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Chapter 1

ESSENTIALS OF

MANAGEMENT


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Learning Objectives

To understand the role of organizations inmodern societies To appreciate the importance of

management for organizations To understand difference between

efficiency and effectiveness To comprehend generic functions of

management To learn about different managerial roles

To appreciate different types of managerialskills and their importance at differentlevels of organization


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Role of Organizations in Modern

Societies

In Modern times it is appropriate thatTermMarket Economy be replaced by termOrganizational Economy- Herbert Simon

Positive association between prosperity of an

Economy and Role of Companies- SumantraGhoshal

Companies engender Value-Creation throughResource Combination and Exchange that

markets alone can not do Companies have Distinct capability to Share,

Transfer, Synthesize and Create Knowledge overMarkets


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Efficiency and Effectiveness

Efficiency refers to Doing Things Right Effectiveness refers to Doing the Right

Thing- Peter Drucker

Efficiency is concerned with getting most

output out of scarce resources (Capital,Human Resource, Raw Material etc.)

Effectiveness is achieved by setting right

organizational goals. No amount ofefficiency can make up for lack ofeffectiveness.


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MANAGEMENT" VariouslyUnderstood

Specific Organ Of an Organization thathas the responsibility to deliver resultsconsistently

Process that drives an Organization

towards its Performance People who have authority to Plan,

Organize, Lead and Control different

Organizational activities Applied Discipline

Profession or a career


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Generic Functions of Management

Managerial Jobs are characterized by

Variety, Fragmentation, Brevity andOral communication with severalpeople.

First written about by Henri Fayol andlater elaborated by Lyndall Urwick,Classical Management functions are:-

PLANNING ORGANIZING

LEADING

CONTROLLING


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Management Functions


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PLANNING

Setting Objectives

Formulating Strategies

Policies

Procedures Methods


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Steps Involved in Planning

Situational Analysis

Desired Goals, Objectives and Result from System

Goal and Plan Evaluation

Establish Goals and Plans

Chalk out Strategies to Reach Goals andImplementation

Acknowledge Complet ion and Celebrate Success


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ORGANIZING

An Intentional Structure of Roles

Organizational Structure

Responsibility & Authority for

achieving objectives Departmensation

Span of Control

Line & Staff Relationships


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LEADING

Leadership Skills

Motivation

Team Work

Communication

Negotiation

Conflict Resolution


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CONTROLLING

Anticipate, Monitor & Respond to changing Environment.

Measurement of Actual Performance Comparison against the Standard Managerial Action to correct Deviation

Traditional Financial Controls are based on

LIQUIDITY

ACTIVITY PROFITABILITY LEVERAGE BALANCE SCORECARD


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Managerial Roles

INTERPERSONAL

Figurehead Leader

INFORMATIONAL Monitor

Disseminator Spokesperson

DECISION

Entrepreneur Disturbance Handler Resource Allocator Negotiator


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Management Skills

TECHNICAL SKILLS

CONCEPTUAL SKILLS

HUMAN SKILLS

Managers at Top Level need ConceptualSkills the most and First-Line ManagersTechnical Skills the most


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Chapter 2

EVOLUTION OF

MANAGEMENTTHEORY


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Learning Objectives To understand the historical evolution of management

discipline.

To comprehend different schools of management thought.

To critically appreciate the modern day relevance of

difference schools of management thought.

To know contributions of pioneers of managementthought.

To become aware of contemporary approaches tomanagement.

To get acquainted with Eastern Management thought.


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Major Schools Of ManagementTheory

CLASSICAL SCHOOL

BEHAVIORAL SCHOOL

QUANTITATIVE SCHOOL

SYSTEMS SCHOOL

CONTINGENCY SCHOOL

CONTEMPORARY /EASTERN APPROACHES


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CLASSICAL SCHOOL Scientific Management:- Application of Scientific Method to

optimize productivity

FREDERICK W.TAYLOR [1856-1915] HENRY GANTT [1861-1919] FRANK [1868-1924]& LILLIAN GILBRETH [1878-1972] HUGO MUNSTERBERG [1863-1916]

Administrative Management:- Emphasizes Role of themanager and the functions of Management.

HENRI FAYOL [1841-1925] HENRI MINZBERG

Bureaucratic Management:- Focuses on Ideal Form ofOrganization.

MAX WEBER [1864-1920] PETER DRUCKER


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BEHAVIOURAL SCHOOL Human Relations:- Dealt with human aspects of

Organizations

ELTON MAYO [1880-1949] & OTHERS MARY PARKER FOLLETT CHESTER BERNARD [1886-1961]

Human Resources:-Motivation and Leadership techniquesfocus etc.

ABRAHM MASLOW,KURT LEWIN & OTHERS Behavioural Science:-Personality, Attitude, Groups,

Values focus etc. DOUGLAS McGREGOR FREDERICK HERZBERG

CHRIS ARGYRIS RENAIS LIKERT


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QUANTITATIVE SCHOOL

Management Science &MIS:- Uses Mathematicaland Statistical approaches to

solve management problems

GEORGE DANTZIG Etc.

DSS &ERP SYSTEMS

Production and Operations Management:-Focusesupon operation and control of production process thattransforms resources into finished goods and services.

JURAN

W.EDWARDS DEMING


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SYSTEMS SCHOOL

Views Organizations as an

interrelated and interdependent set ofsubsystems functioning as a wholeopen system interacting with theEnvironment LUDWIG VON BERTALANFFY

JAMES ROSENZWEIG

KENNETH BOULDING


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CONTINGENCY SCHOOL

Emphasizes the fit between

organizational processes and thecharacteristics of the situation

PAUL LAWRENCE

JAY LORSCH

FRED FIEDLER

JOAN WOODWARD


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CONTEMPORARY APPROACHES

Total Quality Management :-Managing the entire organization

to deliver quality goods/services to the customer

JOSEPH JURAN/W. EDWARDS DEMING/PHIL CROSBY

Learning Organization:-All employees involved in the growth& learning of organization as it deals with the changingenvironment

PETER SENGE

Excellence Approach:- Attributes of Excellence empirically

derived. PETERS & WATERMANS

Chaos Theory:- Views Organizations as complex adaptivesystems


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OTHER APPROACHES

Indian Management Approach:-Emphasizes value-based and management of mind aswell as an attitude of detachment to the outcome butfocused concentration on the work in hand.

Japanese Management Approach:-

Emphasizes Participative style of Management andcontinuous improvement.


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CHAPTER 3

MANAGEMENT BUSINESSENVIRONMENTAND SOCIETY


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Learning Objectives To learn and appreciate the significance of

business environment and society in

management.

To understand difference between old andemerging economies.

To learn application of Michael Porter modelin diagnosing the competitive businessenvironment.

To learn the significance of corporate socialresponsibility in todays business environment

To understand importance of social audit


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To learn the difference between business

ethics and ethics in business. To learn about steps involved in ethical

decision making.

To learn about what is meant bycorporate governance and its relevanceethical standards


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Introduction Managerial actions as reflected in the

organizational performance is the outcome ofsynchronization of internal systems to respondeffectively to the external environment.

Organizations for their success in todays fastchanging environment have to keep adjusting,adopting, and adapting by developing inbuiltresponse mechanisms

Need to understand importance and relevance oforganizational environment for strategicmanagement as also for social concern andvalue-based management.


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Macro Environment Affecting

Organization

ORGANIZATION

SOCIAL CULTURAL

LEGAL

TECHNOLOGICAL

COMPETITIVE

POLITICAL DEMOGRAPHIC ECONOMIC


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Trends Affecting Emerging

Economies

Old Economies Emerging Economies

Dominance of agriculture and Dominance of serviceManufacturing sector

Local and national markets Global markets

Customer behaviour loyalty Customer behaviour highly

fluid

Competitive forces tolerable Competitive forces

intense

Regulated economic regime Deregulated regime

Emphasis on physical assets Emphasis on human assets


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Michael Porters Model

Competitive Diagnosis

Rival firms and

rivalry amongst

them

Threat of

new entrants

Power ofcustomers

Power of

suppliers

Above factors need to be appropriately diagnosed by the managers toidentify their competitive advantages and disadvantages, so as to chalk out

strategies that can enable them to achieve their corporate goals and objectives

by responding effectively to various environmental forces.


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Corporate Social Responsibility

(CSR)

CSR focuses on need for seriously considering the impact ofthe companys actions on society

CSR basically refers to the obligation toward the societyvoluntarily assumed by business. The philosophy of business as highlighted by Keith Davis

and Robert Blomstrom (1975) states Social responsibilityis the obligation of decision makers to take actions whichprotect and improve the welfare of society as a whole along

with their own interests This implies that business has tobe viewed more than a money-making proposition and itprovides a great opportunity to serve society. Businessentity has also to focus their efforts on protecting welfare ofthe society by creating positive benefits for society.

Corporate Social Responsiveness means the extent to whichcompanys policies and programmes are geared to thesocial environment. The responsiveness focuses on actionsthat results in ways and means of firms responses to socialconcerns as against responsibility that focuses more onneed and should for corporate sustained growth.


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Voluantry Responsibilities

Ethical Responsibilities

Legal Responsibilities

Economic Responsibilities

CSR

Obligationtoward

SocietyVoluntarilyAssumed

byBusiness

Corporate Social Responsibility (CSR) atDifferent Levels


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Advantages of CSR The organizations that integrate CSR as part and

parcel of their philosophy of growth, derive various

advantages such as improved financial performance,cost reduction,enhanced brand image and reputation,

increased customer satisfaction,enhanced productivity, quality,increased market share,more engaged investors,

environmental sustainability,and above all competitive edge in the market.


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Social Audit

Social

Audit

Mandatory as

Required by

Government

Voluntary

Social

Programs

undertaken

by companies

Pollution Check

Employment

Standards

Labour Amenities

to be provided as

per factory Act,

Minimum Wages to

be Provided

Rural

DevelopmentEducation

Health


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Ethical Decision Making Define the problem and issue clearly

and explicitly

Jot down the values relevant to thesituation for the issue underconsideration from the short and long

term perspective Analyze the issue vis--vis conflicting

values and choose an alternative thattakes care of most crucial values

Implement the decision


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Chapter 4

PLANNING A

TOOL FOREFFECTIVEMANAGEMENT


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Learning Objectives

To understand the importance of planning

To know what plan and planning mean To learn about steps involved in planning

To learn about different types and levels ofplanning

To understand SWOT analysis as a tool forbusiness strategies development

To understand the use of BCG matrix in

categorization of businesses To understand concept of MBO and its relevance

to planning


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Planning and its Various Facets

Planning refers to a systematic approach towardsmaking decisions about goals and objectives and theassociated activities that need to be carried out alongwith various resource requirements

What is Planning?

Planning

Systematic approach of making

decision about goals and objectives

and associated activi ties

A

C

T

I

V

I

T

I

E

S

Goals & Objectives

Plans

Policies

ProceduresRules

Strategy

Task

Resources

Program

Budget


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Goals and Objectives

Goals refer to specific objectives that an

organization aspires to accomplish intotal, or in some combination, in order toachieve some larger purpose, i.e., themission of an organization

Objectives are clear and verifiableyardsticks against which performance canbe measured. The accomplishment of

various functional and departmentalobjectives lead to the achievement ofgoals.


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Plans and Policies Plans are the actions or means that a manager

proposes to use for achieving pre- determinedgoals. A plan indicates what the managementwants to achieve. It specifies the steps that areto be taken towards the achievement of goals.

Policies refer to a broad statement and/or a set

of guidelines that direct decision-making. It is aplan of action adopted by an individual or anorganization. They define the framework withinwhich managers are expected to make decisionsleading to the achievement of objectives.


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Procedures, Rules and Strategies

Procedures are plans that set out the

required methods and processes to handlefuture activities.

Rules refer to principles or conditions thatgovern behavior. They define specific

required actions and inactions in givencircumstances .

Strategies are an elaborate andsystematic plan of action. These are the

methods or processes required in total, orin some combination, to achieve thegoals.


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Objectives and Tasks

Objectives are specific targets that

must be accomplished in total, or insome combination so as to achievethe predetermined goals in the plan

A piece of work that is undertakento contribute towards theachievement of objectives is called

task


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Resources, Programmes , and

Budget

Resources include the people, materials,machines, technologies, money, etc. required to

implement the strategies or processes A program is a combination of goals, policies,

procedures, rules, and set of activities to beundertaken, resources to be deployed and other

interrelated actions required to be undertakenfor accomplishment of a purpose.

Budget is a statement of expected provisions orresults expressed in numerical terms. It can befor inputs as well as outputs


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Steps Involved in Planning

Situational Analysis

Desired Goals, Objectives and Result from System

Goal and Plan Evaluation

Establish Goals and Plans

Chalk out Strategies to Reach Goals and

Implementation

Acknowledge Complet ion and Celebrate Success


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Types of Planning

Types of Planning

Short-termPlanning

Medium-termPlanning

Long-termPlanning


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Levels of Planning

Levels of Planning

Strategic Tactical Operational

Strategic planning is undertaken at the top-level of the management. It deals with

decision making about the organizations long-term goals and strategies .

Tactical planning deals primarily with the specific goals and plans pertaining

to functional areas production, marketing, human resources management, etc.

It deals with major actions pertaining to implementation phase of the planning

process.

Operational planning deals with specif ic systems, procedures, and processes

required to implement the tactical plan at the level of the operational or front line

manager.

Wh i SWOT A l i ?


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What is SWOT Analysis?

SWOT Analysis

External Internal

Opportunities Threats Strengths Weaknesses

Develop Business Strategies

Opportunit ies and threats are diagnosed by undertaking an external

environmental analysis.

Strengths and weaknesses are essentially internal to the organization and

pertain to its resources. These relate to resources human and non-

human, physical, processes, programs, and organization in key areas.


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Developing Business StrategySWOT analysis helps in identification of possible

strategies based on the following criteria:

Build and develop on strengths Resolve and overcome weaknesses Exploit and avail opportunities Avoid or minimize the effect of threats

BCG (Boston Consulting Group) has developed a toolthat enables the mapping of all the organizationsbusinesses based on the criteria of market growthand relative competitive position vis--viscompetitors.

BCG MatrixA Tool for Mapping


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pp g

Businesses of Organization

Stars are the businesses having high growth as well as a strong competitive position.Dogs have low growth and weak-competitive position businesses.

Cash Cow businesses have low growth but are having strong competitive position .

Question Marks are the businesses that have high growth but weak competitive position

STARS QUESTIONMARKS

CASH COWS DOGSMark

etGrowth

Relative Competitive Position

Management By Objectives (MBO)


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Management By Objectives (MBO) MBO is a

management system that is goal driven and success-oriented

MBO is def ined as an integrated managerial system that

is systematically and consciously directed towards

achievement of organizational and individual objectives

Enhances Organizational Performance

Tracks Performance to Provide a Feedback

for Taking Timely Corrective Measures

Synchronizing Goals and Subordinate

objectives throughout the Organization

Employees Get Adequate and Strong Input

to be Clear about their Objectives, Time

Lines for Completion


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Salient Features of MBO

Salient Features of

MBO

Participative Decision Making

Process

Explicit Time Period Deadlines

Specific Objectives Driven

Cascading of Organizational Goals

and Objectives

Performance Evaluation and

Feedback


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Benefits of MBO Ensuring personal commitment to organizational goals Provides goal and role clarity in the organization and

in turn helps in devising organizational structureconducive for improving efficiency and effectiveness

Ensures result oriented planning Development of effective control mechanism leading

to timely corrective actions Less supervision of subordinates and increased

motivational level as a result of each employees cleardefinition of responsibilities

Employees accountability increases

Improved managerial effectiveness and efficiencyresults in greater satisfaction level to the employees


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Disadvantages of MBO Failure to teach the philosophy of MBO across the

organization

Lack of guidelines to goal setters Difficulty in setting verifiable objectives Over emphasis on short term achievements at the

cost of long term growth and development Lack of flexibility to attune changes with changing

environmental forces Over emphasis on quantitative goals, even where it

may not be applicable It turns out to be paper passing buck, especially in

organizations where in well set mechanism to

monitor and evaluate the performance does get laiddown It is a time consuming process to imbibe the

philosophy of MBO in the organization


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Chapter 5

ORGANIZATIONAL

STRUCTURE


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Learning Objectives To understand what is meant by organizational

structure.

To comprehend different dimensions of organizationalstructure. To understand difference between job specialization

and differentiation To understand what is meant by formalization

To understand difference between centralization anddecentralization.

To understand the use of different bases fordepartmentation.

To understand the effect of size, environment andtechnology on organizational structure.

To learn about Mintzbergs typology of organizationalconfigurations.

DIMENSIONS OF ORGANIZATIONAL


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DIMENSIONS OF ORGANIZATIONAL

STRUCTURE

Job Specialization

Behaviour Formalization

Centralization


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JOB SPECIALIZATION

Division Of Labour Job Specialization in horizontal and

vertical dimensions

Job Enlargement Job Enrichment

When to go for job Enlargement?

When to go for Job Enrichment?


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BEHAVIOUR FORMALIZATION

By Positions [Job Description].

By Work-Flow [Process Descriptions].

By Specifying Rules [Regulations,Policy Manuals, Code and Conduct

Rules etc.]


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CENTRALIZATION

Vertical Decentralization.

Horizontal Decentralization

Selective Decentralization.

Parallel Decentralization.

DEPARTMENTALIZATION Based


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DEPARTMENTALIZATION Based

on..

Number

Function Product-line

Territory

Customers Processes

Matrix

Cross-functional team Virtual Network


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SPAN OF MANAGEMENT

Tall Structure Vs. FlatStructure.

Chain of Command.

Line and Staff Relationships.

SITUATIONAL FACTORS


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SITUATIONAL FACTORS

AFFECTING STRUCTURE

SIZE

ENVIRONMENT STATIC VS. DYNAMIC

SIMPLE VS. COMPLEX

TECHNOLOGY BATCH PRODUCTION

MASS PRODUCTION

PROCESS PRODUCTION


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MINTZBERGS TYPOLOGY

Key Parts Of an Organization:-

Operating Core Strategic Apex

Middle Line

Techno-structure

Support Staff


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MINTZBERGS TYPOLOGY.

Coordinating Mechanisms:-

Direct Supervision Mutual Adjustment

Work-Process Standardization

Outputs Standardization

Skills or Knowledge

Standardization


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MINTZBERGS TYPOLOGY.

Simple Structure Machine Bureaucracy

Professional Bureaucracy

Divisionalized Form

Adhocracy


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Chapter 6

ORGANISATIONALEFFECTIVENESS


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Learning Objectives What is meant by organizational

effectiveness

Organizational culture and its implicationsto organizational effectiveness

Factors that build and nurture favourable

organizational culture Different organization life cycle stages

Measuring organizational effectiveness.

What does it take to become a highperformance organization?

Characteristics of effective organizations


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Organizational Effectiveness Organizational effectiveness is defined as the

ability of an organization to maximize its

performance within a competitive externalenvironment .

An organization is a consciously coordinatedentity with an identifiable boundary that

functions on a relatively continuous basis toachieve a common goal or set of goals.

An organizational structure defines how rolesare defined, tasks are allocated, relationshipsare reported, and the formal coordination and

interaction pattern that the organization wouldfollow

Organizational Effectiveness


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and Culture Culture is a set of norms, values, and

assumptions that are available to the staff, and

it is thus inseparable from action and process . Schein states that organizational culture develops in

response to two major challenges that everyorganization confronts; external adaptation and

survival and internal integration. organizational culture is defined as the overall

attitude of the people within an organization. Itcontributes a great deal to the achievement ofits objectives and in improving its effectiveness.


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Organization Life Cycle Stages

Organization Life Cycle Stages

Entrepren

eurial

StageFormaliza-tion and

Control

StageElaborat-

ion of

Structure

Stage Decline

Stage

Collecti-

vity Stage


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Entrepreneurial Stage The organization is in its nascentstage. Although its goals are ambiguous, they have a highlevel of creativity.

Collectivity Stage Innovations continue in this stage and theorganizations mission is clarified. Communication is informaland its employees are highly committed to the organizationsobjectives and goals.

Formalization and Control Stage In this stage the

organizational structure stabilizes and formal rules andprocedures put in place. However, innovation is given a backseat while efficiency and stability is emphasized upon.

Elaboration of Structure Stage: Products and services arediversified at this level. The structure becomes morecomplex. Decision-making gets decentralized.

Decline Stage: This is the stage when management looksfor ways to hold the markets and look for new opportunities.Organizational effectiveness demands to come out with newideas to exploit existing or emerging opportunities.

Organisational Organizational

Model for organizational effectiveness measurement criteria


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Organisational Organizational

Effectiveness

Where the

Organiszati

on is?

Where the

Organization

Would like to be

Corporate Goals:

Quantitative

Qualitative

Individuals and the

Groups Performance

Viewed and Evaluated

vis--vis aPredetermined Criteria

Individuals and Groups

at Different Tiers have to

Plan and Execute a

Sequence of Actionsand Activities.

Parameters for Hugh Performance


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OrganizationsParameters Yardsticks

Values and goals Clear vision

Leadership behaviour Cohesive leadershipDecision-making Crisp decisionManagement processes Value adding

processes

Talent Deep talentMeasure and incentives MeritocracyCustomer focus Consistent high qualityFrontline support Fit

Performance culture High performanceCapacity to change Continuous evaluation

Characteristics of Effective


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Organizations

Providing sustained leadership

Driving effective decisions Focusing people on performance

Aligning the front line Driving a high-performance

culture


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CHAPTER 7

BUSINESS ECONOMICFUNDAMENTALS


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Learning Objectives The meaning of economics

The purpose of studying economics Types of economic theories

Demand and supply concepts and theirrelevance to the understandingeconomic behaviour

How market mechanism operates

Concepts of elasticity, factors affecting

elasticity, and their implications toeconomic decision-making


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What is Economics? Economics (derived from the Greek words

(okos), house, and (nemo), rules hence,

household management) is the social sciencethat studies the allocation of scarce resources.This involves analysing the production,distribution, trade, and consumption of goodsand services.

Economics studies choice, decision-making, andoptimum allocation of limited resources to fulfilunlimited human needs and wants.

Economics involves analysing the production,

distribution, trade, and consumption of goodsand services with a view to suggest optimumallocation of resources.


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Why study Economics? Economics needs to be studied as

it provides a logical way ofdiagnosis, analysis, and solutionto a variety of problems that arise

within an organization


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Classification of Economic TheoriesEconomics - is the study of choice and decision-making in

a world with l imited resources to fulfi ll unlimited wants

Positive and Normative Economics

Micro-economics and Macro-economics

Descript ive Economics, Economic Theory, andApplied Economics


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Positive economics deals with causalrelationships and attempts to find out thecauses that lead to a given effect or thevice versa.

Normative economics is prescriptive innature and has more to do with values.

Microeconomics deals with individualbehaviour of a householder, consumer,businessperson, producer, etc

Macroeconomics considers the economy as

a whole and deals with aggregate variablessuch as aggregate demand and supply formoney, capital, and commodities.


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Descriptive economics refers to the collectionof all the relevant facts related to an event and

aligning them coherently with emergingimplications .

Economic theory or analysis helps simplifyingexplanation of features of an economic systems

Applied economics operates within theframework of analysis provided by economictheory. It attempts to test the economictheories to ensure whether or not these

theories appear to be supported by statisticalevidence about the real world.


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Demand Demand for a product is defined as the

various quantities of it per unit of atime; daily, weekly, or monthly thatconsumers are willing and able topurchase at alternative prices, keeping

all other things affecting demand asconstant.

The law of demandstates that the

relationship between a goods priceand its quantity demanded is negative

Demand can be expressed as:

XD = f ( Px, N, T, Y, Pn, R, E, )


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Where:X = Quantity of goods or services

Px = Price of X:N = Number of consumers under consideration.T = Taste and preferences of consumers:Y = Consumers income and distribution:

Pn = Price of related goods:R = Range of products available to consumersE = Expectations of consumers:

Demand refers to a demand schedule that lists the different

quantities of the commodity that consumers are will ing and ableto take at alternative prices, keeping all other factors affecting the

demand as constant , i.e., ceteris paribus


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Change in Demand A change in the demand or a shift of the

entire demand curve is caused by achange in any of the other factors otherthan the price of the product underconsideration affecting the demand.

When demand increases, the quantitydemanded by consumers increases atevery price.

When demand decreases, the quantity

demanded by consumers falls at everyprice.


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SupplyThe concept of supply is defined

as various quantities of a productthat the seller places in themarket per unit of time at

alternative prices, keeping allother factors affecting supply asconstant.

Supply can be expressed


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XS = f ( Px, Pn, T, E, Pi)

Where:

X = quantity of good or service

Px = price of X

N= Number of sellers underconsideration

T= Technology to produce the product

E= Future expectations of the sellersPi= is the price of inputs

M k P i


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Market Price Conventional microeconomic analysis states that

the price of a product or service and its output isdetermined at the intersection of supply and

demand curves which is called the equilibriumprice.

Any price above the equilibrium will result in asituation where the quantity supplied exceeds thequantity demanded. Due to their inability to clearthe market, producers may reduce prices.

Any price below the equilibrium will see thequantity demanded exceed the quantity supplied,bidding the price upwards.

P i El ti it f D d


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Price Elasticity of Demand Price elasticity of demand measures the

responsiveness of the quantity demanded as the

price of the product or service undergoeschanges, given the demand curve for theproduct or service .

If the quantity demanded is not too responsiveto the change in price, it would result in anincrease in the total expenditure on the productfor increase in price of the product and viceversa.

If a product or service is highly responsive to

change in price, it would result in a decrease inthe total expenditure on the product for increasein its price and vice versa.

H t M P i El ti it


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How to Measure Price ElasticityWell-known British economist Alfred Marshall (1891), defined price

elasticity of demand as the percentage of change in quantity takendivided by percentage change in price, when the price change issmall.

Percentage change in quantitydemanded

Price elasticity of Demand e = ------------------------------------------------Percentage change in the price of the

product

Numerically, the price elasticity is expressed as : p = (% Q)/(% P)

The elasticity of demand at a given point on the demand curve isreferred to as point elasticity of demand. Arc elasticity of demand iscomputed between two points on the demand curve

Factors that Influence price

l ti it f d d


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elasticity of demand Availability of close substitutes

within the market Degree of Necessity or Luxury

Proportion of income spent on a

good Habit forming goods

Permanent or temporary price

change Time period under consideration

C El ti it f D d


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Cross Elasticity of DemandCross elasticity of demand measures the

responsiveness of the quantity demanded of one

good to changes in the price of another.Cross elasticity of demand for good X is expressed as:

% Change in quantity demanded of good X

= ---------------------------------------% Change in price of another good Y

Two goods which are substitutes will have a positivecross elasticity

Two goods which are complementary to each other

will have a negative cross elasticity


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CHAPTER 8

PRINCIPLESOF

PRODUCTION

Learning Objectives


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Learning Objectives The need for knowing principles of

production To learn about production function

To understand the concepts of

production function

To understand optimal resourceallocation in production

Production Function


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Production FunctionThe production function is the physical relationshipbetween a firms inputs of resources and the output of

goods and services per unit of time, leaving prices aside.

It gives maximum output that can be achieved bycombining inputs into various combinations, for a giventechnology and prices of inputs. Production function isdescribed as under:

Q = f ( x,y,z)

Where Q represents a firms output andx, y, zrepresent the inputs required to produce the givenproduct.

Fixed and variable inputs


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Fixed and variable inputsAn input comprises goods or services that go intothe process of production. Firms add value to

imputs, through production or other processes, toobtain an output.

A fixed input is one whose quantity remains fixedirrespective of level of production in the short runsuch as plant, building, and machinery.

A variable input is one whose quantity varies withthe level of production and, therefore, thequantities of variable input can be changed, such aslabour and raw materials, is elastic in the short run.

Short run and long run


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Short run and long run Short run refers to a period of time

(time horizon) in which the supplyof certain inputs is fixed or inelastic.

The long run refers to a planning

horizon in which all inputs can bereadily varied for a desirable changein the output

Law of Variable Proportion vs

Law of Fixed Proportion


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Law of Fixed Proportion The law of variable proportion is defined

as the possibility under which varied

levels of outputs can be achieved bycombining various amounts of variableinputs together with a fixed input in the

short run. The law of fixed proportion relates to the

production system in which resources canbe combined in only one unique way to

get an output.

Returns to Scale


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Returns to ScaleConstant returns to scale production functions are those inwhich changes in the quantity of all inputs used in the sameproportion results in changes in the quantity of output by thesame proportion.

If all inputs are raised by a proportion kand output increasesby a proportion greater than k, then it is referred to asincreasing returns to scale production function.

If all inputs are raised by a proportion kand output increasesby less than kproportion, then it is referred to as decreasingreturns to scale production function.

For a production function Q = f (x, y) then it is said to be ahomogenous function of degree k if k Q = f ( x, y).

k = 1, it is a constant returns to scale production functionk > 1, it is an increasing returns to scale production functionk < 1, it is a decreasing returns to scale production function

Isoquants


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Isoquants are locus of pointswith various combination ofinputs that can produce a

certain quantity of output perunit of time.

The movement to the rightgives rise to higher level ofproduction.

On a given isoquant map the marginal rate of technicalsubstitution ofB (labour) forA (capital) is given by the ratioof the marginal product ofB to the marginal product ofA.This measures the reduction in one input per unit increase inthe other such that the level of output remains constant

Law of Diminishing Returns


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Law of Diminishing ReturnsAs per law of diminishing returns,

increase in the levels of one inputwhile keeping other inputs fixedwould eventually result in smaller

and smaller increases in additionaloutput

Total Product, Average Product, and

Marginal Product under Short Run


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Marginal Product under Short RunIn the short run, the production function gives themaximum amount of the total product (output) that

can be obtained by combining different amounts ofvariable inputs with fixed amount of fixed inputs.

Marginal product (MP) of a variable input is definedas the change in the total product for a unit changein the variable input in the production system.

Average product (AP), with respect to the variableinput, is defined as the output per unit of a variable

input used, keeping a particular level of fixed input.

Optimal Resource Allocation in

Production


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ProductionObjective of Producer

Producer would either like to minimize the

cost of production for a given level of outputor maximize the production for a given costoutlay.

Mathematically, producer aim to maximizeQ = f(x, y) for a given cost constraint as

E = xpx + ypy

wherexand yare units of inputs andpx andpyare the prices of inputs respectively.

Z = f(x, y) - ( xpx + ypy )

To maximize, we need to take partial derivative with respect to

variables and put them equal to 0.


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dz/dx = fx px = 0 .. 1dz/dy = fy py = 0 2dz/d = E xpx ypy = 0 ..3

Dividing equation 1 by 2 we get:fx/fy = px/py or fx/px = fy/py

or MPx/px = MPy/py

Marginal Rate of Technical Substitution (MRTSxy) = px/pyThis means to optimize the production, the producer shouldoperate at a point of input combination at which MRTSxy is equalto the input price ratio or MP per rupee worth of an input mustbe same for each input used in the production system.The second order condition for maximization of output is thatd2y/dx2 > 0


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CHAPTER 9

MARKETS

Learning Objectives


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Learning Objectives Markets and their relevance to business

decisions.

Different market structures and theirimplications to business decisions.

The difference between normal and

economic profits. The mechanism of pricing and output

decisions in different markets puremonopoly, pure competition, oligopoly, andmonopolistic competition

Classification of Markets


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Classification of MarketsA market refers to a suitable arrangement in which the buyers andsellers could closely interact (physically or otherwise) to arrive atexchange decisions

Pure

Monopoly

OligopolyMonopolistic

competition

Pure

Competition

Classification of Markets

Pure Competition


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Pure CompetitionCharacteristics of Pure Competition

very large numbers of buyers and sellers; standardized product similar in all respects

being produced by each firm;

price takersfirms accept the price asgiven;

free entry and exit for sellers; and

perfect knowledge about the market.


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Pure Competition Firm and

Market Demand Curves


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Q Q1Q Per Unit of time, FIRM Q Per Unit of Time, INDUSTRY

Pri

ce

PerUnit

Pri

ce

PerUnit

d d P

D S

S1

d1 d1

P1

00

Pure Monopoly


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p y Pure monopoly operates in a

market when a single firm is thesole producer of a product forwhich there are no closesubstitutes.

cross elasticity of demand for themonopolists product is eitherzero or negligible.

Barriers to Entry

Demand Curve


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The market demand curve itself would be a demand curve for the

monopolist

QQuantity Per Unit of Time

PriceP

erUnit

Rs/unitD

D

P

A monopolist can increase salesby lowering the price.He can change its demand curveby using promotional tactics.

A monopolist can effectivelyoperate on price discriminationstrategies


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Demand Curve and Influence of the Firm on

Demand, Output, and Prices Th d d f fi d t t b


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The demand for a firms products cannot bedetermined, if the firm is unable to predict thereactions of its competitors to the changes in its

price and output decisions. An oligopolistic firm is in a position to influence

its demand curve to some extent and,consequentially, its price and output.

An oligopolist can shift its demand curveupwards with the help of advertising and otherpromotional efforts.

Generally, the elasticity of demand would beelastic but it would depend on the rivalsreactions to the price and output changes of thesingle seller.

Monopolistic Competition


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p p Many sellers of a particular product

that are differentiated in some way or

the other.

Each seller is too small to influence thedecision of the other.

Cross elasticities of demand are highas though differentiatedproducts aregood substitutes to each other.

Demand Curve and Influence of the

Firm on Demand, Output, and Prices R l i l l l i d d


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Relatively less elastic demand ascompared to Pure Competition because

of differentiated products. Each tries tocreate a niche for its products in themarket.

Firms may enjoy economic gains, i.e.,profits over and above normal profits.

Individual firms may be in a position toinfluence the demand and price of its

product to some degree throughadvertising.


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CHAPTER 10

NATIONAL INCOMEACCOUNTING


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Concept of GDP Gross Domestic Product (GDP) is the total market


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Gross Domestic Product(GDP), is the total marketvalue of all final goods and services produced withina given period, by factors of production located within

a country. Finalgoods and services refer to goods and services

produced for final use. Intermediate goods are goodsproduced by one firm to be used as raw materials byanother.

Value addedis the difference between the values ofgoods as they leave the stage of production and theircost when they entered that stage.

For calculating the GDP, we can either sum up thevalue added at each stage of production, or we canconsider final value of sales.

Measurement of GDPAggregate demand or output for the


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Aggregate demand or output for thedomestic goods and services is made

up of four components namelyconsumption spending by households(C), investment spending by business

and households (I), governmentconsumption of goods and services andgross investment (G) and foreigndemand for our net exports.

Y = C + I + G + (E I)


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CHAPTER 11

GOALS AND

FUNCTIONS OFFINANCE


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Economic Value Added (EVA)Economic Value Added (EVA) is concept used to

fi d h h i i d


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find out whether an existing or a proposedinvestment opportunity would positively

contribute to the shareholders wealth.

EVA = Netoperating profit after taxes (NOPAT) (Capital Cost ofcapital)

Investment opportunities having positive EVAsincrease shareholders wealth, while those withnegative EVAs reduce it


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Role of Finance and Financial

Managers Till the 1950s, the main role of financial managers

continued to be fund-raising and management of the


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continued to be fund-raising and management ofthecompanys cost across various activities.

It was in the 1950s that the concept ofpresent valueled to a change in the role and responsibilities offinancial managers. Which included capital investmentprojects as also implications of time value of money tothe financial decisions.

1990s, transformed the role of financial managerswhich included making financial decisions regardingacquisition, financing, and effective management ofacquired assets to achieve overall goals pertaining tostockholders and stakeholders. Vital decisions pertain

toinvestment decisions, financing decisions, anddividend/share repurchase decisions.

Financial Decisions optimization of financing mix or capital structure


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optimization of financing mix or capital structure.

to generate profit changing the mix of moneyraised from time to time, retirement of high-costdebt by substituting it with low-cost debt, changingthe short-term and long-term mix of fundsdeployed in the business, etc.

to decide as to what proportion of the surplusshould be used for repurchasing dividends/sharesand what proportion should be redeployed withinthe business.

To build good investor relations, so that companyhas their support whenever needed.

CHAPTER 12


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FINANCIAL

STATEMENTS

Learning Objectives Financial statements and their utility

Th d d f fi i l t t t


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The need and purpose of financial statements

Different types of financial statements

What constitutes a balance, profit and loss account,cash flow and fund flow statements

The difference between cash flow and fund flow andtheir implications on business decisions

The relevance and implication of note forming part ofaccounts and the auditors report to theshareholders.

What are Financial Statements? A written record of the financial status of an

individual association or business


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individual, association, or businessorganization. A financial statement includesa balance sheet, income statement (oroperating statement or profit and lossstatement), and a statement of cash flows.

Reports that summarize a firms accountingdata and indicate its financial condition. Thefour basic financial statements are: thebalance sheet, income statement,statement of retained earnings, andstatement of changes in financial position.

Financial Statements - Reports that summarize a

firm's accounting data and indicate its financial

Different types of Financial Statements


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firm s accounting data and indicate its financial

condition

Balance

Sheet

Income

Statement or

Prof it and

Loss Account

Statement of

Cash Flows

Why do we need Financial

Statements?Financial Statements are needed to fulfil the objectivesand interests of different stakeholders such as


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and interests of different stakeholders such as employees, managers, owners, shareholders, creditors,

financial institutions and banks, venture capitalists,customers, government, and public.

Some common questions posed by various stakeholdersare:

What is the financial position of the company atpresent? How does it compare with its past financialposition and competitors?

How has the business performed for the given time

period in absolute and relative terms?Where do the funds come from into the system andwhere do they go?


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Liabilities Liabilities are those amounts of


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money that a company owes toothers

Liabilities may be classified into thefollowing categories:

Share Capital: includes equity and preference capital,i.e., the stake of the owners in the company

R d l i l d t i d i t


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Reserves and surplus: includes retained earnings out

of the profit earned by the business as well asshared premium money and capital subsidy, if any inthe system.

Secured Loans: Loans taken from banks andinstitutions or other sources having charge on theassets of the company.

Unsecured Loans: Loans taken by the companywithout extending any charge on the assets of thecompany.

Current liabilities and provisions: obligations likepayments to be made to creditors, interest accrued

and not due, bills payable, and provision for taxes,dividend, etc., that are expected to materialize withina year.


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Profit and loss account or

income statements It provides broad details of income

and expenses of the company in a


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and expenses of the company in a

particular time period. It gives the net earnings or losses

incurred in undertaking the

business activity in a given timeperiod, say a month, a quarter, halfa year, or a year.


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Fund Flow and Cash Flow

Statements Cash flow statements show a

companys inflows and outflows of cash


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company s inflows and outflows of cash

cash flow statements are divided intothree main parts. Each reviews thecash flow from specific types of

activities:(1) operating activities,

(2) investing activities, and

(3) financing activities

Read the Notes to Accounts Auditors remarks on the fiancial

statements are covered in Note


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statements are covered in Note

Forming part of Accounts and inthe auditors report to theshareholders.

Implications of Auditors remarksshould be clearly analysed for thefuture operations and financial

decisions

Auditors Remarks - Certain vitalareas of concern to various

Stakeholders Prospects about realization of bad debts

Status on certain international contracts


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Status on certain international contracts

and their implications, etc. Payment of income taxes and statutory

dues

Pension plans and other retirementprograms

Stock options

Significant accounting policies and practices

Details on contingent liabilities


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Human Resource Accounting importance and methods


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Knowledge Economy

Human Resource

Accounting GainingImportance

Need for measurement

of Humanresources

value and worth

Cost Based Methods

Economic ValueBased Methods

CHAPTER 13


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FINANCIAL

RATIO ANALYSIS


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Types of Ratio Comparison

Ratio comparisons can be made intwo wayscross-sectional and


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two ways cross sectional and

time series.

Types of ratiocomparison

Cross-Sectional Analysis:It compares the financial

ratios of different

comparablefirms at a givenpoint of time

Time Series Analysis:It compares ratios

for a given companyover a period of time


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Profitability RatioRatios give the margins to sales, on assets, and on ownersinvestment. Comparison of the margin ratios with the averageof the industry or the best performers indicates the performance


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of the industry or the best performers indicates the performance

of the company and the scope the management has to improveefficiency of resource generation, allocation, and value additionto the same.

Gross margin ratio = Gross profit / Net sales

Gross profit = Net sales - Cost of goods sold

Net Profit Margin Ratio = Net Profit (earnings available for commonstockholders)/ Net Sales

Return on total assets= Net profit (earnings available forcommon stockholders) / Total assets

Total Asset Turnover

It indicates the efficiency with which companys assets are being used.

Total asset turnover = Sales /total assets


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Profitability Ratio

Profitability ratios give the margins to sales, on assets, and on owners investment.Comparison of the margin ratios with the average of the industry or the bestperformers indicates the performance of the company and the scope the

management has to improve efficiency of resource generation, allocation, andvalue addition.

Gross margin ratio = Gross profit / Net sales

Gross profit = Net sales - Cost of goods sold

Net Profit Margin Ratio = Net Profit (earnings available for commonstockholders)/ Net Sales

Return on Total Assets/Net Worth/Equity

Return on total assets, also known as Return on Investment (ROI) measuresthe overall effectiveness of the management in generating profits.

Return on total assets= Net profit (earnings available for common


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Return on total assets Net profit (earnings available for common

stockholders) / Total assetsNet profit/ Sales (I)

Sales/Total

Assets (II)

Net

profit/Total

assetsDivide I by II Return on

Assets

Return on net worth = Net profit (earnings available for common stockholders)/

net worth

Return on equity = Net profit (earnings available for common stockholders) /

Common stock equity


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Ratio Analysis enable the management to take correctivesteps or realize its objectives and goals.


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What matters the most is interpretation of financial ratios,as certain information given in the financial statements isincomplete without really understanding the implicationsof notes to accounts and their effect on the financialratio at a given time or in the future.

Therefore, coupled with financial ratio analysis, practisingfinancial analysts with their experience often developtheir own measures for particular industries and even

individual companies to evaluate their financialperformance.

CHAPTER 14


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OVERVIEW OFHUMAN

RESOURCEMANAGEMENT

Learning Objectives

Human Resource Management (HRM)

HRM in the current complex business


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environment The objectives of HRM functions

More about HRM

Steps in HR planning process

Various facets with which HRM dealswith

Human ResourceManagement

Deals with the staffing functions of theorganization such as human resourcesplanning, recruitment, training, career


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planning, compensation package,performance appraisal, etc.

Deals with all aspects of humanresources that enable effective use of

the same to improve organizationaleffectiveness.

Supporting activities such as training,recruitment, orientation, motivation of

employees, and compensation relatedissues.

Human Resource Management (HRM)

Enables the Most Effective and Efficient

Contribution from Human Resources so as to

Achieve Organizational and Individual Goals

Functions of Human Resource Management

Human

R

Recruitment and Selection

Training, Orientation and

I d ti


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ResourcesPlanning,

Organizing,

Directing and

Controlling

Induction

Career Planning

Performance Appraisal

Placement

Compensation Package

Creating conducive WorkEnvironment and Motivation of

Employees

Objectives of the HRMFunctions

Facilitating achievement of organizational goals Effective and efficient deployment of human skills,

abilities, and knowledge Providing inspired, motivated, and trained employees C i ti HRM ti d li i t


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Communicating HRM practices and policies toemployees

Providing scope for creativity and innovation toemployees

Enhancing job satisfaction to the employees Improving the quality of professional life in the

organization Creating healthy work relations in the organization Operating on ethical policies

Complying with statutory requirements To work towards corporate social responsibility (CSR) Managing change

HR Planning Process HR managers have to synchronize their activities with the

business plan of the organization to ensure that the righttype and number of people are made available to differentdepartments of an organization, in line with their

t ib ti t th i ti l l


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contribution to the organizational goals. organization is expected to take steps for synchronizing

human resources activities such as recruitment, selection,placement, training, recognition and reward system,performance appraisal, and labour relations with theorganizational business plan.

HRM has to review and evaluate its actions to ensure thatthe steps taken are producing the expected results as perbusiness plan and the corrective measures that need tobe taken, in case they are not. The evaluation of humanresource activities focus on productivity, quality,

quantity, innovation, and employee satisfaction levels.

Different Facets of HRM

Recruitment and retention of employees Planning for staff requirement

Defining jobs roles and responsibilities


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Defining jobs, roles, and responsibilities Recruitment process applications and resumes examinations, group discussions and interviews

reference checks personality tests integrity tests ensure reliability and validity of various tests

used

Contd..

Induction of new employees Outsourcing certain stages of production,

functions, and services

Creating and providing an environmentd i t th


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Creating and providing an environmentconducive to growth Determining employees benefits and

compensation package Training and development

Career planning for different groups ofemployees

Arranging training in-house or outside Leadership development

Self-development


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Arranging Conducive and SafeWorking Environment

Developing employees assistance programmes

Handling drug abuse situations in the workplace

Ensuring safe working facilities

Promoting welfare schemes for employees


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Promoting welfare schemes for employees

Retaining High Performance Employees

Performance measurement and management

Group performance management

Enhancing personal productivity

Rewarding employees and groups for their specialachievements

Timely promotions and career advancementprospects.

Who performs HRM activities?

HRM Activi ties


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Planning and

Policy Making

HR Specialists

Implementation and

Operationalization

Operating Managers

HRM Importance & Significance

Of all the resources, the only one that is unpredictableis human resource.

In the present information and knowledge age,companies need to devise effective HRM policies andpractices to gain a distinctive advantage over their


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practices to gain a distinctive advantage over theircompetitors.

HRM planning, programming, review, and evaluationensure that the right number and kind of people aremade available at the right time to effectivelyimplement the companys business plan.

Challenge before HRM is to manage change byeliminating systems and practices that come in theway of effective implementation, have ethical leaders

at different tiers of the organization, outsourcingfunctions, services, and production processes.

CHAPTER 15


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JOB DESIGN

Learning Objectives

Job design

Its significance to HRM professionals

Job design related factors that affect workperformance


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Job design related factors that affect workperformance

Changes that the job design perspective hasundergone change over years

Issues that job design addresses Different approaches to job design

Implications of viewing an organization fromsocio-technical systems model point of view

What is job design?

It requires a stepwise diagnosis of a job to dealwith the following issues

Task to be performed; content

How they are to be performed; method andh i


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How they are to be performed; method andmechanism

How many actions are to be performed within thetask; steps involved,

In what order the actions have to be done ;sequencing,

The knowledge skills and attitudes required toperform the task efficiently and effectively; optimum

performance.

Job design also deals with theadministrative issues such as:

Job rotation

Job enlargement

Job enrichment


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Job enrichment Job engineering

Task/machine pacing

Work breaks Working hours

Working environment

Working relationships


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Common approaches to jobdesign

Improving

Performance

Work Design

(jJob

Engineering)


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Job Design

Approaches Focus on

Satisfaction of

Employees

Job

Enlargement

Job Rotation

Job

Enrichment

Job Enlargement

Job enlargement for a particular taskattempts to enhance the scope of the jobsto include a variety of tasks that need to


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ybe performed by the individual

Job Rotation Job rotation moves employees from one

task to another to add variety and reduceboredom by allowing them to perform a

variety of tasks


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CHAPTER 16


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RECRUITMENTAND SELECTION

Learning Objectives

Recruitment and selection as an HRMfunction

The significance of recruitment andfunctional aspects for developing an


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p p geffective recruitment process

The different steps required for effective

recruitment The importance of proper induction of

employees and professional approach to

induct new employees

Recruitment

Recruitment is a specialized task and effectiverecruitment is becoming more and morechallenging in present environment.

Major challenges to recruitment lies in recruitinga right person who would have a long-term


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relationship with the organization.

Recruitment decisions should be made in thecontext of an overall staffing plan, which takesinto account long-term operational needs,known retirements, and resignations vis--visthe growth plans of the company

Approaches to Recruitment

Internal

Promotions and

Transfers from Within

the Organization


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Recruitment

External

Infusion of New

talent Blood from

Outside into the

Organization

HRM Planning Inputs and Tasks

Retirements andresignationsvis--vis thegrowth plans


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Long-termoperational

needs

HRM Planning

RecruitmentSelection

Placement

Identify needfor fresh

induction ofhuman resources

Developing an EffectiveRecruitment Process

Identification and analysis of requirements; atorganisational and job levels

Inviting applications, processing applications, andtaking steps for selection; internal and external

markets Standardization of selection process within the broad


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Standardization of selection process within the broadframework of policies to reduce risk while fillingvacancies

Deploying reliable, valid, and cost effective methodsof selection Taking care of legal constraints and contracts of

employment Recruitment system should maintain and deliver

quality service Recruitment process should be strategic and proactive


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Job Description

Job title Location of the job, i.e.,

department/group/division

Grade of the post Whom an employee would be


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Whom an employee would beresponsible

Who all would be reporting to theperson occupying a particular position

Main purpose of the job Duties and responsibilities involved

Special working conditions

Identifying a pool ofappropriate candidates

People already known, includingex-employees and past applicants

Direct advertising Employment agencies


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Employment agencies

Consulting and hiring firms, along

with advertisement Search consultants

Using personal network for headhunting

The selection

Quality and quantity of results of the effortsmade through alternative sources to attractmore and better candidates depends mainlyupon the good marketing practices followed to

market the organization. Transparency in terms of providing more

i f ti ht b th ti


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information, as sought by the prospectivecandidates, generate greater trust and interestin the organization.

Simplicity and straightforwardness of theprocess lead people to think well of theorganization.

Flexible in approach towards interview timingsand transparent as also quick in decision-making, attracts greater response from thecandidates.

Selection Tests and InterviewTechniques

Methods used should be reliable, valid,cost effective, and acceptable.

Commonly used methods are

application form, bio-data, structured/unstructured interviews; one-to-onef


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panel, references screening, conductingability tests; paper based, practical,

social, aptitude, intelligence, andpersonality tests; in groups or inassessment centres.

An interviewer should necessarily have

due qualities, competence, andknowledge to perform this task.


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The Job Offer Letter

Clearly indicate terms and conditionsof the job.

Collect acceptance of stipulated termsand conditions, that makes an offerletter a contract between the two


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letter a contract between the twoparties.

Candidate, before accepting an offerletter should feel free to seek anyinformation or clarification that mayhelp him/her in making a decision to

join or otherwise.

Induction of new employees

Refers to the smooth entry of new employees into theirjobs and organizational culture

Professionally managed organizations have a detailedchecklist to scientifically and systematically induct peopleinto the organization


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into the organization

In the absence of proper induction, people may makeassumptions or ask the wrong person that may lead togetting incomplete or wrong information resulting in theirgetting dissatisfied and, in turn, quickly quitting theorganization.

Retention of Employees Agreat challenge

Organizational culture and the

relationship with bosses emanatingfrom quality of supervision is a


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from quality of supervision is acritical factor in reducing attrition

rate

CHAPTER 17


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TRAINING ANDDEVELOPMENT

Learning Objectives

The relevance of training in a fast changing businessenvironment

Training, training and development, and learning anddevelopment

The scope of training The steps involved in designing a good training


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programme The significance of systems approach to training

The sources of data for training that need assessment Various methods of training and their relevance to

training objectives The relevance of training evaluation, techniques, and

approaches used to evaluate training

Training: A Definition

Training is A planned process to modifyattitude, knowledge, or skill behaviour throughlearning experience to achieve effectiveperformance in an activity or range of activities.Its purpose, in the work situation, is to developthe abilities of the individual and to satisfy the

t d f t d f th i ti


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current and future needs of the organization.

Training may be distinguished from

development. Training usually refers to teachinglower-level employees how to perform theirpresent jobs, while development involvesteaching managers and professional employeesbroader skills needed for their present andfuture jobs. ( Bateman and Snell 2002)

Contd..

David Kolb (1984) has focused onexperiential learning, i.e., experienceas the source of learning anddevelopment. He emphasizes on how alearner can transform learning into an


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learner can transform learning into anexperience, and later, use it to perform

his assigned duties. Each learner hashis preferred method of learning whichgets developed like any other facet of

his personality


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Training & Development vsTraining & Learning

The field ofTraining and Development (Tand D) deals with the design and deliveryof workplace learning by imparting

required changes in the knowledge, skills,and attitudes to improve job performance.


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Therefore, in some organizations the term

Learning and Developmentis used insteadof Training and Development, in order, toemphasize the importance of continuouslearning for the individual and the

organization.

HRM Linkages between training,learning, individual, andorganizational development

Human Resource Management(HRM)

L i d


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Training anddevelopment

Learning anddevelopment

Individual and organizational

development

Career anddevelopment


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Need and importance for continuous

training and development

Fast Changes

in

Environment

Fast

Obsolecense

of

Continuous

Training

UpdatedKnowledge,

Skills and

Attitude


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Economic

Social

CulturalTechnological

Legal

Political

of

Knowledge,

Skill and

Attitude

Training

and

Develop-

ment

Attitude

Required for

Improved

Efficient

and Effective

Performance

of Job role

Scope of Training

Improve the method and system ofworking

Increase the work output of the

trained employee Increase employee versatility Improve communication and co


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Improve communication and co-operation among employees and with

clients Lower absenteeism Motivate employees to give their best

to the organization

Contd..

Equip employees to deal and handlenew technology

Help in overcoming resistance to

change Increase employee satisfaction and

lower grievances


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lower grievances Reduce overtime Help superiors to delegate their

responsibilities Let the trainee learn new skills at a

very fast rate

Training cannot do the following:

Change the organizational structure orsolve its concomitant problems

Improve the selection process orbecome a substitute for it

Solve problems which are caused by


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Solve problems, which are caused byorganizational shortcomings likeshortage of manpower, lack ofdelegation, conducive workenvironment, and shortage of tools and

technology.

Steps to design a Good TrainingProgramme

Organizational Analysis

Assess Corporate and

Individual Goals Convert into SpecificBehavioural,

Knowledge and

Attitudinal CriteriaEmployee Analysis


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Training Needs

Assessment

Employee Analysis

Depute Employees and Impart

Training

Training Evaluation

Gaps in Performance

Systems Approach to Training

To realize the optimum benefits frominvestment made on training, the systemsapproach to training is imperative thatemphasizes on three major steps namely:


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Assessment emanating from KeyPerformance Areas (KPAs) of jobs

Development of Training Programmes

Training Evaluation

Development of effectivetraining programmes

Key Performance Areas (KPAs)

Design and developmentof training programmes

Training needs assessment


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Content development and

pedagogy for training

Nominate employees andimpart training

Training evaluation


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Job/ Analysis Contd..

Job description

Job specification

Performance standards Steps involved in performing the job

Diagnosing jobs in consultation with


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Diagnosing jobs in consultation with

departmental/divisional employees Operating problems involved in

effectively performing the job

Person Analysis

Contd..

Performance appraisal data

Interviews with job performers

and their supervisors Questionnaires


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Attitude surveys

Assessment centers


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Training Methods

Informational Techniques

Lecture

Talk

Discussion


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AudiovisualsIndependent study

Programmed Instructions


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Learning Objectives

What is motivation

Theories of motivation

Motivating and demotivating factors

How to motivate the self andemployees


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Job Satisfaction (FrederickHerzberg, et al, 1959)

Motivator

Job SatisfactionImproved Product ivity

and

Performance


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Job Enlargement

Job Enrichment


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CHAPTER 19

TEAM

EFFECTIVENESS


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Team

A team is defined as a group ofinterdependent individuals whowork together to accomplish acommon goal or purpose.


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The critical prerequisites forbuilding an effective team areinteraction, mutual influence,interdependence, and a well-defined common goal.


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Critical factor for designing anddeveloping a team - Roles

A role may be defined as a set of behaviours andattitudes that characterizes an individual in a givensituation.

Task-oriented Roles: The team member plays the roleof an initiator, informer, clarifier, summarizer, energizer,reality tester, consensus taker.

Relationship-oriented: The team member takes on


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Relationship oriented: The team member takes on

the responsibilities of a harmonizer, gatekeeper,encourager, compromiser, observer, commentator

Self-oriented roles: The team member plays thenegative role of an avoider, help seeker, aggressor,

blocker, dominator

What makes a Good Team ?

Clear sense of itself as a group

Interacts positively with outsiders

Cultivates positive assumptions andbeliefs

Communicates clearly

Clear approach to the teams work


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pp

Members have a sense of mutualaccountability

Rules for Team Development

Start modestly

Be very clear about your goals and objectives

Remember that the unknown is usually morethreatening than the known

Remember that development is basically self-regulated

Be prepared to grab other opportunities thatmay arise as a result of your actions


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may arise as a result of your actions

Ensure everyones agreement

If required, be prepared to accept outside help

Consult widely and genuinely

Encourage open and frank discussions


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Principles of Team Building

Each team member contributes both a function and ateam role

A team needs an optimal balance between functionaland team roles

Team effectiveness depends on how the teammembers balance themselves within the team

Some team members fit into certain team roles betterthan others, depending on their personalities and


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mental abilities A team can only deploy its technical resources to the

best advantages when it has a suitable range andbalance of team roles


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Barriers to Effective TeamFunctioning

Time trade-of

bhmgmt_chaps1-26

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