. 11.4 Group Characteristics

The characteristics of a group are as follows:​ A group has minimum two members and a maximum based on the tasks and activities of a group. Large groups are difficult to manage and add complexities in communication and execution of tasks by the group. 11.5 Classification of Groups

A group can be classified into two types: formal groups and informal groups.​

FIGURE 11.1 

Group Characteristics

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FIGURE11.2 

Classification of Groups

11.5.1 Formal Groups

These groups evolve from the organization’s structure and work toward a common goal. A committee formed by the organization can be considered a formal group, for example, research and development group, placement group, and so on. These groups have to abide by certain rules and regulations of the organization specific to the task allocated. The contributions of the formal group toward an organization are as follows:

• Completing a task by working together, which otherwise is impossible to be accomplished individually.

• Solving problems effectively and analyzing the problem from different perspectives to generate solutions.

• Inventing new ideas and finding innovative ways and methods have remained the forte of formal groups.

• Implementing the new ideas or putting the devised plans into action. • Imparting guidance and training to the new recruits. Formal groups include permanent and temporary groups, where permanent groups can be any departmental unit, and temporary groups are formed to perform a specific task such as an event management group. Under formal group, the command group constitutes a boss and their immediate subordinates, and the chain of command is defined by the power and accountability accorded to the individual as per their role. The leader plays an important role and sets the objective of the group. The military groups are the command group. Formal groups include the following:

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• Team group: The members within the team group have interchangeable roles •

• • •

•

and work on a specific project in a team. Task group: Here, the group is formed and members are allocated a specific task, and nobody is in command of the group. Employees are not constrained to report to their immediate superior and often seek approvals and bring the task to completion. Command relationships are crossed. These employees work together to complete the task and the group may be temporary and open ended. Technological group: The team has to work as per the laid down goals, roles, and responsibilities and adhere to specific protocols. Status group: Members of a particular group/status enjoy special privileges, such as members of an elite club and so on. Committees: A group of people who are allocated a particular task or function. The committees are generally formed to address issues, investigate the issues, and provide solutions for the same such as grievance redressal committees. Committees consist of members at the consultant, administrator, and other levels. Recommendations of possible solutions are sent to the designated persons for implementation. Command group: This group consists of a manager and a team of members. The members of the group work on a project and progress is monitored by the manager from time to time. The membership of each employee in the group is directly related to their designation.

11.5.2 Informal Groups

An organization’s informal groups are the groups that evolve to meet social or affiliation needs by bringing people together on the basis of shared interests or friendship. Thus, informal groups are alliances that are neither formally structured nor organizationally determined. These groups are natural formations in the work environment that appear in response to the need for social contact. Many factors explain why people are attracted to one another. One explanation is simply proximity; when people work near one another every day, they are likely to form friendships. That likelihood is even greater when people also share similar attitudes, personalities, or economic status. The most obvious example is a group of friends.

• Friendship groups: Groups often develop because the members within the

groups are compatible with one another, having similar opinions, thought processes, common interests, and wavelengths. These groups are known as social alliances. We call these formations ‘friendship groups’. • Interest groups: Groups that work for a specific objective or for a common cause and have common interests are called interest groups.

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• Reference groups: Comparing and analyzing and then making decisions or

forming opinions keeping in view a specific group, such groups are termed as reference groups. These groups are internal or external to the organization and for many, one obvious example is the reference group. Other groups include religious groups, social groups, or a group of colleagues. While referencing to such groups, the comparison need not to be done positively always. It can be against negative scenarios as well. • Membership groups: They are members of formal and informal groups. Members of this group are allocated roles and responsibilities, and they enjoy benefits from the group for achieving a particular goal. • Cliques: These are groups that have people from different professions and are permanent in nature and informal in type. Here, employees develop opinions, exercise some form of control, and establish norms regarding productivity and relationship with their superiors, peers, and subordinates. The members of this group do not allow any external entity to intervene or join the existing group. 11.6 Formal Groups versus Informal Groups 11.6.1 Why Do People Join Groups?

People join groups for the following reasons.​

• People get a sense of ‘security’ when they are in a group. They develop confi-

• • • • • • •

dence while in a group and can face obstacles comfortably. Basically, the novices in an organization turn toward others for support and guidance, whereas employees working for long in the organization already belong to some formal group or the other. People join groups basically to have more interaction, work closely with one another, exchange information, and share knowledge. The identity of an individual is well established if they join a group and a group helps the individual to understand their own potential. When people are in a group and if the group is considered important by outsiders, then people in that group enjoy the social status also. When people join groups for achieving certain objectives, they realize their self-importance and worth, which gives them a very good feeling. It is said that there is power in numbers, so group thinking and group decision are more effective than being done on an individual basis. Goal achievement becomes easier in a group because certain tasks or activities may be easily performed in a group. Groups can easily get adopted or associated with regulatory bodies, enjoy regular interaction and fulfill social needs.

Group and Group Dynamics 361 TABLE 11.1  Formal versus Informal Groups Parameters

Formal Group

Informal Group

Source/evolution

• It possesses a structure and

• Voluntary formation. • Formation of such groups happens in

works for the organization. • Members of the group report to the manager and are dependent on one another due to operational aspects.

Authority

• Authority is allocated

Communication

Communication happens in a top-down or a bottom-up approach but strictly through the designated authority.

Behavioral trends

Employees’ behavior is controlled by organizational rules and regulations to attain productivity and efficiency. In case of any violation of the rule, the group member is subjected to punitive actions. They are groups of large size.

Size

to a member as per organizational hierarchy. • Top management delegates authority to the individual.

formal organizations.

• Groups are formed from informal

interaction between people of different units and work locations where they share and exchange sentiments and views, which gives them social satisfaction not provided by the organizations. Authority is allocated to the person based on their seniority, age, and capability.

There is no organizational hierarchy where communication is concerned, though people are connected with one another informally and information flows from every person to every other person. For an informal group, it is the moral value of any member to prevent themselves from breaking the norms. If the member still continues breaking the norms, then they are forced to exit the group. They are smaller and close-ended groups. These groups are unstable due to the high level of emotions and sentiments attached.

Stability

These groups are stable for longer time frames.

Performance rewards Group dissolution

May be financial or non-financial. As per group dissolution directive from the management.

Non-financial rewards in terms of status and prestige. Group dissolution might lead to disintegration into different groups.

Number of groups

The organization is divided into smaller units or spread across locations, and these units or locations can be treated as formal groups.

They can be within or outside organizations, and members can belong to various groups as well.

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11.6.2 Models of Group Development

CASE STUDY: MODEL OF GROUP DEVELOPMENT DeLaso caters to various IT and IT-enabled services, and a group has been formed of members from various locations of this organization to work on the process improvement project for supporting the huge clientele base. The project management group comprises both senior people and junior members.

Stage 1: Project Group Formation or Forming Stage

• • • • • • •

Jennifer as a group lead with 16+ years of experience in managing process quality. Madeline with 10 years of experience as a project manager for quality assurance in the banking domain. Timothy with seven years of experience and a strong application and database development background. Anderson with eight years of experience working in various project management roles and serving as a business analyst also. Donna with two years of experience as a team member in the process improvement project. Agni with three years of experience as a team member in the process improvement project. Rohit with five years of experience as a technical architect.

Since the group members were new to each other, Jennifer decided that they should have an informal introductory meeting to put everybody at ease so that they could work comfortably on the virtual platform with one another. The initial meeting consisted of introduction of members followed by a small agenda consisting of:

• • • • •

Allocating roles and responsibilities Getting familiar with the project they are going to handle Team-building exercises Team communication norms and procedural workflow Introduction on how to use the SharePoint site that will be used for this project to share ideas, brainstorm, store project documentation, and so on.

The group members met one another on a positive note, and roles and responsibilities were allocated with some opposition from their side, since everybody wanted a key role.

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The architecture of the project and the design of the database were handed over to Rohit, but there was opposition from Rohit since he thought that he required at least Donna with him to complete the assigned task. Since Timothy was assigned the application development part, it was decided that he would help Rohit at intervals to validate the database design. Agni was put on Timothy’s team. It was then decided that Anderson would look after the analysis and reporting and Madeline, the quality. Project execution guidelines were discussed so that every member was on the same platform.

Stage 2: Project Kick-off or Initiation (Storming) Project service-level agreement was signed by Jennifer, and the schedule and milestones for the project were put up by Madeline after a discussion with Anderson. Here again, there was opposition from Timothy for unrealistic delivery deadlines. Jennifer sorted out this issue by looking up at the company’s archive of previous projects and finding out the most appropriate schedule for that project milestone.

Stage 3: Project Execution or Norming Stage With moderate modifications in the project plan consisting of development and quality plans, the team has now been working together and supporting one another with the project’s major and minor issues. Only the project updates were not happening as per schedule on SharePoint, which Jennifer had to resolve so that the group members could be on the same page. Weekly meetings happened, and the project’s progress was up to date. Within the group, some acted as mentors, while others were mentees. Members expert in their own domains trained others as and when they found the opportunity.

Stage 4: Project Delivery or Performing Stage The development and testing of the components of the project have reached their deadlines, and the customer acceptance phase has to be initiated prior to implementation on-site. Regular remote demonstrations through TeamViewer were being given by Madeline and Jennifer and the delivery and deployment team of two members (Timothy and Donna) were getting ready to work on client’s side for successful implementation.

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Stage 5: Project Closure or Adjourning Stage The project closure was initiated after a period of seven months by handing over the deliverables to the customer’s project head and resources were released by Jennifer formally after the team met to discuss the strengths and weaknesses of the project, the things they learned from this project, the best practices which they were not fully able to implement and the tingling issues of squabbles and differences they had in the past seven months. Since the project was a big success with 14 percent profit margin, the project sponsor and some executives from the top management hosted a dinner to celebrate the successful completion of the project.

Summary The success of the project can be attributed to efficient project group formation, effective role and responsibility allocation, sound ownership of responsibilities allocated, excellent group collaboration and communication, and proper execution of team and project guidelines.

11.6.2.1 Five-Stage Model

The five-stage model of group development was proposed by Bruce Tuckman in 1965 and the stages of group development are as shown in Figure 11.3. Forming: In the first stage, the members of the group try to acclimatize with one another and start learning new techniques and methods to work and interact with the teams. Since the team is newly formed, there is very little difference in

FIGURE 11.3  Stages

of Group Development

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opinion among the members. During the initial stage of group formation, the group needs to set up its goal, develop group rules and practices, allocate roles and responsibilities to the members within the group, and build rapport and trust. In the forming stage, the contribution of the leader is quite significant in group formation. Storming: In the second stage, disagreements and differences within the group members arise as they try to showcase the validity of their opinions and objectives. At this stage, the identification of roles and proper allocation of responsibilities to the individual members within the group are done. The group gets a necessary structure and builds consensus by revisiting and refining the purpose. Conflict resolution is the forte of this stage. Norming: This stage is characterized by incorporating problem-solving strategies and concepts and resolution of conflict. At the norming stage, the team learns to make decisions and implement course of actions. Responsibilities taken up by the team members are more and leaders become less directive, team members feel empowered and multiple leaders emerge. • Performing: The teams are engaged in identifying their strengths and weaknesses while accomplishing the objectives. Teams become flexible in terms of taking up roles and responsibilities and are able to evaluate their effectiveness. Based on the age of the team, expectations are set high, and the team uses smaller groups for decision-making and task completion. Also, the team is aware of the degree of alignment each member has toward the stated goal. In this stage, there is frequent sharing of roles. • Adjourning: A well-integrated group disintegrates after the task is accomplished to reform task-oriented groups once again. These groups are given schedules and deadlines to perform the tasks. It is said that the stages attained by the group are not sequential, rather some stages can occur simultaneously or sometimes a group goes back to its previous stage and ignores organizational context. For example, the cabin crew of Air India, who were strangers at the very first instance on a flight to Paris from Delhi, in a few minutes, had become a high-performing group. The organizational framework provides the rules, task descriptions, data, and resources required for the group to execute efficiently.

11.6.2.2 Punctuated Equilibrium Model

This type of group model is for transitory groups with deadlines, and the formation of the group does not follow the five-stage process. They go through transitions, that is, for some time, they are active and then they switch to inactive modes. Mostly during the middle of their tenure, they experience a rise in productivity levels. A good example of punctuated equilibrium can be found in our own evolution. Homo erectus originated in Africa and migrated to places as far as China and

366  Group and Group Dynamics

Java, but persisted largely unchanged for nearly 2 million years, before becoming extinct shortly after modern humans migrated out of Africa about 60,000 years ago. Homo sapiens, in turn, originated in Africa about 150,000 years ago. There are certainly some changes in modern humans, since some of us migrated out of Africa, but these changes are minor and are certainly part of the ‘stasis’ part of punctuated equilibrium. Currently, in relation to group development models, there are two phases attributed to this punctuated model. 11.6.2.2.1 Phase 1

The group’s direction is set first. Then it is in the inactive mode locked in a fixed course of action until a transition takes place when it has reached the midway. The midpoint then becomes an indicator that urges the group to act fast and implement changes if needed in short bursts with the replacement of old arrangements and the implementation of new viewpoints. The course of action goes in for revision and transits to Phase 2. 11.6.2.2.2 Phase 2

This period again starts with inactivity and the group executes plans created during the transition period. The group’s last meeting is characterized by many activities. The model attributed to temporary groups with deadlines follows the sequence as given below:

• • • • •

First meeting assigns group’s direction. Then there is a transition to Phase 2. Before the onset of Phase 2, half of the time is used up. A transition takes place which initiates major changes in the second phase. The last meeting of the group is characterized by activities taking place at a quick pace.

The punctuated equilibrium model is characterized by long periods of inactivity, with massive changes during transition with the constraints of fixed schedules and deadlines (Figure 11.4). 11.6.3 Meaning of Group Dynamics

Group dynamics basically relates to a group’s formation, structure, interaction between people of the group, the processes followed by the group, and so on. The processes followed by the group can be task centric—where individuals concentrate on collating information, summarizing it, and drawing up an analysis for the same—or can focus on societal aspects, including bringing harmony between different groups of society, or entertaining the masses, or encouraging groups,

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FIGURE 11.4  The

Punctuated Equilibrium Model

and so on. When we deal with formal groups, the processes include the allocation of roles, responsibilities, and authority to the people, building synergy between members of the group, working on the level of effectiveness of the group, resolving various conflicting issues among the members, and so on. When the group is an informal group, then the group dynamics do not encompass any definite structure. The Oxford Dictionary defines group dynamics to be an interaction of complex intra- and interpersonal forces operating in a group, which determines the group’s character, development, and long-term survival. Stating it in another way, it is a field of study concerned with the determination of the laws underlying the group behavior. A formal definition of group dynamics is that it is a branch of social psychology that explores or unearths difficulties regarding the formation of a group, the psychology of people who have joined the group, the change in conduct or mindset of the people after interacting with the group or while in a group, analysis of the performance of the group, and the effect of authority and deeds on the group processes.

CASE STUDY A company was passing through a phase of inertia with a static base of customers when its CEO decided to give the employees a little push to do something better, that is, get more profit from new client acquisitions. So, a survey was done to understand the work expectations from employees’ perspectives. The employees found an open work culture within the organization but stated that it lacked a proper structure and communication hierarchy and due recognition of effort. To address these concerns, the CEO told the HR unit to

368  Group and Group Dynamics

prepare an organizational chart with clearly defined roles and responsibilities and elaborate job descriptions. He also started holding meetings with employees of every functional unit once in 15 days and a monthly joint address to all employees across the units, in which he kept employees updated about the company’s new ventures, targets, expansion plans, and so on. He also insisted that unit heads should also conduct meetings from time to time and listen to the employees’ grievances or know their team better. While the heads of the units were busy with their teams, training and mentoring them and identifying which individual could be put to better use, the CEO, with his marketing team, started making extensive marketing plans and executives were directed to put the plan into action. Among the team of executives, two members were unable to adapt to the organization’s flurry of activities, which included extended work hours as well, and took the decision to resign from the organization, which was taken positively. The customer unit head thought it was at this juncture he would make proper arrangement to conduct customer service trainings for the entire helpdesk for seven consecutive days, which ramped up sales substantially and bottom-line profitability. Because of added consultation, training, and coaching, the CEO reported the following improvements during the board meeting:

• • • •

Satisfaction level of the staff increased because of additional investments in terms of training and staff development programs. Employees were allocated tasks as per their skills and work styles. Customer service training increased employees’ ability to recommend appropriate products and services to customers. They have a process in place to add and keep new customers.

Overall, there was a change in the business model, and business practices were up to date and profitability increased, thereby facilitating employees to enjoy monetary benefits and perks as well.

11.6.4 Group Behavior 11.6.4.1 Group Size

• Small groups, varying from 2 to 10 people, are very effective because every member of the group can actively participate and perform the tasks.

• Large groups do not allow every member to participate and their turn comes in sequence and a lot of time is wasted in structuring the processes. A member’s satisfaction is of less importance in large groups because they do not get the opportunity to show their skills very often and experience unity with others.

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• Based on the size of the group, the behavior of the group also changes in terms of frequency of conflicts, group norms, unity, and decision-making.

11.6.4.2 Group Rules

These are rules or code of conduct which are established by the group members and the members have to follow them religiously. Group norms are standard guidelines that enable the members to know how to behave once they are in a group. These norms can be formal and informal. For example, colleagues in a group going out for lunch together make the norm that they would sponsor lunch on a rotational basis and that they would have such informal meetings over lunch once a month. Rules or norms are of two types: one which is essential and the other which is applicable. The essential norms have to be followed by every member, while the applicable norms are required to be confirmed by the members. A little deviation from the set of rules is acceptable, but a significant deviation results in punishment. For example, if a company is perceived as a group of people serving, then violating certain norms such as non-disclosure agreements signed by the employees of that company is an offense which is punishable by law. The rule formulated by the group possesses certain characteristics which are as follows:

• Rules of a group reflect the group’s personality, behavior, and purpose. • Rules impose behavioral constraints on every member of the group. • Rules are applicable to every member within the group. 11.6.4.3 Group Role

The role of an employee within the organization entails the responsibility the candidate is entrusted with along with the position title. Similarly, group roles are entrusted to the formal groups within the organization. These roles are prescribed by the organization in an attempt to distribute the workload among the various members of the group. In informal groups, the workload is not uniformly distributed. 11.6.4.3.1 Types of Group Roles

In practice, three important group roles can be described.

• Work roles: These roles are assigned to accomplish a specific task. For the said

tasks, strategies are devised, tasks are assigned, and progress is evaluated. For example, during the semester, staff members are assigned the role of academic coordinator whose responsibility is to monitor that the lectures are being conducted in a smooth manner.

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• Maintenance role: These roles help maintain participation and obligation to

a group by the group members on an emotional level. Examples of these roles may be encouraging other fellow members to participate, fawning and recompensing other members for their excellent contribution and the like. • Blocking roles: These roles are harmful to the group and tend to disrupt the group. The traits of a group that is assigned such roles are being dominant, aggressive, disruptive, and distracting. 11.6.4.3.2 Role Identity

The milestones of a role are attitudes and actual behaviors, which give identity to a particular role, the role identity. Clearly defined roles form a clearly visible role identity. On the other hand, the opposite makes it clouded. Fast and unstable change in roles is human nature, and it occurs when there is a need of change detected in the surroundings. For example, if an employee is currently being promoted to a managerial position, their attitude will be changed from pro-worker to pro-manager maybe in a month. 11.6.4.3.3 Role Ambiguity

Role ambiguity can be defined as a difference between the defined role and the perceived role. This can be the most confusing and this happens when undefined jobs are assigned to employees, other than their specified job descriptions. The consequences of role ambiguity can be listed as frustration, job dissatisfaction, stress, and tension among employees. However, role ambiguity, if extreme, can result in continuous absenteeism and can affect the turnover of the company. 11.6.4.3.4 Role Conflict

Human life is filled with different types of roles. While serving as an employee in an office, a person plays the role of a father or a husband and much more when they are at home or in the society, they live in. The natural roles are compatible with each other, whereas others may create a conflict. When a person faces a situation where playing one role becomes an obstacle for another, because of the diversity of its nature, it creates conflict, which is called ‘role conflict’. In some cases, two or more roles turn out to be mutually contradicting or conflicting. For example, a role conflict can occur where an individual has to be a father and coach to his child at the same time. 11.6.4.3.5 Role Expectations

Role expectations are predefined behavior guidelines for an individual who is assigned that role. How one should behave in a given situation is determined

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internally, and also a lot depends on the person’s expertise or experience in handling complex situations. A manager within any organization needs to handle situations keeping in fore the business perspective and goals while remaining a source of constant motivation and encouragement for his employees. 11.6.4.4 Group Cohesiveness

Group cohesiveness refers to the extent to which members interact with one another in the group, are influenced by the thought process of the members within the group, the extent to which they have faith and belief in the group, and are enthused to remain part of the group and work toward a specified set of objectives. Group cohesiveness is affected by the following factors:

• The extent of interaction among the members of the group. • External threats, which enhance unity among the members. • The level of intrusion, which means a person who is interested to join the group faces resistance from the group if the group is highly cohesive.

• Leadership traits in a person, which can increase or decrease the group cohesiveness. • The goals and objectives laid down by the group and the degree to which members are aligned to the goals and objectives of the group. • The attitude and value of the group, that is, with the set of right attitudes and values, the cohesiveness within the group increases. • The size of the group—the bigger the group, the lesser the interaction among the people, the less the degree of alignment of people toward goals and objectives, and there is an increase in workload distribution, which imposes restrictions on communication within the group. A typical example of group cohesiveness: Meera joined a gym to stay fit. When Meera and other group members started sharing their fitness schemes and discussing their diet plan together with the instructor, Meera started feeling close to the other members and was happy with her decision to join the group. 11.6.4.4.1 Advantages and Disadvantages of Group Cohesiveness

The highly cohesive group has the following advantages: More teamwork and less difference in opinion, which results in less conflict and improved dialogue with team members. Generally, a cohesive group is more productive because every member gives their best to work for the common cause with fewer obstacles in matters related to work. Factors that affect group cohesiveness are interdependent, size, homogeneity, group status, leadership and competition, location, etc. Generally, the productivity of a cohesive group is high compared with that of non-cohesive groups.

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The above specifications are for a cohesive group, but whether a cohesive group is beneficial from an organizational perspective depends on the performance norms of the group. Some norms enable the group to function more effectively, like participative decision-making whereas low performance norms can affect the productivity of the group. For example, in a cohesive group meeting deadlines will be resisted by the group if the norm is to work at a consistent pace. Also, group cohesiveness can promote the aspect of groupthink in not such a productive manner, because many a time, the ultimate goal is set aside due to the fear of members’ separation from the group. In summary, we can state that high performance and high cohesiveness result in high productivity, whereas high performance and low cohesiveness result in moderate productivity. Low performance and high cohesiveness give low productivity and when both factors are low, the productivity is low. For a cohesive group to work toward organizational goals, the leader or the group manager should do the following:

• Emphasize accomplishment of their tasks. • Increase the commitment level of the members within the group by encouraging participation to achieve organizational goals.

• Increase the competitive spirit within the members of the group for sooner and better task accomplishment.

• The manager should dissolve the group once the tasks are accomplished and send the members to other departments or projects and again start with a new group for diversifying experience and control.

11.6.5 Group Decision-Making Process

It is a circumstance featuring individuals to jointly form an alternative from the set of options. The alternative chosen is not the responsibility of a single individual but a group of individuals who contribute directly or indirectly to it. Decisions made by groups vary from those made by individuals. Group decisions are more extreme than individual decisions as the decisions have the support of a majority of the group. Group decision-making process is similar to a normal decisionmaking process comprising the following steps:

• • • • • •

Problem identification Information retrieval Evaluation of alternatives Selection of an alternative Implementation of the alternative Result concluded from implementation

For example, the production team at ABC Steel received a huge assignment for the hot rolled steel bar. They need to come up with this new version to launch in

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the market in three months. The production team is working on its design and discussing it with all the members of the group, which is group decision-making. 11.6.5.1 Benefits of Group Decision-Making Process

• When a group makes a decision, chances are that the decision is stoic and bold, • • • • •

and there is a high probability of criteria, effect, and alternative being considered. The overall integrity of the group also remains intact. Group decision-making also promotes tapping into a large information base where people providing such information are experts in their own domain. Group decision-making can enhance the complexity of the entire decisionmaking process because there are too many alternatives and ideas made available by the people. If a decision is taken by a group, then there is greater acceptance by the relevant authority, and implementation of such decisions is much faster. People hold themselves more responsible and accountable in their own arena and for the decisions they have taken. The decision-makers and the implementers of the decision are the same people, so the commitment to make the implementation successful is also high.

11.6.5.2 Disadvantages of Group Decision-Making

• With too many opinions and absence of a consensus, group decision-making might lose its effectiveness.

• In group decision-making, the time required to take the decision is more, which can indirectly affect the productivity of the group.

• Incorrect groupthink might make group decision-making less effective. • Responsibility taken up by the members of a group may not be equally distrib• • • • •

uted within the group. Conflicts may arise within the group refraining it from being productive. Decisions can have a high degree of polarization leading to problems. Group decision-making enhances cost in terms of money, time, and resources. Competition can arise among the group members. Groups without a leader lack focus and the decisions taken by that group are vague.

11.6.6 Group Decision-Making Strategies

Group decisions can be autocratic, democratic, or made by consensus. Three forms of decision-making are elaborated as follows:

• Autocratic form of group decision-making implies that decisions are taken

solely by the leader of the group and the success or failure of implementing

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that decision lies with the leader. Decision-making is faster and less time-consuming. When an autocratic form of decision-making is used, it is imperative that the leader has the entire information and is very clear about which decision will work the best. For example, Leona Helmsley of Helmsley Hotel Chain used an autocratic style, which made the hotel chain popular, but employees were bogged down due to her demand for perfection. • Democratic style of group decision-making is a strategy in which a leader allows their team to vote for a decision. The alternative that gets the majority of the votes is taken as the final alternative. Decision-making is faster in this case, though responsibility is not accorded to any individual for the outcome of implementing the alternative for that decision. In this approach, the leader may not have the critical information with them. For example, Steve Jobs followed a democratic style of leadership wherein he actively involved the top management to make key decisions with regard to product designs and manufacturing. • Consensus style of group decision-making strategy is a strategy where a decision is reached only after a group consensus. Though this is time-consuming, it is highly effective, since the decision is a blend of many ideas and information. Here, consultation might be one to one or with the group itself. Whether it is an individual’s decision or a group’s decision, the goal should be kept in mind, and discussion should be pushed to higher levels of generality as a generalization of ideas unites people in the group. Also, the resolution of an issue should be done efficiently and the group should collect ideas and establish decision-making criteria. If there is no consensus within the group, then the approach is to give time to think to individual candidates and pen down their issues and concerns to be dealt separately in a fresh discussion later. In some cases, the strategy is to organize small groups, bring them to a consensus, and finally make the decision. Sometimes, it is the strategy of the leader to create a contradictory statement to refocus the discussion and identify real concerns or choose another facilitator for decision-making. For example, in small business partnerships, if the decision of one partner to induct people from their previous organization is not accepted by another partner, a consensus process could help both arrive at a decision, and they would feel supported, respected, and trusted by each other. 11.6.7 Impact of Group on Individual’s Behavior

An individual’s behavior is influenced by the group where they belong to. For example, religious fanatic groups actually mold an individual’s mind in a negative way. On the other hand, an individual belonging to the groups that provide services to people is impacted by them in a positive way. The key phenomena of group influence are as follows. Groupthink: It is basically a group decision-making process where smooth and quick decision-making is the key without focusing on more result-oriented

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options. In groupthink, individuals are forced to think like a group rather than voicing their own ideas. Sometimes, the performance of the group deteriorates due to groupthink behavior. The factors responsible for groupthink behavior are as follows: • Isolation from external environment • Extreme loyalty to the group, forbidding individuals to cause controversies • Loss of innovation or creativity • Achievement of unrealistic levels of certainty • A biased leader Groupshift: This is a phenomenon where a person loses their sanctity and identity, and acts in accordance with the group. In this, all the control and constraints are lost, and a racist person with group support will act in a more racist manner or a liberal individual will be more liberal without analyzing the consequences. People in groups evaluate risks differently than when they are alone and hence tend to take more risks. Deindividuation: It is the loss of a person’s individuality and they tend to undertake activities dictated by the mob or the group. Some experts are of the opinion that deindividuation can have both positive and negative consequences and chances are high that the individual maintains anonymity while carrying out activities from negative aspects. A larger group has a greater percentage of members showing the traits of deindividuation. Hogg and Vaughan (2008) define deindividuation as ‘a process whereby people lose their sense of socialized identity and engage in unsocialized, often antisocial behaviors’. The Halloween experiment was one of the most interesting experiments which brought out the concept of deindividuation very strongly among group members, where the children took two extra Halloween candies in response to a group activity and under the promise of anonymity (true identity not exposed due to the costume). 11.6.8 Impact of External Factors on Group Behavior

Various external factors impacting group behavior within the organization are summarized as follows (Figure 11.5):

• Organizations’ strategy will actually evaluate the authority of task groups,

which will enable the management to decide the allocation of resources to the task group to perform the desired tasks. • Organizations use proper reporting structures, which show who reports to whom and who all are empowered with the authority of decision-making. • Organizations formulate rules and regulations, policies and procedures, job roles, responsibilities, and descriptions to standardize employee behavior. • Availability and allocation of schedules, deadlines, material resources, and machineries also dictate the behavior of the group within the organization.

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FIGURE 11.5  External

Factors Impacting Organizational Behavior

• The behavior of the group is also attributed to rewards and benefits accorded by the organization to employees.

• Organizational culture defines standards of acceptable and unacceptable

behavior for employees, who have to align themselves with the organization’s culture. • The physical infrastructure of the organization provides barriers and opportunities for task group interaction. Summary

This chapter takes you through the concept of the group, its characteristics, types, and contribution to organizational growth, the fundamentals of groupthink, and its impact on individual behavior. It also elaborates on various models of group development and their implementation in organizations and the perceived outcome, group behavior, cohesiveness within a group and its impact, and advantages and weaknesses of group decision-making. The chapter summarizes every aspect of group and group dynamics in the organizational context.

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Exercise Objective Questions

1. Which type of group model is for transitory groups with deadlines and the formation of the group does not follow the five-stage process? • Five-stage model • Star model • Punctuated equilibrium model • None of the above 2. Which of these refers to the extent to which members interacting with each other in the group are influenced by the thought process of the members within the group? • Role ambiguity • Group cohesiveness • Role conflict • Role identity 3. An autocratic form of group decision-making is where • Decisions are taken solely by the leader of that group and the success or failure of implementing that decision lies with the leader themselves • A strategy in which a leader allows their team to vote for a decision • A decision is reached only after a group consensus • None of the above 4. It is said there is power in number, so groupthink and group decisions are more effective than done individually. • True • False 5. Group dynamics do not relate to a group’s formation, structure, interaction between people of the group, the processes followed by the group, and so on. • True • False 6. Which of these roles helps maintain participation and obligation to the group by the group members on an emotional level? • Work roles • Blocking role • Maintenance role • None of the above 7. Leadership traits in a person can increase or decrease a group’s cohesiveness. • True • False 8. Which of these is the loss of a person’s individuality and tends to undertake activities as dictated by the mob or the group? • Group size • Groupshift • Groupthink • Deindividuation 9. Which is the correct order for the five-stage model? • Forming, storming, norming, performing, adjourning • Forming, norming, storming, performing, adjourning • Forming, performing, storming, norming, adjourning • None of the above 10. When a person faces a situation where playing one role becomes an obstacle for another because of the diversity in its nature, it is called: • Group size • Role conflict • Groupthink • Role expectations

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CASE STUDY Mr. Anderson is the CEO of a consultancy firm in Aguascalientes, Mexico. The annual turnover of the company for the last year was 1.32 crore. Anderson is dedicated and finds ideas to get more projects for the company. The company was expanding to a new location in Denmark. He had a handful of young and talented professionals. As the company was growing, he believed that more workforce is required and it should get more business. A meeting was scheduled with all senior management members, where all the alternatives for how the working of the new location would take place were discussed. It was decided that as the team in Aguascalientes would get more projects, a new team should be formed for Denmark. All the pros and cons of these alternatives were discussed and a separate team was formed that would work dedicatedly on getting business. A plan was put into action, and the team started understanding the environmental factors, the possibility of markets from where they could get business. At the time of the financial review, the Denmark location was found to have made considerable profits in its first working year.

Questions 1. If you were in the CEO’s position, would you take a similar step of group decision-making or would you be using a different method? 2. What could be the pros and cons of group decision-making in the above case? 3. Can you think of other alternatives than those mentioned above?

Critical Thinking Questions

1. Can group decisions result in low efficiency? 2. Does group decision-making influence individual behavior? 3. When a group decision is taken, do you think group roles are followed completely? 4. How does goal achievement become easier when activities are performed in a group rather than by an individual? Chapter at a Glance Introduction

A group consists of any number of people who:

• interact with each other • are psychologically aware of one another • perceive themselves to be a group

—Schein

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Group dynamics is referred as the field of inquiry dedicated to advancing knowledge about the nature of groups. —Cartwright and Zander (Schein, E.H. (2000), Cartwright et al. (1968))

Group Characteristics

• Assembly of a minimum of two people with no upper limit • Group identity: Ascertains the identity of the group becomes the identity of members

• Collaboration and communication: Ideas and opinions are shared through a certain communication medium

• Common goal: Members work toward a common objective Classification of Groups Formal Group

• • • • • •

Team group Work group Technology group Committees Authority group Segment

Informal Group

• • • • •

Group of friends The group having common interest Groups that are referenced (family and colleagues) positively or negatively Institutional members Cliques

Why Do People Join Groups?

• Sense of security • More interaction, work closely with one another, exchange information, and • • • •

share knowledge Helps the individual to understand their own potential Social status Self-importance and worth Groupthink and group decision

380  Group and Group Dynamics

• Goal achievement • Associated with regulatory bodies Models of Group Development Five-Stage Model

• • • • •

Forming Storming Norming Performing Adjourning

Punctuated Equilibrium Model

• Phase 1: A structure of behavioral patterns and assumptions emerges. • Phase 2: The group executes plans created during the transition period. Group Role

A role means a set of expected behavior patterns attached to a position or post in a social unit.

• • • •

Types of Group Roles Work roles Maintenance role Blocking roles

Role Identity

People shift roles rapidly when there is a change in the situation, and demand for change is also recognized. For example, when union leaders were promoted to foremen positions, their attitude changed from pro-workers to pro-management within a month of their promotion. Role Ambiguity

Role ambiguity refers to the discrepancy between the defined role and the perceived role. Role Conflict

A person is confronted by divergent role expectations; this is called ‘role conflict’. For example, one performs the role of a servant, but when the same person is not working, they perform the roles of a husband, a father, a brother, and so on.

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Role Expectations

Role expectations are what other people believe one should behave in a given situation. Group Cohesiveness

Group cohesiveness refers to the extent to which members interact with one another in the group, are influenced by the thought process of the members within the group, have faith and belief in the group, are enthused to remain a part of the group, and work toward a specified set of objectives. Advantages of Group Cohesiveness

• • • •

More of teamwork Less difference of opinion Improved dialogue with team members The productivity of a cohesive group is high compared with non-cohesive groups

Disadvantages of Group Cohesiveness

The individual goal is set aside because of the fear of separation of members from the group. Group Decision-Making Process

• • • • • •

Problem identification Information retrieval Evaluation of alternatives Selection of an alternative Implementation of the alternative Result concluded from implementation

Benefits of Group Decision-Making Process

• Decisions are stoic and bold and have a high probability of considering criteria, effect, and alternative.

• Promotes tapping into a large information base. • Enhances complexity of the entire decision process. • Greater acceptance by the relevant authority and implementation of such decisions is much faster.

• People are more responsible and accountable.

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Disadvantages of Group Decision-Making

• • • • • • • •

Decision-making might lose its effectiveness. More time is required to take the decision. Wrong group makes decision less effective. Responsibility of members of a group may not be equally distributed. Conflicts may arise within the group. Decisions can have a high degree of polarization leading to problems. Enhances cost in terms of money, time, and resources. Competitions can arise among the group members. Groups without a leader lack focus and the decisions taken by that group are vague.

Group Decision-Making Strategies

• Autocratic style: Decisions are taken solely by the leader of that group. • Democratic style: Leader allows the team to vote for a decision. • Consensus style: Decision is reached only after a group consensus. Impact of Group on Individual’s Behavior

• Groupthink: It is a group decision-making process where smooth and quick decision-making is the key without focusing on more result-oriented options.

• Groupshift: It is a phenomenon when a person loses their sanctity and identity and acts in accordance with the group.

• Deindividuation: Here, a person loses their individuality and tends to undertake activities dictated by the mob or the group.

12 TEAM AND TEAMWORK

An Opening Vignette The Ants Story of Teamwork Many a time, a colony of ants is working together as a team to find food and shelter. These ants operate with a high degree of collaboration and cooperation, getting an elaborate know-how and strategic directions from the leader. This is the story of a group of ants carrying an insect much bigger in size on their backs to their shelter for the entire group to feed upon. This large insect was carried by the ants by forming a parallel chain beneath it. The way they carried the insect is a portrayal of effective teamwork with a strong focus on achieving the goal. The situation they were operating in was not conducive since the big insect was quite heavy, but with every member’s contribution and effort in carrying the insect, the complex task became quite achievable with effective load distribution. Every team should have a leader to guide, mentor, and show the team the right direction. Among the ant species, a leader performs the above tasks. Also, the famous story of the grasshopper and ants talks about how the ants had worked to store food during the summer and autumn, fed on the stored food in winter, and also helped a lazy grasshopper by giving it their food. The story also gives evidence of how good planners the ants can be, perceiving the risks of the winters, how they could strategize on storage, and the optimum consumption of food throughout the winter days. Correlating the above situation to the management concept provides us evidence of planning, envisaging risk of contingencies, devising, and executing plans with a focus on optimum utilization of resources with a high degree of collaboration from the team. DOI:  10.4324/9781032634258-12

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12.1 Introduction

With the changing business scenario and increasing project complexities, the concept of teams is gaining more and more importance. Organizations these days assume and believe that teams can bring in more innovative and creative ideas and help achieve organizational goals more effectively and efficiently. The stages of team development include forming, storming, norming, and performing. Some tasks always require people’s participation, where they discuss and work together for a common goal. The individuals who form a team are aligned to common goals and interests. The members within the teams are entrusted to contribute to the maximum and do the task in a stipulated time slot, and the members own the responsibility to perform the task. Whenever one of the team members needs help, the other members are required to provide it. Whenever a team is involved, the performance of the team directly correlates to the sum of individuals. The characteristics of a team suggest that every member is not equally capable and all members do not perform the same. Also, every member is not compatible with every other member, and within groups, there might be subgroups as well. If a team member is not productive or fails to perform, then their performance directly impacts the team’s performance. Team management events consist of putting the team on the same platform and working toward a common objective. 12.2 Nature of Teams

Teams consist of a small number of people with complementary skills working toward a common goal or objective and holding mutual accountability. It is now clear that a team consists of a small number of people. The communication among the team members and the impact they have on each other play a vital role in the success of the team. Thus, it is essential that the team does not have a large number of members as it would make the process of communication and influencing more difficult. Teams include individuals having different skills. All the members may not have common skills but, when put together, these diverse skills would help accomplish the desired output. However, along with the growth, development, and maturity of the team, the members of the team would acquire additional required skills. All the members of a team work toward the achievement of a common goal and hold mutual accountability unlike in groups. 12.3 Characteristics of a Team

Various organizations across the industry verticals are increasingly forming teambased structures and creating a strong linkage between organizational and team goals. Around 80 percent of the companies which are listed under the Fortune 500 category carry out operations through team-based structures; hence, it is very

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much necessary to understand the characteristics of the teams so that the protocol of operating in collaboration with the other members is followed by every member who is part of a team. Various facets play a role in creating effective teams. Although the list of what constitutes making an effective team is too long, a few are discussed as follows. 12.3.1 Clarity of Goals and Objectives

Teams generally have goals and objectives, which are essential as these will help the team members to have better clarity about the vision and purpose of the team. It is necessary that team members are aware of the direction of the team. Team members who are involved in establishing the goals will also work toward their accomplishment. 12.3.2 Communication

Communication is a critical element in any situation. Communication among the team members plays a crucial role in the success of the team. No problem can be solved unless it is discussed considering different viewpoints. 12.3.3 Clarity of Roles

One of the important characteristics of a team is the clarity of roles. Each member has a clear understanding of the role to be played and the tasks to be carried out by them. 12.3.4 Suitable and Situational Leadership

Every team has a formal leader. However, the unique characteristic of a team is that the role of a leader can be performed by any other team member if the circumstance so demands. In such cases, the formal leader monitors appropriate behavior and facilitates creating positive norms. 12.3.5 Participation

Opinions are valued and taken from the members whenever required. The leader specifies what kind of participation they expect from the members. Leaders help to create an environment of participation. 12.3.6 Open Discussion and Conflict (Functional Conflict)

In a team, members express their viewpoints and opinions on the ways of operation as well as the various functions of the team without any hesitation. There may

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be some hidden agendas as well. During this process, there can be disagreement among the team members. Such disagreements are taken positively by the team; thus, the conflict turns out to be a functional conflict. 12.3.7 Consensus Decisions

For important decisions, the goal is substantial, but it is not necessarily a unanimous agreement through open discussion of everyone’s ideas, avoidance of formal voting, or easy compromises. 12.3.8 Valued Diversity

Each member of a team may have different skills or talents. Also, they might have diverse ideas, thought processes, and problem-solving skills. These diversities are valued in a team. 12.3.9 Continuous Self-assessment

While performing assigned tasks, a team stops in between to assess how well it is performing. Also, it tries to identify roadblocks that interfere with its effectiveness. 12.4 Teams versus Groups

Generally, the terms groups and teams are used as synonyms. However, it is not so; there is a difference between groups and teams. The differences are shown in Table 12.1. 12.5 Teamwork

Teamwork is the process of working in collaboration with a group of people in order to achieve business goals. Here, people cooperate using their individual skills and provide combined effort, despite any personal grievances against any person or authority. From small- and medium-scale enterprises to large multinationals, teamwork is a vital aspect of contributing to organizational goals. From creating or exploring new opportunities, idea for a product or service to delivering to customers, employees work together to accomplish day-to-day tasks. Teamwork helps employees build trust among them to reduce burnout and help the company in the attainment of goals. 12.5.1 Benefits of Teamwork

Working in teams provides several benefits, some of which are mentioned as follows:

Team and Teamwork 387 TABLE 12.1  Teams versus Groups

Teams

Groups

Performance depends on individual as well as collective efforts. There exists both individual and mutual accountability. There is a focus on team goals. Teams are self-managed. Members of the team possess complementary skills. Team members are aware of the contributions made by other members of the team and they all contribute to achieve the result. Team members bond with each other and resolve the conflict mutually and bring the manager into picture only when it is needed. Communication is open and opinions from different perspectives are appreciated in finding solutions to the problems. Effective management of teams encompasses the idea generation and implementation and control by the manager as well as members of the group to achieve the objective. Members of the team are trained in professional and technical aspects and team dynamics. Good performance is celebrated by all the members of the team.

Performance depends on individual members. Members of a group are accountable only for their individual work. Each member focuses on their own goals. Goals are set by the management. Members of the groups possess diverse skills. Group members are unaware of the accountability possessed by other members.

Teamwork is often a vital part of the business and a collaborative effort has always helped in the growth of the company.

During conflict, members are quick to bring out other members’ faults and allocate responsibility to the manager to solve the disputes. Communication is closed in the case of groups and the level of trust is not so high as in the teams. In groups, management is done only by the manager and others are instructed to perform a task, reducing them to a position where they can only take instructions. Developing the group members’ skills required to execute the task. Feedback is given when a member has committed a mistake and success is claimed by the manager only. For groups, it is only a short-term goal achievement.

• Effective utilization of resources: Duplication of work is avoided when people work in teams. This leads to effective utilization of organizational resources.

• Better decisions: When individuals work in teams, each of them gets an opportunity to share their ideas. Thus, before arriving at a decision on any of the issues, the most feasible and effective ideas can be selected from an array of ideas.

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Team and Teamwork

• Motivation: The motivation level is higher when people work together as a team to accomplish any goal than when they try to achieve it individually.

• Self-development and growth: A team consists of people with different skills. Thus, while working as a team, members get an opportunity to upgrade and acquire skills that would lead to self-development and growth. • Organizational enhancement: Teams help the management through organizational enhancement that comprises flexibility, increased innovation, and creativity. 12.5.2 Benefits of Teamwork from an Organizational Perspective

• • • • • • • • • •

Higher productivity from a collaborative approach results in quality output. Consensus-based decision-making always leads to better decisions. A consortium of ideas is generated when a team is there. Different perspectives expose team members to the broader concepts. Group discussions help team members to clarify issues and provide optimal solutions. In a team, problem-solving becomes an easy task. Team members focus on the team’s goals for longer periods of time. Seamless knowledge transfer between members and collaboration of skills results in the formulation of innovative concepts that benefit the business. Team effort enables projects to be completed within deadlines and schedules. Implementation of a project plan, which includes allocation of team members to the project, assigning tasks to the team members, checking their project’s progress, and achieving milestones, definitely helps the manager to execute the project in a structured manner and makes it more achievable.

12.5.3 Benefits of Teamwork from the Perspective of an Individual

• Teamwork provides a rich work experience because of the exposure to diverse skill sets of others and is a source of motivation for every individual.

• Team members help in providing mutual support, which enables an individ-

ual to attain goals, and the support can be in the form of work assistance or encouragement. • A greater sense of accomplishment is perceived when there is an outcome of the collective effort expended for a task that was unachievable for a single individual. • Greater and broader set of business benefits can be achieved through effective teamwork. 12.5.4 Disadvantages of Teamwork

• Some people do not enjoy working in a team. • Equal level of job satisfaction might not be there for members working in a team.

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FIGURE 12.1  Process

of Teamwork

• There might arise conflicts among the team members. • Decision-making though is a team effort may be time-consuming because every individual’s approval is sought.

• Groupthink can reduce a team’s creativity and decision-making capability. • Every member’s performance is the team’s performance, which suggests that if

somebody is underperforming, then they get a free ride to success if the team is successful. • In case of personnel replacement or transfer from a team, to get another member into the team becomes awkward if the team has stayed with the project for a long time.​ 12.6 Processes of Teamwork 12.6.1 Transition Process

The transition process deals with the formation of the team and the formulation of its mission, vision, goals, and strategies.

• The mission of a team is basically laying down the objectives of the team. If the team is an organization of people, then it will be the objective of the organization. • Goal specification is the identification of tasks and prioritizing them to achieve the objective. • Strategy formulation is developing a sequence of activities to attain the goals and accomplish the mission. 12.6.2 Action Process

Action process is the phase when the team performs its task or, in other words, executes the project it is allocated. The action process includes the following:

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• Tracking project’s progress toward completion of tasks and activities. • Tracking and monitoring the use of technology, human, and information resources.

• Coordinating the workflow and information flow between the various tasks and activities.

• Mentoring of the team members by providing extensive coaching and feedback on their performance.

12.6.3 Interpersonal Process

Interpersonal processes include activities that occur during the transition and action processes. These include the following:

• Issue or conflict management to manage differences of opinion and avoid disagreements among the members.

• Motivate the team to work toward the common goal or achieve the organizational objective.

• Control of emotions by the various members of the team while working together. 12.7 Types of Teams

In an organization when the tasks to be performed are complicated and cannot be accomplished by a single individual, teams are formed. A team consists of a small number of people having complementary skills, who contribute their efforts to achieve a goal. The main characteristics of a team are: (a) it can be formed anytime depending on the requirement, (b) it may be temporary or permanent, and (c) it may be formed for a specific purpose. The types of teams can be classified as shown in Figure 12.2. 12.7.1 Classification of Teams Based on the Nature of Management  12.7.1.1 Self-managed Teams 

These teams include a group of employees assigned to accomplish a particular task for the organization. A self-managed team works toward the achievement of self-defined goals. Although these teams are independent, the members are interdependent. These teams are self-regulating and self-operating. They do not have any supervisor or leader. Every member is responsible for their performance. Self-managed or self-directed team organizations have given improved team performance over the years. A self-managed team is the one where the responsibility of operating lies on the team itself to achieve the target. The members of self-managed teams have a considerable amount of autonomy and respect, and the boundaries in which they are scheduled to operate are decided by the

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FIGURE 12.2  Types

and Classification of Teams

management. Decisions taken by the self-managed team are independent decisions with very less interference from the management. An organization in itself is a self-managed team. 12.7.1.2 Supervised Teams

Unlike self-managed teams, supervised teams are managed by a leader or a supervisor. The leader/supervisor sets the goals to be achieved and monitors the performance of all the team members. The leader is responsible for the overall performance of the team. Such teams enjoy less autonomy and boundaries are not defined by the leader or the management as the objectives are attained under the supervision of the leader or the management. 12.7.2 Classification of Teams Based on the Period of Existence 12.7.2.1 Permanent Teams

Functional departments such as HR, finance, and operations in an organization are the best examples of permanent teams. These teams are not dissolved when one purpose is over. For example, Ronita and Janet were part of a branding team with a leading company, and their task was to promote their brand and increase

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the brand value along with coming up with innovative marketing strategies for increased sales and turnover. They were extremely focused and ambitious and managed to achieve their yearly targets, along with keeping their team spirit high and motivating the members at frequent intervals. In addition, they mentored the members well, and for the last 10 years, the team was not dissolved at any point in time. Such teams are called permanent teams. Generally, the production, marketing and sales, HR, audit and accounting, and purchase teams are never dissolved. 12.7.2.2 Temporary Teams

Temporary teams are generally formed to assist the permanent teams. These teams exist for a short period of time and are dissolved once the task is over. Such teams are usually formed for a shorter duration either to assist the permanent team or work when the members of the permanent team are busy with some other projects. When organizations have excess work, they generally form temporary teams, which work in association with the members of the permanent teams for the accomplishment of the task within the stipulated time. For example, during natural calamities like earthquakes or floods or tsunamis, many temporary teams evolve that look after the provision of food, shelter, clothing, and security for the people living in these affected areas. Another example is the formation of temporary teams by an assessment provider conducting high-stakes examination across cities in India, where the teams created are responsible for the execution of the examinations at the allotted centers. 12.7.3 Classification of Teams Based on the Nature of Work Performed 12.7.3.1 Work Teams

The work teams are predominantly concerned with the work done by organizations such as manufacturing products, providing services, and developing new products and services. The prime function of these teams is effective utilization of the organizational resources. Have you ever heard the phrase ‘two heads are better than one’? This implies that there are additional benefits of combining the thoughts, perspectives, opinions, and experiences of two individuals as opposed to those of a single person. If this notion is true, just imagine the advantage of combining three, four, five, or even more individuals. Typically, these small groups have complementary skills that they use to work toward a common goal for which they are mutually accountable. Many organizations recognize the benefit of having multiple people working together in a collaborative and cooperative environment to develop and deliver their products. For this reason, the use of work teams has become a routine way of managing organizations. This lesson identifies the different types of work teams, commonly found in contemporary organizations, including functional, cross-functional, and self-directed teams. For example,

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functional teams handle specific functions such as production and finance, and cross-functional teams having members from finance, production, marketing, and so on put forth the perspective for a common problem from various angles. For example, Northwestern Mutual, a life insurance company, in the early 1950s brought in people from the finance, investment, and wealth management sectors to understand the role of information technology and information systems in the business world and went on to create an Information Systems repository that gave the organization a large competitive advantage over its peers. 12.7.3.2 Management Teams

These teams consist of individuals in managerial positions. These teams are permanent in nature as the purpose of these teams does not end with the completion of a specific project or problem. The two major responsibilities of these teams include:

• Providing guidance and counseling to other teams • Coordinating the work of interdependent teams Employees who are on the board of management of any company comprise the management team of the organization. 12.7.3.3 Task Force

The organizations may sometimes form special teams in order to deal with a particular situation or to solve a specific problem; such teams are called task force or problem-solving teams. These teams are temporary in nature and are dissolved once the purpose is served. For example, the Bangalore Metropolitan Task Force was entrusted with the responsibility of better protection of government property and lakes, rivers, and tanks given to the forest department. 12.7.3.4 Committees

Committees are formed to take care of a particular task or project. These may be either temporary or permanent in nature. Individual members of the team usually possess common interests and backgrounds, for example, cultural committees, sports committees, and so on. 12.7.3.5 Virtual Teams

The teams that do not meet physically in a meeting room but are connected via a network are called virtual teams. For example, a manager in Australia can communicate with a manager in India and the USA at the same time via the Internet.

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Virtual teams have now evolved in today’s world of the Internet, email, video conferencing, teleconferencing, and so on. In the traditional approach to team meetings, members were either physically present or absent. Virtual teams, on the other hand, can meet any time of the day from any part of the globe and from any organization. So virtual teams are location-distributed task force, that operate the business from different geographies and have strong information base and skill levels. The main drawback of virtual teams is that they are not able to meet face to face to build more accountability and trust. 12.7.3.6 Cross-functional Teams

A cross-functional team comprises individuals with different functional proficiency working toward a common goal. The members of this team may be working in different functional departments such as marketing, operations, and finance. Crossfunctional teams might include people from different managerial levels. Also, the members may be internal or external to the organization. A task force can be called a temporary cross-functional team with people from diverse functional units of an organization to solve a particular problem. Bringing the cross-functional team on a common platform takes a lot of time because of differences in team members’ views, ideas, and perspectives, and it takes substantial time to build accountability and trust among the members. Even big IT project teams have people from various functions; for example, for a banking system, there are domain experts building domain knowledge, business analysts analyzing customer requirements, developer group writing the business case-specific functionalities, testing unit developing test cases, and quality assurance unit ascertaining the minimal defect scenario. 12.7 Reasons for Team Failure 12.7.1 Unclear Roles

Roles for each individual should always be clearly defined when assigning tasks. Unclear and vague roles can create confusion among the individuals, and the team might end up failing in its objectives. Roles, in terms of leadership, have also to be defined so that the leader can do effective task distribution and members can put forth the problems they come across. 12.7.2 Absence of Team Dynamics

Team dynamics ensures that each member is respectful of the other member and that the communication process is extremely transparent across members in the group. Lack of trust or too much interference among the members might lead to non-attainment of results. Useful interaction, knowledge transfer and exchange of ideas, and use of the right code of conduct and transparent communication are key to strong dynamics.

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12.7.3 Inconsistent Vision and Goals

Every team has to have some goals set in the form of short- and long-term goals, and each goal has to be interpreted and understood by the team in the correct manner. If the goals are not realized properly, then the entire environment becomes chaotic and confusing, thereby muddling up the vision set for the organization. This problem can be resolved by discussing the vision from time to time and ensuring its continuing validity. If the goal needs to be refined, then it has to be done by taking the consensus from all, so that everybody is in sync with respect to vision refinement. 12.7.4 Time Management

Effective time management incorporates designing a detailed time plan, and allocating resources, schedules, deadlines, and milestones so that they work with full commitment and always remain focused to achieve the goal. If there are multiple projects running, then time management becomes a challenge for the project manager as well as the team members. Apart from doing project work, managers at the middle and senior levels are engaged in other tasks as well, so allotting needful work hours becomes extremely mandatory for the management, which can happen through effective time management. Interference or interruptions need to be minimized during the project period. 12.7.5 Impact of Changing Market Scenario

With the change in the market conditions or business situations, teams have to equip themselves with the ability to do a correct analysis based on current market trends and changing scenarios keeping in vision the long-term impact of the decision taken, otherwise there are chances that the project might fail, leading to chances of team failures. 12.8 Creating Effective Teams

Building an effective team involves more than just gathering a group of skilled individuals. The most important aspect of building an effective team is to motivate all the members to work toward a common goal. Some of the steps involved in creating effective teams are as follows:

• It is of prime importance to define the purpose of the team. Setting a clear vision leads to successful functioning of the team and makes it easier to guide and direct the team members. • The members of the team should be selected in a manner such that they possess complementary skills and can suggest a wide range of standpoints and ideas. It

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•

• • • •

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is necessary to ensure that the team has a balance of personality types so that it can function smoothly and contest each other when required. After assembling the team, the next step is to identify the tasks that help in achieving the desired output. Each task has to be assigned a deadline, and each member should be assigned a responsibility. In order to enable the team members to complete their responsibilities effectively and within the specified time, timely and adequate supply of resources to the team must be ensured. Operating standards and the expected output should also be clearly specified. This enables the team members to understand what they have to do and how it is to be done. Regular meetings should be conducted, and the performance should be monitored to make sure that the work is on track and according to the set standards. If there is any deviation, corrective actions need to be taken. One vital aspect of creating effective teams is to recognize and reward both individual and team performance. Recognition and rewarding foster the morale of team members and motivate them to perform better. Creating an effective team is not a one-time task, it requires continuous efforts and monitoring, but the result is much more rewarding.

12.8.1 Discussion and Case Study  12.8.1.1 Discussion: Teamwork at Its Peak 

The success of a business is accredited to the teamwork of the talent pool. Jack Welch, CEO of General Electric (GE), stated that they have developed an incredibly talented team of people running their major businesses, and, perhaps more importantly, a healthy sense of collegiality, mutual trust, and respect for performance that pervades the organization. Jack Welch not only created a team of high-performing executives who later went on to hold leading positions in various Fortune 500 companies. During Welch’s 20-year tenure, GE’s revenue increased nearly sevenfold, such is the achievement of strong and capable teams. It has been further seen that teams with poor leadership bring in politics and rebuff, whereas strong teams bring in coherence and focus. According to a McKinsey report, the most effective teams use a three-step technique to implement an idea and make it a success. As stated, the teams focus on working together in the first phase so that they achieve the desired result in the second phase and finally do a review of the lessons learned in the last phase. Workshops on team building can be helpful sometimes, but they actually do not contribute much to the building of the teams; a good team first addresses business issues, which are central to its growth, and later focuses on behavioral issues. The three performance dimensions mastered by teams to achieve their objective are shown in Figure 12.3.

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FIGURE 12.3 

Performance Dimensions

12.8.1.1.1 Three Performance Dimensions

According to experts at McKinsey, it is not a single person, preferably the CEO at the topmost position of the organization, who can lead the organization toward its growth, rather it is team dynamics that contribute to the growth of a unit or the organization. The prime areas of scrutiny are that the teams should have a high degree of fruitful interactions, be adaptable to changes, and work toward a common goal where every individual in the team is aligned to the goal. The actual problems, as per McKinsey’s report, of the underperforming teams are as follows (Figure 12.4). The issues of underperformance are determined by taking a survey of prominent organizations by interviewing employees at leadership positions and drawing conclusions from their holistic inputs. 12.8.1.1.2 McKinsey’s Takeaway on Underperformance of Teams

McKinsey’s report states that any artificial program, event, or workshop does not actually enable the teams to perform well. The team’s performance is a result of the actual execution of tasks in a collaborative fashion and replication of how senior teams work together. The report states that to make teams perform well, the following points should be taken into consideration:

• Address issues simultaneously: For example, stakeholder management, managing an organization’s performance and reviewing top talent.

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FIGURE 12.4  Problems

of Underperforming Teams as per McKinsey’s Report

• Proper channelization of the team’s discontentment: By bringing in com-

parisons with competitors, focusing on threats, and analyzing alignment to the industry’s best practices. • Minimization of external interference: Theoretical dos and don’ts do not affect the team’s performance. If counselors are appointed to speculate performance, then they need to see the working of the leadership teams. • Solution identification: Finding the root cause of the problem and providing solutions. The above findings are compiled from interviews taken of the top leadership teams of prominent organizations. 12.9 Case Study

This is the case of a company that tried to revamp its entire organizational structure and allocate controlled autonomy to every functional unit of the organization, which is composed of unit heads and their small teams. The idea was that granting little autonomy will enable the teams to be more responsible for their functional unit and encourage them to grow their unit. Initially, the units functioned well as their efforts and contributions surfaced within the units, making the members more confident and elevating their sense of ownership. However, the best performance did not last long since differences started cropping up between unit heads and the top-level team of the organization because of a lack of flexibility and resistance to the change shown by the middle management with the change in market scenarios. The top management of the organization wanted the business unit heads to show considerable involvement in the expansion of business overseas, and they wanted each unit head to plan the overseas operations by replicating the processes,

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but the middle management was reluctant to welcome the change as it was operating in its own comfort zone with the stipulated autonomy. Also, on taking feedback from the other team members of every unit, it was found that the middle management was stuck with its old methods and needed the change to be implemented fast, thereby preventing the decline in growth of the organization. Therefore, changes were prioritized and the middle management was put into action to align its priorities and formulate a common strategy for the expansion of the business, right from unit-level expansion plans to organizationlevel expansion plans. Prior to that, management sessions were conducted for all unit heads where they roleplayed as top management and were taken through reflective working sessions. The teams conducted fortnightly meetings to discuss talent, strategy, performance, and growth keeping in the loop the top management and considering their ideas as well, which opened new opportunities for the company. In between the meetings, a few members helped the members of other units to resolve their issues keeping in mind the global expansion plans. Soon, there was improvement in the performance dimensions.

• A common goal which enabled members to reach a consensus on performance,

the strategy used to attain performance of the individual unit, which would also align with organizational performance, and designate greater responsibility to people for progress of units and employees’ productivity within the unit. At each instance, the top management was kept in the loop for its inputs and implementation of new ideas, as required. • Interaction among team members was healthy, and the level of trust increased due to open and honest communication accompanied by constructive debates on issues and ideas. • Even external information relayed by the top management to the middle level with relation to market trends and competitor analysis as well as location-specific strategy to be adopted for expansion of the business was taken positively along with inputs from new recruits at the senior- and middle-management positions. These recruits shared strategies adopted by their past organizations in global business expansions. Gradually, flexibility, adaptability, and openness among employees of middle management grew, leading to a conducive environment for increased productivity. Summary

This chapter summarizes the concepts of team and team dynamics, focusing on realistic views of team formation through the evolution, transition, and action approach. It also encompasses the benefits of teamwork from organizational and individual perspectives and, using a case-based approach, enforces the

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effectiveness and efficiency of strong teams, and how these teams can support an organization on its roadmap to success, that is, increased productivity and sustainability. Exercise Objective Questions

1. Teams include individuals having different skills. • True • False 2. Group performance does not depend on individual and collective efforts. • True • False 3. Which of these is the correct order for the processes of teamwork? • Transition process, interpersonal process, action process • Transition process, action process, interpersonal process • Interpersonal process, transition process, action process • None of the above 4. Which of these helps motivate the team to work toward the common goal or achieve the organizational objective? • Interpersonal processes • Transition process • Action processes • None of the above 5. Which of these is/are not the type/s of team/s? • Management teams • Task force • Committees • All of the above 6. Which of these teams is temporary in nature? • Task force • Committees • Both of the above • None of the above 7. Which of these teams is formed to assist the permanent teams? • Supervised teams • Work teams • Temporary teams • Management teams

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8. A cross-functional team comprises individuals with different functional proficiency. • True • False 9. Operations department in an organization is an example of • Permanent teams • Work teams • Temporary teams • Committees 10. Which of these includes the benefits of teamwork? • Organizational enhancement • Self-development and growth • Helps in providing mutual support • All of the above CASE STUDY

Impetus Solutions manufactures automotive and vehicle parts in Cleveland. To increase the core functioning of manufacturing operations, it has decided to implement SAP in its IT operations. Its IT operations are carried out in India. The top management decided how this team should come into existence. Discussions were held. A few suggestions that came up were outsourcing the SAP operations to another IT company or having a separate dedicated team in the organization. The pros and cons of these ideas were evaluated and the result was a separate team. As the company is now entering into its SAP operations, it requires good quality SAP HR so that a separate work team is put into place. It has hired a few SAP resources who have around four to five years of experience across the locations. It also appointed a separate leader to manage all the SAP resources. A few members of the manufacturing team were also included in it so that proper business knowledge is there among the team members. A virtual team and cross-functional team were put into existence by hiring a distributed workforce. The top management decided to start with the functioning of the SAP team. The teams coordinated through teleconferences over AT&T. The team started functioning, and all the activities and discussions were carried out virtually. A mid-year progress check was conducted, which found that the team was performing its operations well. Questions

1. Do you think going with the idea of virtual teams was correct? Justify. 2. What other alternatives could you suggest to implement SAP operations in the company? 3. Discuss the complexities of a virtual team.

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Critical Thinking Questions

1. What are your expectations when you join a new team? 2. Do you think the team members should work out their interpersonal differences on their own? 3. How does the teamwork affect the organization’s day-to-day operations? Chapter at a Glance

Team and Teamwork consist of a small number of people with complementary skills working toward a common goal or objective and holding mutual accountability. Characteristics of a Team

• • • •

Collaboration and cooperation Follow a comprehensive approach Maintain cordial relations Focus on both team and individual development

Benefits of Teamwork

• • • • •

Effective utilization of resources Better decisions Motivation Self-development and growth Organizational enhancement

Processes of Teamwork

• Transition process: It deals with the formation of the team and formulation of the mission, vision, goals and strategies of the team.

• Action process: In this phase, the team performs its task or, in other words, executes the assigned project.

• Interpersonal process: It includes activities that occur during the transition and action processes.

Types of Teams

• Self-managed teams: These teams include a group of employees assigned to accomplish a particular task for the organization. • Supervised teams: These teams are managed by a leader or a supervisor, and the leader is responsible for the overall performance of the team. • Permanent teams: These teams are not dissolved when their task is over.

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• Temporary teams: Temporary teams are generally formed to assist the permanent teams.

• Work teams: These teams are predominantly concerned with the work done • • • • •

by the organization, and their prime focus is on the effective utilization of the organizational resources. Management teams: These teams consist of individuals in managerial positions and the purpose of these teams does not end with the completion of a specific project or problem. Task force: These teams help the organizations to deal with a particular situation or solve a specific problem. Committees: Committees are formed to take care of a particular task or project. Virtual teams: The teams that do not meet physically in a meeting room but are connected via networks are called virtual teams. Cross-functional teams: A cross-functional team comprises individuals with different functional proficiencies working toward a common goal.

Reasons for Team Failure

• • • •

Unclear roles Absence of team dynamics Inconsistent vision and goals Time management

13 LEADERSHIP

An Opening Vignette Case Study on Leadership This case study is about the leadership styles of two successors of a company. In the first case, Peter, the Vice Chairman, used to follow an autocratic style of leadership, and in the second case, Sam, who was assigned the role of Vice Chairman, was a more amicable person and chose a democratic style to lead the department. Peter went into the details of crafting out rules, regulations, and policies and ensured that people followed them. During his reign, people were more disciplined but less innovative. The team thought him to be an interfering sort. Their enthusiasm, morale, and productivity remained consistent and targets were achieved. After the retirement of Peter, Sam, who was handling a division in the company and a firm believer of delegating tasks to people in order to show his trust in them, was promoted to the post of Vice Chairman. So, he allocated the task of scheduling milestones to Dick, formulating the quarterly budget and expenditure for the unit to Harry, and stock auditing to Delma. He was more of a democratic style of leadership. For the others, he thought that they would discharge the duties as they had been doing till date. Departmental meetings during Peter’s tenure were frequent, with members forced to attend regularly, while Sam speculated that it was the faculty’s responsibility to attend them and never monitored their absence and presence. However, higher levels of engagement resulted in enhanced team performance during Peter’s leadership regime. The freedom given to the team by Sam did not work right and soon the members started complaining about the absence of guidance from the leader and failure in achieving the departmental goals. DOI:  10.4324/9781032634258-13

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Question Having read this small case, identify the problem area and write assumptions and recommendations for the styles adopted by Peter and Sam. Model Answer Problem Area

Change in leadership style by the management resulting in a change in the work culture of the unit. Assumptions and Analysis

Low morale and enthusiasm among team members resulting in low productivity and irregular attendance at team meetings showcase dissatisfied behavioral attitudes among the employees. Also, it is stated very aptly that the common tendency of a human being is to show resistance to change. Under Peter’s leadership, employees were comfortable in being nurtured in his lap and they were far from taking up any form of ownership. Peter was keener on attaining the targets and was less concerned about his team’s dynamics. He only wanted the tasks to be done efficiently and made his team vow that it would perform to the minutest detail. The team looked up to him as a father figure and felt relaxed that under his leadership, he would not let anything untoward happen in the unit that would disturb them. When Sam was appointed as the Vice Chairman, he did not continue this tradition. This may have led to some of the initial distrust toward Sam when he did not follow the conventional way of Peter. It is said that a leader tries to create leaders within an organization which Peter never did. Sam, in this democratic style, tried the same, but it had the opposite effect on people and later on the management, because, as per the case study, he never had rich communication with his subordinates or the upper management of the organization and nobody was aware of his initiatives to build leaders. Also, the team was not ready for such initiatives. Recommendations Suggested

The leadership style followed by Sam should have been based on employees’ readiness to accept the responsibility and ownership of the newly allocated task, and the leader’s role of slowly easing himself out of the responsibility once the employee’s readiness is affirmed. This would have been possible only by mechanisms of directing, delegating, supporting, and coaching as per the comfort of the followers. Henry and Blanchard had categorized the follower’s attitude as able and unable, with willingness and confidence as their behavioral

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trait or showcasing unwillingness and insecurity to take up the ownership of the task. Sam should have researched employees’ behavior before allocating them new responsibilities and strongly remained aligned with their day-to-day progress with regular coaching, supporting, and directing them as and when required.

13.1 Introduction

The success or failure of an organization is, to a large extent, influenced by the leadership available within the organization. A strong leadership within the organization can contribute to its sustainability and growth, whereas a lack of effective leadership can ruin the entire organization. Many organizations today understand the importance of effective leadership within the organization and hence are trying to develop leadership skills within their employees. Effective leadership can foster organizations in several ways, such as coming up with innovative strategies, helping reduce resistance to change, and finding creative ways of doing things. 13.2 Definitions

Leadership is the activity of influencing people to strive willingly for mutual objectives. —George Terry Leadership is a means of direction. It is the ability of management to induce subordinates to work towards group ideals with confidence and keenness. —Robert Appleby Leadership is the ability of a manager to induce subordinates (followers) to work with confidence and zeal. —Koontz and O’Donnell Leadership is the lifting of man’s vision to higher sights, the raising of man’s performance to higher standards, and building the man’s personality beyond its normal limitations. —Peter Drucker Leadership is the ability to awaken in others the desire to follow a common objective. —R. T. Livingston Source: Terry, G.R. (1972), Appleby, R.C. (1991), Koontz, H., & O’Donnell, C. (1964), Drucker, P.F. (2003), Livingston, R.T. (1949).

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13.3 Importance of Leadership

The growth rate of Infosys, one of the leading IT companies, started declining in the year 2013. According to a few experts and core team members, the reason for this decline was lack of focused leadership within the organization. Then, it was decided that Mr. Narayana Murthy, the cofounder of the company, who had retired from the company, would rejoin the company to guide and mentor the potential leaders who could then take the company ahead. It is evident from this example that effective leadership plays a crucial role in the success of an organization. Whether big or small, profit-making or non-profit-making, every organization requires effective leadership. Effective leadership can benefit the business in the following ways:

• Clarity and Communication

•

•

•

•

Effective leadership ensures that there is clarity in the vision of the organization. At the same time, it also sees that the vision of the organization is communicated to all the employees so that they can clearly understand the purpose and work accordingly. Motivation An effective leadership plays a key role in motivating the employees. A leader may use different types of motivation techniques depending on the individual to be motivated. A motivated individual in turn puts in more effort and performs better, thus helping in achieving the organizational goals in an effective manner. Change Management Several changes occur in the internal as well as external environment of an organization. The organization can sustain only when it takes the necessary actions to adjust to these changes. However, bringing a change is not an easy task; it will, in most of the cases, have resistance from employees. In such cases, effective leadership has a significant role to play, as it has the capability and power to make the people realize the need and importance of change. In other words, effective leadership helps in change management by reducing or eliminating the resistance to change among the employees within the organization. Planning Without effective planning, all the other efforts would go in vain. A leader has a clear vision about the organizational goals and objectives and, thus, helps in effective planning. Employee Relations A leader helps in building cordial relations among their team members, which in turn helps in easy coordination.

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• Crisis Management

Good corporate leadership can assist a team to stay focused in times of crisis, reminding the team members about their accomplishments and inspiring them to set and achieve goals.

13.4 Leadership Traits

• Sympathy: Chances of sharing the vision with the leader become a common phenomenon if the team is well aware of the leader’s sympathetic edge for the team.

• Steadiness: A steady leader will gain reverence and trust, which are very cru• • • • • • • •

cial to get group support, and the team also orients itself toward these virtues. Uprightness: Honesty or uprightness about issues or concerns makes it highly probable that they will be addressed at the proper time because such traits pave the way for better valuation and growth. Direction: Setting proper direction and taking into account current and futuristic conditions are the prime characteristics of a good leader and carving out a road to that desired goal can bring in a major change. Communication: Transparent communication across teams, keeping with the norms of communication in terms of achieving goals, setting expectations, and resolution of issues will motivate the staff to work toward the goals. Flexibility: Open-mindedness of a leader will increase the possibility of finding the most optimal solution by letting the team work on the ideas and formulate strategies from the same. Faith and belief: The leader who believes or has faith in the mission and works to achieve the same will be an embodiment of inspiration to their followers. Complexity resolution: Resolving issues and managing complexities are traits of a good leader, who can decide and implement courses of action under fastchanging situations. Strategic action: Incorporating a global and forward-thinking approach to capture emerging opportunities is a very important characteristic of leaders with a strategic bent of mind. Innovation: To have a competitive edge over others, the leaders should continuously maneuver different courses of action for increased sustainability and emphasize innovation to take the business to the next level.

13.5 Leadership Traits

Leadership style is basically the approach an individual follows while leading other people. Usually, the leadership style a leader selects depends on the behavior, nature, thought process, and perception they have regarding their subordinates or team members. Some of the leadership styles are explained in detail as follows (Figure 13.1).

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FIGURE 13.1 

Leadership Styles

13.5.1 Autocratic Style (Do What I Say)

In autocratic style, the leader decides and instructs the team and the subordinates to follow them and implement their decisions. Employees play no role in decisionmaking. The followers of this style believe that close supervision is essential to get the work done by the subordinates. This style can be most appropriate when the leader is competent as it saves the time spent in decision-making through the two-way communication process. The major disadvantage of this style is that the employees do not get a chance to participate in decision-making and sometimes feel demotivated. Adolf Hitler and Colonel Gaddafi are examples of autocratic leaders. 13.5.2 Participative Style (Let Us Work Together)

It consists of three sub-types given as follows:

• Consultative: In this style, leaders consider the opinions of the group members before coming to the final decision. At the same time, these leaders make it very clear that the final decision would be made by them. • Consensual: These leaders believe in motivating the group members to discuss the issue and then arrive at a conclusion. These types of leaders assign more weightage to the group opinion in comparison to the consultative leaders. They arrive at a decision that echoes the unanimity of group members. This style leads to delays in decision-making. • Democratic: In this style, each group member votes before the leader takes any decision. Here, the entire authority lies with the group. The role of the leader is more or less like that of a coordinator.

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The participative style can be advantageous because:

• • • • •

It leads to motivation and satisfaction of the group members. Group members feel that their views are valued. It enhances the sense of responsibility. It increases morale and self-confidence. It lowers resistance to change.

This style can be successful only when group members are competent enough to take a decision. The prime demerit of this style is that it is time-consuming and might lead to delays in decision-making. 13.5.3 Free-Rein Style (I Go and You Work)

It is also known as laissez-faire. It is a laid-back leadership style wherein the leader gives entire freedom to the group members to identify the goals and objectives, take decisions, and resolve issues. Here, the leader plays the role of a consultant and guide. This style proves to be effective when the members of the group are highly competent, experienced, skilled, educated, self-motivated, and responsible. For example, the free-rein style of leadership occurs in the R&D sections of industries. 13.6 Difference between Leader and Manager

The differences between a leader and a manager are stated in Table 13.1. TABLE 13.1  The Differences between a Leader and a Manager

Sr. No.

Manager

1 2

An official designated authority. Responsible for controlling and supervising subordinates. Receives and follows directions.

3 4 5 6 7 8

Leader

An authoritative individual. Responsible for building trust and confidence among followers. Provides a vision to believe in and strategic alignment. Provides instructions to his Trains and guides people and subordinates. empowers them. The main focus is on the achievements The main focus is on the growth and of employees. development of employees. Avoids risk. Takes risks when opportunities appear promising. Focuses on the substance of events and Focuses on process, for example, how decisions, including their meaning decisions are made rather than what for the participants. decisions to make. Negotiates and coerces; balances Develops fresh approaches to opposing views. problems.

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13.7 Leadership Models and Theories 13.7.1 Likert’s Management System

Dr. Rensis Likert developed four systems of management in the 1960s. He charted these systems to explain the association, participation, and roles of supervisors and subordinates in industrial settings. According to Likert, the style of management has a huge impact on the efficiency of the organization. The four systems developed by Likert are discussed as follows:

• Exploitative Authoritative

In this style, all the decisions are taken by the superiors and the subordinates have to abide by these decisions. This system makes use of negative motivational techniques. Without knowing the problems faced by the employees at the lower level of the hierarchy, the decisions of the top management are just imposed on them. • Benevolent Authoritative Unlike exploitative authoritative, the benevolent authoritative style uses positive motivational techniques like rewards. Here, the top management feels responsible, but the lower level does not. In this system, there is more downward communication and very little upward communication. • Consultative In this style of management system, subordinates are motivated by offering rewards and little involvement in the decision-making process. The opinions and ideas of the lower-level management are viewed positively and can be considered in the process of decision-making. Yet participation of subordinates is incomplete, and key decisions are still made by the senior management. There is a greater level of upward communication in this style as compared with exploitative authority and benevolent authoritative styles. • Participative This is a system in which superiors have complete confidence and trust in their subordinates. The subordinates are motivated by offering them monetary rewards. In this system, individuals at all levels of management feel responsible for the organizational goals. Among all the four systems of management developed by Likert, this one has the highest level of communication among the superiors and subordinates. Also, this is the system wherein the participation of lower levels of management in the process of decision-making is the highest. According to Likert, the participative system of management is most effective if the organization wants to achieve a higher level of effectiveness. 13.7.2 Managerial Grid: Blake and Mouton

Robert R. Blake and Jane Mouton developed a behavioral leadership model in 1964, which is known as the managerial grid or leadership grid. The managerial grid is a graphical representation of two behavioral dimensions of a leader.

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• Concern for people (Y-axis): This is the extent to which a leader accommodates the needs and interests of the team members and gives them priority while making a decision about the best means to accomplish a task. • Concern for production (X-axis): This is the extent to which a leader lays emphasis on tight schedules and high productivity while making a decision about the best means to accomplish a task. The scale of the grid ranges from 1 (low) to 9 (high), thus forming 81 positions (Figure 13.2). The grid identifies five basic styles of leadership. These are explained further. 13.7.2.1 Impoverished Management (Avoid and Escape) (1,1)

Leaders with this style are considered to be ineffective since they have low concern for people as well as production. This type of leader is concerned only about preserving their jobs and seniority and does not want to be responsible for any mistakes. This causes the decisions to be less innovative and may also lead to dissatisfaction and disharmony. 13.7.2.2 Dictatorial (Produce or Perish) (9,1)

This style is based on McGregor’s theory X. Leaders following this style believe that HR employed in the organization is just a means to an end. They consider the

FIGURE 13.2  A Graphical

Representation of the Managerial Grid

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needs of the employees to be secondary and believe that organizational efficiency can be achieved by following strict rules and work procedures. 13.7.2.3 Country Club (Yield and Comply) (1,9)

Leaders with this style have a high concern for people and a low concern for production. Leaders following this style pay more attention to the needs and comfort of their team members with an assumption that this would motivate the employees to perform better. The consequence of this could be a friendly environment, which may not necessarily be productive. 13.7.2.4 Team Management (Contribute and Commit) (9,9)

According to Blake and Mouton, this is the most effective style. The leaders following this style have high concern both for people and production. It is based on McGregor’s theory Y. The leader believes that enablement, commitment, faith, and respect play a major role in developing the team atmosphere that will lead not only to the satisfaction and motivation of team members but also to higher production. 13.7.2.5 Middle of the Road (Balance and Compromise) (5,5)

In this style, the leader tries to maintain a balance between both dimensions, that is, the concern for people and production. They hope to achieve suitable performance but do not realize that they are compromising with each of the dimensions up to a certain extent. The managerial grid enables the managers/leaders to know where they stand in regard to the concern for people and the concern for production. Thus, it helps them to identify and analyze their leadership style. The drawback of this model is that it overlooks the internal and external environmental conditions and also does not take into account other aspects of leadership. 13.7.3 Situational Leadership Model (Hersey and Blanchard)

The situational leadership theory is a leadership theory developed by Paul Hersey, a professor, and Ken Blanchard, a management guru and author. This leadership model was developed in the late 1970s or the early 1980s. It states that there is no single ‘best’ style of leadership. Effective leadership is all about setting high expectations and working toward them with the team and group of people they are leading. Effective leadership not only varies with the person or group that is being led but also depends on the task, job, or function that needs to be completed. The Hersey–Blanchard situational leadership model rests on two elementary concepts (Figure 13.3):

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FIGURE 13.3  Hersey–Blanchard

Situational Leadership Model

• Leadership style • Individual’s or group’s maturity level 13.7.3.1 Choosing the Right Leadership Style for the Right People

The theory states that instead of using just one method, successful leaders should change their management styles based on the maturity of the people and the tasks accorded. Using this theory, leaders should be able to handle tasks and relationships with people accordingly. 13.7.4 Leadership Styles

According to Hersey and Blanchard, there are four main leadership styles.

• Telling: Leaders are more authoritative in their leadership styles and tell their people what to do and how to do it.

• Selling: Leaders provide more information and direction to get people on board.

• Participating: The leader works with the team and shares decision-making responsibilities.

• Delegating: Leaders pass most of the responsibility to the group. The leaders still monitor progress, but they are less involved in decisions.

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Leadership Style

Maturity Level

Telling or directing Selling or ensuring conviction Collaborative Delegating

M1: Low maturity M2: Medium maturity, low skill set M3: Medium maturity, high skill set M4: High maturity

Basically, Styles 1 and 2 are focused on getting the task done and Styles 3 and 4 are more concerned with developing team members’ abilities to work independently. 13.7.5 Maturity Levels

According to Hersey and Blanchard, leadership styles and maturity levels are broken down across four different levels.

• M1: People at this level of maturity are at the bottom level of the scale; they

lack the knowledge, skills, or confidence to work on their own, and they need to be pushed to take up the responsibility of the task. • M2: At this level, followers lack appropriate skills but are desirous to work on the task until successful completion. • M3: They have more skills and readiness than the M2 group but lack confidence in their abilities. • M4: The group is able to work on its own. Members of the group have high confidence and strong skills, and they are dedicated to the task. The Hersey–Blanchard model maps each leadership style for each maturity level as shown in Table 13.2. To use this model, reflect on the maturity of individuals within your team. Table 13.2 shows which leadership style Hersey and Blanchard advise for people with that level of maturity.

EXAMPLE You are about to leave for an extended holiday, and your tasks will be handled by an experienced colleague. He is familiar with your responsibilities and excited to do the job. Instead of trusting his knowledge and skills to do the work, you spend hours creating a detailed list of tasks for which he will be responsible and give full instructions on how to do them.

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What is the result? Your work gets done, but you have damaged the relationship with your co-worker by your lack of trust. He was an M4 in maturity and yet you used an S1 management style instead of an S4, which would have been more appropriate.

EXAMPLE You are about to leave for an extended holiday, and your tasks will be handled by an experienced colleague. He is familiar with your responsibilities and excited to do the job. Instead of trusting his knowledge and skills to do the work, you spend hours creating a detailed list of tasks for which he will be responsible and give full instructions on how to do them. What is the result? Your work gets done, but you have damaged the relationship with your co-worker by your lack of trust. He was an M4 in maturity and yet you used an S1 management style instead of an S4, which would have been more appropriate.

EXAMPLE You have just been put in charge of leading a new team. It is your first time working with these people. As far as you can tell, they have some of the required skills to reach the department’s goals but not all of them. The good news is that they are excited and keen to do the work. You guess they are at an M3 maturity level, so you use the matching S3 leadership style. You train them through the project’s goals, pushing and teaching where required, but mostly leaving them to make their own decisions. As a result, their relationship with you is strengthened and the team is successful.

13.7.6 Leadership Style and the Work: Fiedler

According to Fiedler, stress is a key determinant of a leader’s effectiveness (Gujral, 2012), and a difference exists between stress related to the leader’s superior and subordinates and the situation itself. Fiedler concludes that experience impairs performance under low-stress situations but contributes to performance under high-stress situations. Fiedler’s recommendations for such situations lie in capitalizing on the leader’s strengths. Fiedler’s situational contingency theory holds that group usefulness depends on a leader’s style and the demand for that situation. Fiedler’s contingency model

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is a dynamic model where the personal characteristics and motivation of the leader are said to interact with the current situation that the group faces. The first major factor in Fiedler’s theory is known as the leadership style. This is the consistent system of interaction that takes place between a leader and a work group. According to Fiedler, an individual’s leadership style depends upon their personality and is, thus, fixed. In order to classify leadership styles, Fiedler has developed an index called the least-preferred co-worker (LPC) scale. The LPC scale asks a leader to describe one person with whom they work the least well from the past and the present. On a scale of 1 to 8, leaders are asked to rate this person in a series of bipolar scales such as the following: Unfriendly Uncooperative Hostile Guarded

12345678 12345678 12345678 12345678

Friendly Cooperative Supportive Open

The response to these scales is summed and averaged. A high LPC score suggests human relations orientation, while a low LPC score depicts task orientation. Fiedler’s logic is that satisfaction is derived in the case of a high LPC score from an interpersonal relationship and low scores denote task satisfaction. This method reveals an individual’s emotional reaction to people with whom they cannot work. In the first case, these leaders see good interpersonal relations as a requirement for task accomplishment, and in the second case, they are more concerned with successful task accomplishment and worry about interpersonal relations later. For example, Papiya was elected president of a cultural committee on which she had no control. The committee is tasked with instituting a new policy that will ask the various music and dance groups to pay a registration fee for the forthcoming cultural event, and this is the first time that such a decision has been made. The question is how she is going to implement this policy with a committee where she has no way of rewarding or punishing for motivating the members. The LPC measure of Papiya is 98, which shows that, according to our text, she is motivated by relationships. There are three factors in the contingency model: leader–member relations, task structure, and positional power. The leader–member relation factor for Papiya is good, the task structure defines that this is the first time when groups have to pay a fee and the task has clarity but no precedence, hence structuring is low, and the power factor is weak as the case states that she has no power to reward or punish the committee. The points collated by her are 1, 5, and 8. Based on Papiya’s relationship motivation, she scored high on the relationship aspect and scored low on areas that detract from relationships. It is believed that she will use the relationship strength to further build trust with the committee members and motivate them to be successful in the implementation of the new fee policy irrespective of being able to exude and control the members. The second major factor in Fiedler’s theory is known as environmental or situational variable. Fiedler then extends his analysis by focusing on the three key

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situational factors: leader–member, task structure, and position power. Each factor is defined as follows:

• Leader–Member relations: Employee’s acceptability for the leader. • Task structure: Detailed job description of the subordinate. • Position power: Formal authority possessed by a leader in the organization. For leader–member relations, Fiedler maintains that the outcome of a good relationship is the trust of subordinates. Fiedler explains that task structure is the second most important, influential factor for a leader who correctly structures the task and specifies how a job is to be done in detail. Finally, as for position power, leaders who have the authority to employ, fire, and reward have more power than those who do not have these authorities. By classifying a group according to three variables, it is possible to identify eight different group situations or management styles, which are classified as either task orientated or relationship orientated. According to Fiedler, a task-oriented style of leadership is more effective than a relationship-oriented style. The task-oriented leaders who get things accomplished prove to be the most successful. Blue-collar workers generally want to know exactly what they are supposed to do and, hence, the tasks are usually highly structured. Here, the leader–member relation can be made strong (Table 13.3). The considerate style of leadership seems to be appropriate when the environmental or a certain situation is moderately favorable, for example, when

• Leader–member relations are good. • The task is unstructured. • Position power is weak. For example, research scientists do not like superiors to structure the task for them.

TABLE 13.3  Leadership Management Style

Very Favorable Intermediate Leader– Member relations Task structure Leader position power Situations

Good

Good

Good

High Strong

Low High Low Weak Strong Weak Strong Weak Strong

Weak

I

II

VIII

III

Good

Very Unfavorable

IV

Poor

V

Poor

VI

Poor

VII

Poor

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Fiedler’s theory gives some interesting conclusions:

• Candidates for leadership positions should be evaluated using the LPC scale. • If a leader is sought for a particular leadership position, a leader with the appropriate LPC profile should be chosen, that is, task orientated for very favorable or very unfavorable situations and relationship orientated for moderate situations.

Fiedler’s other observations were as follows:

• Only the leader performs better in some situations but not in all situations. • Selection of situations can match their leadership style and, hence, anybody can be a leader.

• Finally, the effectiveness of a leader can be improved by increasing or decreasing a leader’s position power, changing the organization of a task, or influencing leader–member relations, an organization can alter a state to better fit a leader’s style.

The limitations of Fiedler’s theory are as follows:

• The absence of situational variables, such as training and experience, has an impact on a leader’s effectiveness.

• Uncertainties about LPC score. 13.7.7 Path–Goal Approach

The path–goal theory is a leadership theory developed by Robert House, an Ohio State University graduate, in 1971 and revised in 1996. The theory states that a leader’s action directly correlates to the approval, keenness, and performance of their team members. The revised version also argues that the leader follows the path that appropriately complements subordinates’ abilities and compensates for deficiencies. First, the theory was inspired by the work of Martin G. Evans (1970) and then by the expectancy theory of motivation, developed by Victor Vroom in 1964. According to this theory, a manager’s job is to aid the team members in accomplishing goals and to offer the direction and support needed to align departmental goals with organizational goals. A leader’s behavior is acceptable to subordinates when the leader offers coaching, direction, and rewards to the employees. Various behaviors of a leader are as follows:

• The directive path–goal clarifying leader behavior refers to situations where

the leader tracks the followers’ progress and tells them how to perform their

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tasks. This behavior has the most positive effect when the subordinates’ role and task demands are uncertain and satisfying. • The achievement-oriented leader behavior refers to situations where the leader sets high-stakes goals for employees, expects them to perform at a high scale, and shows self-assurance in their capacity to meet this standard. • The participative leader behavior involves leaders consulting the group and asking for their suggestions before making a decision. • The supportive leader behavior is directed toward showing concern for the group’s psychological well-being where the work leads to stress. Path–goal theory assumes two variables, environment and group characteristics, that depict the leader behavior–outcome relationship. Environmental factors determine the type of leader behavior based on maximization of group outcomes. Group characteristics are the focus of control, experience, and perceived ability. Research demonstrates that employees’ performance and satisfaction rely on a leader’s ability to overcome their shortfalls and achieve the goal successfully. According to Northouse, the theory is useful because it reminds leaders that their main task as a leader is to help the subordinates define and reach their goals in an efficient manner. Also, the theory justifies that fluidity be observed while choosing a leadership style. For example, a store manager might reward an employee’s excellent sales performance with a promotion that assigns more responsibilities and rewards to the employee both financially and professionally, or they can create an employee-training program to help workers hone their sales skills, or clarify employees’ expectations with regard to their duties and achievements, or have an open-door policy to learn about employee grievances and provide on-the-job training based on employees’ experience and abilities. This prevents redundant training and makes effective use of employees’ time. 13.7.8 Theories on Leadership Traits

Leadership theories revolve around the characteristics of successful and unsuccessful leaders, and the leaders are rated based on these characteristics to assess the probability of their success or failure. Experts relying on this approach conducted studies across the following dimensions:

• • • • • •

Physiological (appearance, weight, and height) Demographic (age, education, and background) Character (confidence, nature, and assertiveness) Intellect (knowledge, decisiveness, and judgmental) Work aspect (accomplishment initiative and perseverance) Communal characteristics (cooperation)

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Successful leaders have interests, abilities, and personality traits that are different from those of the less-effective leaders. Through research conducted in the last three decades of the 20th century, a set of core traits of successful leaders has been identified. These traits are not responsible solely to identify whether a person will be a successful leader or not, but they are essentially seen as preconditions that endow people with leadership potential. The core traits identified, among others, are as follows:

• • • • •

Achievement drive: High level of effort, ambition, energy, and initiative. Leadership motivation: An intense desire to lead others to reach shared goals. Honesty and integrity: Trustworthy, reliable, and open. Self-confidence: Belief in one’s self, ideas, and ability. Cognitive ability: Capable of exercising good judgment, has strong analytical abilities, and is conceptually skilled. • Knowledge of business: Knowledge of the industry and other technical matters. • Emotional maturity: Adjusts well and does not suffer from severe psychological disorders. • Others: Charisma, creativity, and flexibility. 13.7.8.1 Strengths/Advantages of Trait Theory

• It is a naturally pleasing theory. • It is valid as a lot of research has substantiated the foundation and basis of the theory.

• It serves as a yardstick against which the leadership traits of an individual can be assessed. • It gives a detailed knowledge and understanding of the leader element in the leadership process. 13.7.8.2 Limitations of the Trait Theory

• There is bound to be some subjective judgment in determining who is regarded as a ‘good’ or ‘successful’ leader.

• The list of possible traits tends to be very long. More than 100 different traits of

successful leaders in various leadership positions have been identified. These descriptions are simply generalities. • There is also a disagreement over which traits are the most important for an effective leader. • The model attempts to relate physical traits, such as height and weight, to effective leadership. Most of these factors relate to situational factors. For example, a minimum weight and height might be necessary to perform the tasks

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efficiently in a military leadership position. In business organizations, these are not the requirements to be an effective leader. • The theory is very complex. 13.7.8.3 Trait Theory and Its Implications

The trait theory is characterized by the following:

• • • •

Information on leadership is constructive. It is applicable to people across all levels of the organization. Leaders can use the information from trait theory to be better leaders. Leaders get a detailed understanding of their own identity and personality and their effect on others in the organization. • This theory helps managers inculcate leadership qualities. 13.7.9 Behavioral Theories

Behavioral theory encourages participative decision-making and emphasizes people and collaboration with respect to leadership styles. It also helps in aligning individual and group objectives and focuses majorly on the behavior of the leaders with regard to two aspects: task and relationship. 13.7.9.1 What Is Behavioral Theory of Leadership?

The behavioral theory of leadership describes the behavior of leaders and focuses on the making of a leader rather than ascertaining that leaders are born. Behavioral theories of leadership are classified as such because they focus on the study of specific behaviors of a leader. As per the study conducted by behavioral theorists, leadership influences and leadership success can be concluded from the behavior of a leader. The theory concentrates on the action plan set by the leader, rather than on what qualities they possess, and the focus is more on the styles of leadership. 13.7.9.2 Advantages of Behavioral Theory

• It encourages values of leadership styles with a focus on collaboration. • It promotes participative decision-making and team development. • It helps managers evaluate their own style and its impact on their team, which affects the team’s contribution toward organizational goals.

• A balance is achieved by the managers while they use different leadership styles with a focus on the concern for their team and its productivity. This theory helps managers find the right balance between different styles of leadership

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and decide how to behave as a leader, depending on concerns for people and productivity. 13.7.9.3 Criticism/Arguments against Behavioral Theory of Leadership

• The theory provides less guidance on effective leadership in different situations. • Researches carried out by various experts were different each time, leading to a number of inconsistencies.

• Leadership styles adopted are dependent on situations, environment they are working on, and the people they are working with.

• Today, no leadership style is right for managers which works under every circumstance.

13.7.10 Contingency Theories

Leader–Member Exchange Theory 13.7.11 Vertical Dyad Linkage Theory 

The first study of exchange theory is known as the vertical dyad linkage theory, which defines the nature of the relationship between managers and team members (dyadic relationships). The leader establishes a relationship with each of their team members, which influences their accountability, decision-making, and performance. This theory focuses on establishing positive relations between the leader and subordinates contributing to organizational success. 13.7.12 In-Group and Out-Group

A leader’s behavior changes when they interact with an individual. The quality of this relationship between the two is based on trust, loyalty, sustenance, respect, and obligation, and, hence, the relationship varies. Groups are further divided into subgroups: in-group and out-group. In-groups are groups of people who work well with the leader and out-groups are groups that represent the comfort level of the leader who works with the groups. 13.7.13 In-Group

In-groups are favored by the leader since they have a greater role, responsibility, and commitment to the team’s goals and are dependable with greater access to organizational resources. The in-group consists of highly competent and trustworthy followers. The members in this group receive considerable care, information,

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opportunities, and training, are highly confident and committed, and are very much inclined toward taking up a challenging job and successfully executing it. 13.7.14 Out-Group

Relationships based on the formal defined roles are called the out-group. The members who are not in the ‘in-group’ fall into the ‘out-group’. Members who show or emanate mistrust are put in the out-group. These individuals receive fewer valued resources from their managers. They are less like-minded compared with the leader, have limited work, do not advocate/confront challenging situations, and have, therefore, limited opportunities. 13.7.15 Relationship Stages

The various stages of the relationship between a manager and their team comprise role-taking, role-making, and routinization.

• Role-taking: This is the phase when the members join the team and their

skills and abilities are assessed by the leaders before allocation of roles and responsibilities. • Role-making: In the second phase, after a role is created for the members, they start working harder and with more commitment, fulfilling managers’ expectations. Trust building is very important in this stage, and any negation of that would result in the member being demoted to the out-group. Work-related factors govern the thought process of managers in keeping the members in the in-group or out-group. • Routinization: In the last phase, stability is attained and processes have more structure, which results in ongoing social interchange between the leader and the members. In-group team members work hard to maintain good relations with their managers by sustaining faith, esteem, sympathy, endurance, perseverance, fairness, and thoughtfulness. They are good at seeing the vantage point of other people, especially their leader. Hostility, irony, and being selfcentric are qualities seen in the out-group as they may start to show aversion or disbelief in their managers. 13.7.16 Leader–Member Exchange Theory and Organizational Effectiveness

This theory directly promotes organizational effectiveness as a summation of leaders, members, groups, and organizational success. Among the in-groups considered to be of high standards, qualitative exchange of information, effective task

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execution, and greater performance result in less employee turnover, with quick promotions and high organizational productivity. 13.7.16.1 Vroom–Yetton Contingency Model

The Vroom–Yetton contingency model consists of a theory proposed by Victor Vroom, Phillip Yetton, and Arthur Jago, which states that the best style of leadership is dependent on the current environment or situation. Experts suggest that there are five different styles of leadership, ranging from autocratic to groupbased, under the normative decision-making model formulated by Vroom, Yetton, and Jago. These styles are crafted based on the organizational situation, environment, and level of involvement (Figure 13.4). Vroom and Yetton designed seven questions to judge members’ contribution to the decision-making and the questions are based on the quality of decisions taken, effort expended to make the decision and acceptance of the decision, and an answer in ‘yes’ or ‘no’ is expected.

FIGURE 13.4  Vroom–Yetton

Contingency Model

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• Is there a quality requirement? Is the nature of the solution critical? Are there technical or rational grounds for selecting from possible solutions?

• Do I have sufficient information to make a high-quality decision? • Is the problem structured? Are the alternative courses of action and methods for the evaluation known?

• Is acceptance of the decision by subordinates critical to its implementation? • If I were to make the decision by myself, is it reasonably certain that it would be accepted by my subordinates?

• Do subordinates share the organizational goals to be obtained in solving this problem?

• Has the conflict among subordinates been likely in obtaining the preferred solution?

The Vroom, Yetton, and Jago model requires decision trees to be implemented to find the best decision alternative as presented in Figure 13.5. 13.7.17 Transformational Leadership Theory

Transformational leadership theory aims at creating a high-performance workforce and special emphasis is given to the elevation of motivation levels among

FIGURE 13.5  Decision Tree

to Be Implemented in the Vroom, Yetton, and Jago Model

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FIGURE 13.6  Components

of Transformational Leadership

the members in the team, which is considered to be essentially the task of the leader, and the transformation leadership theory evolved from this necessity. It has been seen that transformational leaders are generally spirited and zealous, actively involved in processes and try to bring out the best in every member of the group. 13.7.17.1 Transformational Leadership

Introduced by presidential biographer James MacGregor Burns, transformational leadership revolves around the mutual contribution of leaders and followers to advance to the next level of morale and motivation. Transformational leaders motivate followers to change their outlook, insight, and impetus to work toward common goals. Later, researcher Bernard M. Bass came up with Bass’ transformational leadership theory. According to Bass, transformational leadership has four components (Figure 13.6).

• Intellectual stimulation: Here, leaders encourage followers to come up with new ideas and explore new ways and opportunities.

• Individualized consideration: Transformational leadership also allows the

free flow of information exchange and ideas between leaders and members so that leaders can offer direct credit for the one-off assistance of each follower. • Inspirational motivation: Transformational leaders communicate passion, dedication, and motivation to the followers to fulfill the organizational goals. • Idealized influence: The transformational leaders emanate their idealistic views and the followers are impressed by their decision-making styles and handling issues, worship these leaders as gurus, and treat them as their idols.

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13.7.18 Criticisms of Transformational Leadership Theory

• Transformational leadership encourages self-promotion and impression management.

• This theory is a mix of many leadership theories. • Manipulation might be done by leaders and there are chances of losses accrued by followers.

13.7.19 Transformational Leadership Theory and Its Implications

Transforming an organization through leadership is the current buzzword in the industry, and in times of global turbulence in economic, political, and market scenarios, it is very much mandatory that followers of such leaders exhibit high levels of commitment and engage in organizational citizenship behaviors, and this objective can be best achieved if the leaders take up the initiative to inculcate the spirit of high involvement and ownership among followers to achieve organizational objectives. For example, the transformational leadership theory implemented at the Lippincott Nursing Center encourages nurse managers who are effective communicators to meet with the nursing staff so that complaints and recommendations are discussed. Further, the nurse manager who communicates effectively will allow staff members to voice their worries and show reverence toward the employees by patiently listening to them. Also, the nurse managers should be inspirational and trustworthy and work on effective stakeholder engagement by promoting teamwork and collaboration, which can give rise to new ways of service delivery at the center, ensuring its positive impact on the patients. 13.7.19.1 Transactional Leadership Theory

Max Weber in 1947 first introduced the transactional style of leadership followed by Bernard Bass in 1981. This style focuses on the function of management, that is, controlling, organizing, and short-term planning. The transactional leadership theory was used by McCarthy and De Gaulle. Coaches of sports teams are a good example of appropriate transactional leadership. The authority and the level of responsibility for the transactional leader are very high, and followers have to obey the instructions of the leaders. The concept of rewards and punishments is introduced, where if the follower achieves the desired goal as per the directives of the leader, then they are rewarded. In the case of non-performance, they are aptly punished. The leader and follower always exchange information and ideas pertaining to the achievement of organizational goals and it happens across four dimensions (Figure 13.7).

• Contingent rewards: Rewards are based on the achievement of mutually

agreed goals by making available necessary resources. They set SMART (specific, measurable, attainable, realistic, and timely) goals for their members.

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FIGURE 13.7  Dimensions

of Transactional Leadership

• Active management by exception: Transactional leaders actively monitor the

work and performance of their members, see if there exists divergence from set standards and rules and take remedial action to prevent errors. • Passive management by exception: Transactional leaders intervene happens when expectations are not met or when the quality of tasks deviates from the standards defined. They may even use punishment for unacceptable performance. • Laissez-faire: Multiple opportunities are given to members wherein leaders themselves start avoiding making decisions on their own and, in due course, the group starts lacking direction. 13.7.19.2 Assumptions of Transactional Theory

• Employee motivation happens through rewards and punishment. • There is a strict superior–subordinate relationship. • The leaders monitor the performance of the subordinates and control is exercised to get the work done from them.

13.7.19.3 Implications of Transactional Theory

• High level of emphasis on short-term goals, standard rules, and procedures. • Not much importance is given to team members’ creativity and generation of ideas.

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• Style of leadership works well for simple organizational problems. • Transaction leaders go to lengths for cutting costs and improving productivity. • Transactional leaders are highly focused on professional achievements in organizational contexts and do not share emotional bonds with followers or members. • The transaction between leader and member is through monetary benefits.

The transactional style of leadership is not adequate enough for developing the maximum leadership potential and if exercised heavily, it might lead to the formation of an environment infiltrated by position, power, perks, and politics. 13.7.20 Leadership Development

We often relate the success of a team or an organization to its leaders. However, the focus on developing leadership is now changing from just an individual to the entire organization. Today, leadership development is referred to as developing the quality of leadership among individuals as well as the organization as a whole. The increasing importance of leadership has forced modern-day organizations to focus on the leadership aspect in a more serious and mature manner. Organizations have now realized that for long-term sustainable growth and development, leadership qualities need to be fostered. An organization that focuses on leadership development should promote the following.

• Initiative thinking: Whenever feasible, the subordinates should be given an

opportunity to make independent decisions. Creative thinking should not only be appreciated but also taken into consideration. Opportunities to explore creative ideas should be introduced. • Personal skills development: A training and development program to refine skills, personalities, and attitudes, and for overall professional grooming is mandatory. Job rotations can also play a crucial role in this regard. • Encouraging a challenging project: Taking up challenging opportunities is also promoted in the case of leadership development.

CASE: LINKING BUSINESS STRATEGY TO LEADERSHIP STRATEGY A business drives when there are leaders at all levels, and each and every individual is trained, coached, and aligned to the organizational objective. Highperforming companies build execution into the culture.

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EXAMPLE 1. UPS has outperformed its competitors for many years with continuous transformations happening in terms of promoting a leadership culture of customer service, security, and entrepreneurship. 2. Jack Welch, Chairman and CEO of GE, during his tenure increased the market value of the firm from approximately $12 billion to a colossal $505 billion with a market capitalization that was only exceeded by Microsoft. Strategic acquisitions under his leadership helped GE climb to its peak, with 10 percent or more earnings growth for many quarters, in which the most lucrative acquisition of Welch was $6.4 billion paid for by Radio Corporation of America which is owned by the National Basketball Association. Jack Welch built execution into the culture. 3. IBM went through a major transformation when it shifted from ‘technology selling’ to ‘delivering high-value services’ by building a consulting mindset, driving innovation and inventiveness into the management team.

High Performers Develop Leaders at All Levels Nowadays, companies develop leaders bottom-up where every individual is thought to be a leader and undertakes responsibility and makes decisions which support the business motives. A very prominent organization that does that is Accenture, where every manager is made to believe that they should work to make Accenture a better organization every day. Senior executives ‘serve’ the needs of line leaders like an inverse pyramid.

Summary

This chapter focuses on the importance of leadership from an organizational perspective and how great leaders make and break organizations. At the same time, it describes the various leadership models and theories and the implications of using the modern and traditional approaches to leadership styles and theories. The ultimate objective of this chapter is to inculcate among the enthusiasts the spirit of doing something innovative and creative and leading a group in accomplishing the holistic tasks that can facilitate both the industry and the society.

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Exercise Objective Questions

1. Leadership is the ability of a _______ to induce subordinates (followers) to work with confidence and zeal. • HR • COO • Manager • All of the above 2. In which leadership style, employees play no role in decision-making? • Autocratic style • Free-rein style • Participative style • None of the above 3. Which type of leadership style has lower resistance to change? • Free-rein style • Autocratic style • Participative style • None of the above 4. In which type of leadership, leaders take in opinions from the group members before coming to the final decision? • Autocratic style • Free-rein style • Participative style • None of the above 5. A _____ helps in building cordial relations among their team members which in turn helps in easy coordination. • HR • COO • Manager • Leader 6. ________ is the one in which the leader decides and instructs and the subordinates follow and implement. • Autocratic style • Democratic style • Consultative style • Free-rein style 7. In which style of leadership, employees do not get a chance in decision-making and sometimes may be demotivated? • Autocratic style • Democratic style • Consultative style • Free-rein style 8. In which style of leadership, the entire authority lies with the group? • Autocratic style • Democratic style • Consultative style • Free-rein style 9. Leader receives and follows directions. • True • False 10. _______ is a key determinant of the leader’s effectiveness. • Change • Motivation • Stress • None of the above 11. Which of these theories states that a leader’s action directly correlates to the approval, keenness, and performance of their team member? • Situational leadership • Managerial grid • Path–goal • None of the above

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12. ________ encourages participative decision-making and emphasizes people and collaboration with respect to leadership styles. • Situational leadership theory • Trait theory • Path–goal theory • Behavioral theory 13. The participative leader behavior is not directed toward showing concern for the group’s psychological well-being where the work leads to stress. • True • False 14. In which of these, leaders encourage followers to come up with new ideas and explore new ways and opportunities. • Intellectual stimulation • Inspirational motivation • Individualized consideration • Idealized influence 15. In which of these theories, the authority and the level of responsibility for the transactional leader are very high and followers have to obey the instructions of the leaders. • Trait theory • Leader–Member exchange theory • Transactional leadership theory • Behavioral theory

CASE STUDY Pragstamin Private Limited is a manufacturing company of automotive parts. It has remarkable footprints in the market. Customers say that they want to do more business with Pragstamin. Shareholders believe that Pragstamin is one of the best investments. Mr. Amar was appointed as the new general manager. Before being promoted to general manager, he was an executive in the company. He had five years of experience in total. He had completed his MBA in production, and he considered himself a high flier. He was very enthusiastic about being promoted. However, because of his young age, he lacked adequate experience and, therefore, was still considered an executive by his subordinates. These production units were primarily based in two regions: North America and Europe, the Middle East and Africa (EMEA). Each of these locations was headed by a manager. Managers of these two regions reported to Mr. Amar and they had over 16 years of experience with an average age of 47 years. These managers had been with the company for a very long time. Since Mr. Amar had very less experience, they were against the decision of making him the general manager. Mr. Amar started holding biweekly meetings with these managers. At the meeting, he noticed that the managers were hesitant to speak to him. Therefore, he made some changes in the operating procedures so that the efficiency was increased and announced this change in one of the biweekly meetings. He kept a close eye on the behavior of the managers at the next meeting.

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He noticed that the managers were still not opening up to him, and the problem still continued. After three months, Mr. Amar started receiving emails from the top management about the fall in the business. These complaints mentioned that the company has started losing business from its core customers as it was unable to fulfill its promise of high quality, and this has resulted in a huge loss for the company. He continued to receive emails from the top management and was becoming frustrated. One day, he walked down to the production unit and wanted to talk to the floor-operating manager for the production. The manager, who reported to him for that division, was out of the office. Later, the floor-operating manager was informed about the visit. The manager immediately called upon a virtual meeting with the managers of other locations who directly reported to Mr. Amar. In the meeting, upon knowing about the visit, one of the managers commented, ‘Mr. Amar is incompetent and too young and a dictator in the biweekly meetings. He shows no confidence in them and so they are fed up of this situation’. Hearing this, the other replied, ‘we don’t have a choice because Mr. Amar has been regarded highly by the top management and, therefore, we should start looking for other job opportunities’. The other managers reluctantly agreed and ended the meeting.

Questions

1. What actions would have been taken to avoid the problem? 2. What style of leadership does Mr. Amar have? What are the pros and cons of this style in this situation? 3. What solution can you propose to solve the problem as a leader? Critical Thinking Questions

1. Leadership is situational. Comment. 2. Imagine that you are appointed as a leader of a project and you are preparing for the first meeting, identify important actions you could take to have a positive influence on the team members. 3. The leader brings changes into people’s life at work. Comment. Chapter at a Glance Leadership

Leadership is the activity of influencing people to strive willingly for mutual objectives.

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Effective leadership can foster organizations in several ways, such as coming up with innovative strategies, helping reduce resistance to change, and finding creative ways of doing things. Importance of Leadership

• Clarity and communication • Motivation • Change management

• Planning • Employee relations • Crisis management

Leadership Traits

• • • • •

Sympathy Steadiness Uprightness Direction Communication

• • • • •

Flexibility Faith and belief Complexity resolution Strategic action Innovation

Leadership Styles Autocratic Style (Do What I Say)

The leader decides and instructs, and the subordinates follow and implement. The employees play no role in decision-making. Participative Style (Let Us Work Together)

• Consultative: In this style, leaders ask for the opinions of the group members before coming to the final decision.

• Consensual: These leaders believe in motivating the group members to discuss the issue and then arrive at a conclusion. These types of leaders assign more weightage to the group opinion in comparison to the consultative leaders. • Democratic: In this style, each of the group members votes before the leader takes any decision. Here, the entire authority lies with the group. Free-Rein Style (I Go and You Work)

The leader gives freedom to the group members to identify the goals and objectives, take decisions, and resolve issues.

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Leadership Models and Theories Likert’s Management System

In this style, the management has a huge impact on the efficiency of the organization. The four systems developed by Likert are as follows:

• Exploitative authoritative • Benevolent authoritative

• Consultative • Participative

Managerial Grid

The managerial grid is a graphical representation of two behavioral dimensions of a leader.

• Concern for people (Y-axis): The leader accommodates the needs and inter-

ests of the team members and gives them priority while making a decision about the best means to accomplish a task. • Concern for production (X-axis): The leader lays emphasis on tight schedules and high productivity while making a decision about the best means to accomplish a task. The grid identifies five basic styles of leadership.

• • • • •

Impoverished management: Avoid and escape Dictatorial: Produce or perish Country club: Yield and comply Team management: Contribute and commit Middle of the road: Balance and compromise

Situational Leadership Model

Situational leadership theory states that there is no single ‘best’ style of leadership. Effective leadership is all about setting high expectations and working toward them with the team and group of people they are leading. Leadership Style and the Work

Fiedler’s situational contingency theory holds that group usefulness depends on a leader’s style and the demands of the situation. Fiedler’s contingency model is a dynamic model where the personal characteristics and motivation of the leader match with the current situation that the group faces.

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Limitations of Fiedler’s Theory

• Absence of situational variables • Uncertainties about LPC score Path–Goal Approach

In this approach, a leader’s action directly correlates to the approval, keenness, and performance of their team members. The various types of leader’s behaviors are depicted as follows:

• The directive path–goal clarifying leader behavior refers to situations where

the leader tracks the follower’s progress and tells them how to perform their tasks. • The achievement-oriented leader behavior refers to situations where the leader sets high-stakes goals for employees and expects them to perform at a high scale. • The participative leader behavior involves leaders consulting the group and asking for their suggestions before making a decision. • The supportive leader behavior is directed toward showing concern for the group’s psychological well-being where the work leads to stress. Trait Theory

Leadership theories revolve around the characteristics of successful and unsuccessful leaders, and the leaders are rated based on these characteristics to assess the probability of their success or failure. Strengths/Advantages of Trait Theory

• It is a naturally pleasing theory. • Research has validated the foundation and basis of the theory. • It serves as a yardstick against which the leadership traits of an individual can be assessed.

• It gives a detailed knowledge and understanding of the leader element in the leadership process.

Limitations of the Trait Theory

• Bound to be some subjective judgment. • List of possible traits tends to be very long. • Disagreement over which traits are the most important for an effective leader.

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• Attempts to relate physical traits, such as height and weight, to effective leadership. Most of these factors relate to situational factors.

• Very complex theory. Behavioral Theories

Behavioral theory of leadership describes the behavior of leaders and focuses on the making of the leader rather than ascertaining that leaders are born. Advantages of Behavioral Theory

• It encourages values of leadership styles with a focus on collaboration. • It promotes participative decision-making and team development. • It helps managers to evaluate their own style which affects the team’s contribution toward organizational goals.

• It helps managers to find the right balance between different styles of leadership. Contingency Theories Leader–Member Exchange Theory

This theory focuses on establishing positive relations between the leader and subordinates contributing to organizational success.

• In-group and out-group • Relationship stages • Role-taking • Role-making • Routinization Decision Theory/Leader Participation Model

This theory states that the best style of leadership is dependent on the current environment or situation. Experts suggest that there are five different styles of leadership ranging from autocratic to group-based under the normative decisionmaking model formulated by Vroom, Yetton, and Jago. Transformational Leadership

Transformational leaders motivate followers to change their outlook, insight, and impetus to work toward common goals.

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Transformational leadership has four components:

• Intellectual stimulation • Individualized consideration

• Inspirational motivation • Idealized influence

Transactional Leadership Theory

In this theory, the authority and level of responsibility of the transactional leader are very high and followers have to obey the instructions of the leaders. The leader and followers always exchange information and ideas pertaining to the achievement of organizational goals and it happens across four dimensions.

• Contingent rewards • Active management by exception

• Passive management by exception • Laissez-faire

Leadership Development

Leadership development is referred to as developing the quality of leadership among individuals as well as the organization as a whole. The organization that focuses on leadership development should promote the following:

• Initiative thinking • Personal skills development • Encouraging a challenging project

14 MOTIVATION

An Opening Vignette Caselets on Motivation READY IT wanted a considerable increase in sales of its product Fastsol GIS App. So, the management decided to engage and motivate the sales and marketing teams with an incentive. Employees who achieved their goals won 5 percent increments as their incentive. All the employees then were engaged in further upheaval of sales in that quarter. Around 98 percent of the employees signed up for their ‘track-and-locate’ feature campaign. The company’s sales jumped 13 percent over the quarter. India Inc. workers availed long leaves after every two years. They also got long service awards in terms of employee bonus after five years of service. For a project that earned a profit of more than 25 percent employee performance summed up to 5 percent of the profit. At Shimadza Scientific Instruments (Eldersburg, Maryland), outstanding performers are ‘promoted’ to special assistant to the president for two weeks. ‘It is a great ego trip’, says Louis Ratmann, administration manager, ‘plus the improved understanding of the business demands is worth it’. At Apple Computer, employees were loaned a computer just two months after joining the company. Their program called ‘Loan to Own’ would then give the employees a machine after completion of a year’s service. On one Christmas, all employees received a solar-powered calculator, and the next year, they received an FM radio with headphones. These are some examples of employee motivation.

DOI:  10.4324/9781032634258-14

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14.1 Introduction

Motivation is a driving force that creates an urge to take action to achieve our desired goals. There is always a motivating force behind anything we do and it is the intensity of our motivation that determines how well and how fast we succeed in obtaining what we wish to achieve. 14.2 Definitions

Motivation is the willingness of an individual to respond to organizational requirements in the short run. —Hodge and Johnson Motivation is a reported urge or tension to move in a given direction or to achieve a certain goal. —Shartle Motivation refers to the way in which urges, drives, desires, aspirations, and strivings or needs direct control or explain the behavior of human beings — Dalton.E.Mc.Farland Motivation is the process of attempting to influence others to do your will through the possibility of gain of reward. —Flippo Motivation is an ordered way of explaining why a person elects to channel his energies in one direction rather than in another. —Owen Sources: Hodge, B.J., & Johnson, H.J. (1970), Shartle, C.L. (1959), McFarland, D.E. (1974), Flippo, E.B. (1976), Owen, W.V. (1958)

14.3 Process of Motivation (Cycle of Motivation)

The motivation process starts with a need, an individual’s perception of a deficiency that triggers behavior or drive that is intended to accomplish a goal. For example, an employee might feel the need for promotion, recognition, appreciation, challenging work environment, and so on. In order to satisfy these needs, the employee might decide on a particular course of action. If the employee’s selected option leads to a desired outcome, they might feel motivated by the reward to act in a similar manner in the future. However, if an individual’s action does not result in the expected reward, they are unlikely to repeat the behavior. Thus, we can say

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that the reward plays a role as a feedback mechanism to facilitate an individual to assess the consequences of the behavior when considering future action. Motives are believed to be cyclical in nature, they are aroused, and they motivate certain behavior that leads to a goal The behavior that is associated with a drive state is called ‘instrumental behavior’, because it is instrumental in satisfying a need. 14.3.1 Stages of Motivational Cycle

The process of motivation begins with a drive. The term ‘need’ is often used to refer to the drive state. A drive is created when an individual feels the need for something that they lack, and this creates tension in the individual. This tension in turn creates a drive in the individual. It urges them to behave in a particular manner such that the need can be satisfied. The second stage of the motivational cycle is the instrumental behavior. It is instigated by the tension caused due to the drive state. When instrumental behavior leads to the achievement of a goal, the need is satisfied, which leads to a temporary period of relief. This is the third stage of the motivational cycle (Figure 14.1). 14.4 Nature of Motivation

The nature of motivation is explained as follows:

• A psychological concept: Every individual needs to be motivated in order to get the work done for them. But before motivating the individual, it is essential

FIGURE 14.1  Cycle

of Motivation

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•

• •

• •

to understand their psychology so that appropriate motivational techniques can be used to create their interest in the assigned work. If lessons are taught in a playful manner, a child can be made to concentrate on lessons at school, which instantaneously arouses their interest. Continuous process: Every employee working in an organization may have different needs and wants, which are not constant and keep on changing. Similarly, the needs of the organization (goals and objectives) also keep on changing. Accordingly, the manager has to keep on motivating the subordinates to achieve these changing needs. Thus, we can say that motivation is a continuous process. For example, in the Opening Vignette, we discussed that for sales to go up, the organization wanted extra hours of effort from the employees and in return gave 5 percent compensation in salary to those who could achieve the target. Considers whole individual: An individual has different needs, which are all interrelated. Thus, the individual is to be considered as a whole and not as a part of motivation. It may be financial or non-financial: Depending on the employee to be motivated, the company can use either financial or non-financial motivation. Financial motivation includes hikes in salary/wages, allowances, bonuses, and so on. Non-financial motivation includes an increase in responsibility, recognition, participation in the process of decision-making, and so on. It may be positive or negative: Positive motivation includes rewards for encouraging employees to perform better, for example, a promotion, a hike in salary, and so on. Negative motivation includes an element of fear. Negative motivation makes individuals perform better as they fear being punished if their performance is not as per the expectation, for example, demotion, penalties, and so on.

14.5 Importance of Motivation

CASE STUDY Tata Steel has a course called ‘Aspire Knowledge Manthan’, which facilitates knowledge sharing among supervisors and workers. Its objective is to motivate workers to perform better and enhance their capabilities. Another Tata company, TCS, has a job rotation policy that exposes its employees to new responsibilities, functions, or geographies on a regular basis. Cognizant has introduced the concept of gamification to reduce employee turnover and absenteeism.

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The following points explain the importance of motivation:

• Effective utilization of resources: The human resources employed in the

•

•

•

•

organization are provided with financial as well as physical resources to achieve the organizational goals. All these resources involve a cost, and thus it is essential that these resources are utilized effectively. Motivation enables the employees to convert physical/financial resources to products/services. This is how motivation helps in the effective utilization of resources. Achievement of organizational goals: Every organization exists to achieve some predetermined goals and objectives. Thus, it becomes necessary that all the individuals working in the organization are motivated to put in their efforts toward achieving these organizational goals. Improves efficiency of employees: The work performance does not solely depend on the ability of the employee but also on their willingness to work. Willingness is of no use unless it is converted into action. Motivation creates willingness as well as encourages the employees to initiate actions that help achieve the organizational goals. Reduced employee turnover and absenteeism: Motivation creates a willingness to work and to perform better. The employees would be satisfied with their own performance and the rewards/appreciation they would get from the organization. This satisfaction further leads to reduced employee turnover and absenteeism. Cordial organizational relations: A good motivation system can be developed by offering improved working conditions and framing effective incentive plans. The existence of a better motivation system will lead to job satisfaction. This will create an environment of confidence between the employer and the employees. Thus, there would be no or very few conflicts, which would in turn lead to cordial organizational relations.

14.6 Types of Motivation

Some of the major types of motivation are explained as follows:

• Intrinsic motivation: It refers to the motivation that arises from the inside of

an individual rather than from any external rewards, like monetary incentives or promoting. It basically talks about the motivation that develops from internal rewards (such as a sense of responsibility and achievement) or reinforcers (like a guilty conscience).

For example, an intrinsically motivated individual may work toward finding solutions to operate in a difficult situation because the challenge of finding the way out develops a sense of achievement within that individual.

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A real-world example of intrinsic motivation that drives competence is the learning app Duolingo which in order to keep users occupied uses progress visualization (known as skill trees) to show users their advancement in the lessons. As users become better, they earn experience points that are used to unlock the next level. Duolingo users possess four ‘lives’, losing one each time they make a mistake in a program module. Lose all four, and you have to start over again. Duolingo currently boasts of 25 million users. Extrinsic motivation: It refers to the incentives that are external to the individuals such as monetary benefits and promotions. It basically talks about the motivation that develops from external rewards (praise, award, and so on) or reinforcers (policies and procedures, disciplinary actions, and so on). For example, a word of appreciation or a hike in salary encourages a person to perform better. • Financial motivation: It means encouraging the employees to perform better by offering them monetary incentives. Monetary incentives increase the purchasing power of an individual and lead to satisfaction since people can satisfy their material needs. Offering monetary incentives proves to be a potentially good option when the workers have to be motivated but is not a very good option when it comes to motivating people at higher levels. For example, bonuses, increments in salary, profit-sharing, and so on. • Non-financial motivation: Apart from the monetary incentives, there are several non-monetary incentives that can help in motivating employees. For example, job security, recognition, job enrichment, delegation of authority, promotions, and participation in decision-making. • Positive motivation: According to Flipps, ‘Positive motivation is the process of attempting to influence the psychological needs of the employees. Positive motivation is based on an optimistic approach’. For example, salary hikes, perks, promotions, recognition, and praise. • Negative motivation: Negative motivation is the process of attempting to influence others to do your will through the possibility of punishment. It involves using negative incentives to threaten the employees to complete the given task. 14.7 Theories of Motivation

The theories of motivation are classified largely into content and process theories. Content theories deal with an individual’s needs and goals and focus on the factors that motivate an individual. Different theories of motivation that were developed with a ‘content’ perspective include Maslow’s hierarchy of needs, McClelland’s learned needs theory, Alderfer’s existence, relatedness and growth (ERG) theory, Herzberg’s two-factor theory, self-determination theory and temporal motivation theory (TMT).

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However, process theories deal with the ‘process’ of motivation and are concerned with the way in which motivation occurs. Different theories developed with the process approach include equity theory by Adams, expectancy theory by Porter and Lawler, and expectancy theory of motivation by Vroom. For example, demotion, dismissal, transfer, fine, and penalties.

CASE STUDY This is an example of the conceptual model of Maslow’s theory applied to a real situation. There was a manufacturing plant in which most of the managers possessed degrees in engineering, finance, and pharmacy. These managers had very little or no training regarding human behavior. Maslow’s model acted as a blueprint and helped them to address the problems of lower productivity and unhappy laborers. With the help of this model, managers could identify not only the reasons behind the employees’ behavior but also the actions necessary to change the undesired behavior. One day, a consultant presented Maslow’s theory to the management team of a manufacturing unit. Maslow’s hierarchy of needs was used to identify the needs of the laborers. From the study it was revealed that the laborers had little regard for the traditional techniques of management and that the needs of employees had changed over the years, which in turn was causing unrest among them. It was noticed that the older employees were on a lower level of Maslow’s scale (physiological and safety needs). But when the new generation of employees entered the unit, the management started facing resistance since the new workers had a higher level of education as compared to the older employees. The newer employees no longer sought satisfaction from their lowerlevel survival needs. The new generation had needs that corresponded to the higher-level needs of Maslow’s hierarchy, for example, recognition and personal growth. The consultant then revealed the findings of his study to the management of the firm. These findings helped the management team to solve the problems and settle the unrest.

14.7.1 Content Theories of Motivation

Content theory or need theories are considered to be the earliest theories associated with the concept of motivation. It outlines ‘what’ motivates an individual, which means it helps to identify the necessities and requirements that motivate a person. Each of these theories is explained in detail as follows.

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14.7.1.1 Maslow’s Hierarchy of Needs

In 1943, Abraham Maslow proposed a theory, ‘Maslow’s hierarchy of needs’, in a paper titled, ‘A Theory of Human Motivation’. To describe the array of human motivations, Maslow used the terms physiological, safety, belongingness and love, esteem, and self-actualization (Figure 14.2). Maslow’s hierarchy of needs is usually depicted in the form of a pyramid that has five layers, the most basic needs being at the bottom. The first four layers are known as ‘deficiency needs’ or ‘d-needs.’ According to Maslow, if basic needs are not met, then the individual will not have a strong craving for higher-level needs. The five layers are explained in detail as follows (Table 14.1).

• Physiological needs: If these needs are not fulfilled, the human body cannot

function properly, and going further, human survival also becomes impossible. Thus, these needs are considered to be the most vital and must be fulfilled first.

FIGURE 14.2  Maslow’s

Hierarchy of Needs

TABLE 14.1  Examples of Maslow’s Five Basic Needs

Need

Examples

Self-actualization Esteem Social Security Physiological

Justice, wisdom, truth, and so on Self-respect, independence, self-confidence, and so on Love, affection, care, belongings, friendship, and so on Job security, health security, and so on Air, water, food, shelter, sexual instinct, and so on

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• Safety needs: Once the physiological needs are satisfied, the safety needs start

dominating the behavioral aspect of an individual. Safety needs include • Physical safety • Economic safety • Environmental safety • Emotional safety • Social needs: The next layer of the pyramid portrays the social needs of an individual. Social needs are related to relational aspects and involve a sense of belongingness. Social needs include • Need for love • Need for belonging • Esteem needs: After a person experiences a sense of belongingness, the desire to feel valued develops. Esteem needs may be either internal or external. Internal esteem needs include confidence, self-respect, freedom, and so on. External esteem needs consist of social status, recognition, and so on. • Self-actualization: It is the peak of Maslow’s hierarchy of needs. It is the journey of accomplishing one’s full potential as an individual. Unlike the other needs, the self-actualization needs are never completely satisfied; with the psychological growth, the need for excellence also increases. 14.7.1.2 Limitations of Maslow’s Hierarchy

• This theory is oversimplified and is based on only human needs. It fails to reflect the direct cause-and-effect relationship between need and behavior.

• All the employees may not have similar needs. Most of the employees may be content only with the fulfillment of physiological and security needs.

• Every employee may not follow the similar pattern as suggested by Maslow’s

hierarchy of needs. • With the growing needs of individuals, the assumptions of this theory may not hold well in today’s context. • Although Maslow’s theory is widely accepted, there is very little evidence to support it. It is largely tentative and untested. Maslow’s writings are more philosophical than scientific. To Maslow’s theory, another dimension was added by Herzberg, which was the degree of dissatisfaction in employees. Herzberg listed these factors as supervision problems, company policy, relationship with peers and seniors, working conditions, salary, and security. Satisfaction and dissatisfaction do not form a continuum; hence, to improve productivity and attitudes, managers must identify and attend to both and not make false deductions that an increase in satisfaction leads to a decrease in dissatisfaction. Tesco uses the elements of Herzberg’s theory to evaluate the satisfaction and dissatisfaction levels among its employees. The company motivates the individuals

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by involving employees in decision-making to the point that the staff can also voice their input on pay rises and so on. It is said that Tesco workers even get a chance to tell their choices when bistro menus are designed, which gives them a sense of satisfaction. In a study conducted by the University of Malaysia, it was found that the major factors determining job satisfaction for staff members were salary, policy, and administration and the factors that caused dissatisfaction were lack of personal growth and achievement on the professional front. The tenets of Herzberg’s twofactor theory are discussed as follows. 14.7.1.3 Herzberg’s Two-Factor Theory

This theory was developed by Frederick Herzberg, a psychologist. The two-factor theory is also known as Herzberg’s motivation–hygiene theory or dual-factor theory. This theory is based on the analysis done by Herzberg after interviewing 203 accountants and engineers in Pittsburgh, Pennsylvania. The theory determines that some specific factors lead to job satisfaction, while there are other job factors that prevent dissatisfaction. According to Herzberg, the contrast of ‘satisfaction’ is ‘no satisfaction’ and the contrast of ‘dissatisfaction’ is ‘no dissatisfaction’. Herzberg classified the job factors into hygiene factors and motivating factors and suggested a two-step approach to understanding employee motivation and satisfaction (Figure 14.3).

• Hygiene factors: These factors do not actually act as motivation but, if absent, result in demotivation. Some of these factors are as follows: • Working conditions • Job security • Fringe benefits • Company policies

FIGURE 14.3  Herzberg’s Two-Step Approach

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• Motivational factors: The presence of these factors creates positive job satisfaction. A few of them are as follows: • Recognition • Responsibility • Status • Personal growth

14.7.1.4 Limitations of Two-Factor Theory

• • • •

It does not take into consideration the situational variables. The theory assumes that greater satisfaction leads to greater productivity. The theory ignores blue-collar workers. No comprehensive measure of satisfaction is used. An employee may find their job satisfactory regardless of the fact that they may dislike a portion of the job. • The two-factor theory is not free from bias as it is largely based on the reaction of the respondents. For example, an individual might blame external factors, such as salary structure, company policies, and peer relationship for dissatisfaction. On the other hand, they might give credit to themselves for the satisfaction factor at work. Next, we move on to discuss the learned theory of needs by McClelland’s starting with an example. The theory will bring clarity to various types of motivational indicators for different categories of employees.

CASE STUDY An employee in the IT department of an organization created an application that could accurately post advertisements of internal jobs based on an employee’s preference. The top management of the organization directed the senior manager of the IT department to applaud the employee’s effort for the excellent application made. So, the employee during the staff meeting was congratulated for his achievement in front of the team, but he became extremely embarrassed with this so-called hullabaloo.

What Did Actually Go Wrong? It is said that employees respond to feedback and praises in different ways. David McClelland’s human motivation theory gives way to identifying people’s motivation drivers. In this case, according to McClelland’s theory, the team member’s motivational driver was affiliation, which meant that he never

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wanted to stand out in a crowd so either a private feedback or a personal email would have been apt in this situation. The succeeding section explains learned theory more elaborately.

14.7.1.5 McClelland’s Learned Needs Theory

Psychologist David McClelland proposed a motivational theory in the 1960s. This theory is known by different names like need theory, three needs theory or McClelland’s learned needs theory. This motivational model explains how the needs for achievement, power, and affiliation influence the actions of individuals in a managerial context. According to McClelland, all individuals have three types of motivation regardless of age, sex, race, or culture. The type of motivation by which a person is motivated depends on their life experiences and the opinion of culture to which the individual belongs. These motivators fall under three categories: achievement, affiliation, and power. 14.7.2 Need for Achievement

Individuals with a high need for achievement aspire to excel and, thus, have a tendency to stay away from both low-risk and high-risk situations. They avoid low-risk situations since they believe that success achieved easily is not worth it. According to achievers, high-risk projects are an outcome of luck rather than one’s efforts. Achievers expect regular feedback with an intention to keep an eye on the progress of their achievements. Generally, these kinds of individuals prefer either to work alone or with other high achievers. They take calculated risks to achieve their goals. 14.7.3 Need for Affiliation

Individuals having a high need for affiliation call for sound associations with other people and feel the need to be accepted by other people. Due to their tendency to be liked by others, they often go along with their group. They believe in collaborating with other group members rather than competing with them. They tend to conform to the norms of their work group. Individuals having a high need for affiliation prefer tasks that provide noteworthy personal interaction. 14.7.4 Need for Power

An individual’s need for power may be of two types, personal or institutional. Those with a need for personal power wish to direct others. Such a need can be perceived negatively by other group members. Individuals with a need for institutional power wish to direct the efforts of others to achieve the goals of the

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institution. Individuals with a high need for institutional power are likely to be more effective than those with a high need for personal power (Figure 14.4). 14.7.5 Implications for Management

Individuals possessing different needs need to be motivated differently. Those having a high need for achievement must be given challenging tasks with achievable goals. A person with a high need for affiliation can prove to be a good group performer, and thus can perform best in group tasks, whereas those with a high need for power must be given an opportunity to lead or manage others. 14.7.5.1 Alderfer’s ERG Theory

Alderfer refined Maslow’s hierarchy of needs theory to synchronization in an article titled ‘An Empirical Test of a New Theory of Human Need’ in the year 1969 (https://www​.mindtools​.com​/pages​/article​/newTMM​_78​.htm, accessed on 26 February 2016). His theory is called the ERG theory of motivation. He compressed Maslow’s hierarchy of needs into three simpler classes of needs, namely existence, relatedness, and growth. For example, if an individual is working and needs financial security in order to improve other costs and expenses, they might be in the ‘existence’ needs of the model. For an employee who prospers on interpersonal connection and acknowledgment from others, their needs are in the ‘relatedness’ sector. Finally, the needs for reflective ‘growth’ indicate that an individual has

FIGURE 14.4  McClelland’s

Learned Needs Theory

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reached a level where they desire to grow personally in the sphere of professional development and enhancement (Figure 14.5).

• Existence needs: These include basic material needs of an individual. In sim-

ple words, existence needs include the physiological and safety needs of an individual. Figure 14.5 depicts how these needs map to Maslow’s hierarchy of needs. • Relatedness needs: These include the desires possessed by individuals to maintain significant interpersonal relationships and receive fame and recognition. Maslow’s social needs and external component of esteem needs fall under this class of needs. • Growth needs: These needs are related to the need for self-improvement and personal development and growth. Maslow’s self-actualization needs and intrinsic component of esteem needs fall under this category of need. ERG theory and Maslow’s theory differ in the following three key points:

• Unlike Maslow’s theory, which suggests a progression of needs from one level

to another, the ERG theory suggests that an individual can be motivated by needs of more than one level at a time. • The ERG theory acknowledges that the significance of the needs may differ from person to person depending on the circumstances. Some individuals might put a higher value on relationships than growth at certain stages of their lives.

FIGURE 14.5  Relation

between Maslow’s Hierarchy of Needs and ERG Theory

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Motivation

• It has a ‘frustration–regression’ element. This means that if the needs at one of the higher levels remain unsatisfied, individuals become frustrated and pursue lower-level needs again.

14.7.5.2 Self-determination Theory

The self-determination theory of motivation was developed by psychologists Edward Deci and Richard Ryan. According to this theory, people are driven by a need to grow and achieve fulfillment. The basic assumption of self-determination theory is that individuals are actively directed toward growth. Acquiring mastery over challenges and gaining new experiences is necessary for developing a cohesive sense of self. Although people are often motivated by extrinsic motivation factors such as money, prizes, and praise, self-determination theory focuses mainly on intrinsic motivation factors like a desire to gain knowledge or autonomy. For example, self-determination theory in the education sector is used primarily for generating interest of the students in learning, valuing their education, and being confident about their own capabilities, which results in high-quality learning, understanding, and personal growth. Self-determination theory acknowledges three basic psychological needs that must be fulfilled in order to promote well-being and health; these needs can be applied universally. However, some may be more prominent as compared with others at certain times and will be expressed differently based on experience, time, or culture.

• Competence: Try to control the outcome and acquire mastery. • Relatedness: It is the universal desire to interact, be connected to, and experience a sense of belongingness.

• Autonomy: It is the universal urge to have control of one’s own behaviors and goals.

According to Ryan and Deci, when people understand these three things, they become self-determined and feel intrinsically motivated to pursue the things that interest them. In order to fulfill these needs, it is necessary to realize that the psychological growth described by self-determination theory does not occur automatically. Although individuals might be directed toward such growth, it requires unremitting sustenance. According to Deci and Ryan, social support is the key. Through our relationships and interactions with others, we can either foster or ruin well-being and personal growth. Other factors that can help or hinder the three elements needed for growth are explained as follows.

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FIGURE 14.6 

Self-determination Theory

According to Deci, giving individuals extrinsic rewards for already intrinsically motivated behavior can undermine autonomy. As the behavior becomes progressively more controlled by the external rewards, individuals begin to develop a feeling of less control of their behavior and intrinsic motivation diminishes. Deci also suggests that presenting unexpected positive encouragement and feedback on an individual’s performance can add to intrinsic motivation as this kind of feedback helps individuals to feel more competent (Figure 14.6). 14.7.5.3 Temporal Motivation Theory

Piers Steel and Cornelius J. König (2006) developed an integrative motivational theory known as TMT. This theory emphasizes ‘time’ as a crucial motivational factor and focuses on the impact of deadlines on the allocation of attention to particular tasks. According to this theory, the perceived worth or benefit of an activity increases exponentially as a deadline nears. TMT is particularly useful for understanding human behaviors such as procrastination and goal setting. The theory suggests that an individual’s motivation for a task can be derived using the following formula: Motivation = (Expectancy × Value) / 1 + (Impulsiveness × Delay) where motivation is the desire for a particular outcome; expectancy is the probability of success; value is the reward linked to the outcome; impulsiveness is an individual’s sensitivity to delay; and delay is the time for realization.

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14.7.6 Process Theories of Motivation

Process theory is a commonly used form of a scientific research study in which events or occurrences are said to be the result of certain input states leading to a certain outcome (output) state, following a set process (https://en​.wikipedia​.org​/ wiki​/ Process​_theory, accessed on 3 March 2016). Process theory proposes that if an outcome is to be duplicated, the process that originally created it also needs to be duplicated and that there are certain constant essential conditions to achieve the outcome. The process theories provide an explanation for ‘how’ something happens. 14.7.6.1 Equity Theory by Adams

John Stacey Adams, a workplace and behavioral psychologist, developed an equity theory of motivation in 1963. He asserted that employees seek to maintain equity between the inputs that they bring to a job and the outcomes that they receive from it against the perceived inputs and outcomes of others (Adams 1965). The belief is that individuals value fair treatment and this is what causes them to be motivated to keep the fairness maintained in the relationships with their colleagues and the organization. The structure of equity in the workplace depends on the ratio of inputs to outcomes. The inputs are the contributions made by the employees toward the organization. According to equity theory, an individual who perceives himself as either undervalued or overvalued will experience distress, and this distress leads to the distribution of efforts to restore equity in the relationship. The focus of this theory is to identify if the distribution of resources is fair to both partners who are in relation. Equity is measured by comparing the ratios of contributions and benefits accorded to each person within the relationship. It is not necessary that the partners get equal benefits or make equal contributions provided the ratio between these benefits and contributions is equal.

EXAMPLE Suppose there are two employees, Rahul and Vijay. Rahul was given a hike in salary and Vijay received a higher hike for the same amount of work. Rahul would assess this change, notice inequality, and be unhappy. However, if Rahul considers that Vijay was given more responsibility hence more work, and had hence received a higher hike in salary, then Rahul may assess the change and conclude that there was no loss in equality status, and hence would not resist the change.

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An individual will believe that they are treated fairly if they perceive that the ratio of their inputs to their outcomes is equal to those around them. This can be illustrated by the following equation: (Individual’ s outcomes)    (Relational partner’s outcome) = (Individual’ s input) (Relational partner’ s inputs) Inputs: Inputs are defined as each participant’s contribution to the relational exchange and are viewed as entitling them to rewards or costs. The inputs that a participant contributes to a relationship can be either assets (entitling them to rewards) or liabilities (entitling them to costs). Individual traits such as boorishness and cruelty, are seen as liabilities entitling the possessor to costs (Traupmann, J., Petersen, R., Utne, M., & Hatfield, E. (1981). Measuring Equity in Intimate Relations. Applied Psychological Measurement, 5(4), 467–480. https://doi​.org​/10​.1177​/014662168100500405). Inputs typically include the following: • Effort • Time • Determination • Enthusiasm • Loyalty • Adaptability • Flexibility • Commitment • Tolerance • Skill • Personal sacrifice • Support from co-workers and colleagues • Education • Experience • Hard Work • Ability • Trust in superiors Outcomes: Outcomes are defined as the positive and negative consequences that an individual perceives a participant has incurred as a consequence of their relationship with another. Generally, when the ratio of inputs to outcomes is close, employees are satisfied with their job. Outcomes can be both tangible and intangible. Typical outcomes include the following: • Job security • Salary • Expenses

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• • • • • •

Recognition Responsibility Sense of achievement Praise Employee benefit Reputation

If people do not receive the above as per market standards, then their motivation levels decrease and they seek to change in every professional aspect. 14.7.6.2 Propositions of Equity Theory

• Individuals try to capitalize on their results (where results are rewarded minus the expenses).

• Groups can capitalize on joint rewards by developing systems for justifiably

distributing rewards and expenses among their members. A system of equity develops within groups, and members try to convince other members to agree and adhere to these systems. The only way groups can persuade members to justifiably behave is by showing the advantages of the same. Thus, groups will generally compensate members who treat others justifiably and generally raise costs for those members who treat others inequitably. • Individuals tend to get highly disturbed if they find themselves in inequitable relationships. According to equity theory, a person who gets ‘too much’ and the person who gets ‘too little’ feel distressed by an equal measure where the measure can be guilt or shame, anger or humiliation. • Individuals who perceive that they are in an inequitable relationship attempt to eliminate their distress by restoring equity. The greater the inequity, the more distress people feel and the more they try to restore equity (Walster et al. 1978). 14.7.6.3 Three Primary Equity Theory Assumptions Applied to Most Businesses

The three primary assumptions are as follows:

• Employees expect a return in proportion to their contribution, referred to as the ‘equity norm’.

• Employees determine the equitable returns on the basis of efforts expended and

outcomes achieved in proportion to their co-workers. This perception is known as ‘social comparison’. • Employees who face an inequitable condition will establish inequity either by distorting their efforts and/or outcomes, otherwise known as cognitive distortion, and they do this by directly altering inputs/outputs or by leaving the organization (Carrell and Dittrich 1978).

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14.7.6.4 Implications for Managers

Equity theory has several repercussions for business leaders.

• People weigh the total of their contributions and rewards. This means the •

• • • •

mother of an infant may settle for a lower monetary reward in return for more flexible working hours. Different employees might attach different perspectives to the contributions and results. For example, two or more employees having equal experience and skills and contributing toward the same work and for the same pay may have varied insights into the equality of the deal. Employees also adjust to purchasing power and local market conditions. Thus, a car driver living in a small town in India may accept lower compensation than a driver living in metros such as Mumbai, Hyderabad, and Bangalore. Although it may be acceptable for more senior-level employees to receive higher pay, there are boundaries to the equilibrium in the scales of equity and employees can find the disproportionate executive pay discouraging. Staff’s perception on contributions and results may be incorrect and observations need to be managed effectively. An employee who thinks they are getting overpaid may also adjust the values that they attribute to their own personal inputs and might internalize a sense of supremacy, which can actually decrease their efforts.

14.7.7 Expectancy Theory of Motivation

Victor Vroom from the Yale School of Management proposed an expectancy theory in 1964. Vroom emphasized outcomes and results and not needs like Maslow and Herzberg. The theory states that the intensity of a tendency to perform in a particular manner is dependent on the intensity of an expectation that the performance will be followed by a certain outcome and on the appeal of the outcome for the individual. The expectancy theory states that employees’ motivation is an outcome of to what extent the employee wants to get rewarded (valence), that the added efforts will lead to expected performance (expectancy), and that the expected performance will finally lead to the reward (instrumentality). In brief, valence is the importance of the expected outcome for the employee. It is just the expected and not the actual satisfaction that an employee assumes to receive after achieving the goals. Expectancy is the belief that better efforts will result in better performance. Expectancy is influenced by factors such as possession of appropriate skills and capabilities for performing the job, availability of proper resources, availability of crucial information and getting the required support for completing the job. Instrumentality is the trust that if an individual performs well in the organization, then an effective outcome exists. Instrumentality is affected by factors such

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as trust in the individuals who choose who receives what outcome and lucidity of association between performance and outcomes. Thus, the expectancy theory concentrates on the following three relationships.

• Effort–Performance relationship: What is the probability that the individual’s effort be recognized in their performance appraisal?

• Performance–Reward relationship: It indicates how much the employee

believes that they will get a fair performance appraisal and the organizational rewards. • Rewards–Personal goals relationship: It is said that rewards encourage employees to work toward their personal goals. Vroom stated that motivational force can be calculated using the following formula: Motive force = Expectancy × Instrumentality × Valence

EXAMPLE Consider the sales target to be achieved for a particular product, as stated in the opening vignette, for the company READY IT. For sales and marketing teams, to get a 5 percent salary rise on achieving sales target was an attractive option (valence 0.9 and expectancy 0.9), and they were highly optimistic that it would work out based on their previous attempts. By applying the formula, we see that the motive force is very strong. Motive force = 0.9 × 0.9 = 0.81

The range of the various components of motivation is shown in Table 14.2.

TABLE 14.2  Expectancy Theory: Components of Motivation and Their Range

Component

Range

Range Definition

Expectancy

0 to 1

Instrumentality

0 to 1

Valence

–1 to +1

0 = Perform unsuccessfully 1 = Perform successfully 0 = Outcome independent of performance 1 = Outcome dependent on performance – = Avoidance of outcome 0 = Indifference + = Satisfactory outcome

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FIGURE 14.7  Expectancy Theory

of Motivation

According to Vroom, employees consciously decide whether to perform a job or not. This decision completely depends on the employee’s motivation level (Figure 14.7), which instead depends on three factors—expectancy, valence, and instrumentality. 14.7.8 Advantages of Expectancy Theory

It is based on a self-interested individual who expects to gain maximum satisfaction and in turn minimize dissatisfaction.

• This theory focuses on expectations and perception; the real and actual are trivial.

• It highlights rewards or payoffs or other related aspects. • It focuses on psychological indulgence where the final notion of the employee is to achieve.

• Extreme benefits and least discomfort. 14.7.9 Limitations of Expectancy Theory

The expectancy theory seems to be idealistic as very few individuals attain a high degree of correlation between performance and rewards. The application and implementation of this theory are limited as a reward is not directly correlated with performance in many organizations. It is relevant to other parameters as well, such as position, effort, responsibility, education, and so on.

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14.7.10 Implications of the Expectancy Theory

• Managers can synchronize the expected outcomes to the desired performance levels.

• Managers must ensure that the employees achieve the performance levels in a

simplistic manner. • On the basis of performance evaluation, deserving employees must be rewarded for their exceptional performance. • The reward system must be free from partial and biased decisions, ultimately making it fair in an organization. • Organizations must evolve into designing dynamic and challenging tasks for the employees. Employees’ motivation levels should be persistently evaluated and analyzed through various techniques, such as questionnaire and personal interviews. 14.7.10.1 Goal-Setting Theory of Motivation

The goal-setting theory of motivation was introduced by American psychologist Edwin Locke. In his theory, he stated the essential linkage of the setting of goals to the task performance. His theory states that higher and better task performances are a result of the contribution of complex and challenging goals along with appropriate feedback. In other words, goals display and show the path to an employee about what needs to be done and how much efforts are required to do it. The important features of the goal-setting theory are as follows:

• The willingness to work toward achieving a particular goal is the root of job • •

•

•

motivation. Clear, specific, and complex goals are greater motivating factors than simple, general, and unclear goals. Specific and clear goals lead to greater results and best performance. Nonmessed, easily measurable, and clear goals along with deadlines for completion avoid misunderstanding. Goals set should be realistic as well as challenging. It provides assurance that one can gain a certain amount of pride and success in achieving them, which motivates them for the success of the next goal. The higher the complexity and realism of the goal, the more intense the success and the higher the enthusiasm for achieving it. Feedback on outputs gives direction to the employee behavior and contributes to better performance than the absence of feedback. Feedback is the means of gaining focus, making specifications, and regulating goal complexities. It is very useful in getting employees to work with more dynamism and leads to greater job satisfaction. The participation of employees in goals is not always desirable.

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• Goal-setting plays an important role in making a goal acceptable, and it leads to more involvement.

Goal-setting theory has certain eventualities.

• Self-efficiency: Self-efficiency is one’s belief and faith that they have the capa-

• • • •

bility of doing a task. Higher level of self-efficiency ensures more expending of efforts by an individual when doing complex tasks. The lower the level of self-efficiency, the less the expending of efforts by the individual. Goal commitment: This theory assumes that the individual is involved in the goal and will not leave the goal. The variable factors on which the goal commitment depends are as follows: Goals are made open, known, and broadcasted. Goals should be self-implied and not assigned by another individual. Goals made by an individual should possess the consistency and vision of organizational goals.

14.7.11 Advantages of Goal-Setting Theory

• The theory is a kind of mechanism that can raise the incentives of employees to get work done with increasing speed.

• Goal setting raises performance levels not only by producing increasing moti-

vation and efforts but also by increasing and improving the quality of feedback.

14.7.12 Limitations of Goal-Setting Theory

• At times, organizational goals and managerial goals do not match. And ulti-

mately it hampers the performance if it is used to spread incompatible action drift. • Setting difficult and complex goals leads to danger. • Lack of skills and competency required to perform a task to achieve the goal affects the success of goal setting and performance goes down. • There is no strong justification or evidence to prove that goal-setting theory by Locke is responsible for improving job satisfaction. 14.7.12.1 Theory X and Theory Y of Motivation

Human behavior, like perception, has two contradictory aspects: pessimistic (negative) and optimistic (positive); the former is called theory X, and the latter theory Y. It was initiated in 1960 by Douglas McGregor. According to McGregor, theory X and theory Y are based on certain assumptions featured in Table 14.3.

464  Motivation TABLE 14.3  Theory X and Theory Y of Motivation

Theory X (Pessimistic Views)

Theory Y (Optimistic Views)

Attitude negative: Do not like work and find it boring Direction: Forced to make an effort Responsibility/ownership: Avoided Motivation: Material gains lead to motivation only Creativity: Not encouraged by self and others

Attitude positive: Like work and take interest in learning Direction: Makes an effort on their own Responsibility/ownership: Self-imposed Motivation: Self-motivated, under healthy environment Creativity: Encouraged by self and others

14.7.12.1.1 Assumptions: Theory X

• Employees resist work and will try to avoid it whenever possible. • Employees emphasize on job security and being less ambitious. • Employees who dislike their work must be made to follow guidelines and pro• • • •

tocols with respect to adherence to quality, schedules, and productivity so as to achieve desired goals and targets. Employees do not easily accept change and may resist changes The Managers must adopt a more dictatorial style. Employees usually dislike responsibilities. An average employee always expects a formal guidance.

14.7.12.1.2 Assumptions: Theory Y

• Employees can perceive work as normal and utilize physical and mental efforts in an inherent manner in their jobs.

• Employees may not always need to be threatened by external control, but a • • • •

sense of self-direction and self-motivation exists if they are committed to achieve organizational objectives. The rewards of the job are motivating and lead to more loyal employees. An employee can learn to identify and uphold the responsibility and sometimes obtain the same. The employees may explore their skills and competencies. Their logical capabilities, if completely utilized, may lead to having a resourceful and worthy employee for identifying and resolving multiple issues rising inside and outside the organization.

Thus, we can say that theory X presents a pessimistic view of employees’ nature and behavior at work, while theory Y presents an optimistic view of the employees’ nature and behavior at work.

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McGregor states that theory Y is comparatively more valid for implementing than theory X. Hence, he has encouraged team building, responsible and brainstorming jobs, and joint participation in the decision-making process of the organization 14.7.12.2 Implications of Theory X and Theory Y

• Employees being the most valuable assets of the organization, theory X is less

preferred today. Theory X leads to exercising tight control and supervision. It indicates the reluctance of the employees toward the organizational changes and, hence, does not encourage innovation and creativity. • A plethora of organizations today are using theory Y as it implies that managers should encourage an optimistic work environment, providing opportunities for employees to take initiative and be self-motivated. Employees should be given equal importance and opportunities for their contribution to organizational enhancement. • Theory Y expresses a distributed sense of power, teamwork, and participative decision-making in an organization. It elaborates on how an employee can make noteworthy contributions to an organization. It synchronizes and harmonizes employee’s needs and aspirations with organizational needs and aspirations. CASE STUDY ON MOTIVATION

Shekhar Jaiswal joined ISIC Computers after working some years at CITTI, as he thought that the company would offer better career prospects, since it was a bigger company than CITTI. Although Shekhar had spent some of his best years there, he realized that to grow further in his field, he would have to join a bigger company, and preferably face some good clients on an international platform and he was sure he would excel in his own position. Shekhar joined as a senior programmer at ISIC and was immediately put on client-side operations and there was more than a slim chance that he would be sent to the USA or the UK on a project. Shekhar was very excited about his new job. He joined Radhika’s team handling the US clients and had met Radhika during the orientation sessions. His team members seemed warm and friendly, and comfortable with their work. Shekhar in his initial days hardly had time to interact with his boss, so out of curiosity, wanting to know more about his boss, he asked his team members one day about her, to which they replied that Radhika was a non-interfering type of a person and lets them work the way they wanted. At CITTI, Shekhar had a very dynamic and considerate boss who was like a mentor for him and his entire team. The boss strongly believed in discourse, discussion, and dialogue and would set up frequent brain storming sessions and let the team come up with ideas, if any, through discussion and experience.

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Motivation

He rarely held an individual member of his team responsible for failure or success, which later Shekhar found was not the case with Radhika. In his first week at work, he found the atmosphere at the office a bit dull. However, he was quite excited. His team had been assigned a new project and was facing a few glitches with the new software, but he had some solutions with him. He wanted to discuss these on top priority with Radhika and was confident that Radhika would be happy to hear the solutions but this did not come true as Radhika showed no interest in hearing him the day, they all sat in a meeting to resolve the issues. Instead, she gave solutions that she thought were right and thought it was a waste of time to ask the team for better ideas. Shekhar felt his heart sink but again stood up thinking that he could bring some changes in the environment but Radhika was not someone who could be so easily handled. While she was efficient at what she did and extremely intelligent, she had no time for her subordinates, and whenever schedules and deadlines were not met, she would just put the blame on them. Shekhar’s motivation levels went down steadily, and he started losing interest in work. Slowly, his performance suffered and from being someone with substantial potential, Shekhar was now in danger of losing his sharpness. Questions for Discussion

1. What according to you, were the reasons for Shekhar’s disillusionment? Answer the question using Maslow’s hierarchy of needs. Model answer: Referring to Maslow’s hierarchy of needs, Shekhar’s social needs were not satisfied. He received love, affection, recognition, and independence in his former organization, which substantiates Maslow’s hierarchy of security, social and esteem needs, and his former boss was very adept at motivating him from within (intrinsic motivation) by making him realize that he bore substantial responsibility and ownership for his tasks. Shekhar had achieved targets in his former company and was rated as a top performer with high potential and had even reached the stage of self-actualization, where he would compare his past performances to his current ones. But the current company’s environment did not allow him to do so and he was strongly missing the support of his boss. The contribution of his previous boss had worked wonders in fueling his motivation levels. 2. What should Shekhar do to resolve his situation? What can a team leader do to ensure high levels of motivation among their team members? Model answer: There are possible solutions for Shekhar to adopt. First is to motivate oneself intrinsically and then to set one’s own goal and work toward it as has been stated under the goal-setting theory of motivation. He should also form a team of his own at QUITO, collating all team members working on his project and then distribute responsibilities informally to

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make them feel good about the ownership of tasks allocated and resolve all the minor issues cropping up in his team, instead of taking them to Radhika every time. This would be apt for him because of his experience as a team lead at his previous workplace. It will make the team also feel that they have somebody who could guide and mentor them and give both Shekhar and his team the confidence to work together. Motivation could also be derived from the teammates by conducting special interactive sessions where business ideas would flow, get challenged, be appreciated by colleagues, and so on. A team leader should use both the intrinsic and extrinsic methods of motivation and should see that as per Maslow’s hierarchy, the resources’ needs are met and guide them to adopt the goal-setting theory of motivation.

14.8 Managing Cross-Cultural Motivational Challenges 14.8.1 Overview

A team is a synergy between well-defined mindsets and skill sets that cooperate to perform a job or a task with a specific intent. Managing a team with heterogeneous personalities is an extremely complex task. More of a challenge is envisaged while managing cross-cultural teams that encompass people from various societies and geographies. Since the inception of globalization, organizations have started to interact with customers, service providers, and their partner organizations around the world. Globalization in the workplace now means transacting with people coming from different cultures, traditions, and countries; speaking different languages; following different religions; and working together smoothly and seamlessly without any apprehension. 14.8.2 Definition: Cross-Cultural Team

Cross-cultural teams have a global mix of people coming from different cultures, backgrounds, and territories, along with varied experiences. Those companies that fail to create a conducive environment and harmony among employees, resulting in mutual conflicts and disappointments, lose out on establishing a positive culture, resulting in a low yield and productivity of employees. Certain differences can arise when there is no compliance set in the method and management of communication and no setting up of an appropriate work culture. For example, with regard to work timings, employees who come from some countries are more adaptable to long working hours either in physical or online mode than those willing to work more than the stipulated hours of work, even if working remotely, in contrast to a few who, as per their nation’s work engagement hours, restrain from doing so except during emergency situations.

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Also, in a multicultural environment where there is huge diversity in putting forth thoughts, ideas, and actions, such situations often pose a challenge where each member of the team needs to be heard and the team is required to be handled effectively. 14.8.3 Managing a Cross-Cultural Team: The Challenges

Team management is in its evolutionary phase, and there are several barriers encountered in managing them.

• Communication and expression: The subtlety of expression such that each

•

•

•

•

•

member of the team is on the same page and there is a consistency in synchronizing their thoughts, actions, and understandings, which is a cause of concern while handling multicultural teams, especially when the communication is virtual. Issues related to the tasks need to be mitigated at the earliest with prompt responses to queries and action initiation. For Germans, the thumb rule is to get down to business as soon as possible and not to while away time talking about other subjects. Information gaps: Sometimes there can be a gap in the information disseminated and eventually it becomes important to make available the right resources at the required time to collaborate and complete one’s tasks. Accessing databases and updating applications in a shared mode, scheduling and tracking projects jointly become prima facie for teams operating in a virtual mode. Work style: Every team member has a specific work form that is significantly determined by the society in which they live. Some work cultures are open to individual endeavors and pay attention to individual thoughts and beliefs. In some, the regulatory body decides a course of action and employees devotedly follow it. Even though employee personalities range from moderately aggressive to highly aggressive, and the contributions of the latter are more in focus than the contributions of the former, it is extremely important to separate out and motivate team members to perform. Influence: There can be occasions when a team having employees from the same ethnicity may try to prevail upon the procedure, and this can be the prime causal factor for the entire team moving in their direction. This can create unneeded tensions among other team members. Team dynamics can be a cause of concern in a cross-cultural team, which eventually can lead to unnecessary politics and conflicts within a team. Motivation factors: Normally, companies do not take into cognizance the motivational factors, unique to a cross-cultural team. They generalize it across tangible benefits such as increments, bonuses, incentives, career progression, and intangible benefits that include awards and recognition, job

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satisfaction, and so on. Each employee should be mapped to a motivating mechanism in order to be more productive and performance-driven. In the absence of a proper catalyst, the team members may miss sprightliness and be discouraged at work. 14.8.4 Effective Management of Cross-Cultural Teams

The most optimal solution is to minimize misunderstandings and make team operations seamless and smooth, as a single solution does not fit all. A multicultural team has an assemblage of different beliefs and styles of communication at play. It is seen that a culturally diverse team’s productivity is much higher than those teams that render homogeneity in the culture. The problems looked upon by the culturally diverse teams have a broader understanding, hence proposed solutions encompass more innovation, creativity, and inclusion. 14.8.5 Fostering Cross-Cultural Working Relationships

• Getting to know each team member helps in analyzing the skills of the member and leveraging their skills accordingly.

• Adopting flexibility renders prioritization of tasks in which the approach is •

•

•

• • •

either pliable or a linear time construct across respective cultures. Establishing communication channels to enable team members to present their opinions and reach a consensus in the case of online meetings by sharing the agenda in advance, collating the opinions of the participants, and initiating a poll on the given opinion. Ensuring team building by rolling out, happy hours, lunch and dinner outings with teams, informal Fridays, and birthday celebrations to help employees bond with each other. Inspire team members to interact during their free time and at organization’s events. Listening with patience and compassion to prevent biased decisions. For instance, the Singapore team does not abide by the stipulated directions, thereby ruining trust and preventing collaboration. Hence, a leader needs to pause and try to understand the cause of such restraints, as seamless operation can happen only when motivation and mobilization of groups with different thought processes take center stage. Creating a road map for success by establishing rules and guidelines, justifying the implementation of the said rules, and making team members adhere to the same. Resolving conflicts by understanding various cultural perspectives and trying to address them by maintaining neutrality. Developing a cross-cultural awareness program that includes greetings, business etiquette, and dining customs to educate members on the prevailing

470 

• •

•

• • •

Motivation

culture of other team members and bring in resilience within teams and healthy relationships among clients. Allocating roles and responsibilities by clearly outlining the expectations of each team member and their relevant contributions so that each individual is aligned to a common goal and will collaborate to meet the said objective. Encourage the building of trust by respecting individual differences in opinion and understanding and to build unity in a team that is culturally diverse. Building trust can happen through extensive interactions and by instituting a framework that can leverage the differences to render the best of the capabilities in a team. Conducting an employee opinion survey to learn more about employee predilections in terms of line of work, the ways supervisors and managers furnish responses, and work schedules and circumstances. To understand employee work styles and predilections, ask questions such as: ‘Would they have predilections for a face-to-face meeting or web-based meetings for more flexibility?’ ‘What should be an ideal work schedule?’ Identifying ways to apply the talents of a multicultural workforce in order to capture global markets and motivate them by offering more responsible positions that can aptly use their skills and qualifications. Facilitate the formation of cross-departmental focus groups and enliven the forthright transaction of ideas, constructs, and experiences among employees who else would not communicate with each other. Encourage a singular workplace culture by identifying similarities among employees from different cultures and backgrounds.

14.8.6 Dealing with Multiple Personalities at Workplace

• Making an effort to understand the team member. • Allowing the employee autonomy if they consistently perform well. • Promoting open, constructive communication among employees for idea exchange.

• Embracing employees’ divergence in their attributes and personalities and their strengths and invigorating other staff to do the same.

Summary

The chapter takes the reader through the nature, process, and types of motivation and gives him a fair idea of motivation theories and metrics of motivation, and their applicability from organizational perspectives. It provides insight into the importance of employee motivation and the aspects of implementation in relation to inducing higher levels of motivation among employees for organizational benefit, productivity, and increased employee retention. This chapter also discusses the management of cross-cultural motivation challenges and its ways.

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Exercise Objective Questions

1.

Motivation is

• Psychological concept • Continuous process

• Positive or negative • All of the above

2. Intrinsic motivation refers to the motivation that arises from the inside of an individual rather than from any external rewards. • True • False 3. _______ is a kind of mechanism that can raise the incentives of employees to get work done with increased speed. • Theories X and Y • Goal-setting theory • Expectancy theory • None of the above 4. Two-factor theory was given by • Frederick Herzberg • Clayton Alderfer • David McClelland • None of the above 5. ______ is the belief that better efforts will result in better performance. • Expectancy • Competency • Outcome • Instrumentality 6. According to McGregor, under theory Y, creativity is not encouraged by self and others. • True • False 7. _________ are related to relational aspects and involve a sense of belongingness. • Safety needs • Esteem needs • Social needs • Self-actualization 8. Integrative motivational theory is also called TMT. • True • False 9. Which of these has a ‘frustration–regression’ element? • Safety needs • Growth needs • Social needs • Self-actualization 10. Job security, health security, and so on come under: • Security needs • Esteem needs • Social needs • Self-actualization 11. According to Mitchell, motivation can be characterized as: • Intentional • Multifaceted • An individual phenomenon • None of the above 12. Expectations between an individual and the organization on the whole, which are not defined but which will influence the motivation to work, are: • The psychological aspect • The social aspect • The sociological aspect • Physiological aspect

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13. Which of the following is a positive reaction to the barrier encountered in achieving a desired goal? • Restructuring • Fixation • Withdrawal • Regression 14. Maslow and Herzberg propound to _______ motivation theories. • Content • Process • Equity • Expectancy

CASE STUDY I Jennifer Vas used to work at Zenich Solutions, and joined Trigen Solutions in March as a programmer. Jennifer was career oriented. Zenich Solutions is a relatively small company. She enjoyed working at Zenich, but she believed that it was Trigen which could provide her more opportunities because it was a bigger company and she might get a chance to work on international projects as well. She was sure about doing her best in the new company, just like she had proven herself in her old job. Jennifer got promoted as a senior programmer with a good hike at Trigen. There was a chance of her to be sent to the UK for a project. During the orientation sessions, she met Alan whom she was supposed to directly report to. Alan and his other colleagues gave a warm welcome to her for joining their team. She introduced herself and exchanged numbers. Out of curiosity, to know more about her boss, she asked Ankita, one of her new colleagues. Ankita answered, ‘Alan did not interfere with their work. He tries to avoid interrupting, during their work schedules’. Jennifer was surprised to hear this. At Zenich, Jennifer reported to Vaibhav and had looked up to him whenever she wanted guidance. Vaibhav made sure that Jennifer always learned from experiences and always encouraged to bring new ideas to the table. She remembered telling her colleagues at Zenich that an ideal boss is one who does not interfere with their subordinate’s work. Jennifer believed that even Alan seemed to be of non-interfering type. During her first week in a new role in the office, she found the atmosphere to be dull, but she was also excited. Her team was assigned a new project. While working on the project, she was facing few hurdles with the new software. She tried hard to solve the problem and tried to come up with several possible solutions. She then thought of asking for help from Alan and his team by mentioning all the possible solutions that she tried. She started daydreaming about all the praise that she would be getting for the effort put into the project. Next morning, when Alan walked into the office, Jennifer was ready to get into his cabin. Alan asked Jennifer to come into the cabin after 10 minutes.

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When she went inside the cabin, Alan was completely blank and asked Jennifer to introduce her. Jennifer introduced herself. Later he asked, ‘Why did you want to meet me?’ Jennifer replied by mentioning about the problems she was facing. But before she could even finish, he told her that he has got a busy schedule and so he would send an email with the solution to be implemented by the team. Jennifer was disheartened. She came out of the cabin and went to her team members to brainstorm. She discussed all the solutions that she could think of and waited for others to suggest ideas. Nobody was interested. After a few minutes, Rakesh, one of her colleagues, replied, ‘there is no point in discussing because Alan would give the best solution and we will have to do whatever he says’. Jennifer was disappointed. As time passed by, Jennifer realized that Alan was completely opposite to her previous boss. Gradually, she started losing interest in her work and was not at all learning new things. She felt that her career was going nowhere. Her performance was going nowhere.

Questions 1. According to you, what are the reasons for disappointment for Jennifer? Answer the question using Maslow’s theory. 2. How does the team leader or a manager play a role in an employee’s performance? 3. What should Jennifer do in order to solve the situation?

CASE STUDY II A company operating in a global business landscape needs to effectively manage and motivate employees from different backgrounds and experiences. The most justified way was to assess the performance and productivity of the employees. The newly inducted CEO of the organization realized that, among other key business changes, motivating employees was a way to withstand the current turbulence in the country. The CEO believed that in order to ensure customer satisfaction, employees should stay motivated at work. The CEO, in due course, was able to create a stronger and more focused company. The CEO, in their sessions with the employees, explained that managing employees in different ways and relating to them and their individual perspectives actually motivates people. The CEO further stated that they wanted to motivate their teams by letting them know their intentions and priorities. So it is said that leadership style correlates to employee performance, where employees feel important and engaged and become a part of the process of running a profitable business.

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Questions 1. How do you think the new CEO could motivate the employees to perform and take risks? 2. Communicating priorities enables employees to get clarity on the implementation plan and the road ahead. Explain with examples. 3. How does any organization enable a high retention ratio of employees?

Critical Thinking Questions (Relevant examples to be cited during discussions)

1. 2. 3. 4. 5.

How does motivation affect human behavior and performance? Discuss a few strategies for motivating employees. Which factors affect individual performance? How does the job situation affect performance? Explain the effective management across cross-cultural teams to ensure employee motivation with an example.

Chapter at a Glance Introduction

Motivation is the process of attempting to influence others to do your will through the possibility of gain of reward. Motivation is the driving force that creates an urge to take action to achieve our desired goals. There is always a motivating force behind anything we do and it is the intensity of our motivation that determines how well and how fast we succeed in obtaining what we wish to achieve. Nature of Motivation

• • • • •

A psychological concept Continuous process Considers whole individual May be financial or non-financial May be positive or negative

Importance of Motivation

• • • • •

Effective utilization of resources Achievement of organizational goals Improves efficiency of employees Reduced employee turnover and absenteeism Cordial organizational relations

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Types of Motivation

• • • • • •

Intrinsic motivation Extrinsic motivation Financial motivation Non-financial motivation Positive motivation Negative motivation

Theories of Motivation Maslow’s Hierarchy of Needs

• • • • •

Physiological needs Safety needs Social needs Esteem needs Self-actualization

Limitations of Maslow’s Hierarchy

• • • •

It is oversimplified and is based only on human needs. All the employees may not have similar needs. Every employee may not follow the similar pattern. With the growing needs of individuals, the assumptions of this theory may not hold good in today’s context. • Maslow’s writings are more philosophical than scientific. Herzberg’s Two-Factor Theory

Herzberg suggested a two-step approach to understanding employee motivation and satisfaction.

• Hygiene factors: These are basically the factors that do not actually act as motivation, but their absence results in demotivating employees.

• Motivational factors: The presence of these factors creates positive job satisfaction.

Expectancy Theory of Motivation

The theory states that the intensity of a tendency to perform in a particular manner is dependent on the intensity of an expectation that the performance will be followed by a certain outcome and on the appeal of the outcome for the individual.

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Advantages of Expectancy Theory

• • • •

It is based on self-interest of the individual. This theory focuses on expectations and perception. It emphasizes on rewards or payoffs or other related aspects. It focuses on psychological extravagance.

Limitations of Expectancy Theory

• Seems to be idealistic • Application and implementation of this theory are limited Goal-Setting Theory of Motivation

It states that goals display and provide a path to an employee about what needs to be done and how much efforts are required to do it. Goal-setting theory has certain eventualities such as:

• Self-efficiency • Goal commitment Advantages of Goal-Setting Theory

• Goal-setting theory is a kind of mechanism that can help raise incentives for employees to get work done fast along with steady effectiveness.

• Goal setting leads to better performance by increasing motivation and efforts, as well as through increasing and improving the feedback quality.

Limitations of Goal-Setting Theory

• It hampers performance if it is used to spread drift from actions • Very complex goal leads to the danger. • Employee with lack of skills and competency to perform a task to achieve a goal affects the success of goal setting and performance goes down.

• There is no strong reason or evidence to prove that goal-setting theory improves job satisfaction.

McClelland’s Learned Needs Theory

This motivational model explains how the needs for achievement, power, and affiliation influence the actions of individuals in a managerial context. These motivators fall under three categories: achievement, affiliation, and power.

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Alderfer’s ERG Theory

Alderfer refined Maslow’s hierarchy of needs theory to synchronize with his research. Self-determination Theory

The self-determination theory of motivation was developed by psychologists Edward Deci and Richard Ryan. According to this theory, people are driven by a need to grow and achieve fulfillment. The basic assumption of self-determination theory is that individuals are actively directed toward growth. TMT

Piers Steel and Cornelius J. König developed an integrative motivational theory known as TMT. This theory emphasizes ‘time’ as a crucial motivational factor and focuses on the impact of deadlines on the allocation of attention to particular tasks. Theory X and Theory Y of Motivation Assumptions: Theory X

• On average, employees resist work and will try to avoid it whenever possible. • Employees emphasize on job security and being less ambitious. • Employees who dislike their work must be mandated with protocols and be

punished so as to achieve desired goals and targets. The managers must adopt a more dictatorial style. • Employees do not easily accept change. • Employees usually dislike responsibilities. • An average employee always expects formal guidance. Assumptions: Theory Y

• • • •

Employees can perceive work as normal. Employees may not always need to be threatened by external control. The rewards of the job are motivating leading to more loyal employees. An employee can learn to identify and uphold the responsibility and sometimes obtain the same. • The employees may explore their skills and competencies. • Their logical capabilities if completely utilized may lead to having a resourceful and worthy employee for identifying and resolving multiple issues within and outside the organization.

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Managing Cross-Cultural Motivational Challenges

A team is a synergy between well-defined mindsets and skill sets that cooperate to perform a job or a task with a specific intent. Globalization in the workplace now means transacting with people coming from different cultures, traditions, and countries; speaking different languages; following different religions; and working together smoothly and seamlessly without any apprehension. Definition: Cross-Cultural Team

Cross-cultural teams have a global mix of people coming from different cultures, backgrounds, and territories, along with varied experiences. Those companies that fail to create a conducive environment and harmony among employees, resulting in mutual conflicts and disappointments, lose out on establishing a positive culture, resulting in a low yield and productivity of employees. Certain differences can arise when there is no compliance set in the method and management of communication and no setting up of an appropriate work culture. For example, with regard to work timings, employees who come from some countries are more adaptable to long working hours either in physical or online mode than those willing to work more than the stipulated hours of work, even if working remotely, in contrast to a few who, as per their nation’s work engagement hours, restrain from doing so except during emergency situations. Also, in a multicultural environment where there is huge diversity in putting forth thoughts, ideas, and actions, such situations often pose a challenge where each member of the team needs to be heard and the team is required to be handled effectively. Managing a Cross-Cultural Team: The Challenges

Several barriers encountered in managing teams are as follows: 1. Communication and expression: The subtlety of expression such that each member of the team is on the same page and there is a consistency in synchronizing their thoughts, actions, and understandings, which is a cause of concern while handling multicultural teams, especially when the communication is virtual. 2. Information gaps: Accessing databases and updating applications in a shared mode, scheduling and tracking projects jointly become prima facie for teams operating in a virtual mode. 3. Work style: Every team member has a specific work form that is significantly determined by the society in which they live. Even though employee personalities range from moderately aggressive to highly aggressive, and the contributions of the latter are more in focus than the contributions of the former,

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hence it is extremely important to separate out and motivate team members to perform. 4. Influence: There can be occasions when a team having employees from the same ethnicity may try to prevail upon the procedure, and this can be the prime causal factor for the entire team moving in their direction. Team dynamics can be a cause of concern in a cross-cultural team, which eventually can lead to unnecessary politics and conflicts within a team. 5. Motivation factors: Each employee should be motivated in order to be more productive and performance-driven. In the absence of a proper catalyst, the team members may miss sprightliness and be discouraged at work. Effective Management of Cross-Cultural Teams

A multicultural team has an assemblage of different beliefs and styles of communication at play. It is seen that a culturally diverse team’s productivity is much higher than those teams that render the homogeneity in the culture. Cross-cultural Working Relationships - The Steps

• Getting to know each team member helps in analyzing the skills of the member • •

• •

• • •

and leveraging their skills accordingly. Adopting flexibility renders prioritization of tasks in which the approach is either pliable or a linear time construct across respective cultures. Establishing communication channels to enable team members to present their opinions and reach a consensus in the case of online meetings by sharing the agenda in advance, collating the opinions of the participants, and initiating a poll on the given opinion. Ensuring team building by rolling out, happy hours, lunch and dinner outings with teams, informal Fridays, and birthday celebrations to help employees bond with each other. Listening with patience and compassion to prevent biased decisions. A leader needs to pause and try to understand the cause of such restraints, as seamless operation can happen only when the motivation and mobilization of groups with different thought processes take center stage. Creating a road map for success by establishing rules and guidelines, justifying the implementation of the said rules, and making team members adhere to the same. Resolving conflicts by understanding various cultural perspectives and trying to address them by maintaining neutrality. Developing a cross-cultural awareness program that includes greetings, business etiquette, and dining customs to educate members on the prevailing cultural of other team members and bring in resilience within teams and healthy relationships among clients.

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• Allocating roles and responsibilities by clearly outlining the expectations of • • • • •

each team member and their relevant contributions so that each individual is aligned to a common goal and will collaborate to meet the said objective. Encourage the building of trust by respecting individual differences in opinion and understanding and to build unity in a team that is culturally diverse. Conducting an employee opinion survey to learn more about employee predilections in terms of line of work, the ways supervisors and managers furnish responses and work schedules and circumstances. Identifying ways to apply the talents of a multicultural workforce in order to capture global markets and motivate them by offering more responsible positions that can aptly use their skills and qualifications. Facilitate in the formation of cross-departmental focus groups and enliven the forthright transaction of ideas, constructs, and experiences among employees who else would not communicate with each other. Encourage a singular workplace culture by identifying similarities among employees from different cultures and backgrounds.

Dealing with Multiple Personalities at Workplace

• Promoting open, constructive communication among employees for idea exchange.

• Embracing employees’ divergence in their attributes and personalities and their strengths and invigorating other staff to do the same.

15 CONFLICT MANAGEMENT

An Opening Vignette Rebuilding Trust and Communication The scenario relates to a company in the small- and medium-sized enterprise category in the service domain. The conflict between the members arose due to lack of communication and distrust built slowly over a period of time, resulting in dysfunctional conflict with gossip and rumors at every corner of the office about improper task allocation, departmental goal variation, resource constraint, and so on, which left the team and team members in a state of unaddressed conflict. Therefore, to manage the conflict, several team-building sessions were conducted by a conflict management expert hired from outside the organization, and a report of the same was given to the top management, and the stakeholders, consisting of a five-member team with a manager, and the customers. During the team-building session, the expert encouraged the team to read The Five Dysfunctions of a Team by Patrick Lencioni (2012), which led to the supposed conflict and in sequence the non-productive environment within the company. The dysfunctions as identified were as follows:

• • • •

Absence of trust, for which the remedy was to build trust. Fearing conflict, for which it was required to efficiently manage conflict. Lack of consistency and commitment, for which focus and accomplishment of goals were remedial solutions for an individual. Avoidance of ownership and not focusing on results, for which the solution was to own the responsibility and be result oriented. DOI:  10.4324/9781032634258-15

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The team then started seeing the facts as they were and stopped working on assumptions anymore. They started viewing conflict as a base for improving productivity and performance. They set targets for the team, and each one promised to expend their effort to achieve the same. Then they started working on the areas of their weakness where conflict was not properly managed and came up with the following findings: • They found that most of the time the team, in its earlier phases, had made negative assumptions solely because of a lack of transparency in communication and the absence of a methodical communication flow. • They learned how each person wanted to be intimated in communication and conflict. • The team started meeting frequently to resolve important issues, which they were avoiding to discuss because some of the team members did not follow the collaborative style of conflict resolution and wanted to force the team to believe their individual perspectives. They started making extensive plans for the crucial issues, inclusive of risk management policies prior to implementation of a plan. • They started exuding ownership for various tasks even if they confronted problems and complexities for which the solutions were designed in a collaborative manner, minimizing the chances of conflict evolution. • The team, in due course, learned to respect each other, to solve problems more innovatively, and to lessen stress and tension in a very open manner. Overall, they started a collaborative mechanism of identifying issues, hearing each individual’s perspective, narrowing down a hybrid feasible solution with a high degree of transparency in communication, and inculcating a culture of seeing conflict in a positive light.

15.1 Introduction

Conflicts which are a common occurrence in organizations arise when the goals, needs, requirements, opinions, and areas of interest of the concerned individual(s) interfere with one another. Conflicts might occur between team members, among the various functional units or members of a functional unit, department, organization, and with customers, boss, and subordinates, and can also occur when organizational needs and personal needs are not aligned. Conflict, if intensified, might lead to non-productive results, and should be resolved to achieve betterquality products or services. Therefore, conflict management is integral to a team that wants to deliver and perform well. Conflict management addresses solvable conflicts by learning to manage conflicts, which can decrease non-productive escalation. Conflict management involves acquiring skills to resolve conflicts, being aware of various conflict modes, and establishing a structure for the management

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of conflict. Often a conflict leads to progress; hence, it is important to apply various conflict-resolution techniques. 15.2 Definitions

Conflict is a process that begins when one party perceives that another party has negatively affected, or is about to negatively affect, something that the first party cares about. —K. W. Thomas Conflict is a struggle between incompatible or opposing needs, wishes, ideas and interests of people. —Chung and Meggison Conflicts are communicative interactions among people who are interdependent and who perceive that their interests are incompatible, inconsistent, or in tension. —Conrad and Poole Source: Thomas, K.W. (1992), Chung, K.H., & Megginson, L. C. (1981), Conrad, C., & Poole, M.S. (2002).

15.3 Traditional versus Modern View of Conflict: Functional and Dysfunctional Conflicts

In the early days, the conflict was perceived in a negative way and the most appropriate approach to manage a conflict was to avoid it. The other view was that conflicts arise because people within a team or a group tend to create trouble by bringing negativity within the group. According to the traditional view, conflict is the result of reduced communication, dishonesty and distrust among people, and the failure of managers to be receptive to the wants and desires of their employees. The modern view of conflict is that it is a natural outcome, is unavoidable, especially when conditions and situations are susceptible to change, and is functional if the minimum level is attained. The modern view of conflict states that conflict between various bodies in the organization depends on the organizational structure, variations in long- and short-term goals, insights, and employees’ values. According to the modern view, conflict contributes to organizational performance if prevalent minimally and detracts from organizational performance if it goes beyond control. In the modern era, controlled conflict is required for optimal organizational performance. Today, managements have come up with perspectives of conflict as described below.

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15.3.1 Functional Conflict

• This allows the groups to track their goals and enhance their performance. • Helps increase knowledge about current issues and provides solutions for them. • With the onset of constructive conflict, comes the concept of change, refine• • • •

ment, and rectification. Decisions are more robust because they pass through perspectives, visualizations, and so on, of various people. It helps in the reduction of complex disagreements, which can impact the performance of individuals or organizations. Conflicts or arguments can encourage people to find out new solutions. It enhances the relationship and increases the cohesiveness by learning more about each other.

15.3.2 Dysfunctional Conflict

• This conflict creates problems for the group’s performance within the organization.

• Conflict between groups or individuals takes a considerable amount of time to resolve opinion disagreements and provide a relevant solution.

• Sometimes when the conflict is not under control, it disrupts the progress of the • • • •

organization, conflict resolution does not happen and every member within the organization cannot showcase the desired productivity level. The group does not remain aligned with the goals of the company or the project. As a result, the performance of the group and the organization decreases. Unresolved conflict can significantly reduce coordination and association between members of the group and the team spirit is lost. Due to a conflict, innovative ideas are not shared by the members of the team resulting in lower quality and productivity. Conflict also reduces the team’s effectiveness.

For example, Joanna, heading a highway construction project in the East Coast, has faced vehement protests from the residents living along the highway in small villages. The villagers think it is an encroachment as it will lead to increase in pollution and noise levels. Discussions with residents have turned bitter, leading to a win–lose situation or a dysfunctional conflict. 15.4 Process of Conflict

The process of conflict comprises five stages (Figure 15.1). 15.4.1 Opposition

Conflict arises in an environment where there exists opposition between individuals and groups. For example, in an organization, there are a few recourses that

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FIGURE 15.1  Process

of Conflict

need to be shared by the various departments. This could become the potential source of conflict. The disagreement arises due to the following: communication, structure, and personality. Communication: Different jargons or too much noise in the communication channel or even a gap in communication can give rise to conflict or are antecedents of conflict. Structure: Structure can refer to a group or organizational structure and consists of variables such as size and task specialization, because large groups are mainly task-specific groups. The larger the group and younger the members, the more the conflict between members and among the groups. Ambiguity

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in the allocation of roles and responsibilities can also give rise to intergroup conflicts. Personality: Some personality types who prefer autocracy to a greater extent are sources of conflicts within the group. Also, because value realization differs from one personality type to the other, the amount of contribution toward achieving organizational goals also differs. 15.4.2 Cognition

This stage brings clearness on whether the conflict is felt or sensed, between people, and groups, and sentiments play a vital role in affecting the insights. For example, while carrying out a quality assurance check for enterprise resource planning (ERP), it was found that the code did not pass through the testing phase after the development, rather it was deployed directly. This could pose a serious conflict between the marketer and the seller because once the marketer starts to fall, it might disrupt its own brand value. 15.4.3 Intention

The purpose of a sensed conflict is identified at this stage and there can be confrontations at this stage and the individuals involved in this conflict might address/ attack an issue from their very own perspective. As a result, they might either seek to satisfy their interest or resolve the conflict by collaborating where individual interests of groups or individuals are not kept at the fore rather the respective groups/individuals who are party to the conflict resolve the problem together.

• Competing: If an individual seeks to satisfy their own interest without con• • • •

sidering people or groups who are party to the conflict, then it is said to be competing. Collaboration: If the parties to conflict try to resolve it by sorting out the problem and clarifying the differences, then they are said to be collaborative. Avoidance: It is an intention where a person either avoids the conflict or avoids the person with whom they have a conflict. Accommodating: It is the intention wherein the parties to conflict place an opponent’s interest above theirs. Compromising: It is an intention where each party to the conflict can let go some of their points to narrow down to a resolution. Generally, the intentions of people are ever-changing.

15.4.4 Behavior

Conflict is evident because there is the external display of conflict using oral and visual modes by the staff. For example, open discussions between the marketer

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and seller of the ERP about the various issues of the customer are verbally put forth, giving rise to conflict. 15.4.5 Outcomes

These are consequences that may be functional, in the sense that there was improvement in the performance of the group or organization, or dysfunctional. Functional conflict improves the quality of decisions, conjures up the imagination and advancement, provides the medium through which tribulations can be settled and strain released, and promotes a situation of self-evaluation and transformation. Conflict is dysfunctional when there is a breach in trust and faith and leads to the obliteration of the group. 15.5 Levels of Conflict 15.5.1 Intrapersonal Conflict

Intrapersonal conflict implies the internal conflict or annoyance of a human being. This occurs when people demand attention from self, which does not depend upon any rationale, goals are set by the self that cannot be achieved, or some external factor prevents the individual from completing a task. For example, storekeepers keep fast-moving items and daily necessities at the end of the store and consumers are enticed to buy certain items that they might not even want and finally end up buying more items than their budget (Figure 15.2). Another intrapersonal conflict is the goal conflict where the achievement of one goal prevents the other goal from being accomplished. The major forms of goal conflict in existence are as follows:

• Approach–Approach conflict: For example, choosing an educational insti-

tution from a number of institutions, each offering some unique programs in addition to the regular course. • Approach–Avoidance conflict: For example, wanting to talk to a department head for allocation of a different project that has overseas opportunities and

FIGURE 15.2 

Intrapersonal Conflict

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then fearing that the proposal would not be fairly accepted by the head. This type of conflict becomes very difficult to resolve in scenarios like the following: • Independence versus dependence • Collaboration versus competition • Impulsive versus restricted • Avoidance–Avoidance conflict: For example, the conflict between avoiding unwanted expenditures or cutting down on the budget. The last intrapersonal conflict is the role conflict, where an individual needs to play several roles at the same time but cannot afford to do so because of the time and resource crunch. For example, a boss has to face a conflict if they are firing an employee who is also their close acquaintance. Intra-individual conflict arises due to inconsistencies in a person’s thought process or certain neurotic tendencies like keeping tight control over others or over the budget. 15.5.2 Interpersonal Conflict

Interpersonal conflict arises between two individuals in a company. It occurs due to variations in insights, beliefs, and ethos and no clear categorization of roles. The tools that can describe the manifestation of interpersonal conflict are Transactional Analysis, Johari Window, Life position, etc. 15.5.2.1 Transactional Analysis

The stages of communication between two or more people can correlate to the moves of the game. This concept was introduced by Eric Berne and made popular by Thomas Harris. The benefits of transactional analysis are as follows:

• • • •

Learning is very simple. It helps to improve interpersonal relationships in organizations. It encourages employees and increases productivity. It helps to improve communication among employees and clearly shows hidden cases, crossed and complementary transactions, and different ego states of an individual (child, adult, and parent) while a communication exists between two individuals. • It improves clarity in problem analysis, reduces miscommunication among individuals, and explains vividly that a manager cannot always motivate their subordinates by assigning them the most complex task (otherwise known as boosting the adult ego state). Sometimes, the manager should also act like a parent to their employees, thereby motivating them for better performance. • Transactional analysis is vital to all business situations as it gives a discrete view of the stage, phase, and status of progress with respect to the work allocated to the project group.

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However, the limitation of transactional analysis is that the framework for assessing the outcome of a transactional analysis is neither very scientific nor can the ego states be quantitatively or qualitatively assessed. Transactional analysis predominantly revolves around three ego states.

• Parent ego state: The person is authoritative, controlling, protective, and so on.

• Adult ego state: The person is balanced and mature. • Child ego state: The person is dependent on others like a child. 15.5.3 Transaction Types

Crossed transactions: When two people keep a distance from each other, without further discussion, conversation, or deliberation after they had a dispute, then it is a case of crossed transaction. Crossed transactions are elements of discomfort in relationships, whether husband–wife, parent–child, and so on. If an individual says to one of their best buddies, ‘Well, how you think I feel!’, then their friend might feel the sarcasm in their statement and choose not to respond (Figure 15.3). It is a transaction between two individuals, one representing the adult ego state and the other individual responding using a child ego state. Crossed transactions are a source of conflict.

FIGURE 15.3 

Crossed Transaction

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Complementary transactions: It is a transaction between individuals when a person’s ego state receives a proper rejoinder. An adult ego state gets an adult response and so on (Figure 15.4). A complementary transaction can appear between any two ego states. For example, two people may transact an adult–adult ego while resolving a problem. If the response is the one that is sought for, then the transaction is complementary. Ulterior transactions: Ulterior transactions are complex transactions and involve more than two ego states. In this communication, one has to read between the lines. If A says to B, ‘Since you are busy, let’s talk about it some other time’, then they are exuding both parent ego and adult ego, where they are being considerable about other’s situation and do not want an extended conversation at that point of time (Figure 15.5).

FIGURE 15.4 

Complementary Transaction

FIGURE 15.5 

Ulterior Transaction

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15.5.4 Johari Window

The next most commonly used tool is the Johari window developed by Joseph Luft and Harry Ingham. The model is vital for representing interpersonal conflict and is based primarily on two concepts.

• The degree to which a person can self-assess themselves. • The degree to which the person is known to others. The concept of Johari window is that understanding oneself to the minutest extent and being in relationship with others that is of value can help in improving both the personal and professional lives of an individual. Or, understanding oneself better and also having insights of relationship with others is a heuristic exercise that has been in existence in corporate settings for ages, majorly to enhance the degree of cooperation and reduce differences. More valued sharing results in the strengthening of interpersonal relationships and lessens interpersonal conflicts. The Johari window is represented diagrammatically in Figure 15.6.

• Open area: This area correlates to a candidate’s personal profile. In the initial

stages of a relationship, because no two individuals are close to each other, their personal profiles are not known to each other. However, as the relationship grows, information sharing is high, compatibility among them increases and conflict reduces. • Hidden self: This area shrinks as the person shares more information with others. With more sharing comes more trust and belief and less conflict. However, this area is prone to more conflict. • Blind area: This area contains information unknown to self and known to others. For example, movements in a person happen just out of sheer stress,

FIGURE 15.6  Diagrammatic

Representation of Johari Window

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like stammering while giving a presentation or holding shifting from one foot to the next while speaking. Such habits when pointed out by others can reduce the blind area. The blind area can clearly depict a person’s strengths and weaknesses; the more a person is open to others’ views, the more effective manager they can be. • Unknown area: This is not the area that contains information not known to others or to oneself, but it contains information that is deliberately suppressed. As a person grows, develops, and learns, this area goes on shrinking. 15.5.5 Life Positions

Life positions are an amalgamation of positive and negative evaluations of self and the other. These are used to validate the decisions to warrant the behavior exuded. Four positions arise from the permutation (Figure 15.7). 15.5.5.1 Intragroup Conflict

Intragroup conflict refers to the conflict between group members, resulting in a decline in the performance of the group. It can also happen within a familyrun business such as Tata and Birla. Intragroup conflict refers to the inaptness and incongruence among the members of a group and subgroup with regard to long- and short-term goal attainment, policy formulation and implementation, processes, functions, or group charters. In intragroup conflict, most of the group or subgroup members must be involved. 15.5.5.2 Intergroup Conflict

Intergroup conflicts refer to the conflict between groups of people, strategic business units, or functional units within the organization. Intergroup conflicts occur due to several reasons given as follows. Task interdependence: It is the interdependence between various functional units of an organization for information gathering or collaborative tasks performed

FIGURE 15.7 

Life Positions

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by them. They can be represented as sequentially dependent; dependency is like a two-way process of pooling each team’s resources to accomplish a particular task. Task interdependence can be of three types. Pooled task interdependence: Group performance is the sum of an individual’s contribution.​ Sequential task interdependence: There is interdependence in the sequence of tasks performed by the members.​ Reciprocal task interdependence: Performance of a member executing a task directly affects the performance of other members executing the task in the same group. For all of the above scenarios, conflict arises when there is a mismatch between expectation and performance. Improper task allocation: This is another common cause of intergroup conflict when roles and responsibilities are not properly allocated to the respective groups.​ Interdepartmental goal variation: This can give rise to conflict. For example, the testing unit of a software development organization might want to establish its goal of 0.3 percent defects per person per thousand lines of code, whereas the development unit might not want to adhere to that standard.

FIGURE 15.8 

Pooled Performance

FIGURE 15.9  Sequential Task

Interdependence

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FIGURE 15.10  Reciprocal Task

Interdependence

• Resource constraint: Various groups might fight for resources such as

manpower, money, material, and infrastructure or for intangible elements such as authority, prestige, and status. • Benefits or rewards: Conflict can occur among the group when there is a benefit or reward scheme operating across groups or units. So, the quality assurance department is rewarded for keeping product quality in sync with ISO standards, whereas the marketing department is rewarded for intelligent campaigning methods. • Intrapersonal and interpersonal conflicts: Both can give rise to intergroup conflict. 15.5.6 Scenario of Intergroup Conflict 15.5.6.1 Within the group

• Trust between members increases. • Authoritative style of leadership persists. • Organizational hierarchy is not flexible. 15.5.6.2 Outside the group

• Perceive each other in a distorted manner and judge the other group irrationally. • Intergroup communication decreases. 15.6 Conflict Resolution

The conflict arising between groups in an organization or within the groups needs to be resolved. To solve interpersonal conflict, certain methodologies are used. 15.6.1 Lose–Lose

In this strategy, both the entities suffer defeat. One of the solutions can be a compromise made by both groups. The next is to bribe the other party from carrying

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out further disputes. The third form is to bring an external entity or group that can mediate between the groups by giving honest judgments. The last approach is to use existing rules or regulations for the resolution of the conflict. 15.6.2 Win–Lose

In this strategy, an individual wins whereas the other loses. For example, either the worker’s union or the management of an organization wins. The conflict is mainly due to the difference in perspectives while looking at things; moreover, the emphasis is on the solution approach rather than on the achievement of goals and objectives. Both entities view issues from short-term perspectives and conflicts are more personalized. 15.6.3 Win–Win

Using this strategy, both the entities win, and the brainstorming of opinions and schemes to resolve certain issues happens from a positive viewpoint. To be able to obtain a win–win situation for both the parties might not be realistic but should be set as an organizational goal for maximum outcome. 15.6.4 Transactional Analysis

To resolve interpersonal conflict, communication between two groups should be similar to the communication between two adult ego states. 15.6.5 Changing People’s Attitude and Behavior

Interpersonal conflict can be resolved to quite an extent if the attitude and perception of people change. 15.6.6 Intragroup Conflict Resolution

To resolve intragroup conflict, the members of that group should recognize and honor the roles accorded to various members. 15.6.7 Intergroup Conflict Resolution

Certain strategies are used for resolving intergroup conflicts, which are as follows:

• Problem-solving: Problem-solving in collaboration is the most effective approach when both the groups try to identify the problem and resolve it using some solution strategies.

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• Organizational restructuring: Intergroup conflict can be resolved if organi-

•

• • •

zational restructuring is done so that roles and responsibilities are defined clearly and allocated to groups, and task interdependence between various units of the organization is reduced to lessen the level of conflict. Alignment to common goals: Both the groups can be aligned to a common goal wherein both the parties put in their efforts to achieve the goal, which in a way can reduce intergroup conflict. To work in unison when an organization faces bad weather is an example of a common goal of the various organizational units. Upgradation of resources: If conflict arises due to constrained resources, then the best way would be to go in for resource upgradation and allocation of resources across various groups uniformly. Not to let conflict happen: For not so complex issues, the best way to resolve conflict is to withdraw from the phase of the conflict. The withdrawal can happen either from both parties or from one of them. Collating similarities among groups: If similarities between groups are identified, then it becomes easier for groups to smoothen down on the conflicting issues and work with a renewed perspective.

15.6.8 Line and Staff Conflict Resolution

The approaches to reduce conflicts are as follows:

• Defining clear roles and responsibilities for line and staff. • The role of staff managers is to give advice and line managers should follow suitable advice.

• Communication exchange between line and staff should be enhanced. • Inferiority complex in line managers should not be allowed to develop. • Both should have the freedom to approach top management if required. 15.7 Conflict Management Styles

It has been seen that bosses within the organization spend a lot of time resolving conflicts and issues. Therefore, there is a need to manage conflicts in an appropriate manner, which will not only reduce time spent on the same but also help resolve them in an effective manner. To manage conflicts, one can use the following styles (Figure 15.11). 15.7.1 Competition or Application of Force

This style suggests that one party is the victor and the other is the loser. The advantage of this style is that the winner has a very clear insight about the problem and the solution strategy, but at the same time the other party’s ego is hurt, which

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FIGURE 15.11  Conflict

Management Styles

can boost up the enmity within groups and sometimes can even provoke important groups to withdraw from conflicts. This style is used when relationships are not focal to a party and the party is forceful as well as sure about its decision. In certain instances, the individual strongly puts forth their concerns and worries, irrespective of whether the other individual or group agrees to the same. Examples of when aggression for instituting worries and concerns works are as follows:

• In situations when all other methods are ineffective. • When a quick resolution is required and there is total justification for the application of the force or pressure.

15.7.1.1 Advantages

• Instant conflict resolution • Encourages self-respect when the other party investigates the rationalization for applying force

15.7.1.2 Disadvantages

• Relations with opponents may get damaged. • If imposition leads to uncontrolled authority taken up by individuals/groups who have imposed their opinion, it becomes very difficult for other individuals or groups to sustain. • Adopting this approach may require a lot of strength and is stressful for some.

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15.7.2 Collaboration

This is also known as ‘win–win’ or ‘problem–solving’. In the collaborative style, both parties are the winners, which promotes good feelings among the parties, but this style takes a great deal of time and effort to make both the parties agree. This style is appropriate when consensus is important, when maintaining a relationship is vital, time is not an important factor, and merging both perspectives can bring out a good solution. Collaboration involves two parties or individuals working in alliance toward a shared goal or objective and get equally profited from the result. It considers the concerns of each group and finds solutions that satisfy both. Collaboration is appropriate when:

• • • •

The parties agree to work as a unit. The perspectives of various stakeholders are considered. There is the presence of high level of trust. Decision-making is collaborative and needs consensus, or it is difficult for a single party or individual to take the decision.

15.7.2.1 Advantages

• Problem-solving gets easy, resulting in a win–win outcome. • It promotes confidence and respect and establishes a framework for useful

collaboration. • Shared responsibility of the outcome. • Since it is a collaborative effort, every individual’s/group’s perspective is considered, and relationships are maintained. • The consequence of the conflict resolution is less worrying. 15.7.2.2 Disadvantages

• Commitment from all individuals or groups for the desired solution. • It may require more work and more time, and conflict resolution happens in a

collaborative style. • This method is not appropriate when resolution demands instant decision-making. • This should not be used in situations where relationship matters the most because many a time, the parties lose trust and faith later. 15.7.3 Compromise

This style is used when the leading concern is the accomplishment of goals and relationships. Both the parties forego a few of their goals to attain a long-term goal

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in association. This is used when an ideal resolution cannot be identified or all the parties are in identical power offering their own solution. The style is used when both parties are satisfied with solutions that partially fulfill their perspectives. The appropriateness of this style can be explained better with the following:

• • • •

When goals have to be achieved in moderation Ad hoc manner of issue resolution To achieve realistic solutions to crucial issues When the parties do not know each other well or do not have a high level of trust • When collaboration or forcing does not work 15.7.3.1 Advantages

• Convincing and quick issue resolution • Ad hoc solutions endowed while looking for the most favorable one. • Lower degree of pressure and stress 15.7.3.2 Disadvantages

• It may result in a condition where both parties are not convinced with the result (a lose–lose situation).

• It does not influence to building confidence in the long run. • It may require close monitoring and control to ensure the agreements are met. 15.7.4 Avoidance

This style, also known as retreating, helps to evade conflicts and can be used when the issue is not major or too much of a conflict has an influence on the relationship, or when there is very little scope to achieve a party’s own needs or when reaching a solution can invite delays. This style makes the person not address the conflict by putting in his views or opposing the other party’s view. Situations when withdrawing may be appropriate are as follows:

• When issues are very inconsequential, and there are other issues that require attention

• Where dealing with the issue at a later stage might be beneficial • When it requires time to gather information and knowledge • When there is very little opportunity of getting an appropriate solution from one’s own perspective

• Not well versed to handle conflicts

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15.7.4.1 Advantages

• Under conditions of force, one can postpone response to a later date until a favorable circumstance is established to voice one’s own concern.

• Avoidance incorporates the low level of stress. • Better readiness by collecting information over time to handle issues. 15.7.4.2 Disadvantages

• Showing no conflict can be perceived as a pact in some cases. • May have a negative effect on the party that was counting on the action taken by that individual or group.

15.7.5 Accommodation

This style, otherwise known as smoothing, has a party overlook its own goals and accommodate its opponent’s views and ideas. This strategy only helps in developing relationships and the agreement and time is a restricted for settling issues. Smoothing is prioritizing other people’s concern and is appropriate under the following conditions:

• When it is required to provide temporary relief or buy time • When the issue is listed under low priority • When mistakes are accepted, and continuous competition is not favorable for long-term relationships

15.7.5.1 Advantages

• It encourages solutions to listed issues. • It gives a chance to conjecture problems from various prospects. 15.7.5.2 Disadvantages

• The opponent might take advantage of the accommodating style of the other;

hence, a balance has to be maintained between when to accommodate and when not to do so. • It may negatively affect the individual’s confidence in response to aggressive opponents and some parties may not accept the concept of accommodating too often. • It is difficult to transform to a win–win solution in the future.

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CONFLICT MANAGEMENT: A CASE STUDY The production unit of Company ABC is facing major conflict among its team members, who have divided themselves into two groups, and the coordinator of that unit has turned a blind eye to the same. The unit head now has to take a decision to either change the supervisor or intervene personally to resolve the issues since it was disrupting the unit’s productivity. The unit head thought that the best idea would be to assign responsibility to any other member who could mediate between the groups. Therefore, a supervisor was appointed, who along with his professional load had to manage the unit’s differences holistically. Question: As per your speculation, what steps should be taken by the individual allocated to resolve the issue? Model answer: Assumptions—the strategy adopted depends on the conflict-resolution style of an individual, which can be as follows:

• • • • •

Compete Collaborate Compromise Accommodate Avoid

The first coordinator avoided resolving the problem. The second, if he himself is a collaborator, would like to establish a balance between the two groups and this would best suit a situation where maintaining relationship is vital for the success of the unit. If his style is the compromising type, then the best situation in which this strategy will work is when goals have to be achieved and both the parties have equal power to and can work toward it. Let us assume that the coordinator who has been given the charge wants to use the collaborative style of management because he wants an optimum solution for both the teams without damaging relationships. Solution: His strategy then would be to bring the teams together, which is possible only through regular team meetings and one-on-one meetings. Every time during the team meetings, project issues are discussed and both teams agree to the resolution of issues. The constraints for each and every project undertaken were discussed openly and actions for the same were seconded by an appropriate voting mechanism to bring a sense of togetherness to the team. The one-on-one session between the coordinator and employees proved to be useful since employees were open to spill out their grievances. Even shy and introvert employees could voice their thoughts openly about their concerns and goals. In addition, the coordinator received some strong feedback on the strengths and weaknesses of the unit and solutions to eradicate the issues.

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Some of the conflicts were a result of improper task allocation, as certain tasks were always given to the same staff due to resource constraints. Such type of conflict is referred to as intergroup conflict, and, therefore, the only solution for the coordinator was to shuffle responsibilities across groups and demand for more resources from the management. As a result, team members were trained on new roles, which renewed their enthusiasm and helped with levelling out the playing field. People started working with a positive attitude. The policies and procedures of the department were documented so that all were on the same platform while following them, resulting in a streamlined workflow and there was no redundancy in executing the steps. Even the concept of work rotation helped to enhance the knowledge of the entire unit since everybody in the team had an idea about several tasks being performed, which balanced situations when employees were on leave.

Summary

The chapter takes the reader through various conflict-resolution and management styles and discusses the benefits and the caveats of various styles. It also sheds light on the conflict processes and levels of conflict as perceived within organizations by various experts and researchers hindering the decision-making, productivity, and profitability of the organization. Exercise Objective Questions

1. Which type of conflict lets the groups track their goals and better the performance? • Intrapersonal conflict • Functional conflict • Dysfunctional conflict • Interpersonal conflict 2. Which type of conflict increases knowledge about what problem persists and solution for the stated problem? • Functional conflict • Intrapersonal conflict • Dysfunctional conflict • Interpersonal conflict 3. Which of these levels of conflict refers to the internal conflict or annoyance of a human being has? • Functional conflict • Interpersonal conflict • Dysfunctional conflict • Intrapersonal conflict

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4. Interpersonal conflict arises due to differences in perceptions, values, integrity, and no clear description of roles. • True • False 5. ______ brings clarity on whether the conflict is felt or perceived, between individuals and groups and emotions plays a crucial role in influencing perceptions. • Opposition • Outcomes • Cognition • Structure 6. _______ is a tool to encourage employees of an organization and increase productivity. • Transactional analysis • Life position • Johari window • None of the above 7. Crossed transactions are not a source of conflict. • True • False 8. When two people turn away from each other, without further discussion or dialogue after they had a dispute, it is said to be • Ulterior transactions • Crossed transactions. • Complementary transactions • None of the above 9. Which area of the Johari window can clearly depict a person’s strengths and weaknesses? • Open area • Blind area • Hidden self • Unknown area 10. Which area of the Johari window contains information unknown to self and known to others? • Open area • Blind area • Hidden self • Unknown area 11. Task interdependence is the interdependence between various functional units of an organization for information gathering or the collaborative tasks performed by them. • True • False 12. Using which approach of conflict resolution, both the entities win and the dream up of views and ideas to resolve certain issues happen from a positive viewpoint? • Lose–Lose • Win–Win • Win–Lose • None of the above 13. Organizational restructuring can resolve • Intragroup conflict • Intrapersonal conflict • Intergroup conflict • Interpersonal conflict 14. Which style of conflict management suggests that one party is the winner and the other loser? • Competition or application of • Avoidance force • Compromise • Collaboration

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15. Which style of conflict management provides realistic and quick issue resolution? • Competition or application of • Avoidance force • Compromise • Collaboration

CASE STUDY Phantactic Textile Limited is into the business of manufacturing different types of yarns. It also carried out marketing of different types of yarns such as syntactic yarn, cotton yarn, acrylic yarn, and many more. It is in Jamshedpur, Madhya Pradesh, and has a good infrastructure. The company has grown considerably in both abilities and proficiencies and is nearing an attractive gain from the business. The top management team comprised the title-holder (managing director), chairman, technical director, and four vice-presidents, responsible for finance and accounts, marketing, manufacturing, and personnel and administration, respectively. These vice-presidents have different executives working under them. A majority of the executives under them have done MBAs from top universities. The technical director was an expert in yarn dyeing and, therefore, used to concentrate more on the yarn quality, depending on the quality of dyeing. The production department was under the supervision of the factory manager who reported to one of the production vice-presidents. Industrial relations were taken care of by the personnel and administration vice-president. With the active support and cooperation of all the faculty members of business management of a nearby local university, Lenardial Management Association, an affiliate of the All-India Management Association, was constituted. Many of the industrialists, managers, as well as large business units of the city became members of the organization. The association became popular as it provided a good opportunity for the academics and the practitioners. Dr. Alan, one of the faculty members having behavioral science specialization in the management department of the university, was appointed as the secretary of the association for five years. The university encouraged visits to different universities as a part of its extension program. After the visit, Dr. Alan used to discuss the management problem with the different organizations. Through informal sources, Dr. Alan came to know that Phantactic Textile Limited does not have good industrial relations. Therefore, he thought of this as an opportunity and decided to visit it as a courtesy call. During the visit, Dr Alan wanted to visit the factory. The vice-president for personnel and administration was also a member of the association and, therefore, accompanied Dr. Alan. During the visit, Dr Alan found that workers’ behavior was not amenable at all and they looked at both of them as uninvited guests. After the visit, the

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vice-president and Dr. Alan met and Dr. Alan explained to the vice-president about poor industrial relations and lack of interest of the workers. On this, the vice-president commented that there was no reason to worry. Dr. Alan laughed along with the vice-president but hinted that the matter should be given a thought. After several months, in the morning, some workers were having troubles with the supervisor and a quarrel took place between them. The issue was resolved with the help of other workers of the factory. The supervisor left the factory instantly and met the factory manager, who accidentally happened to be his kin. The factory manager came to the factory with the supervisor and called all the workers involved in the morning incident. There were a few other workers who joined as a mob along with the workers who were involved in the incident. Accusations and counteraccusations took place. The factory manager took out his personal pistol and fired, in which one worker died and a few workers were injured. As soon as this news spread, the workers stopped working and came out with iron rods which were used in the textile machines. They started hitting all the persons coming their way. They also killed the supervisor, the factory manager, and a few more persons from the senior management. By this time, the police came and then the matter was resolved, and a lockout was announced in the factory. Next morning, on reading newspaper reports about the incident, Dr. Alan was upset. Being the secretary of the association, he made a report criticizing the episode and conduct of the workers. He also contacted the president of the association for the agreement to this statement, ‘If the top management cannot understand their workers, then they should warrant such action by the workers, and we should not support them’.

Questions 1. State the organizational climate that existed in Phantactic Textile Limited. 2. What if the conflict was brought forward? State the best and worst that could happen. 3. If you were the vice-president of personnel and administration, what measures would you have taken to prevent the happening of the incident?

Critical Thinking Questions

1. Conflict is the same as fight. Discuss. 2. Discuss the pros and cons of conflict-resolution techniques in organizations. 3. Collaboration is one of the possible outcomes of a conflict situation. Discuss.

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Chapter at a Glance Conflict Management

Conflict management addresses solvable conflicts by learning to manage conflicts, which can decrease non-productive escalation. Conflict management involves acquiring skills to resolve conflicts and to be aware of various conflict modes and establishing a structure for the management of conflict. Traditional versus Modern View of Conflict

• According to the traditional view, conflict is the result of reduced communica-

tion, dishonesty and distrust between people, and the failure of managers to be receptive to the wants and desires of their employees. • The modern view of conflict states that conflict between various bodies in the organization depends on the organizational structure, variations in long- and short-term goals, insight, and employees’ values. Functional Conflict

• This allows the groups to track their goals and enhance their performance. • Helps increase knowledge about current issues and provides solutions for them. • With the onset of constructive conflict, comes the concept of change, refine• • • •

ment, and rectification. Decisions are more robust because they pass through perspectives, visualizations, and so on, of various people. It helps in the reduction of complex disagreements that can impact the performance of individuals or organizations. Conflicts or arguments can encourage people to find out new solutions. It enhances the relationship and increases the cohesiveness by learning more about each other.

Dysfunctional Conflict

• This conflict creates problems for the group’s performance within the organization.

• Conflict between groups or individuals takes a considerable amount of time to resolve opinion disagreements and provide a relevant solution.

• Sometimes when the conflict is not under control, it disrupts the progress of the organization, conflict resolution does not happen and every member within the organization is not at their productive best. • The group does not remain aligned with the goals of the company or the project. As a result, the performance of the group and the organization decreases. • Unresolved conflict can significantly reduce coordination and association between members of the group and the team spirit is lost.

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• Due to a conflict, innovative ideas are not shared by the members of the team resulting in lower quality and productivity.

• Conflict also reduces the team’s effectiveness. Process of Conflict

The process of conflict comprises five stages. Opposition

Conflict arises in an environment where there exists opposition between individuals and groups. The disagreement arises due to the following: communication, structure, and personality. Communication: Different jargons or too much noise in the communication channel or even a gap in communication can give rise to conflict or are antecedents of conflict. Structure: Structure can refer to a group or organizational structure and consists of variables such as size and task specialization because large groups are mainly task-specific groups. Personality: Some personality types who prefer autocracy to a greater extent are sources of conflicts within the group. Also, because value realization differs from one personality type to the other, the amount of contribution toward achieving organizational goals also differs. Cognition

This stage brings clearness on whether the conflict is felt or sensed, between people, and groups, and sentiments play a vital role in affecting the insights. Intention

The purpose of a sensed conflict is identified at this stage and there can be confrontations at this stage and the individuals involved in this conflict might address/ attack an issue from their very own perspective. Competing: If an individual seeks to satisfy their own interest without considering people or groups who are party to the conflict, then it is said to be competing. • Collaboration: If the parties to conflict try to resolve it by sorting out the problem and clarifying the differences, then they are said to be collaborative. • Avoidance: It is an intention where a person either avoids the conflict or avoids the person with whom they have a conflict. • Accommodating: It is the intention wherein the parties to conflict place an opponent’s interest above theirs.

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• Compromising: It is an intention where each party to the conflict can let go

of some of their points to narrow down to a resolution. Generally, the intentions of people are ever-changing.

Behavior

Conflict is evident because there is the external display of conflict using oral and visual modes by the staff. Outcomes

These are consequences that may be functional, in the sense that there was improvement in the performance of the group or organization, or dysfunctional. Levels of Conflict Intrapersonal Conflict

Intrapersonal conflict implies the internal conflict or annoyance of a human being. This occurs when people demand attention from self, which does not depend upon any rationale, goals are set by the self that cannot be achieved, or some external factor prevents the individual from completing a task. Approach–Approach conflict: For example, choosing an educational institution from a number of institutions, each offering some unique programs in addition to the regular course. • Approach–Avoidance conflict: For example, wanting to talk to a department head for allocation of a different project that has overseas opportunities and then fearing that the proposal would not be fairly accepted by the head. This type of conflict becomes very difficult to resolve in scenarios like the following: • Independence versus dependence • Collaboration versus competition • Impulsive versus restricted • Avoidance–Avoidance conflict: For example, the conflict between avoiding unwanted expenditures or cutting down on the budget.

Interpersonal Conflict

Interpersonal conflict arises between two individuals in a company. It occurs due to variations in insights, beliefs, and ethos and no clear categorization of roles. The tools that can describe the manifestation of interpersonal conflict are Transactional Analysis, Johari Window, Life position, etc.

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Transactional analysis predominantly revolves around three ego states.

• Parent ego state: The person is authoritative, controlling, protective, and so on. • Adult ego state: The person is balanced and mature. • Child ego state: The person is dependent on others like a child. Transaction Types

Crossed transactions: When two people keep a distance from each other, without further discussion, conversation, or deliberation after they had a dispute, then it is a case of crossed transaction. Crossed transactions are elements of discomfort in relationships, whether husband–wife, parent–child, and so on. If an individual says to one of their best buddies, ‘Well, how you think I feel!’, then their friend might feel the sarcasm in their statement and choose not to respond. It is a transaction between two individuals, one representing the adult ego state and the other individual responding using a child ego state. Crossed transactions are a source of conflict. Complementary transactions: It is a transaction between individuals when a person’s ego state receives a proper rejoinder. An adult ego state gets an adult response and so on. A complementary transaction can appear between any two ego states. For example, two people may transact an adult–adult ego while resolving a problem. If the response is the one that is sought for, then the transaction is complementary. Ulterior transactions: Ulterior transactions are complex transactions and involve more than two ego states. In this communication, one has to read between the lines. If A says to B, ‘Since you are busy, let’s talk about it some other time’, then they are exuding both parent ego and adult ego, where they are being considerable about other’s situation and do not want an extended conversation at that point of time. Johari Window

The next most commonly used tool is the Johari window developed by Joseph Luft and Harry Ingham. The model is vital for representing interpersonal conflict and is based primarily on two concepts.

• The degree to which a person can self-assess themselves • The degree to which the person is known to others The concept of the Johari window is that understanding oneself to the minutest extent and being in relationship with others that is of value can help in improving both the personal and professional lives of an individual. Or, understanding oneself better and also having insights of relationship with others is a heuristic exercise

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that has been in existence in corporate settings for ages, majorly to enhance the degree of cooperation and reduce differences. More valued sharing results in the strengthening of interpersonal relationships and lessens interpersonal conflicts. The Johari window is represented diagrammatically.

• Open area: This area correlates to a candidate’s personal profile. In the initial

stages of a relationship, because no two individuals are close to each other, their personal profiles are not known to each other. However, as the relationship grows, information sharing is high, compatibility among them increases and conflict reduces. • Hidden self: This area shrinks as the person shares more information with others. With more sharing comes more trust and belief and less conflict. However, this area is prone to more conflict. • Blind area: This area contains information unknown to self and known to others. For example, movements in a person happen just out of sheer stress, like stammering while giving a presentation or holding shifting from one foot to the next while speaking. Such habits, when pointed out by others can reduce the blind area. The blind area can clearly depict a person’s strengths and weaknesses; the more a person is open to others’ views, the more effective manager they can be. • Unknown area: This is not the area that contains information not known to others or to oneself, but it contains information that is deliberately suppressed. As a person grows, develops, and learns, this area goes on shrinking. Life Positions

Life positions are an amalgamation of positive and negative evaluations of self and the other. These are used to validate the decisions to warrant the behavior exuded. Four positions arise from the permutation. Intragroup Conflict

Intragroup conflict refers to the conflict between group members, resulting in a decline in the performance of the group. It can also happen within a familyrun business such as Tata and Birla. Intragroup conflict refers to the inaptness and incongruence among the members of a group and subgroup with regard to long- and short-term goal attainment, policy formulation and implementation, processes, functions, or group charters. In intragroup conflict, most of the group or subgroup members must be involved. Intergroup Conflict

Intergroup conflicts refer to the conflict between groups of people, strategic business units, or functional units within the organization. Intergroup conflicts occur due to several reasons given as follows.

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Task interdependence: It is the interdependence between various functional units of an organization for information gathering or collaborative tasks performed by them. They can be represented as sequentially dependent; dependency is like a two-way process of pooling each team’s resources to accomplish a particular task. Task interdependence can be of three types. Pooled task interdependence: Group performance is the sum of an individual’s contribution. Sequential task interdependence: There is interdependence in the sequence of tasks performed by the members. Reciprocal task interdependence: Performance of a member executing a task directly affects the performance of other members executing the task in the same group. For all of the above scenarios, conflict arises when there is a mismatch between expectation and performance. Improper task allocation: This is another common cause of intergroup conflict when roles and responsibilities are not properly allocated to the respective groups. Interdepartmental goal variation: This can give rise to conflict. For example, the testing unit of a software development organization might want to establish its goal at 0.3 percent defects per person per thousand lines of code, whereas the development unit might not want to adhere to that standard. • Resource constraint: Various groups might fight for resources such as manpower, money, material, and infrastructure or for intangible elements such as authority, prestige, and status. • Benefits or rewards: Conflict can occur among the group when there is a benefit or reward scheme operating across groups or units. So, the quality assurance department is rewarded for keeping product quality in sync with ISO standards, whereas the marketing department is rewarded for intelligent campaigning methods. • Intrapersonal and interpersonal conflicts: Both can give rise to intergroup conflict.

Scenario of Intergroup Conflict Within the group

• Trust between members increases. • Authoritative style of leadership persists. • Organizational hierarchy is not flexible.

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Outside the group

• Perceive each other in a distorted manner and judge the other group irrationally. • Intergroup communication decreases. Conflict Resolution

The conflict arising between groups in an organization or within the groups needs to be resolved. To solve interpersonal conflict, certain methodologies are used. Lose–Lose

In this strategy, both the entities suffer defeat. One of the solutions can be a compromise made by both groups. The next is to bribe the other party from carrying out further disputes. The third form is to bring an external entity or group that can mediate between the groups by giving honest judgments. The last approach is to use existing rules or regulations for the resolution of the conflict. Win–Lose

In this strategy, an individual wins whereas the other loses. For example, either the worker’s union or the management of an organization wins. The conflict is mainly due to the difference in perspectives while looking at things; moreover, the emphasis is on the solution approach rather than on the achievement of goals and objectives. Both the entities view issues from short-term perspectives and conflicts are more personalized. Win–Win

Using this strategy, both the entities win, and the brainstorming of opinions and schemes to resolve certain issues happens from a positive viewpoint. To be able to obtain a win–win situation for both the parties might not be realistic but should be set as an organizational goal for maximum outcome. Transactional Analysis

To resolve interpersonal conflict, communication between two groups should be similar to the communication between two adult ego states. Changing People’s Attitude and Behavior

Interpersonal conflict can be resolved to quite an extent if the attitude and perception of people change.

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Intragroup Conflict Resolution

To resolve intragroup conflict, the members of that group should recognize and honor the roles accorded to various members. Intergroup Conflict Resolution

Certain strategies are used for resolving intergroup conflicts, which are as follows:

• Problem-solving: Problem-solving in collaboration is the most effective •

• • • •

approach when both the groups try to identify the problem and resolve it using some solution strategies. Organizational restructuring: Intergroup conflict can be resolved if organizational restructuring is done so that roles and responsibilities are defined clearly and allocated to groups, and task interdependence between various units of the organization is reduced to lessen the level of conflict. Alignment to common goals: Both the groups can be aligned to a common goal wherein both the parties put in their efforts to achieve the goal, which in a way can reduce intergroup conflict. Upgradation of resources: If conflict arises due to constrained resources, then the best way would be to go in for resource upgradation and allocation of resources across various groups uniformly. Not to let conflict happen: For not so complex issues, the best way to resolve conflict is to withdraw from the phase of the conflict. The withdrawal can happen either from both parties or from one of them. Collating similarities among groups: If similarities between groups are identified, then it becomes easier for groups to smoothen down on the conflicting issues and work with a renewed perspective.

Line and Staff Conflict Resolution

The approaches to reduce conflicts are as follows:

• Defining clear roles and responsibilities for line and staff. • The role of staff managers is to give advice and line managers should follow suitable advice.

• Communication exchange between line and staff should be enhanced. • Inferiority complex in line managers should not be allowed to develop. • Both should have the freedom to approach top management if required. Conflict Management Styles

It has been seen that bosses within the organization spend a lot of time resolving conflicts and issues. Therefore, there is a need to manage conflicts in an

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appropriate manner, which will not only reduce time spent on the same but also help to resolve them in an effective manner. Competition or Application of Force

This style suggests that one party is the victor and the other is the loser. The advantage of this style is that the winner has a very clear insight about the problem and the solution strategy, but at the same time the other party’s ego is hurt, which can boost up the enmity within groups and sometimes can even provoke important groups to withdraw from conflicts. Collaboration

This is also known as ‘win–win’ or ‘problem–solving’. Collaboration involves two parties or individuals working in alliance toward a shared goal or objective and get equally profited from the result. It considers the concerns of each group and finds solutions that satisfy both. Collaboration is appropriate when there exists the following: Compromise

This style is used when the leading concern is the accomplishment of goals and relationships. Both the parties forego a few of their goals to attain a long-term goal in association. This is used when an ideal resolution cannot be identified or all the parties are in identical power offering their own solution. Avoidance

This style, also known as retreating, helps to evade conflicts and can be used when the issue is not major or too much of a conflict has an influence on the relationship, or when there is very little scope to achieve a party’s own needs. Accommodation

This style, otherwise known as smoothing, has a party overlook its own goals and accommodate its opponent’s views and ideas.

16 ORGANIZATIONAL DEVELOPMENT AND CULTURE

An Opening Vignette Organizational Culture at ABC Company ABC is a manufacturing firm for home appliances. Approximately 65 percent of the employees are located outside of South America, and the company has a rich and high multicultural mix of employees. The main goal of the company is ‘to have their appliances in every home and everywhere’. The company believed, because of its diversity, it is able to utilize all employees’ strength to increase the profit, productivity, and performance of the company. The company tried to create cultures of inclusion by taking the following measures. Building awareness: It began by building various business cases for diversity and change in the marketplace. Building competency: It developed tools to effectively manage a global workforce and increase employee engagement. Implementing best practices: It began by incorporating a diversified strategy for new employees and developed an educational curriculum that helps the managers to effectively manage a multicultural workforce in the organization.

16.1 Introduction to Organizational Development

Organizational development is a consciously designed endeavor to add to an association’s efficacy. Vasudevan defined organizational development as DOI:  10.4324/9781032634258-16

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endorsing organizational promptness to meet change. Organizational development is further said to be a universal learning and development strategy of an organization which aims at continuous change in outlook, principles, and standards of the existing organization and makes use of complex tools and technologies, during favorable or adverse times, with respect to market opportunities, and the business world. 16.2 Definitions of Organizational Development

Organization development is an effort (1) planned, (2) is organization-wide, and (3) managed from the top, to (4) increase organization effectiveness and health through (5) planned interventions in the organization’s ‘processes’, using behavioral-science knowledge. —Richard Beckhard Organization development is a system -wide application of behavioral science knowledge to the planned development and reinforcement of organizational strategies, structure and processes for improving an organization’s effectiveness. —Thomas Cummings and Christopher Worley Organization development is a long-term effort, led and supported by top management, to improve an organization’s vision, empowerment, learning, and problem-solving processes, through an on-going, collaborative management of organization culture—with special emphasis on the culture of work teams and other team configurations—utilizing the consultant– facilitator role, and the theory and technology, applied behavioral science, including action research. —Wendell French and Cecil Bell Organization development is the attempt to influence the members of an organization to expand their candidness with each other about their views of the organization and their experience in it and to take greater responsibility for their own actions as organization’s members. —Neilson A planned process of change in an organization’s culture through the utilization of behavioral science technology, research and theory. —Burke Source: Beckhard, R. (1969), Cummings, T.G., & Worley, C.G. (2014), French, W.L., & Bell, C. (1999), Nielsen, J.S. (2011), Burke, W (2023)

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16.3 Nature of Organizational Development

An organization consists of people, process, equipment, and machinery, and these entities change with time. Skills and attitudes of people need to be refined, equipment and machinery need to be changed, and processes and procedures need transformation, and to make these changes happen by taking appropriate measures is the responsibility of the organization, which can be called organizational development. Organizational development is an ongoing, methodical, and continuous process. To bring in development within an organization, goals have to be planned, with strong focus, intention, and sound analytics. Organizational development is interdisciplinary and draws on sociology, psychology, and various motivational theories (Brown, A.D.,1998). It is a growing field that is responsive to many news approaches. For example, WW Bakers’ organizational climate, an important constituent of organizational development, became negative as sales for cake products were declining and managers were under huge pressure as the profit margins were going down. On the other hand, products, such as patties and rolls, made by them were achieving a new high. The employees were excited to have another chance at success. The organizational culture, an important constituent of organizational development, was very friendly at WW Bakers, and employees nurtured a culture of friendship and alliance which the top management thought should undergo a complete transformation if the company wanted to expand across the globe. 16.4 Characteristics of Organizational Development

The characteristics of organizational development are as follows:

• It is a well-managed process, depends on extensive data gathering, and is planned with long-term objectives and a pronounced vision.

• It is integrated and has a problem-oriented approach, which affects the solutions. • It also reflects a systems approach wherein the organization is viewed as a system, and the system includes employee, employer, and technology.

• It depends on practical implementation of various organizational approaches. • It involves the distinct role of a person who makes progress easier to ensure that changes are real.

• It involves learning the principles that individuals as well as all employees of an organization should work together and relearn at all levels in order to bring in changes for betterment. • It consists of a structured approach to detecting organizational problems and opportunities and then using expert’s opinion to solve them. • It is based on solid research and involves application of knowledge of behavioral science to the problems faced by the organization. • It emphasizes on the fact that if an organization has to change, then individuals also have to change.

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• It aims to improve individuals’ and organization’s professional health. • It focuses more on problem-solving. 16.5 Goals of Organizational Development

The goals of organizational development vary based on situations, and some of the most common goals are as follows:

• Align the employee’s goal with the organization’s mission, and workers should work in unison to achieve the goals.

• Motivate workers to solve the problems related to the enterprise, which gives • •

• • •

the workers the necessary exposure and experience and aids them in improving their performance. The process of planning for any task or planning to achieve the organizational goal is very crucial for an organization, and it requires active participation from the workers. Organizational development works toward developing a communication channel between the workers and the management, and an effective communication channel is mandatory to develop trust and cooperation and strengthen the ties for the growth of the organization. Organizational development promotes a conducive atmosphere for workers and makes them self-motivated to work for the profitability, productivity, and growth of the business. Organizational development enables workers to adapt to internal and external changes in the organization, which indirectly increases the work efficiency of the employees and the organization. Organizational development aims at building trust and confidence, which in turn makes workers feel that their contributions to the organization are significant, and hence the management has started believing in them, which leads to more cooperation from that individual and others as well, and this goes a long way in enhancing organizational performance.

16.6 Importance of Organizational Development

Organizational development aims at improving productivity and is very much required with respect to problem-solving and decision-making, and implementation requires time and money. 16.6.1 Organizational Change

The process of organizational development seeks areas where change is required and an in- depth analysis of the change is made, and put up in the change management plan. The plan then elaborates on the ways in which changes can be done, and the

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impact the changes will have on the company operations. It also outlines who will be affected by the change, and how a smooth transition can be ensured while implementing the change. All this is possible because of organizational development. 16.6.2 Growth

Effective organizational development directly impacts business growth. Based on financial and sales growth and keeping in line customer demands, an organization’s growth is perceived, and human, and material resources such as workforce, and the distribution channels are used to propel future growth. 16.6.3 Work Processes

Companies need to indulge in organizational development in order to grow and keep their processes standardized, efficient, and accurate. Appropriate quality control measures are taken to achieve company standards. Evaluators analyze the existing work processes and try to refine the processes as per company standards by crafting out plans, and proposals that abide by the standards. 16.6.4 Product Innovation

With reference to innovation of products, organizational development assists in getting innovation practices of competitors, the technology required for product development, customers’ preferences, and demands, the market segment, manufacturing potential, and patents and trademarks for making a new product. 16.7 Organizational Development: Principles of Practice

The practitioners of organizational development are guided by the following core values and beliefs. Respect—the perspectives of every individual Collaboration—work together to achieve a particular goal Authenticity—entrusting people to stick to sound beliefs and goals Self-awareness—committed to developing self-awareness and interpersonal skills within the organization Empowerment—allocate sense of authority to every individual simultaneously, and providing them support in order to improve productivity and raise their morale Democracy and social justice—it implies if employees feel that the organization’s growth is primarily because of their contribution, then definitely for all organizational initiatives, they would be supportive. Hence, the perception of democracy and practice of democracy should prevail among the employees.

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16.8 Support from Other Disciplines

Organizational development draws its support from theories which include the applied behavioral and physical sciences. 16.8.1 Systems Focused

The systems-focused approach relies heavily on open systems theory and techniques to understand communities and organizations. Therefore, a change made in an area of the system always results in changes in other areas as well, and organization being a system, change in one process, standard, schedule, or service will bring a change in other components. 16.8.2 Action Research

A distinctive organizational development feature is the continuity in the research undertaken, wherein the planned action must be constantly scrutinized and policies revised as interventions unfurl. 16.8.3 Process Focused

Organizational development is process focused, and management consultants are more worried with ‘what’ instead of ‘why’. 16.8.4 Data Driven

Organizational development involves the investigation, and evaluation of the internal, and external surroundings in order to unearth authentic information, and craft a basis for change and promise accomplishment of a sounder state of the organization. 16.9 Action Research Model of Organizational Development

Wendell L. French and Cecil Bell defined organizational development at one point as ‘organization's improvement through action research’. Conceptualized by Kurt Lewin, and later elaborated, and expanded by other behavioral scientists, Lewin believed that the motivation to change was strongly related to action, and organization’s improvement could happen only with planned and continuous change. Employees who are responsive and offer less resistance to changing scenarios are more likely to adopt new ways. Rational social management, as per Lewin, proceeds in a series of steps, each of which is composed of a loop constituting planning, action, and fact-finding about the result of action, which is a combination of the change in process from Lewin’s perspective and involves the following three steps.

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Unfreezing: A problem in the existing process might lead the individual or group to believe that there is a requirement for change. Changing: New behavioral models are explored, and then tested, and implemented. Refreezing: If the new behavioral model after an evaluation deems to be fit, then it is adopted. Figure 16.1 consolidates the steps and processes involved in planned change through action research, which includes initial investigation, collection of data/ information, and feedback on output received. Here, the client and the change agent work together. Action research is depicted as a cyclical process of change. The systems theory states that this is the input phase where the client system identifies the need for change, becomes aware that an external agent is required to bring in the changes, and initiates a dialogue with the consultant to diagnose the problem. The next stage of action research is the transformation phase. This stage includes activities related to the learning processes and planning, and implementing the behavioral changes in the client organization. In Figure 16.1, every stage is associated with feedback, and hence if the feedback in the second phase is not justifiable, then it would mean to change the plan to make the learning better aligned to the organizational objective. Here, there is a regular interaction between the client and the consultant for more accurate transformations. The third stage of action is the result phase, which includes monitoring actual changes in behavior resulting from the implementation of the changes. This phase includes data collection from the client system so that improvements can be understood, and minor adjustments in learning activities can be made via the feedback

FIGURE 16.1  System

Model of Action Research Process

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loop as shown in Figure 16.1, whereas major ones will have to be undertaken from the initial phase. This model is similar to Lewin’s three-step process of unfreezing, changing, and freezing. 16.9.1 Characteristics of Action Research Theory

• It is problem centric, client centric, and action oriented. • It is characterized by problem identification and problem-solving process. • There is a very close interaction between the client and the change agent wherein they go through the stages of identifying, and ranking problems, to understand their causal effect, and formulating plans to tackle them. • Since the action research theory is based on research methodologies, it constitutes data gathering, hypothesis formulation, testing hypotheses, and evaluating outcomes. • Action research is supported by a mechanism for sustaining and improving the efficiency of the client’s system where the system is powered by tools for selfanalysis and renewal. 16.9.2 Application of Action Research Theory: Organizational Development

• People become co-investors and take part in identifying and understanding the • • • • • •

problem and analyzing the reasons for change. Enable the individuals to have a futuristic view. People interaction and collaboration, and their perspectives on the reason for change and implementing the change, can contribute substantively to organizational development. Allocate decision-making power to the people involved in collecting the information so that changes can be implemented. Formulation of an implementation team with regard to the changes identified. Plan the direction of change in association with all stakeholders. Legally implement decisions that employees and leaders make, provide a learning environment where employees can adapt, and align themselves to the prospective changes.

16.10 Limitations of Organizational Development

• The underlying framework of organizational development includes behavioral science and organizational development theory and has its limitations.

• Limitations of organizational development accrue to its inability to challenge a complacent person’s motivation. • Organizational development implementation is circumstantial, and mostly research and development organizations are not impacted by organizational development.

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16.11 General Process of Organizational Development

The organizational development process is based on the action research model, which begins with an identified problem or need for change followed by an analysis of what change is required, and how it has to be done, collecting information to evaluate the involvement, and implications of change, and tracking the status of progress in a cyclical approach till the result is achieved. The phases (shown in Figure 16.2) of organizational development are as follows: 16.11.1 Problem Identification

The identification of the problem in relation to growth and utilization of resources, which has a direct impact on the vital statistics of the organization, calls for a change or else the top leadership strata of the organization want to bring a total transformation in the organization. 16.11.2 Analysis

Once the problem is identified or the decision is made to change the current execution scenario, the next step is to analyze the existing conditions, the causal scenario, the avenues which require change, and what sort of changes need to be done. This analysis is done using the techniques of documentation reviews, taking feedback from focus groups, and interviewing or conducting an extensive survey. For an impartial result, the assessment could be done by members external to the organization. The analysis done constitutes the following. Structural analysis: Alignment of different units of the organization to organizational goals.

FIGURE 16.2  Phases

of Organizational Development

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Process analysis: It relates to decision-making, group dynamics, communication, and conflict management within the organization. Function and domain analysis: Function analysis relates to the performance of certain variables, results and outcomes, and domain analysis. 16.11.3 Plan an Intervention

The intervention will depend directly on the changed goals, and they could be in the form of skill-based or process training and development or collaborations among the management teams across the units to achieve the changed goals. 16.11.4 Implementation

After planning for the change, and collecting the required data for it, the execution of the plan is initiated. 16.11.5 Evaluation and Feedback

For example, if the intervention were process training for individual employees or for certain units of the organization, data has to be accumulated to track changes in knowledge and competencies. Based on evaluation and feedback, the leadership body or the stakeholders can decide whether the process has to end or whether to follow another cycle of intervention or involvement. For example, Coca-Cola undertook organizational development or transformation that would better suit the North American market by establishing two big units—Coca-Cola North America and Coca-Cola Refreshments—and went on to consolidate the leadership of its global operations as Coca-Cola International and Coca-Cola America wanted to enhance their focus on execution and delivery and accelerate the franchising of their bottling system in their international market. 16.12 Organizational Development Interventions

• Interventions are the techniques used to perform various activities in an organ-

ized way, individually or in combination, to improve the social or task performance of the members of the client. • Interventions are structured activities, which include experiential exercises, questionnaires, attitude surveys, interviews, relevant group discussions, and even lunchtime meetings between the change agent and a member of the client organization. • In short, every action that helps in an organization’s improvement program in a change agent–client system relationship can be said to be an intervention.

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• To choose any of the possible intervention strategies, several assumptions about the nature and functioning of organizations are made.

• Beckhard lists six such assumptions (Beckhard, R. (1969)), which are as follows:

• The basic building blocks of an organization are groups (teams). Therefore, the basic units of change are groups, not individuals.

• An always relevant change goal is the reduction of competition between parts of the organization and the development of a more collaborative condition.

• Decision-making in a healthy organization is, where the information sources are, rather than in a particular role or level of hierarchy.

• Organizations, sub-units of organizations, and individuals continuously manage their affairs to aligned goals. The controls are interim measurements, not the basis of managerial strategy. • One goal of a healthy organization is to develop generally open communication, mutual trust, and confidence between and across levels. • People support what they help create. People affected by a change must be allowed active participation and a sense of ownership in the planning and conduct of the change. 16.13 Types of Organizational Development Interventions 16.13.1 Large-Scale Interventions

Large-scale interventions involve a whole system working simultaneously to achieve a particular set of goals. These interventions are highly structured as all the activities are planned beforehand. Each level of the organization participates in the implementation of planned activities for the long-term support. Cummings and Worley (2001) describe the three-step process involved in any large-scale intervention as follows:

• The preparation of the large-group meeting • Conducting the meeting • Following up on meeting outcomes Some other examples include inquiry summit, future search, open space, and realtime strategic change. 16.13.2 Strategic Interventions

These interventions link the internal functioning of the organization to the larger environment and transform the organization to keep pace with changing conditions. Strategic intervention helps organizations to understand their current status

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and develop more strategies like cost-cutting to diversifying into innovation of new products or alteration in the services as per the changing market scenarios to compete with other organizations. Kormanik (2005), under the umbrella of strategic interventions, includes mission/vision/purpose, strategic planning and goal setting, visioning/scenario planning, benchmarking, SWOT, communication audit/strategy, values clarification and commitment, climate survey, and culture change. 16.13.3 Techno-structural Interventions

Techno-structural interventions rely on a deficit-based approach, and the idea is to find problems to solve. These interventions focus on the technology, and structure for the development, and are rooted in the fields of engineering, sociology, and psychology, combined with socio-technical systems and job analysis and design. Kormanik (2005), under the umbrella of techno-structural interventions, includes organizational structure, organizational systems, business process redesign, space and physical settings, socio-technical systems, change management, job design/enrichment, competency-based management, knowledge management, and organizational learning. For example, ABC Co. Ltd decided to divide the project work across three subunits—planning, design, and development—and coordinated the work of these departments using an efficient communication channel. Later, the manager made decisions about how to deliver the services to clients and how to link people to tasks. 16.13.4 Management and Leadership Development Interventions

These interventions aim to develop the quality and effectiveness of the leaders. Kormanik (2005), under the umbrella of management and leadership development interventions, includes executive and professional development, mentoring, coaching, action learning, action science, MBO, succession planning, 360-degree feedback, participative management, and technical/skills training. A research study conducted by the Corporate Leadership Council (2001) revealed that organizations are focusing on the following five actions to increase their leadership strength:

• • • • •

Redefining the leadership profiles to better respond to current business needs Targeting future leadership needs Ensuring top-management accountability for leadership development Creating a continuous development culture Customizing the development opportunities to the leaders’ needs

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16.13.5 Team Development and Group Processes Interventions

Team development and group process interventions aim at improving various aspects related to group performance and interdependency among the group members. According to Robbins (1994), team building is applicable where group activities are interdependent. The main objective of these interventions is to improve the coordination among the team members, which will result in a better performance. 16.13.6 Individual/Interpersonal Process Interventions

These interventions are the most personalized of all and probably the most widely used by organizations. The individual/interpersonal process aims at the development of specific skills of every individual in the organization. The most common examples of this type of intervention are learning strategies, life transitions, mentoring, and interpersonal communications, among others. 16.14 Definitions of Organizational Culture

The set of beliefs, values, and norms, together with symbols like dramatized events, and personalities that represents the unique character of an organization, and provides the context for action in it and by it. —Gareth Morgan A pattern of shared basic assumptions that the group learned as it solved its problems that has worked well enough to be considered valid and is passed on to new members as the correct way to perceive, think, and feel in relation to those problems. —Edgar Schein Organizational culture refers to the pattern of beliefs, values and learned ways of coping with experience that have developed during the course of an organization’s history, and which tend to be manifested in its material arrangements and in the behaviors of its members. —Donald Brown Sources: Morgan, G. (1986), Schein, E.H. (2009), Brown, D.R. (2011)

16.15 Organizational Culture

Organizational culture revolves around an organization’s prospects, knowledge, viewpoint, and principles that bind it and is expressed in its execution process,

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exchange of information with the outside world, and future prospects. It is dependent on shared feelings, values, traditions, and explicit and implicit rules. Organizational culture is also termed as corporate culture, which includes the following:

• The process of conducting the business, the conduct of employees, customers, and other stakeholders.

• The approach to decision-making and innovation. • The power and authority allocated across the levels and the information flow through the hierarchy.

• The commitment level of employees and the approach to achieve the objective.

• Impact on the organization’s performance, process, and productivity and focus

on improving customer service, product quality, production methods, safety and security, marketing and advertising strategies, and product innovation. • Variation in culture from organization to organization. 16.16 Subculture and Counter-culture

An organization might have a culture within its own culture known as subculture. For example, people working at the support desk may have a different culture, which induces openness and human interaction or intervention, than people working in the production unit, which emphasizes innovation and management. A culture that evolves within different units and subunits or geographic boundaries is called a subculture. Mostly, subculture is attuned to the work environment and conditions. Counter-culture of an organization or a subunit within an organization comprises values, beliefs, and traditions which are in direct opposition to the actual culture. For example, a unit within the organization may adopt frequently changing strategies which are at par with the current market, whereas another unit might be less flexible in adapting to the changes which can later be perceived as a threat, and this counter-culture needs to be eliminated. 16.17 Factors Affecting Organization Culture

Factors affecting organizational culture are as follows: 16.17.1 Leadership

The people in the leadership position have an enormous impact on how the work environment operates, and the leaders should follow the policy of inclusion and the policy of constructive criticism in a healthy office environment.

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16.17.2 The people who are hired

The team within the organization and the relevant co-workers often spend more time with their colleagues, which has a great impact on organizational culture. Encouraging a team to organize and participate in social events outside of work is a great way to get the team on the same page and ensure unity. 16.17.3 Work environment

Surroundings have an impact on the work performance of employees, and some infrastructures should undergo renovation and redesign to boost employee performance. Even installing secluded work pods may enthrall the employees in an organization. 16.17.4 Growth opportunities

For most employees, having the chance to improve their skills and grow in their career is a necessary part of organizational culture. These can be accentuated by conducting training and promotion opportunities. 16.17.5 Clients/customers

The product or service the organization offers to a segment of customers might also attract the new prospects if certain changes are made. Just as an individual attempts to sell their skill set in an interview, a business must sell its capabilities strategically to the ideal customers. 16.17.6 Humanitarian approach

With the evolution of organizational culture, everything that is done in the workplace is open to scrutiny. Employment review sites and employee well-being are key to the organizational culture, and the companies that make it a priority are reaping the benefits. 16.18 Strong versus Weak Culture

A strong culture helps organizations to operate smoothly with less friction among the subordinates or peers, a solid execution methodology, and very less amendments required, whereas the counter sequence is envisaged in a company having weak culture, and greater control needs to be exercised in such situations. Research carried out in organizations makes the fact evident that organizations with strong culture make employees align with the culture very quickly,

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and service sector organizations tend to exhibit that sort of culture. The benefits derived from developing strong and prolific cultures are as follows:

• • • • •

Everyone works toward the company’s vision, mission, and objectives. Employees are highly inspired and exude trust. Increased solidity among various units and subunits of the organization. Promoting reliability with proper control within the company. Making organization more efficient by implementing sound execution concepts.

For example, Infosys as a company has a very strong organizational culture. The limitations of strong culture are as follows:

• A company which has a strong culture promotes the concept of groupthink

since the employees believe that what they think and do is correct. The concept of groupthink is dealt extensively in Chapter 11.

16.19 Characteristics of Organizational Culture

The seven characteristics of organizational culture are as follows. 16.19.1 Innovation

Companies which adopt a culture that promotes exploring new ideas and avenues encourage employees to take risks, whereas those who do not undertake risks do not focus much on the area of innovation and exploration. 16.19.2 Detailing

Detailing refers to the accuracy with which employees are expected to work and organizations which stress on the same expect employees to work with precision than organizations which focus less on the aspect of detailing. 16.19.3 Result and Outcome

Companies that focus on meeting the desired outcome attach importance to this trait of organizational culture. For example, a company directs its marketing executives to do aggressive marketing so that the sale of their product achieves a significant high within a very short span. 16.19.4 Employee Centric

Companies that have an employee-centric culture place a great deal of importance on how their decisions will affect the people in their organizations. In such companies, the culture is to treat the employees with respect and dignity.

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16.19.5 Teamwork

Companies that organize work activities around teams place strong emphasis on this characteristic of organizational culture. People who are employed in such companies have very good relations with their peers and managers. 16.19.6 Competitive Edge

Companies with an aggressive culture place a strong emphasis on being the market leader and outperforming the competitors at all costs. 16.19.7 Stability

A company whose culture focuses majorly on stability is rule-oriented, predictable, and officious in nature. They provide consistent output and operate best in non-changing market conditions. 16.20 Features of Organizational Culture

The following are some features of organizational culture:

• The culture decides the employees’ interaction at their workplace to enhance motivation, loyalty, and healthy competition.

• A sound culture ensures better employee performance and productivity. • The culture of an organization represents certain predefined policies with • • • •

respect to the roles and responsibilities of the employees and gives them a direction in the workplace. No two organizations can have the same work culture, and it reflects the brand and the identity. A sound organizational culture brings all the employees, even those from different backgrounds and families, with varying attitudes and mentalities. An organization’s culture enforces the desired discipline in terms of punctuality and other modalities and can even have a robust reporting structure in place where employees would be required to send reports by the end of the day. Organization culture ensures seamless implementation of policies and healthy relationships among the employees.

16.21 Importance of Organization Culture 16.21.1 Enhance Workforce Involvement

Culture within an organization influences the work environment through intent and clear judgment that propels and inspires employees to be more involved in their tasks and exchange of information with others, which in turn drives productivity.

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16.21.2 Low Rate of Attrition

Employees feeling valued and respected in an organization are less likely to leave, which is why it is extremely necessary for brands to adopt an organizational culture that reinforces their core values and mission statement. This saves companies time and money in the hiring process. Companies that institute a healthy culture must take steps to maintain and ameliorate it. 16.21.3 Enhanced Productivity 

Resources and tools made available to the employees help increase productivity and performance levels. Organizational culture ensures bringing people of the same skill set to work in collaboration to expedite tasks with speed. 16.21.4 Enriched Brand Identity 

Organizational culture represents public image and reputation, and a bad image prohibits customers from doing business with the said brand. Hence, businesses need to care about their brand identity. 16.21.5 Ownership and Authority 

A strong culture ensures that employees in the organization expend their efforts and instill within them a sense of ownership that enables the company to achieve their long- and short-term goals. 16.21.6 Top-performing Employees

A sound organizational culture strengthens the work of employees within the firm, resulting in a progressive employee experience. 16.21.7 Outcome-Driven Onboarding

Onboarding practices include positioning, grooming, and employee performance management programs that assist the new hires to get the right resources and make seamless a transition to their roles and responsibilities. These boost employees’ length of service and commitment and cut down on the interference some employees experience when they don’t have adequate information to perform their tasks. Onboarding ensures new entrants realize the core values of their business. 16.21.8 Healthy Team Environment

A sound culture within an organization helps improve the delivery and fast-tracks the decision-making process. It also helps teams to be more precise and accurate.

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Team members are those who possess the desired knowledge and are self-driven to complete the projects. Having a sound culture encourages employees and boosts work structures that help people be driven by purpose. 16.22 Organizational Culture and Its Functions 16.22.1 Culture Endorses Code of Conduct

An organization with a strong culture sets acceptable behavioral norms and code of conduct to achieve good business outcomes. 16.22.2 Culture Facilitates Recognition

An organization’s name and fame are not only based on the products or services it sells but also on the culture it adopts and the recognition it receives from adopting a good culture. 16.22.3 Culture Provides Self-satisfaction

Employees associated with organizations which have strong culture are deemed to be satisfied employees. 16.22.4 Culture Provides Opportunity to Set the Standards of Performance

An organization with a strong culture enables employees to get a chance to set the performance standards. They try to achieve the standards. It becomes a tool depending on which organizations develop and prosper. 16.22.5 Culture within Organizations Mentors Employees

Organizational culture acts as a motivator that forms a base for employee guidance and control. 16.22.6 Organizational Culture Also Helps in Attainment of Goals

A robust culture directs the stance and conduct of the employees toward the accomplishment of goals. 16.22.7 Culture Orients People toward Development

Organizational culture develops implicit rules which orient people toward selfdevelopment and discipline.

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16.22.8 Culture Inculcates Positive Attitude

Culture inculcates a positive attitude and good behavioral norms among employees. 16.22.9 Conflict Reduction

A common culture promotes steadiness in observation and reduction in conflict because every employee is aligned to the culture of the organization. 16.22.10 Coordination and Control

Organizational culture promotes steadiness of viewpoint and facilitates processes of coordination and control. 16.22.11 Uncertainty Reduction

Adopting the cultural mind-set simplifies the work methods and helps in selecting alternatives easily and initiating actions in response to the alternatives. 16.22.12 Motivation

A consistent and unified culture motivates employees to develop their identity, foster belief and loyalty, and perform to their potential. 16.22.13 Competitive Advantage

Strong culture improves the organization’s chances of being successful in the market. 16.23 Types of Organizational Culture 16.23.1 Normative Culture

In such an organizational culture, the standards and procedures are defined before, and the rules and regulations are set accordingly. The employees are bound by norms and stick to the policies, and there is no attempt to break the rules. For example, Accenture has a normative organizational culture where standards and procedures are already set. 16.23.2 Pragmatic Culture

Customer satisfaction is the main motto of the organization in a realistic environment, and most of the companies follow this culture. In a pragmatic culture, customer is treated as God. Customer satisfaction is the main motive of the employees

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in order to get more business deals. Mostly, all service-based companies follow pragmatic culture. 16.23.3 Academy Culture

The organization which tries to follow this type of culture has a highly skilled employee base. The role and authority are distributed according to the technical qualification and education background, appropriate training programs are conducted in an academy, and association of employees with the organization is of long duration. An example can be of premier management institutes across India. 16.23.4 Baseball Team Culture

In complete contrast to the pragmatic culture, a baseball team culture considers the employees as the most precious asset of the organization. These employees in due course exhibit indifference to their organization, and ad agencies, event management firms, and financial institutions are followers of this culture. 16.23.5 Club Culture

Organizations have highly skilled professionals and are very choosy about the employees they induct with regard to their specialization, educational qualification, and areas of inclination. The organization follows the process of promotions and appraisals on a regular note. Some examples include military organizations and legal firms. 16.23.6 Organization-centric Culture

In this culture, profit of the organization is more important. If the organization is not able to perform well, then it terminates the employee. 16.23.7 Performance-Based Culture

In such type of culture, performance of an individual is important. The employee is under continuous observation, and based on performance, they can be rewarded. For example, loan disbursement firms and premiere car companies. 16.23.8 Process Culture

All the procedures of the company are very much important. They are already established. Reviews do not matter in such organizations. Employees should work according to the already establish procedure. For example, IBM follows a process culture.

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16.24 Levels of Organizational Culture

Organizational culture consists of three interrelated levels, of which some are visible and some are intuitive consisting of assumptions, values, and artifacts. The three levels of organization culture as portrayed by Schein (Figure 16.3) are as follows. 16.24.1 Artifacts

Architecture, furniture, and dress code, all denote organizational artifacts and are immediately recognized by the people of another culture. 16.24.2 Values

Espoused values are the organization’s stated values which are inculcated among the members to project organizations’ values not only to others but also to themselves. This is often expressed in public statements of identity. 16.24.3 Assumptions

Shared assumptions are deeply rooted and so well incorporated in the office dynamics that they are hard to identify from within. For example, a basic assumption on satisfied employees in an organization might be translated into values, such as consensus, transparency, and tolerance in relationships for which the artifacts might be conference rooms equipped with modern amenities, company lawns and courts, and frequent company picnics where the employees get to interact with

FIGURE 16.3  Levels

of Organizational Culture

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each other, irrespective of the unit they are working in. Organizational culture is best depicted through its physical infrastructure, employee interactions, company policies, and reward systems. For example, the company culture cannot be understood only by taking a note of the outside appearance of the infrastructure for more lies beneath it, that is the level of interaction among the employees, their choices, beliefs, and perspectives on the dos and don’ts of the behavioral norms. 16.25 Dimensions of Organizational Culture

The organizational culture defined by Geert Hofstede, social psychologist and authority on global and organizational cultures, consists of six dimensions. 16.25.1 Means versus Goal Oriented

The two aspects differ in how and what: for example, a means-oriented culture focuses on how work is to be done and avoids approaches which undertake risks, whereas a goal-oriented culture aims at finding what work is to be done and involves risk-taking approaches. In such cases, the outcome is also mandatory. From the perspective of organizational effectiveness, goal-oriented culture is very effective. 16.25.2 Internally versus Externally Driven

Internally driven employees are those who think that they know what is best for the customer, whereas externally driven employees focus on customers’ requirements and wants. As Steve Jobs once said, ‘A lot of times, people don’t know what they want until you show it to them’. 16.25.3 Easy-Going versus Strict Work Discipline

As the term suggests that work discipline refers to the structured method in which the work is executed, and if some control is exercised, then there is more imposition on employees to get the work done in a methodical manner with a focus on productivity and efficiency, whereas in an easy-going culture, the approach to work is informal, slack, and unpredictable, and these factors steer a fair amount of innovation. 16.25.4 Local versus Professional

In an organizational culture, which is of local type, employees identify with their managers and the members of the team where risk-taking is low because of social obligations, whereas in a company with a professional culture, employees identify with their work, which has a low level of predictability since work needs to be finished.

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16.25.5 Open versus Closed System

In an open system, new employees are welcomed with open arms and people fit well in these open systems, but in closed ones, the adaptability to accept and align with employees, both internal and external to the system, are constrained and employee satisfaction is also less. 16.25.6 Employee versus Work Centered

Organizational culture which is employee centric keeps the employees satisfied and happy even at the expense of productivity and profitability, but in a work-centered environment, the focus is on work performance, and the leaders have extremely low levels of sympathy where employees’ personal problem is concerned. 16.26 Creating Organizational Culture

Creating an organizational culture involves developing the identity of the organization, establishing organizational values and sound traditions, and adopting best management practices. The creation and refinement of organizational culture is a four-step process.

• Acquire: First, knowledge, facts, skills, processes, and concepts are acquired.

• Embed: All the above acquisitions are then embedded in the learning and practices followed by the organization.

• Integrate: The various refined sub-processes within the processes are then integrated and sent to the next step.

• Test: At this stage, the refined concepts are tested and then implemented. 16.27 Organizational Culture and Its Sustenance

The key entities which play a role in sustaining the organization’s culture are as follows.

• Selection practices: Selection practices are adopted for hiring individuals with

the right skill sets, knowledge, and abilities to perform the tasks successfully and adhere to organizational values. These are also characterized by potential task forces who want to work with the organization and are very much interested in knowing its history and culture (Brown, A.D, 1998). Also, the selection process is a mechanism to choose individuals who adopt and align with the organizational culture (Martins and Martins 2003). • Socialization process: It is the process in which a new employee is made to adapt to the organizational culture prior to joining the organization otherwise

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termed as pre-arrival. Encounter process actually makes the employee understand the difference between expectations and realities followed by metamorphosis wherein the employee masters the skills required for the job and takes up new roles and responsibilities. • Stage of incorporation or rejection: This is the final stage with regard to the sustainability factor of the organization culture where incorporation leads to acceptance of members by the work groups and alignment to organizational culture by members, and rejection leads to loss of values, goals, and assumptions which might lead to identity crisis among the members of the organization, a theory formulated by Scheins, Brown, and Martin. 16.28 Adjusting to the Changing Culture

The work culture represents the ideologies, principles, policies, and beliefs of the organization. The individual’s style of working, their behavior, and ways of interaction also contribute to the culture of the organization. Changes in the organizational culture lead to changes in management, weak financial status, and goal and target revisions, and not all employees can adapt to organizational changes and cope with the new norms. The employees must try to accommodate the changes, and the management must also allot time for the employees to adapt and adopt. The employees must design new strategies, actions, and guidelines to meet the new challenges and be flexible. An organizational culture that adheres to fixed timings can change the behavioral traits of new employees, especially those who are used to a flexible schedule. Some employees find it easy to adapt and adopt to the changing norms and some do not. The following are tips to adjust to the changing organizational culture:

• • • •

Giving the employees time to adjust Employees to be flexible in their approach Ensure openness and bear a positive perspective Develop alternate plans and do not develop a very emotional relation in the professional space

16.29 Role of Employees in Organizational Culture

A conscious and thoughtful culture that is specific to each organization can enhance employee experience and job satisfaction and ensure that the personal goals of employees are in alignment with the individual goals. Millennials, in particular, are concerned more about organizational culture, job fitment, growth opportunities, and work–life balance, along with compensation. Not only the employees but leaders also need to make the employees feel that they have been contributing substantially toward the growth of the organization. They also need to ensure clarity

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in the vision and co-create organizational values with the employees. Personal passion, corporate orientation, and business performance all go together. A successful culture is the one where each employee/leader is committed wholly to doing their work. The work culture in an organization helps create and enhance the brand image of the organization and ensure a competitive edge. The employees’ behavior, attitude, and interest in the workplace define the culture of the organization. An example of how employees’ behavior defines the organizational culture is as follows. For example, at Organization A, the workplace for the employees is nothing but a place for earning money, and the attrition rate is higher in these organizations. At Organization B, employees adhere to the organizational guidelines and are work-focused and look forward to achieving their goals within the stipulated deadlines. People refrain from gossip and prefer to utilize their time productively at the workplace. Organization C, which is male-dominated and where late working hours are common, creates and denotes the culture of that workplace. In all the above situations, it is the style of working and the behavior of the employees that constitute the culture, along with the direction of thought, motivation, and satisfaction level of the employees. There are organizations where the employees willingly accept challenges, as opposed to organizations where things need to be imposed. In the former case, the role and responsibility are delegated as per the employee’s area of specialization, and in the latter, they need to be forced to perform duties and performances have to be monitored regularly. Some organizations have aggressive employees and recognition-hungry task force that promote a positive culture in the workplace compared to organizations where people have no innovative tasks to do. Constant disagreements lead to a weak culture in the workplace. 16.30 Threats to Organizational Culture

Negative attitude and ego are in fact two biggest threats to organizational culture and employees who exhibit such traits find it difficult to align with their coworkers. The strikes, employee unions, and mass bunking bring a bad name to the organization. A positive attitude needs to be developed in order for the organization to do well and outshine its competitors. Corporate culture gives an individual the liberty to address their co-worker by their first name irrespective of position and age. Along with a negative attitude and ego, favoritism is a major threat as it demotivates the employees who genuinely want to work. Lack of communication can also pose a threat to the organization, and it is a dire requirement that employees need to discuss work, problems, and issues

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in order to innovate. The leaders should also communicate effectively with the employees of the organization. 16.31 Organizational Culture and Its Elements

The elements of organizational culture consist of stories, rituals, ceremonies, languages, and customs, some of which are discussed below. It is through these that the culture has evolved and has been learned. 16.31.1 Stories

Stories about laying the stones of foundation, challenges faced in the initial years by founders and leaders, and how these issues were dealt with in the context of the organization form the base of the culture the organization carries today, and employees of the organization tend to relate to the past based on the current scenarios, and this gradually evolves as an organizational culture. 16.31.2 Rituals and Ceremonies

Rituals are organizational events that are conducted when someone is accorded a promotion or in case of events such as superannuation, resignation, project success, clinching deals, and festivals, where the employees gather to celebrate in some form or the other based on the event and the circumstance. These all combine to sustain the culture of the organization along with a few add-ons, such as working for stipulated hours of the day, learning professional etiquettes, and reinforcing organizational values. Ceremonies include national holidays or events like award ceremonies where major contributors to the organization are facilitated. 16.31.3 Language and Customs

A company’s culture is often associated with language and customs where there are slogans, expressions, and sayings, basically to motivate employees to achieve desired objectives or to instill in them the core ethics, values, and focus of the company. For example, some often-heard sayings like ‘transformation of customer satisfaction to delight’ can enthuse employees to follow that culture. Even customers can appreciate the service deliveries by sending in gifts or greetings. 16.31.4 Symbols and Symbolic Action

Symbols and symbolic actions remind employees of the organization’s ethics and values and focus on clothing and office decor, whereas status symbols signify the

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usage of the right behavior with others as per the superiority and the individual’s status and position. There may be many symbols around an organization highlighting products, services, and cultural etiquettes from around the world. 16.31.5 Beliefs, Assumptions, and Attitudes

Sharing of beliefs is a common culture across the employees in an organization and can make them not see through the dangers. Attitudes can be positive or negative wherein members very positively adapt to changing scenarios in situations where they show positive traits and always show resistance in case of a negative attitude leading to a flexible or a constrained culture. 16.31.6 Rules, Norms, and Ethics

The norms and ethics of organizational culture are ingrained in artifacts, symbols, stories, and so on, and to sustain culture, employees might abide by them. 16.31.7 Mission and Values

The organization’s mission statement is the underlying base on which future course of action is planned. For example, to be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people is Infosys’s consulting and IT services. As for values, if employees are treated as important assets, then the organizational policies should provide them with the necessary support. Shared values are strong motivators and provide a competitive edge. 16.31.8 Climate and Habits

The climate of an organization is basically decided by the top management before it reaches the other employees, and this constitutes whether the climate is conducive for employees to do whatever they want or pursue in relation to the organizational context and whether they are also able to spend quality time with their family and so on. People of an organization develop habits which are portrayed by the top leaders of the organization, so a lot depends on the steering committee of the organization to pave the way for a corporate culture within the organization. 16.31.9 Heroes and Artifacts

Heroes are basically the founder members of the organization or people having special accomplishments who have taken the organization through exponential growth or have helped the organization to diversify into other areas as well.

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16.32 Ethical Organizational Culture: Sustainability Issue

When we use the term organizational culture, we are actually referring to the following aspects as shown in Figure 16.4. To create and sustain an ethical organizational culture which is further a strenuous task, people need to align themselves to the organization’s values and ethics which need to be discussed and communicated continuously across the levels, ensuring that leaders and staff members are aligned to those values and living the principles. An ethical organizational culture ensures the continuity in decisionmaking, trust building, and consistency and commitment in operating under difficult situations when information is unclear and vague. 16.33 Changing Organizational Culture

Change management comprises three aspects of change instituted within the organizational culture: adapting to change, controlling change, and effecting change. This incorporates defining and implementing changes, procedures, and technologies to deal with changing business scenarios. From the IT perspective, change management refers to information updates in relation to hardware, software, and tools for which employees need to adapt themselves by building new structures and mechanisms to implement change. Change management is an

FIGURE 16.4  Ethics

and Organizational Culture

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important part of project management where a plan is designed to implement the changes. Sometimes, culture of organizations needs to be changed, especially when it becomes unhealthy or weak or when it acts as an obstacle in implementing a new plan or strategy. The behavioral approach emphasizes the surface level of culture and the pattern of behaviors that an employee exhibits. The competing value approach seeks to access an organization’s culture in terms how it resolves the dilemma. The competing value approach provides clan culture, adhocracy culture, hierarchical culture, and market culture. 16.33.1 Guidelines for Changing Organizational Culture

• Formulate a clear strategic vision—Organization should have a clear • • •

•

• •

vision of its long-term goals and about the new strategy that is required to be implemented. Display top-management commitment—The top-level management should be committed to their values and beliefs, which give a positive image to managers and workers to follow and abide the values. Model culture at the highest levels—senior executives are free to communicate and express their values to the employees of the organization. Restructure the organization—In order to support the new culture, the organizational structure should be redesigned or re-engineered with the changing times, and the workers should be able to adapt to the changes made in the organizational structure. Select and socialize with newcomers and terminate deviants—People need to be selected and terminated in terms of their capabilities and competencies, and their alignment with organizational goals. This especially develops key leadership positions, where actions of people significantly promote outcomebased endeavors. Develop ethical and legal sensitivity—Organization’s ethics should be followed at every leadership level and legal guidelines to be followed stringently. Cultural change may cause conflicts, but the top management should be able to convey and provide assistance to employees to adapt, keeping in mind the ethical and legal norms.

16.34 Organization Culture Models 16.34.1 Edgar Schein Model

Edgar Schein’s organizational culture triangle says that there are different layers to the cultures within organizations. There are shallow layers and deeper layers, of which the latter provides deeper insights.

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The three key layers that Schein discusses are as follows: 16.34.2 Artifacts

Artifacts include posters, dress codes, job titles, and the style and interior design of the work spaces within an organization. Artifacts are the shallow indicators of organizational culture.​ 16.34.3 Values

Values are indicators such as organizational values and behaviors, company or employee visual communication and planning, team contracts, and vision and mission statements. Analyzing the values and changing them will provide deeper insights into an organization’s culture, and changing them will provide some level of change to organizational culture. 16.34.4 Underlying Beliefs

The underlying beliefs of members within the organization are significantly deeper indicators of an organization’s culture. They include assumptions on collaborations and types of behavior that lead to workplace success or failure. Many organizations have intimated employees to have lifelong remote working conditions that can institute a culture within an organization in the long run. These indicators are also the hardest levers to influence. 16.34.5 Robert A. Cooke Model

Individuals from different backgrounds and varied interests come together on a common platform called an organization to achieve targets and work together to achieve a common goal.

FIGURE 16.5  Edgar

Schein’s Model

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Here, the policies, practices, and principles of an organization form its culture, and in order to deliver, employees should understand the culture well. Every employee working in the organization has a certain way of behaving that, according to them, is the right way and will enable them to survive longer in the organization. These perceptions lead to the formation of the organizational culture. According to Robert A. Cooke, the culture of an organization is the way employees behave in the workplace to ensure a stable future and growth. The organizational culture measures three types of culture with 12 different traits.

• Constructive cultures, in which members are encouraged to interact among

themselves, with suppliers, and with customers to enable them to meet their needs • Passive/defensive cultures, in which employee extensive interaction ensures security • Aggressive/defensive cultures, in which employees are required to take upon the tasks in full force for the upkeep of their status and privacy 16.34.5.1 Constructive Cultures

Constructive cultures comprise the following:

• Achievement: It is completing the task wholly by taking into consideration alternatives and selecting the optimal one.

• Self-actualizing: Realization or fulfillment of one’s talents and potential with a desire to exhibit a strong inclination to learn and experience things, creative yet realistic thinking, and a balanced concern for people and tasks. • Humanistic-encouraging: Employees dedicate time to coaching and counseling, are considerate in nature, and provide support and encouragement to others. • Affiliative: Employees are friendly and cooperative and make others feel a part of all organizational endeavors.

Organizations with constructive cultures promote members to work at their full capacity resulting in enhanced motivation and satisfaction levels, teamwork, service quality, and sales growth. Constructive culture aims at ensuring quality, creativity, and cooperation and is believed to achieve better results. 16.34.5.2 Passive/Defensive Culture

This culture that ensures security has certain norms, and they are as follows:

• Approval • Conventional

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• Dependent • Avoidance Employees avoid interpersonal conflicts, and rules, procedures, and orders are kept in focus rather than personal beliefs, ideas, and judgment. Here, employee motivation and satisfaction are generally low. 16.34.5.3 Aggressive/Defensive Cultures

This style is characterized by an emphasis on tasks, and this style is not peoplecentric. The aggressive/defensive style encourages people to make decisions based on status and not on expertise.

• Opposition: This cultural norm is based on the fact that the usage of this style may lead to being overly critical toward others and unnecessarily putting them down.

• Power: Based on the need for prestige and influence, those who use this

style have an inclination to direct others more and want the employees to act accordingly. • Competitive: This cultural norm is instilled in those who are seekers of appraisal and recognition from others. • Perfectionist: This cultural norm is based on the need to achieve flawless results, and they focus on the minute details and place exuberant demand on themselves and others. The organizations adopting an aggressive culture accentuate finding errors, rather than mistake reconciliation and encouraging members to compete against each other. 16.34.6 Hofstede Model

Hofstede’s cultural dimension theory, developed by Geert Hofstede, is a framework used to identify and design innovative ways to do business across different cultures. The aim of the study is to determine the dimensions in which cultures vary. Hofstede has identified six categories that define culture: 16.34.7 The power distance index

The high-power distance index denotes that the organizational culture accepts inequity and power differences and encourages and exhibits high respect for rank and authority. Low-power distance index indicates that a culture encourages flat organization structure, decentralized decision-making, a participative and collaborative style of management, and power distribution.

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16.34.8 Individualism versus collectivism

Individualism bespeaks that there is a greater importance placed on attaining personal goals. Collectivism, on the other hand, indicates that importance is placed on the goals and objectives of a group. 16.34.9 Uncertainty avoidance index

A high uncertainty avoidance index indicates a relatively low allowance for uncertainty, ambiguity, and risk-taking. Here, the unknown is not accepted. A low uncertainty avoidance index indicates a relatively high allowance for uncertainty, ambiguity, and risk-taking. The unknown is more openly accepted, and there is compliance with rules and regulations. 16.34.10 Masculinity versus femininity

Masculinity comes with the following features: distinct gender roles, emphatic and focused on material achievements, and wealth-building. Femininity comes with the following features: fluid gender roles, humble, rearing and upbringing, and being concerned with the quality of life. 16.34.11 Long-term orientation versus short-term orientation

Long-term orientation emphasizes tenacity, perseverance, and long-term growth. Short-term orientation shows focus on the near future and lays emphasis on quick results and regard for tradition. 16.34.12 Indulgence versus restraint

Indulgence relates to enjoying life and having fun, and restraint indicates suppressing gratification of needs and regulation of the same through social norms.​ 16.34.13 Charles Handy Model

Charles Handy (1996) popularized a framework which links categorizations of organizational culture to organizational structure. The four types of culture that Handy identified are as follows: Role culture: It is characterized by organizations having a high degree of formalization and a high degree of centralization, such as large stable businesses. There are well-established formal rules and procedures and a well-defined organizational hierarchy that is clearly understood and tightly enforced. Employees understand the expectations of the organization, and the disadvantage of

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FIGURE 16.6 

Hofstede Model

such organizations is that they are less adaptable and agile in a continuously changing business environment. Very large organizations have failed in many instances because of their inability to adapt. Task culture: These organizations are characterized by a high degree of centralization but low formalization and are results-driven and adaptable. Examples are architects and designers who respond well to a competitive environment but require professionals who, through collaboration and communication, are able to work on their own initiatives using team dynamics. Power culture: Lacking in centralization but high on formalization and composed of leaders and employees who are agile in their responses. Entrepreneurs are associated with this culture, and also micro, small, and medium enterprises are those that can operate in turbulent environs. Small family businesses can have leaders who might find it difficult to adapt and adopt the said culture as they are strongly opinionated in their ways. The benefits of a power culture are that an organization is quick and responsive, but the disadvantages are that employees have to keep up their pace with changing scenarios and leaders’ decisions. Personal culture: Here, the work environment is self-directed and status-driven. Professional services firms such as accounting and insurance benefit from this type of culture. Individuals are self-motivated, so they need less guidance or structure, but conversely, people can react improperly to even small changes in rules and procedures.

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Handy recognized that in small organizations, it is quite likely that culture will continue to be driven by individuals or leaders, but in larger organizations, culture will become self-replicating and reinforcing. Summary

The chapter summarizes the development of organization and the various models used over the years that have contributed successfully toward the organization’s development, reinforcing a culture within the organization which employees can correlate to and gather the motivation to work for improved productivity and business. With the development of an organization and sustaining a culture within the organization, the chapter stresses the importance of organizational culture, the role of employees in developing the organizational culture, threats to organizational culture, and various models of organizational culture. Exercise Objective Questions

1. Phases of organizational development are: • Problem identification, analysis, plan an intervention, implementation, evaluation, and feedback • Problem identification, analysis, implementation, evaluation, and feedback • Problem identification, plan an intervention, analysis, implementation, evaluation, and feedback • None of the above 2. __________ contribute to align the organization with its environment. • Large-scale interventions • Strategic interventions • Techno-structural interventions • Group process interventions 3. Interpersonal process interventions do not aim at improving organizational performance by developing specific skills of individuals. • True • False 4. A culture that emerges within different departments, branches, or geographic locations is called • Counter-culture • Strong culture • Subculture • None of the above 5. In a weak culture, there is less alignment with organizational values and control to maintain a sustainable culture must be exercised through extensive procedures and bureaucracy. • True • False

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6. Which characteristic of organizational culture dictates the degree to which employees are expected to be accurate in their work? • Innovation • Emphasis on outcome • Emphasis on people • Attention to detail 7. Which of the following is true? • Culture promotes code of • Culture provides self-satisfaction conduct • All of the above • Culture facilitates recognition 8. In pragmatic culture, more weightage is given to clients and the external parties. • True • False 9. In which type of organizational culture, the individuals always have an upper edge and do not bother much about their organization? • Normative culture • Baseball team culture • Academy culture • Performance-based culture 10. A goal-oriented culture places importance on how work is to be done and emphasizes on avoiding risk, and means-oriented culture identifies with what work is to be done. • True • False 11. In an open system, newcomers are not welcomed easily, and in a closed system, newcomers have to prove themselves. • True • False 12. Creating an organizational culture includes the following four processes. • Acquire, Embed, Integrate, Test • Embed, Integrate, Acquire, Test • Embed, Acquire, Integrate, Test • None of the above 13. In _________, a new employee is made to adapt to the organizational culture prior to joining the organization, otherwise termed as pre-arrival. • Selection practices • Incorporation stage • Socialization process • None of the above 14. _________ are the physical things that have particular symbolism for a culture. • Rituals • Artifacts • Mission and values • None of the above 15. _______ is a systematic approach to dealing with change both from the perspective of an organization and an individual. • Change management • Pragmatic culture • Organizational culture • Organizational change 16. _________ is the process by which organizations move from their present state to some desired future state to increase their effectiveness. • Change management • Pragmatic culture • Organizational culture • Organizational change

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17. Refreezing means that what has been learned is integrated into actual practice. • True • False 18. Change often brings • Fear of losing the jobs • Substantial uncertainty • Lack of reliance • None of the above 19. __________ is an important part of project management. • Change management • Pragmatic culture • Organizational culture • Organizational change 20. In which type of organizational culture, the profit of the organization is more important? • Normative culture • Organization-centric culture • Process culture • Performance-based culture 21. _________, __________, and __________ are three layers in Edgar Schein’s organizational culture triangle. • Mission, vision, values • Rituals, artifacts, values • Artifacts, espoused values, underlying beliefs • Culture, values, change 22. The following are Hofstede’s dimensions of culture, except for ___________. • Power distance • Individualism versus • Femininity versus masculinity collectivism • Paradoxicality 23. Hofstede holds that there are ___________ dimensions to culture. • four • seven • five • six 24. The factors that shape the culture of a workgroup or an organization include ___________. • Structure and size • Nature of business • Leadership • All of the above 25. Organizational culture: • It refers to a set of beliefs, values, and attitudes shared by everyone in the organization. • It refers to the way in which organizations are managed. • Both of the above • None 26. Mismatch between personality and organization may lead to ___________. • Confusion and chaos • Loss of interest by members in organization • Low morale and job satisfaction • All of the above

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CASE STUDY ÁBC was a private equity firm. It had funded the roll-up of multiple small businesses and appointed Mr. Rakesh as CEO to lead the newly created firm. The founders of the acquired firms had different sets of beliefs, values, ways of working, communication styles, and leadership styles. And one of the major aspects was that the founders of the acquired organizations had always run their own firms, with their own distinctive cultures. Mr. Rakesh’s objective was to create a single umbrella culture that incorporated the founders and their employees and provided them with a single core value system, mission, and vision to follow. The ultimate purpose of the rollup is to create a single entity to be acquired by one of the industry giants, so healthy financial performance across all businesses was critical.

Questions 1.

What are the challenges that Mr. Rakesh will have to face while developing a sole organizational culture for roll-up? 2. Suggest how Mr. Rakesh should proceed with the process. 3. What, according to you, are the positive aspects of developing a single umbrella culture in this scenario?

Critical Thinking Questions (Relevant examples to be provided for each question)

1. Do you think organizational culture plays an important role in the success or failure of a firm? If so, why? 2. What are the different types of organizational culture, and what are the pros and cons of each? Chapter at a Glance

Organizational development is the attempt to influence the members of an organization to expand their candidness with each other about their views of the organization and their experience with it and take greater responsibility for their own actions as an organization member.

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Characteristics of Organizational Development

• • • • • • • • • • •

Well-managed process Integrated and has a problem-oriented approach Reflects a systems approach Depends on practical implementations Involves the distinct role of a person who makes progress easier by ensuring that changes are real Involves learning principles Systematic approach to the planned change Involves the application of our knowledge of behavioral science Recognizes the reciprocal relationship between individuals and organizations Goal-oriented Designed to solve problems

Importance of Organization Development

• • • •

Organizational change Growth Work processes Product innovation

Action Research Model of Organization Development

• Unfreezing • Changing • Refreezing Limitations of Organization Development

• It is based on behavioral science, which has its limitations, and so has an organization development theory.

• Inability to challenge a complacent person’s motivation. • For research and development, organizations are not impacted by organizational development.

Process of Organization Development

• • • • •

Problem identification Analysis Plan an intervention Implementation Evaluation and feedback

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Types of Organization Development Interventions

• Large-scale interventions: This involves a full-sized group of stakeholders, working toward the definition of a future state.

• Strategic interventions: This helps organizations to gain a better understand• • • •

ing of their current state and environment, which allows them to better target strategies for competing or collaborating with other organizations. Techno-structural interventions: This focuses on improving organizational effectiveness and human development by focusing on technology and structure. Management and leadership development interventions: These types of organizational development interventions aim to improve organizational performance by increasing the effectiveness of formal and informal leaders. Team development and group processes interventions: The important objective of team-building interventions relies on improving the inter-dependency of team members. Individual/interpersonal process: This aims at improving organizational performance by developing specific skills of individuals.

Organizational Culture

• Organizational culture: It refers to the pattern of beliefs, values, and learned ways of coping with the experience that has developed during the course of an organization’s history. • Subculture: A culture that emerges within different departments, branches, or geographic locations is called a subculture. • Counter-culture: It is defined as shared values and beliefs that are in direct opposition to the values of the broader organizational culture, and countercultures are often shaped around a charismatic leader. • Strong and weak culture: A strong culture is said to exist where staff respond to stimulus because of their alignment with organizational values. A weak culture is one where there is little alignment with organizational values and control must be exercised through extensive procedures and bureaucracy. Characteristics of Organizational Culture

• • • • •

Innovation Attention to detail Emphasis on outcome Emphasis on people Teamwork

• Aggressiveness • Stability

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Functions of Organizational Culture

• • • • • • • •

Culture promotes a code of conduct. It facilitates recognition. It provides self-satisfaction. It provides an opportunity to set the standards of performance. It guides and controls the employees. It directs employee behavior toward goal achievement. It makes people development oriented. It develops a positive attitude.

Types of Organizational Culture

• Normative culture: In such a culture, the norms and procedures of the organi• • • • • •

zation are predefined, and the rules and regulations are set as per the existing guidelines. Pragmatic culture: More weightage is given to clients and the external parties. Academy culture: The organization that tries to follow this type of culture has a highly skilled employee base. Baseball team culture: In such a culture, the individuals always have an upper edge, and they do not bother much about their organization. Organization-centric culture: In this, the profit of the organization is more important. Performance-based culture: In such type of culture, an individual’s performance is important. Process culture: All the procedures of the company are very important, and they are already established.

Importance of Organizational Culture

• • • •

Enhance workforce involvement Low rate of attrition Enhanced productivity Enriched brand identity

• • • •

Ownership and authority Top-performing employees Outcome-driven Healthy team environment

Factors Affecting Strong and Weak Culture

• Leadership • The people who are hired • Work environment

• Growth opportunities • Clients/customers • Humanitarian approach

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Adjusting to the Changing Culture

The following are tips to adjust to the changing organizational culture:

• • • •

Giving the employees time to adjust Employees to be flexible in their approach Ensure openness and bear a positive perspective Develop alternate plans and do not develop a very emotional relation in the professional space

Edgar Schein Model

The three key layers that Schein discusses are as follows:

• Artifacts • Espoused values • Underlying beliefs Robert A. Cooke Model

Robert A. Cooke defines culture as the behaviors that members believe are required to fit in and meet expectations within the organization. The organizational culture measures 12 behavioral norms that are grouped into three general types of cultures:

• Constructive cultures • Achievement • Self-actualizing • Humanistic-encouraging • Affiliation • Passive/defensive cultures • Approval • Conventional • Dependent • Avoidance • Aggressive/defensive cultures • Oppositional • Power • Competitive • Perfectionist

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Hofstede Model

Hofstede identified the following six categories that define culture:

• • • • • •

Power distance index Individualism versus collectivism Uncertainty avoidance index Masculinity versus femininity Long-term orientation versus short-term orientation Indulgence versus restraint

Charles Handy Model

The four types of culture he identified were as follows:

• • • •

Role culture Task culture Power culture Personal culture

17 CHANGE MANAGEMENT

An Opening Vignette Change Management Case Study: The Change Management Process at FruitieBev This specific case study will discuss how FruitieBev incorporated ‘Lewin’s three-step model’ to drive successfully a change management program within the organization. The organization actually deployed the three steps and made strategic planning and decision execution on some key endeavors to create a competitive edge through transformation. At the initial stage, the Lewin model was followed meticulously as follows:

• • •

Unfreezing Changing Freezing

Managers at FruitieBev could actuate the workforce who were at the stage of ‘unfreeze’ by informing them about the importance of change being planned and implemented with the objective of achieving the organization’s benefits. Training the staff led to a smooth transformation. In the phase of change, FruitieBev could initiate and execute the steps of developing strong relationships and offer compensation and rewards. The refreezing phase was used by FruitieBev to incorporate and keep consistent the transformation so that the task force refrained from using the previous methods of the organization (Robbins and Coulter 2008).

DOI:  10.4324/9781032634258-17

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FruitieBev is a beverage company that has a global penetration across 50 countries. The company had a total net income of approximately 7,000 million, with a total number of employees of more than 50,000 worldwide. FruitieBev is a unique beverage company, so there was a dire need for the organization to make the required changes in its products and plan of action according to user demands and external environments. The external and internal factors created a need for change within the organization, where the former included the national laws, labor markets, business environment, economic scenario, and so on, and the latter constituted the task force, resources, workforce attitude, and plan of action adopted (Robbins and Coulter 2008). FruitieBev, in the recent past, had undergone many such internal and external changes, and the company had incorporated techniques of change management to ensure sustainability. The company had been impacted by external factors in the past and had acquired during the financial famine in the Asian subcontinent, the bottling, coffee, and tea businesses across South and Central Asia. The beverage is a category of the industry in which tastes and preferences of the consumers change on a regular basis, and FruitieBev was always open to continuous change. With people willing to invest in their HealthifyMe program, FruitieBev was investing in various energy drinks as well. The company imbibed the theory of organizational change by Kotler to manage change along the people dimension and refined its advertising strategy based on target groups. In a few countries, owing to problems in marketing initiatives, the company had been planning to reorient its performance standards, aligning them with the corporate culture and strategies. These changes were to be implemented within the business operations and management. Employee Engagement The recent change management at FruitieBev was directed toward the inherent values and motivations of the employees that would reorient the operations of FruitieBev worldwide. A robust communications system, focusing on creating the brand image, and maintaining positive relationships with employees, would enhance the operations of FruitieBev with robust employee engagement along with enriching its capability and enhancing maintenance. This was also supported by an extensive survey of their employees’ wants and requirements. For FruitieBev, an engaged workforce laid emphasis on workforce commitment, performance alignment to organizational objectives, and ensuring quality in employee deliverables. Employees who were aligned with the company goals took a proactive approach to various issues and legislation at

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local levels. For volatile and dynamic markets with consistent changes, it was required that employee communication channels be strong, thus enhancing employee engagement to a considerable extent. Ensuring the Participation of Stakeholders The tools implemented by FruitieBev were the force field analysis and the awareness, desire, knowledge, ability, and reinforcement (ADKAR) model discussed extensively in the chapter. By doing force field analysis, FruitieBev was able to recruit people who needed to be trained. Using the ADKAR model, FruitieBev could create awareness about the need for change, make people contribute to the transition, impart knowledge to the people for their contribution to change, and assure them that there would be resistance to the change (CMLR 2011). Guaranteeing that the change implemented will be successful can be assured by consistent dialogues and talks with employees. Online and physical surveys of the stakeholders involved in the ‘change’ would help gain relevant insights. Effective communication citing the reasons for change and the benefits that would be brought, and overcoming the resistance in stakeholders are some of the key strategies that FruitieBev built for implementing successful change. Recommendations for FruitieBev In the volatile market, the organizations that operate know that change is unavoidable, and to successfully implement the organizational change with respect to structure, design, culture, management, and leadership, it is required to check whether the change would be the best fit in alignment with organizational objectives. First of all, FruitieBev needed to determine the core problems and accordingly develop a change management program as a response to the volatile market for streamlining the operations and logistics. The company could introduce changes in procedures and technology and also the company’s mission. For that, the top management needed to undergo training to enable smooth transition and transformation in its processes. Imbibing Systems Thinking The system, with the interdependence of processes and resources, the chain of influence, adaptability and balance being the key characteristics, being an open system is where communication is integrated across levels, processes, and individuals, that facilitates change within the organization.

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Establishing New Structure FruitieBev should have a clearly defined hierarchy, a well-defined area of operations, standard operating procedures, necessary regulatory guidelines and policies, division of labor, centralized decision-making, technical competency, and work standardization. Reducing Employee Resistance

• • • • • •

FruitieBev needed to employ the below strategies to reduce employee resistance Involve the employees extensively in the change process Create awareness about the benefits that the change programs would bring. Stakeholder agreement and negotiation should have been there to a considerable extent Employee support to be extended, owing to some disabilities or psychological issues, those who are not able to adapt to the change FruitieBev, as a fifth option, could make use of a union leader to convince other employees.

Conclusion To conclude, the key takeaway will be that communication can support successful change management, by communicating why the change was inevitable and the benefits received from it. The management should embrace a positive attitude and welcome the change. FruitieBev has the attribute of adopting change rather than resisting it in order to be best poised for market volatility.

17.1 Introduction

A total transformation in the technologies, business outlook, functions, and tasks are being incorporated into the businesses, and these entities are accepting the same in a consistent manner. For such industries and businesses, even their overall goals need to be re-aligned in reaction to external market drivers and disruptions. As organizations align their task force to focus on new goals, issues are then assigned precedence, with some staff taking on new roles and responsibilities. With the organization’s employees facing continuous change, creating a standardized framework for change is to assure that all types of transitions remain as smooth as possible. This is where change management comes into play. Prior

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to delving in depth into change management, focus is laid on the nature and the characteristics of change. 17.2 Meaning and Definitions

Change management is the procedure of facilitating and implementing a change at a point and the stage where it is detected. It is on the board of management to decide exactly how this change will be incorporated in order to transit from situation A to B. The Business Dictionary and the Change Management Learning Centre define change management as the use of procedures, tools, and methods to achieve relevant business outcomes and to initiate the realization of said change within the social infrastructure of the workplace. The practice of applying a structured approach to transition an organization from a current state to a future state to achieve expected benefits. —Association of Change Management Professionals Change management is an organized, systematic application of the knowledge, tools, and resources of change that provides organizations with a key process to achieve their business strategy. —Markus Wanner A set of basic tools or structures intended to keep any change effort under control. The goal is often to minimize the distractions and impacts of the change. —John Kotter’s consultancy Sources: Kanter, R.M., Press, H.B., & R., M.K. (2001), Wanner, M.F., Kotter, J (2012) 17.3 Nature and Characteristics of Change

Organizational change enables movement from their current state to some desired future state to attain a desired maturity that enables progression.

• It is a process and is not an event that has occurred. • It is normal and constant in nature. • Directive change is implemented from top to bottom in the management hierarchy.

• Participative change involves everyone or those who are impacted by the change.

• It is interdependent on organizational culture.

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17.4 Principles of Successful Change Management

To roll out change management across levels or across functional units/departments of industries, the following certain basic steps need to be followed: Create an environment for change: Change can discourage, or even thwart, and it is indispensable for managing to soften the resistance by communicating the value of the change, directing the teams where modification occurs, and enabling a smooth transition during the incorporation of change. Communication and clarity on the ‘why’ and ‘how’ behind the change are pivotal in gaining the confidence of the employees. This enables employees to adapt and adopt to change. Implement the change: Once the environment is created, the next step is to enable the organization to ordain the change, and this can happen by allocating the responsibility. The type of change, that is, organizational or departmental, requires, in general, an individual or a team for implementation in order to reduce loss of clarity and keep communications transparent and open. Sustain the change: In this instance, it is crucial to keep in focus to accomplish the desired outcome, from implementation of the change and then integrating the new status-quo and shifting the organization from a state of flux to a state of permanency in order to attain the sustenance. Review and reflect on change: The last step in the change management process is the review of the process that did, or did not, work efficaciously and then learn from the outcomes. Documentation of the stages and cases can benefit the organization that enables the employees within an organization to learn from mistakes and any change that arises can be approached with confidence. 17.5 Forces Responsible for Change in Organizations

Changes brought forth from outside the organization are due to external causes, and those from within the organization are called internal causes. 17.5.1 External Forces

The external causes which are instrumental in bringing the changes in the organization are as follows: Demographic characteristics: Diversity management is mandatory for organizations operating across the globe to ensure consistent contribution and commitment from employees. Social and political pressures: With respect to social pressures, managers may need to adjust their style to accommodate changing employee values, which consist of employees’ needs and priorities. Political events can also create

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substantial changes. For example, the collapse of the Berlin Wall created many new business opportunities, and at that time in India, the Bharatiya Janata Party government had major plans for expansion across various business verticals. Globalization: It has made organizations rethink their boundaries as the level of competition has risen. The organizations have to rethink in the most efficient way to utilize their resources more efficiently by making people think from global perspectives so that global markets can be captured, and they have to develop people to become global citizens by capturing new global markets in terms of products, services, and demographics. • Economics: Adaptability is very important in changing business scenarios, such as low supply and high demand or high supply and low demand or low-cost product lines or more efficient operational paradigms, which can change the entire financial scenario. • Competition: Changes can also happen through mergers, acquisitions, or the launching of new products or services, which can give a competitive edge to the other players in the market, so a company has to strive continuously and enforce the same in the rapidly changing market. If a change is not successful, then taking the above measures is extremely essential. • Technology: Embracing new technologies requires adaptability. When the media went digital, many companies quickly found ways to stay competitive, while many failed in this endeavor. • Legislation: Legislation can change operations for companies like the implementation of value-added tax; service tax to be paid by companies consistently to the government; or the individual/group who has set up an organization/company of their own and has to abide by the Indian Company Act and any new rules formulated under this act.

17.5.2 Internal Forces

Internal forces consist of employee changes, social amendments, and operational challenges.

• Problem of manpower: Symptoms of such problems are absenteeism and

attrition, which should be addressed by the organization by using innovative job designs, minimizing role conflicts, removing bias, distributing employee workload, minimizing stress, and so on. These problems arise from employees’ perceptions of the treatment they receive at the workplace and the alignment of individual and organizational needs and desires. • Crisis: A crisis also effects change in an organization, like employee strikes, which may lead management to take appropriate actions. Also, the exit of people for leadership roles is a type of crisis that the company has to face.

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•

•

•

• •

•

A much-publicized crisis of Exxon’s oil spill from the tanker incorporated changes in Exxon’s environmental policies. Employee expectations: Expectations from new employees of the company can be different from those of the older ones, as they have been inducted because of their additional skills and experience. However, this has the disadvantage that these employees expect more from the company, such as a balance between career and family, and as a result, dependents are facilitated from the company’s perspective. Work environment: The work climate should be conducive and motivating for employees, and organizations that frequently perform layoffs do not exude this type of work climate, and employees, because of the constant fear of being laid off, fail to be productive. Reduction of impact: Declining impact causes companies to formulate change strategies, such that some companies experiencing a quarterly loss consecutively within a fiscal year are encouraged to incorporate strategies for resource layoffs, and massive cost-cutting programs, whereas others view the loss as an outcome of an underlying issue and try to find the relevant cause. Managing change: New CEOs or other executive board members can craft appropriate strategies, and bring in organization and business culture change. Organizational restructuring: Organizational restructuring to adapt to new business situations in terms of new product lines or service deliveries, or global expansion, requires hierarchy and communication channels to be reintegrated and training to be imparted to adapt them well to the new processes. Innovation from external and internal sources: Capitalizing on a new idea by the organization’s top management will require reallocation of resources, branding, and hiring.

17.6 Resistance to Change

People often resist change when they feel that their freedom is threatened and give a negative reaction to it. Reasons for resisting changes are as follows: Lack of proper communication: News of a change spreads through the chain of command, which is sometimes highly skewed, giving incorrect information to the next-level employees, and this can therefore cause resistance to change. Self-ego: Employees having a personal agenda resist change. Feeling excluded: Employees who are decision-makers, when they learn of a sudden change, are offended for not having been considered to take decisions and resist to change. Lack of reliance/trust: Lack of reliance or trust can make members of the organization violent and create negativity among them, which can ultimately lead to resistance to change.

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Mastering skills/training needs: Having to work with a new technology can bring resistance among employees, unless organizations set up training for employees, prior to working with a new technology. Fear of the unknown: Change is always accompanied by uncertainty and is evidenced by a story from the past where when computerization/automation first came to India, the people from an esteemed organization were reluctant to change to computerized processes since they were very comfortable in their own arena and were not willing to learn something new and implement it. Fear of loss: Change may lead to employees losing their jobs or reducing manpower when machines can achieve intelligence like humans and work with minimal errors. Computer systems experts, for example, may feel threatened by intelligent systems capable of making their decisions. Computerizing the customer service function at Southwestern Bell posed a threat to the service representatives. Fear of failure: Some employees fear change because they fear that they will fail. In many cases, a change has led to failure. An educational group having 47 institutions under its aegis subscribed to the implementation of opensource KOHA software, and customization leading to fear and doubt among the employees, to adopt the new software and make it operational. Change in interpersonal relationships: Employees may resist change that threatens to limit interpersonal relationships among their peers, bosses, or subordinates. For example, with the onset of automation, the men at the assembly line of a factory feared that they would have minimum interaction among their colleagues, in exchanging important information on manual assembling of their product, since every task in assembling would be performed by the machines under the direction of a single supervisor at that point, thus decreasing interaction among the human resources, and also the need for them. Personality conflicts: If a person acting as a change agent emanates negative reactions from the employees, then the employees might resist the change. This might be because the change agent who is unresponsive to employee grievances and feelings may confront resistance because employees recognize that their needs are not being considered. For example, while implementing a critical incident management plan in a nursing institution, the chief staffing officer faced a lot of resistance from the senior nursing staff when they set the ratio of 1:1, that is, a one-nurse-to-one-patient system shift-wise, as they felt that they were being subjected to handling critical care incidents alone without more staff support and for 70 percent of their time in a month. Politics: Organizational change may bring about a change in the balance of power, and groups or individuals who hold authority under the current scenario may feel intimidated by losing these political benefits in times of change. For example, with rapid digitization and the launch of smart city concepts across the Indian subcontinent, an initiative by the BJP government, the stakeholders of many organizations are fearing that control now will be increased

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government-centric, and they will lose the monopoly in their operations and executions. Cultural assumptions and values: Cultural assumptions and values can be obstacles to change, particularly if the norms forming the basis of change are not known to employees. In IBM’s introduction, the concept of business process management in its work culture offered stiff resistance from IBM employees during the initial years. 17.7 Managing Resistance to Change

The traditional view of resistance to change is thought to be an attempt by the employees to hinder some aspect, which requires that the attempt to resist be overcome by the management. But the modern approaches suggest that it is a form of feedback which has to be taken into consideration and can be used to effectively manage the change. The three key strategies which are instrumental in managing the resistance to change are as follows:

• Communication • Involvement • Sympathy and support Employees should be informed of the change and the reason why it is being implemented. Communication about impending change is essential and details of the change should be provided, as also the rationale behind it. Providing the correct information at the right time and providing clarity on the consequences of change are the keys to successful change implementation. Educating employees on new methodologies is always beneficial. For example, employees gain a new-found confidence level when they are trained on new tools and technologies, and start operating applications based on these technologies, so educating people on processes, tools, technologies, equipment, and machines helps ease inhibitions and fear. Also, employee participation or involvement during change implementation is highly essential. Even a very simple case of a retail outlet shifting to a different location should actively involve customer service staff to notify customers about the change of address before and after the change, and the customer service staff should also be made aware as to why the change is being sought. Similarly, the employees of financial institutions (such as securities and banking institutions) are kept updated about the changes in product plans, and services, and they in turn update the customers about the new product and service offerings. 17.7.1 Initiation of Change Management

Much of the conflict can be shunned if effective change management is applied in an organization at the outset. Considering it, the following change management activities can be considered:

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• • • •

Implement an appropriate change management plan Involvement of senior-level management is mandatory Advocacy by middle-level management Communications that describe the need for change, the change outcome, and the employee benefits

17.7.2 Expecting Resistance

Even if a solution is an improvement to a problem and offers resistance, human beings tend to get very comfortable with their current status quo. A second aspect of expecting resistance is to identify the origin of resistance, and the anticipated objections, and then the management can confront it accordingly. So, the possible areas where resistance can be expected are as follows:

• • • •

Employees who are working with the current tactic The people who established the methodologies of doing the work Employees who fear more work due to changes Employees who proposed the alternative solution to bring in change

17.7.3 Formal Address

Phase 1—Preparing for change: During the formulation of the change management plan, the items of resistance are envisaged and tactics are crafted to confront them. Phase 2—Managing change: Once the change management plan is drafted, in phase 2, the plan is executed by addressing the obstacles to implement the change successfully. Phase 3—Implementing change: The deviation report is derived at this stage and shows to what percentage the individuals have aligned themselves to the new workflows and processes. Evaluation of the reports by the management to recognize the gaps, and take action against the resistance may still be occurring. 17.7.4 Identify the Root Causes

The root causes of resistance are evident, such as complaining, not attending meetings, not providing information or resources, and not adopting the change. Effective resistance management requires identification of the root causes of resistance, understanding why an individual is showing resistance, and so on. The root cause could also be the following:

• For employees: Lack of awareness for understanding the reason behind the change

• For managers: Lack of getting managers involved in designing the change, and change management plan.

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17.7.5 Engage Appropriate Resistance Managers

The managers who offer resistance in an organization are the senior leaders, wherein they can moderate resistance by making a convincing case for the need for change and by showcasing their commitment to a change because the lower levels of management and employees look up to their senior leaders. Managers and supervisors should be keen on adopting change so that their employees follow suit. 17.8 Methods for Overcoming Resistance to Change and Selection of Apposite Technique

In the year 1979, Kotter and Schlesinger proposed six techniques as produced in Table 17.1 for overcoming the resistance to change. The table bears the details of where the proposed approach can be implemented and their advantages and disadvantages. A narrative on each and every approach is presented below: Education and effective communication: To minimize resistance to change, the most popular mechanism is to educate people and encourage cognizance, through effective communication with respect to the paybacks of a prearranged change. By substantiating the requirement for change, and focusing on the purposes of change, the most sought-after reinforcement from the team members will facilitate the change’s smoother execution. Also, with transparency in communication, the inquiries and oppositions with respect to the aspects of change put forth by individuals help in the resolution of issues. A large-scale, pre-planned change can be implemented if and only if efforts for two-way communication are made. According to Beckhard and Pritchard (1992), Robbins et al. (1998), and Ivancevich and Matteson (1996), employees prefer to be consulted, engaged, and involved in the change. Some important changes that need to be remembered while implementing an organization-wide change are as follows: • Avoidance in sending emails or memos, when change is to be implemented • Invite the propositions and feedback from the staff members, involving them and encouraging them to achieve desired outcomes • Encourage face-to-face interactions at an individual and group level and allow the team to participate in discussions Facilitate a collaborative environment: To engage and involve the entire team by implementing a constructive strategy that can minimize the resistance to change by engaging the employees in the endeavor of their involvement in the entire process. Support and facilitation: The employees need to be supported and made to cope with the ongoing challenges and should be encouraged to showcase their

Situations where there is less tolerance to changing conditions This method is adopted in situations where there are agreements made by the employee/employees for change implementations The inability to implement any other strategy

Initiators of change possess considerable power

Discuss the change and agree on the implementation points—a form of negotiation Manipulation and co-optation

Explicit and implicit force

Facilitation and support

Where the employees have substantial authority to be involved

Lack of information and analysis

Communicating and training Involvement

Manipulation if felt by employees or people in later period might have negative consequences Can be risky if it seeks people’s displeasure for initiators

Relatively quick and easy in case of high degree of resistance It is fast-paced and quickly implemented

Can be too expensive, to negotiate for compliance

Extremely time-consuming when there are many people Those involved if they suggest changes that are inappropriate to the situation, then their involvement will lead to wastage of time and effort Can be time-consuming, costly, and susceptible to failure

Disadvantages

The form of negotiation and implementation reduces resistance to change

People if convinced support to implement the change People’s involvement results in successful change implementation with additional inputs or perspectives from them for greater effectiveness of change No other mechanism to facilitate change

Condition Where It Is Implemented Advantages

Approach

TABLE 17.1  Techniques to Overcome Change

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emotions, fear, bitterness, or wrath in relation to the change, and the challenges encountered during the change. Negotiation and agreement: The trade-offs on the perspectives of various stakeholders are given due consideration and weightage in order to incorporate changes smoothly. Manipulation and co-operation: Manipulation involves attempts by the managers to make it more likeable, for the team members or propagating false speculations within the organization, in order to obligate the employees to evaluate the change. At times, employee polling is also implemented, and the management can co-opt as an entity and delegate obligations in regard to the implementation of change. Coercion (inherent and explicit): Exercising force by enabling changes that need to be accepted by the employees also involves compelling the team members to adhere to the probable ways or else resign. But such strategies lead to hostility, discontentment, a high rate of absenteeism, less productivity, and also employee attrition. 17.8.1 Adoption of the Appropriate Methodology and Their Benefits

• Training, learning, and effective communication: This technique is useful

•

•

• • •

when there is imprecise or incomplete information, with respect to facets of change. Realization of certainty by employees, with respect to the outcomes of change, leads to successful implementation of the change. Facilitation and engagement: This technique proves useful when the leaders require information for crafting and implementing the change, and the team members have the required power to oppose the change. The extended engagement of the employees can gain the desired earnestness, and motivation for encouraging the change, cut down on the opposition, and enhance the quality of the decision with respect to change. Enablement and support: This technique is useful as it concerns employee training, mentoring, and supportive endeavors, to reduce the impedance. This technique consumes time and is costly, and a successful outcome is not guaranteed. Negotiation: This technique is efficacious, when it concerns dealing with some valued propositions, for decreasing the opposition to the change. This is a favored method for lessening any kind of opposition. Manipulation: This technique can be essential to effective change management when there are no alternatives or they are too expensive. This technique does not incur costs and can generate the desired results. Compulsion (explicit and implicit): This technique should be eluded majorly and can be considered as the last choice.

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17.9 Personality and Change Management 17.9.1 Change Management and the Involvement of Eight Personalities

The primary aim of a change management program is to boost efficiency, enable better utilization of human resources, and help to make an improved product or deliver a service for a lesser amount, yet the key to successful change is human resources. Without the support and engagement of human resources, the duration to get a change project into action can multiply, or in the worst-case scenario, can fail. In a situation where there exists organizational pressure to increase output, small and large organizations must not underestimate the power of their people. There are the following eight personality types that can decide the success or failure of a change management program:

• • • • • • • •

Champion Ambassador Challenger Skeptic Prisoner Passenger Saboteur Thief

In the majority of cases, the determination of persona, participating in a change, is undertaken when problems originate, and that is of no use. Employees and their opinions need to be reasoned with during the initial stage, that is, when it is being crafted out as a strategic and operational change management program. As an example, that is being cited here, Festo, a company in training services, has developed the three verticals of employee engagement. The three dimensions that can identify employees as being engaged, not engaged, or disengaged are as follows:

• Alignment • Personal satisfaction • Drive (proactive or reactive) 17.9.1.1 Involved in Change

Champions and ambassadors will be extensively involved in any change management program, and the difference between them is envisaged along the proactive dimension.

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• Champion: Champions are highly aligned with the organization and the

change that is being sought after. They work hard to convince people to take their point of view and can be trusted more than the senior management. A champion welcomes challenges and is self-motivated, and they often try to create a collaborative environment for their teammates. • Ambassador: Ambassadors induce positivism toward planning and implementing change, but they do not proactively try to change people’s view point. Shouldering more responsibilities may transform them from the status of an ambassador to a champion. 17.9.1.2 Not Engaged

The employees who are not involved can be categorized as follows: the ones who are challengers and the others who are skeptical.

• The Challenger: Challengers are more tilted toward earning their personal

satisfaction, and this enhances their perspective in understanding the outcome of a proposed change. Challengers need to evaluate and understand the reasons behind the said change and seek the detailed statistics, facts, and figures as well as support such that their future is not at stake. Procedural implementation of the changes is crucial to a project’s success. • Skeptic: Skeptics exude their lack of alignment with the organization. They are personally less satisfied with the assignment of a role, often visibly opposing any suggested change. Skeptics have a lot of questions, and based on the knowledge and information, they either support or oppose change and always suspect moves by the management board or the team. Due to their low levels of enthusiasm, other team members find it extremely difficult to work with this segment. 17.9.1.3 Actively Disengaged

• Saboteur: Saboteurs differ from skeptics on the personal satisfaction scale, in

that they are highly dissatisfied with their role, responsibilities, and rewards. On the contrary, the pros associated with them correspond to high energy and drive, and they can be brought to the scale of not being so engaged from a highly disengaged state. • Thief: Thieves are dissatisfied people and very difficult to communicate with. The term ‘thief’ refers to that group of people who are not at all actively engaged within the organization and try to avoid receiving attention of others as they believe it would lead to more responsibilities and more workload. A successful change management program should relieve a thief who costs money, develops distrust with prime stakeholders, and possibly leads to an organizational

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situation. They sulk at being treated poorly and disregard others. They need support on an individual basis. 17.9.1.4 Not Engaged

The prisoners and passengers are well aligned to the organization’s strategy and will likely support any change initiative.

• Prisoner: They are lower on the personal satisfaction scale and are vocal and proactive, and this segment often feels like they are trapped in their responsibilities. They can move from not engaged to engaged based on the guidance given, and adding responsibility, and acknowledgment will help discard a few barriers that they are experiencing. • Passenger: Passengers to a large extent tend to be dissatisfied with their career, and though they understand the motives behind the change, they are on the back foot when it comes to getting involved in the process. Their natural tendency is to be less satisfied in their current role. Drive, alignment, and satisfaction are key to the successful incorporation of a well-defined change management program. 17.10 Models of Change Management 17.10.1 Kurt Lewin’s Change Management Model: The Planned Approach to Organizational Change

In the year 1950, Lewin, a social scientist and a physicist, formulated a three-stage theory, which he referred to as unfreeze, change (transition), and freeze (refreeze), in order to understand organizational change more clearly (Figure. 17.1). According to Lewin, change for any individual or an organization generally embraces several stages of transitions or flux before accomplishing equilibrium or steadiness. The analogy given by him is that an ice block changes its shape to a cone through unfreezing. 17.10.1.1 Lewin’s Three-Stage Theory

Stage 1—Unfreezing: It emphasizes the preparedness as well as the temperament of people to change by encouraging to move from comfort zone to a newly

FIGURE 17.1  Lewin’s Three-Stage

Model

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created setup, after the implementation of change. It involves accepting methods that are result-driven. During this stage, efficient communication plays a key role in seeking the support, and engagement of the people in the entire change process. Stage 2—Change: The actual implementation of change happens at this stage. This stage requires vigilance in planning, meaningful exchange, and the participation of individuals to approve the change. This stage is complex due to the uncertainties or people’s apprehension about the outcome of change. Stage 3—Freeze (refreezing): During this stage, the state of equilibrium is attained. The stage of refreezing is the stage where people internalize the new methodologies of working. For adopting, and self-enforcing the new behavior, the employees should be contented and should be recognized, and the policies or structures supporting the change can help in strengthening the working methodologies. The three stages of change management can be described using the case of Nissan Motor Company, which confronted huge debts and was on the verge of bankruptcy. Carlos Ghosn had taken charge as the head of Nissan and was entrusted with the responsibility of implementing a change management plan, designed and developed by Nissan’s cross-functional team, and bring Nissan on to the track, by ensuring that resistance to change was totally under control. Charles subsequently designed a strategy and involved the employees in the process of change management through engaging in conversations, and communication, and reinforcing appropriate attitude in employees and their behaviors. He introduced performance bonus, established an open environment and a transparent feedback mechanism to chaperon, and assist the employees in embracing the new behavioral patterns in order to refreeze the behavioral change. According to Branch (2002, 4), Lewin’s change management model can be implemented in three ways:

• Incorporating behavioral, attitudinal changes in the skills of the employees • Restructuring the organization, its systems, and processes • Bringing in change in the organization’s environment, culture, and style Lewin’s model emphasized on the dependencies across units as well as subunits in an organization, and the model assumes that organizations move from one stable state to another in a planned manner, and generally function well in a stable state, but in the present day, uncertain business and market conditions enforce organizations to have change strategies and plans well in place and updated at regular intervals of time. Several critics are of the opinion that Lewin’s planned approach to change management defaults on the following issues:

• It is simple and mechanistic and may not be applicable to ever-changing business conditions.

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• Failure to adopt and adapt to radical or transformational changes, and can be utilized if changes are incremental within an organization.

• The model does not take into consideration the role of power, politics, and con-

flicts and does not accommodate the feelings and experiences of employees, which is an important component in the entire change process. The model is majorly goal-driven. • Supports a top–down approach to change management, and fails to associate the relative importance of the bottom–up approach in the entire change process. 17.10.2 Lewin’s Force Field Analysis

Kurt Lewin’s Force Field Analysis attempts to explain the working methodology of the change process, and how the forces that drive the change and those that restrain impact the outcome of the organizational change. The driving forces push the organizations to achieve the new state, while the forces that restrain are the factors like the behaviors of the employees that block the process of change. According to Lewin, organizational stability is a state that can be reached or attained, when the driving and restraining forces reach a stage of equilibrium that is equal in force from opposite directions. Changes are effective when they are implemented by unfreezing the current situation and moving to another stage by embracing a new situation and then refreezing to attain a stable and permanent state. During the stage of unfreeze, the driving forces should act strongly to motivate a change in behavior or approaches in working. Driving forces that necessitate the changes to happen quickly could be due to globalization, technological development, the IT enablement, and diversity in the workforce or they may originate within the organization based on the efforts of the people at the leadership level.

• Any change process should start by creating an awareness among the employees about the impact of external driving forces such as competitors, consumer demands and trends, government regulations, compliances, etc. To effectuate such changes, the restraining forces should be controlled. • The control can be incorporated through effective communication and employee engagement strategies; training and mentoring initiatives for upskilling of employees; implementation of stress management methodologies to help employees manage their stress areas; negotiations for government compliances; and implementation of coercive measures is a dire necessity. 17.10.3 ADKAR Model

The ADKAR model is a type of change management model that ensures the involvement of various categories of employees within an organization with the proposed change. ADKAR model was developed by Jeff Hiatt in the year 2003, which stands for awareness, desire, knowledge, ability, and reinforcement. The

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ADKAR model was made popular by Prosci, a change management consultancy firm and then refined based on the study that was conducted with 900 organizations across 59 countries. The ADKAR model coaches, and supports employees within an organization as the entity, along with its employees, enters the state of change.

• Awareness: People within an organization/unit are made aware of why the

•

•

• •

change is happening in the first place. Because of the change being installed, there is resistance among the employees. • Passive resistance: This leads to employees not talking openly about the change or rendering support for the change plan and implementation. • Regression: Employees continue to follow the old methodologies for doing things. • Active resistance: When employees openly state their lack of interest to instill change, there exists a necessity to justify the requirements of the change. Desire: For example, major businesses of this era rely on automation and are continuously in search of technological innovation within their businesses. This leads to a threat as perceived by the employees. But one needs to emphasize the fact that automation helps in making tasks a lot easier. Robotic process automation eliminates wearisome, and repetitious tasks so that humans can focus on tasks that require intelligence, and critical thinking. The best way to handle is through effective communication. Knowledge: Once a change is to be implemented, it will more than likely require education and training, especially in areas like process improvement. Automation software and technology offer a method of standardization across organizations and can help ameliorate choke-points and dependencies. Ability: Hands-on training and mentoring are instrumental in making a new change get implemented and succeed. Reinforcement: Reinforcement refers to the feedback generated in order to understand that the newly implemented changes are supporting business goals. This is done using the QER indicators in order for the top management to evaluate the past and current performances.

17.10.3.1 Foundations of the ADKAR Model

• The ADKAR models can be learned by self. It is driven by actions and clearly

focuses on an organization’s structure and effective implementation of change based on the number of people who are key to making change work, in the organization’s structure and hierarchy. • Organizations going in for extensive automation should implement the ADKAR model to make employees understand that automation, and data analytics help businesses operate more efficiently and can reduce costs. Automation tools

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assist employees to make their jobs easier, boost transparency, ensure positive corroboration in the form of report generation, and the responsiveness, willingness, and knowledge help employees realize the actual benefits rendered. 17.10.4 Kotter’s Model

John Kotter (1996), a Harvard Business School Professor, and renowned change expert, in his book Leading Change, introduced a change management model comprising eight steps based on the research conducted across hundred organizations in which change was instantiated. Figure 17.2 illustrates the same.

• Creating an urgency • Identification of potential threats and future consequences • Opportunity identification through effective interventions

FIGURE 17.2 

Kotter’s Model

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• Open platforms for honest deliberations, and discussions on the prevalent issues with justifications on need for change

• Request the participation, and support of customers, employees, and key stakeholders to drive the change

• Build guiding teams • Identify the leaders and other stakeholders who are actively engaged in the change management process.

• Form a powerful group of those who would be working as a team • Identification of weaknesses in the team and inclusion of influential stakeholders from cross-functional units, and across levels in the organization

• Develop the vision • Determining the core values, vision, and strategies for implementing the change in an organization

• The vision should be described clearly for the stakeholders to implement

• Communicate for buy-in • Communicate the change in the vision with precision and clarity • Connect the vision with performance reviews, educating, training, mentoring, etc.

• Handle people’s issues with transparency

• Solicit action • Processes and structure within an organization should be aligned with an organizational vision

• Monitor barriers and resistance to change • Implement proactive actions to remove the barriers • Reward people for supporting and implementing the change

• Focusing on short-term wins • Short-term wins at an early stage in the change implementation process lead to concrete outcomes

• Multiple short-term goals work better than one long-term goal and have low probability of failure

• Rewarding people who have contributed significantly to the change implementation process

Do not give up

• Ensure continuous enhancement by deducing an inference from the success stories, and iteratively refining them

Make change stick

• Discuss the success stories of the changes that have already been implemented • Ensure continuous and consistent change within an organization • Ensure that the support of the people at the leadership position within an organization

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17.10.4.1 Benefits of Kotter’s Model

• Easily implementable • Preparing for change acceptance • Employee involvement and acceptance of change implementation for the success in the overall process

17.10.4.2 Kotter’s Model and Its Disadvantages

• Being a step-by-step model, eliminating a step can result in sequencing problem

• The process is time-consuming (Rose 2002) • As a top–down model co-creation of solution alternatives is not a possibility 17.10.5 McKinsey 7S Change Model

The McKinsey 7S model was developed during the early 1980s by two consultants Robert Waterman and Tom Peters working for McKinsey & Company. The model is used as an assessment tool for performing analysis in regard to the changes within the organization. It is dependent on the seven key elements that influence an organization’s success, and these should be interdependent and aligned to generate outcomes that create synergies in systems. This model can be used for the following:

• For improving the performance of an organization. • Analysis of the future outcomes that are instantiated due to the implementation of the proposed changes.

• The framework can be used during mergers and acquisitions that involve the alignment of the key processes of an organization.

• The model can provide a framework for implementing the action plan to be used for all types of teams, groups, and projects.

The McKinsey 7S model constitutes seven interrelated elements of an organization that can be subdivided into hard and soft versions. The hard elements within the 7S model are as follows:

• Strategy: The blueprint that an organization uses to gain a competitive advantage.

• Structure: This refers to the reporting hierarchy within an organization. • Systems: This includes operational activities performed by employees within an organization to ensure the completion of their assigned tasks.

The soft elements cannot be identified easily, and the following are the soft elements:

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• Shared values: The core values that embody or influence the values and ethics within the organization.

• Style: The leadership style, and its impact on strategic decisions, employee impetus, and organizational performance.

• Staff: The employee capability or competency within an organization. • Skills: The core competencies of the employees define the organizational success.

As per Figure 17.3, the shared values in the center of the model are the determining factor for all the elements that are integrated and interconnected. The other elements originate mainly due to their formation by the creators. Change in the values result in change in the parameters. The 7S model helps identify the uniformity between various elements and provides a strategic plan of action for reaching the desired organizational state. The alignment between the elements can be verified by executing the following:

• Assessment of the shared values—these values should be consistent with

the structure, systems, and strategy and identify the element that needs to be improved. • Assessing the interdependence between the soft and the hard elements, aligning them accordingly, also the course of action that needs to be taken if these elements do not support each other. • Incorporating relevant changes and then investigating whether these elements execute in alignment or not.

FIGURE 17.3  Hard

and Soft S of the McKinsey Model

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According to Watermann and Peters, this model can be used by following these five steps:

• First, identification of those elements of the framework that do not have a proper alignment and exhibit inconsistency in the relationship

• Second, focus on the optimal design of an organization that differs for different organizations

• Third, deciding on the course of action for the changes that need to be implemented • The fourth step is the actual implementation of the change, and the fifth is the review of the implementation. 17.10.5.1 Limitations of the 7S Model

• The model does not take into account the impact of the external environment

in explaining the interdependency among the organizational processes and factors. • It does not adequately explain the concept of organizational effectiveness or performance. • It does not substantiate its explanation with enough empirical evidence and is considered to be static in nature. • Its fitment to certain situations and conditions is difficult to assess as it fails to address areas where gaps in conceptualization and strategy execution may actually arise.

CASE STUDIES Kodak The Eastman Kodak Company was founded by George Eastman in the year 1880. The company had at first started making photographic plates and eventually switched to photo films, and it became so user-friendly that it became a possession of every household in a four-year tenure. The founder’s philosophy was:

• • • •

Low-cost production Global distribution Phenomenal promotion Growth through research and development

The company started diversifying into new product lines, such as cameras, medical imaging, and graphic arts, and worked across the following segments:

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• • •

The health group constituting medical films and digital products such as x-rays and hardware supplies Digital and film imaging, such as camera rolls and cameras, and photo finishing services and supplies Graphic communication segments such as ink-jet printers

Initially, it did very well for a span of four to five years and then went into decline because of failed strategies, such as failure to innovate consistently, ignoring the current customer trend and having a contented cultural attitude within the company. Pre-emptive measures that should have been adopted by Kodak then are as follows:

• • •

Creating small business units as per the three segments Licensing the brand/technology

Not bringing the digital into prominence

ABCL ABCL came into existence in the late 1980s. Earlier, its main business was saw milling, and later, it started producing veneers. By diversifying into new business areas, certain changes had to be incorporated which are as follows:

• • • • •

Changes in organizational business strategy Changes in organizational structure Changes in organizational culture Changes in technology Changes in organizational workflow

Summary

Long-term success in business is based on the ability to manage change, to foster creative thinking, and to boost innovation. Employee creativity enables them to use creativity and passion to come up with ideas and translate them into commercial products, processes, and services. Change may pertain to a companywide transformation or a small-scale incremental change. Also, with transparency in communication, the queries and oppositions with respect to the aspects of change put forth by individuals help in the resolution of issues and make change complete. While the McKinsey 7S model is used as an assessment tool for performing analysis with regard to the changes in the internal situation of an organization, Kotter’s Model is an easy step-by-step model for change that is relatively easy to

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implement and focuses on employee involvement and acceptance of change implementation for the success of the overall process. On the other hand, organizations going in for extensive automation should implement the ADKAR model to make employees understand that automation and data analytics help businesses operate more efficiently and can reduce costs, and hence such a transformation should be welcomed by all employees. Exercise Objective Questions

1. _______ is a systematic approach to dealing with change both from organizational and individual perspectives. • Change management • Pragmatic culture • Organizational culture • Organizational change 2. _________ is the process by which organization transitions from their present state to some desired future state to enhance their productivity. • Change management • Pragmatic culture • Organizational culture • Organizational change 3. Refreezing means that what has been learned is integrated into actual practice. • True • False 4. Change often brings • Fear of losing the jobs • Substantial uncertainty • Lack of reliance • None of the above 5. __________ is an important part of project management. • Change management • Pragmatic culture • Organizational culture • Organizational change 6. The word ADKAR is an acronym for the ____ outcomes an individual needs to accomplish in order for the change to be successful: awareness, ____, knowledge, ability, and reinforcement. • Four, awareness, desire, knowledge, ability • Two, awareness, knowledge • Five, awareness, desire, knowledge, ability, reinforcement • Three, desire, knowledge, ability 7. The analogy given by Lewin correlates to how an ice block transforms into a cone of ice through the process of_____. • Unfreezing • Transformation • Freezing • No change

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CASE STUDY Ravisti Industrial Limited powers businesses worldwide by manufacturing and supplying industrial products. The major markets that the company deals with is from the USA. There is an IT department to provide the services to support this core manufacturing division. Mr. Mitesh has several years of experience in various roles in his career. He is young and passionate and believes in results. He has recently completed his Master of Business Administration, having a specialization in personnel management from the USA. He has joined as a COO in the IT department for the Mumbai location. The office timings when he joined were from 9.30 am to 6.30 pm. He felt that, as the company gets most of its business from the USA, the job timings should be from 11.30 am to 8.30 pm so that more services could be offered. He officially announced the change of timings and also gave the reason for the change in timings. There was no reaction for the first week. Later, Mr. Mitesh received a memorandum for the old office timings to be restored or to have different shift timings for different people. Mr. Mitesh did not yield to the demand. However, he was convinced that a step should be taken to instill a cooperative attitude among his employees, via an informal get-together. He started with a scheme where a monthly dinner was planned for all the employees at the office, and all the employees would bring their home-made dishes. They were also encouraged to bring their wives and children along for the dinner. The scheme was announced by sending an email to all the employees. The suggestions were welcomed to make the scheme successful. No suggestions were received for the two monthly dinners. On one occasion, when the dinner party was approaching, Mr. Mitesh heard a conversation between two employees. One of the employees said to another: ‘What are you bringing for the coming dinner party? I would be bringing nachos’. The other replied, ‘I would be bringing Biryani’, and both of them laughed. Mr. Mitesh felt that nobody was concerned about the suggestions for the dinner party. Though the event was not mission critical, and relatively frivolous, the scheme did not get due acknowledgment from the employees.

Questions 1. Assess the positive and negative consequences of the changes being implemented for the work timings. 2. What are the possible reasons for employees not supporting the actions of Mr. Mitesh? 3. Suggest how Mr. Mitesh should proceed in this situation.

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Critical Thinking Questions

1. What are the factors that make organizations and people resist change? 2. Identify the role of change agents in organizations. 3. How can the changes be incorporated into an organization in the best possible manner? 4. Compare and contrast the various change management models using examples. Chapter at a Glance Change Management

Change management is defined as the use of procedures, tools, and methods to achieve relevant business outcomes and to initiate the realization of said change within the social infrastructure of the workplace. Characteristics of Change

• It is a process and is not an event that has occurred. • It is normal and constant in nature. • Directive change is implemented from top to bottom in the management hierarchy.

• Participative change involves everyone or those who are directly or indirectly affected by the change.

• It is dependent on organizational culture. Principles of Successful Change Management

To roll out change management across levels or across functional units/departments of industries, certain steps need to be followed:

• Create an environment for change: Change can discourage, or even thwart,

and it is indispensable for managing to soften the resistance by communicating the value of the change, directing the teams where modification occurs, and enabling a smooth transition during the incorporation of change. • Implement the change: Once the environment is created, the next step is to enable the organization to ordain the change, and this can happen by allocating the responsibility. The type of change, that is, organizational or departmental, requires, in general, an individual or a team for implementation in order to reduce loss of clarity and keep communications transparent and open. • Sustain the change: In this instance, it is crucial to keep focus to accomplish the desired outcome from implementation of the change and then integrate the

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new status-quo and shift the organization from a state of flux to a state of permanency in order to attain the sustenance. • Review and reflect on change: The last step in the change management process is the review of the process that did, or did not, work efficaciously and then learn from the outcomes. Forces for Change in Organization External Causes

• • • • • • •

Demographic characteristics Social and political pressures Globalization Economics Competition Technology Legislation

Internal Forces

• • • • • • • •

HR problems/prospects Crisis Employee expectations Work climate Reduced effectiveness Managing change Organizational restructuring Intrapreneurship

Resistance to Change

• • • • • • • • • •

Lack of proper communication Self-ego Feeling excluded Lack of reliance/trust Mastering skills/training needs Fear of the unknown, loss, failure Disruption of interpersonal conflicts Personality conflicts Politics Cultural assumptions and values

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Managing Resistance to Change

• Do change management right the first time • Expect resistance • Formal address • Phase 1: Preparing for change • Phase 2: Managing change • Phase 3: Implementing change • Identify the root causes Techniques for Overcoming Resistance to Change and Selection of Appropriate Technique

In the year 1979, Kotter and Schlesinger proposed six crucial techniques for overcoming the resistance to change. These are as follows:

• Education and effective communication: To minimize resistance to change,

•

•

• •

the most popular mechanism is to educate people and encourage cognizance through effective communication with respect to the benefits of a prearranged change. Some important changes that need to be remembered while implementing an organization-wide change are as follows: • Avoidance in sending emails or memos when change is to be implemented • Invite the suggestions and feedback from the staff members, involving them and encouraging them to achieve desired outcomes • Encourage face-to-face interactions at an individual and group level and allow the team to participate in discussions Facilitate a collaborative environment: To engage and involve the entire team by implementing a constructive strategy that can minimize the resistance to change by engaging the employees in the endeavor of their involvement in the entire process. Support and facilitation: Employees need to be supported and made to cope with the ongoing challenges and should be allowed to express their emotions, fear, bitterness, or wrath in relation to the change and the challenges encountered during the change. Negotiation and agreement: The trade-offs on the perspectives of various stakeholders are given due consideration and weightage in order to incorporate changes smoothly. Manipulation and co-operation: Manipulation involves attempts by the managers to make it more likeable for the team members or propagating false rumors within the organization in order to encourage the employees to evaluate the change that needs manipulation.

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• Coercion (inherent and explicit): Exercising force by enabling changes that

need to be accepted by the employees also involves compelling the team members to adhere to the expected ways or else resign.

Adoption of the Right Technique and the Relative Benefits of Each Technique

Education and effective communication: To minimize resistance to change, the most popular mechanism is to educate people and encourage cognizance through effective communication with respect to the paybacks of a prearranged change. By substantiating the requirement for change and focusing on the purposes of change, the most sought-after reinforcement from the team members will facilitate smoother execution. Facilitate a collaborative environment: To engage and involve the entire team by implementing a constructive strategy that can minimize the resistance to change by engaging the employees in the endeavor of their involvement in the entire process. Support and facilitation: The employees need to be supported and made to cope with the ongoing challenges and should be encouraged to showcase their emotions, fear, bitterness, or wrath in relation to the change and the challenges encountered during the change. Negotiation and agreement: The trade-offs on the perspectives of various stakeholders are given due consideration and weightage in order to incorporate changes smoothly. Manipulation and co-operation: Manipulation involves attempts by the managers to make it more conducive for the team members or propagating false speculations within the organization in order to obligate the employees to evaluate the change. Coercion (inherent and explicit): Exercising force by enabling changes that need to be accepted by the employees also involves compelling the team members to adhere to the probable ways or else resign. Personality and Change Management The Eight Personalities Involved in Change Management

There are the following eight personality types that can decide the success or failure of a change management program:

• • • •

Champion Ambassador Challenger Skeptic

• • • •

Prisoner Passenger Saboteur Thief

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In the majority of cases, determination of personality traits participating in a change is done when problems originate, and that is of no use. The three dimensions that can identify employees to be engaged, not engaged, or disengaged are as follows:

• Alignment • Personal satisfaction • Drive (proactive or reactive) Engaged in Change

Champions and ambassadors will be fully engaged in any change management program, and the difference between them is envisaged along the specified dimension.

• Champions: Champions are highly aligned to the organization and the change

is being sought after consistently. They work hard to convince people to take their point of view and can be trusted more than the senior management. A champion welcomes challenges and is self-motivated, and they often try to create a collaborative environment for their teammates. • Ambassador: Ambassadors induce positivism toward planning and implementing change, but they do not proactively try to change people’s view point. Shouldering more responsibility may transform them from the status of an ambassador to a champion. Not Engaged

The employees who are not engaged fall into two categories: the ones who are challengers and the others who are skeptical.

• Challengers: Challengers are more tilted toward earning their personal sat-

isfaction and this enhances their perspective in understanding the outcome of a proposed change. Procedural implementation of the changes is crucial to a project’s success. Skeptic: Skeptics exude their lack of alignment with the organization. They are personally less satisfied with the assignment of a role, often visibly opposing any suggested change.

Actively Disengaged

• Saboteur: Saboteurs differ from skeptics on the personal satisfaction scale in that they are highly dissatisfied with their roles, responsibilities, and rewards.

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• Thief: The most disengaged group is the thieves, who are dissatisfied and very difficult to communicate with.

Not Engaged

The prisoners and passengers are well aligned to the organization’s strategy and will likely support any change initiative.

• Prisoner: They are lower on the personal satisfaction scale and are vocal and proactive, and this segment often feels like they are trapped in their role and responsibility. • Passenger: Passengers to a large extent tend to be dissatisfied with their career, and though they understand the motives behind the change, they are on the back foot when it comes to getting involved in the process. Models of Change Management Kurt Lewin’s Change Management Model: The Planned Approach to Organizational Change

In the year 1950, Lewin, a social scientist and a physicist, formulated a three-stage theory, which he referred to as unfreeze, change (transition), and freeze (refreeze), in order to understand organizational change more clearly. According to Lewin, change for any individual or an organization generally embraces several stages of transitions or flux before accomplishing equilibrium or steadiness. The analogy given by him is that an ice block changes its shape to a cone through unfreezing. Lewin’s Three-Stage Theory

Stage 1—Unfreezing: It emphasizes on the preparedness as well as the temperament of people to change by encouraging to move from comfort zone to a newly created environment, after the implementation of change. It involves accepting methods that are result-driven. During this stage, efficient communication plays a key role in seeking the coveted support and engagement of the people in the entire change process. Stage 2—Change: The actual implementation of change happens at this stage. This stage requires vigilance in planning, meaningful exchange, and the participation of individuals to approve the change. This stage is complex due to the uncertainties or people’s apprehension about the outcome of change. Stage 3—Freeze (refreezing): During this stage, the state of equilibrium is attained. The stage of refreezing is the stage where people internalize the new methodologies of working. For adopting and self-enforcing the new behavior,

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the employees should be contented and should be recognized, and the policies or structures supporting the change can help in strengthening the working methodologies. Lewin’s Force Field Analysis

Kurt Lewin’s Force Field Analysis attempts to explain the working methodology of the change process, and how the forces that drive the change, and those that restrain, impact the outcome of the organizational change. The driving forces push the organizations to achieve the new state, while the forces that restrain are the factors like the behaviors of the employees that block the process of change. According to Lewin, organizational stability is a state that can be reached or attained, when the driving and restraining forces reach a stage of equilibrium that is equal in force from opposite directions. Changes are effective when they are implemented by unfreezing the current situation and moving to another stage by embracing a new situation and then refreezing to attain a stable and permanent state. During the stage of unfreeze, the driving forces should act strongly to motivate a change in behavior or approaches in working. Driving forces that necessitate the changes to happen quickly could be due to globalization, technological development, the IT enablement, and diversity in the workforce or they may originate within the organization based on the efforts of the people at the leadership level. ADKAR Model

The ADKAR model is a type of change management model that ensures the involvement of various categories of employees within an organization with the proposed change. ADKAR model was developed by Jeff Hiatt in the year 2003, which stands for awareness, desire, knowledge, ability, and reinforcement. The ADKAR model was made popular by Prosci, a change management consultancy firm, and then refined based on the study that was conducted with 900 organizations across 59 countries. The ADKAR model coaches and supports employees within an organization as the entity, along with its employees, enters the state of change.

• Awareness: People within an organization/unit are made aware of why the change is happening in the first place. Because of the change being instantiated, a resistance is triggered among the employees. • Passive resistance: This leads to employees not talking openly about the change or rendering support for the change plan and implementation. • Regression: Employees continue to follow the old methodologies for doing things.

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• Active resistance: When employees openly state their lack of interest to •

•

• •

•

•

•

•

instill change, there exists a necessity to justify the requirements of the change. Desire: For example, major businesses of this era rely on automation and are continuously in search of technological innovation within their businesses. This leads to a threat as perceived by the employees. But one needs to emphasize on the fact that automation helps in making tasks a lot easier. Robotic process automation eliminates wearisome and repetitious tasks so that humans can focus on tasks that require intelligence and critical thinking. The best way to handle is through effective communication. Knowledge: Once a change is to be implemented, it will more than likely require education and training, especially in areas like process improvement. Automation software and technology offer a method of standardization across organizations and can help ameliorate choke-points and dependencies. Ability: Hands-on training and mentoring are instrumental in making a new change get implemented and succeed. Reinforcement: Reinforcement refers to the feedback generated in order to understand that the newly implemented changes are supporting business goals. This is done using the QER indicators in order for the top management to evaluate the past and current performances. John Kotter (1996), a Harvard Business School Professor and renowned change expert, in his book Leading Change, introduced a change management model comprising eight steps based on the research conducted across hundred organizations in which change was instantiated Creating an urgency • Identification of potential threats and future consequences • Opportunity identification through effective interventions • Open platforms for honest deliberations and discussions on the prevalent issues with justifications on need for change • Request the participation and support of customers, employees, and key stakeholders to drive the change Build guiding teams • Identify the leaders and other stakeholders who are actively engaged in the change management process. • Form a powerful group of those who would be working as a team • Identification of weaknesses in the team and inclusion of influential stakeholders from various cross-functional units and across levels in the organization Develop the vision • Determining the core values, vision, and the strategies for implementing the change in an organization • The vision should be described clearly for the stakeholders to implement

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• Communicate for buy-in • Communicate the change in the vision with precision and clarity • Connect the vision with performance reviews, educating, training, mentoring, etc.

• Handle people’s issues with transparency

• Solicit action • Processes and structure within an organization should be aligned with an organizational vision

• Monitor barriers and resistance to change • Implement proactive actions to remove the barriers • Reward people for supporting and implementing the change

• Focusing on short-term wins • Short-term wins at an early stage in the change implementation process lead to concrete outcomes.

• Multiple short-term goals work better than one long-term goal and have low probability of failure

• Rewarding people who have contributed significantly to the change implementation process

Do not give up

• Ensure continuous enhancement by deducing an inference from the success stories and iteratively refining them

Make change stick

• Discuss the success stories of the changes that have already been implemented • Ensure continuous and consistent change within an organization • Ensure the support of the people at the leadership position within an organization

Advantages of Kotter’s Model

• An easy step-by-step model for change that is relatively easy to be implemented • Focus on preparing and building acceptability for change • Employee involvement and acceptance of change implementation for success in the overall process

Disadvantages of Kotter’s Model

• Even a single step results in the change of sequence • The process is time-consuming (Rose 2002) • Co-creation of alternatives is not possible

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McKinsey 7S Change Model

The McKinsey 7S model was developed during the early 1980s by two consultants Robert Waterman and Tom Peters working for McKinsey & Company. The model is used as an assessment tool for performing analysis in regard to the changes within the organization. It is dependent on the seven key elements that influence an organization’s success, and these should be interdependent and aligned to generate outcomes that create synergies in systems. This model can be used for the following:

• For improving the performance of an organization. • Analysis of the future outcomes that are instantiated due to the implementation of the proposed changes.

• The framework can be used during mergers and acquisitions that involve the alignment of the key processes of an organization.

• The model can provide a framework for implementing the action plan to be used for all types of teams, groups, and projects.

The McKinsey 7S model constitutes seven interrelated elements of an organization that can be subdivided into hard and soft versions. The hard elements within the 7S model are as follows:

• Strategy: The blueprint that an organization uses to gain a competitive advantage.

• Structure: This refers to the reporting hierarchy within an organization. • Systems: This includes operational activities performed by employees within an organization to ensure the completion of their assigned tasks.

The soft elements cannot be identified easily, and the following are the soft elements:

• Shared values: The core values that embody or influence the values and ethics within the organization.

• Style: The leadership style and its impact on strategic decisions, employee impetus, and organizational performance.

• Staff: The employee capability or competency within an organization. • Skills: The core competencies of the employees define the organizational success.

The 7S model helps identify the uniformity between various elements and provides a strategic plan of action for reaching the desired organizational state. The alignment between the elements can be verified by executing the following:

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• Assessment of the shared values—these values should be consistent with

the structure, systems, and strategy and identify the element that needs to be improved. • Assessing the interdependence between the soft and the hard elements, aligning them accordingly, also the course of action that needs to be taken if these elements do not support each other. • Incorporating relevant changes and then investigating whether these elements execute in alignment or not. According to Waterman and Peters, this model can be used by following these five steps:

• First, identification of those elements of the framework that do not have a proper alignment and exhibit inconsistency in the relationship

• Second, focus on the optimal design of an organization that differs for other organizations

• Third, deciding on the course of action for the changes that need to be implemented

• The fourth step is the actual implementation of the change, and the fifth is the review of implementation.

Limitations of the 7S Model

• The model does not take into account the impact of the external environment

in explaining the interdependency among the organizational processes and factors. • It does not adequately explain the concept of organizational effectiveness or performance. • It does not substantiate its explanation with enough empirical evidence and is considered to be static in nature. • Its fitment to certain situations and conditions is difficult to assess as it fails to address areas where gaps in conceptualization and strategy execution may actually arise.

18 STRESS MANAGEMENT

An Opening Vignette Employee Stress Management at ABC Managing Stress The employees of Company ABC were afflicted with high levels of stress due to increased work pressure, unrealistic schedules, environmental constraints, and some self-inflicted imbalance in work–life aspect. Problem Scenario The company wanted to implement measures for dealing with stress among its employees. A survey by an expert showed that employees had an inclination to avail more leaves than necessary during the project-delivery period due to work-related stress, even some could not maintain a healthy work–life balance. Objective The company wanted to introduce certain benefit schemes to enthuse the employees and decrease their stress levels. For this purpose, they conducted a detailed survey across all units and all levels.

DOI:  10.4324/9781032634258-18

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Steps Taken by the Company

• • • •

•

• • •

Introducing stress risk assessment methodologies and policy formulation dictating appropriate stress management standards and circulation of these to all units. Introducing stress-relieving sessions such as regular yoga classes, laughter sessions, weekly team dinners, and quarterly outings. Increasing peer-to-peer and boss–subordinate interactive sessions. Including stress management training sessions for all. The topics included stress definitions, stress points, targets aimed at reducing stress cases, the company’s legal obligation to health and safety legislation’s, and so on. Advising managers to initiate effective time management across teams, ensure healthy working patterns through increased communication and collaboration, initiate smooth transitions among the members of the team, and promote proper exercise, diet, and sleeping rules for all. Weekly visits by stress management consultants for expert suggestions and ideas on how to de-stress. Establishing a gymnasium and indoor play area for employees to stay fit. Proper task allocation to avoid work overload.

After taking these steps, it was found that within the span of a quarter, employees’ stress came down from 37 percent to 17 percent within the organization. The productivity rose from 42 percent to 58 percent and overall employee satisfaction increased to a whopping 79 percent. The top- and middle-level management was satisfied to have combated stress for a long time.

18.1 Introduction

The term ‘stress’ has been derived from the Latin word stringer, which means to draw tight. It is a multifarious phenomenon. It is an emotion that arises when we face a particular situation. It may differ from individual to individual. In other words, a situation or circumstance might be a challenge for one individual, whereas for the other, it might be a stressor. This basically depends on the experience, personality, and the environment in which the individual operates. The everchanging situations that an individual has to face cause stress. Thus, today, stress has become a part of our daily life, which has a huge impact on all the activities we perform. Hence, managing stress effectively is essential.

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18.2 Definitions

Stress is a feeling experienced when a person thinks that the demands exceeds the personal and social resources the individual is able to mobilize. —Richard S. Lazarus Stress is the psychological, physiological and behavioral response by an individual when they perceive a lack of equilibrium between the demands placed upon them and their ability to meet those demands, which, over a period of time, leads to ill-health. —S. Palmer Stress can be considered as any factor, acting internally or externally that makes it difficult to adapt and that induces increased effort on the part of the person to maintain a state of equilibrium both internally and with the external environment. —Humphrey Stress is caused by a multitude of demands (stressors), such as an inadequate fit between what we need and what we are capable of, and what our environment offers and what it demands of us. —Levi Non-specific response of the body to any demand for change.

—Hans Selye

Source: Lazarus, R.S. (1966), Palmer S. and Dryden W. Counselling for Stress Problems. London: Sage., Humphrey, J.H. (1992), Levi, L. (1972). Selye, H. (1984) 18.3 Understanding Stress

Today, life is full of worries, targets, frustrations, and burdens. For a number of people, stress is so common that it has become a part of everyday life. The term stress was coined by Hans Selye in 1936 (http://www​.stress​.org​/about​ /hans​-selye​-birth​-of​-stress/, accessed on 26 February 2016). He stated, ‘stress is not bad always’. In small doses, stress not only helps an individual perform under pressure but also motivates to give their best performance. This kind of stress is called ‘eustress’ (good stress). However, when stress exists for a larger span of time, places constant demands, and causes problems, then it is called ‘distress’ (bad stress). He presented ‘general adaptation syndrome’, which states that people react in a similar way when exposed to stressors. A stressor is defined as something that causes stress.​

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FIGURE 18.1  Three

Stages of the General Adaption Syndrome

18.3.1 General Adaptation Syndrome

• Stage 1 (alarm reaction): A stressor leads the body to use its alarm reaction.

Any cause of worry or excitement that further causes emotional or physical changes can be called a stressor and that leads the body to start an alarm reaction. For adult people, stressors can be vacation plans, family conflicts, work responsibilities, bills, and so on. Physical changes start occurring when the body starts its alarm reaction to a stressor. This may cause an increase in the heart rate and so on. • Stage 2 (resistance): After the alarm reaction, the body adjusts itself and enters the second stage of general adaptation syndrome. This stage is called the stage of resistance as the immune system resists or fights the stressor. Also, in case of illness, antibodies are sent to fight and in the case of physical stressors such as doing heavy exercises, the heart rate goes up accordingly in order to supply more blood and oxygen to the body. In most of the cases, the resistance of the body is enough to overcome the stressor and return to normal state. • Stage 3 (exhaustion): In extreme cases, the body enters the third stage of the syndrome, that is, the stage of exhaustion when the body is unable to resist. To overcome and resist the stressor, various medical treatments are necessary. If the stress is to the extent that even the body and medicine cannot fight against the disease, then it can cause death. 18.4 Relation between Stress and Performance Level

The relationship between stress and performance was described by Robert Yerkes and John Dodson in 1908. The Yerkes–Dodson law states that up to a certain level, stress is beneficial as it motivates an individual to perform. The usefulness can also be reflected in the health and well-being of an individual.

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Certain amount of stress is necessary to succeed. This is seen at various events in life like sports academics and so on. The level of performance increases with the increase in the level of stress; however, this happens only to a certain point. On the other hand, when the level of stress increases beyond a certain point, the performance starts diminishing and affects the health and well-being of a person. All stressful experiences are not harmful as there are basically two kinds of stress. The term ‘eustress’ is used to describe ‘positive stress’. It helps you face challenges and do the best and makes life more enjoyable. Various situations such as riding a roller coaster, successfully competing in an activity, passing a driving test, playing in the school band, and meeting new people are some examples that produce eustress. On the other hand, there are unpleasant situations that cause ‘negative stress’ called as distress. Distress includes the situations that cause worry, sorrow, anger, or pain. There are many occasions where a situation is eustress for one person, while for another person, it is distress. For example, an outgoing person always likes to participate in extracurricular activities at college or attend social events, but, at the same time, for a shy person, this would be a situation of distress. There can be situations where you experience eustress or distress for a similar experience at different times. For example, if an individual is well prepared for an upcoming test, then the test would be situation of less stress, whereas if the same individual is not prepared for the test, then it would be a situation of distress. The experience of low levels of stress may help you to deal with more stressful situations in the future. For example, physical activity may be a stressor, but regular physical activity helps you to stay healthy, happy, and fit, and an individual would be able to handle the stress more easily. This is shown in Figure 18.2. 18.5 Signs and Symptoms of Stress

Stress can lead to various changes in the life of a person who is experiencing it. It is seen that people experience stress at work and it can be prevented if required actions are taken at the early stages. Everyone looks out for changes in the behavior of a group or a person so as to identify if there is any potential issue or stress-related problem so that positive actions can be taken as early as possible; this can be a critical matter for the line manager. Stress can be seen in different ways. Some of the signs are mentioned as follows. Managers may need to deal with the staff showing a few of these signs in a different manner. 18.5.1 Signs of Stress in Individuals

If an individual is suffering from most of the following symptoms, it may be possible that there are effects of stress on you. If work aspects are leading to these

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FIGURE 18.2  Relation

between Stress and Performance

symptoms, speak to the line manager, trade union representative, or the HR department. Actions taken during the early stages may reduce the stress or stop the symptoms. 18.5.1.1 Sensitive Syndrome

• • • • • • •

Depression or negative feeling Feeling of loneliness and solitude Getting disappointed with self More emotional reactions like getting more aggressive, sensitive, or tearful Mood swings Loss of confidence Loss of motivation

18.5.1.2 Mental

• More confusion • Poor memory • Less concentration 18.5.1.3 Physical

• Headache • Frequent infections

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• Muscle beat • Breathlessness 18.5.1.4 Changes in Normal Behavior

• • • • •

Changes in eating habits Arriving late or taking more time to do things Changes in sleep pattern Mood swings that affect the behavior Increased drinking, drug intake, and smoking

18.5.2 Signs of Stress in Groups

Stress can be found at the workplace too and can be contagious. It is often seen that low level of satisfaction in job is discussed among the employees. If stress in the organization is not noted and acted upon by the management at an early stage, then team dynamics may be destroyed, hampering the social and cultural synergies that exist in the organization. Managers play a different and unique role when it comes to dealing with workplace stress. They are responsible for assigning tasks, maintaining peace, and cherishing social customs that direct the work group. Managers should consistently discuss about job satisfaction and professional and personal health with their subordinates. Some other common signs include the following:

• • • • • • • •

Conflict and sickness Increase in staff turnover More absence due to sickness Poor performance The difficulty faced in attracting new staff Increased stress reports Increase in the number of complaints and grievances Customer complaints or dissatisfaction

18.6 Types of Stress

There are three types of stress: acute, episodic acute, and chronic. Each type possesses typical features, indicators, periods, and treatment methods. Because of these variations, it becomes difficult and challenging to manage stress. Each type of stress is explained in detail as follows (see Figure 18.3). 18.6.1 Acute Stress

Among all the forms of stress, acute stress is most commonly experienced since this occurs due to day-to-day demands and pressures faced by every individual.

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FIGURE 18.3  Types

of Stress

Acute stress in small amount creates a stimulation but causes fatigue when goes beyond a certain level. For example, riding a motorboat might be exciting for some time, but when the activity is stretched over hours, it might be tiring. Acute stress exists for a short span and may occur due to the burden of work, abiding by the deadlines, trivial accidents, and so on. Some of the common symptoms include the following.

• Emotional distress: Irritability, anxiety, depression, and anger. • Physical problems: Muscular problems, headaches, dizziness, and so on. Acute stress is very common and can occur in anybody’s life and can be thrilling and enjoyable at times, with a mix of emotions, and is easy to manage and treat (Craft, D., 2018). 18.6.2 Episodic Acute Stress

When acute stress is experienced frequently, it is termed as episodic stress. This stress is typically noticed among individuals who create impractical or unreasonable demands which get all messed up and cause a lot of stress in their effort to achieve these goals. Episodic stress is generally seen in people with ‘Type A’ personality, who are exceedingly competitive, aggressive, and demanding (Hiriyappa, B., 2013). The symptoms of episodic stress include the following:

• Extended periods of intermittent depression, anxiety disorders, and emotional distress

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• Constant worrying • Physical symptoms similar to those found in acute stress • Heart problems 18.6.3 Chronic Stress

Chronic stress contrasts with acute stress. Acute stress is exciting and thrilling, whereas chronic stress is harmful and unhealthy. This stress occurs due to longterm exposure to stressors. Chronic stress can occur as a result of some traumatic events, unhappy marital life, prolonged illness, problems in relationships, job dissatisfaction, and so on. Stress arising out of such situations seems to be never ending and life threatening, as there are chances of a person committing suicide or becoming violent. Severe illnesses such as stroke, heart attack, depression, and post-traumatic disorder can initiate due to chronic stress. The symptoms of chronic stress include:

• Physical problems: Breathing problems, increased heart rate, abdominal problems, headache, and so on.

• Mental problems: Irritability, tension, weak concentration, sleeplessness, depression, and fatigue.

Chronic stress is experienced when an individual does not find a way to get rid of the problematic situation. It is the stress of burdens and pressures for seemingly endless periods of time (Craft, D., 2018). 18.7 Causes of Stress

Stress can be categorized as organizational and non-organizational stress. The following are the causes or sources of organizational and non-organizational stress. 18.7.1 Causes of Organizational Stress

• Role ambiguity: It exists when an individual working in the organization is

not clear about their roles and responsibilities. This causes confusion and the individual is not able to understand what work they are supposed to do, which leads to stress. • Role conflict: Many a time, an individual working in an organization is required to play more than one role. The stress situation arises when an employee has to play roles wherein the demands are conflicting. For example, due to the bad financial conditions of the company, the head of a labor union, Rajesh, is asked to give a list of non-performing individuals so that they can be terminated. Here, Rajesh has to play two roles that have conflicting demands.

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• Negligible management support: When there is no support from the top man-

• • •

• • •

•

• • •

agement, it becomes very difficult for the teams to perform and remain productive and stress and frustration level among employees increases. For example, when a company wanted to restructure its supply chain to maximize returns on investment by digitizing decision-making, by putting data from Oracle data warehouse, it faced a lot of cost pressures and challenges from some members of the board, which delayed the implementation for a few months and inadvertently caused stress among the rest. Time pressure: Even tight deadlines can be a cause of organizational stress among the individuals and the team involved in projects. Less interest in participating: Organizational stress can occur when employees are not motivated to participate in decision-making or follow a creative approach in their work. No sense of belonging: It is not proper to not have a sense of belonging. A sense of belonging has high value as is portrayed in the example: When Tina puts on her QUITO name tag, she feels like she is representing the high value that QUITO places on customer service. When Tina goes the extra mile to assist a customer, she feels like her efforts match the goals of everyone who works at QUITO, absence of which might not lead Tina to work to her fullest capacity and in due course can be a cause of stress. Less opportunities: If the organization does not provide enough opportunities to grow or perform, then it can indirectly affect the employees’ enthusiasm and effort expended, leading to negativity and stress. Working conditions: Improper working conditions such as insufficient lighting and ventilation, too much noise and dust, and unhygienic sanitation facilities act as major stressors. Work under-load or overload: Both situations, under-load or overload of work, lead to stress. When the employee is under-loaded, they might experience boredom or sometimes a decrease in self-confidence, which causes frustration and stress. On the other hand, work overload might put excessive pressure on the individual, which in turn takes the form of stress. Conflicts at workplace: It is the difference in attitudes, values, perceptions, and beliefs of the individuals that leads to conflicts at the workplace. The conflicts may be interpersonal or inter-group. These types of conflicts are a potential source of stress. Shift working: Often, adjustments in shift timings lead to health and family problems. Working in shifts is a popular and most common source of stress among people working in rotating shifts. Lack of recognition: Recognition of the work done is a major motivator. However, lack of recognition may lead to dissatisfaction and stress. Organizational changes: Adapting to and managing change causes stress among the people. Some of the examples are transfer and introduction of new technology or policy.

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• Lack of power: In a workplace, the status of a person also affects the level of

stress. Employees of all categories in a workplace get affected by stress, though not at the same level. However, the lower-level employees, who have less control over their jobs, are more likely to experience stress than employees at a higher level. This indicates that authority is an important factor complicating the work stress environment. • Social interactions and stress: Bullying in the workplace can be a threat to an employee’s overall professional or personal image or status involving deliberate isolation or giving an employee excess work. • Destabilization: Destabilization is another type of workplace bullying, where an employee is not given credit for his/her work or is assigned meaningless tasks. This can create a negative effect on the work ethic of the employees and their contribution to the organization. 18.7.2 Causes of Non-organizational Stress

Non-organizational stress incurred by an individual during their lifetime arises due to expectations in life, followed by the fact that they are not met in due course or some unforeseen mishaps, hectic schedules, and demands of family members which are not met timely or are not possible to be met. The following are the causes or sources of stress.

• Basic needs: Unavailability or insufficiency of basic needs such as food, water, shelter, air, and clothing are major sources of stress.

• Sudden undesirable changes in life: Sudden undesirable changes in life such • • •

•

as transfer to a new location, death of a near one, and loss of a job can cause immense stress to an individual. High expectations: Unrealistic expectations, that is, higher than those that an individual can actually achieve, can cause frustration, which ultimately leads to stress. Too busy schedule: When an individual has a very busy schedule and they cannot spare time for the family, relaxation, and hobbies for a long period of time, it becomes a potential source of stress. Home demands: Relationships, children and family, which are hard to ignore, are some of the reasons for stress. The Academy of Management Journal states that this constitutes ‘an individual’s lack of personal resources needed to fulfil commitments, obligations, or requirements’ (Hu, Jia & Liden, Robert. (2014). Making a Difference in the Teamwork: Linking Team Prosocial Motivation to Team Processes and Effectiveness. Academy of Management Journal. 58. 10.5465/amj.2012.1142) Personal demands: Personal demands are brought forth by the person who takes on too many responsibilities at work or any other place.

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18.8 Managing Stress

Stress should not be ignored, but it has to be managed. Both individuals and organizations can take necessary actions to manage stress. Some of the tips to manage stress are as follows.

• Communicate with friends and family: Friends and family members are the

people who care and are ready to listen to the problems. They are the ones who understand and can suggest ways to overcome the stress. • Regular exercise: Regular physical exercise helps reduce stress to a very good extent, which will prevent an individual from falling into the bad stress zone. Endorphins are the natural painkillers and mood-elevating chemicals in the body. Aerobics helps in releasing endorphins. Doing regular exercise and mediation to relax muscles and mind is an effective way of managing stress. • Meditation: Meditation focuses on slowing down the mind and clearing unimportant matters or things from it. There are various techniques for meditation; however, all the techniques revolve around the aim of focusing on a particular thing. Techniques can vary greatly, but they all center around attempting to focus the mind on ‘one thing’. This one thing can be breathing. It can also be an object, a chant, a phrase, or even a positive thought (Stein 2003). Managing time: Planning and prioritizing activities to be carried out in advance lead to a reduction in the level of stress. Thus, managing time can prove to be a good effort to manage stress. Therefore, it is necessary to avoid taking new responsibilities or activities if an individual finds it difficult to give them the time required. Healthy diet and sleep: Healthy diet plays a crucial role in managing stress. Thus, an individual should carefully follow the diet plan. Good health practices such as getting a good amount of sleep and good nutrition help an individual remain in the good stress zone. It is like energizing oneself before physical exercise rather than waiting until one dies of thirst. Adequate amount of sleep is a must to make the best of what a human being can and handle stress. According to research, lack of sleep makes an individual more prone to illness and reduces focus. It has been suggested by health experts that most adults should get at least 7–9 hours of sleep in a day. Leisure/hobbies: Hobbies are a very good way to manage stress. Hobbies help an individual forget problems and relax the mind. Leisure time helps reduce stress as it slows down the mind, which helps an individual to be calmer and better. It helps recharge the body and the mind. Eliminate stressors in the environment: One of the potential sources of stress is poor working conditions such as insufficient lighting and poor ventilation.

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Efforts made to improve the working conditions will be helpful in reducing stress. Avoid excessive alcohol: The intake of alcohol and substances containing caffeine should be restricted to reduce stress. Visit doctor: If the stress continues to exist in spite of putting in efforts to manage or reduce it, it is advisable to visit a doctor and undergo proper treatment. Identify the stressor: Identify the reason for stress. For example, if anger is the reason for stress, then try to identify the reason for the anger. Accept things that cannot be changed: All the problems cannot be solved in the same way as planned or intended, but still that problem can be solved in a more successful manner. For example, an individual is asked to trim the bushes. They start trimming the bushes and find that they are not able to trim correctly. That individual cannot change the bushes that have already been trimmed but can deal with this stress by realizing that all people tend to make mistakes. An individual can learn from the mistakes and get insights for doing the job better next time. Positive thinking: One needs to stay positive in all situations. For example, thinking that an individual will get a hit in the softball game instead of getting tensed about the strikeout. One could make an effort to perceive a stressor as a challenge rather than perceiving it as a problem.

18.8.1 Companies that Are Using Meditation as a Stress Management Technique

Apple: Meditation has been promoted at Apple by Steve Jobs for a long time. Jobs had maintained a lifelong relationship with many monks and had taken part in many retreats. Some believe that the main reason behind his success was the mental control he had gained from meditation. Jobs wanted to pass on his love for meditation to others in the workplace, allowing employees of the tech giant to take 30 minutes each day to meditate at work, providing on-site classes on meditation and yoga and offering a meditation room. Nike: It seems that Nike’s motto ‘just do it’ applies to meditation as well. This company is also one of the many big businesses that incorporate meditation practices into their workplace. Employees are provided with access to relaxation rooms, where they can take some rest, pray, or, of course, meditate. In addition to these quiet rooms, employees can also take part in meditation and yoga classes without leaving the office. Google: Even when you are working in a company like Google, things can get a bit stressful on the job. Chade-Meng Tan, who is one of Google’s original software engineers and now head of personal growth, has been working hard to bring meditation to the workplace.

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Tan initiated a program called ‘Search Inside Yourself’ at Google in 2007. This program helped more than 500 employees improve emotional intelligence, breathe mindfully, and listen to co-workers. The company offers various meditation spaces and meditation courses for their mental health and well-being. Home Box Office: For turning the viewers into couch potatoes, the employees of HBO have to work really hard, and, therefore, the company provides them a wealth of resources to help them stay healthy, both mentally and physically. The company offers free yoga classes, meditation classes, and gyms for the same. The promotion of meditation and mindful exercise helped inspire their hit show Enlightened. Procter & Gamble: P&G’s CEO, A.G. Lafley, believes, ‘An individual cannot out-work a problem, and has to out-meditate it’. He has his own meditation practices and thinks they will help his employees as well. The company offers various fitness programs that include meditation for the employees. Case Study: Managing Stress and Finding New Ways of Sustenance

An educational institution running a particular course is finding it very difficult to sustain in this competitive environment as year after year, it is observed that student enrollments are decreasing due to better alternatives available for the student community. The head of the institution is facing a tough challenge as to what measures they should take to come out of this scenario. The impact of fewer enrollments has traversed deep down to the lowest-grade staff and every individual is concerned about their job. But the entire team is trying to handle the stress levels through establishing and enhancing student connect across the west, central, and east zones by starting various initiatives such as awarding scholarships to the bright and the poor, inducting working students and encouraging them to work while they take the course, and facilitating the students with paid jobs and training right from their induction into the institute and are optimistic that they will manage to handle stress and ensure continuity of business in these troubled times. Summary

This chapter summarizes human interventions or leans toward the psychological perspectives involved in doing businesses, since the operations are handled by human beings, who differ in their thought processes, attitudes, and behavior toward other individuals or groups, irrespective of whether they are working in teams or individually. Whichever business process requires human interventions, it has been seen that many psychological instances, such as stress, dissatisfaction, and demotivation, surface, for which resolution strategies are fabricated to efficiently manage them as a measure to ensure continuity of business, and such resolutions are discussed in the chapter.

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Exercise Objective Questions

1. ______ is a feeling experienced when a person thinks that the demands exceed the personal and social resources an individual is able to mobilize. • Conflict • Want • Stress • None of the above 2. A stressor leads the body to use its alarm reaction. • True • False 3. Unpleasant situations that cause negative stress are called: • Eustress • Distress • Harm • None of the above 4. Which kind of sign of stress is mood swing? • Sensitive syndrome • Mental • Physical • None of the above 5. Stress is not contagious. • True • False 6. Which type of stress occurs due to the day-to-day demands and pressures faced by every individual? • Acute • Episodic acute • Chronic • None of the above 7. When acute stress is experienced frequently, it is termed as: • Acute • Chronic • Episodic acute • None of the above 8. Hobbies are a very good way to manage stress. • True • False 9. Which kind of sign of stress is less concentration? • Physical • Mental • Sensitive syndrome • None of the above 10. _________ focuses on slowing your mind down and clearing it of unimportant matter or things. • Regular exercise • Meditation • Excessive alcohol • None of the above Case Study

Infobridge Private Limited is a product development company. It started with two employees and has now grown to 275 employees. This huge growth occurred because of its innovative product development and it is still growing rapidly. Alan Gay had joined as a managing director in 2009 and started managing its operations. Despite the economic crises in 2010, the company made profits and the credit was given to the managing director. Later in 2012, the company found that it had started going into losses. On investigating, it was found that many employees

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are on leave for sickness, a few of them are complaining about the sleeping problem, and some of them have upset stomachs. The employees were forced to work overtime and were expected to help each other. The managing director then hired John Stewart to assess this problem and take necessary actions. On analyzing, John realized that there is a strong correlation between the organization and the employee satisfaction. The top management met and discussed the problem. To have more clear insights into this matter, a one-day workshop was organized for the top management. They conducted a few games where the top management was involved in spontaneous movements of their body. They were asked to touch a body part which they found to be very firm. Alan touched the back of his body. This was quite obvious as he carries all the responsibilities on his back for all the operational matters of the organization. The workshop clearly revealed the problems because of which employees were on leave and could not be productive. In another meeting, they discussed about the problems that arose in the organization with all the possible interventions. After a long discussion, it was decided that three departments would be established, each separate from the other on a professional basis. Three leaders were appointed to look after these departments independently. They also decided to have a rest policy where employees can spend a few minutes as a coffee break at 3.30 pm. To measure the efforts put by the management in order to overcome losses and regain profit levels, they chose a few parameters such as ensuring and monitoring physical fitness through sports activities and make employees avail shopping benefits through usage of gift/travel vouchers thereby increasing work satisfaction and their productivity. Six months later, the outcomes were evaluated. The profit levels started to grow again, and the number of sick leaves was dropped to a minimum. A questionnaire was drawn up to assess the work satisfaction. Stress management proved to be successful within six months. Questions

1. What type of job stress is found in this situation? 2. How did the stress affect the organization? 3. What other stress management strategies could have been implemented? Critical thinking Questions (Relevant examples to support the discussion)

1. Give an example of a work situation that really stressed you to the maximum. 2. What are the most effective strategies to cope up with stress? 3. Under stressful situations what will push you to excel?

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Chapter at a Glance Introduction

Stress is a feeling experienced when a person thinks that the demands exceed their personal and social resources. Signs and Symptoms of Stress Signs of Stress in Individuals

These are accompanied by some symptoms that are listed below. Sensitive Syndrome

• • • • • • •

Depression or negative feeling Feeling of loneliness, solitude Getting disappointed with self More emotional reactions like getting more aggressive, sensitive, or tearful Mood swings Loss of confidence Loss of motivation

Mental

• More confusion • Poor memory • Less concentration Physical

• • • •

Headache problem Frequent infections Muscle beat Breathlessness

Changes in Normal Behavior

• • • • •

Changes in eating habits Arriving late or taking more time to do things Changes in sleep pattern Mood swings that affect the behavior Increased drinking, drug intake, and smoking

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Signs of Stress in Group

• Stress can be found at the workplace too and can be contagious. Example: Job satisfaction.

• If the organization is not able to note and act upon stress at an early stage, this may be detrimental to team dynamics.

Types of Stress Acute Stress

• This occurs due to the day-to-day demands and pressures faced by every individual.

• Acute stress in small amount creates a stimulation but causes fatigue when goes beyond a certain level.

• For example, riding a motorboat might be exciting for some time, but when the activity is stretched over hours, it might be tiring.

• Acute stress exists for a short time and may occur due to the burden of work, abiding by the deadlines, trivial accidents, and so on.

Episodic Acute Stress

• When acute stress is experienced frequently, it is termed episodic stress. • This stress is typically noticed among individuals who create impractical or

unreasonable demands which get all messed up and cause a lot of stress in their effort to achieve these goals. • Episodic stress is generally seen among the ‘Type A’ personality people who are exceedingly competitive, aggressive, and demanding. Chronic Stress

• This stress occurs due to long-term exposure to stressors. • It can also occur because of some traumatic events, unhappy marital life, prolonged illness, problems in relationships, job dissatisfaction, and so on.

• Severe illnesses such as stroke, heart attack, depression, and post-traumatic disorder can be caused due to chronic stress.

Causes of Stress

Stress can be categorized as organizational and non-organizational stress. The causes of stress are as follows. Causes of Organizational Stress

• Role ambiguity: It exists when an individual working in the organization is not clear about their roles and responsibilities.

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• Role conflict: Many a time, an individual working in the organization is •

• • • • • •

• • • • • •

required to play more than one role. The stress situation arises when they play roles wherein the demands are conflicting. Negligible management support: When there is no support from the top management, it becomes very difficult for the teams to perform and remain productive and, therefore, the stress and frustration level among employees increases. Time pressure: Even tight deadlines can be a cause of organizational stress among the individuals and the team involved in projects. Less interest in participating: Organizational stress can occur when employees are not motivated to participate in decision-making or not following a creative approach in their work. No sense of belonging: Employees do not feel that the organization where they work is their second home and the onus is on them to be responsible to drive the growth. Less opportunities: If an organization does not provide enough opportunities to grow or perform, it indirectly affects employees’ enthusiasm and effort, leading to negativity and stress. Working conditions: Improper working conditions such as insufficient lighting and ventilation, too much noise and dust, and unhygienic sanitation facilities act as major stressors. Work underload or overload: When an employee is underloaded, they might experience boredom or sometimes a decrease in self-confidence, leading to frustration and stress. On the other hand, work overload might cause excessive pressure on the individual, which in turn takes the form of stress. Conflicts at workplace: It is the difference in attitudes, values, perceptions, and beliefs of the individuals that leads to conflicts at the workplace. Shift working: Often, adjustments to the shift timing lead to health and family problems. Lack of recognition: Recognition of the work done is a major motivator. However, lack of recognition may lead to dissatisfaction and stress. Organizational changes: Adapting to and managing change causes stress among the people. Lack of power: In a workplace, the status of a person also affects the level of stress. Employees of all categories in a workplace get affected by stress, though not at the same level. Social interactions and stress: Bullying in the workplace can be a threat to an employee’s overall professional or personal image or status.

Causes of Non-organizational Stress

Non-organizational stress incurred by an individual during their lifetime arises due to high expectations in life followed by the fact that they are impossible to satisfy.

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• Basic needs: Unavailability or insufficiency of basic needs such as food, water, • • • • •

shelter, air, and clothing are the major sources of stress. Sudden undesirable changes in life: Sudden undesirable changes in life such as transfer to a new location, death of a near one, and loss of a job can cause immense stress to an individual. High expectations: Expectations that are higher than those that an individual can actually achieve can cause frustration, which ultimately leads to stress. Too busy schedule: When an individual has a very busy schedule, they cannot spare time for family, relaxation, and hobbies, which when continued for a long period of time becomes a potential source of stress. Home demands: Relationships, children and family, which could not be ignored, are some reasons for stress. Personal demands: Personal demands are brought on by the person when an individual takes on too many responsibilities at work or any other place.

Managing Stress

Stress should not be ignored, but it has to be managed. Both individuals and organizations can take necessary actions to manage stress. Some of the tips to manage stress are as follows.

• Communicate with friends and family: Friends and family members are • • • • • • • •

the people who care about you and are ready to listen to your problems. They understand you and can suggest a way to overcome your stress. Regular exercise: Regular physical exercise helps reduce stress to a very good extent, which will prevent an individual from falling into the bad stress zone. Meditation: Meditation focuses on slowing down your mind and clearing it of unimportant matters or things. Managing time: Planning and prioritizing activities in advance leads to a reduction in the level of stress. Thus, managing time can prove to be a good effort to manage stress. Healthy diet and sleep: Healthy diet plays a crucial role in managing stress. Good health practices such as getting a good sleep and good nutrition help an individual remain in the good stress zone. Leisure/hobbies: Hobbies are a very good way to manage stress. Hobbies help an individual forget problems and relax the mind. Eliminate stressors in the environment: One of the potential sources of stress is poor working conditions such as insufficient lighting and poor ventilation. Avoid excessive alcohol: The intake of alcohol and substances containing caffeine should be restricted to reduce stress. Visit doctor: If stress continues to persist in spite of putting in efforts to manage or reduce it, then it is advisable to visit a doctor and undergo proper treatment.

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• Identify the stressor: Identify the reason for stress. For example, if anger is the reason for stress, then try to identify what is the reason for the anger.

• Accept things that cannot be changed: All the problems cannot be solved in

the same way as planned or intended, but still that problem can be solved in a more successful manner. • Positive thinking: One needs to stay positive in all situations.

19 POWER AND POLITICS

An Opening Vignette POWER AND POLITICS: CASE STUDY ON POLITICAL ETHICS A company that had its headquarters in Mumbai was manufacturing bicycles in its plant near Aurangabad. The turnover of the organization was 150 crores and its net profit margin fell from 15 percent to 12.5 percent in the last financial year. The CEO of the company was under great pressure to turn it around, but his immediate subordinate (the VP, finance) aspired to be the next CEO of the organization. The average production of bicycles was 250 per day, while the machine unit for manufacturing and assembling the frame, fork, handlebar, rim, wheel, and the complete was considerably old, and the company could not sustain the production schedule owing to the maintenance and replacement of any parts that needed to be done at the earliest. Hence, the production started declining phenomenally. The CEO of the organization then initiated a probe on the maintenance and possible replacement of such old parts but came to understand that the party to whom the annual maintenance contract was given had not been paid its previous dues as the audit team had taken objection to certain discrepancies that had been intentionally not resolved by the VP (finance). So, there was a political perspective to the above issue where the ethics for behaving politically were not adopted as per norms and even the actions taken were not synchronized with the organization’s goals, which led to the production below the desired level resulting in substantial loss.

DOI:  10.4324/9781032634258-19

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The VP (finance) of that organization was then educated on the common political ethics to be followed within the organization and some additional punitive actions were taken to prevent employees from using unethical approaches.

19.1 Powers: An Overview

Power is the capability to determine the demeanor and the attitude of the others. The term power may be applied to individuals, teams, functional units, industries, and nations. For example, a team within an organization is considered powerful, which means it has the potential to impact the conduct of individuals in other functional units. This can affect resource assignment, space allocation, long- and shortterm goals, recruitment decisions, and many other outcomes in an organization. A structure that creates positions in the organizations gives the power of dominance to the individuals. Certain individuals who are given the authority control the activities of the organization. Therefore, employees in the organization try to gain an authoritative position in order to avail control in the organization. For example, a CEO has many senior people under him. The CEO accords the positional power to the relevant employees who he/she controls, and also the activities of the organization. Power is also vital for the efficient running of the organization. The strategic constituency theory states that power is required to make strategic decisions and solve the most complex problems that originate because of environmental uncertainties. The organization chart depicts the power structure. When the top management gets a broad overview and understanding of power, then the power and politics have minimal negative effects. A manager’s success is directly proportionate to how expeditiously and accurately they are able to evaluate and analyze the organization’s power structure and politics. 19.2 Concept of Power

‘Power is simply the ability to get things done the way one wants them to be done’ (Salancik, G.R., & Pfeffer, J. (1989)). Power refers to a behavioral trait where A controls and directs the behavior of B, and B acts in agreement with A’s dictum. Power can exist but might not be used or imposed. The crucial facet of power is its property of dependency. The more the dependency of B on A, the greater the power of A. Dependence, in turn, is based on options that B notices and the weight that B attaches to the option(s) that A exercises control upon. Power prevails in all possible types of situations and conditions and there are multiple definitions of power. According to R.A. Dahl, power is the capability of a person or group of persons to get a task of any form executed by another person

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or group. It is the quality to create an impact on others in a designated manner. Power resides with managers and leaders, and it is the essential means of leading and controlling the organization and achieving its goals and objectives. A manager’s capability to get the work completed depends upon the degree of authority that they can exercise and these authoritarians try to accomplish the tasks for the smooth functioning of the organization. 19.3 Dependency: The Key Element

Power is directly proportional to dependency; the more the dependency of Person A on Person B, the more powerful is Person B. The strategic contingency model states that dependency is the power that a person gains from their ability to handle potential problems that the organization faces (Saunders 1990). Dependency increases when the resource is very much in demand and is not so easily accessible and non-substitutable. When an organization seeks to avert uncertainty, those individuals who can confront the same will be seen as exercising control on an important asset. For example, the sales and marketing department of an organization is considered to be more powerful when the uncertainty that is being faced by the firm is centered around the product’s sale. This might justify that engineers, as a group, would be more commanding at Intel than at Procter & Gamble. Intel, as an organization, relies on high-end technology, and is dependent on its engineers to enhance the product quality, while at Procter & Gamble, marketers are more powerful as sales of their baby and fabric care products are chiefly dependent on how they are marketed. The above example showcases that once uncertainty within an organization is reduced by an individual or a group, the power of that individual or the group automatically enhances. A resource needs to be supposed as rare to create dependencies. Even the workers at the bottom of the pyramid possessing hands-on knowledge gain more power than their immediate superiors and sometimes they indulge in not-so-professional tasks such as refusing to train people or operating in secrecy to make the task appear more complex. Individuals in occupations where demand is more than supply can negotiate compensation and other benefits that are far more lucrative. The market for corporate finance faculty is extremely scarce, with high demand and limited support, as compared to a language teacher, resulting in the negotiation of higher salaries. Non-substitutability ensures that there are no viable substitutes, as a result more power is accorded to the person or group who cannot be substituted. In the case of universities having data centers and IT units, the authority of the highest cadre has to depend on the data center employees for the design and development of websites and apps, and to ensure authenticity and secured storage of data and reports; hence, such employees, say in strategic decision-making, have to be heard and honored by the top management.

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19.4 Importance of Power in Organization

People in the organization yearn for power because of the following reasons:

• To control the people and other resources, to collaborate toward, the achieve• • • •

ment of the organization’s goal To influence the decision-making, in order to achieve the short- and long-term organizational goals To influence the centralization of activities within the organization Individuals bestowed with power determine even the allocation of performance awards, selection of technology, and so on To facilitate efficient functioning of the organization

19.5 Sources of Power

French and Raven who are forerunners in this area have separated an individual’s power into two types: formal and informal (Figure 19.1). 19.5.1 Formal Power

The formal power comes from the position, role, and responsibility held by the person in the organization. The higher the role, responsibility, and position within the organization structure, the greater the power relished by the person. An individual who is accorded role and responsibility and entrusted with the task to face uncertain situations within an organization enjoys more power and authority in the organization.

FIGURE 19.1  Sources

of Power

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Formal power can be divided into categories as follows:

• Legitimate power: The power that is exercised to control and use the organi-

zational resources to accomplish long- and short-term goals. It includes recognition of positional power by employees within an organization. Utilizing this power, a manager not only controls various resources of the organization but also controls the conduct of the juniors. • Reward power: Reward power can accord tangible and intangible benefits. It is the power by which a person who has the authority accords promotion, praise, raise, and projects to their subordinates. The entity that gives reward has more power than the entity that accepts it. An individual with power can give or withhold the reward to their subordinate. • Coercive power: Being intimidating, one can downgrade, dismiss, and suspend others. It involves keeping control of others through restrained movement or controlling by force the elementary physical or security needs and suppressing compliment and benevolence. In fact, coercive power is often condemned and hard to control. An individual because of their physical strength can exhibit coercive power, use commanding tones, foul language, or withhold emotional backing. • Information power: Those individuals who have the accession over the information exercise this power and they get the tasks done by others based on the power they have been accorded. The more the control over information, the more is the power. As a result, the subordinates are highly dependent on them. 19.5.2 Informal Power

People possessing informal power are as powerful as the persons occupying formal power positions within the organization, based on their knowledge, skills, and personality types. Accordingly, informal power can be largely classified into expert power, referent power, and charismatic power.

• Expert power: Expert power, which is an informal power, is in existence across

every organization. It is applied as a result of expertise gained, specific skill, or knowledge possessed by any entity or individual. Those who are expert in relative domains and technology wield more power as a result of their proficiency. • Referent power: Thus, referent power is based on association with a person who holds position, power, and resources and the dependents take pride in referring to them while getting their job done. The referent power closely aligns with charismatic power. • Charismatic power: Charismatic power is usually found in faith, belief, politics, and unionism. Where the charismatic power exists, the value of other powers substantially decreases. The power disappears with the disappearance of the leader. Charismatic power is not transferable as other people might not possess

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similar abilities and properties as found in a charismatic leader. When the leader is charismatic, the followers blindly follow them without a proper rationale. 19.6 Power Tactics

To obtain power, individuals in the organizations use the following popular tactics: Friendliness: Some of the traits, such as flattery and being friendly with people who hold a relevant position and power, help an individual to showcase the power accorded to them. Such individuals request powerful entities to favor them in times of need, and they become passionate in the organization. Irreplaceable: To gain power, individuals need to sharpen their skills and enhance their knowledge so that it becomes challenging for the organization to find a standby or a replacement. Intentional acceptance of duties by individuals can over the course of time create dependency of the managers on these individuals, leading to promotion and reward conferred on the Manager by the individual. Building power network: This is done by people who connect with individuals who have authority, position, control over resources, special skills, and so on. By distinguishing and connecting with persons of authority, one tries to become powerful. Building an alliance: Employees form confederation and alliance; more alliances are created where there are a lot of responsibilities and resource interdependence. Ensure assertiveness and build credibility: To be coercive, one has to aggressively and forcibly solicit cooperation with repeated appeals, notifications, and reminders, citing rules that require adherence. One has to set up one’s credibility in terms of sincerity, morality, and quickness in words and actions. Exert pressure: This is an aggressive method and trade unions in an organization exercise this authority. They call for strikes if the management does not consider their demands. The use of warning may call for counter-threats. Some individuals become leaders of such associations to create pressure on the organization to acquire the power. 19.7 Positions of Power – Warning Signs of Abuse

When politics and power come into action in a business, there is a chance of misuse of power. Following are some indicators that can portray a misuse of power. Unfair disciplinary measures: In some cases, infliction of unfair disciplinary measures or picking up intentionally on a person depicts the abuse of power. Superiority: Superiority can also lead to misuse of power and some individuals might bruise those who are below them in seniority and enforce tasks on people simply because they have the desired power.

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My way or the highway behavior: A behavior exhibited by the person in authority that is used to forestall anyone else from exhibiting proficiency and to help raise the former’s status. Hence, greater control and not so rational ways are adopted to prevent the subordinates under them from growing. Disrespecting personal boundaries: Disregarding employees’ personal obligations and cognition tends to yield a non-conducive work environment. The demeaning activities can range from sexual harassment to strong humiliation. Aggression: Verbal and physical abuse arising from aggression has occurred in varying degrees. Hostility can be a way to discourage people, and it is one of the most prevalent factors of injury and death in the workplace. 19.8 Dealing with Workplace Abuse

If there is mis-utilization of power, then a few steps can be taken, which are as follows: Challenge the person: This is effectively done in isolation with the person who has the authority. Mis-utilization of power can be hurtful and highly unprofessional and the person accorded the power should be made to see it and be aware of the same. Document it: Keeping the necessary proofs such as documents, messages, and images of power abuse can be offered to the business’s human resources unit and used as evidence against an abuser. Human resources responsibly: A business’s human resources unit is organized to manage any occurrence of misconduct among the staff. In cases where strong involvement like the police or legal action is required, the HR unit will need to get involved in the state of affairs on behalf of the business. 19.9 Politics: Power in Action

Pettiberg (1973) defined organizational politics as events in which managers involve themselves to grow their authority and follow their goals that support their individual and group interests. According to Pfeffer (1981), organizational politics involve the activities carried out within the organization to gain, grow, and utilize power and other resources for preferred outcomes, in situations, where there is indecision or no consensus on the preferences. Employees use power or politics to gain promotion and organizational decision-making is hugely influenced by them to get things done in their favor and for their own personal interest. Mayes and Allen (1977) are of the view that organizational politics is the degree of influence exercised to obtain the results through non-sanctioned means. Transnational politics are related to resource allocation, resolution of ambivalence, and strategic decision-making of the organization. When power is put into

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action, it can be termed as politics. Individuals involve themselves in politics to gain more authority in the organization to instill command over resources, to voice their opinion and their perspectives in decision-making and to accomplish their personal goals. Organizational politics can be attributed to the balanced pursuit of personal and organizational goals, critical problem-solving, and analyzing the situation. The negative aspect of organizational politics is characterized by a hidden agenda, pursuing individual interest and so on. Though political behavior is not appreciated in an organization, individuals having a political bent of mind choose to do so to gain more power. The political demeanor within an organization includes many activities such as dissemination of incorrect information, leaking of classified information, exchange of organizing information for mutual benefit, and lobbying against an individual, group, or decision. Politics causes dissonance, struggle, mental strain, anxiety, and incertitude within an organization. 19.10 Types of Political Behavior

The political behavior of the individuals in an organization can be largely divided into two categories: legitimate and illegitimate. Legitimate political behavior: Legitimate politics comprise repining over one’s higher-ups, bypassing the chain of command, forming alliances, hindering organizational contracts, and developing external contacts in the professional sphere. Illegitimate political behavior: Illegitimate politics include activities such as destruction, whistle-blowing, and emblematic resistance, like a team of employees citing illness. Steven and Mary Ann Von have categorized the behavior across seven dimensions, which are as follows: Blaming others: It is basically to make the rivals face the blame game. Restricted information sharing: Information is the most important tool and the members in possession of pertinent and strategic information are powerful entities within an organization. They share such information with people whom they favor the most and gain the desired support. Controlling individual behavior: Powerful people can exercise their influence to such an extent that subordinates try to please them by exhibiting the desired behavior in the organization. Forming alliance: In alliance, more than two persons form a group to achieve some common objectives in order to impact the decisions within the organization. Developing networks: People develop networks to gain support, collate information, and facilitate the members’ initiatives.

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Creating obligations: Powerful individuals try to make people in their group or team feel obliged so that they can get support from them. Managing impressions: It refers to the creation and development of favorable images in the organization by powerful entities. They offer to lend support at the time of crisis to the other members to create a favorable image for themselves. 19.11 Factors Contributing to Organizational Politics

The political atmosphere in an organization is not the same everywhere. In some places, politicking is evident and extensive, and in others, politics has a minimal impact on the outcomes. Recent research has recognized and extrapolated, determinants that boost political behavior. Some are individual traits of employees within the organization, the others are an outcome of the organization’s culture. Figure 19.2 illustrates both the determinants and their impact and when used correctly can provide promising outcomes, i.e., rewards, accolades, and punishments avoided for both individuals and groups in an organization. 19.11.1 Individual Factors

In terms of attributes, employees who are self-monitors, having a dire need for power, engage in political behavior. They showcase higher levels of social

FIGURE 19.2  Factors

Contributing to Organizational Politics

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compliance and are skilled politicians. Individuals with an internal locus of control are subject to take a retroactive attitude and endeavor to fudge circumstances in their advantage. The Machiavellians use politics as a means to make progress in their personal interest. When an individual invests their time and effort within the organization, then based on the various growth alternatives and ambition to succeed, the actions will determine the extent to which they will engage themselves to take the course of illegitimate means. When an individual has multiple job opportunities due to a favorable job market scenario or is in possession of skills or knowledge that cannot be found frequently or has a salient repute or authoritative contacts outside the organization, then they are more prone to exercising their power from a political perspective. Knowledgeable and powerful individuals with political abilities have high chances of being successful by using illegitimate ways. Organizational Factors

When considering an organization, the political behavior varies to a great extent, and this is most prominent around the time of promotions. The opportunity for promotion inspires people to contend for a controlled resource to ensure a positive outcome and in such cases, the political interventions are high. In addition, organizational cultures defined by low reliance, the ambiguity of roles, vague performance appraisal and evaluation systems, inconsistent reward allocation practices, inappropriate decision-making, substantive performance pressure, and power-loving senior managers will nurture a base for politicking. When organizations reduce the resources to drive optimality, the employees who have power may get involved in political conduct to safeguard what they have. When resources are significantly reallocated within the organization, conflict, and politicking increase. In the case of role ambiguity, the higher the uncertainty, the greater the degree to which an individual gets involved in political activities which have a negative impact on the other members of the team and affects team performance. The more an organization uses subjective criteria in the assessment and lays weightage on a single outcome or allows a duration to pass between the time to act and the assessment/appraisal, the greater the probability that an employee gets away with politicking. The more an organization’s culture emphasizes the win–lose approach to reward employees, the higher the chances of politicking. In recent times, organizations follow the collaborative style of leadership rather than the autocratic style, with subordinates being allowed to participate in the decision-making. If a person perceives that their career performance is significantly dependent on the next quarterly sales, then there is a great motivation to achieve the same despite the built-in pressure.

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Finally, when employees perceive that the top management is engaged in political behavior and are rewarded for the success that has come out of manipulation, an environment is created that supports politicking. 19.12 The Ethics of Behaving Politically

A few ethical guidelines on political behavior are shown through the decision tree in Figure 19.3. The first question addresses personal versus organizational goals. Ethical actions need to be aligned with the organization’s goals. For example, in order to lower the confidence of the design team, taking help of rumors is purely an unethical mode of conduct. However, in order to clinch a deal, if a unit’s head exchanges favor with the sales’ head to get the contract processed quickly, then the act cannot be termed as unethical. The second question apprehends the rights of other stakeholders. The most common unethical measures are privacy intrusion by people who are in power and activities like reading other employees’ official mail/message. The final question is whether the political activity is equitable and justifiable or not. For example, a unit head allocates a better score to an employee whom he

FIGURE 19.3  Ethics

in Politics

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favors and lowers the performance score of the one whom he does not favor, then such acts are unethical. 19.12.1 Implications for Managers

The fact that we can ascertain is that when people in organizations are difficult, disputative, and unreliable, it may be because the performance demands placed on them surpass their resources and abilities. Expert and referent powers lead to employee productivity, cooperation, dedication, and contentment. Coercive power gives rise to dissatisfaction and discontentment and employees are more likely to resist the attempts of the managers to influence. For example, when a study was conducted on several organizations, it was seen that expert power in managers had a wider appeal. These managers are flexible to any type of political culture within organizations and use this information to communicate strategies that will be of vantage to each employee. It is said that good politicking skills solicit good performances from employees and acknowledge their contributions with rewards and promotions. Lowly ranked employees, those that lack the power base, comprehend organizational politics as a source of disappointment and are highly dissatisfied when politics prevails, while highly ranked employees can judiciously handle political behavior. Summary

Power and politics in an organization are a result of the interaction and interchange between different entities or groups within an organization. Power has been described to be the capability to create an impact on the conduct of employees within an organization and to enforce tasks on them. French and Raven, renowned social psychologists, identified five power sources: coercive, reward, legitimate, expert, and referent. While coercive power describes authority based on fear and threat, reward power is a type of positive power executed by rewarding subordinates. Legitimate power is the power bestowed upon a person of authority in an organization, while expert power refers to a person’s skill and subject knowledge that is of value to the organization. Referent power is an individual’s attempt to emulate a person’s behavior whom they know and find them powerful. Dependency with respect to power is a function of value, and nonsubstitutability of the human resources on whom the power to control resides. The contingency approach identifies compliance, identification, and internalization as traits to achieving power. Organizational politics that is ‘power in action’ may be legitimate or illegitimate in nature. The extent of politicking depends on personality and background

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of an individual, as well as organizational determinants like culture, goals, and the attitude of top management. Ethics in power and politics are also important. Exercise Objective Questions

1. _________ is the ability to control an employee’s behavior and a way of attaining it. • Rational persistence • Expert power • Coercive power • Charismatic power 2. A worker who behaves in a manner that portrays a healthy boss–subordinate relationship exudes____________ power. • Expert • Coercive • Legitimate • Referent 3. The three basic power relationships that are approaches to success within an organization are ____________. • Upward, downward and laterally • Upward, downward and oblique • Downward, lateral and oblique • Downward, lateral and external 4. In which direction a manager would find the usage of both position and personal power impactful? • Upward • Lateral • Downward • Workflow 5. Ethics in politics should be ____________. • Equitable and justifiable • Equitable and not justifiable • Not equitable and justifiable • Not equitable and not justifiable CASE STUDY: POLITICS AND ORGANIZATIONAL APPROACH

An employee of a chemical company, Ariola, was concerned about some harmful carbon emissions, and increased carbon footprints which had been overlooked by environmentalists and political groups or the statutory bodies involved in environmental protection. Since the company was not receptive to new ideas, the

632  Power and Politics

employee devised an air filter to prevent those harmful emissions. But he faced a stiff resistance from his unit manager and hence had to approach the managing director of Ariola. The managing director, though not averse to the idea of placing the air filters at the point of the gas emissions, could not take the decision solely. A meeting of the heads of the three operating units was called: the research head, the unit manager under whom the employee was working, the chief of infrastructure and resources, and the marketing and finance head. The polling mechanism was used to get the approval of the majority of this proposal to consider it final from a strategic perspective. From the organization’s cultural perspective, it is required that an employee at the lowest level proceeds through a structured process in order to get their idea approved and sanctioned due to the absence of the needed authority. However, the employee’s situation was such that when he approached the unit heads, they wanted their heads to shoulder the responsibility of validating the proposal, pushing it to the managing director of the organization. From the political perspective, a stakeholder mapping was done with respect to the stakeholders who would be interested, and the positional power was taken into account to set the ball rolling. So, taking into consideration the government regulations that require the pollution levels to be under control along with the company’s strategic innovative initiative to be brought into focus, it was decided that the following strategic measures were to be taken:

• Rally support that would result in a coalition, creating momentum that would work its way up the corporate ladder to get the proposal accepted.

• Employee and his support group approaching unit heads to gain support. • Wait for the time that is right to initiate the push of that proposal based on internal and external business conditions and proposing to external stakeholders for relevant funds and grants to run the pilot.

Question

1. What according to the reader is the inference derived from the case above? 2. Strategy formulation and strategy implementation revolved around a set of rules. Throw light on the same. Critical Thinking Questions (Relevant examples should support the answers)

1. Power, authority, and leadership to be compared and contrasted with suitable examples. 2. A narrative on the five bases of power with the most commonly occurring base within an organization. 3. Discuss the concept of power dependencies and its relationship with the bases of power.

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4. 5. 6. 7.

What is the significance of political behavior within organizations? Define politics and explain how politics differs from power. Identify several specific power tactics used in organizations with examples. Ethical handling of authority and the positive polity within an organization add to the organization’s benefits. Discuss

Chapter at a Glance Power: An Overview

Power is the capability to determine the demeanor and the attitude of others. The term power may be applied to individuals, teams, functional units, industries, and nations. Power and leadership: Power does not require goal similarity but only dependence, whereas leadership requires a match between the goals of the leader and employees. Sources of power: Positional, referent, reward, and expert. Positional power is due to authority rendered to a person in an organization. Referent power is associated with a person having power and authority who is in contact with an employee of the organization. The reward is the power to use benefits to motivate employees and expert power refers to the knowledge that makes a person powerful. Power tactics: They range from legitimate, rational persuasion, appeals, consultation, and exchange Politics: An Overview

Organizational politics refer to the activities managers engage in to increase their power and use it to achieve their goals. Types of political behavior: The political behavior of the individuals in the organization can be broadly divided into two categories: legitimate and illegitimate. Legitimate political behavior: Legitimate politics comprise repining over one’s higher-ups, bypassing the chain of command. Illegitimate political behavior: Illegitimate politics can be activities such as destruction, whistle-blowing, and emblematic resistance like team of employees calling in ill. Steven and Mary Ann Von have categorized behavior across seven dimensions, and they are as follows. Blaming others: It is basically to make the rivals face the blame game. Restricted information sharing: Information is the most important tool and the members in possession of pertinent and strategic information are powerful entities within an organization.

634  Power and Politics

Controlling individual behavior: Powerful people can exercise their influence to such an extent that subordinates try to please them by exhibiting the desired behavior in the organization. Forming alliance: In alliance, more than two persons form a group to achieve some common objectives in order to influence the decisions within the organization. Developing networks: People develop networks to gain support and collate information and facilitate members’ initiatives. Creating obligations: Powerful individuals try to make people in their group or team feel obliged so that they could get the support from them. Managing impressions: It refers to creating and developing favorable images in the organization by powerful entities. Factors contributing to organizational politics: Individual and organizational determinants with respect to politics can play a crucial role in generating favorable outcomes in the form of rewards and recognition for individuals as well as groups. The ethics of behaving politically: Addressing personal vis-à-vis organizational goal, addressing political rights of an employee, and ensuring usage of politics is justifiable.

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INDEX

Adams, John Stacey: equity theory of motivation 456–458 ADKAR model: defined 577–578, 593; foundations of 578–579; steps in 578, 593–595 administration and management (difference between) 7–9 administrative management 31 Alderfer, Clayton: ERG theory 452–454 approaches to management: classical 30–31; contingency/situational 32–33; human/behavioural 31–32; mathematical/quantitative 36–37; operational 33; systems 34–36 Argyris, Chris: adult personality (theory of) 52 attitude: vs. behaviour 326–327, 346; changing in workplace 329; classification of 327–328, 346; components of 326–327, 346; defined 325–326; negative 326–329, 345–347, 540, 542; neutral 326, 346; positive 161, 326, 328, 329, 338, 343, 345–348, 502, 534, 540, 556, 562; on workplace, impact of 328, 347 balanced scorecard actions to take/do’s 280, 282–283; benefits of 281–282; case study 283–285; defined 281, 294 Barnard, Chester 31, 34, 44–45, 100–101, 120, 261

Blake, Robert R. and Mouton, Jane: managerial grid or leadership grid model 411–413 Boston Consulting Group (BCG) matrix 273–275, 291–292 break-even analysis 203, 204, 242–246 budget/budgeting process: advantages of 200; defined 199; limitations of 201; process involved in 200–201 bureaucratic organization 30, 31, 46, 62 business plan for manufacturing company 65 business process reengineering 310, 318 capital expenditures 68–69 centralization of authority: advantages of 136–137; case study 135; defined 136; disadvantages of 137 change management: characteristics of 563; defined 407, 563, 587; external and internal forces responsible for 564–566; management to resistance 568–570; models 575–583, 592; nature of 563; personality and 573–575, 590–591; principles of successful 564, 587; resistance to 566–570 code of ethics for employees 316 compensation: components of 172–173, 181; direct 172, 181; indirect 172, 181 compensation management: benefits of 171–172; defined 171, 181; fiscal 171, 181; non-fiscal 171, 181 

642 Index

competencies for successful manager 14–15 conflict(s): defined 49, 130, 481–483; dysfunctional 481, 483, 484, 487, 506; functional 385–386, 483–484, 487, 506; intergroup 486, 492–496, 502, 510–513; interpersonal 311, 488–489, 491, 494, 495, 508–509, 511, 512, 547, 588; intragroup 492, 495, 510, 513; intrapersonal 487, 488, 494, 508, 511; process involved in 486, 492, 507, 510; resolution of 15, 51, 63, 296, 365, 482–498, 502, 505, 506, 512, 513 conflict management styles: accommodation 500, 514; avoidance 499–500, 514; collaboration 498, 514; competition or application of force 496– 497, 514; compromise 498–499, 514 controlling: basis of designing control systems 198; basis of management levels 199; basis of responsibility 199; basis of time 197–198; defined 190–191; designing of effective system for 196–197; features of 192–193; need of 191–192; resistance to 195–196; steps involved in 194–195 control techniques, types of: financial 203–205, 214; non-financial 202–203, 205–209, 215 costs: construction 68; inventory 68–69 critical path method (CPM) 207–208, 245 cross-cultural team: defined 467–468; effective management of 469; fostering working relationships 469–470; management of, challenges in 468–469; multiple personalities in workplace, methods to deal 470 decentralization of authority: advantages of 138–139; case study 135; defined 137; disadvantages of 139 Deci, Edward and Ryan, Richard: selfdetermination theory 445, 454–455, 477 decisions/decision-making 190; under certainty 218–219, 254; difficulties faced in 226, 256; group 223, 337, 352, 360, 372–374, 376, 378, 381–382; individual 223, 372; major 137, 223; minor 4, 223, 307; non-programmed 223, 254; for organizational effectiveness 54, 226–227; programmed 222–223, 254; under risk 218, 221–222, 251, 254; scenario of 82, 243, 260, 280–281, 395,

398, 428, 526, 628; strategic 4, 7, 257, 621, 625; tactical 7, 217, 223, 235, 254; under uncertainty 218, 219, 251, 254; when-to-order 229, 231–232 decisions/decision-making, styles of: autocratic 227, 254, 373–374, 409, 425; consultative 227, 254, 373; democratic 227, 254, 373; participative 227, 254 decisions/decision-making, tools for: break-even analysis 204, 242–244; cost–benefit analysis 235–237, 255; decision table 240, 255; decision trees 238–240, 250, 255, 426; force field analysis 237–238, 255; Gantt charts 248–249; grid analysis method 238, 255; paired comparison analysis 241–242, 255; project evaluation and review technique (PERT) 245–248; pros and cons method with benefits 242–243, 255 decisions/decision-making models: administrative 224, 254; classical 224, 254; political 224–225, 254; rational 224 design thinking strategy 270 deterministic or economic order quantity (EOQ) model 206, 228–231, 233 directing/direction: defined 183–184; elements of 185–186; features of 165– 166; nature of 184; need and importance of 184–185; principles of 187–188; techniques of 189 Douglas, Max E.: model for writing effective objectives 269–270, 290–291 Drucker, Peter F. management by objectives (MBO), concept of 53, 170, 267–268 ego states 165–166, 488–490, 509 electronic business (e-business) 213–314, 323 electronic commerce (e-commerce): defined 313, 323; vs. e-business 313–314 environmental factors affecting business: external 21–22, 27; internal 22–23, 27 e-organization/e-governance 315–316, 323 evolution of management, history of 29–30 expected profit with perfect information (EPPI) 222 expected value of perfect information (EVPI) 222

Index 643

Fayol, Henri thoughts on management 42–44 Fiedler, F. E.: situational contingency theory 416–419, 436 Follett, Mary: management principles 51–52, 63 functions or processes of management 3, 18–19; controlling 20, 190, 193–195; directing 20, 185–186, 188, 190; organizing 19–20; planning 19; staffing 20 Gantt, Henry ideology on management 41 Gantt charts 41, 248–250 Gilbreth, Frank 30–31, 42 Gilbreth, Lillian 42 globalization 57–59, 64, 311–318, 467, 478, 565, 577, 593 group(s): characteristics of 357, 379, 420; defined 356–357; formal 355, 357–361, 367, 369, 379; impact on individual behaviour 374–375, 382; informal 121, 359–360, 367, 379; need to join 360, 379–380; vs. team 386, 387 group behavior: cohesiveness 355, 371–372, 381; decision-making process 372–374, 381–382; decision-making strategies 373–374, 382; external factors, impact of 375–376; role 369–371, 380; rules 365, 369; size 355, 357, 368–369 group development models 362–364, 376, 380; five-stage 364–365, 380; punctuated equilibrium 365–366, 380 group dynamics: case study 367–368; defined 356–357, 366–367 Hersey, Paul and Blanchard, Ken: situational leadership model 413–414 Herzberg, Frederick: two-factor theory 449–450, 455, 475 House, Robert: path–goal leadership theory 419–420 HR planning (manpower planning) steps involved in 153–154 importance of management: achievement of group goals 7; cost reduction 7; growth and survival 7; optimum utilization of resources 6–7 IT system impact on organizational structure 140–141

just-in-time manufacturing (lean manufacturing) 234 Kalam, A. P. J. Abdul 5 Kautilya Arthashastra 28–28 Kotter, John: eight-step model of change 579–581 leader/leadership autocratic 444; defined 406; free-rein style 410, 435; importance of 407–408; vs. manager 410; models and theories of 411–431, 436; participative 227, 409–410, 420, 437; situational leadership model 413–414, 436; traits 408–410, 420–422 leader–member exchange theory 423–426, 438 leadership theory(ies): behavioral 411, 422–423, 438; contingency 423, 438; development 430, 439, 526, 555; transactional 428–429, 439; transformational 426–429, 438–439 learning classical conditioning 330, 348; vs. behaviour 332; defined 330; operant conditioning theory 330–331 levels of management lower/supervisory/ operative-level management 10; middlelevel management 10, 53–54, 116, 147, 223, 569, 599; top-level or strategiclevel management 4, 9–10, 12, 14, 26, 53, 127, 131, 134, 138, 199, 223, 320, 398, 544 Lewin, Kurt: force field analysis 577, 593; three-stage theory 575–577, 592–593 life positions defined 492, 510 Likert, Rensis: management system 411, 436 Locke, Edwin: goal-setting theory of motivation 462–463, 476 Luft, Joseph and Ingham, Harry: Johari window 491, 509–510 management: audit 203, 207; defined 2–3, 69–70; gurus, current trends in management by 58–59, 64 management by objectives (MBO): advantages of 54–55, 268, 290; defined 170, 267; limitations of 55, 268, 290– 291; practice of 268; process of 268 managers (types of): first-line 11–12; functional 12, 27, 125; general 13, 16, 27, 320, 433; line 12, 85, 130, 196, 496,

644 Index

513, 602–603; middle 12, 27; specialist 13; staff 12, 27, 496, 513; top 12, 27, 129 Maslow, Abraham: hierarchy of needs theory 452–454, 477 material requirements planning: benefits of 235; defined 235; disadvantages of 235; objectives of 235 Mayo, George Elton: Hawthorne experiments 49–50, 62 McClelland, David: learned needs theory 445, 451, 452, 476 McGregor, Douglas: theory X and theory Y 463–465, 477 motivation: cycle of 441–442; defined 441; extrinsic 445, 454, 475; financial 445, 475; importance of 443–444, 474; intrinsic 444, 445, 454, 455, 466, 475; nature of 442–443; negative 411, 443, 445, 475; non-financial 443, 445, 475; positive 411, 443, 445, 475 motivation theory(ies): case study 446; content 446–451; expectancy 419, 446, 459–461, 475–476; goal-setting 462–463, 476; process 456–459 Myers-Briggs Type Indicator (MBTI) 340–341, 353 Nadella, Satya 182 nature of management: as a activity 4; as an art and science 4; as an discipline 5; as an group 4; orients towards organizational goals 5; as a process 3–4; as an resources 5; universal process 5–6 objectives: individual 266; primary 265; secondary 265; social 266 objectives of management 5; organizational 6; personal 6; social 6 organization: defined 100–101; external environment of 104–107; nature of 102– 103; need and importance of 101–102 organizational approach(es): classical 107–108; human relations 109–110; systems 111–112 organizational behaviour: approach(es) to 306; autocratic model 307; challenges and opportunities, trends in 309–311; collaborative model 308; components of 299–300; contributing disciplines of 298–299; custodial model 308; defined 296–297; elements of 302–305; goals of 300–302; importance of 305–306; levels of analysis 297–298; study of 299–300;

supportive model 308; system model 308–309 organizational change: characteristics of 563; external and internal forces responsible for 564–566; management of resistance to 568–570; nature of 563; process of 564; resistance to 566–568 organizational culture: academy 535; adjusting to changing culture 539; baseball team 535; changing 539; characteristics of 530–531; club 535; counter-culture 528; creation of 538; defined 527; dimensions of 537–538; elements of 541–542; employees role in 539–540; ethical 543; factors affecting 528–529; features of 531; functions of 533–534; importance of 531–533; levels of 536–537; normative 534; performance-based 535; pragmatic 534–535; process 535; role in sustaining organization 538–539; strong vs. weak 529–530; subculture 528; threats of 540–541 organizational development: action research model 520–522; characteristics of 517–518; defined 516; general process of 523–524; goals of 518; importance of 518–519; limitations of 522; nature of 517; principal of practice 519 organizational development interventions: individual or interpersonal process 527; large-scale 525; management and leadership development 526; strategic 525–526; team development and group processes 527; techno-structural 526 organizational goals: defined 266; importance of 266; official 267; operational 267; operative 267 organizational politics 541; defined 625; managers, implications for 630; reasons for 541–543; transnational 625 organizational structure: case study 118–119; difference between formal and informal 121–122; difference between mechanistic and organic 123; formal 119–121; informal 121; market data, importance of 66; mechanistic 122; organic 122–123 organizational structure, types of: divisional 125–127; flat organizational 132–133; functional 123–125; line-andstaff 129–130; matrix 127–128; network

Index 645

128–129; tall organizational 131–132; virtual 130–131 organization culture models: Charles Handy model 548; Edgar Schein model 544–545; Hofstede model 547; Robert A. Cooke model 557 organizing, principles of: authority 115; definition 115; objectives 114; parity of authority and responsibility 115; scalar 114; span of control 115; specialization 114; supremacy of organizational objectives 116; unity of command 115; unity of direction 115 organizing, process involved in 116–118 orientation 159 Pareto’s analysis tool 242 perception: case study 344–345; and decision-making 336–338; defined 333; factors influencing 334–335 perceptual process, phases of 349–350 performance appraisal methods: futureoriented methods 170–171; past-oriented methods 168–170 performance management and evaluation process: defined 180; effective 180–181 personality: defined 338–339; factors influencing 339; traits of 339–340 placement 179 planning: defined 69–70; essentials of good 85–88; exemplary 88–90; features of 70–71; global implications 90–91; importance of 75–76; limitations of 76–77; nature of 71–73; premises 73–75; steps in 78–80; tools and techniques 80–85; types of 77 political, economic, social and technological (PEST): analysis 271–273 political behaviour ethical guidelines on 629–630; types of 626–627 Porter, Michael five forces analysis 277–281 power: defined 621; formal 622–623; informal 624–625; misuse of 624–625; in organization, importance of 622; strategic contingencies model 621; tactics 624; workplace abuse, methods to deal with 625 Pralahad, C. K.: pyramid, concept of 56 project evaluation review technique (PERT) 207, 245–247

recruitment: defined 154; external 157; internal 156–157; process of 155–156 reinforcement: defined 331; extinction 331; negative 331; positive 331; primary reinforcer 331; punishment 331; secondary reinforcer 331 return on investment (ROI) 169, 205 SAP Design Services Team (DST) 270 scientific management 30, 31 scope or functional areas of management: financial management 16; human resources management 16–17; marketing management 18; production management 17–18 selection: effective procedure, importance of 157; process involved in 157; vs. recruitment 159 Simon, Herbert: model for decisionmaking 217, 225 Sisk, Henry 217 skills in employees, upgradation of: managerial 309; technical 309 skills in manager: conceptual 14; human 14; technical 13–14 span of control: defined 133; narrow 134; wide 134–135 staffing: case study 152–153; defined 149; ethnocentric 173; function, nature of 149–150; global perspectives on 173; polycentric 174; process of 150–151; regiocentric 174 Steel, Piers and Konig, Cornelius J.: motivational theory (TMT) 445, 455, 477 strategic decision-making, case study 257–259 strategic management: defined 260–261; environmental survey 264; evaluation and control 265; features of 261; financial benefits of 285; importance of 263; non-financial benefits of 285; strategic intent 262–263; strategy formulation 264–265; strategy implementation 265 strategy for marketing 66–67 strengths, weaknesses, opportunities and threats (SWOT) analysis 67; advantages of 276; framework of 275–276; limitations of 277 stress: acute 604–605; among individuals and groups 602–604; chronic 606; defined 600; episodic acute 605; general

646 Index

adaption syndrome 301; management of 609–610; non-organizational 608; organizational 606–608; and performance level, relationship between 601–602 Taylor, F. W.: theory of scientific management 37–41 team(s): characteristics of 390; committees 393; cross-functional 394; effective, creation of 395–396; failure of, reasons for 394–395; vs. groups 386–387; management 393; McKinsey’s takeaway on underperformance of 397–398; nature of 392–394; permanent 340–341; task force 393; temporary 392; virtual teams 393–394; work 392 teamwork: benefits of 387–388; case study 401; defined 386; disadvantages of 388; process involved in 389–390; selfmanaged 390–391; supervised 391; total quality management (TQM) 310 training: defined 160; importance of 161; off-the-job training methods 163–166;

on-the-job training methods 162–163; on-the-job vs. off-the-job training 166; sensitivity 165 trends in management: knowledge management 57; knowledge process outsourcing 58; retail management 58; six sigma 57 values: content and intensity attributes 341; defined 342; types of 342; at workplace 342–343 variance analysis: actual vs. budgeted variance 202; adverse 202; defined 201; favorable 201–202; importance of 201 Vroom, Victor expectancy theory 459–462 Vroom–Yetton contingency model 425–426 Waterman, Robert and Peters, Tom: 7S change model 581–583 Weber, Max: bureaucracy, notion of 46–47; principles of management 45–46 Williams, Clifton 217