PRINCIPAL OF MANAGEMENT notes

Evolution of Management Thought

Management has been progressively evaluated through the following three stages.

The Classification theory of management

It has three streams:-

1.      Bureaucracy : 1900
2.      Scientific management:  1900-1930
3.      Administrative / Operational management:  1916-1940

The Neo-classical Theory of management

It has two streams:-

1.   Human Relations: 1930-1950
2. Behavioral Approach: 1940-1950

Modern Theory of management

It has three streams:-

1. Quantitative Approach: 1950-1960
2. Systems Approach: 1960s on words
3. Contingency Approach: 1970s on words 

Classical theory of management

BUREAUCRACY MANAGEMENT (Max Weber-1900)

Bureaucracy management is a stream of classical theory of management. Max Weber was the first of management theorists who were concerned the management structure with the sets of rule and regulations. Bureaucracy management depends upon administration devices. Max Weber presents the ideal organization structure. There are four major characteristics of organizational structure.-

• Hierarchical positions
• Rules of system
• Division of  labour for specialization
• Impersonal relationship

Advantage of bureaucracy management:

• Hierarchy of authority.
• Employment is based on the technical efficiency.
• Eliminate managerial inconsistencies.
• A well understood system.
• Maintain the consistency of working.
• Rules and regulation of the duties are followed by the employees.
• Records are kept for future references.
• People are given authority according to their position in organization.

Disadvantage of bureaucracy management:

• Human resources are not tackled.
• Inter personal relations are discarded.
• It does not allow for personal growth and development.
• It does not possess adequate.
• Organization becomes static and change is not anticipated.
• Difficult to keep co-ordination and communication between employees.
• It is a “closed system”.

·         Scientific Management

·         (Contribution of F.W. Taylor)

·         Frederick Winslow Taylor was first person who gave Scientific Management in 1911. He also called the father of scientific management. Scientific Management was concerned to improving the operational efficiency at the shop-floor level.

·         According to Taylor, “scientific management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way.”

·         Scientific management is based on the analysis, planning and control functions. And job accomplished by analyzing, and works can selected and trained scientifically. In this, management role is to determine the kind of work for which an employee suited and hire and assign workers accordingly. Management is not responsible for execution of work but they are responsible for how the work is done. Co-operation between management and workers can enhance the work and achieve the maximum output.

·         Taylor called it as “Mental Revolution”, because it creates the mutual understanding, trust and confidence between the management and workers for achieving goal (higher production).

·         Principles of scientific Management

·         Under scientific management, Taylor developed the following parameters for organization.

·         Ø Scientific work study

·         Ø Task planning

·         Ø Tools and materials

·         Ø Selection and Training

·         Ø Standardization

·         Ø Worker management interrelationships

·         Ø Differential piece wage system

·         Objective of Scientific Management

·         Ø Scientific utilization of various resources like human power, material etc.

·         Ø To provide trained and efficient work force.

·         Ø To provide standardize methods of work.

·         Ø To provide a scientific base for selecting material, and equipment.

·         Ø To provide extra wages to the worker for higher production.

·         Ø Replace old rule of thumbs to new scientific methods.

·         Ø To develop a good rapport between management and workers.

·         Ø To achieve higher production, with reduce costs and maximum efficiency.

·         Ø Less wastage.

Administrative Management

(Contribution of Henri Fayol)

·         Henri Fayol was real father of modern Management. Henri Fayol is the French industrialist in 1841-1925. He was a mining engineer in.  Henri Fayol spent his entire working career in French industry; French cool and iron combine of commentary fourchambault. Henri Fayol developed a general theory of Business Administration.

·         Henri Fayol was concerned the principles of organization and the function of management. Fayol laid the foundation of management as a separate body of knowledge. He always insisted that if scientific forecasting and proper methods are used in management than company can get satisfactory results.  According to Fayol, management was not personal talent; it is a knowledge base skill. 

Henri Fayol’s Administrative Management is based on six admin activities. They are-

1.     Technical: Production and manufacture

2.     Managerial: Planning, controlling, co-ordination

3.     Commercial: Purchasing and selling

4.     Financial: Use of capital

5.     Accounting: Asset, Liabilities, cost, profits

6.     Security: Protection of goods and Person

·         Fayol’s fourteen Principles of management

·         Fayol derived the following fourteen principles.-

·        Division of work: Division of work means specialization. Each job and work should be divided into small task and should be assigned to specialist of it.    

·        Authority and responsibility: Authority means right to give order and command while responsibility means to accomplish objective.

·        Discipline: Discipline is required at every level in every organization. Fayol stated discipline in terms of obedience, application, and respect to superiors.

·        Unity of command: A subordinate should receive order from only one boss.

·        Unity of direction: It means that all the works of an organization must work together to accomplish a common objective in under one plan and head.

·        Subordination of individual interest to common interest: Worker follows the common interest of organization rather than individual.

·        Remuneration: Remuneration should be fair and adequate. It includes both types of incentives financial as well as non financial.

·        Centralization: There should be one central point in organization which exercises overall direction and control of all the parts.

·        Scalar Chain: Scalar chain is the chain or line of command from superior to subordinates.

·        Order: Only proper order can give an efficient management.

·        Equity: Equity creates loyalty and devotion among the employees.

·        Stability of tenure personnel: Security of job for an employee in an organization is very important and pre-requisite condition. Retaining productive employee should always a higher priority of management.

·        Esprit de corps: Management should encourage harmony and proper understandings between workers. Fayol said that in union there is strength. Whole organization should work as a team.

·        Initiative: Manager should be encouraged the employees Initiative for creative working.

Evolution of Management Thought

Neo- Classical Theory

Neo- classical theory is also referred to as behavioral science approach to modifying and improving the classical theory.  While classical theories focused more on structure and physical aspects of the worker and Neo-classical theory gives importance to human and social aspects of the worker and his relations in the organization.

The neo-classical theory is based on the Hawthrone experiments. Elton Mayo conducted the Hawthrone experiments at Hawthron plant of General Electronic Company (GEC) between 1927 and 1993 at Chicago with 30,000 workers. The Hawthron plant was manufacturing telephone system bell. The objective of the experiment was to find out the behavior and attitude of workers at workplace under better working conditions. In the company, when management provide the benefits of medical allowance and pension with recreational facilities. Even thought workers get all facilities but the productivity was not up to expectation. So, in 1924, the professor Elton Mayo and his research team investigate the reasons for dissatisfaction of employees and decrease in productivity.

Four Phase of Hawthrone experiments:

Prof. Elton Mayo and his team conducted researches in four phases.

• Illumination experiments (1924 – 1927)
• Relay assembly room experiments (1927 – 1928)
• Mass interviewing programme (1928 -1930)
• Bank wiring room study (1931 – 1932)

 Result of Hawthrone Experiments:

• Motivation: Employees are not motivated by only money (bonus scheme and incentive).
• Communication:  communication helps the management and employees to have better mutual understanding. Through proper communication, management can easily identified the problem faced by its employees and can easily solve out.
• Social factors: Social factors are responsible for deciding the level of output.
• Behavior of workers: workers are not as individual identity but as members of a group in an organization and they have their own norms and beliefs. Workers behavior depends upon his mental level and emotions. Workers began to influence their group behavior towards management.
• Relationship: Employees do not like order and command. They preferred to maintain amicable relationship with their co-workers. They want co-operative attitude from their superiors.
• Production level:  Teamwork and Group psychology increases productivity.

Criticism of Hawthrone Experiments:

• Hawthrone experiment was not conducted scientifically.
•  In the experiment, various format and structure are not feasible.
•  Eltone Mayo gives more importance to human aspect and ignoring other important aspects.
•  Group conflict is prevalent in an organization.
• Hawthrone experiment did not give any recognition to the forces which are responsible for productivity in the organization.
• During   experiment, Eltone Mayo has assumed that a satisfied employee would be productive. But the finding was different. There is no link between working condition and productivity.

Major contributors of Neo-classical theory are:

1.      Chris Argyris- He recommended that worker should be given freedom to make their own judgments.

2.      Mary Praker Follett: He referred group influence.

3.      Dougals Me Gorgor: he referred two views.

X-theory- it is based on classical theory and

Y-theory- it is based on neo-classical theory.

4.      Abraham Maslow: He referred individual needs.

5.       

Modern Management Theory

Management is one or the other form has existed in every nook and corner of the world since the dawn of civilization. Modern Management has grown with the growth of social-economics and scientific institution. Modern view consists that a worker does not work for only money. They work for their satisfaction and happiness with good living style. Here Non- financial award is most important factor.

Modern management theories started after 1950s. Modern management theory focuses the development of each factor of workers and organization. Modern management theory refers to emphasizing the use of systematic mathematical techniques in the system with analyzing and understanding the inter-relationship of management and workers in all aspect.

 It has following three Streams-

• Quantitative Approach
• System Approach
• Contingency Approach

Quantitative Approach:

Quantitative approach also called Operation Research.  Quantitative approach is a scientific method. It emphasizes the use of statistical model and systematic mathematical techniques to solving complex management problems. Its helps the management to making decisions in operations. It can only suggest the alternatives based on statistical data. It cannot take final decision.

It helps the management for improving their decision making by increasing the number of alternatives and giving faster decisions on any problem. Management can easily calculate the risk and benefit of various actions.

Major contributors in Quantitative Approach are-

Johan MacDonald

George R. Terry

Andrew Szilagyi

System approach:

System approach was developed inlate1960s. Herbert A. Simon is the father of system theory. A  System is defined as a set of regularly interacting or inter - dependent components that create as a whole unit. The system concept enables us to see the critical variables and constraints and their interactions with one another.

According to Cleland and King; “ A system is composed of related and dependent elements which  when in interaction from a unity whole”.

Characteristics of system approach:

• A system must have some specific components, units or sub units.
• A Change in one system affects the other subsystems.
• Every system is influenced by super system.
• All systems along their subsystem must have some common objectives.
• A system is a goal-oriented.
• A system cannot survive in isolation.

Major contributors in system theories are-

1. Daniel Katz,
2. Robert L. Khan,
3. Richard A. Johnson.

Contingency Approach:

Contingency Approach also knows as situational approach. In 1980s, it is recognized as a key to effective management. This approach accepts the dynamics and complexities of the organization structure. An organization is affected by its environment and environment is composed by physical resources, climate, persons, culture, economic and market conditions and their laws.

 This approach argues that there is no one universally applicable set of rules by which to manage organization.  

Major contributors in the contingency theories are-

1. G.M. Stalker,
2. Joan Woodward,
3. Tom Burns,
4. Paul R. Lawrence,
5. L.W. Lorsch.

Conclusion

Modern management theory depends upon System approach and Contingency approach. Management is influenced by Internal and external environment. Appropriate techniques are determined by situation and Environmental factors of an organization.

     Thus the conclusion is that there cannot be any fixed universal principles of management and organizations.

Importance of Management

Management is the catalyst and brain of industry without which no any organization can established or survive in the business environment. But, management was not know in old times as it presently seems, it became this world at the beginning of the industrial revolution when the  scale of production became vary large and need to control  its various stage of production and distribution problems in the industries. This problem required an immediate action and attention for the coordinate of work. Thus management was born in industries to solve and manage industrial conditions. Now management is worldwide in the modern industry. It becomes essential part of modern industrial world.

According to Trucker, "management is the dynamic life-giving element in every business. Without it the resources of production remain resources and never become produc­tion. Management is the catalyst without which no organization can survive and grow”.

According to Peter Drucker,” management is the crucial factor in economic and social development.”

Thus the importance of management can be summarized as below-

• Formulate objectives and goals: - Management determines the objectives and main goals for the organization.
• Innovation: - Management encourages to using new technology and ideas. Innovation makes the organization more efficient.
• Guidance: - Management provides guidance to the workers to work properly and efficiently.
• Motivation: - Management motivates the workers to work hard by providing them various incentives. They also solve their personal problems.In this way they can boost the productivity and profitability of the organization.
• Reducing cost by increasing output: - Management does work through planning, organizing and controlling; thus, it reducing the cost and increasing the output.
• Optimum utilization of resources: - Management utilizes all the physical and human resource effectively; this leads to efficiency in organization. Management provides maximum utilization of scare resources by selecting its best possible alternate. It avoids wastage to utilize proper resources.
• Selection of well qualified human power: - Management selects well qualified and expert human power for different works.
• Establishes Equilibrium:- Management helps in serving an organization in its dynamic environment. It enables the organization to survive in changing environment. The environment of organization changes due to external complexities and hence management has to deal with it. To establish sound organizational structure is one of the objectives of management.
• Useful for society: - Management provided good standard of living to his workers. And management provides useful and quality products to the consumers.

At the last, in the word of Peter Drucker,

          “Management is the dynamic life giving element in every business without it the resources of production remains resources and never become production”.

 DECISION MAKING PROCESS

1. What is Decision Making?

Decision-making is an essential aspect of modern management. It is a primary function of management. A manager's major job is sound/rational decision-making. He takes hundreds of decisions consciously and subconsciously. Decision-making is the key part of manager's activities. Decisions are important as they determine both managerial and organizational actions. A decision may be defined as "a course of action which is consciously chosen from among a set of alternatives to achieve a desired result." It represents a well-balanced judgment and a commitment to action.

It is rightly said that the first important function of management is to take decisions on problems and situations. Decision-making pervades all managerial actions. It is a continuous process. Decision-making is an indispensable component of the management process itself.

Means and ends are linked together through decision-making. To decide means to come to some definite conclusion for follow-up action. Decision is a choice from among a set of alternatives. The word 'decision' is derived from the Latin words de ciso which means 'a cutting away or a cutting off or in a practical sense' to come to a conclusion. Decisions are made to achieve goals through suitable follow-up actions. Decision-making is a process by which a decision (course of action) is taken. Decision-making lies embedded in the process of management.

According to Peter Drucker, "Whatever a manager does, he does through decision-making". A manager has to take a decision before acting or before preparing a plan for execution. Moreover, his ability is very often judged by the quality of decisions he takes. Thus, management is always a decision-making process. It is a part of every managerial function. This is because action is not possible unless a firm decision is taken about a business problem or situation.

This clearly suggests that decision-making is necessary in planning, organising, directing, controlling and staffing. For example, in planning alternative plans are prepared to meet different possible situations. Out of such alternative plans, the best one (i.e., plan which most appropriate under the available business environment) is to be selected. Here, the planner has to take correct decision. This suggests that decision-making is the core of planning function. In the same way, decisions are required to be taken while performing other functions of management such as organising, directing, staffing, etc. This suggests the importance of decision-making in the whole process of management.

The effectiveness of management depends on the quality of decision-making. In this sense, management is rightly described as decision-making process. According to R. C. Davis, "management is a decision-making process." Decision-making is an intellectual process which involves selection of one course of action out of many alternatives. Decision-making will be followed by second function of management called planning. The other elements which follow planning are many such as organising, directing, coordinating, controlling and motivating.

Decision-making has priority over planning function. According to Peter Drucker, it is the top management which is responsible for all strategic decisions such as the objectives of the business, capital expenditure decisions as well as such operating decisions as training of manpower and so on. Without such decisions, no action can take place and naturally the resources would remain idle and unproductive. The managerial decisions should be correct to the maximum extent possible. For this, scientific decision-making is essential.

2. Definitions of Decision-making

1. The Oxford Dictionary defines the term decision-making as "the action of carrying out or carrying into effect".
2. According to Trewatha & Newport, "Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem".

3. Characteristics of Decision Making

1. Decision making implies choice: Decision making is choosing from among two or more alternative courses of action. Thus, it is the process of selection of one solution out of many available. For any business problem, alternative solutions are available. Managers have to consider these alternatives and select the best one for actual execution. Here, planners/ decision-makers have to consider the business environment available and select the promising alternative plan to deal with the business problem effectively. It is rightly said that "Decision-making is fundamentally choosing between the alternatives". In decision-making, various alternatives are to be considered critically and the best one is to be selected. Here, the available business environment also needs careful consideration. The alternative selected may be correct or may not be correct. This will be decided in the future, as per the results available from the decision already taken. In short, decision-making is fundamentally a process of choosing between the alternatives (two or more) available. Moreover, in the decision-making process, information is collected; alternative solutions are decided and considered critically in order to find out the best solution among the available. Every problem can be solved by different methods. These are the alternatives and a decision-maker has to select one alternative which he considers as most appropriate. This clearly suggests that decision-making is basically/fundamentally choosing between the alternatives. The alternatives may be two or more. Out of such alternatives, the most suitable is to be selected for actual use. The manager needs capacity to select the best alternative. The benefits of correct decision-making will be available only when the best alternative is selected for actual use.
2. Continuous activity/process: Decision-making is a continuous and dynamic process. It pervades all organizational activity. Managers have to take decisions on various policy and administrative matters. It is a never ending activity in business management.
3. Mental/intellectual activity: Decision-making is a mental as well as intellectual activity/process and requires knowledge, skills, experience and maturity on the part of decision-maker. It is essentially a human activity.
4. Based on reliable information/feedback: Good decisions are always based on reliable information. The quality of decision-making at all levels of the Organisation can be improved with the support of an effective and efficient management information system (MIS).
5. Goal oriented process: Decision-making aims at providing a solution to a given problem/ difficulty before a business enterprise. It is a goal-oriented process and provides solutions to problems faced by a business unit.
6. Means and not the end: Decision-making is a means for solving a problem or for achieving a target/objective and not the end in itself.
7. Relates to specific problem: Decision-making is not identical with problem solving but it has its roots in a problem itself.
8. Time-consuming activity: Decision-making is a time-consuming activity as various aspects need careful consideration before taking final decision. For decision makers, various steps are required to be completed. This makes decision-making a time consuming activity.
9. Needs effective communication: Decision-taken needs to be communicated to all concerned parties for suitable follow-up actions. Decisions taken will remain on paper if they are not communicated to concerned persons. Following actions will not be possible in the absence of effective communication.
10. Pervasive process: Decision-making process is all pervasive. This means managers working at all levels have to take decisions on matters within their jurisdiction.
11. Responsible job: Decision-making is a responsible job as wrong decisions prove to be too costly to the Organisation. Decision-makers should be matured, experienced, knowledgeable and rational in their approach. Decision-making need not be treated as routing and casual activity. It is a delicate and responsible job.

4. Advantages of Decision Making

1. Decision making is the primary function of management: The functions of management starts only when the top-level management takes strategic decisions. Without decisions, actions will not be possible and the resources will not be put to use. Thus decision-making is the primary function of management.
2. Decision-making facilitates the entire management process: Decision-making creates proper background for the first management activity called planning. Planning gives concrete shape to broad decisions about business objectives taken by the top-level management. In addition, decision-making is necessary while conducting other management functions such as organising, staffing, coordinating and communicating.
3. Decision-making is a continuous managerial function: Managers working at all levels will have to take decisions as regards the functions assigned to them. Continuous decision making is a must in the case of all managers/executives. Follow-up actions are not possible unless decisions are taken.
4. Decision-making is essential to face new problems and challenges: Decisions are required to be taken regularly as new problems, difficulties and challenges develop before a business enterprise. This may be due to changes in the external environment. New products may come in the market, new competitors may enter the market and government policies may change. All this leads to change in the environment around the business unit. Such change leads to new problems and new decisions are needed.
5. Decision-making is a delicate and responsible job: Managers have to take quick and correct decisions while discharging their duties. In fact, they are paid for their skill, maturity and capacity of decision-making. Management activities are possible only when suitable decisions are taken. Correct decisions provide opportunities of growth while wrong decisions lead to loss and instability to a business unit.

5. Steps Involved In Decision Making Process

Decision-making involves a number of steps which need to be taken in a logical manner. This is treated as a rational or scientific 'decision-making process' which is lengthy and time consuming. Such lengthy process needs to be followed in order to take rational/scientific/result oriented decisions. Decision-making process prescribes some rules and guidelines as to how a decision should be taken / made. This involves many steps logically arranged. It was Peter Drucker who first strongly advocated the scientific method of decision-making in his world famous book 'The Practice of Management' published in 1955. Drucker recommended the scientific method of decision-making which, according to him, involves the following six steps:

1. Defining / Identifying the managerial problem,
2. Analyzing the problem,
3. Developing alternative solutions,
4. Selecting the best solution out of the available alternatives,
5. Converting the decision into action, and
6. Ensuring feedback for follow-up.

The figure given below suggests the steps in the decision-making process:-

1. Identifying the Problem: Identification of the real problem before a business enterprise is the first step in the process of decision-making. It is rightly said that a problem well-defined is a problem half-solved. Information relevant to the problem should be gathered so that critical analysis of the problem is possible. This is how the problem can be diagnosed. Clear distinction should be made between the problem and the symptoms which may cloud the real issue. In brief, the manager should search the 'critical factor' at work. It is the point at which the choice applies. Similarly, while diagnosing the real problem the manager should consider causes and find out whether they are controllable or uncontrollable.
2. Analyzing the Problem: After defining the problem, the next step in the decision-making process is to analyze the problem in depth. This is necessary to classify the problem in order to know who must take the decision and who must be informed about the decision taken. Here, the following four factors should be kept in mind:
1. Futurity of the decision,
2. The scope of its impact,
3. Number of qualitative considerations involved, and
4. Uniqueness of the decision.
3. Collecting Relevant Data: After defining the problem and analyzing its nature, the next step is to obtain the relevant information/ data about it. There is information flood in the business world due to new developments in the field of information technology. All available information should be utilised fully for analysis of the problem. This brings clarity to all aspects of the problem.
4. Developing Alternative Solutions: After the problem has been defined, diagnosed on the basis of relevant information, the manager has to determine available alternative courses of action that could be used to solve the problem at hand. Only realistic alternatives should be considered. It is equally important to take into account time and cost constraints and psychological barriers that will restrict that number of alternatives. If necessary, group participation techniques may be used while developing alternative solutions as depending on one solution is undesirable.
5. Selecting the Best Solution: After preparing alternative solutions, the next step in the decision-making process is to select an alternative that seems to be most rational for solving the problem. The alternative thus selected must be communicated to those who are likely to be affected by it. Acceptance of the decision by group members is always desirable and useful for its effective implementation.
6. Converting Decision into Action: After the selection of the best decision, the next step is to convert the selected decision into an effective action. Without such action, the decision will remain merely a declaration of good intentions. Here, the manager has to convert 'his decision into 'their decision' through his leadership. For this, the subordinates should be taken in confidence and they should be convinced about the correctness of the decision. Thereafter, the manager has to take follow-up steps for the execution of decision taken.
7. Ensuring Feedback: Feedback is the last step in the decision-making process. Here, the manager has to make built-in arrangements to ensure feedback for continuously testing actual developments against the expectations. It is like checking the effectiveness of follow-up measures. Feedback is possible in the form of organised information, reports and personal observations. Feed back is necessary to decide whether the decision already taken should be continued or be modified in the light of changed conditions.

Every step in the decision-making process is important and needs proper consideration by managers. This facilitates accurate decision-making. Even quantitative techniques such as CPM, PERT/OR, linear programming, etc. are useful for accurate decision-making. Decision-making is important as it facilitates entire management process. Management activities are just not possible without decision-making as it is an integral aspect of management process itself. However, the quality of decision-making should be always superior as faulty/irrational decisions are always dangerous.

Various advantages of decision-making (already explained) are easily 'available when the entire decision-making process is followed properly. Decisions are frequently needed in the management process. However, such decisions should be appropriate, timely and rational. Faulty and hasty decisions are wrong and even dangerous. This clearly suggests that various advantages of decision-making are available only when scientific decisions are taken by following the procedure of decision-making in an appropriate manner.

For accurate/rational decision-making attention should be given to the following points:

1. Identification of a wide range of alternative courses of action i.e., decisions. This provides wide choice for the selection of suitable decision for follow-up actions.
2. A careful consideration of the costs and risks of both positive and negative consequences that could follow from each alternation.
3. Efforts should be made to search for new information relevant to further evaluation of the alternatives. This is necessary as the quality of decision depends on the quality of information used in the decision-making process.
4. Re-examination of the positive and negative effects of all known alternatives before making a final selection.
5. Arrangements should be made for implementing the chosen course of action including contingency plans in the event that various known risks were actually to occur.
6. Efforts should be made to introduce creativity and rationality in the final decision taken.

6. Why Rational and Right Decisions Are Not Possible?

Rational decisions are the best decisions under the available circumstances. All decisions should be rational as such decisions facilitate expansion of business and give more profit, goodwill and prosperity to a business unit. Rationality and decision-making are closely related concepts. Rationality principle is applicable to all types of decisions. All decisions (business, economic, social etc.) should be fair and rational. They should serve as examples over a long period. For such decisions, rational/scientific/balanced approach is essential while making decisions. In the absence of such approach, decisions are likely to be faulty and dangerous to the Organisation and also to all concerned parties.

Rationality in decision-making is possible through human brain which has the ability to learn, think, analyze and relate complex facts and variables while arriving at a decision. A manager has to introduce rationality in his decision-making by using his skills, experience, knowledge and mental abilities.

On some occasions, such rational and right decisions are not taken due to variety of possible reasons. It is also possible that the decision taken may be rational when taken but is treated as wrong/irrational/faulty because' the results available from the decision taken are not as expected/positive/encouraging. Rational decisions may not be possible when the approach of the decision-maker is casual and superficial. He may not be alert, careful and cautious while taking the decisions or he might not have followed the decision-making process in a scientific manner. In brief, all business decisions should be rational as far as possible as such rational decisions offer many benefits/advantages. However, rational decisions may not be taken on certain occasions. According to Herbert A. Simon, human beings are not always rational in the decisional process.

7. Reasons Why Rational and Right Decisions May Not Be Possible?

1. Inadequate information, data and knowledge: For rational decision-making accurate, reliable and complete information about various aspects of the problem under investigation is necessary. The possible future trends can be estimated with the help of such information. This facilitates rational decision-making. However, adequate and reliable information may not be available at the time of decision-making. As a result, the decisions become defective or irrational. Such decision may prove to be faulty in the course of time. This is how the decisions become irrational to certain extent.
2. Uncertain environment: Decisions are taken on the basis of information available about various environmental variables. However, the variables are many and complex in nature. They may be related to political, economic, social and other aspects. It is not possible to study all such variables in depth due to inadequate information/data. This leads to inaccuracy in decision making and the decisions taken are not fully rational.
3. Limited capacity of decision-maker. A decision-maker should be expert, knowledgeable, intelligent and matured. He needs vision and capacity to imagine possible future situation. In the absence of such qualities, the decision-maker may not be able to take rational decisions. Similarly, the decision taken may not be rational if the decision-maker fails to follow all necessary steps required for scientific decision-making. A hasty decision or decision taken without full use of all mental faculties may not be fully rational. Thus, decisions are likely to be less rational if the decision maker lacks capacity to take rational decisions.
4. Personal element in decision-making: Decision-making should be always impartial and also favorable to the Organisation. Decision against Organisation but favorable to decision maker or other employees will be unfair. Such decision will not be rational. Similarly, every decision-maker has his own personal background in the form of personal beliefs, attributes, preferences, likes and dislikes and so on. A decision-maker is expected to keep these elements away while taking management decisions. This may not be possible in the case of all decision-makers and on all occasions. However, decisions are not fully rational when such personal element comes in the picture.
5. A decision cannot be fully independent: Managerial decisions are interlinked and interdependent. A manager has to make adjustments or compromises while making decisions. For example, for reducing price, some compromise with the quality may be necessary. A manager gives more importance to one and less to the other. He takes one decision which is rational at the same time makes some compromise in the other decision. As a result, other decision is not likely to be fully rational. In short, business decisions are interlinked. This brings an element of irrationality in some decisions.

The points noted above suggest why it is not possible to take rational and right decisions on all occasions.

8. Relationship between Planning and Decision-making

There is close relationship between planning and decision-making. Decision-making has priority over planning function. It is the starting point of the whole management process. In fact, decision-making is a particular type of planning. A decision is a type of plan involving commitment to resources for achieving specific objective. According to Peter Drucker, it is the top management which is responsible for all strategic decisions such as the objectives of the business, capital expenditure decisions as well as operating decisions such as training of manpower and so on. Without management decisions, no action can take place and naturally the resources would remain idle and unproductive. The managerial decisions should be correct to the maximum extent possible. For this, scientific decision-making is essential.

Introduction to Managerial Environments

A manager's environment is made up of constantly changing factors — both external and internal — that affect the operation of the organization. If a new competitor appears in the marketplace, the managerial environment is affected. If key clients take their business elsewhere, managers feel the impact. And if technological advances date an organization's current methods of doing business, once again, the managerial environment has to adapt.
Although managers can't always control their environments, they need to be aware of any changes that occur, because changes ultimately affect their daily decisions and actions. For example, in the airline industry, deregulation opened up the market to new airlines, forcing existing airlines to be more competitive. Managers in existing airlines couldn't afford to ignore the cheaper airfares and increased service that resulted. Not only did managers have to identify the new challenge, but they also had to act quickly and efficiently to remain competitive.

The External Environment

All outside factors that may affect an organization make up the external environment . The external environment is divided into two parts:

·         Directly interactive: This environment has an immediate and firsthand impact upon the organization. A new competitor entering the market is an example.

·         Indirectly interactive: This environment has a secondary and more distant effect upon the organization. New legislation taking effect may have a great impact. For example, complying with the Americans with Disabilities Act requires employers to update their facilities to accommodate those with disabilities.

Directly interactive forces

Directly interactive forces include owners, customers, suppliers, competitors, employees, and employee unions. Management has a responsibility to each of these groups. Here are some examples:

·         Owners expect managers to watch over their interests and provide a return on investments.

·         Customers demand satisfaction with the products and services they purchase and use.

·         Suppliers require attentive communication, payment, and a strong working relationship to provide needed resources.

·         Competitors present challenges as they vie for customers in a marketplace with similar products or services.

·         Employees and employee unions provide both the people to do the jobs and the representation of work force concerns to management.

Indirectly interactive forces

The second type of external environment is the indirectly interactive forces. These forces include sociocultural, political and legal, technological, economic, and global influences. Indirectly interactive forces may impact one organization more than another simply because of the nature of a particular business. For example, a company that relies heavily on technology will be more affected by software updates than a company that uses just one computer. Although somewhat removed, indirect forces are still important to the interactive nature of an organization.
The sociocultural dimension is especially important because it determines the goods, services, and standards that society values. The sociocultural force includes the demographics and values of a particular customer base.

·         Demographics are measures of the various characteristics of the people and social groups who make up a society. Age, gender, and income are examples of commonly used demographic characteristics.

·         Values refer to certain beliefs that people have about different forms of behavior or products. Changes in how a society values an item or a behavior can greatly affect a business. (Think of all the fads that have come and gone!)

The political and legal dimensions of the external environment include regulatory parameters within which an organization must operate. Political parties create or influence laws, and business owners must abide by these laws. Tax policies, trade regulations, and minimum wage legislation are just a few examples of political and legal issues that may affect the way an organization operates.
The technological dimension of the external environment impacts the scientific processes used in changing inputs (resources, labor, money) to outputs (goods and services). The success of many organizations depends on how well they identify and respond to external technological changes.
For example, one of the most significant technological dimensions of the last several decades has been the increasing availability and affordability of management information systems (also known as MIS). Through these systems, managers have access to information that can improve the way they operate and manage their businesses.
The economic dimension reflects worldwide financial conditions. Certain economic conditions of special concern to organizations include interest rates, inflation, unemployment rates, gross national product, and the value of the U.S. dollar against other currencies.
A favorable economic climate generally represents opportunities for growth in many industries, such as sales of clothing, jewelry, and new cars. But some businesses traditionally benefit in poor economic conditions. The alcoholic beverage industry, for example, traditionally fares well during times of economic downturn.
The global dimension of the environment refers to factors in other countries that affect U.S. organizations. Although the basic management functions of planning, organizing, staffing, leading, and controlling are the same whether a company operates domestically or internationally, managers encounter difficulties and risks on an international scale. Whether it be unfamiliarity with language or customs or a problem within the country itself (think mad cow disease), managers encounter global risks that they probably wouldn't have encountered if they had stayed on their own shores.

The Internal Environment

An organization's internal environment is composed of the elements within the organization, including current employees, management, and especially corporate culture, which defines employee behavior. Although some elements affect the organization as a whole, others affect only the manager. A manager's philosophical or leadership style directly impacts employees. Traditional managers give explicit instructions to employees, while progressive managers empower employees to make many of their own decisions. Changes in philosophy and/or leadership style are under the control of the manager. The following sections describe some of the elements that make up the internal environment.

Organizational mission statements

An organization's mission statement describes what the organization stands for and why it exists. It explains the overall purpose of the organization and includes the attributes that distinguish it from other organizations of its type.
A mission statement should be more than words on a piece of paper; it should reveal a company's philosophy, as well as its purpose. This declaration should be a living, breathing document that provides information and inspiration for the members of the organization. A mission statement should answer the questions, “What are our values?” and “What do we stand for?” This statement provides focus for an organization by rallying its members to work together to achieve its common goals.
But not all mission statements are effective in America's businesses. Effective mission statements lead to effective efforts. In today's quality-conscious and highly competitive environments, an effective mission statement's purpose is centered on serving the needs of customers. A good mission statement is precise in identifying the following intents of a company:

·         Customers — who will be served

·         Products/services — what will be produced

·         Location — where the products/services will be produced

·         Philosophy — what ideology will be followed

Company policies

Company policies are guidelines that govern how certain organizational situations are addressed. Just as colleges maintain policies about admittance, grade appeals, prerequisites, and waivers, companies establish policies to provide guidance to managers who must make decisions about circumstances that occur frequently within their organization. Company policies are an indication of an organization's personality and should coincide with its mission statement.

Formal structures

The formal structure of an organization is the hierarchical arrangement of tasks and people. This structure determines how information flows within the organization, which departments are responsible for which activities, and where the decision-making power rests.
Some organizations use a chart to simplify the breakdown of its formal structure. This organizational chart is a pictorial display of the official lines of authority and communication within an organization.

Organizational cultures

The organizational culture is an organization's personality. Just as each person has a distinct personality, so does each organization. The culture of an organization distinguishes it from others and shapes the actions of its members.
Four main components make up an organization's culture:

·         Values

·         Heroes

·         Rites and rituals

·         Social network

Values are the basic beliefs that define employees' successes in an organization. For example, many universities place high values on professors being published. If a faculty member is published in a professional journal, for example, his or her chances of receiving tenure may be enhanced. The university wants to ensure that a published professor stays with the university for the duration of his or her academic career — and this professor's ability to write for publications is a value.
The second component is heroes. A hero is an exemplary person who reflects the image, attitudes, or values of the organization and serves as a role model to other employees. A hero is sometimes the founder of the organization (think Sam Walton of Wal-Mart). However, the hero of a company doesn't have to be the founder; it can be an everyday worker, such as hard-working paralegal Erin Brockovich, who had a tremendous impact on the organization.
Rites and rituals, the third component, are routines or ceremonies that the company uses to recognize high-performing employees. Awards banquets, company gatherings, and quarterly meetings can acknowledge distinguished employees for outstanding service. The honorees are meant to exemplify and inspire all employees of the company during the rest of the year.
The final component, the social network, is the informal means of communication within an organization. This network, sometimes referred to as the company grapevine, carries the stories of both heroes and those who have failed. It is through this network that employees really learn about the organization's culture and values.

Organizational climates

A byproduct of the company's culture is the organizational climate. The overall tone of the workplace and the morale of its workers are elements of daily climate. Worker attitudes dictate the positive or negative “atmosphere” of the workplace. The daily relationships and interactions of employees are indicative of an organization's climate.

Resources

Resources are the people, information, facilities, infrastructure, machinery, equipment, supplies, and finances at an organization's disposal. People are the paramount resource of all organizations. Information, facilities, machinery equipment, materials, supplies, and finances are supporting, nonhuman resources that complement workers in their quests to accomplish the organization's mission statement. The availability of resources and the way that managers value the human and nonhuman resources impact the organization's environment.

Managerial philosophies

Philosophy of management is the manager's set of personal beliefs and values about people and work and as such, is something that the manager can control. McGregor emphasized that a manager's philosophy creates a self-fulfilling prophecy. Theory X managers treat employees almost as children who need constant direction, while Theory Y managers treat employees as competent adults capable of participating in work-related decisions. These managerial philosophies then have a subsequent effect on employee behavior, leading to the self-fulfilling prophecy. As a result, organizational philosophies and managerial philosophies need to be in harmony.

Managerial leadership styles

The number of coworkers involved within a problem-solving or decision-making process reflects the manager's leadership style. Empowerment means delegating to subordinates decision-making authority, freedom, knowledge, autonomy, and skills. Fortunately, most organizations and managers are making the move toward the active participation and teamwork that empowerment entails.
When guided properly, an empowered workforce may lead to heightened productivity and quality, reduced costs, more innovation, improved customer service, and greater commitment from the employees of the organization. In addition, response time may improve, because information and decisions need not be passed up and down the hierarchy. Empowering employees makes good sense because employees closest to the actual problem to be solved or the customer to be served can make the necessary decisions more easily than a supervisor or manager removed from the scene.

The Organizational Process

Organizing, like planning, must be a carefully worked out and applied process. This process involves determining what work is needed to accomplish the goal, assigning those tasks to individuals, and arranging those individuals in a decision-making framework (organizational structure). The end result of the organizing process is an organization — a whole consisting of unified parts acting in harmony to execute tasks to achieve goals, both effectively and efficiently.

A properly implemented organizing process should result in a work environment where all team members are aware of their responsibilities. If the organizing process is not conducted well, the results may yield confusion, frustration, loss of efficiency, and limited effectiveness.

In general, the organizational process consists of five steps (a flowchart of these steps is shown in Figure 1 ):

Figure 1 The organizational process.

1. Review plans and objectives.

Objectives are the specific activities that must be completed to achieve goals. Plans shape the activities needed to reach those goals. Managers must examine plans initially and continue to do so as plans change and new goals are developed.

2. Determine the work activities necessary to accomplish objectives.

Although this task may seem overwhelming to some managers, it doesn't need to be. Managers simply list and analyze all the tasks that need to be accomplished in order to reach organizational goals.

3. Classify and group the necessary work activities into manageable units.

A manager can group activities based on four models of departmentalization: functional, geographical, product, and customer.

4. Assign activities and delegate authority.

Managers assign the defined work activities to specific individuals. Also, they give each individual the authority (right) to carry out the assigned tasks.

5. Design a hierarchy of relationships.

A manager should determine the vertical (decision-making) and horizontal (coordinating) relationships of the organization as a whole. Next, using the organizational chart, a manager should diagram the relationships.

Concepts of Organizing

The working relationships — vertical and horizontal associations between individuals and groups — that exist within an organization affect how its activities are accomplished and coordinated. Effective organizing depends on the mastery of several important concepts: work specialization, chain of command, authority, delegation, span of control, and centralization versus decentralization. Many of these concepts are based on the principles developed by Henri Fayol.

Work specialization

One popular organizational concept is based on the fundamental principle that employees can work more efficiently if they're allowed to specialize. Work specialization, sometimes called division of labor, is the degree to which organizational tasks are divided into separate jobs. Employees within each department perform only the tasks related to their specialized function.
When specialization is extensive, employees specialize in a single task, such as running a particular machine in a factory assembly line. Jobs tend to be small, but workers can perform them efficiently. By contrast, if a single factory employee built an entire automobile or performed a large number of unrelated jobs in a bottling plant, the results would be inefficient.
Despite the apparent advantages of specialization, many organizations are moving away from this principle. With too much specialization, employees are isolated and perform only small, narrow, boring tasks. In addition, if that person leaves the company, his specialized knowledge may disappear as well. Many companies are enlarging jobs to provide greater challenges and creating teams so that employees can rotate among several jobs.

Chain of command

The chain of command is an unbroken line of authority that links all persons in an organization and defines who reports to whom. This chain has two underlying principles: unity of command and scalar principle.

·         Unity of command: This principle states that an employee should have one and only one supervisor to whom he or she is directly responsible. No employee should report to two or more people. Otherwise, the employee may receive conflicting demands or priorities from several supervisors at once, placing this employee in a no-win situation.

Sometimes, however, an organization deliberately breaks the chain of command, such as when a project team is created to work on a special project. In such cases, team members report to their immediate supervisor and also to a team project leader. Another example is when a sales representative reports to both an immediate district supervisor and a marketing specialist, who is coordinating the introduction of a new product, in the home office.

Nevertheless, these examples are exceptions to the rule. They happen under special circumstances and usually only within a special type of employee group. For the most part, however, when allocating tasks to individuals or grouping assignments, management should ensure that each has one boss, and only one boss, to whom he or she directly reports.

·         Scalar principle: The scalar principle refers to a clearly defined line of authority that includes all employees in the organization. The classical school of management suggests that there should be a clear and unbroken chain of command linking every person in the organization with successively higher levels of authority up to and including the top manager. When organizations grow in size, they tend to get taller, as more and more levels of management are added. This increases overhead costs, adds more communication layers, and impacts understanding and access between top and bottom levels. It can greatly slow decision making and can lead to a loss of contact with the client or customer.

Authority

Authority is the formal and legitimate right of a manager to make decisions, issue orders, and allocate resources to achieve organizationally desired outcomes. A manager's authority is defined in his or her job description.
Organizational authority has three important underlying principles:

·         Authority is based on the organizational position, and anyone in the same position has the same authority.

·         Authority is accepted by subordinates. Subordinates comply because they believe that managers have a legitimate right to issue orders.

·         Authority flows down the vertical hierarchy. Positions at the top of the hierarchy are vested with more formal authority than are positions at the bottom.

In addition, authority comes in three types:

·         Line authority gives a manager the right to direct the work of his or her employees and make many decisions without consulting others. Line managers are always in charge of essential activities such as sales, and they are authorized to issue orders to subordinates down the chain of command.

·         Staff authority supports line authority by advising, servicing, and assisting, but this type of authority is typically limited. For example, the assistant to the department head has staff authority because he or she acts as an extension of that authority. These assistants can give advice and suggestions, but they don't have to be obeyed. The department head may also give the assistant the authority to act, such as the right to sign off on expense reports or memos. In such cases, the directives are given under the line authority of the boss.

·         Functional authority is authority delegated to an individual or department over specific activities undertaken by personnel in other departments. Staff managers may have functional authority, meaning that they can issue orders down the chain of command within the very narrow limits of their authority. For example, supervisors in a manufacturing plant may find that their immediate bosses have line authority over them, but that someone in corporate headquarters may also have line authority over some of their activities or decisions.

Why would an organization create positions of functional authority? After all, this authority breaks the unity of command principle by having individuals report to two bosses. The answer is that functional authority allows specialization of skills and improved coordination. This concept was originally suggested by Frederick Taylor. He separated “planning” from “doing” by establishing a special department to relieve the laborer and the foreman from the work of planning. The role of the foreman became one of making sure that planned operations were carried out. The major problem of functional authority is overlapping relationships, which can be resolved by clearly designating to individuals which activities their immediate bosses have authority over and which activities are under the direction of someone else.

Delegation

A concept related to authority is delegation. Delegation is the downward transfer of authority from a manager to a subordinate. Most organizations today encourage managers to delegate authority in order to provide maximum flexibility in meeting customer needs. In addition, delegation leads to empowerment, in that people have the freedom to contribute ideas and do their jobs in the best possible ways. This involvement can increase job satisfaction for the individual and frequently results in better job performance. Without delegation, managers do all the work themselves and underutilize their workers. The ability to delegate is crucial to managerial success. Managers need to take four steps if they want to successfully delegate responsibilities to their teams.

1.      Specifically assign tasks to individual team members.

The manager needs to make sure that employees know that they are ultimately responsible for carrying out specific assignments.

2.      Give team members the correct amount of authority to accomplish assignments.

Typically, an employee is assigned authority commensurate with the task. A classical principle of organization warns managers not to delegate without giving the subordinate the authority to perform to delegated task. When an employee has responsibility for the task outcome but little authority, accomplishing the job is possible but difficult. The subordinate without authority must rely on persuasion and luck to meet performance expectations. When an employee has authority exceeding responsibility, he or she may become a tyrant, using authority toward frivolous outcomes.

3.      Make sure that team members accept responsibility.

Responsibility is the flip side of the authority coin. Responsibility is the duty to perform the task or activity an employee has been assigned. An important distinction between authority and responsibility is that the supervisor delegates authority, but the responsibility is shared. Delegation of authority gives a subordinate the right to make commitments, use resources, and take actions in relation to duties assigned. However, in making this delegation, the obligation created is not shifted from the supervisor to the subordinate — it is shared. A supervisor always retains some responsibility for work performed by lower-level units or individuals.

4.      Create accountability.

Team members need to know that they are accountable for their projects. Accountability means answering for one's actions and accepting the consequences. Team members may need to report and justify task outcomes to their superiors. Managers can build accountability into their organizational structures by monitoring performances and rewarding successful outcomes. Although managers are encouraged to delegate authority, they often find accomplishing this step difficult for the following reasons:

·         Delegation requires planning, and planning takes time. A manager may say, “By the time I explain this task to someone, I could do it myself.” This manager is overlooking the fact that the initial time spent up front training someone to do a task may save much more time in the long run. Once an employee has learned how to do a task, the manager will not have to take the time to show that employee how to do it again. This improves the flow of the process from that point forward.

·         Managers may simply lack confidence in the abilities of their subordinates. Such a situation fosters the attitude, “If you want it done well, do it yourself.” If managers feel that their subordinates lack abilities, they need to provide appropriate training so that all are comfortable performing their duties.

·         Managers experience dual accountability. Managers are accountable for their own actions and the actions of their subordinates. If a subordinate fails to perform a certain task or does so poorly, the manager is ultimately responsible for the subordinate's failure. But by the same token, if a subordinate succeeds, the manager shares in that success as well, and the department can be even more productive.

·         Finally, managers may refrain from delegating because they are insecure about their value to the organization. However, managers need to realize that they become more valuable as their teams become more productive and talented.

Despite the perceived disadvantages of delegation, the reality is that a manager can improve the performance of his or her work groups by empowering subordinates through effective delegation. Few managers are successful in the long term without learning to delegate effectively.
So, how do managers learn to delegate effectively? The following additional principles may be helpful for managers who've tried to delegate in the past and failed:

·         Principle 1: Match the employee to the task. Managers should carefully consider the employees to whom they delegate tasks. The individual selected should possess the skills and capabilities needed to complete the task. Perhaps even more important is to delegate to an individual who is not only able to complete the task but also willing to complete the task. Therefore, managers should delegate to employees who will view their accomplishments as personal benefits.

·         Principle 2: Be organized and communicate clearly. The manager must have a clear understanding of what needs to be done, what deadlines exist, and what special skills are required. Furthermore, managers must be capable of communicating their instructions effectively if their subordinates are to perform up to their expectations.

·         Principle 3: Transfer authority and accountability with the task. The delegation process is doomed to failure if the individual to whom the task is delegated is not given the authority to succeed at accomplishing the task and is not held accountable for the results as well. Managers must expect employees to carry the ball and then let them do so. This means providing the employees with the necessary resources and power to succeed, giving them timely feedback on their progress, and holding them fully accountable for the results of their efforts. Managers also should be available to answer questions as needed.

·         Principle 4: Choose the level of delegation carefully. Delegation does not mean that the manager can walk away from the task or the person to whom the task is delegated. The manager must maintain some control of both the process and the results of the delegated activities. Depending upon the confidence the manager has in the subordinate and the importance of the task, the manager can choose to delegate at several levels.

Span of control

Span of control (sometimes called span of management) refers to the number of workers who report to one manager. For hundreds of years, theorists have searched for an ideal span of control. When no perfect number of subordinates for a manager to supervise became apparent, they turned their attention to the more general issue of whether the span should be wide or narrow.
A wide span of management exists when a manager has a large number of subordinates. Generally, the span of control may be wide when

·         The manager and the subordinates are very competent.

·         The organization has a well-established set of standard operating procedures.

·         Few new problems are anticipated.

A narrow span of management exists when the manager has only a few subordinates. The span should be narrow when

·         Workers are located far from one another physically.

·         The manager has a lot of work to do in addition to supervising workers.

·         A great deal of interaction is required between supervisor and workers.

·         New problems arise frequently.

Keep in mind that the span of management may change from one department to another within the same organization.

Centralization versus decentralization

The general pattern of authority throughout an organization determines the extent to which that organization is centralized or decentralized.
A centralized organization systematically works to concentrate authority at the upper levels. In a decentralized organization, management consciously attempts to spread authority to the lower organization levels.
A variety of factors can influence the extent to which a firm is centralized or decentralized. The following is a list of possible determinants:

·         The external environment in which the firm operates. The more complex and unpredictable this environment, the more likely it is that top management will let low-level managers make important decisions. After all, low-level managers are closer to the problems because they are more likely to have direct contact with customers and workers. Therefore, they are in a better position to determine problems and concerns.

·         The nature of the decision itself. The riskier or the more important the decision, the greater the tendency to centralize decision making.

·         The abilities of low-level managers. If these managers do not have strong decision-making skills, top managers will be reluctant to decentralize. Strong low-level decision-making skills encourage decentralization.

·         The organization's tradition of management. An organization that has traditionally practiced centralization or decentralization is likely to maintain that posture in the future.

In principle, neither philosophy is right or wrong. What works for one organization may or may not work for another. Kmart Corporation and McDonald's have both been very successful — both practice centralization. By the same token, decentralization has worked very well for General Electric and Sears. Every organization must assess its own situation and then choose the level of centralization or decentralization that works best.

Organizational Design Defined

Few things endure long term without being changed. Even well-known brand names, familiar slogans, and classic songs face updates in today's changing culture. Organizations are no different, and must respond to changes in their environments as well. Whether it's technology upgrades to meet customer demands or policy updates to accommodate employee growth, managers must be both willing and able to deal with the challenges of change.
An organization's structure is defined by its configuration and interrelationships of positions and departments. Organizational design is the creation or change of an organization's structure. The organizational design of a company reflects its efforts to respond to changes, integrate new elements, ensure collaboration, and allow flexibility.
Organizing a business is difficult. Once an organization has a plan, the next step is to make it happen. The major characteristic of organizational structure is in many ways, like the important parts of a jigsaw puzzle—you pick them out, one by one. In particular, the two basic forms of organizational structure are mechanistic and organic.

Defining Motivation

Many people incorrectly view motivation as a personal trait—that is, some people have it, and others don't. But motivation is defined as the force that causes an individual to behave in a specific way. Simply put, a highly motivated person works hard at a job; an unmotivated person does not.

Managers often have difficulty motivating employees. But motivation is really an internal process. It's the result of the interaction of a person's needs, his or her ability to make choices about how to meet those needs, and the environment created by management that allows these needs to be met and the choices to be made. Motivation is not something that a manager can “do” to a person.

Motivation Theories: Individual Needs

Motivation is a complex phenomenon. Several theories attempt to explain how motivation works. In management circles, probably the most popular explanations of motivation are based on the needs of the individual.

The basic needs model, referred to as content theory of motivation, highlights the specific factors that motivate an individual. Although these factors are found within an individual, things outside the individual can affect him or her as well.

In short, all people have needs that they want satisfied. Some are primary needs, such as those for food, sleep, and water—needs that deal with the physical aspects of behavior and are considered unlearned. These needs are biological in nature and relatively stable. Their influences on behavior are usually obvious and hence easy to identify.

Secondary needs, on the other hand, are psychological, which means that they are learned primarily through experience. These needs vary significantly by culture and by individual. Secondary needs consist of internal states, such as the desire for power, achievement, and love. Identifying and interpreting these needs is more difficult because they are demonstrated in a variety of ways. Secondary needs are responsible for most of the behavior that a supervisor is concerned with and for the rewards a person seeks in an organization.

Several theorists, including Abraham Maslow, Frederick Herzberg, David McClelland, and Clayton Alderfer, have provided theories to help explain needs as a source of motivation.

Abraham Maslow's hierarchy of needs theory

Abraham Maslow defined need as a physiological or psychological deficiency that a person feels the compulsion to satisfy. This need can create tensions that can influence a person's work attitudes and behaviors. Maslow formed a theory based on his definition of need that proposes that humans are motivated by multiple needs and that these needs exist in a hierarchical order. His premise is that only an unsatisfied need can influence behavior; a satisfied need is not a motivator.

Maslow's theory is based on the following two principles:

• Deficit principle: A satisfied need no longer motivates behavior because people act to satisfy deprived needs.
• Progression principle: The five needs he identified exist in a hierarchy, which means that a need at any level only comes into play after a lower-level need has been satisfied.

In his theory, Maslow identified five levels of human needs. Table 1 illustrates these five levels and provides suggestions for satisfying each need.

TABLE 1 Maslow's Hierarchy of Human Needs Higher Level Needs To Satisfy, Offer: Self-actualization needs Creative and challenging work Participation in decision making Job flexibility and autonomy Esteem needs Responsibility of an important job Promotion to higher status job Praise and recognition from boss Lower Level Needs To Satisfy, Offer: Social needs Friendly coworkers Interaction with customers Pleasant supervisor Safety needs Safe working conditions Job security Base compensation and benefits Physiological needs Rest and refreshment breaks Physical comfort on the job Reasonable work hours

Although research has not verified the strict deficit and progression principles of Maslow's theory, his ideas can help managers understand and satisfy the needs of employees.

Herzberg's two-factor theory

Frederick Herzberg offers another framework for understanding the motivational implications of work environments.

In his two-factor theory, Herzberg identifies two sets of factors that impact motivation in the workplace:

• Hygiene factors include salary, job security, working conditions, organizational policies, and technical quality of supervision. Although these factors do not motivate employees, they can cause dissatisfaction if they are missing. Something as simple as adding music to the office place or implementing a no-smoking policy can make people less dissatisfied with these aspects of their work. However, these improvements in hygiene factors do not necessarily increase satisfaction.
• Satisfiers or motivators include such things as responsibility, achievement, growth opportunities, and feelings of recognition, and are the key to job satisfaction and motivation. For example, managers can find out what people really do in their jobs and make improvements, thus increasing job satisfaction and performance.

Following Herzberg's two-factor theory, managers need to ensure that hygiene factors are adequate and then build satisfiers into jobs.

Alderfer's ERG theory

Clayton Alderfer's ERG (Existence, Relatedness, Growth) theory is built upon Maslow's hierarchy of needs theory. To begin his theory, Alderfer collapses Maslow's five levels of needs into three categories.

• Existence needs are desires for physiological and material well-being. (In terms of Maslow's model, existence needs include physiological and safety needs)
• Relatedness needs are desires for satisfying interpersonal relationships. (In terms of Maslow's model, relatedness correspondence to social needs)
• Growth needs are desires for continued psychological growth and development. (In terms of Maslow's model, growth needs include esteem and self-realization needs)

This approach proposes that unsatisfied needs motivate behavior, and that as lower level needs are satisfied, they become less important. Higher level needs, though, become more important as they are satisfied, and if these needs are not met, a person may move down the hierarchy, which Alderfer calls the frustration-regression principle. What he means by this term is that an already satisfied lower level need can become reactivated and influence behavior when a higher level need cannot be satisfied. As a result, managers should provide opportunities for workers to capitalize on the importance of higher level needs.

McClelland's acquired needs theory

David McClelland's acquired needs theory recognizes that everyone prioritizes needs differently. He also believes that individuals are not born with these needs, but that they are actually learned through life experiences. McClelland identifies three specific needs:

• Need for achievement is the drive to excel.
• Need for power is the desire to cause others to behave in a way that they would not have behaved otherwise.
• Need for affiliation is the desire for friendly, close interpersonal relationships and conflict avoidance.

McClelland associates each need with a distinct set of work preferences, and managers can help tailor the environment to meet these needs.

High achievers differentiate themselves from others by their desires to do things better. These individuals are strongly motivated by job situations with personal responsibility, feedback, and an intermediate degree of risk. In addition, high achievers often exhibit the following behaviors:

• Seek personal responsibility for finding solutions to problems
• Want rapid feedback on their performances so that they can tell easily whether they are improving or not
• Set moderately challenging goals and perform best when they perceive their probability of success as 50-50

An individual with a high need of power is likely to follow a path of continued promotion over time. Individuals with a high need of power often demonstrate the following behaviors:

• Enjoy being in charge
• Want to influence others
• Prefer to be placed into competitive and status-oriented situations
• Tend to be more concerned with prestige and gaining influence over others than with effective performance

People with the need for affiliation seek companionship, social approval, and satisfying interpersonal relationships. People needing affiliation display the following behaviors:

• Take a special interest in work that provides companionship and social approval
• Strive for friendship
• Prefer cooperative situations rather than competitive ones
• Desire relationships involving a high degree of mutual understanding
• May not make the best managers because their desire for social approval and friendship may complicate managerial decision making

Interestingly enough, a high need to achieve does not necessarily lead to being a good manager, especially in large organizations. People with high achievement needs are usually interested in how well they do personally and not in influencing others to do well. On the other hand, the best managers are high in their needs for power and low in their needs for affiliation.

Motivation Theories: Behavior

Process theories explain how workers select behavioral actions to meet their needs and determine their choices. The following theories each offer advice and insight on how people actually make choices to work hard or not work hard based on their individual preferences, the available rewards, and the possible work outcomes.

Equity theory

According to the equity theory, based on the work of J. Stacy Adams, workers compare the reward potential to the effort they must expend. Equity exists when workers perceive that rewards equal efforts (see Figure 1 ).

Figure 1 The equity theory.

But employees just don't look at their potential rewards, they look at the rewards of others as well. Inequities occur when people feel that their rewards are inferior to the rewards offered to other persons sharing the same workloads.

Employees who feel they are being treated inequitably may exhibit the following behaviors:

• Put less effort into their jobs
• Ask for better treatment and/or rewards
• Find ways to make their work seem better by comparison
• Transfer or quit their jobs

The equity theory makes a good point: People behave according to their perceptions. What a manager thinks is irrelevant to an employee because the real issue is the way an employee perceives his or her situation. Rewards perceived as equitable should have positive results on job satisfaction and performance; those rewards perceived as inequitable may create job dissatisfaction and cause performance problems.

Every manager needs to ensure that any negative consequences from equity comparisons are avoided, or at least minimized, when rewards are allocated. Informed managers anticipate perceived negative inequities when especially visible rewards, such as pay increases or promotions, are allocated. Instead of letting equity concerns get out of hand, these managers carefully communicate the intended values of rewards being given, clarify the performance appraisals upon which these rewards are based, and suggest appropriate comparison points.

Expectancy theory

Victor Vroom introduced one of the most widely accepted explanations of motivation. Very simply, the expectancy theory says that an employee will be motivated to exert a high level of effort when he or she believes that:

1. Effort will lead to a good performance appraisal.
2. A good appraisal will lead to organizational rewards.
3. The organizational rewards will satisfy his or her personal goals.

The key to the expectancy theory is an understanding of an individual's goals and the relationships between effort and performance, between performance and rewards, and finally, between the rewards and individual goal satisfaction. When an employee has a high level of expectancy and the reward is attractive, motivation is usually high.

Therefore, to motivate workers, managers must strengthen workers' perceptions of their efforts as both possible and worthwhile, clarify expectations of performances, tie rewards to performances, and make sure that rewards are desirable.

Reinforcement theory

The reinforcement theory, based on E. L. Thorndike's law of effect, simply looks at the relationship between behavior and its consequences. This theory focuses on modifying an employee's on-the-job behavior through the appropriate use of one of the following four techniques:

• Positive reinforcement rewards desirable behavior. Positive reinforcement, such as a pay raise or promotion, is provided as a reward for positive behavior with the intention of increasing the probability that the desired behavior will be repeated.
• Avoidance is an attempt to show an employee what the consequences of improper behavior will be. If an employee does not engage in improper behavior, he or she will not experience the consequence.
• Extinction is basically ignoring the behavior of a subordinate and not providing either positive or negative reinforcement. Classroom teachers often use this technique when they ignore students who are “acting out” to get attention. This technique should only be used when the supervisor perceives the behavior as temporary, not typical, and not serious.
• Punishment (threats, docking pay, suspension) is an attempt to decrease the likelihood of a behavior recurring by applying negative consequences.

The reinforcement theory has the following implications for management:

• Learning what is acceptable to the organization influences motivated behavior.
• Managers who are trying to motivate their employees should be sure to tell individuals what they are doing wrong and be careful not to reward all individuals at the same time.
• Managers must tell individuals what they can do to receive positive reinforcement.
• Managers must be sure to administer the reinforcement as closely as possible to the occurrence of the behavior.
• Managers must recognize that failure to reward can also modify behavior. Employees who believe that they deserve a reward and do not receive it will often become disenchanted with both their manager and company.

Goal-setting theory

The goal-setting theory, introduced in the late 1960s by Edwin Locke, proposed that intentions to work toward a goal are a major source of work motivation. Goals, in essence, tell employees what needs to be done and how much effort should be expanded. In general, the more difficult the goal, the higher the level of performance expected.

Managers can set the goals for their employees, or employees and managers can develop goals together. One advantage of employees participating in goal setting is that they may be more likely to work toward a goal they helped develop.

No matter who sets the goal, however, employees do better when they get feedback on their progress. In addition to feedback, four other factors influence the goals-performance relationship:

• The employee must be committed to the goal.
• The employee must believe that he is capable of performing the task.
• Tasks involved in achieving the goal should be simple, familiar, and independent.
• The goal-setting theory is culture bound and is popular in North American cultures.

If the goal-setting theory is followed, managers need to work with their employees in determining goal objectives in order to provide targets for motivation. In addition, the goals that are established should be specific rather than general in nature, and managers must provide feedback on performance.

Leadership Defined

Leading is establishing direction and influencing others to follow that direction. But this definition isn't as simple as it sounds because leadership has many variations and different areas of emphasis.

Common to all definitions of leadership is the notion that leaders are individuals who, by their actions, facilitate the movement of a group of people toward a common or shared goal. This definition implies that leadership is an influence process.

The distinction between leader and leadership is important, but potentially confusing. The leader is an individual; leadership is the function or activity this individual performs. The word leader is often used interchangeably with the word manager to describe those individuals in an organization who have positions of formal authority, regardless of how they actually act in those jobs. But just because a manager is supposed to be a formal leader in an organization doesn't mean that he or she exercises leadership.

An issue often debated among business professionals is whether leadership is a different function and activity from management. Harvard's John Kotter says that management is about coping with complexity, and leadership, in contrast, is about coping with change. He also states that leadership is an important part of management, but only a part; management also requires planning, organizing, staffing, and controlling. Management produces a degree of predictability and order. Leadership produces change. Kotter believes that most organizations are underled and overmanaged. He sees both strong leadership and strong management as necessary for optimal organizational effectiveness.

Leadership traits

Theories abound to explain what makes an effective leader. The oldest theories attempt to identify the common traits or skills that make an effective leader. Contemporary theorists and theories concentrate on actions of leaders rather than characteristics.

A number of traits that appear regularly in leaders include ambition, energy, the desire to lead, self-confidence, and intelligence. Although certain traits are helpful, these attributes provide no guarantees that a person possessing them is an effective leader. Underlying the trait approach is the assumption that some people are natural leaders and are endowed with certain traits not possessed by other individuals. This research compared successful and unsuccessful leaders to see how they differed in physical characteristics, personality, and ability.

A recent published analysis of leadership traits (S.A. Kirkpatrick and E.A. Locke, “Leadership: Do Traits Really Matter?” Academy of Management Executive 5 [1991]) identified six core characteristics that the majority of effective leaders possess:

• Drive. Leaders are ambitious and take initiative.
• Motivation. Leaders want to lead and are willing to take charge.
• Honesty and integrity. Leaders are truthful and do what they say they will do.
• Self-confidence. Leaders are assertive and decisive and enjoy taking risks. They admit mistakes and foster trust and commitment to a vision. Leaders are emotionally stable rather than recklessly adventurous.
• Cognitive ability. Leaders are intelligent, perceptive, and conceptually skilled, but are not necessarily geniuses. They show analytical ability, good judgment, and the capacity to think strategically.
• Business knowledge. Leaders tend to have technical expertise in their businesses.

Traits do a better job at predicting that a manger may be an effective leader rather than actually distinguishing between an effective or ineffective leader. Because workplace situations vary, leadership requirements vary. As a result, researchers began to examine what effective leaders do rather than what effective leaders are.

Leadership skills

Whereas traits are the characteristics of leaders, skills are the knowledge and abilities, or competencies, of leaders. The competencies a leader needs depends upon the situation.

These competencies depend on a variety of factors:

• The number of people following the leader
• The extent of the leader's leadership skills
• The leader's basic nature and values
• The group or organization's background, such as whether it's for profit or not-for-profit, new or long established, large or small
• The particular culture (or values and associated behaviors) of whomever is being led

To help managers refine these skills, leadership-training programs typically propose guidelines for making decisions, solving problems, exercising power and influence, and building trust.

Peter Drucker, one of the best-known contemporary management theorists, offers a pragmatic approach to leadership in the workplace. He believes that consistency is the key to good leadership, and that successful leaders share the following three abilities which are based on what he refers to as good old-fashioned hard work:

• To define and establish a sense of mission. Good leaders set goals, priorities, and standards, making sure that these objectives not only are communicated but maintained.
• To accept leadership as a responsibility rather than a rank. Good leaders aren't afraid to surround themselves with talented, capable people; they do not blame others when things go wrong.
• To earn and keep the trust of others. Good leaders have personal integrity and inspire trust among their followers; their actions are consistent with what they say.

In Drucker's words, “Effective leadership is not based on being clever, it is based primarily on being consistent.”

Very simply put, leading is establishing direction and influencing others to follow that direction. Keep in mind that no list of leadership traits and skills is definitive because no two successful leaders are alike. What is important is that leaders exhibit some positive characteristics that make them effective managers at any level in an organization.

Leadership styles

No matter what their traits or skills, leaders carry out their roles in a wide variety of styles. Some leaders are autocratic. Others are democratic. Some are participatory, and others are hands off. Often, the leadership style depends on the situation, including where the organization is in its life cycle.

The following are common leadership styles:

• Autocratic. The manager makes all the decisions and dominates team members. This approach generally results in passive resistance from team members and requires continual pressure and direction from the leader in order to get things done. Generally, this approach is not a good way to get the best performance from a team. However, this style may be appropriate when urgent action is necessary or when subordinates actually prefer this style.
• Participative. The manager involves the subordinates in decision making by consulting team members (while still maintaining control), which encourages employee ownership for the decisions.

A good participative leader encourages participation and delegates wisely, but never loses sight of the fact that he or she bears the crucial responsibility of leadership. The leader values group discussions and input from team members; he or she maximizes the members' strong points in order to obtain the best performance from the entire team. The participative leader motivates team members by empowering them to direct themselves; he or she guides them with a loose rein. The downside, however, is that a participative leader may be seen as unsure, and team members may feel that everything is a matter for group discussion and decision.

• Laissez-faire (also called free-rein). In this hands-off approach, the leader encourages team members to function independently and work out their problems by themselves, although he or she is available for advice and assistance. The leader usually has little control over team members, leaving them to sort out their roles and tackle their work assignments without personally participating in these processes. In general, this approach leaves the team floundering with little direction or motivation. Laissez-faire is usually only appropriate when the team is highly motivated and skilled, and has a history of producing excellent work.

Many experts believe that overall leadership style depends largely on a manager's beliefs, values, and assumptions. How managers approach the following three elements—motivation, decision making, and task orientation—affect their leadership styles:

• Motivation. Leaders influence others to reach goals through their approaches to motivation. They can use either positive or negative motivation. A positive style uses praise, recognition, and rewards, and increases employee security and responsibility. A negative style uses punishment, penalties, potential job loss, suspension, threats, and reprimands.
• Decision making. The second element of a manager's leadership style is the degree of decision authority the manager grants employees—ranging from no involvement to group decision making.
• Task and employee orientation. The final element of leadership style is the manager's perspective on the most effective way to get the work done. Managers who favor task orientation emphasize getting work done by using better methods or equipment, controlling the work environment, assigning and organizing work, and monitoring performance. Managers who favor employee orientation emphasize getting work done through meeting the human needs of subordinates. Teamwork, positive relationships, trust, and problem solving are the major focuses of the employee-oriented manager.

Keep in mind that managers may exhibit both task and employee orientations to some degree.

The managerial grid model, shown in Figure 1 and developed by Robert Blake and Jane Mouton, identifies five leadership styles with varying concerns for people and production:

Figure 1 Blake-Mouton Managerial Grid.

• The impoverished style, located at the lower left-hand corner of the grid, point (1, 1), is characterized by low concern for both people and production; its primary objective is for managers to stay out of trouble.
• The country club style, located at the upper left-hand corner of the grid, point (1, 9), is distinguished by high concern for people and a low concern for production; its primary objective is to create a secure and comfortable atmosphere where managers trust that subordinates will respond positively.
• The authoritarian style, located at the lower right-hand corner of the grid, point (9,1), is identified by high concern for production and low concern for people; its primary objective is to achieve the organization's goals, and employee needs are not relevant in this process.
• The middle-of-the-road style, located at the middle of the grid, point (5, 5), maintains a balance between workers' needs and the organization's productivity goals; its primary objective is to maintain employee morale at a level sufficient to get the organization's work done.
• The team style, located at the upper right-hand of the grid, point (9, 9), is characterized by high concern for people and production; its primary objective is to establish cohesion and foster a feeling of commitment among workers.

The Managerial Grid model suggests that competent leaders should use a style that reflects the highest concern for both people and production—point (9, 9), team-oriented style.

Power versus authority

Effective leaders develop and use power, or the ability to influence others. The traditional manager's power comes from his or her position within the organization. Legitimate, reward, and coercive are all forms of power used by managers to change employee behavior and are defined as follows:

• Legitimate power stems from a formal management position in an organization and the authority granted to it. Subordinates accept this as a legitimate source of power and comply with it.
• Reward power stems from the authority to reward others. Managers can give formal rewards, such as pay increases or promotions, and may also use praise, attention, and recognition to influence behavior.
• Coercive power is the opposite of reward power and stems from the authority to punish or to recommend punishment. Managers have coercive power when they have the right to fire or demote employees, criticize them, withhold pay increases, give reprimands, make negative entries in employee files, and so on.

Keep in mind that different types of position power receive different responses in followers. Legitimate power and reward power are most likely to generate compliance, where workers obey orders even though they may personally disagree with them. Coercive power most often generates resistance, which may lead workers to deliberately avoid carrying out instructions or to disobey orders.

Unlike external sources of position power, personal power most often comes from internal sources, such as a person's special knowledge or personality characteristics. Personal power is the tool of a leader. Subordinates follow a leader because of respect, admiration, or caring they feel for this individual and his or her ideas. The following two types of personal power exist:

• Expert power results from a leader's special knowledge or skills regarding the tasks performed by followers. When a leader is a true expert, subordinates tend to go along quickly with his or her recommendations.
• Referent power results from leadership characteristics that command identification, respect, and admiration from subordinates who then desire to emulate the leader. When workers admire a supervisor because of the way he or she deals with them, the influence is based on referent power. Referent power depends on a leader's personal characteristics rather than on his or her formal title or position, and is most visible in the area of charismatic leadership.

The most common follower response to expert power and referent power is commitment. Commitment means that workers share the leader's point of view and enthusiastically carry out instructions. Needless to say, commitment is preferred to compliance or resistance. Commitment helps followers overcome fear of change, and it is especially important in those instances.

Keep in mind that the different types of power described in this section are interrelated. Most leaders use a combination of these types of power, depending on the leadership style used. Authoritarian leaders, for example, use a mixture of legitimate, coercive, and reward powers to dictate the policies, plans, and activities of a group. In comparison, a participative leader uses mainly referent power, involving all members of the group in the decision-making process.

Situational Approaches to Leadership

The theme in early approaches to understanding leadership was the desire to identify traits or behaviors that effective leaders had in common. A common set of characteristics proved to be elusive, however. Researchers were continually frustrated by the lack of consistent support for their findings and conclusions. As a result, research began to focus on what style of leadership was most effective in a particular situation. Contingency or situational theories examine the fit between the leader and the situation and provide guidelines for managers to achieve this effective fit.

The theorists in this section believe that managers choose leadership styles based on leadership situations. Managers adjust their decision-making, orientation, and motivational approaches based upon a unique combination of factors in their situations: characteristics of employees, types of work, organizational structures, personal preferences, and upper-level management's influences.

The following sections describe the three most well-known situational theories.

Fiedler's contingency theory

Fred E. Fiedler's contingency theory centers on the belief that there is no best way for managers to lead. Different situations create different leadership style requirements for managers. The style that works in one environment may not work in another.

Fiedler looked at three elements that dictate a leader's situational control. These elements are:

• Task structure. Is the job highly structured, fairly unstructured, or somewhere in between? The spelling out in detail (favorable) of what is required of subordinates affects task structure.
• Leader/member relations. This element applies to the amount of loyalty, dependability, and support that a leader receives from his or her employees. In a favorable relationship, a manager has a highly formed task structure and is able to reward and/or punish employees without any problems. In an unfavorable relationship, the task structure is usually poorly formed, and the leader possesses limited authority.
• Positioning power. Positioning power measures the amount of power or authority a manager perceives the organization has given him or her for the purpose of directing, rewarding, and punishing subordinates. Positioning powers of managers depends on the taking away (favorable) or increasing (unfavorable) of the decision-making power of employees.

Fiedler then rated managers as to whether they were relationship oriented or task oriented. Task-oriented managers tended to do better in situations with good leader/member relationships, structured tasks, and either weak or strong position power. They also did well when the tasks were unstructured but position power was strong, as well as when the leader/member relations were moderate to poor and the tasks were unstructured. Relationship-oriented managers, on the other hand, do better in all other situations.

The task-motivated style leader experiences pride and satisfaction in task accomplishment for his or her organization, while the relationship-motivated style leader seeks to build interpersonal relations and extend extra help for team development in his or her organization.

Judging whether a leadership style is good or bad can be difficult. Each manager has his or her own preferences for leadership. Task-motivated leaders are at their best when their teams perform successfully—such as achieving new sales records or outperforming major competitors. Relationship-oriented leaders are at their best when greater customer satisfaction is gained and positive company images are established.

Hersey-Blanchard's situational model

The Hersey-Blanchard Model of Situational Leadership, shown in Figure 1 , is based on the amount of direction (task behavior) and amount of socio emotional support (relationship behavior) a leader must provide given the situation and the level of maturity of the followers.

Figure 1 Hersey-Blanchard's Model of Situational Leadership.

Task behavior is the extent to which the leader engages in spelling out the duties and responsibilities to an individual or group. This behavior includes telling people what to do, how to do it, when to do it, and where to do it. In task behavior, the leader engages in one-way communication. Relationship behavior, on the other hand, is the extent to which the leader engages in two-way or multiway communications. This behavior includes listening to, facilitating, and supporting employees. And maturity is the willingness and ability of a person to take responsibility for directing his own behavior. Employees tend to have varying degrees of maturity, depending on the specific tasks, functions, or objectives that they attempt to accomplish.

To determine the appropriate leadership style to use in a given situation, a leader must first determine the maturity levels of his or her followers in relationship to the specific task. As employee maturity levels increase, a leader should begin to reduce task behavior and increase relationship behavior until his or her followers reach moderate maturity levels. As the employees move into above-average maturity levels, the leader should decrease not only task behavior but also relationship behavior.

Once maturity levels are identified, a manager can determine the appropriate leadership style: telling, selling, participating, or delegating.

• Telling. This style reflects high task/low relationship behavior (S1). The leader provides clear instructions and specific direction. Telling style is best matched with a low follower readiness level.
• Selling. This style reflects high task/high relationship behavior (S2). The leader encourages two-way communication and helps build confidence and motivation on the part of the employee, although the leader still has responsibility and controls decision making. Selling style is best matched with a moderate follower readiness level.
• Participating. This style reflects high relationship/low task behavior (S3). With this style, the leader and followers share decision making and no longer need or expect the relationship to be directive. Participating style is best matched with a moderate follower readiness level.
• Delegating. This style reflects low relationship/low task behavior (S4). Delegating style is appropriate for leaders whose followers are ready to accomplish a particular task and are both competent and motivated to take full responsibility. This style is best matched with a high follower readiness level.

House's path-goal theory

The path-goal theory, developed by Robert House, is based on the expectancy theory of motivation. A manager's job is to coach or guide workers to choose the best paths for reaching their goals. Based on the goal-setting theory, leaders engage in different types of leadership behaviors depending on the nature and demands of a particular situation.

A leader's behavior is acceptable to subordinates when viewed as a source of satisfaction. He or she is motivational when need satisfaction is contingent on performance; this leader facilitates, coaches, and rewards effective performance. Path-goal theory identifies several leadership styles:

• Achievement-oriented. The leader sets challenging goals for followers, expects them to perform at their highest levels, and shows confidence in their abilities to meet these expectations. This style is appropriate when followers lack job challenges.
• Directive. The leader lets followers know what is expected of them and tells them how to perform their tasks. This style is appropriate when followers hold ambiguous jobs.
• Participative. The leader consults with followers and asks them for suggestions before making a decision. This style is appropriate when followers are using improper procedures or are making poor decisions.
• Supportive. The leader is friendly and approachable. He or she shows concern for the followers' psychological well-being. This style is appropriate when followers lack confidence.

Path-goal theory assumes that leaders are flexible and that they can change their styles as situations require. This theory proposes two contingency variables that moderate the leader behavior-outcome relationship:

• Environment characteristics are outside the control of followers, task structure, authority system, and work group. Environmental factors determine the type of leader behavior required if follower outcomes are to be maximized.
• Follower characteristics are the focus of control, experience, and perceived ability. Personal characteristics of subordinates determine how the environment and leader behavior are interpreted.

Effective leaders clarify the path to help their followers achieve their goals, and make their journeys easier by reducing roadblocks and pitfalls. Research demonstrates that employee performance and satisfaction are positively influenced when leaders compensate for shortcomings in either their employees or the work settings.