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Concept and Nature ofManagement

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Self-Instructional Material 3

UNIT 1 CONCEPT AND NATURE OFMANAGEMENT

Structure1.0 Introduction1.1 Unit Objectives1.2 Significance and Meaning of Management

1.2.1 Management Defined1.3 Changes in Management Concepts

1.3.1 Management by Objectives (MBO)1.4 Nature of Management

1.4.1 Scope of Management1.4.2 Need for Management1.4.3 Management and Administration

1.5 Management: A Science, an Art or a Profession1.6 Functions of Management

1.6.1 Managerial Functions1.7 Managerial Hierarchy1.8 Management Skills

1.8.1 Managerial Responsibilities1.9 Social Responsibilities and Ethics

1.9.1 Arguments For and Against Corporate Social Responsibility (CSR)1.9.2 Spectrum of Social Issues1.9.3 Social Responsiveness1.9.4 Planning for Social Issues1.9.5 Managerial and Business Ethics1.9.6 Ethical Pressure Points1.9.7 Philosophical Approaches to Ethical Conduct1.9.8 The Code of Ethics

1.10 Summary1.11 Key Terms1.12 Answers to ‘Check Your Progress’1.13 Questions and Exercises1.14 Further Reading/References

1.0 INTRODUCTION

In this unit you will learn about the nature, scope and need of management.Management is essential for an organized life and is necessary to run all types oforganizations. Good management is the backbone of successful organizations.Managing life means getting things done to achieve life’s objectives and managingan organization means getting things done with and through other people to achieveits objectives.

Whether management is an art or a science will continue to be a subject ofdebate. However, most management thinkers agree that some form of formalacademic management background helps in managing successfully. Practically, all

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of the chief executive officers (CEOs) are university graduates. Hence, the reasonfor including business degree programmes in all academic institutions.

Management is a set of principles relating to the functions of planning,organizing, directing and controlling, and the application of these principles inharnessing physical, financial, human and informational resources efficiently andeffectively to achieve organizational goals.

A leader has certain inherent qualities and traits that assist him in playing adirecting role and wielding commanding influence over others. Leadership is anessential component of management and performs a crucial role in managerialfunctions, while management is an integral component of technical as well as socialprocesses. The practice of management is as old as human civilization. However,the study of management in a systematic and scientific way as a distinct body ofknowledge is only of recent origin.

1.1 UNIT OBJECTIVES

After going through this unit, you will be able to:• Understand the nature, scope and need for management• Explain the relationship between management and administration• Identify whether management is a science or an art • Analyse the skills, roles and responsibilities of a manager • Outline the different levels of management• Realize the social and (ethical responsibilities) of business

1.2 SIGNIFICANCE AND MEANING OFMANAGEMENT

Management in some form or another is an integral part of living and is essentialwherever human efforts are to be undertaken to achieve desired objectives. Thebasic ingredients of management are always at play whether we manage our livesor our business. For example, let us look at the managerial role of a simple housewifeand how she uses the managerial ingredients in managing the home. First of all, sheappraises her household and its needs. She forecasts the needs of the householdfor a period of a week or a month or longer. She takes stock of her resources andany constraints on these resources. She plans and organizes her resources toobtain the maximum benefits out of these resources. She monitors and controlsthe household budget and expenses and other activities. In a large household, shedivides the work among other members and coordinates their activities. Sheencourages and motivates them to do their best in completing their activities. Sheis always in search for improvements in goals, resources and in means to attainthese goals. These ingredients, generally, are the basic functions of management.


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The concept of management is as old as the human race itself. The conceptof ‘family’ itself required that life be organized and resources of food be apportionedin a manner so as to maximize the utility of such resources. Taking proper steps tosafeguard the family from attacks by wild animals, planning on where to go fishingand hunting and whom to go with, organizing these groups into hunting and fishingbands where chiefs gave directions and so on are all subtle ingredients ofmanagement and organization. A study of various people around the world showsgood examples of organizational structures and organizational evolution over theyears. A village open market in a tribe and a large department store in a moderncity serve the same needs in a similar fashion, which is putting together things thatpeople need. While the tribal organization was simple in nature, the modernorganization is much more sophisticated and complex with many technologicalinnovations. However, the basic form of management and organizational structureseem to have existed since the beginning of organized human activity.

Even the recorded history shows the application of some current managementtechniques as far back as 5000 BC when the ancient Sumerians used written recordsin assisting governmental operations. The Egyptian pyramids, built as early as3000 BC, required the organized efforts of over 100,000 workers. It would benatural to assume that all functions of modern management, namely, planning,organizing, directing and controlling played a significant role in the construction ofthese monuments. Similarly, the early civilisation of India bears witness to organizedliving. Around 500 BC, Mencius declared:

‘Whoever pursues a business in this world must have a system. A business,which has attained success without a system, does not exist. From ministers andgenerals down to the hundreds of craftsmen, every one of them has a system. Thecraftsman employs the ruler to make a square and the compass to make a circle.All of them, both skilled and unskilled, use this system. The skilled may at timesaccomplish a circle and a square by their own dexterity. But with a system, eventhe unskilled may achieve the same result, though dexterity they may have none.Hence, every craftsman possesses a system as a model. Now, if we govern theempire, or a large state without a system as a model, are we not even less intelligentthan a common craftsman?’

Management, as a system, is not only an essential element of an organizedsociety but also an integral part of life when we talk about managing our lives.Managing life is not much different from managing an organization and this ‘art’ ofmanagement has been with us from time immemorial. Just as a well-managed life ismuch better organized, goal oriented and successful, ‘good’ management of anorganization makes the difference between the success and the failure of theorganization. Perhaps the importance of management was highlighted by the latePresident of United States, John F. Kennedy, when he said that ‘the role ofmanagement in our society is critical in human progress. It serves to identify agreat need of our time, to improve standards of living for all people through effectiveutilization of human and material sources’. Similarly, Peter F. Drucker, a noted



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management authority, has emphasized the importance of management to socialliving. He proclaimed nearly 25 years ago that ‘effective management was becomingthe main resource of developed nations and that it was the most needed resourcefor developing nations’.

A manager’s job is highly crucial to the success of any organization. Themore complex the organization, the more crucial is the manager’s role in it. A goodmanager makes things happen. The importance of management in any organizationwas emphasized by Professor Leonard R. Sayles in his address to a group ofmanagement development specialists, as follows:

‘We must find ways of convincing society as a whole, and those who trainmanagers in particular, that the real leadership problems of our institutions—thegetting things done, the implementation, the evolving of a consensus, the making ofthe right decisions at the right time with the right people—is where the action is.Although we as a society haven’t learned to give much credit to managers, I hopewe can move toward recognising that managerial and leadership jobs are amongthe most critical tasks of our society. As such, they deserve the professional statusthat we give to more traditional fields of knowledge’.

1.2.1 Management DefinedMany management thinkers have defined management in their own ways. Forexample, Van Fleet and Peterson define management, ‘as a set of activities directedat the efficient and effective utilization of resources in the pursuit of one or moregoals’. Figure 1.1 shows the components of management.

Humanresources

Physicalresources

Effective andefficient

utilization

Financialresources

Informationalresources

Managerialactivities Goals

Figure 1.1 The Components of Management

Megginson, Mosley and Pietri define management as ‘working with human,financial and physical resources to achieve organizational objectives by performingthe planning, organizing, leading and controlling functions’. Figure 1.2 shows theMegginson, Mosley and Pietri definition of management.

Management Planning, organizing, leading, controlling

Human, financial and physical resources Goals

Figure 1.2 Megginson, Mosley and Pietri Management Definition


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Kreitner considers management as a problem-solving process. He definesmanagement as follows:

‘Management is a problem solving process of effectively achievingorganizational objectives through the efficient use of scarce resources in a changingenvironment’.

Some of the integral elements of this definition can be separated and brieflyexplained as follows:

1. Problem-solving process: One of the most important functions of amanager is to make decisions and solve problems. Some of the majorproblems that management must continually face include unpredictableeconomic trends, changing governmental regulations, resourceshortages and a severe competition for these resources, employeedemands, technical problems, technological developments and so on.There are other problems that are comparatively routine in nature andcan be solved by some tried and tested mechanisms. For example, achange in production quality can be easily looked into and the processcorrected or modified or changed if necessary. On the other hand, anincrease in employee grievances or employee absenteeism or turnovermay require carefully studied unique solutions.

2. Organizational objectives: All organizations have a mission that isthe very basic reason for their existence and certain goals and objectives.While the goals are long range and more general in nature, objectivesare more specific, tangible and most often quantifiable. For example,the mission of a college may be high-quality education, its goal may beto primarily serve the educational needs of the surrounding communityand its objective may be to increase the number of new studentsentering the college by 10 per cent in 2 years. The primary objectiveof most organizations is to provide a service for the public. Of course,such service has to be profitable for the organization in monetary terms,for that is the essence of a capitalist economy. Accordingly, managementmust plan its activities along these lines. Additionally, it is also themanagement’s responsibility to integrate the personal objectives ofthe employees into organizational objectives. The personal objectivesof employees may include higher remuneration, more challenging tasksand responsibilities and participation in the decision-making process.

3. Efficiency: Efficiency, along with effectiveness, is the most commonway of measuring organizational performance. Efficiency is the abilityto ‘get things done correctly’. An efficient manager achieves a higheroutput with given resources of time, talents and capital such that theseresources are fully utilized without waste. Similarly, effectiveness means‘ doing the right things in the right way at the right time’. Accordingly,successful managers would not only be effective in terms of selectingthe right things to do and the right methods for getting them done, butthey would also be efficient in fully utilizing resources.



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4. Scarce resources: The resources of people, time, capital and rawmaterials are all finite and limited. They are all scarce in nature and arenot expandable. Additionally, there is a fierce competition for acquiringthese resources. Management, basically, is a ‘trusteeship’ of theseresources and hence must make conscious efforts to make the mostof these resources.

5. Changing environment: The dynamics of the environment isevidenced by the changes that have taken place in all areas in the lastfew years. The advent of computers and telecommunicationstechnology has changed the ways in which the assessment of theenvironment is carried out for decision-making purposes. Accordingly,management must be prepared to predict accurately these changesand formulate ways to meet these new challenges more effectively.

CHECK YOUR PROGRESS

1. What are the integral elements of Kreitner’s definition of management?2. How do Van Fleet and Peterson define management ?3. How do Megginson, Mosley and Pietri define management ?

1.3 CHANGES IN MANAGEMENT CONCEPTS

As the organizations became more complex both in structure as well as the extentof operations, the need for more sophisticated techniques of management arose.The conglomerates created by mergers, acquisitions, or expansions becamesufficiently complicated such that it became necessary to devise new methods ofmanaging that would ensure that the desired results are achieved effectively.Additionally as the patterns of the workforce changed so that they became moreaware and educated, it was felt that their participation in the affairs of the organizationwould be useful both for the workers and the company. That is how the moremodern concept of participative management evolved.

This type of management is known as ‘management by objectives’ or MBO.

1.3.1 Management by Objectives (MBO)

The notions behind MBO were supported and made famous by Peter Drucker1,who emphasized that ‘business performance requires that each job be directedtowards the objective of the whole business’. Even though it is comparatively anew area, a lot of attention has been paid to it, notably by John Humble in Englandand George Odiorne in America.

MBO is a process in which managers and their subordinates work jointly inoutlining objectives and establishing goals. They make joint plans to accomplishthese objectives. These goals and objectives are aligned to the company’s goals.George Odiorne2 has explaned the concept as follows:


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‘The system of management by objectives can be described as a processwhereby the superior and subordinate managers of an organization jointly identifyits common goals, define each individual’s major areas of responsibility in terms ofresults expected of him and use these measures as guides for operating the unitand assessing the contribution of each of its members’.

MBO then can also be referred as‘management by results or goalmanagement’ 3, and is grounded on the presumption that participation results inloyalty. In case an employee involves himself in the establishing of goals and alsosetting measurement standards of performance towards those goals, he will bemotivated to perform better and in a manner that directly contributes to theachievement of organizational objectives.

John Humble4 seems to be highly excited about this new and challengingconcept and defines MBO as ‘A dynamic system which integrates the company’sneed to achieve its goals for profit and growth with the manager’s need to contributeand develop himself. It is a demanding and a rewarding style of managing a business’.

MBO by definition is a goal-oriented process and not a work-orientedprocess. Just being busy and doing work is not important, if it does not effectivelylead to achievement. It is both an aid to planning as well as a motivating factor foremployees. By its proper use, some of the planning errors can be eliminated orminimized. It is a comprehensive method based upon decided objectives whereinall the members get involved. These objectives are the same objectives for allthose who are involved and the amount or rewards for each member would bedecided by the degree of achievement. This results in a just appraisal method.Moreover, a fine MBO plan includes regular and one-to-one superior–subordinateinteraction and therefore it improves the communication network.

The MBO process

Some of the elements in the MBO process can be explained in the followingmanner:

1. Central goal setting: The first fundamental phase in the MBO process isthe determination and elucidation of organizational objectives which areestablished by the central management, generally in consultation with theother managers. These objectives need to be exact and practical. In thisprocess, both group managers and top managers are together involved.Once these goals are established clearly, they should be communicated toall the employees of the organization to be clearly comprehended by them.

2. Manager–subordinate involvement: When the goals of the organizationhave been established and determined, the subordinates engage with themanagers in setting their personal goals. This kind of mutual discussion isessential as employees are far more motivated in accomplishing objectivesthat they decided upon to begin with. Subordinates goals are precise andshort-termed. Goals should be set by the subordinates in discussion withthe individuals who comprise this unit. This way all participate in the settingof goals.



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3. Matching goals and resources: Objectives by themselves carry nomeaning until we have the resources and means to accomplish thoseobjectives. Accordingly, management must ensure that subordinates aresupplied with the essential tools and resources to effectively accomplishthese goals. Goals precisely set will result in the precise measurement ofresource requirement thus leading to an effortless allocation of resource.However, similar to goal setting, allocation of resources must be performedafter consulting with the subordinates.

4. Freedom of implementation: Manager–subordinate workforce must havesufficient independence to decide the utilization of resources and the meansof achieving the objectives. As long as these means are within the largerframework of organizational policies, there should be minimum interferenceby the superiors.

5. Review and performance appraisal: Periodic assessments or reviewsof progress between managers and subordinates should be performed.These reviews will help in determining whether is person is making acceptableprogress. They will also expose any unexpected troubles. They also help inthe clear understanding of the MBO processes to the subordinates. Theactive involvement of the manager himself in his subordinate's performanceand progress boosts the morale of the subordinates. However, theperformance appraisal at these intermediate reviews should be conducted,based upon fair and measurable standards. These reviews will also assistthe manager and the subordinates to modify either the objectives or themethods, if necessary. This increases the chances of success in meeting thegoals and makes sure that there are no surprises at the final appraisal.

Advantages of MBO

Henri Tosi and Stephen Carroll5 have done extensive work in this area and describedsome of the pros and cons of MBO. Some of the advantages of MBO are asfollows:

1. Since MBO is a result-oriented process and focusses on setting andcontrolling goals, it encourages managers to do detailed planning. As theplanning process is improved, it helps in a better overall management system.

2. Both the manager and the subordinates know what is expected of them andhence there is no role ambiguity or confusion.

3. The managers are required to establish measurable targets and standardsof performance and priorities for these targets. Since these measurable targetsare tailored to the particular abilities of the subordinates, it obtains maximumcontribution from them thus providing optimum utility of human resources.In addition, the responsibilities and authority of the personnel is clearlyestablished.


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4. It makes individuals more aware of the company goals. Most often thesubordinates are concerned with their own objectives and the environmentsurrounding them, whereas with MBO, the subordinates feel proud of beinginvolved in the organizational goals. This boosts their morale andcommitment.

5. MBO often highlights the areas in which the employees need further training.By taking keen interest in the development of skills and abilities ofsubordinates, the management provides an opportunity for strengtheningthose areas needing further refinement thus leading to career development.

6. The system of periodic evaluation lets the subordinates know how well theyare doing. Since MBO puts strong emphasis on quantifiable objectives, themeasurement and appraisal can be more objective, specific and equitable.These appraisal methods are superior to trait evaluation, which is basedupon factors such as cooperation, likeability, self-discipline, loyalty,etc., since they focus on results and not on the same subjective intangiblecharacteristics. This evaluation being more objective can be highly moraleboosting.

7. It improves communication between management and subordinates. Thiscontinued feedback helps clarify any ambiguities and it helps in the processof control so that any deviations can be easily and quickly corrected.

Disadvantages of MBO

1. In a classical established structure of our organizations, the authority flowsfrom top to bottom. This creates discipline and better performance. Hence,the top management is usually reluctant to support the process of MBO inwhich their subordinates would take equal part. Accordingly, MBO canonly succeed if it has the complete support of top management.

2. MBO may be resented by subordinates. They may be under pressure toget along with the management when setting goals and objectives and thesegoals may be set unrealistically high. This may lower their morale and theymay become suspicious about the philosophy behind MBO. They mayseriously believe that MBO is just another of the management’s ploy tomake the subordinates work harder and become more dedicated andinvolved.

3. The emphasis in MBO system is on quantifying the goals and objectives. Itdoes not leave any ground for subjective goals. Some areas are difficult toquantify and even more difficult to evaluate.

4. There is considerable paperwork involved and it is time consuming for themanager. Too many meetings and reports add to the manager’s responsibilityand burden. Some managers may resist the program because of this increasedpaperwork.



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5. The emphasis is more on short-term goals. Since the goals are mostlyquantitative in nature, it is difficult to do long-range planning because all thevariables affecting the process of planning cannot be accurately forecast,due to constantly changing socio-economic and technological environment,which affect the stability of goals.

6. Most managers may not be sufficiently skilled in interpersonal interactionsuch as coaching and counselling, which is extensively required.

7. The integration of MBO system with other systems such as forecasting andbudgeting etc., is very poor. This makes the overall functioning of all systemsmore difficult.

8. Group goal achievement is more difficult. When the goals of one departmentdepend on the goals of another department, cohesion is more difficult toobtain. For example, the production department cannot produce a set quotaif it is not sufficiently supplied with raw materials and personnel.

Suggestions for improving the effectiveness of MBO

1. For MBO to be successful, it is essential to gain the encouragement andcommitment of the top management. Managers at the top level of thehierarchy and their subordinates must regard themselves as being membersof one team. The meaning of this is that superiors should be prepared tosurrender and divide the needed rights with their subordinates.

2. The objectives should be clearly formulated, should be realistic andachievable. For example, it is not realistic for the R & D department of anorganization to set a goal of, say, ten inventions per year. These goals shouldbe set with the participation of the subordinates. They must be properlycommunicated, clearly understood and accepted by all. MBO works bestwhen goals are accepted.

3. MBO must be a complete philosophy of management and the organizationas a whole, rather than merely being a process of the division or a strategyfor performance appraisal. MBO is a chief responsibility and must take theplace of traditional systems instead of simply being added to them. Felix M.Lopex6 has observed, ‘When an organization is managed by objectives, itbecomes performance oriented. It grows and it develops and it becomessocially useful’.

4. The goals must be continuously reviewed and modified as the changedconditions require. ‘The review technique should be such that any deviationsare caught early and corrected’.

5. All participating officials must be provided official training to help themcomprehend the fundamentals and the contents of the programme. Thistraining should include the setting of goals, the methods to accomplish thesegoals, methods of reviews and evaluation of performance and provisions toinclude any feedback that may be given.


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6. MBO system is a major undertaking based upon sound organizational andpsychological principles. Hence, it should be totally accepted as a style ofmanaging and should be totally synthesized with the organizational climate.All personnel involved must have a clear understanding of their role authorityand their expectations. The system should be absorbed totally by all membersof the organization.

CHECK YOUR PROGRESS

4. What does MBO stand for?5. How would you define MBO ?6. What are some of the elements in MBO process ?

1.4 NATURE OF MANAGEMENT

Inspite of the growing importance of management as an academic discipline therebycontributing to the quality of human life, the concept is still clouded by certainmisconceptions. No doubt, management as an academic body of knowledge hascome a long way in the last few years. It has grown and gained acceptance all overthe world. Yet, it is a paradox that the term ‘management’ continues to be the mostmisunderstood and misused. A study of the process of management reveals thefollowing points about the nature of management.

Management is a universal process

Where there is human activity, whether individual or joint, there is management.The process of management can be noticed in all spheres of life. The basic natureof management activity remains the same in all arenas, whether the organization tobe managed is a family, club, trade union, trust, municipality, business concern orthe government. Slight variations in approach and style may be there fromorganization to organization, but the management activity is basically the sameeverywhere.

Management is a factor of production

Management is regarded as a factor of production. Just as land, labour and capitalhave to be brought together and put to effective use for the production anddistribution of goods and services, similarly managerial skills have also to be acquiredand effectively used for the purpose.

In the modern industrial set-up, qualified and efficient managers are essentialto reap the fruits of huge investment in business where the pattern of productionhas become capital-intensive. In fact, in this scenario, the more important wouldbe the role of management.



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Management is goal oriented

The most important goal of all management activity is to accomplish the objectivesof an enterprise. These objectives may be economic, socio-economic, social andhuman and thereby management at different levels seeks to achieve these in differentways. However, at all times, management has definite objectives to pursue and itemploys all the resources at its command— men, money, materials, machines andmethods in the pursuit of the objectives.

Management is supreme in thought and action

Determination of the objectives of an enterprise tests the collective wisdom andsense of imagination of its management. The objectives should be neither too highsounding or difficult to achieve, nor too low pitched to rob the workers of theirsense of achievement. However, mere setting of objectives will be of no avail, ifthere is no vigorous action to achieve them.

Managers set realizable objectives and then mastermind action on all frontsto accomplish them. Managers belong to that rare breed of men who are not onlyaware of what is to be achieved and how, but also possess the capability andcourage to accept the challenges of doing it.

Management is a group activity

An enterprise will not be able to achieve its objectives if only one or a few individualsor departments are efficient and the rest are inefficient. The calibre of each individualand department needs to be efficient in order to make a project successful. Forexample, even the best performance by the production department will becomemeaningless if the sales department does not make efforts to sell the products or ifthe finance department does not ensure adequate availability of funds.

For the success of an enterprise, it is necessary that all human and physicalresources at its disposal are efficiently coordinated to attain the maximum levels ofproductivity. It is well known that the combined productivity of different resourceswill always be much higher than the total of individual productivity of each resource.The test of managerial ability lies in coordinating the various resources and toachieve maximum combined productivity. With proper management, one plus onedoes not mean two but eleven. This is also called the multiplier effect of managementactivity.

Management is a dynamic function

Management is a dynamic function of a collective enterprise that is constantlyengaged in casting and recasting the enterprise in the world of an ever-changingbusiness environment. Not only this, it also sometimes initiates moves that reformand alter the business environment. If an enterprise is well equipped to face thechanges in business environment brought about by economic, social, political,technological or human factors, it can soon adapt itself to a changed environmentor make innovation to attune itself to it. For example, if there is a fall in the demandfor a particular product, the enterprise can be kept in readiness to explore newmarkets or switch over to production of new goods with ready demand.


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Management is a social science

In other words, management means getting the tasks done by different peoplewith different qualities. This involves dealing with individuals, each one of whomhas a different level of sensitivity, understanding and dynamism. In fact, no definiteprinciples or rules can be laid down in respect of human behaviour. These principleschange from individual to individual and from situation to situation. No doubt, amanager may seek guidelines from established principles and rules but he cannotbase his decisions on them.

Management is an important organ of society

Management as an activity has carved for itself an important place in society.Management shares a direct relationship with society. While the society influencesthe managerial actions, managerial actions influence the society. By their decisions,management of large undertakings influence the economic, socio-political, religious,moral and institutional behaviour of the members of society. This creates an impacton the social and moral obligations of business management, which cannot beeasily ignored.

Management is a system of authority

It is the job of management to bring about a harmonious arrangement and patternamong the different resources employed in an undertaking. In fact, management’srole as a factor of production forces itself to be methodical in plans and proceduresand on the other hand systematic and regular in their implementation. For this, it isnecessary that the authority vested in the management is to be exercised properlyand correctly. Therefore, this calls for well-defined lines of command, delegationof suitable authority and responsibility at all levels of decision-making. Unlessthere is proper balance between authority and responsibility at each level of decision-making, the organization might not succeed in the task of accomplishment of itsobjective.

Management is a profession

Management makes judicious use of all available means to accomplish certainpredetermined ends. To achieve this successfully, managers need to possessmanagerial knowledge and training. Moreover, they have to conform to a recognizedcode of conduct and remain conscious of their social and human obligations.Managers are well paid and well provided by the organization for their work.Moreover, they enjoy considerable social prestige too.

Management is a process

Management is an activity consisting of a distinct process, which is known as themanagement process. This process is primarily concerned with the important taskof goal achievement. No business enterprise can achieve its objectives until andunless all the members of the unit make an integrated and planned effort under thedirections of central coordination agency. In management terminology, this central



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co-ordinating agency is technically known as ‘management’ and the methodologyof getting things done is known as ‘management process’. The process, in general,is defined as a series of actions or operations conducted towards an end. Thelogic of the management process is that particular functions are performed in asequence within a given period of time. In other words, the functions that areperformed by a manager and the sequence in which they are performed are togethercalled the ‘management process’.

The processes such as planning, organizing and actuating involved in theachievement of business goals together form the management process.

1.4.1 Scope of Management

Although it is difficult to precisely define the scope of management, yet the followingareas are included in it:

1. Subject-matter of management: Planning, organizing, directing,coordinating and controlling are the activities included in the subject matterof management.

2. Functional areas of management: These are as follows:• Financial management includes accounting, budgetary control, quality

control, financial planning and managing the overall finances of anorganization.

• Personnel management includes recruitment, training, transfer promotion,demotion, retirement, termination, labour-welfare and social securityindustrial relations.

• Purchasing management includes inviting tenders for raw materials,placing orders, entering into contracts and materials control.

• Production management includes production planning, production controltechniques, quality control and inspection and time and motion studies.

• Maintenance management involves proper care and maintenance of thebuildings, plant and machinery.

• Transport management includes packing, warehousing and transportationby rail, road and air.

• Distribution management includes marketing, market research, price-determination, taking market-risk and advertising, publicity and salespromotion.

• Office management includes activities to properly manage the layout,staffing and equipment of the office.

• Development management involves experimentation and research ofproduction techniques, markets etc.

3. Management is an inter-disciplinary approach: For the correctimplementation of the management, it is important to have knowledge ofcommerce, economics, sociology, psychology and mathematics.


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4. Universal application: The principles of management can be applied to alltypes of organizations irrespective of the nature of tasks that they perform.

5. Essentials of management: Three essentials of management are as follows:• Scientific method• Human relations• Quantitative technique

6. Modern management is an agent of change: The managementtechniques can be modified by proper research and development to improvethe performance of an organization.

1.4.2 Need for Management

Management is an essential component of all social organizations and is to befound everywhere as a distinct, separate and dominant activity. The importance ofmanagement cannot be over emphasized. The significance of ‘management’ maybe outlined in the following paragraphs:

1. To meet the challenges of change: In recent years, the challenge ofchange has become intense and critical. Only scientific management canovercome the complexities of modern business.

2. For effective utilization of the Seven Ms: There are seven Ms in business:men, materials, money, machines, methods, markets and management.Management stands at the top of all these Ms. It determines and controls allother factors of business.

3. For the development of resources: Good management procures goodbusiness by creating vital dynamic and life-giving force in the organization.

4. Management directs the organization: Just as the mind directs andcontrols the body to fulfil its desires, similarly management directs andcontrols the organizations to achieve the desired goal.

5. Integrate various interests: There are various interest groups that putpressure over other groups for maximum share in the total output.Management balances these pressures and integrates the various interests.

6. Management provides stability: In the modern organization, managementprovides stability by changing and modifying the resources in accordancewith the changing environment of the society.

7. Management provides innovation: Management provides new ideas,imagination and vision to the organization and is necessary for better andgreater performance.

8. Management provides coordination and establishes team spirit:Management coordinates the activities of the different departments in anenterprise and establishes team spirit amongst the personnel.



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9. To tackle business problems: Goods management serves as a friend,philosopher and guide in tackling business problems. It provides a tool fordoing a task in the best possible manner.

10. A tool of personality development: Management is necessary not onlyfor productivity, but also for improvement in the efficiency of mankind.Management helps improve the personality of people and therefore attemptsto raise their efficiency and productivity.

1.4.3 Management and Administration

The terms ‘management’ and ‘administration’ are often used synonymously.According to Dalton E. McFarland, ‘In business firms, administration refers tohigher, policy-determining level. One seldom regards the first-line supervisor as anadministrator, instead he is a manager. In the health care fields and in many serviceorganization, problems (such as individual’s chronic disease) are managed butprogrammes (such as flu vaccine distribution) are administered’.

Administration may be defined as ‘the guidance, leadership and control ofthe efforts of a group of individuals towards some common goals’. Often theterms administration and management are used together as administrativemanagement. Administrative management is different from ‘operative management’,which is concerned with the operational aspects of a business. Some experts likeOliver and Sheldon distinguished administration from management by suggestingdefinitions of their own.

The definition

Administration is defined as a function of an organization that is concerned withpolicy determination, coordination of finances, production, distribution and controlof the executives that are required for establishing an organization. Contrary tothis, management is the process that is concerned with the execution of the policieswithin certain limits set by the administration and employment of the organizationfor the purpose of accomplishing objectives laid down by the administration.

Essence of administration

Ordway Tead has analysed the process of administration into distinct elementsthat are as follows:

• Establishing the objectives• Formulating broad policies• Stimulating the organization• Evaluating the performance• Looking ahead

Thus, management actions are directed towards attaining aims and objectivesthat are laid down by the administration.


NOTES


It is, therefore, clear that administration is more important at higher levelswhereas management is more important at lower levels in the firm’s organizationalpyramid.

Thus, administration is a top-level function while management is a bottom-level function. The fundamental point of distinction between these two aspects isthat the former is the process of formulating policies and goals of the organizationwhile the latter directs and guides the operational or functional aspects of theorganization towards achieving the objectives set by the former. Figure 1.3 showsthe administration and management ladder.

Administration

Management M

anag

emen

t lad

der

Top management(Executive President)

Bottom management(Foreman, Supervisor)

Figure 1.3 The Administration and Management Ladder

A closer look reveals that the scope of management is broader than that ofadministration. It is true that planning is more important and broader at higherlevels of organization. Yet it is equally valid that every level of management,irrespective of its hierarchy in the organizational setup, has to do some sort ofplanning and policymaking along with their execution. Therefore, managementincludes both administrative management and operative management.

CHECK YOUR PROGRESS

7. List the points in nature of management.8. What is the need for management ?9. Which are the three essentials of management ?

10. What is the fundamental point of distinction between administration andmanagement ?

1.5 MANAGEMENT: A SCIENCE, AN ART OR APROFESSION

Generally, a controversy arises over the question whether management is a scienceor an art. It is said management is the oldest art and the youngest science. Thisexplains the changing nature of management. However, to have an exact answerto the question, it is necessary to understand the meaning of the terms ‘science’and ‘art’.



NOTES

Management as a science

Before trying to examine whether management is a science or not, we have tounderstand the nature of science. Science may be described as a systematizedbody of knowledge pertaining to an act of study and contains some general truthsexplaining past events or phenomena. It is systematized in the sense that relationshipsbetween variables and their limits have been ascertained and underlying principleshave been discovered. Three important characteristics of science are as follows:

• It is a systematized body of knowledge and uses scientific methods forobservation.

• Its principles are evolved on the basis of continued observation andexperiment.

• Its principles are exact and have universal applicability without any limitation.Examples of scientific principles are that two atoms of hydrogen and one

atom of oxygen form one molecule of water, or according to the law of gravitationif anything is thrown towards the sky it will come down to the earth.

Judging from these criteria, it may be observed that management too is asystematized body of knowledge and its principles have evolved on the basis ofobservation not necessarily through the use of scientific methods. However, if weconsider science as a discipline in the sense of our natural science, one is able toexperiment by keeping all factors and then varying them one at a time. In naturalscience, it is possible to repeat the same conditions over and over again, whichenables the scientist to experiment and obtain a proof. This kind of experimentationcannot be carried out in the art of management since we are dealing with thehuman element. This puts a limitation on management as a science. It may bedesignated as an ‘inexact’ or ‘soft science’.

Management as an art

Art comprises the ‘know-how to accomplish a desired result’. The focus is ondoing things in one way. As the saying goes ‘practice makes a man perfect’, constantpractice of the theoretical concepts (knowledge base) contributes to the formationof skills. The skills can be acquired only through practice. In a way, the attributesof science and art are two sides of a coin. Medicine, engineering, accountancyand the like require skills on the part of the practitioners and can only be acquiredthrough practice. Management is no exception. For example, a university goldmedallist in surgery may not necessarily turn out to be a good surgeon; similarly amanagement graduate from the best of the institutes may not be very effective inpractice. In both the cases, the application of knowledge acquired through formaleducation requires ingenuity, correct understanding of the variables in the situation,pragmatism and creativity in finding solutions to problems.

Effective practice of any art requires a thorough understanding of the scienceunderlying it. Thus science and art are not mutually exclusive, but are


NOTES


complementary. Executives who attempt to manage without the conceptualunderstanding of the management principles and techniques have to depend onluck and intuition. With organized knowledge and the necessary skill to use suchknowledge, they have a better chance to succeed. Therefore, it may be concludedthat management is both a science and an art.

1.6 FUNCTIONS OF MANAGEMENT

In addition to the four managerial functions of planning, organizing, directing andcontrolling, there are ten managerial roles that are commonly defined. These rolescan be defined as the organized sets of behaviours identified with the position.These roles were developed by Henry Mintzberg in the late 1960s after a carefulstudy of executives at work. All these roles, in one form or another, deal withpeople and their behaviour. These ten managerial roles are divided into threecategories. The first category of ‘interpersonal roles’ arises directly from themanager’s position and the formal authority bestowed upon him. The secondcategory of informational roles is played as a direct result of the interpersonal rolesand these two categories give rise to the third category of decisional roles.

These roles, in the context of organizational behaviour, are explained inmore detail in Figure 1.4.

Conflict handler

p

Figure 1.4 Managerial Roles

Interpersonal roles

Managers spend a considerable amount of time in interacting with other peopleboth within their own organizations as well as outside. These people include peers,subordinates, superiors, suppliers, customers, government officials and communityleaders. All these interactions require an understanding of interpersonal behaviour.Studies show that interacting with people takes up nearly 80% of a manager’stime. These interactions involve the following three major interpersonal roles:



NOTES

Figurehead role. Managers act as symbolic figureheads performing socialor legal obligations. These duties include greeting visitors, signing legal documents,taking important customers to lunch, attending a subordinate’s wedding or speakingat functions in schools and churches. All these primarily are duties of a ceremonialnature but are important to the smooth functioning of the organization.

Leadership role. The influence of the manager is most clearly seen in hisrole as a leader of the unit or organization. Since he is responsible for the activitiesof his subordinates, he must lead and coordinate their activities in meeting task-related goals and he must motivate them to perform better. He must be an exemplaryleader so that his subordinates follow his directions and guidelines with respectand dedication.

Liaison role. In addition to their constant contact with their ownsubordinates, peers and superiors, the managers must maintain a network of outsidecontacts in order to assess the external environment of competition, social changesor changes in governmental rules and regulations. In this role, the managers buildup their own external information system. This can be achieved by attending meetingsand professional conferences, personal phone calls, trade journals and informalpersonal contacts with outside agencies.

Informational roles

By virtue of his interpersonal contacts, a manager emerges as a source of informationabout a variety of issues concerning the organization. In this capacity of informationpossessor, a manager executes the following three roles:

Monitor role. The managers are constantly monitoring and scanning theirenvironment, both internal and external, collecting and studying informationregarding their organization and the outside environment affecting their organization.This can be done by reading reports and periodicals, by interrogating their liaisoncontacts and through gossip, hearsay and speculation.

Information disseminator role. The managers must transmit theinformation regarding changes in policies or other matters to their subordinates,their peers and to other members of the organization. This can be done throughmemos, phone calls, individual meetings or group meetings.

Spokesman role. A manager has to be a spokesman for his unit andrepresent his unit in either sending relevant information to people outside his unit ormaking some demands on behalf of his unit. This may be in the form of the presidentmaking a speech to a lobby on behalf of an organizational cause or an engineersuggesting a product modification to a supplier.

Decision roles

On the basis of the environmental information received, a manager must makedecisions and solve organizational problems. In that respect, a manager plays fourimportant roles.


NOTES


Entrepreneurship role. As entrepreneurs, managers are constantlyinvolved in improving their units and facing the dynamic technological challenges.They are constantly on the lookout for new ideas for product improvement orproduct addition. They initiate feasibility studies, arrange for capital for newproducts and ask for suggestions from the employees for ways to improve theorganization. This can be achieved through suggestion boxes, holding strategymeetings with project managers and R&D personnel.

Conflict handling role. The managers are constantly involved as arbitratorsin solving differences among the subordinates or the employee’s conflicts with themanagement. These conflicts may arise due to demands for higher pay or otherbenefits or these conflicts may involve outside forces such as vendors increasingtheir prices, a major customer going bankrupt or visits by governmental inspectors.Managers must anticipate such problems and take preventive action, if possible,or take corrective action, once the problems have arisen. These problems mayinvolve labor disputes, customer complaints, employee grievances, machinebreakdowns, cash flow shortages and interpersonal conflicts.

Resource allocator. The third decisional role of a manager is that of aresource allocator. The managers establish priorities among various projects orprogrammes and make budgetary allocations to different activities of the organizationbased upon these priorities. They assign personnel to jobs, allocate their own timeto different activities and allocate funds for new equipment, advertising and payraises.

Negotiator role. The managers represent their units or organizations innegotiating deals and agreements within and outside the organization. They negotiatecontracts with the unions. Sales managers may negotiate prices with primecustomers. Purchasing managers may negotiate prices with vendors.

All these ten roles are important in a manager’s job and are interrelated,even though some roles may be more influential than the others depending uponthe managerial position. For example, sales managers may give more importanceto interpersonal roles while the production managers give more importance todecisional roles. The managerial effectiveness is most often determined by howwell the decisional roles are performed.

1.6.1 Managerial Functions

In addition to the ten managerial roles as described, the job of a manager is mostoften described in terms of management functions. There are four basic andinterrelated functions that managers perform utilizing human, financial, physicaland information resources in order to achieve the organizational goals. Thesemanagerial functions are planning, organizing, leading and controlling. The functionsand their interrelationship is illustrated in Figure 1.5 as follows.



NOTESFigure 1.5 Managerial Functions.

Planning. Planning is considered to be the central function of themanagement and determines an organization’s direction. It is a rational andsystematic way of making decisions today that will affect the future of the company.It involves the process of ascertaining organizational goals and objectives anddeciding on activities to attain these objectives. It is also a process of preparing forchange and coping with uncertainty by formulating future courses of action. Planningis particularly important because of scarce resources and uncertain environmentswith a fierce competition for these resources.

Behavioural characteristics and processes are closely connected to theprocess of planning. For example, perception plays an important role in scanningand assessing the environment and making intuitional judgements about the future.Similarly, determination of goals and formulation of strategies for achieving suchgoals reflect some degree of motivation and creativity.

Organizing. Organizing requires a formal structure of authority and thedirection and flow of such authority through which work sub-divisions are defined,arranged and coordinated. Each part relates to other parts in a united and coherentmanner so as to attain the prescribed objectives. The function of organizing isprimarily concerned with the following:

• Identifying the tasks that must be performed and grouping these taskswherever necessary

• Assigning these tasks to personnel while defining their authority andresponsibility

• Delegating the necessary authority to these employees• Establishing a relationship between such authority and responsibility• Coordinating all these activitiesThe entire process of organizing and coordinating the various activities

requires an understanding of human behaviour and group dynamics that are integralparts of organizational behaviour.

Directing. The directing function is concerned with leadership,communication, motivation and supervision so that the employees perform theiractivities in the most efficient manner possible in order to achieve the desiredgoals. The leadership element involves issuing of instructions and guiding thesubordinates about procedures and methods in a manner so that the employeesfollow willingly and with enthusiasm. The communication must be open both waysso that the information can be passed on to the subordinates and the feedbackreceived from them. Motivation is very important, since highly motivated peopleshow excellent performance with less direction from superiors. Supervisingsubordinates in a friendly but firm manner would give continuous progress reports


NOTES


as well as assure superiors that directions are being properly carried out. Allcomponents of the function of leading are important ingredients of organizationalbehaviour.

Controlling. The function of control consists of those activities that areundertaken to ensure that the events do not deviate from the pre-arranged plans.The activities consist of establishing standards for work performance, measuringperformance and comparing it to these set standards and taking corrective actionsas and when needed to correct any deviations. Again behavioural processes andcharacteristics are embedded in this function since control involves performanceevaluation, reward and recognition systems and motivation.

CHECK YOUR PROGRESS

11. What are three important characteristics of science?12. What does organizing require?

1.7 MANAGERIAL HIERARCHY

As organizations grow larger and more complex, they usually develop severallevels of managerial positions, forming a hierarchy of superior and subordinatereporting relationships. Traditionally, there are three managerial levels, which areusually depicted in the form of a hierarchical pyramid. The total number of personnelfound at each level decreases as the management level increases up the pyramid.The largest number of people in the organization are at the lower organizationallevel, at the bottom of the pyramid, and these people operate in a non-managerialcapacity. This group consists of individual contributors who are simply theemployees who work under the guidance of their supervisors.

A flat organization or horizontal organization is an organizational system thathas few or no levels of management between the workforce and managers.Figure 1.6 shows the hierarchical pyramid.

Top-level managers

Top-level managers are ultimately responsible for the entire organization. The top-level management, also known as ‘central management’, includes top executivessuch as chief executive officer (CEO), chairman of the board of directors, president,executive vice-presidents and various vice-presidents. These managers are primarilyinvolved in broad organizational matters such as policy formulation, long-rangestrategic planning, goal setting and development of organizational strategies. Ingeneral, top management effectively deals with all elements and forces that affectthe survival, stability and growth of the organization. In the words of B.Yuill:



NOTES

‘It is the function of top management to watch, interpret, exploit, or wherenecessary, counter external influences with appropriate decisions and plans and toinitiate the appropriate adjustments in the functional authority and status structuresof the organization. It is the top management’s duty to protect the integrity of theorganization so that it can survive for its own employees, shareholders, suppliersand the customer’s interests and for the general good of the social and economicsystem within which it operates’.

President, chairman of the board, vice-presidents

Department head, branch manager, dean of a school

Supervisor, foreman, office manager

Salesmen, clerical and

technical employees

Top Manage- ment

Middle-level management

First-level management

Individual contributors

Figure 1.6 The Management Levels

Middle-level managers

The middle management level generally consists of divisional and departmentalheads such as a plant manager, production manager, marketing manager, personneldirector and so on. Their responsibility is to interpret policies and directions set bythe top-level management into specific plans and guidelines for action. Their furtherresponsibility is to coordinate the working of their departments so that the setobjectives can be achieved. They are concerned with short-term goals and specificresults. They spend more time on operational planning, information processingand day-to-day monitoring of their divisional activities. They serve as a link betweenthe strategic activities of the top managers and operational activities of first-levelmanagers who are the subordinates in terms of information dissemination in bothdirections.

Organizations, specially the very large ones, often have several layers ofmiddle managers. During its expansion years, at one time, General Motors (GM)had fourteen or fifteen management levels. However the tendency now is to havefewer layers and give the managers greater autonomy and responsibility, part ofwhich is delegated to lower-level managers.

First-level supervisory managers

This level of management consists of supervisors, superintendents, unit heads,foremen, chief clerks and so on. The primary concern of the first-level managers is


NOTES


with the mechanics of the job and they are responsible for coordinating the workof their employees. They must possess technical skills so that they can assist theirsubordinate workers where necessary.

They plan day-to-day operations, assign personnel to specific jobs, overseetheir activities, evaluate their performances and become a link between the workersand the middle level management. Because they represent both the middle-levelmanagement as well as the workers on the other side, the first-line supervisors caneasily find themselves in the middle of conflicting demands. According to Kerr, Hilland Broedling, their greatest emphasis is evolving around dealing with internalhuman relations rather than operational activities because of the trend towards amore educated workforce, team works and group cohesions as well as growinguse of computers in tracking and monitoring many activities that were previouslyregulated by first-line managers.

General versus functional managers

Apart from the vertical levels of managerial hierarchy, there are two types ofmanagers with different responsibilities. These are ‘functional managers’ and ‘generalmanagers’. Functional managers take responsibility for one type of function orspecialized activity and supervise the work of employees who are engaged in suchspecialized activities as marketing, finance, accounting, quality control, productionand so on.

General managers, on the other hand, are responsible for the activities ofseveral different groups that perform a variety of functions and have authority overboth the specialized as well as generalized activities. For example, the generalmanager of a plant in a manufacturing company is responsible for monitoring allaspects of the plant such as production, engineering, quality control, labour relations,purchasing, inventories and so on. Branch managers are considered as generalmanagers if employees from different disciplines within the branch report to them.

General managers in non-profit organizations such as hospitals, universitiesor government agencies are designated as ‘administrators’, rather than as managers.For example, the head of a hospital might be known as a chief administrator.Similarly, the president of a college or the dean of a school would be designated asan administrator.

CHECK YOUR PROGRESS

13. What is hierarchy?14. How would you arrange managers on a hierarchy chart?15. What are the differences between general managers and functional managers?



NOTES

1.8 MANAGEMENT SKILLS

A skill is an acquired and learned ability to translate knowledge into performance.It is competency that allows for performance to be superior in the field in whichthe worker has the required skill. All managers need to possess technical,interpersonal, conceptual, diagnostic, communicational and political skills. Whiletechnical and diagnostic skills refer to the knowledge and ability of understandingthe processes involved and scientifically analysing problems and opportunities, allother skills deal with people in one form or the other and hence contribute to theunderstanding of organizational behaviour. These various skills are as follows:

Technical skills. Technical skills basically involve the use of knowledge,methods and techniques in performing a job effectively. For example, engineers,accountants, computer programmers and analysts have technical skills in theirareas acquired through education and training. This is a specialized knowledgeand expertise that is used in day-to-day problems and activities. This skill is highlynecessary at the lower-level of management and desirable at the middle managementlevels, and even the top-level management requires some technical skills such aspreparing a budget or laying out a production schedule.

Interpersonal skills. Interpersonal skill is the ability to work with otherpeople amicably. It involves patience, trust and genuine involvement in interpersonalrelationships. It is the ability to lead and motivate and effectively interact withothers. This will create an environment in which the workers work together as ateam with a sense of belonging and dedication and this is truly conducive to highmorale that is necessary for organizational success.

Conceptual skills. Conceptual skill is the ability to view the organizationas a whole and as a total entity as well as a system comprised of various parts andsubsystems integrated into a single unit. This skill generally depends upon anorganized thinking process that deals with understanding of various functions of anorganization, their interdependence and the relationship of the organization withthe outside environment in terms of threats and opportunities. This skill is particularlyneeded at the top-level management because the executive managers havecontinuous contact with the outside world.

Diagnostic skills. Diagnostic skill refers to a manager’s analytical abilitywhere he can logically and objectively investigate and analyse a problem or anopportunity and use scientific approaches to arrive at a feasible and optimal solution.It is important however that a manager gets to the root cause of the problem sothat the solution is real and permanent rather than a cosmetic one. This skill overlapswith other skills because a manager may need to use technical, human, conceptualor political skills to solve the problem that has been diagnosed.

Communicational skills. Communication skills are basic to all other skillsand are important at all levels of management. A manager’s best ideas will havelittle impact if they cannot be communicated effectively. Good communication is


NOTES


the foundation of sound management. Proper communication eliminates delays,misunderstandings, confusion, distortions and conflicts and improves coordinationand control. The ten managerial roles as discussed earlier are based upon thepremise that managers possess writing, verbal and non-verbal communicationalskills. Accordingly, communicational skill plays an important role in all walks ofhuman life as well as organizational life.

Political skills. Political skills can be described as the ability to get yourown way without seeming to be selfish or self-oriented. It is the ability to get yourshare of power and authority and use it without fear of losing it. It is the mostcomplex skill in the sense that it is required to establish the right connections andimpress the right people and then skilfully using these connections to your ownadvantage. Political skill is most important at the middle management level becausemiddle managers always aspire to reach the top levels of management.

1.8.1 Managerial Responsibilities

The management is responsible and answerable to many groups. Sometimes theinterests of these groups conflict with each other. Hence, management must conductits affairs in a manner so as to be fair and equitable to all parties who have a vestedinterest and claim on management. These interested parties are as follows.

1. The stockholders and other investors2. Employees3. Consumers4. Inter-related businesses5. The government6. The community

These responsibilities are discussed in more detail as follows:1. Responsibility towards stockholders: The stockholders are the

owners of the company who have invested capital in the organization.Their primary purpose in investing funds is to make a reasonable profit.Accordingly, the management must direct its resources at its commandin such a manner so as to yield a satisfactory rate of return for itsinvestors in the long run. The stockholders are not so much interestedin quick profits as they are in the stability, growth, and the image of thecompany. The company must create an image of quality and service.In addition, it is the management’s duty to inform the shareholdersabout the company’s financial position from time to time and all otherrelevant matters regarding objectives, policies and procedures, so thatthe stockholders can give some necessary input from time to time.The stable growth of a company will help the stockholders in twoways. First, they will share a part of the total profits in the form ofdividends. Second, the value of their share will appreciate. Accordingly,the management must base their decisions on long-range planning andobjective forecasting.



NOTES

2. Responsibility towards employees: The responsibilities ofmanagement towards employees who put in their time and efforts aremanifold. Some of these responsibilities relate to the following areas:(a) Responsibility in relation to employment. This must be clearly

understood that the employment is meant to be mutually beneficialfor the employee as well as for the employer. Accordingly, theemphasis should not only be on what the employee can do forthe company, but also on what the company can do for theemployee. The employee contribution must be fully recognized.The employees must be ‘assigned the right jobs as per theirknowledge, experience, attitudes and interests. Additionally, theemployees must be made aware of company policies, proceduresand objectives.

(b) Responsibility in relation to working conditions. Theemployees spend their major part of the day in work environment.Accordingly, working conditions must be conducive to work.These working conditions refer to physical facilities that must beadequate and acceptable. These must meet the acceptedstandards of cleanliness, light, heat, air conditioning, ventilation,safety and sanitation facilities. They should also be given theproper tools and machines to work with. Whenever the jobrequires some extra degree of risk or difficulty, then additionalbenefits and incentives must be offered. These conditions includenight duty, working with chemicals, working underground in coalmines or working with fast, heavy machinery. In addition,provisions for social activities as well as athletic activities wouldmake the employees more dedicated. The workers shouldconsider this an additional benefit as well as a boost in theirmorale, if they are allowed easy access to superiors, provisionsfor suggestions that would be seriously considered and flexibilityin working hours, if possible. Many large companies provide forpsychological counselling, which greatly reduces the stress ofwork and helps solve other personal problems. This reductionin stress and tension and the development of a positive attitudewould greatly improve the productivity.

(c) Responsibility in relation to economic security. Theeconomic security implies the continuity of the job in good timesas well as bad times. This sense of job security greatly improvesthe sense of dedication to the company. The system of ‘tenure’in academic institutions after five or six years of service is designedto give the professor a sense of economic security that shouldbring out dedication, sincerity and a sense of belonging to theinstitution. In addition to job security, the remuneration and fringe


NOTES


benefits must be adequate and encouraging. Some of the fringebenefits in addition to the salary are as follows:• Life insurance• Medical insurance• Sick leave• Maternity leave• Provision for other emergencies• Profit-sharing plans• Stock options. This is a provision to buy the stock shares of

the company at a price lower than the price paid by thecompany at a price lower than the price paid by the public.

• Pension plans and retirement benefits• Paid vacation• Free education, for workers, if necessary, and for their children

(d) Responsibility in relation to job satisfaction. Job satisfactionrefers to the employee’s self-fulfillment and happiness at the job.The conceptual environment should be such as to enhance theemployee confidence and faith in the company. Workers shouldbe encouraged to participate in the company affairs as much aspossible, especially in the formulation of procedures and policiesaffecting them. This would encourage a sense of belonging. Inaddition the employee contributions should be properlyrecognized and rewarded. Other management policies includeprovisions for challenging opportunities, increased responsibility,promotion and participation in the decision-making process.

3. Responsibility towards consumers: The customers expect a qualityproduct at a reasonable price with guaranteed satisfaction. It is theresponsibility of the management to see that the interests of theconsumers are promoted. The quality of the product can be guaranteedby offering facilities for returning the defective product either for arefund of the purchase price or for a new unit. Also, by providing freeservice to the product for a specified period of time, the customer’sconfidence in the quality of the product can be strengthened. Theproduct should be simple to operate and be made easily availablethrough proper distribution channels and the customer satisfactionshould be the first rule of sales. ‘The customer is always right’ hasproved to be a good policy for initiating sales and keeping the customer.

4. Responsibility towards inter-business relations: All industries buyraw materials or semi-finished products from other industries. Allbusinesses buy some supplies from vendors. All companies sell theirproducts to other companies like distributors and wholesalers. It is



NOTES

the responsibility of the management to maintain the inter-businessrelationship at a level of high ethical standards. They should have fairtrade practices regarding their prices, the quality and the quantity ofthe product, methods of payment, time and mode of delivery and thequality of service. For example, General Motors buys steel from steelmills, tyres from Firestone or General Tyre and some other parts ofthe cars from other companies and sells the cars to dealers. Theseinter-business relationships demand a fair code of conduct from allparties concerned.

5. Responsibility towards government: The management mustoperate within the legal system, adhering to all laws which may belocal, state, or federal laws. These laws include, but are not limited to:• Paying proper taxes and paying them on time.• Respecting laws pertaining to social environment. These may

be relating to air pollution, water pollution, noise pollution,dumping of chemical wastes, respect for zoning laws etc.

• Affirmative action. This means that the management makesspecial provisions for hiring, training and promoting employeesbelonging to such minority groups who have been discriminatedagainst previously. These discriminations may have been on thebasis of ethnic origin, race, provincialism or sex.

• Equal opportunities for all. This means that there is no longerany discrimination in hiring practices and that people are hiredonly on the basis of merit.

• Respect for anti-trust laws. This means that a few majorcompanies that may dominate the market for a particular productshould not conspire to fix prices or create artificial shortages byhoarding and holding back supply of product.

• Truth in advertising. This means that the public should not bemisled by false claims about the benefits of the product.

6. Responsibility towards community interests: Some of theseinterests may be protected by law such as areas of air pollution andwater pollution. Other interests may be the outcome of socialenvironments. Some of the community interests are as follows:• Providing jobs within the community• Hiring the handicaps• Assisting in church and school activities• Organizing sports tournaments and other cultural functions for

the community• Raising funds for public activities such as opening of hospitals or

other charitable activities• Taking active interest in all community affairs


NOTES


CHECK YOUR PROGRESS

16. What are management skills?17. What are managerial responsibilities?

1.9 SOCIAL RESPONSIBILITIES AND ETHICS

Over the centuries, businessmen as well as industrialists have been looked uponas ruthless, money-hungry ambitious people whose primary purpose was to makemoney, expand business to make more money, irrespective of the cost to thepeople whom these businesses served. In this pursuit, they have been known totreat their employees as subservient workers who must be paid minimum andexploited to their maximum potential. In many developing countries, the workersare still exploited, prices of the products are manipulated and monopolized, materialsof sub-standard quality are deliberately produced with total disregard of the interestsof the community around. Sayings like, ‘you cannot make money by honest means’,or ‘businesses are sucking the blood of poor people’ etc., are still heard everywhere.Stories about the ruthlessness of many multi-millionaire industrialists have beencirculated widely. The way John D. Rockefeller eliminated his competitors in theoil industry has been branded as ruthless and unethical. Storing grain, cement andother commodities needed by the customers and then increasing their cost arefamous strategies of trading in India which prey on the livelihood and survival ofthe society.

The practices may in a less obvious way be present even in the developedsocieties. Neil Jacoby has summarized the views of the majority of corporatecritics who believe that the businesses have failed to establish and fulfil any criteriaof social responsibility and obligation. These views are as follows:

• Big corporations exercise concentrated economic power, contrary topublic interest.

• Big business corporations exercise concentrated political power,contrary to public interest.

• Big businesses are controlled by a self-perpetuating, irresponsible‘power elite’.

• Big corporate businesses exploit and dehumanize workers andconsumers.

• Big corporate businesses degrade the environment and the quality oflife.

Even though the society’s desire for corporate responsibility has beenrecognized since the days of industrial revolution, it has been crystallized in themore recent years. In this change, the government is passing the laws that protectthe interests of the community where the labour unions and the awareness of the



NOTES

community of the consumer rights has played a significant role. For example, inAmerica in the 1970s, laws were enacted in the areas of environmental protection,equal employment opportunity, minimum wages, consumer product safety,affirmative action, truth in advertising, occupational safety and health etc. Theselaws made sure that businesses recognized their responsibility towards the peoplethey served. This era also brought changes in the outlook of business people.Whereas the past businesses were judged primarily on the achievement of theireconomic objectives, which centred on profitmaking, the current national attentionis focussed on a new set of priorities that are expected to be achieved alongwitheconomic objectives. These are:

Environmental protection, Equal employment opportunity, Consumerconcerns and Safety in the workplace.

The social responsibility of business has been defined in many ways andfrom many angles. One expert has defined corporate social responsibility as ‘thenotion that the corporations have an obligation to the constituent groups in society;other than stockholders and beyond that prescribed by law or union contract’.Keith Davis and Robert Blomstrom have given a more pointed definition as ‘Socialresponsibility is the obligation of the decision makers to take actions which protectand improve the welfare of the society as a whole alongwith their own interests’.There are several key ideas in this definition. One is that the social responsibility isan obligation, for which the business should be held accountable. Another keyissue is the responsibility of the business to protect the society’s welfare in terms ofnot polluting the environment, not discriminating, not producing harmful products,not deceptively advertising etc. Lastly, it should improve the well-being of thesociety by generating constructive benefits in the interest of the society. Theseinclude sustaining charitable causes, art and culture, educational institutes and othercommunity projects and programmes that would result in an overall improvementof the quality of life.

The social issues faced by management are numerous and complex. Someof these issues are listed and discussed by Massie. These are as follows:

1. Policies regarding discrimination in the employment practices:Women and minorities have generally been discriminated against asfar as careers and professions are concerned. Untouchables in Indiaand blacks in America have been traditionally outcast from good jobpositions, future promotions and added responsibility. Otherdiscriminating factors have been provincialism, racism, religion, age etc.

2. Policies towards labour unions: The management and labour unionshave been considered to be at the opposite ends of the spectrum. Theunions have always been viewed as having motives that are in conflictwith those of the management. Should the management work with theunions in improving the lot of the workers? Should the unions pursuethe policy of ‘get as much as you can’, ignoring the interests of thebusinesses and the management?


NOTES


3. Policies towards support of political aspirants. Should thebusinesses indulge in influencing the political environment? Should thecorporations provide funds for a particular political group in order towin favours, in case such a group comes into political power?

4. Policies towards support of charitable causes. Should themanagement actively support and contribute towards charitable causessuch as Red Cross, American Cancer Society, from where there isapparently no economic gain, simply to be known as communityconscious management?

5. Policies towards support of educational institutions. While manycorporations have contributed towards research being conducted atcolleges and universities and many scholarships donated bycorporations are available to students, many other corporations wonderwhether they should ‘invest’ in educational institutions where the returnsat best are only indirect.

6. Policies regarding promotion and marketing of anti-socialproducts thus affecting the moral health of the community. Suchproducts may be tobbaco, cigarettes, alcohol, drugs, weapons etc.

7. Policies regarding expert of products. Should the managementexercise control over the export of products to countries that areunfriendly, even though such control may have an adverse effect onthe profits of the corporations? Similarly, in order to assist the countryin its balance of payment problems, should the corporations exercisecontrol over investing abroad even if such investments bring inhandsome returns?

8. Policies regarding modernization. Should the corporations involvethe technical innovations to modernize their operations in order tominimize the costs as well as keep up with more advanced technologybut at a social cost of increased air pollution, urban congestion andincreased unemployment? Or should the corporations become morepeople sensitive and subscribe to Gandhian philosophy of labour-intensive operations in order to give employment to more people?

These concerns and some other concerns like community planning, maritalcounselling, individual psychological counselling participation in religious activitiesand providing opportunities for women in career-oriented roles not traditionallyavailable to them previously have caused the management to do some soul searchingand reform their roles from simply profit-creating activities to being sensitive tocommunity needs. There is an interaction between the business institution and thevarious units and components of the society and the environment.

Just as there are some who overemphasize the importance of corporatesocial responsibility, there are others who criticize the concept and propose thatany act of social responsibility which would drain the profits of the corporationswould be outside the realm of legitimate business functions and would defy thevery purpose of the existence and objectives of the corporations. These criticsview the economic and social objectives as contradictory to each other and asseparate ends of a continuum.



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1.9.1 Arguments For and Against Corporate Social Responsibility (CSR)

The criticsThe major anti-CSR arguments are summarized as follows:

1. The primary duty of the management is to work for the shareholders whoexpect maximum returns on their investment. The management is undermoral and contractual commitment to the stockholders. The policies of profitmaking and social responsibility are mutually exclusive and hence pursuingpolicies of social responsibility reduces profits, since profits are believed tobe the by-product of high prices and consequent exploitation of the commonpublic who are the consumers.

2. In a free and democratic economy, all groups are expected to take care oftheir own problems and responsibilities. Why should the managers beconcerned with the interests of the workers and consumers? The pricesshould be fixed by the economic forces of supply and demand and not bythe capability of the consumers. The consumers must look after their owninterests. Similarly, the workers should be responsible for their own safetyand well being.

3. The management is not properly equipped and trained in handling socialissues and activities. The management is so heavily involved in enormouslyimposing tasks of managerial functions such as planning, organizing, staffing,leading, directing and controlling, that it will not be desirable to impose anadditional task of social responsibility.

4. Big businesses already hold enough economic power. Giving them the socialpower as well would be detrimental to the general and optimal welfare ofthe society. Such social power could influence political results and hencelegislative results that would undermine the true principles of democracy.

The proponentsIn a similar fashion, the proponents of the corporate social responsibility have putforth arguments supporting the concept. Some of the reasons cited for CSR aresummarized as follows:

1. Business is unavoidably involved in social issues: A business workswith social resources, and it is the management’s responsibility to put theseresources to the best possible use. It is in the self-interest of business in thelong run that these societal resources are not misapplied. The businesseswould be benefited by being concerned about societal problems such asunemployment, inflation, etc.

2. CSR programs create a favourable public image: The community showsrespect for such businesses that display socially responsible behaviours. Asocially conscious enterprise would win the goodwil1 of the society. It willcreate better environment for business–customer relations and forworker–management relations, thus ensuring industrial peace.


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3. The society expects the businesses to act more responsibly and besocially sensitive: The public opinion runs deep in expecting theproductivity goals to co-exist with the quality of life social goals.

4. Businesses have the resources: The modern businesses commandenormous wealth, huge wealth- generating capacity, a rich stock of technical,financial and managerial resources and a pool of expertise and capital thatcan solve many societal problems and provide leadership to society.

5. Avoidance of excessive government regulations: Laws cannot bepassed for all circumstances and hence business must resume responsibilityto maintain an orderly society. As evidenced by waves of anti-trust, equalemployment opportunity, air and water pollution control legislation and truthin lending and truth in advertising legislation in America, it is apparent thatthe government will force the business to do for social benefit what it hasfailed to do voluntarily. Thus the more socially responsible the business is,the less government regulations can be expected.Based upon these arguments, it is natural to assume that it is beneficial to

businesses to integrate expanded social responsibility into their activities andphilosophy. Keith Davis has summed up his views regarding managerial socialresponsibility as follows:

‘Society wants business as well as all other major institutions to assumesignificant social responsibility. Social responsibility has become the hallmark ofmature, global civilization. The business which vacillates or chooses not to enterthe arena of social responsibility may find that it gradually will sink into consumerand public disfavor’.

1.9.2 Spectrum of Social Issues

There are a number of social issues where the businesses and the management areexpected to get involved. Some of these issues may give rise to legal considerations.These social responsibilities have been extensively discussed. These and someadditional issues are summarized as follows:

1. Environment: The issues relating to environment are as follows:• Conservation of natural resources. It is very important to use the

resources wisely. Our society is already facing shortages and depletionof resources that have been overused. The energy crisis is the directresult of such usage. It is the managerial responsibility to be involvedin research to find new sources of energy. Similarly, forests cut forproduction of paper must be replenished.

• Pollution control: The management owes it to society to ensure thattheir production processes or usage of their products does not causeair pollution or water pollution. Other waste products that areunacceptable to society are toxic wastes, excessive noise, chemicalpesticides, odours, automobile exhaust, packing boxes, aluminium



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cans, newspaper waste etc., that spoils the natural outlook.Management must accept responsibility for reducing such pollutionby recycling policies of waste products and by minimizing the pollutionin the first place.

2. Consumers. Organizational policies and practices affect consumers in manyareas including pricing, product performance etc. The managerialresponsibilities in relation to consumers extend to the following:

• Product line. This includes product quality, safety, design, averagelife for the product, efficacy, guarantees and warranties, service policies,service availability, packaging, degree of disposibility and recycleabilityetc.

• Marketing. Accuracy of advertising claims, adequate information aboutproduct use and misuse, fair pricing, consumer complaint, answeringpolicies, clear explanation of credit policies where applicable, existenceof pressure tactics in selling etc.

3. Fair business practices. These include employment practice concerningminorities and women, promotion performance of minority groups andwomen, programs to ease integration of minority groups and women intocompany operations, specialized minority and women career counselling,support for minority-owned businesses, employment and advancement ofdisadvantaged individuals such as handicapped, former criminals, drugaddicts, mentally retarded etc.

4. Human resources. These include the following:• Employee education and training facilities. Facilities for leave of

absence for educational courses, budget allocated for formal vocationaltraining, special training and counselling, education programs fordisadvantaged employees, plans for future programs etc.

• Employee relations. Salary and other related fringe benefits,promotional policies, transfer policies, termination policies, generalworking conditions, leisure and recreational activities for employees,union–management relations, confidentiality and security of personneldata etc.

• Employee safety and health. Employee physical fitness and stressmanagement programs, accident frequency and severity, fatalities,provisions for safety equipment, food facilities, alcohol and drugcounselling programs etc.

5. Community involvement. Contribution performance in the areas ofeducation, art, health services, support of community recreation programs,encouraging employee involvement in social projects such as disasterassistance, urban renewal etc.


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1.9.3 Social Responsiveness

Social responsiveness is defined as ‘the degree of effectiveness and efficiency anorganization displays in pursuing its social responsibilities’. The more sociallyresponsive attitude the organizations show, the greater the degree of effectivenessand efficiency they have in pursuing their social responsibilities. Deciding exactlyon the type of social activities that the management should pursue, organizing theresources that are necessary to meet those responsibilities and then controllingthese management processes, so that these social goals are optimally accomplishedwithout wasting any organizational resources in the process, are the key functionsof management in this area in order to maintain a high level of social responsivenesswithin the organization.

Approaches to meeting social responsibilities

The level of social responsiveness is directly related to the management approachtowards meeting these responsibilities. According to Harry A. Lipson, a highlysocially responsive approach has the following characteristics:

• It incorporates social goals into the annual planning process.• It seeks comparative industry norms for social programs.• It presents reports to organization members, the board of directors and

stockholders on social responsibility progress.• It experiments with different approaches for measuring social performance.• It attempts to measure the cost of social programs as well as the returns on

social program investments.Similarly, S. Prakash Sethi has outlined three management approaches with

various levels of social responsiveness in meeting the managerial responsibilities inthe social area. These are as follows:

• The social obligation approach: This approach reflects an attitudethat is the least socially responsive, restricted primarily to economicobjectives fulfilling such social responsibility as prescribed by law andequating profitable operations with fulfilling social expectations.

• The social responsibility approach: This approach is categorizedby an attitude that sees business as having both economic and societalgoals. It goes beyond the minimum legal requirements that have beenenacted to protect social interests and accepts broader extra legaland extra market criteria for measuring corporate performance andsocial role. It is involved in societal issues and helps in social causes.

• The social responsive approach: This approach reflects an attitudewhich is highly socially responsive and has an obligation to preventany social problems from occurring and assist in solving these oncethey occur. It takes a definite stand on issues of public concern and ishighly concerned about the environment. It actively supports publicinstitutions, supports any legislation that is in public interest and opposesany governmental action that it feels to be detrimental to societal welfare.



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These issues and approaches point to social responsibility being a majororganizational activity which involves major management functions of planning,organizing and controlling.

1.9.4 Planning for Social Issues

Planning is one of the most fundamental functions of management and primarilyinvolves goal setting and forecasting. Social trends should be forecast along witheconomic, political and technological trend forecasts that are primary elements ofmanagement planning.

1. Social forecasting : It has been defined as:‘Social forecasting … is a systematic process for identifying social trendsand their underlying attitudes, analyzing these social changes for theirrelevance to the organization, and integrating these findings with otherforecasts to cover a time period of at least five, but preferably more years’.The purpose of social forecast is to identify social trends in the future andanalyse their relevance to the organization. These social trends may be inthe areas of public attitudes towards energy conservation, water pollution,safe working conditions, attitudes towards elderly and the handicapped,rehabilitation of criminals and drug addicts etc. These forecasts would theninfluence the organizational strategic and tactical plans as well as theircorresponding activities.

Social goal setting: These goals may be set in response to socialforecasts or in some social areas that exist currently. These goals determinethe direction which the organization would be taking in moving its efforts.These goals should be as specific as possible. General goals like ‘operatingwith public interests in mind’ or ‘to protect the environment’ are too broadto be efficiently pursued. Within these generalized goals, some specific andconcrete objectives should be established. For example, a general goal of‘supporting community activities’ would include specific and preciseobjectives such as contributing 10 per cent more to a particular charity thanthe previous year or to open a community swimming pool this year etc.There are certain benefits in making the goals so precise. First, it makes theplanning process more meaningful, functional and with specific identifiableend results and these tangible accomplishments improve the future plansresulting in more careful goal-setting process. Second, the goal attainmentfacilitates appraisal of managerial and professional personnel. Since the goalsare specific their achievement can be measured more accurately reflectingon the capabilities of personnel more accurately. Third, the measureableresults enhance the credibility of the management. This will prove to allrelevant and pressure groups that the management is socially reponsive andis sensitive to its social responsibility.


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2. Organizing : In the social responsibility area, the organizational policiesshould be established that should be acted upon to achieve the goals. Theseactivities involve three distinct and sequential phases. The first phase requiresthat the management recognizes its social obligation and communicate somepolicy relating to it to all members of the organization. The second phaserequires that the management gather all relevant information and assignpersonnel to assist in meeting the accepted social obligation. In the thirdphase, the management commits resources and obtains the commitment oforganizational members to live up to the accepted social obligation. Theorganizing patterns take into consideration such factors as characteristics ofthe industry, size of the firm, legal requirements, visibility and success of thecompany etc.

3. Controlling : The controlling function requires that things happen as theywere planned to happen. It is concerned with measuring and monitoringsocial performance. These performance appraisals have two aspects. Oneis the areas of measurement. These areas include the following:

• The economic function. If the company is doing well, producinggoods and services, creating jobs, then this will be an indication ofeconomic contribution to the society.

• Quality of life. Producing high-quality goods for consumers, providingadequate supporting services, preserving the natural environment areall indications of improvement of quality of life.

• The social area. The organization may be active in such social activitiesas those related to education, arts, disease control etc.

• Problem-solving area. Participating in long-range communityplanning, preventing social problems from occurring and solving themonce they occur.

The social audit. The second aspect is the social audit, which is a socialperformance report involving the process of actually taking the measurements ofsocial responsibility activities. The purpose of conducting a social audit is to get acomprehensive picture of organizational performance, to determine strengths andweaknesses of various approaches and to evaluate and appraise such performancefrom all aspects. Since the social benefits and social costs are comparativelyintangible in nature, it is extremely difficult to develop a valid and reliable measureof social performance outcome. Hence most methods developed are usually simplybroad indicators with a qualitative judgement of the usefulness of social performance.One method known as process social audit attempts to examine the underlyingprocess of the social activity as well as to ascertain the goals of social effort. It alsodescribes what is actually being done to compare it with what was planned to bedone or expected to be done. The audit itself can be performed by the organizationalpersonnel or by outside consultants.



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1.9.5 Managerial and Business Ethics

Ethics is probably the most difficult concept to define. It is as intangible to assessas the idea of morality or right and wrong. It may have some facets that are universalin nature, but much of it may be defined with reference to the values established bya particular society. For example, accepting bribes may be unethical in somesocieties and may be a way of life for others for getting things done. Sex beforemarriage in India may be immoral while it may be desirable in America. It is properfor women in some societies to be subservient to men while in others there isemphasis on equality of sexes. Artificial birth control techniques may be a taboo inCatholic Christian societies and may be mandatory in Russia and China. Ethicalconduct is not easy to understand. The determination of ethical conduct is subjectiveand vague varying among different cultures and different environmental conditions.

DeGeorge has defined ethics as, ‘a theory or morality which attempts tosystematize moral judgements and establish and defend basic moral principles’.As this definition suggests, the moral principles and moral judgements are alsosubjective in nature and depend much upon the value system of the individual. But,how do you determine the validity of the value system or judgement about ethicalbehaviour. R. Baumhart asks a number of questions related to ethical behaviour.For example, is there a set standard against which the ethical standard can bemeasured, or is there a ‘situational code’ of ethics according to which the ethicalmerits of an activity can be evaluated? Is the evaluation of ethical and unethicalconduct consistent among cultures and countries? Does it vary from individual toindividual? Who decides what is right and what is wrong. Is it the individual, family,organization or community?

While it is difficult to draw specific guidelines that would categorize ethicaland non-ethical conduct, some general guidelines can be established that woulddefine ethics through accepted norms of the society. As far as the business ethicsare concerned, some ethical codes have been incorporated into law. These mayinclude truth in advertising, laws against monopolizing the market, laws againstadulteration of the product etc. Obviously the truth in advertising law is aimed atforbidding false claims by advertisers about their product that would be considereddeceiving the consumer and hence considered unethical by the society. Similarly,monopolizing the market would mean the ability to fix prices and control theavailability of the product to the consumers and this could also be branded asunethical. Adulteration of the product would mean playing with the health of thepeople and also cheating them out of their money’s worth, which would be unethical.In addition to these areas protected by law, there are many other areas whichpertain ethical issues for which even the society has not established any clear-cutmandates.

As far as business ethics are concerned, the concept of right and wrong,fair and unfair, just and unjust is reflected by either the organizational policies or bythe social reactions. Some such issues for consideration are raised by Archie B.Carroll. These are as follows:


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• Suppose a firm is advertising for vegetable soup on television. Is itethical to put small marbles at the bottom of the bowl of soup so thatthe soup will look thicker?

• A salesman for an electrical machine is anxious to sell his equipment.Is it ethical for him to offer a bribe to the purchasing agent as aninducement to buy? Suppose that instead of bribe, he gives the moneyout of his own commission, does it make the transaction ethical?

• Is it ethical for a production manager to overlook minor contract andsafety violations in order to get on the job?

• Is it ethical for someone to understate his educational qualifications inorder to get a job during hard times for which the candidate would beconsidered as overqualified?

• Is it ethical to write personal letters during company time or usecompany telephone for private use?

• Is it ethical for a company employee to keep quiet knowing that thecompany is violating its own rules simply to keep his job?

• Is it ethical for an accountant to add expenses in the company incometax returns that did not occur, knowing that they will get away with it?

In addition to questions about ethics in the business world, some ethicalconcepts have been studied in the academic world. An extensive study conductedby a task force on ethics headed by Professor Mary Ann Von Glinow of theUniversity of Southern California and supported by the Organizational BehaviorDivision of the Academy of Management, in 1981, has delved into the subjectdeeply. For example, in the area of research and publication, the taskforce hasisolated certain behaviours and activities that it believes to be clearly unethical andanother area which is ethically ambiguous. The clearly unethical behaviours includethe following:

• The use of an idea or concept by a reviewer of an article rejected bythat reviewer

• Doctoral advisors listing where they had little or no responsibility• Use by an author of a key concept or principle from an unpublished

manuscript of a colleague, without proper citation• Simultaneous submission of an article to multiple journals• Falsification or fabrication of data• Attaching one’s name to a paper to which no commensurate

contribution was made• Conscious misstatement of facts from previous studies• When acting as an editor or reviewer, attempting to suppress

publication or research that refutes one’s pet theory• Plagiarism



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Similarly, some of the ethically ambiguous behaviours include the following:• Suppression of disconfirming data or selective presentation of data• Repeated publishing of marginally different data, perhaps with some

overlap• Taking advantage of friendship with editors or relying on reward or

coercive power over editors• Assignment of term paper topics (to students), corresponding to the

outline of a book an individual is writing, so as to obtain a literaturereview done that way

• Giving students who collect and analyse data, nothing more thanfootnote acknowledgement in publication

• Using organizational records, with organizational approval and withconfidentiality protected, but without obtaining the consent of individualemployees

• Circulation to colleagues by a reviewer of a submitted manuscriptwithout the author’s approval, etc.

Similarly such behaviours can be isolated for other professionals likeconsultants, attorneys and politicians etc.

1.9.6 Ethical Pressure Points

On-the-job research of business ethics has revealed three ethical pressure pointsfor management. These are as follows as follows:

1. Pressure from above: Most people succumb to pressure from superiorsin doing things that they might find unethical otherwise. For example, whena boss tells his secretary to tell any caller that he is not in, when in fact he isin, it forces the secretary to tell a lie which otherwise she would not want todo. A research conducted among ‘Harvard Business Review’ readerssuggested that ‘respondents frequently complained of superior’s pressuresto support incorrect viewpoints, sign false documents, overlook superior’swrong doings and do business with superior’s friends’. Some managers areunder so much pressure to achieve results, that they sometimes have tocompromise their principles and integrity. Similarly the ‘publish or perish’attitude of most universities about professors put so much pressure on themthat some professors may do anything, including unethical activities, topublish for their very surviva1.

2. Comparative conceptual disparity: Studies have shown that managersconsider themselves more ethical than their peers. Newstrom and Ruchconcluded from their research that, ‘If managers believe...that they are moreethical than their peers, they may easily justify some indiscretions on thebasis of ‘everybody is doing it’ or ‘it is not as bad as what others are doing’.Accordingly, the managers must be aware of this perceptual difference sothat they can make the objective decisions when faced with an ethicalquestion.


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3. Ambiguous situations: Managers are sometimes faced with situations whichare ethically ambiguous without any clear-cut ethical guidelines. Theseambiguities can be avoided if the organization sets up a clear code of ethicswhich should be formal and specific. For example, Xerox’s code of ethicsclearly states, ‘We are honest with our customers. No deals, no bribes, nosecrets, no fooling around with prices. A kickback in any form kicks anybodyout. Anybody’.

1.9.7 Philosophical Approaches to Ethical Conduct

While most aspects of ethical conduct are determined by personal values andpersonal evaluations, there are two identifiable approaches to determining theethical connotations of activities as evaluated relative to accepted social norms.These approaches are based upon the merits of the act itself and the consequencesof the act. The approach that determines the merits of the act is known as the‘deontological approach’ and the one based on the consequences of the act isknown as the ‘teleological approach’. These approaches are described in detail.

1. The deontological approach: According to DeGeorge, ‘the deontologicalapproach is built upon the premise that the “duty” is the basic moral categoryand that the duty is independent of the consequences. An action is right if ithas certain characteristics or is of a certain kind and wrong if it has othercharacteristics or is of another kind’. This approach does not evaluateconsequences. For example, if a person lies to save his life, it is the lyingthat has to be ethically evaluated and not the end result of this activity whichwas a life saved.

This approach has more of a religious undertone. The ethical code ofconduct has been dictated by the holy scriptures. The wrongs and rightshave been defined by the word of God. William Paley, an eighteenth-centurymoralist, asserted that ethical and moral behaviour follows the will of Godand that unethical behaviour contradicts the will of God. This gives theconcept of ethics a fixed perception. Since the word of God is permanentand unchangeable, so then is the concept of ethics. Holy scriptures like theBible, the Holy Quran, the Bhagvad Gita and the Guru Granth Sahib areconsidered to be the words of God and must be accepted in their entiretyand without question. In a similar thinking though based upon rationality,rather than religious command, Immanuel Kant, anothereighteenth-century philosopher, suggested morality as universally bindingon all rational minds. He believed that morality should be unconditional andapplicable to all people at all times and in all cases, which gives his views adeontological perspective.

This approach suggests that moral judgements be made on thedetermination of intrinsic good or evil in an act which should be self-evident.For example, the Ten Commandments would be considered as one of theguidelines to determine what is intrinsically good and what is intrinsicallyevil.



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2. The Teleological approach: This approach determines the moral conducton the basis of the consequences of an activity. Whether an action is right orwrong would depend upon the judgement about the consequences of anaction. For example, with this approach, lying to save one’s life would beethically acceptable. Some of the philosophers supporting this view arenineteenth-century philosophers like John Stuart Mill and Jeremy Bentham.They proposed that the ethics and morality of an act should be judged onthe basis of their ultimate utility. An act was moral if it produced moresatisfaction than dissatisfaction for society. It must be understood that thissatisfaction or happiness should be for the society in general and not to thepeople committing the act or the people who are directly involved in theact. For example, not paying the money to someone whom you owe maymake you happy but it disrupts the social system of fairness and equity thusmaking the society as a whole unhappy. Accordingly, this would not be amoral act. Similarly, a party who breaks a contract may be happy becauseit is beneficial to it, but it would damage the society’s legal framework forconducting business in an orderly fashion. Hence, it would not be an ethicalact. According to these philosophers, all laws, customs, rules and normsshould be judged from the utilitarian point of view so that if they have noutilitarian benefits to society then they have no value or use. This means thatthe moral and ethical values do not have a universal definition or applicationbut vary from culture to culture and the cultural force would be the guidingforce in establishing ethical values. In less democratic countries andsocieties, these values may be established by the elite and the powerful orthe scholars who interpret the word of God.This utilitarian approach can be segmented into three areas. These are asfollows:

(a) Hedonistic approach. In this approach, the judgement about themorality of an act is made on the basis of the degree of pleasure orpain that it gives to the society as a whole. For example, overthrowinga dictatorial government may bring pain to some but it could bringpleasure to many more. Hence, it would be considered a moral act.

(b) Eudaimonistic approach. This approach measures the degree ofhappiness to society. The more happiness it brings to the society,irrespective of the nature of the act, the more moralistic that act isconsidered.

(c) Ideal approach. This approach, according to DeGeorge, takes awider view of the worth of the outcome of an act and considers, allintrinsically valuable human goods, which also include friendship,knowledge and a host of other goods valuable in themselves.

Another approach proposed by A.J. Ayer suggests that morals and ethicsare just the personal viewpoints and ‘moral judgements are meaningless expressionsof emotions’. The concept of morality is personal in nature and only reflects a


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person’s emotions. He called this view as ‘emotive theory’. It proposes that if aperson feels good about an act, then in his view it is a moral act. For example,using loopholes to cheat on income tax may be immoral from societal point ofview, but the person filing the income tax return sees nothing wrong with it. Similarly,not joining the army in time of war may be unethical and unpatriotic from thesociety and country point of view, but the person concerned may consider war asimmoral in itself. Therefore, according to this approach, the whole idea aboutmorality hinges on the personal viewpoint.

1.9.8 The Code of Ethics

The difficulty in defining morality or ethical behaviour makes an acceptable codeof ethics highly cumbersome for the organizations. Ayer’s emotive theory has theleast significance, since completely individualized approach cannot be consistentlyapplied in judging all moral or immoral actions. Accordingly, an organization isfaced with a dilemma of establishing clear-cut policies regarding ethical conduct ofits employees, specially for those organizations that operate in a number of countriesas a multinational corporation. Even for organizations operating within a given setof circumstances and in a narrow societal area, establishing a firm code of ethicsbecomes difficult. For example, most life insurance companies forbid their salesmento share commission with their clients as this practice is considered as unethical.But the competition as it is making it difficult for sales people to make a salewithout giving any financial incentive to the clients. Accordingly, the organizationsare finding it exceedingly hard to enforce the application of such ethical policies.Organizations usually establish a code of ethics that is consistent with the viewpointsprevalent in the immediate social circle. However, the same code may not be validin a different society and may change within the same society over a period oftime. For example, in the 1900s, it was considered highly unethical for a person topurchase merchandise on credit, while in the 1980s, credit purchases were anintegral part of living. This makes defining and specifying the code of ethics verydifficult. If the ethical guidelines are not specific, they could lead to differentinterpretations, thus defeating the very purpose for which these are designed. Ifthey are highly specific, they will not equally apply to all, because of differentnorms among different cultures and sub-cultures.

An example of bribery

What code of ethics can be written about bribery? Is bribery an unethical act ofunfair influence in your favour, or is bribery simply a cost of doing business?Secondly, how do you define bribery? Is it simply a form of ‘tip’ before the service,simply to expedite service or to get a favourite table in a restaurant? What if thebribery is a way of life for doing business in some country? Should you bend therules in order to conduct business or stick to your established code of ethics andsuffer economically? What if the bribery is the only way to get your goods throughcustoms, which are necessary to operate your business? What if that is the onlyway? Is there a degree of bribe, so that some degree of bribery is acceptable and



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another is not? Bribery can be defined as follows: ‘To bribe someone is to offersomething of value to another with the intent of inducing an action that is contraryto the positional duties of the office or role of that person.’ This role or position ofthe other person must have a moral backing, however. It should be a role in whichaccepting the bribe would be established as immoral, as for example, a position inthe judicial system.

This bribery taking may be immoral, specially for the person who takes thebribe. But how could he take the bribe if there was nobody to give this bribe?Does this make the giver of the bribe also responsible for committing an immoralact? In some cultures and countries, the bribe giver is also punished, either by thelegal system or by social indignation. But in most societies, the bribe giver is mostoften let off while the bribe taker is held responsible for moral disobedience. Thisseems to be unethical in its own way. Secondly, the bribe may have differentconnotations, sometimes opposing to each other even though with the same conceptof end-result. As an example, take the case of buying a railway ticket in Americaas compared to India. In America, we generally funnel fees for services through anagency rather than paying directly to the employee of the railroad. But in India,part of the fee for generating the appropriate /railway tickets is paid directly to theticket agent. Both these routes are meant to expedite service for the sake of theconvenience of the customer. But, in America, if the railway ticket agent had directlyaccepted these fees, it would be considered bribery and hence immoral. Accordingly,because of these differences in the concept as well as perception of ethics amongdifferent cultures, it becomes very difficult to prescribe a set of rules describing acode of ethics that would be applicable and acceptable universally.

A program for action

The following call for action, as proposed by Max Ways, requires significantconsideration.

External pressures and internal needs require that management develop aconscious, analytical, systematic interest in ethical questions. Schools of businessadministration should respond seriously to the promptings of many students andalumni who recognize that the art of management cannot cut itself off from concernwith the difference between right and wrong. Ethical constraints and ethicalmotivations will have to be brought into much clearer relation with economicconstraints and economic motivation.

In response to this call, a plan for action is called for in order to improve theethical climate of an organization. This action can be categorized into differentlevels and areas where each level has a significant contribution towards theformation of the entire ethical system. These levels are as follows :

1. Individual level: The ethics at the individual level are usually a productof personal upbringing, schooling, religious affiliation and organizationalgroup dynamics. Any ethical considerations that are unclear can becleared through religious leaders, teachers or friends. An individualcan also attend some management seminars or associations conferenceson ethical issues and values that are periodically held to gain a better


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insight and perspective. He must make himself fully familiar withorganizational attitudes towards certain clear-cut ethical issues.

2. Organizational level: This is the most important level at which themanagement can play an important role in shaping the ethical climateof the organization. Top management should play a strong ethical rolemodel so as to see that sound ethics permeate through all levels of theorganization hierarchy. The management must set goals that areobjectively achievable, because setting too high goals might inducesome employees to use unethical methods to achieve them. This isespecially true at the salesman level. The ethical aspects of the goalsetting must be recognized and the organizational priorities must beclearly defined and communicated. The ethical aspects of goals,priorities and activities should be provided to all through a writtencode of ethics. It is also the management’s responsibility to ensurethat these ethical concepts are respected by all and followed throughresponsibly.

3. Societal level: At the societal level, the ethics can be shaped by law,since laws are passed by society representatives and are meant toprotect the society’s health and values by fear of enforcement. Lawslike ‘Foreign Corrupt Practices Act’ are meant to discourage briberyas a means of doing business in other countries. Laws against industrialespionage are meant to discredit unfair competition and encouragehonest progress. The society should also take a dim view of practicesthat may be unethical but not dealt with by legal framework. Forexample, using sex workers for conducting business would clearlypose a question of ethics to society even though there may not be anyinterference by law in this matter. Accordingly, society must make itknown to all as to what is ethically acceptable and what is not.

4. International level: The ethical codes of doing business at theinternational level require a closer look and analysis. Payments in theform of commissions to governments or their representatives is acommon practice in order to get licenses to operate in a given countryor to get favourable responses from the concerned officials on acontinuous basis. Such business agreements among organizations orgovernments must adhere to certain universally accepted standards ofethics to develop an ethically sound relationship and environment. Inthat respect the host countries must set down rules and laws pertainingto those transactions which encourage ethical conduct and make surethat these are honoured by all concerned parties. It will be desirableto set up an international body to look over such arrangements amongdifferent countries with due respect given to the cultural and societalnorms of the host country. Several years ago, the United NationsGeneral Assembly condemned all practices including bribery bytransnational and multinational corporations that were a violation ofthe laws set forth by the host countries.



NOTES

In general, the management has a serious responsibility to ensure that anorganizational climate exists that is ethically defendable and to ensure that it meetsall its social obligations with honesty and sincerity and to ensure that the economicgoals and social goals complement each other.

CHECK YOUR PROGRESS

18. In which areas were laws enacted in America in the 1970s?19. What does CSR stand for?20. What are the issues relating to environment?21. How would you define social responsiveness ?22. What is the approach that determines the moral conduct on the basis of the

consequences of an activity?23. Name the three areas into which utilitarian approch can be segmented?

1.10 SUMMARY

In this unit, you learnt that : Management is a science or an art and that these aredifferent levels of management.

• The importance of organizational behaviour stems from its relevance tothe human context of managerial work environment. All the ten roles ofa manager as described by Henry Mintzberg deal with human aspect inone form or the other. Similarly, the four functions of management—planning, organizing, directing and controlling deal with people as groupsin the form of organizations, people as resources and people as individualhuman beings.

• A managerial network consists of forces and interactions within theinternal environment of organizations, as well as the external systemswith which an organization is interconnected. The internal environmentof a manager has both vertical as well as lateral components. The verticalrelationships involve various superiors and subordinates and lateralrelationships involve peers and co-workers. The external environmentof a manager consists of forces that directly affect the operations of theorganization and other environmental forces that have an indirect effecton the organizations.

• Though management has been in practice in some form or the othersince ancient times, the development of a systematic body of knowledgedates back to the last century. The industrial revolution has contributedimmensely for the development of management thought. Over the years,it has drawn heavily from various disciplines like economics, psychology,sociology, operations research and so on. The contributions of prominentthinkers who have created an everlasting impact on management havebeen discussed in this lesson in detail. An attempt is made to expose thelearner to the historical development of management over the years.


NOTES


1.11 KEY TERMS

• Management by objectives (MBO): A process by which managers andsubordinates work together in identifying goals and setting up objectivesand make plans together in order to achieve these objectives.

• Management: A problem-solving process of effectively achievingorganizational objectives through the efficient use of scarce resources in achanging environment.

• Administration: A function of an organization that is concerned with policydetermination, coordination of finances, production, distribution and controlof the executives that are required for establishing an organization.

• Hierarchy: As organizations grow larger and more complex, they usuallydevelop several levels of managerial positions forming a hierarchy of superiorand subordinate reporting relationships.

• Skill: A learned and acquired ability to translate knowledge intoperformance.

• Social responsibility: The notion that corporations have an obligation tothe constituent groups in society other than stockholders and beyond thatprescribed by law or union contract.

• Bribery: To offer something of value to another with the intent of inducingan action that is contrary to the positional duties of the officer or role of thatperson.

1.12 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. The integral elements of Kreitner’s definition of management are:• Problem-solving process• Organizational objectives• Efficiency• Scarce resources• Changing environment

2. Van Fleet and Peterson define management ‘as a set of activities directed atthe efficient and effective utilization of resources in the pursuit of one ormore goals’.

3. Megginson, Mosley and Pietri define management as ‘working with human,financial and physical resources to achieve organizational objectives byperforming the planning, organizing, leading and controlling functions.

4. MBO stands for management by objectives.



NOTES

5. MBO can be defined as a process by which managers and subordinateswork together in identifying goals and setting up objectives and make planstogether in order to achieve these objectives.

6. Some of the elements in the MBO process are:(a) Central goal setting(b) Manager–subordinate involvement(c) Matching goals and resources(d) Freedom of implementation(e) Review and appraisal of performance

7. The points in the nature of management are as follows:• Management is a universal process.• Management is a factor of production.• Management is goal oriented.• Management is supreme in thought and action.• Management is a group activity.• Management is a dynamic function.• Management is a social science.• Management is an important organ of society.• Management is a system of authority.• Management is a profession.• Management is a process.

8. The need for management is as follows:• To meet the challenges of change• For effective utilization of the seven Ms• For the development of resources• Management directs the organization• Integrate various interests• Management provides stability• Management provides innovation• Management provides coordination and establishes team spirit• To tackle business problems• A tool of personality development

9. The three essentials of management are as follows:• Scientific methods• Human relations• Quantitative technique


NOTES


10. The fundamental point of distinction between administration and managementis that the former is the process of formulating policies and goals of theorganization while the latter directs and guides the operational or functionalaspects of the organization towards achieving the objectives set by theformer.

11. Three important characteristics of science are:• It is a systematized body of knowledge and uses scientific methods for

observation.• Its principles are evolved on the basis of continued observation and

experiment.• Its principles are exact and have universal applicability without any

limitation.12. Organizing requires a formal structure of authority and the direction and

flow of such authority through which work sub-divisions are defined,arranged and coordinated.

13. As organizations grow larger and more complex, they usually develop severallevels of managerial positions forming a hierarchy of superior and subordinatereporting relationships.

14. Starting from the top, managers can be arranged according to their hierarchyas top-level managers, middle-level managers, first-level supervisorymanagers and individual contributors.

15. The difference between general managers and functional managers is thatfunctional managers take responsibility for one type of function or specializedactivity and supervise the work of employees who are engaged in suchspecialized activities as marketing, finance, accounting, quality control,production and so on.General managers on the other hand are responsible for the activities ofseveral different groups that perform a variety of functions and have authorityover both the specialized as well as generalized activities.

16. Management skills are technical skills, interpersonal skills, conceptual skills,diagnostic skills, communicational skills and political skills.

17. The management is responsible and answerable to many groups. Managerialresponsibilities are:• Towards stockholders• Towards employees• Towards consumers• Towards inter-business relations• Towards the government• Towards community interests



NOTES

18. In America, in the 1970s laws were enacted in the areas of environmentalprotection, equal employment opportunity, minimum wages, consumerproduct safety, affirmative action, truth in advertising, occupational safetyand health etc. These laws made sure that businesses recognized theirresponsibility towards the people they served. This era also brought changesin the outlook of business people.

19. CSR stands for corporate social responsibility.20. The issues relating to environment are:

• Conservation of natural resources• Pollution control

21. Social responsiveness is defined as the ‘degree of effectiveness and efficiencyan organization displays in pursuing its social responsibilities’.

22. The teleological approach determines the moral conduct on the basis of theconsequences of an activity.

23. The three areas into which utilitarian approach can be segmented into are:• Hedonistic approach• Eudaimonistic approach• Ideal approach

1.13 QUESTIONS AND EXERCISES

Short–Answer Questions

1. What is the MBO process? Trace its evolution.2. Management is a group activity. Explain3. What areas are included in the scope of management?4. What interpersonal roles does a manager play in an organization?5. What are the various skills a manager needs to possess? Explain one of

them.

Long–Answer Questions

1. Explain the points revealed about the nature of management?2. What is the ‘need for management’?3. What are ‘managerial responsibilities’? Explain4. Which are those social issues where the businesses and the management

are expected to get involved?


NOTES


1.14 FURTHER READING/REFERENCES

Chandan, J.S. Management Theory & Practice. Vikas Publishing House Pvt.Ltd., 2007.Ewald, H.R. and R.E. Burnett. Business Communication. Prentice Hall, 1997.Lesikar, R.V., John D. Pettit and M.E. Flately. Lesikar’s Basic BusinessCommunication. Mc Graw-Hill College, 1999.

References1. Drucker, Peter F. The Practice of Management. Allied Publishers, 1970.2. Odiorne George S. Management by Objectives. New York, Pitman: 1965, p.26.3. Reddin, W.J. Effective Management by Objectives. McGraw Hill, 1971, p.11.4. Humble, John. Management by Objectives, Industrial Education and Research Foundation, London,

1967.5. Tosi, Henri L. and Stephen J. Carroll, ‘Managerial Reaction to Management by Objectives.’

Academy of Management Journal, Vol. 11, No. 4 Dec. 1968), pp. 415-426. Sec also Tosi andCarroll, ‘Management by Objectives: Applications and Research, McMillan Publising, 1973.

6. Lopex, Felix M. The Making of a Manager, American Management Association.

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