LECTURE NOTES

ON
ENGINEERING
MANAGEMENT

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COURSE OUTLINE
MEE 515 ENGINEERING MANAGEMENT (2 CREDIT UNITS)
Factors of management’s decision making (shareholders, bankers, workers, government,
general public, suppliers and customer); Resources for organizational survival (money, men,
materials, machines etc.), Management functions (organizing, staffing, controlling,
coordinating, directing); Organization and planning: Need for and objectives of organization;
Organizational charts and organizational levels, organizational structures (line, line and staff,
functional, matrix, informal); Use of committees; Organizational planning (short-term,
intermediate-term and long-term);
Fundamentals of control: Basic control tools/elements (plan, actual performance, comparison
and evaluation, corrective action); Characteristics of good control; Basic causes of control
failure; Control applied to different management functions; Personnel management: Role of
people in an organization. Functions of personnel department (employment, training, health,
safety, benefits, incentive schemes, services etc.) Financial management: Kind of capital
(equity and borrowed capital, long term and short-term capital, fixed and working capital);
Sources of capital (savings, loans, sale of securities, security exchanges, trade credits, profit
plough-back, debentures, etc); Financial statements (balance sheet, profit and loss account),
Cost control; Basic cost elements (direct labour cost, direct material cost, overhead, factory
cost); quality management: Product life cycle, quality assurance, quality control techniques;
Organizing for quality; Economics of quality (appraisal, failure and prevention costs);
product liability; Total Quality Management (TQM); Maintenance management: Scope of
maintenance; Organizing for maintenance; Economics of maintenance; Types of maintenance
(corrective, preventive, predictive)

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 DEFINITION AND FUNCTIONS OF MANAGEMENT
Introduction
Controlling a complex organization so as to achieve
desired goals resulted in the evolution of the concept of
management. Management includes all those people who
are concerned with managing an organization. It is a sum
of organized activities by a group of people.
Management involves decision making at various levels of
organization for getting things done by others. It is both
science as well as an art, because the fundamentals of
management are same everywhere but the practices differ.

Definition of Management
Different experts have defined the term “Management”. Some of these
definitions are given below:-“To manage is to forecast and plan, to
organize, to co-ordinate and to control.” – Henry Fayol

“Management is a distinct process consisting of planning, organizing,

activating and controlling to determine and accomplish the objectives
by the use of people and resources.”- G.R. Terry

“Management is simply the process of decision making and control

over the action of human beings for the express purpose of attaining
pre-determined goals.”- Stanley Vance

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“Management is the art of getting things done through and with the
people in formally organized groups.”- Harold Koontz

Functions of Management
Different experts have classified functions of management. According to George & Terry,
“There are four fundamental functions of
management i.e. planning, organizing,
actuating and controlling”. According to
Henry Fayol, “To manage is to forecast and
plan, to organize, to command, & to
control”. Whereas, Luther Gullick has given
a keyword ‘ POSDCORB’ where ‘P’ stands
for Planning, ‘O’ for Organizing, ‘S’ for
Staffing, ‘D’ for Directing, ‘C’ for Co-
ordination, ‘R’ for reporting & ‘B’ for
Budgeting. But the most widely accepted
are functions of management given by
Koontz and O’Donnell i.e. Planning, Organizing, Staffing, Directing and Controlling;
which are described below:-

Planning. The function of management of systematically making decisions about the

goals to be achieved and activities or actions needed to achieve those that an individual,
a group, a work unit, or the overall organization will pursue in the future. Plans are
developed for the entire organization unit and individuals for certain period of time. Its
activities include:-

(a) Analyzing the current situation.

(b) Anticipating the future.
(c) Determining the organizational objectives.
(d) Deciding the activities to be involved.
(e) Choosing strategies.
(f) Determining resources to achieve organizational goals.

Every plan has to contribute positively towards the accomplishments of the objectives.
Efficiency is measured by the contribution of the plan to objectives implementing the
plan. Planning is the primary prerequisite for all other function of management. Every
action of the manager follows a planning step. If more people in an organization use
common and consistent planning premises, the enterprise planning will be more
coordinated. Planning covers a period over which commitment of resources can be
clearly visualized. Building flexibility in planning beneficial, but cost of building flexibility
needs to be evaluated against the benefits. Manager needs to periodically check events
of the plan and redraw plans to maintain the move towards a desired goal.

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In my area of work (Maintenance Engineer), we at the
beginning of a year plan what maintenance procedures
should be adopted to ensure 100% utilization of the Exhaust
Gas Analyser by the artisans. We identify the resources that
are mandatory for the maintenance of the Exhaust Gas Analyser. Estimation of monetary
resources is being done to complete the tasks well in time. After this, there is need to
prepare a comprehensive plan to execute the tasks.

Organizing. The management function of assembling and coordinating human,

financial, physical, information and other resources needed to achieve organizational
goals. Its activities include:
(a) Specifying Job responsibilities.
(b) Grouping jobs into work units.
(c) Resource allocation

An organization is effective is effective if it as a whole, and every part of it, makes

possible accomplishment of individuals in contributing towards the attainment of
objectives. There is a limit at each managerial position on the number of persons an
individual can effectively manage. Maintenance of authority delegation requires that
decisions within the authority competence of an individual manager be made by him and
not referred upward in the organization. The better an organizational structure reflects a
classification of the tasks and activities required for achievement of objectives and
assists their coordination through creating a system of interrelated roles; and the more
these roles are designed to fit the capabilities and motivations of people available to fill
them, the more effective and efficient an organization structure will be. The more a
position or a department has clear definition of results expected, activities to be
undertaken, organization authority delegated, and authority and informational
relationships with other positions, the more adequately individual responsible can
contribute toward accomplishing objectives.
In my area, I used to delegate responsibilities to
my subordinates according to their trade
structure initially when they posted-in with
appropriate level of authority, and after some
time I delegate them other trade duties to
expand the radius of their experience and
intellect.
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Staffing. The positions provided by the organization structure must be staffed with
personnel able and willing to carry out the assigned functions. The quality of
management personnel can be ensured
through proper definition of the job and its
appraisal in terms of human requirements,
evaluation of candidates and incumbents, and
appropriate training. Specifications for the job
rest on organization requirements and on
provision for incentives to induce effective and
efficient performance of the tasks involved.
Performance must be appraised against the
management action required by superiors and
against the standard of adherence in practice to
managerial principles. Managers should be selected from among the best available
candidates for the job, whether they are inside or outside the enterprise. The objective
of management development is to strengthen existing managers. The most effective
means of developing managers is to have the task performed primarily by a manager's
superior.

In my area of work, I used to put special emphasis on the training of deployed

manpower, evaluate them on daily basis and appreciate them by granting them day-off
etc.

Directing. The management function that involves the manager's efforts to stimulate
high performance by employees and includes directing, motivating and communicating
with employees, individually and in groups. Its activities include:

(a) Directing the workforce.

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 (b) Motivating your subordinates.
(c) Communicating with employees
(d) Leadership

Effective directing depends on the extent to which individual objectives in cooperative

activity are harmonized with group objectives. The more completely an individual has a
reporting relationship to a single superior, the less the problem of conflict in instructions
and the greater the feeling of personal
responsibility for results. Effective direction
requires that management supplement
objective methods of supervision with direct
personal contact. Since people, tasks, and
organizational environment vary, techniques of
supervision will be most effective if
appropriately varied. At one time there was a
management emphasis on directing in the
directorial (autocratic) sense, but in recent
times, the concept of directing has become
more congruent with leading than with pushing.
Thus today, directing is more related to leading and leadership styles. Leadership in this
context means the process whereby a work environment is created in which people can
do their best work and feel an interest in producing a quality product or service.

In my area of work, I religiously direct my subordinates before, during and after the
execution of a task. I assure that there should be no communication gap at all levels of
my squadron. I used to communicate with my subordinates quite often.

Controlling. The function of management of

monitoring progress and making needed changes to make sure
that the organizational goals are achieved. Its activities include:

(a) Setting performance standards that indicate

progress toward long-term goals.
(b) Monitoring staff performance through
performance data evaluation.
(c) Identifying performance problems by comparing performance data against
standards and take corrective actions.

The task of control is to assure accomplishment of objectives by detecting potential or

actual deviation from plans early enough to permit effective corrective action. The
primary responsibility for the exercise of control rests in the manager charged with the
execution of plans. The more controls are designed to deal with and reflect the specific
nature and structure of plans, the more effective they will serve the interests of the
enterprises and its managers. The more controls are designed to reflect the place in the
organization structure where responsibility for action lies, the more they will facilitate
correction of deviation of events from plans. Controls have to be consistent with the

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position, operational responsibility, competence, and needs of the individuals who have
to interpret the control measures and exercise control. Effective control requires
objective, accurate, and suitable controls. Effective control requires attention to those
factors critical to appraising performance against an individual plan. Control is justified
only if indicated or experienced deviations from plans are corrected through appropriate
planning, organizing, staffing and directing.

In my area of work, I used to monitor the scheduled tasks regularly. If there is certain
deviation in the completion of task(s) due to any reason such as procurement of items,
non-availability of manpower etc. I correct that misbehavior and change the strategy if
appropriate.

Conclusion
In conclusion, “Management” is an individual or group of individuals that accept
responsibilities to run an organization. Management brings together all six M’s i.e. Men
and Women, Money, Machines, Materials, Methods and Markets.

CHARACTERISTICS OR NATURE OF MANAGEMENT

Management is Goal-Oriented: The success of any management activity is accessed
by its achievement of the predetermined goals or objective. Management is a purposeful
activity. It is a tool which helps use of human & physical resources to fulfill the pre-
determined goals. For example, the goal of an enterprise is maximum consumer
satisfaction by producing quality goods and at reasonable prices. This can be achieved
by employing efficient persons and making better use of scarce resources. Management
integrates Human, Physical and Financial Resources: In an organization, human
beings work with non-human resources like machines. Materials, financial assets,
buildings etc. Management integrates human efforts to those resources. It brings
harmony among the human, physical and financial resources.
Management is Continuous: Management is an ongoing process. It involves
continuous handling of problems and issues. It is concerned with identifying the problem
and taking appropriate steps to solve it. For achieving this target various policies have to
be framed but this is not the end. Marketing and Advertising is also to be done. For this
policies have to be again framed. Hence this is an ongoing process.
Management is all Pervasive: Management is required in all types of organizations
whether it is political, social, cultural or business because it helps and directs various

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efforts towards a definite purpose. Thus clubs, hospitals, political parties, colleges,
hospitals, business firms all require management.
Whenever more than one person is engaged in working for a common goal,
management is necessary. Whether it is a small business firm which may be engaged in
trading or a large firm like Tata Iron & Steel, management is required everywhere
irrespective of size or type of activity.
Management is a Group Activity: Management is very much less concerned with
individual‘s efforts. It is more concerned with groups. It involves the use of group effort to
achieve predetermined goal of management of ABC & Co. is good refers to a group of
persons managing the enterprise
Organized Activities: Management is a process of organized activities. Groups of
people cannot be involved in the performance of activities without organized activities.
Management comes into existence where a group of people are involved in achieving a
common objective. The organized activities may take a variety of forms ranging from a
tightly structured organization to a loosely-knit organization.
Existence of Objectives: The existence of objectives is a basic criterion of every
human organization. The organizational objectives are the desired state of affairs which
an organization attempts to realize. This realization of objectives is sought through the
coordinated efforts of the people constituting an organization.
Decision-making: Management process involves decision making at all levels.
Decision-making describes the process by which a course of action is selected as the
way to deal with a specific problem. If there is only one alternative, the question of
decision making does not arise. The quality of alternatives which a manger selects
determines the organization‘s performance, and the future of the organization.
Relationship among resources: The essence of management is integration of various
organizational resources. Resources include money, machine, materials, and people.
Management is concerned with the proper utilization of human resources which, in turn,
utilize other resources.
Working with and through people: Management involves working with people and
getting organizational objectives achieved through them. Working through people is
interpreted in terms of assigning activities to subordinates.
Multidisciplinary: Management is multidisciplinary because it includes
knowledge/information from various disciplines- economics, statistics, maths,
psychology, sociology, ecology, operations research, history, etc. Management
integrates the ideas and concepts taken from these disciplines and presents newer
concepts which can be put into practice for managing the organizations. Management is
dynamic: Management has framed certain principles, which are flexible in nature and
change with the changes in the environment in which an organization exits.
Relative, Not Absolute Principles: Management principles are relative, not absolute,
and they should be applied according to the need of the organization. A particular
management principle has different strengths in different conditions. Therefore,
principles should be applied according to the prevailing conditions.
Management- Science or Art: Management likes other practices- whether medicine,
music composition, or even accountancy- is an art. It is know-how. Yet managers can
work better by using the organized knowledge about management. It is this knowledge
that constitutes science. Thus, managing as practice is an art; the organized knowledge

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underlying the practice may be referred to as science. Management as Profession:
Management has been regarded as a profession by many while many have suggested
that it has not achieved the status of a profession. Schein concluded that by some
criteria management is indeed a profession, but by other criteria it is not. Today we can
see many signs that management is working towards increased professionalism.
Management is Universal: Management is a universal phenomenon. However,
management principles are not universally applicable but are to be modified according to
the needs of the situation.

CONCEPTS OF MANAGEMENT
Management as a Discipline Discipline refers to a field of study having well-defined
concepts and principles. When we refer to management as a discipline, we include in it
the various relevant concepts and principles, the knowledge of which aids in managing
Management as a Group of People We refer to management as a group of people in
which we include all those personnel who perform managerial functions in organizations.
We refer to two distinct classes or groups of personnel in the organization. In the first
category, we include all those persons who are responsible for managerial functions and
in the second category, we include non-managerial personnel.
Management as a process
In studying management discipline, we generally refer to management as a process. A
process can simply be defined s systematic method of handling activates. However, the
management process can be treated as a complex one which can be referred to as an
identifiable flow of information through interrelated stages of analysis directed towards
the achievement of an objective or set of objective. It is a concept of dynamic rather than
static existence in which events and relationships must be seen as dynamic, continuous,
and flexible, and as such, must be considered as a whole. Thus, management as a
process includes various activities and sub activities.

QUALITIES OF A SUCCESSFUL MANAGER

It is easy to find a bad manager, but much harder to find a successful one. So what
makes a manager successful? Here are my top ten qualities of a successful manager:
1. Demonstrates integrity - A manager should walk the talk. The old saying, "Lead by
example" is the first quality that makes a manager a stand out.
2. Deals honestly and diplomatically - A manager, who owns their mistakes, deals
openly, and honestly with others, earns the respect of those they are trying to lead.
3. Demonstrates flexibility - A manager who is responsive to the needs of the business
and the needs of employees, is able to keep his team on target and yet achieve the
goals of the business.
4. Shows commitment and reliability - A manager who delivers their promises shows
their team that they are reliable and promotes trust.
5. Listens effectively - A manager who 'seeks first to understand, then to be
understood' (Dr Steven Covey) is a manager who will always have their finger on the
pulse of the business.
6. A good negotiator - A manager who comes to the table prepared to give a little that
the outcome is a positive one for everyone, will not only earn the respect of his
employees but be guaranteed of the opportunity for further negotiations in the future.

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7. A thorough planner - 'If you fail to plan, you plan to fail.' This saying is especially true
for managing. A manager is a coach to their team and the team are looking to them for
the game plan.
8. Is fair - A manager who doesn't take sides, show favoritism or victimize those they are
supervising, will earn their trust and in turn, will have more personal power to influence
their team for good.
9. Knows how to have fun and has a good sense of humor - A manager who is able
to promote a safe and happy work environment where appropriate fun is embraced, will
ensure the retention of staff.
10. Seeks to understand their workers - A manager who is able to accurately assess
the skills, abilities and personalities of their work team, will be able to develop individual
managers to maximize their effectiveness and help them reach their potential, whilst
focusing their efforts on the goal.

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 PLANNING FUNCTION
Planning is the first and perhaps the most important function of management. The
essence of planning is to prepare for and predict future events. Planning goes beyond
attempting to attain strategy and procedure required for effective realization of the entire
plan. It entails determination of control, direction and methods of accomplishing the
overall organizational objective. Planning is a process that involves the establishment of
objectives, strategies to achieve the objectives and a step-by-step determination of the
activities and resources necessary to achieve them.
Importance of Planning
Planning is particularly very important in a developing country where resources are
relatively scarce. In Nigeria where many of the businessmen are inexperienced and the
academic preparation is by no means very impressive, planning to avoid waste of money
and other resources is very compelling. The importance of planning is well recognized by
the Nigerian government that it engages in National Development plans. A Plan is a
blueprint for action. In Nigeria, a businessman who wishes to enter into any business
has to engage in detailed planning in order to identify the source of raw material,
equipment, determine delivery dates, sources of manpower supply and, in some
instances, sources of working capital. Many projects have failed in the country because
adequate plans were not made to identify all the important variables likely to bear on the
projects that would determine their failure or success.
Many indigenous businessmen are often too preoccupied by the day-to-day operation of
their businesses with the result that they have no time set aside to reflect on the future of
their enterprises. Some have a very narrow concept f their business and consider it idle
to plan because they believe they cannot control most of the variables. To this group of
businessmen, planning is not a necessity. Failure to plan gives rise to inefficiency and
lack of direction. It makes the businessmen to constantly put off fire instead of preventing
its occurrence. Planning for a Nigerian enterprise could mean identifying what the
business plans to do in terms of growth, developing its share of the market and business
volume, return on investment, identifying operating strategies, marketing plans and
strategies and performance goals. Over 48.6% of Nigerian indigenous small
businessmen do not undertake a formal plan and do not have budgets.

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The need for planning in Nigeria is emphasized by the fact that the businesses are
relatively small and when a businessman needs financial assistance from the bank, the
first question that he will have to answer deals with planning- the question deals with a
proposed budget showing anticipated profit and loss statement. Every bank considers
this essential and a necessary condition for the success of an enterprise. It is not
surprising that many indigenous businessmen find it difficult to raise loans from banks.
According to the study, 86.7% of Nigerian indigenous businessmen who apply for loans
fail to obtain it.
For many managers, planning is an activity that is undertaken when the daily pressure of
doing business no longer exist. This never happens. For every businessman, there us
always a need for planning, both in the long-run and in the short-run. Postponement of
planning is very dangerous because failure to plan gives rise to ineffectiveness,
undirected action and waste of resources. For example, planning helps the businessman
to determine how many employees he must have, the level of skill of and experience, the
salary levels, and the nest way to utilize them. Personnel is one of the most expensive
items of cost in an enterprise because personnel is indivisible and hard to develop. Good
planning is a precondition for better result. Some state governments recognize the
crucial role of planning and have often set up a planning committee for any major
project. The Anambra State Government, for example, set up the Anambra State
Television Planning Committee, and Imo State Government had the Imo State University
Planning Council to ensure a smooth implementation of these projects. Thus, planning
helps to establish coordinated effort. It gives direction and reduces the impact of change,
minimizes waste and redundancy and sets the standards used for controlling.
Planning Function
Planning is the basic function of management. Planning is the process of bridging the
gap between where we are and where we want to be in the future. In other words,
planning is ―looking ahead, relating today‘s events with tomorrow‘s possibilities.
According to KOONTZ, Planning is deciding in advance – what to do, when to do &
how to do. It bridges the gap from where we are & where we want to be. A plan is a
future course of actions. It is an exercise in problem solving & decision making. Planning
is determination of courses of action to achieve desired goals. Thus, planning is a

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systematic thinking about ways & means for accomplishment of pre-determined goals.
Planning is necessary to ensure proper utilization of human & non-human resources. It is
all pervasive, it is an intellectual activity and it also helps in avoiding confusion,
uncertainties, risks, wastages etc.
Planning is a process of seeking answers to some of the following particular
questions:
(i) What is to be done?
(ii) Why is it to be done?
(iii) How the work will be done?
(iv) Who will do the work?
(v) When the work will be done?
(vi) Where the work will be done?
Planning pervades all the levels of organization. But the scope of planning is not the
same at each level of organization; the higher the level of organization, the broader the
scope of planning. Planning may be long term and short term.
Characteristics of Planning
1. Planning is goal-oriented.
a. Planning is made to achieve desired objective of business.
b. The goals established should be generally acceptable, otherwise individual efforts &
energies will go misguided and misdirected.
c. Planning identifies the action that would lead to desired goals quickly & economically.
d. It provides sense of direction to various activities. e.g. Peugeot Automobile Nigeria is
trying to capture once again Nigerian Car Market by launching diesel models.
2. Planning is looking ahead.
a. Planning is done for future.
b. It requires peeping in future, analyzing it and predicting it.
c. Thus planning is based on forecasting.
d. A plan is a synthesis of forecast.
e. It is a mental predisposition for things to happen in future.
3. Planning is an intellectual process.

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a. Planning is a mental exercise involving creative thinking, sound judgement and
imagination.
b. It is not a mere guesswork but a rotational thinking.
c. A manager can prepare sound plans only if he has sound judgement, foresight and
imagination.
d. Planning is always based on goals, facts and considered estimates.
4. Planning involves choice & decision making.
a. Planning essentially involves choice among various alternatives.
b. Therefore, if there is only one possible course of action, there is no need planning
because there is no choice.
c. Thus, decision making is an integral part of planning.
d. A manager is surrounded by no. of alternatives. He has to pick the best depending
upon requirements & resources of the enterprises.
5. Planning is the primary function of management / Primacy of Planning.
a. Planning lays foundation for other functions of management.
b. It serves as a guide for organizing, staffing, directing and controlling.
c. All the functions of management are performed within the framework of plans laid out.
d. Therefore planning is the basic or fundamental function of management.
6. Planning is a Continuous Process.
a. Planning is a never ending function due to the dynamic business environment.
b. Plans are also prepared for specific period f time and at the end of that period, plans
are subjected to revaluation and review in the light of new requirements and changing
conditions.
c. Planning never comes into end till the enterprise exists issues, problems may keep
cropping up and they have to be tackled by planning effectively.
7. Planning is all Pervasive.
a. It is required at all levels of management and in all departments of enterprise.
b. Of course, the scope of planning may differ from one level to another.
c. The top level may be more concerned about planning the organization as a whole
whereas the middle level may be more specific in departmental plans and the lower level
plans implementation of the same.
8. Planning is designed for efficiency.

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a. Planning leads to accomplishment of objectives at the minimum possible cost.
b. It avoids wastage of resources and ensures adequate and optimum utilization of
resources.
c. A plan is worthless or useless if it does not value the cost incurred on it.
d. Therefore planning must lead to saving of time, effort and money.
e. Planning leads to proper utilization of men, money, materials, methods and machines.
9. Planning is Flexible.
a. Planning is done for the future.
b. Since future is unpredictable, planning must provide enough room to cope with the
changes in customer‘s demand, competition, govt. policies etc.
c. Under changed circumstances, the original plan of action must be revised and
updated to male it more practical.
Figure 3.1 shows the planning circle. Many studies point to the fact that there is a
positive relationship between planning and higher profits, higher returns on assets and
other positive financial results.

Figure 3.1 planning Circle in an Organization

Types of Plans
The essence of a plan is to reduce business risks. In planning we concentrate on the five
M’s of planning-Men, Money, Machine, Material and Methods. The details of this are
carried out, in the form of time, business function, breath and scope.
Thompson has described three kinds of business plans-
(a) Plans for doing current business,
(b) Plans for continuing in business, and
(c) Plans for business development and growth.2

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The plans for current business are those that are necessary for the day-to-day operation
of the business. These are those required by managers to ensure that they have
available the five M’s for each order, assignment or work schedule.
Plans for continuing business are those that deal with the changing character of
the customer’ business, with changing, technology of one’s own business and with
changing habits and expectations of workers and society at large.3
Plans for business development and growth, include plans to ensure that the
product continues to meet changing customer tastes. These include plans to exploit new
market opportunities by product differentiation, introduction of new product lines and
services.
Classification by Terms
Very often, planning is classified in terms of
(a) Short-range and
(b) Long-range.
Short-range plans are sometimes called operating plans. A short-range plan is usually
from six months to one year planning. Whether short-range or long-range depends on
the type of enterprise, the kind of industry, the production cycle and the quality of
management. As a general rule, plans that only require a short period of time to
accomplish are referred to as short-range plans. The long-range plan of an organization
determines what constitutes its short-range plans. The budget is the most used short-
range plan. The budget is a device for expressing future plans in quantitative terms.
When, on the other hand, many executives talk of long-range plans, they refer to
a short time period over five years. Large corporations and universities generally plan
over a long time span. A plywood industry that plants new seedlings to grow into timer is
planning for the long term.
Thompson has succinctly summarized the factors that lead to a selection of the
proper planning time span as follows.
(1) Lead time- time it takes from the realization that new products are
needed for the commercial production of the products including the
period of utilization before the products becomes obsolete.

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 (2) The length of time required to recover the capital funds invested in
plan and equipment, and in training skilled personnel.
(3) Expected future availability of consumers
(4) Expected future availability of raw materials and components.
Long-Range Planning Process
One of the major problems confronting small business enterprises in Nigeria is how to
engage in long-range planning. Many indigenous small enterprises do not undertake
long-range planning because of the ignorance of how to do it and my are entangled in
day-to-day operation. Benge recommends that the realistic steps for undertaking long-
range planning should include:
(a) Begin with a realistic appraisal of the present strengths and weaknesses of the
company. A book publishing company may forecast rapid growth in the demand for
primary school textbooks. This would influence the company in determining its course of
action in the future. In analyzing the enterprise strength, the following factors are
considered:
(i) the demand for the product or service;
(ii) company’s competitive position or strength;
(iii) the cost position of the company; and
(iv) resources availability-finance and quality of staff.
(b) Involve the company’s key personnel in planning. It is wrong for the managing
director to do the planning of an organization alone. Research has shown that
key employees can reason and their ideas are as good if not better than those of
the directors. They should be involved in planning. The sales manager,
production manager, chief engineer, accountant and personnel officer should be
involved in planning.
(c) Base the plan on the customer: give it a marketing orientation, the success or
failure of an enterprise could depend on customer orientation. Good plans should
be concentrated in finding out such factors as the stability of company product,
for it is the utility or satisfaction derived from a product by the consumer that will
determine customer loyalty. Planning should include strategy to counteract the
effect of close substitutes and product obsolescence.

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(d) Establish a five-year plan, subdivide it, delegate responsibilities. Good long-range
plans take up to five years. The involvement of key personnel in long-range
planning is strongly recommended.
(e) Set up a schedule for key events and try to keep to it. These serve as sign posts
to aid in evaluating the plan and taking necessary corrective action.

Classification by Functional Areas

Planning can be classified according to the functional areas: production, sales
promotion, finance and personnel. In this case plans are centered around the five M’s of
planning. The advantage in this type of classification is that it helps the planner to use
the systems approach and recognize the interrelationship between these functions. In
planning, the promotions department, for example, will consider the financial strength of
the company, the activities of the production department and availability of personnel
before it decides the right time to undertake a massive campaign programme.
Classification by Scope
Classification by scope takes into consideration company strategies, policies,
programmes and procedures.
Strategy: Strategy consists of moves and approaches devised by management to
produce successful organization performance. It is the game plan which helps it to
highlight its strength and opportunities and plan down on its weaknesses and threats.
Strategy help a company determine its future plans. All successful organizations have
strategies to exploit their environment by first undertaking a detailed analysis of their
strengths and weaknesses. After this, a plan of action is formulated. A good company
strategy helps the organization to identify and define factors such as:
(1) the products or services it is capable of producing for a group of customers,
(2) the services or products to be produced,
(3) the synergy to exploits,
(4) timing and sequence of major steps,
(5) targets to be met.

19
Policies: A policy is a company’s standing plan of action to guide its methods of
operation. Every company is expected to have policies in all its major areas of operation
including:
(a) marketing
(b) production
(c) purchasing
(d) personnel
(e) finance and
(f) public relations.
Policies: are very useful because they make for consistency in decision making and give
guidance as to what, how, who, when and where action should be taken.
Procedures: These deal with the manner in which an organization goes about to
achieve its objectives. Procedures are often restricted to specific departments or units.
The sales department could have procedure for initiating credits; personnel department
may have procedures for giving casual leave or allocating accommodation. The
procedure for costing products by the accounting department could be different from the
method used by the department for entering orders or accepting returns.

Organizational Strategy
Strategy may be seen as pattern of objectives, purposes, or goals and major policies
and plans for achieving those goals stated in such a way as to define what business the
company is in and the kind of business it is or is to be. Newman and Logan 6 Tilles7
“defined strategy as the set of goals and major policies of an organization.
Strategy decisions are big decisions which significantly affect the organization’s
ability to achieve its objectives. This could include decisions about human resources
recruitment, product to sell, in which market, production process, organization structure
etc.
Strategy planning therefore are plans that apply to the entire organization,
establish the overall goals, and seek to position the organization in terms of its
environment.8

20
 Strategic planning is the major preoccupation of top management whereas
operating plans dominate the attention of middle and first line managers.
Figure 3.2 Planning in the Hierarchy of Organization

The decision of each of the levels could have far reaching impact on the entire
organization. A wrong decision by the first line manager (supervisor) to suspend an
employee could incur the anger of the union and lead to strike and plant closure. The
modern approach to planning recognizes the importance of involving many people to
participate in the plan formulation. Some organizations have formal planning department
responsible in helping write different organizational plan. Plans formulated by top
management flow to other departments through the planning unit and are tailored to suit
the needs of the departments.
If these steps are taken, planning for the future becomes relatively simple. The
first thing to do is to determine the organizational goals.

Figure 3.3 Six Steps in the Planning

21
 This is very important because it gives a sense of direction. If a man decides to
produce bread, this will become the objective and will determine subsequence course of
action.
Once this is determined, the planner has to search for opportunities as to key
customers, competitors, suppliers, and the type of technology required. Then he has to
select the appropriate course of action for accomplishing the objectives.
In order to be definitive, he must set targets and quotas. Quantitative measures
help to know if the objective is being realized or not. This may involve the use of
budgets, and schedules. The next step is the implementation of these measures and,
finally, review. These help to take corrective actions and serve as a control process.
Characteristics of a Good Plan
Certain features distinguish a good plan from a bad one. Some of the distinguishing
features include the fact that good plans:
(a) are realistic and capable of implementation;
(b) Have clearly defined objectives in terms of scope, accuracy, clarity and
definitiveness. Whenever possible, targets, targets must be set and they have to
be qualitative or quantitative;
(c) Must be comprehensive. This makes it possible to take a systems view of the
entire organization thus recognizing the interrelationship-the different functional
areas. This will also make it possible to coordinate and integrate the different
parts of the plan and ensure a degree of structuralisation;
(d) Are flexible. A good plan must enough to take care of what takes place in our
dynamic environment. Flexibility does not mean lack of takes place specificity or
vagueness. It entails building into the plan opportunity to monitor the performance
of the plan and take appropriate action should circumstances makes it necessary;
(e) Have economic effectiveness. A good plan must be economically feasible. There
must be ample resources to implement it at the least possible cost. It is expected
to result in the optimum utilization of enterprise resources.

Project Planning

22
Projects characterize the activities of many organizations. Construction companies
undertake many road projects, housing or building. A project is a one-time only set of
activities that has a definite beginning and ending point in time. It contains cost and time
schedules to produce a specific product or services.
A project may cut across many functional lines- engineering, accounting,
medicine, surveying and administration. The factors promoting the use if project
management approach include the use of project managers concept the use of outsiders
such as consultants, joint ventures, sub-contractors etc., and the fact that a new project
constitutes a new challenge and the results to be attained are measurable and specific.
Project management is the task of getting a project completed within the time and
budget, and according to specifications.
The success of any project planning is as shown on figure 4.5.

Figure 4.5: project Planning Process

23
Figure 4.5: project Planning Process

The project manager in many instances is working with people who are assembled for
the specific task and they return to their parent departments at the completion of the
task. His most effective weapon is his communication skills, and power of persuasion
and the liking for people and goal attainment orientation. Sometimes, project team
members may be assigned to more than one project at a time, creating divided interest
and loyalty. There may also be other resource that are shared and each project is given
a limited time within which to make use of it. Good organizations make use of
sophisticated computerized online scheduling programmes and other project
management tools-such as flow charts and PERT network.

Criticisms of Planning

24
Despite the advantages inherent in planning, especially in making an organization to
have a sense of direction, planning has been criticized. Some of the major criticisms
include:
(i) Planning creates rigidity, when plans are formulated by managers, some set
of assumptions are made. There is a tendency to keep to these plans even
when the circumstances have changed. If the assumptions made ab initio are
faulty, the plan fails to achieve the desired objectives.
(ii) Closely allied to the problem of rigidity is the fact that plans cannot easily be
formulated for a dynamic environment. The avalanche of changes taking
place in almost a chaotic competitive and innovative business environment
precludes the adherence to any formal plans. The dynamic environment
demands flexibility and not rigidity, which plans dictate especially in the hands
of the less initiated managers.
(iii) Formal plans tend to work counter to innovation in the work place. Formal
plans require that actions be institutionalized, that there be procedures and
rules for carrying out action plans. This appears to work against intuition and
creativity. It appears that the less the plan, the more an organization avoid
bureaucracy and the more it innovates.
(iv) Hamel and Prahaled10 have the view that planning focuses managers
attention on today’s competition not on tomorrows survival. There is the
tendency for plans to focus on the immediacy, by drawing attention to existing
business opportunities as opposed to long-term business opportunities.
(v) Formal planning tend to reinforce success which may lead to failure. There is
a tendency in all formal plans to follow the plans that give success as long as
the company is doing very well. This may give a false sense of security and
lead to business myopia, stressing the present to the detriment of the future
as many managers may like to avoid future challenges unless they are forced
to it. Managers caught in this we tend not to be proactive, before the company
derails and will be gasping for survival.

25
 Despite these criticisms, which are valid when directed at rigid, inflexible
planning, today’s managers can be effective planners understand planning in dynamic
uncertain environment.
Business Forecasts
The essence of planning is to decide what is to be done in the future. This requires
information or assumption about the future. One of the factors that preoccupy the
attention of business executives is to determine what is most likely to happen in the
future in order to plan around it. Forecasting is involved in all business activities from
inception to winding up. A man who decides to produce a certain number-4,000 books-
the assumption is that demand will be equal or greater than the forecasted demand.
Forecasting help in future planning. Forecasting makes it necessary to seek
systematically, information on key business area such as production information, human
resources, accounting and sales information. These help to promote team work and
encourage accountability in the execution for actual result in the various functional areas.
A comprehensive budget requires forecast of sales, advertising, and manpower needs of
the organization in order to be realistic and useful to management.
Forecasting is not a very simple exercise for it requires:
(a) A clear understanding of the industry and the company operation over the years.
This is for trend analysis;
(b) A thorough knowledge of company history and a thorough analysis of company
records to determine the performance of each product line, noting seasonal and
yearly fluctuations;
(c) Estimating future business prospects based on the analysis on (a) and (b) above.
This step would involve a study of competition to determine one’s strategy,
marketing and production plan for the planned period, and knowledge of
substitutes and direct competitors productions quality. This will help to establish
relationship and trends as it relates to individual products, the industry and the
economy as a whole;
(d) Adjustment for unforeseen circumstances in the economy as a whole. It could
involve modification of an original optimistic forecast. A good forecast requires
patience and dedication;

26
 (e) That effort be made to compare actual result with estimated result periodically in
order to adjust for deviations. Forecasting is not the panacea for all management
planning problem or to be seen as the “crystal-ball.” It is to be used with caution
for “these estimates are likely to be highly subjective and, as a result, biased by
distinctly human tendencies toward caution, self-protection, or the desire to
please.”12
Forecasting Techniques
Forecasting starts with environmental scanning. To do a good forecasting, one
uses either quantitative or qualitative approach. Quantitative approaches to forecasting
involve the use of statistical or mathematical techniques. In this group are found such
techniques as trend analysis, regression analysis, economic models and indicators
substitution effect, etc.
Qualitative Approach, unlike the quantitative approaches, uses the judgment and
opinions of knowledgeable individuals to predict outcome. In management forecast for
example, the human resources manager may use the opinions (judgments) of
supervisors, departmental managers, experts or other knowledgeable individuals in
forecasting future employment needs. This may include jury opinion, sales force
composition and customer evaluation.
In a typical human resources forecasting for example, the following methods may
be used: staffing tables, Markov analysis, skills inventories, replacement charts or
succession planning.
BENCHMARKING: This is one of the tools used for effective planning and measuring
one’s own services and practices against the recognized leaders in order to identify
areas of improvement.
The essence of benchmarking is to learn how to improve performance by
conducting a research for the best practices among competitors that lead to their
industry, it has to benchmark itself against SPDC with regard to the efficiencies that
make Shell a leader in oil exploration in Nigeria. Today, companies in the construction
industry use benchmarking as a tool in their quest for performance improvement to
compete against Julius Berger, Mother Cat, etc. W. Edwards Deming advocated four-
step process in benchmarking:

27
 (i) Plan-Conduct a self-audit to determine internal processes and measurement,
for the planning team, and identify comparative organizations to be
benchmarked.
(ii) Do-Collect data through surveys, interviews, site visits etc.
(iii) Check-Analyse data to identify performance gaps and causes of differences
and suggest improvement to management.
(iv) Act-Establish goals, implement specific changes to meet or exceed standards.
Monitor progress and redefine benchmarks as a continuous improvement
process.

DECISION MAKING
Decision making is one of the most crucial activities of management. The necessity to
decide is the everyday preoccupation of management in all types of organizations
whether small enterprises or multinational corporations. The decision that management
faces are sometimes simple and in other instances, complex and overwhelming. A
decision to increase production in a particular industry could necessitate the employment
of more labour, increase in plant capacity, acquisition of more equipment, borrowing of

28
money and the mastering of new technological know-how. This decision could affect the
economic climate resulting in full employment, with its attendant consequences –
increase in money circulation and inflation. In business, there are absolutely no right
decision or wrong decisions but intelligent choices. What one considers a right decision
in a particular time-frame may turn out to be an unintelligent decision if the
circumstances change. This is particularly true in developing countries where most to the
variables required for intelligent decision are lacking. In some industries, the total
production is unknown, the consumption pattern is not clear, the total population is a
guess work, supply of raw materials is influenced by political consideration and the lead
time for the supply of raw material is most unpredictable. An entrepreneur may decide to
import large quantities of raw material because it is under license. The restriction could
be lifted within a month after the interpretation, purely on political grounds without giving
consideration to its consequences on the successful operation of the businessmen in the
industry.
Decision Making Process
Definition: A decision is the selection of alternative course of action from available
alternatives in order to achieve a given objective. The decision process is influenced by
the unique environment of the decision maker, his organizational position, available
knowledge and experience in decision making. Decision Making is the process of
mapping the likely consequences of decisions, working out the importance of individual
factors, and choosing the best course of action to take in order to achieve a
predetermined goal or objective. A decision is a choice aimed at achieving optimum
result in a given situation. Decisions are made when a person finds himself in a situation
where he must act and he is not quite sure of the choice that will give the best result. A
decision could be seen as a mental process that forces us to analyse the situation in
order to master it, or increase our knowledge on the area in which decision is to be
made. Decision Making is choosing between alternative courses of action using
cognitive processes - memory, thinking, evaluation, etc. When trying to make a good
decision, a person must weigh the positives and negatives of each option, and consider
all the alternatives. For effective decision making, a person must be able to forecast the
outcome of each option as well, and based on all these items, determine which option is

29
the best for that particular situation. An intelligent decision is one which yields the best
intelligent response to a situation. Decisions aim at making things happen – in order to
achieve an objective. Absence of a decision is a decision. A decision not to act or to
postpone a major decision is a decision.
TYPES OF DECISION-MAKING
Irreversible These are those types of decisions, which, if made once cannot be
unmade. Whatever is decided would than have its repercussions for a long time to come.
It commits one irrevocably when there is no other satisfactory option to the chosen
course. A manager should never use it as an all-or-nothing instant escape from general
indecision.
Reversible This is the decisions that can be changed completely, before, during or after
the agreed action begins. Such types of decisions allow one to acknowledge a mistake
early in the process rather than perpetuate it. It can be effectively used for changing
circumstances where reversal is necessary.
Experimental These types of decisions are not final until the first results appear and
prove themselves to be satisfactory. It requires positive feedback before one can decide
on a course of action. It is useful and effective when correct move is unclear but there is
a clarity regarding general direction of action.
Trial and Error
In this type of decisions, knowledge is derived out of past mistakes. A certain course of
action is selected and is tried out, if the results are positive, the action is carried further, if
the results appear negative, another course is adopted and so on and so forth a trial is
made and an error is occurred. Till the night combination this continues. It allows the
manager to adopt and adjust plans continuously before the full and final commitment. It
uses both, the positive and negative feedback before selecting one particular course of
action.
Made in Stages Here the decisions are made in steps until the whole action is
completed. It allows close monitoring of risks as one accumulates the evidence of out-
comes and obstacles at every stage. It permits feedback and further discussion before
the next stage of the decision is made.

30
Cautious It allows time for contingencies and problems that may crop up later at the
time of implementation. The decision-makers hedge their best of efforts to adopt the
night course. It helps to limit the risks that are inherent to decision- making. Although this
may also limit the final gains. It allows one to scale down those projects which look too
risky in the first instance.
Conditional Such types of decisions can be altered if certain foreseen circumstances
arise. It is an “either / or” kind of decision with all options kept open. It prepares one to
react if the competition makes a new move or if the game plan changes radically. It
enables one to react quickly to the ever changing circumstances of competitive markets.
Delayed Such decisions are put on hold till the decision–makers feel that the time is
right. A go-ahead is given only when required elements are in place. It prevents one from
making a decision at the wrong time or before all the facts is known. It may, at times
result into forgoing of opportunities in the market that needs fast action.

The Manager as a Decision Maker

It is very safe to say that all managers are involved in decision making. The
decisions that they make are assumed to be rational. A rational decision is one that is
made systematically or consistently aimed at maximizing the outcome. The decision
maker knows his or her objectives and rationally makes the following assumptions:
i) The decision maker knows his or her objectives in the order of importance
ii) The problem to be solved is clear and unambiguous
iii) The possible alternatives and consequences are known
iv) The preferences are clear
v) There are no constraints in terms of time and cost
vi) The final choice will make maximize the attainment of the objective

31
SOURCE: Adapted from Howard M. Carlisle: Management Concept and Situation. Chicago, S.R.A. 1976.p. 131.

It has to be pointed out that most decisions that managers face do not fall into these
assumptions.
Figure 4.3: Structure of decision making

Decision Making Process

They may be seen as a set of steps that can be taken to resolve a problem when
a manager perceives a problem, the need for the resolution of the problem occurs. The
decision-making process is followed. This is as shown on table 4.1. The company here

32
has urgent need to improve communication with salesmen and wants to purchase
mobile handsets.

Table 4.1 Decision in the purchase of mobile handsets

The decision process here begins with the identification of a problem- salesmen
need mobile phones to improve communication with the customers and personnel at the
head office. A problem is the discrepancy between an existing and a desired state of
affairs. To zero in on this problem, the organization could have lost sales due to
communication problems. There could be declining sales, etc. To characterize
something as a problem, managers have to be aware of the implications and the
resources needed to take action. Step two in the decision process is the identification of
decision criteria. These are factors that are considered as being relevant for the decision

33
such as price, warranties, screen type, reliability, weight, etc. Weights have to be
assigned according to the importance attached to each criterion.
In developing alternatives in step 4, we have listed the viable or preferable
alternatives. We have identified six brands of mobile handsets available in the market –
Nokia, Siemens, Ericsson, Motorola, Philips and Samsung.
In step five, there was the analysis of the six alternatives. Each criterion was used
as identified in step 3. Here information obtained from the manufacturer/dealers were
used.
In step six, Motorola brand was chosen as the most viable alternative, all things
considered. The last step deals with implementation. This could mean informing the
purchasing department, conveying the decision to the salesmen or obtaining the
permission to incur expenditure from top management and the accounts department in
line with company policies and procedures.
It is necessary to evaluate the purchase made to determine if the problem had
been solved as expected. Has the problem been solved satisfactorily? If not, the
decision-making process may have to start again.
Classification of Decision
Decision making can be classified into three major groups
1. Decision making value certainty. It is assumed that there is a single-space,
complete and accurate knowledge of the consequence of each event. A decision
made with full knowledge of the occurrence of an event is said to be decision
under certainty. In this situation, the decision maker knows what the stated value
of the pay-off is expected to be. If, for instance, the value is 1.00 in making the
decision one has to select the alternative that gives the expected pay-off of 1.00.
Assuming that a service organization wishes to determine the cheapest way of
handling its security services and finds out that:
a) if it subcontracts security service, it would cost N7,000 per annum;
b) if it handles its own security by hiring 4 security men, it would cost
N10,000 per annum;
c) if it installs burglary proof and other security measures it would cost
N12,000 per annum.

34
In this situation, it is easy to select plan (a) since it entails the lowest cost
2. Decision making under uncertainty. The consequence of each choice cannot be
defined by a correspondent relationship even within a probabilistic framework.
3. Decision making under risk. It is assumed that accurate knowledge about the
probability distribution of the consequence of each alternative exists.
Stages in Decision Making
Every decision making process has some basic elements in order to be effective
i) The formulation of goal or goals
ii) Mental process to acquire knowledge on the situation
iii) Analysis to determine alternative course of action
iv) Choice procedure
v) Implementation

Figure 4.4 Elements of Decision Making

The formulation of goals: For one to make a decision, one must have goals that one
expects to achieve. The goals to be achieved may be determined by the organization
and could aim at minimizing cost or maximizing profit. In the case of the production
manager, the decision at that level could be to reduce rejects by 20% or increase
average output by 10%.
Acquire knowledge: A rational decision requires the maker to acquire a thorough
understanding of the problem in order to make an intelligent choice. This demands that
the decision maker saturates himself with facts about the situation. At this stage, he

35
seeks information from employees who have expert knowledge about the situation under
study. When vital decisions are to be made, “brain-storming” is encouraged in order to
avoid costly, hasty decisions. It is advisable to hear both from those who are interested
in the problem and those who are opposed to it. The step is likened to a situation where
a “car won’t start” in the morning. Why? What is the cause of the problem?
Analyse to determine alternatives: The essence of analysis at this stage is to
determine possible course of action – the search for alternatives. The number of
alternative ways of solving the problem that could be thought out depends on the effort
expended by the decision maker in the search. This is one of the crucial steps in rational
decision making. It involves the utilization of the vital information gathered through the
process of defining the problem. The decision maker could tap the brain of experts and
engage in creative logical reasoning. This will help to achieve the objective with cost
effectiveness in mind.
Decision: Decision is the selection of the course of action believed by the decision maker
to yield the best result under the circumstances. The final selection is influenced by the
decision maker’s past experience, his value judgment, and the logical process that has
been established and followed in the previous steps 1-3 above.
It has to be pointed out that the selected solution may not necessarily be the most
satisfactory solution but the most intelligent decision under the circumstance. This has
often been called satisficing. An entrepreneur may decide in the circumstance to select
the alternative that minimizes his risk or involves “minimum regret” or gives him optimum
result in the short-run.
It is important at this stage to ask four vital questions:
a) Did I consider all possible alternatives that bear on the question?
b) Does the selected alternative contribution to the realization of the intended
objective?
c) Will the decision lead to the attainment of the preferred solution?
d) Is this alternative capable of implementation?
Implementation: A decision process is not complete until it is implemented. The
essence of any decision is to secure action. If this stage is not properly carried out, the
entire process is a waste of time and resources. For some important decisions to be

36
implemented effectively, the decision maker has to seek and obtain the willing
cooperation of all involved. He has to “sell” the decision to them. Factors involved in
securing acceptance include effective communication, motivating the employees into
accepting the decision and pointing out the advantage to be achieved, effective control
of the process for the implementation of the decision and proper timing of events to aid
coordination.
Decision Making Styles
Different people have different approaches to decision making. A decision is
invariably influenced by a manager’s way of thinking. Some managers are averse to or
have very low tolerance for ambiguity whereas there are some of us with high tolerance
for ambiguity. This helps to classify different decision-making styles.
Using Robbins and De Cenzo, there are four decision making styles as in figure
4.6.
Figure 4.6: Decision Making Styles

SOURCE: S.P. Robin and D.A. De Cenzo, Supervivion Today N.J. Prentice Hall, 1998 p. 166.
(i) Directive style. People who use the directive style are believed to have low
tolerance for ambiguity; they have high efficiency in making decision and tend
to consider few alternatives in their decision making. They focus more on the
short-run than in the long-run. Basically, the directive style is characterized by
low tolerance for ambiguity and a rational way of thinking.
(ii) Analytical style. This is a decision-making style characterized by a high
tolerance for ambiguity and a rational way of thinking. People using this style
need more information to make a decision and consider more alternatives
than the directive style.

37
 (iii) Conceptual style is a decision making characterized by high tolerance for
ambiguity and initiative way of reasoning. They generally have very broad
outlook and consider many alternatives before they make decisions. They
focus on the long run and are very creative.
(iv) Behavioural style is a decision-making style characterized by a low tolerance
for ambiguity and an intuitive way of reasoning. They relate well with
subordinates and are interested in employee participation in decision making.
They have to carry people along and avoid conflict.

It is important that a manager uses different styles and appreciates the fact that different
people use different styles which does not make them less effective. It only means that it
may take longer time to make decisions as in the case of analytical style. All the styles
are useful in a work environment as they have moderating influence on one another.
Personal Characteristic of Decision Makers
There are many personal characteristics and traits that affect decision making.
According to Back and Wisdom, these characteristics include;
(i) Intelligence: Reasoning skills lead to better decision
(ii) Cautiousness Versus Impulsiveness: Overly impulsive decision makers tend
to make more mistakes and spend more time trying to cover up.
(iii) Risk taking: Overly cautious decision-makers tend not to complete the task
and fail to inspire confidence in their decisions.
Risk-aversive decision makers should be matched with risk-aversive roles,
(eg. 'safety programs). - Risk-takers should be placed in high risk occupations
(product design, creative positions).
(iv) Optimism versus pessimism: Reliance should be on ones own abilities rather
than beliefs, about fate: decision makers should not be overly optimistic or
pessimistic in most instance.

(v) Ego defensive: Too big an ego means a lack of objectivity.

(vi) Level of expectation: One with low expectation levels often accepts lesser
quality. Decisions Aspiratxofis should be matched with reality.

38
 (vii) Decisiveness: Self-confidence helps implement and "sell" decisions to
subordinates.
(viii) Creativity: Creativity helps generate alternatives moreso than actually
reaching a final decision.
These factors that are found in individuals could account for the differences in the
effectiveness of decisions made by managers. There are other behavioural factors
may affect decision making in an organisation. These factors include:
i. Expectations: A manager's decision may be affected by the expectations of
others for guidance. Instead of following rational approach one may rely on
peers, superiors or subordinates. First lines and middle managers are known
to have made bad decisions because the boss or superior expected a certain
decision. An employee may accept poor job from a contractor because of the
contractor's relationship with the boss or acquiesce when poor quality
material is supplied by a vendor. Due to peer [Link] expectation
employee may take a decision that is not to the best interest of i organization
or an employee. The desire to be seen as a "good guy" "gentleman" could
force one to make a poor decision.
ii. Emotion: Anger or depression may make one not to make a good decisic
When an employee is depressed, he may [Link] the total picture or [Link] at
options. Anger, revenge or even quick/hot temper may cloud a persor
reasoning and he makes poor decisions.
iii. Power and Politics: These factors may influence the decision-maker to tn
action that are defective or that benefits him or his department alone. Politics
may influence hiring, promotion. or the manner in which organization favours
are shared. Power as used here is the capacity or ability to influence other
either because of formal position or through other means of influence. One
can abuse one's power when making decisions thereby promoting injustice or
inequity.
iv. Individual bias: A manager who feels very strongly about an issue may n
consider alternatives without bias. An employee who hates drinking alcohol

39
 may be biased against another employee who is found drinking intoxicated at
work and may as a result impose stiff punishment against him.
v. Mismatch between a decision-maker and the decision: If a manager is a ri:
taker, or a risk avoider or a risk manager, a mismatch could result in a wrong
decision being made. This risk aversive decision makers should be match? –
with risk-aversive roles. As Baack and Wisdom pointed out, '"quality check
and balances" should be incorporated into all important decision-making
processes to make sure that these behavioural concerns do not disrupt to
overall functioning of the organization

Other Factors That Affect Decision-Making Process

There are many other factors that affect decision-making. These factors include:
i. The significance of the decision. In this process one considers tl number of
people to be affected by the decision. A lay-off policy th may affect 400
employees is a significant decision for mo companies. The amount of money
involved in a decision may mat the decision significant. For many companies a
decision to invest million may be significant but for some less than million
significant also. Generally, managers give more time, care and attention to
significant decisions than to insignificant decisions.
ii. Time pressure. Another factor that impacts on decision making is to" degree of
time pressure. Rush orders, deadlines set by others fc management could cause
rush decision. Thus one does not have adequate time to consider alternatives
properly. In hospital, many often are confronted with situations in which they must
decide fast in order to save lives. They may ignore some risks or fail to follow
procedures. Decisions that offer three or more equally attractive options are more
difficult to make than those that offer only two attractive alternatives. Executives
in small organisations make faster decisions than those in larger organizations.
iii. Factors in decision environment Factors in a decision environment such as the
degree of certainty, ox uncertainty, the level of risk involved, the conflicts to be
encountered, affect the decision maker end the quality of decisions made.

40
iv. Factors that have been mentioned before that affect the decision maker include
personal "attitude towards feelings, abilities and motives, and the personality of
the decision maker.

Group Decision Making

An organisation is not better than die people that make it up. The success or failure of
an organisation depends on the quality of its human resources- Efficient and effective
utilisation of these people to make use of their intellectual abilities, in parts helps the
growth of the organisation. There is a popular saying that "two heads are better than
one, even if they are 'coconut' heads. This illustrates the importance of participative
decision making-
One of the major problems encountered in retaining youiig university graduates
in many indigenous enterprises is the absence of participative decision making. The
entrepreneur is reluctant to involve the young graduates in areas they believe they
could contribute their best in the organisation. Thus only 20% of the graduating class
of the professional school of the University of Nigeria would elect to work for
indigenous enteiprises. Sixty-six percent of the graduates who left their employment
with small businessmen gave lack of participation as one of the key reasons why they
changed employment. Other key reasons include lack of future prospect, lack of
prestige and inability to use their expertise. - Employees like to be involved in
decisions that affect the organisation especially those that affect them directly.
Decisions are expect to be in a social environment. It is a situation [Link] each
participant contributes his ideas towards the realisation of a predetermined goal. No
idea is useless no matter how stupid it sounds, in many instances, what some people
call "stupid" or "crazy" ideas are those that disagree with their own. There is a popular
sayingjhatJ'where the people always agree, only one person is doing the thinking"
Group decision calls for varied views, some optimistic and some pessimistic.
In the final analysis, what determines whether a decision is to be mk an
individual or group is the type of decision to be made, and the importance the decision
to the immediate attainment of organisational objectives.

Committee Decision

41
 In modern organisation, committees are increasingly being used as effective
administrative tools. In large and small organisations, committees are used for a variety
of reasons. In large decentralized organisations, a committee is the device for
achieving coordination of activities and sharing information among the various
departments and divisions of a company.
A committee could be seen as a group of people assembled together to take
action on an administrative task. In some organisations there are committees for each
key functional area such as finance, production, sale, auditing, purchasing and
engineering. These are generally permanent committees. These, committees often
meet regularly once or twice a month to discuss general problems affecting their
operation. There are instances when committees are appointed to study and offer
solution to a specific organisational problem. They stop functioning as soon as their
assignment is completed. This is generally called an ad hoc committee. Committees
such as salary adjustment committee, tenders board committee, employee grievance
committee or question box committee could be ad hoc committees. They could also be
permanent committees. The government makes use of such committees in dealing with
specific assignments. In Imo state, the government appointed the University Planning
Committee to help plan the state university. Anambra slate appointed the Television
Planning Committee, whereas the federal government appointed the Revenue,
Allocation Committee. These are ad hoc committees which fail to exist as soon as their
functions are completed.

Selection of Committee Members

The effective use of committees in the solution of organisational problems
depends on the selection of the right people to serve in the committee. Most of the
criticisms often voiced in the use of a committee as an effective device in decision
making depend on the quality of people appointed to serve on them. Committees are
often seen as "a group of people who keep minutes and waste time and money."
Hudson, writing on this important issue, observed:
Equally sad and costly are the "good" people who are untrained to the rigours of
sound committee working - the people who debate on ideas, who lack a gift for

42
negotiation, the people who are spineless, irrational, hyper-sensitive and over emotional
people who are blindly devoted to an ideology, blindly loyal, or blindly combative
The selection of members of a committee should be based on qualification such -
is knowledge of" the subject matter "to De assigned to the committee., interests,
responsibility. availability and emotional maturity. The number of people to serve in a
committee is to be determined by the nature of the assignment. A large number is
sometimes very cumbersome to manage and makes it often difficult to agree on a
specific time and date for meetings.

Committee Chairman
The success or failure of a committee in most instances depends on the chairman. The
chairman is expected to be a mature, intelligent, skillful, versatile person who is capable
of accommodating varied opinions. A committee succeeds when the members believe
that the chairman is equal to the task'and is capable of leading the committee to arrive
at mature conclusions. A capable chairman is in a position to help reduce soma of the
major disadvantages associated with committees such as cost, idle debates, danger of
compromise and slow action.

Benefits of Committees
Almost all formal organisations have committees because it has been very useful as
one of the basic democratic ways of operation and the realisation that the concentration
of tasks in one individual does-not make for efficient and effective control. The following
are the basic advantages: -
(a) Make different viewpoints available. The interaction between members brings out
different viewpoints that could not have been considered or given due weight if the
decision was made by one person. Collective views make for thorough and
complete analysis. Thus it provides a forum whereby knowledge, experience and
abilities of several experts are brought together.

(b) Better coordination. Committee decision helps to promote belter • coordination in the
company. In any type of organisation there is often constant need for coordination in
order for everyone to pull in the same direction. The coordination of sales

43
 department with production, purchases and advertising departments brought about
by their being in the same committee will help, to achieve optimum results.

(c) Committee as advisers. A committee could be advisory in nature. This type of

committee is created to advise, counsel and make recommendations to the
managing director to help him make an intelligent decision. An administrative
commission of inquiry is a typical example of a committee .set up to investigate, 2nd
collect information required for effective action.

(d) Providing a means of training youn« executives. One of the effective means of
developing executives is to assign them rn [Link] to understand how team
work operates and to appreciate difficulties encountered in different parts as
articulated by department representatives who are committee members.

(e) Motivation of members. Employees who are members of committees are motivated
by the feeling of participation. It is easy to "sell" a new wage rate to labour union
members if a committee on wages in which they are well represented comes up with
a new wage rate. The decision is easily accepted because they see the
reasonableness behind the decision to which they are a pan

(f) Involvement of different interest groups. Committee makes it possible for different
interest groups to participate in decision making. An accident preventive committee
of grievance committee would make it possible for management and employees or
labour union representatives to meet on the basis of equality to determine the best
way to solve problems of mutual interest. Decision arrived at is usually acceptable to
both sides since each side has an input.

(g) Helps management to avoid action or blur responsibility. Management in an

organisation could through the use of a committee avoid the antagonism of
employees. Management may like to avoid decision on a very sensitive issue that
may create precedence-or have far reaching consequences. By judiciously selecting
people who- could 'be' bogged down in interminable debate or indecision on the
matter to serve on a committee, a decision could be delayed indefinitely. A
committee could be created to handle a disciplinary issue especially when it involves

44
 a key employee who has a large following among other employees. The committee
could recommend dismissal or other stiff punishment which management is happy to
implement without incurring public opprobrium. In a murder case a jury could be
used, in armed burglary cases., special armed robbery tribunal is used in Nigeria.

(h) Avoiding consolidating authority. In an organisation where S decision is made by a.

committee, no executive becomes indispensable in the organisation. Authority is not
consolidated in one person who could as a result become arrogant and insensitive
to employee feelings and aspiration and may even frustrate other executives,
instead, authority aria responsibility are shared among the various committees in the
organisation
Limitation of Committees
Some of the major disadvantages of committee as follows:
(a) Cost. Committees are costly in terms of time and money; participants spend
many man hours on committee assignments sometimes at the neglect of their
duties in the section. It is not unusual for committee members to disagree
fundamentally on an issue, which means cost.
(b) Delay in making Decision. Closely allied to the time and money involved in
committee work is the fact that decisions that are required promptly i cannot be
assigned to a committee. Thus, a committee is seen by critics as j a group that
"takes minutes and wastes time."

(c) Decisions are often a compromise. One of the criticism of a committee is that their
decisions are often a compromise bordering on indecision. Committees strive for
unanimous decision and, in some instances, the only r way to achieve this is by
compromise.

(d) Influence of superior. In a situation where the chief executive is a member of the
committee members who are his subordinates only propose ideas: they believe he
likes. The decision becomes the decision of the "boss who they cannot afford to
disagree with. In some instances there is an "overtone" which suggests to
members that he would like them to "go': along." What he really, demands from
them is support
45
 (e) Lack of accountability. One of the major disadvantages of a committee decision is
that many committees can only recommend or advise. To : advise is not to decide;
the decision lies with the chief executive who is accountable for the outcome of the
decision. In a committee, decision- no I one is held accountable or responsible for
the decision because of the nature of the impersonality that characterises all
committees. It has to be 1 observed here that depending on the' nature and
authority, a committee may serve in a service, advisory, co-ordinating information
or final - decision making capacity

Use of Committees in Nigerian Organisations

Committees, standing and ad hoc, are extensively used in Nigerian organisations. ' All
organisations with more than 50 employees have one form of committee or the other. in
a study of Nigerian establishments, 78% of the organisations: reported the existence of
one committee or the other with varying degrees of I authority and life span.
Interestingly, 58% of the respondents in industry, commerce and service organisations
and 28% of the respondents in the public service advocated the use of more
committees. Some managers, 68% serve more than four committees at a time. Only 2%
serve in only one committee. The most popular committee in Nigerian organisations are
given on table 4.1 below.

Table 4.1: Committees in Nigerian Organisations

Functional Area Number of Companies with the Percentages of Total

Committee Frequency of Mention
General management 204 85
Marketing 96 40
Production labour and 156 65
personnel
84 35
R & D New products
132 55
Public relation
108 45
Others
132 55
60 25

46
 It is interesting to observe that a large percentage (55%) gave labour and personnel
committees. It is equally revealing to note that 60% of the respondents believe that
committees are very efficient and only 28% believe that they are not efficient. The
summary is on table 4.2

Table 4.2: Efficiency of Committees in Nigerian Organisations

Degree of Efficiency No of Respondents Percentage

Very efficient 48 20
Efficient 96 40
Not efficient 72 30
No opinion 24 10

A cursory analysis of respondents by occupation shows that 45% of those in the

public service reported that committees were inefficient as a device for decision
making. The reasons given range from the inability of committees to implement their
decisions, committees serving as "rubber stamp'" for management, to the
entrenchment of highly centralised structures that cannot accommodate the decision of
committees. It is true that the potential benefits of group participation in decision
making are selection achieved in many instances. Nevertheless, this should not be
seen as a sufficient reason to underestimate the importance of committee decision.
The quality of decision making by committee is a function of the environment for
decision, the quality of leadership and the calibre of people in the committee. •"

Creativity in Decision Making

A good committee could be very creative. A creative committee is one that comes up
with new ideas, new approaches, new ways of doing old things, doing a common
thing, in an uncommon way, a new product, or new application or a combination of an
existing knowledge. Creativity is one of the highly sought after talents in management.
A creative manager seeks original" solutions to existing problems. Creativity is
necessary in business for the organisation is constantly in search of an imaginative
solution to problems posed- by its competitors and the total environment. Many

47
organisations have in their midst individuals of great inventiveness, and the unusual
ability to create new ideas. It is the realisation that soma people are more creative
than others that committees are often used in the solution of some vital organisational
problems.
An ideal environment that is supportive of and promotes creative thinking is
necessary for individuals to challenge their imagination. The recruitment' of people
who are creative is a necessary pre-condition in encouraging creativity in an
organisation.

Steps in Creative Thinking

Studies have shown that certain steps are necessary in creative thinking. These
can be summarised as follows:
(I) Problem identification
(2) Investigation
(3) Incubating
(4) Illumination
(5) Verification.
Problem Identification: The first step in creative thinking is the perception that a
problem exists. This could be "in production, sales, customer relations or advertising.
The discovery of this problem launches the creative individual immediately to seek for
suitable solution. No creative work has been achieved without dissatisfaction with the
existing situation which forces the "genius" to seek new ways.

Investigation: Investigation is the second step in creative thinking. In this step the
individual examines the problem and analyses old ways of performing the task. This
could call for intensive research into existing knowledge on the subject: There could be
an exploration into all the possible avenues that will lead to the discovery of such things
as the interrelationships and associations. This step involves l he accumulation of facts
and figures that bear on the subject. A thorough examination which helps the individual
to saturate himself with facts -end figures on the problem will help to develop a creative
solution.

48
 incubation: This is a very important stage in the process. Here the entire mind reflects
on the problem. Sometimes a creative solution is not easily available and the individual
leaves the subject for more reflection. Creative thinking is nor a choice of alternatives
as in decision making. It is a process of mulling the problem over. It may involve the
use of the unconscious mind. The creative person is at this time in a special state of
mental "stress" and detaches himself from things around him. He could go around in
circles with a real solution arising and he could at this stage leave the problems for a
while to avoid mental fatigue. This period is characterized by frustration and
helplessness. This is often referred to as the gestation period. Rest is recommended.
The rest period would refresh the mind.

Illumination: This is the crucial stage. The creative thinker could now shout Eureke" (I
have found it) while resting or sitting like Archimedes in his bath. It is important to write
down the solution as soon as it comes to mind.

Verification: This is a period of refinement. The first solution may not necessarily be
the ideal solution. It could require changes arrived at by a trial- and-error process. In all
inventions-whether it is the invention of "Ogbunigwe" during the Nigerian-Biafran conflict
or the invention of the transmitter by Darnian Anyanwu of Imo State, the period of
verification is an important stage. All singers, entertainers, public relations officers etc.
undergo the process of experimentation, modification and improvement for
effectiveness. When the final polish is put to it, the ideal product or system emerges. It
is important for management to encourage creative ideas by financial rewards, job title,
recognition or citation.

Brainstorming Session
Grouping approach to creative thinking is referred to as brainstorming. Brainstorming is
often associated with Alex F. Osbom"5 who saw it as an effective way of generating
ideas for an advertising agency. Today, brainstorming is widely used and encouraged.
A brainstorming session requires an ideal environment that promotes a free flow of
ideas. In a brainstorming session, the problem to be solved is stated to the participants,
and they are encouraged to come up with new ideas no matter how unconventional they
might be. People are often opposed to ''unconventional:';', ideas.
49
 Each of us pays convincing lip service to his willingness – even eagerness - to
consider new thoughts and ideas/people use remarkable ingenuity to make clear by
tone, nonverbal slights, turning out, supposedly helpful criticisms, false issues and
outright negativity, that they are not only against ideas and change, but also against
those who propose them: We humans habitually try to protect ourselves even from '. our
own new ideas

An ideal brainstorming session highlights the importance of new-ideas. The rules for a
successful brainstorming session include:

(1) Criticism of ideas must be withheld until after the session:

(2) The group must welcome freewheeling and encourage the wildest of
ideas;
(3) Developing a greater quality of ideas increase the likelihood of having one
really useful idea;
(4) Each member of the group should improve and relate his own l ideas to the
ideas of others
Some of the major criticisms -of brainstorming are that it is time, consuming. Many man-
hours are spent in generating ideas and also in crystallizing^' them. It also produces
many superficial ideas.
Nevertheless, its usefulness in creative thinking can hardly be overstated. 1 In
many organisations it is indispensable m determining the name of a new^ product and
determining a new advertising slogan. Political parties in Nigeria use-
it very. extensively.

Quantitative Methods in Decision Making

The use of quantitative methods as aid in decision making is well recognised in' large
organisation in developing countries, and to a lesser extent in small industries. One of
the major reasons for this is the limited education of the owners of small businesses.
With increased education and the separation of owner- manager, these techniques will
be increasingly found useful by small businessmen.

Operations Research (OR)

50
 The mathematical techniques used as aid to decision making are often called
operations research. Churchman et al defined operations research as:
An application of the scientific method to- problems arising in the
separation of a system which may ^represented by means of a mathematical
model and the solving of these problems by resolving the equations representing
the system14.
Operations research has gained wide acceptance because of its use in modern high
speed electronic computers. Basically, operations Research is the applicant scientific
method in the solution of business problem. OR is applied in a variety business
problems, which include:

(1) Productive scheduling

(2) New product development
(3) Long-range planning
(4) Warehouse location selection
(5) Retail outlet selection
(6) Product mix selection
(7) Air and highway traffic control –

(8) (.8) Portfolio management.

The use of OR entails the building-of models called equations which represent the
system.
Linear Programming
Linear programming is a relatively new mathematical technique in situations requiring
the optimum allocation of resources-money, capital equipment, raw material and
personnel. It is very useful in production management because allocation problems of
great complexity involving a large number of variables can easily be solved through
linear programming techniques. If the Nigerian Bottling Company wishes to determine
the best cost method of distributing its products from its four bottling plants to a number
of warehouses, located all over Nigeria, linear programming technique will be
employed.

Queuing Theory

51
 Queuing theory ^is often called waiting line theory. This model is used in
determining the optimal utilisation of a facility involving intermittent service. In the use of
the queuing theory, we deal with a situation in which there is an input that arrives at a
facility for processing or service. The time between the arrivals of the individual inputs at
the service facility is generally random. This is true of cars arriving at toll collection points
along the Lagos-Ibadan Expressway, people arriving at a bank cinema hall or football
gate. The same is true of hotels, beauty salons, shopping centres and supermarkets or
departmental stores. There are costs involved in waiting. To reduce the waiting line in a
supermarket, for example, entails additional checkout counters or increase in service
facility. This involved cost- also in the purchase of the required physical facilities and
recruitment of additional labour. For a restaurant, more labour, more seating facilities
and more material will be needed to reduce the waiting line. The essence-of queuing
theory is to determine the optimum size of the service facility to reduce waiting line.
Many production problems are associated with the theory of wailing line.
"In this case we have men, machines that need service at random intervals." The
queuing theory is used here to forecast the probable length of waiting line and the
probable delay of waiting line. It addresses problems such as:
(a) How long should a conveyor belt be between two stations on an assembly
line?
(b) How many men are needed to serve a tool crib?
(c) How many automatic machines should one man operate?
The inability of many service establishments-to make use of the queuing theory
technique is one of the major causes of frustration-of their customers. A visit to. one of
the commercial banks in Nigeria highlights the importance of this theory.' There is a
need for management to determine the number of depositors who will stand in a line
for service at a bank cashier's window.

Probability Theory
Nearly all business decisions are made under conditions of uncertainty. The
executive is expected to-select a- course- of action from all available courses of action

52
 open to him. The decision to select one alternative in preference to other alternatives
depends on many factors. One of these is that various possible events will occur, and
the consequence that will result if certain events do occur. It is not possible to imagine
all the possible outcomes of an action without decomposing the problem and figuring
out the implication of each set of factors. A block moulder must consider the cost of
adding a new line of decorative or "fancy" block. He will, for examples-calculate the
cost of the new mould, cost per unit produced, number of units that can be sold and the
sales revenue that can be generated. All these involve different degrees of uncertainty.
The essence of probability theory is to determine the degree of risk involved in a
decision.

Conclusion
Decision making is very important in all organisations. All managers make decisions
and they spend a great deal of time making them.
A manager is evaluated and rewarded on the basis of the number and importance of
decisions he or she makes. Managers are often reluctant to make decisions because of
the stress and conflicts involved Decision making is often poorly done for a number of
reasons including distraction, information about risk and stereotyping. The quality of a
decision is measured by the proper problem identification and if the solution matched the
problem, management commitment, the subordinate acceptance of the decision by .
ensuring its implementation, solution "purity/" having lowest possible negative impact,
optimal use of resources and lime. Research has shown that many managers do not
have sufficient lime, energy, money or brainpower to consider all alternatives and have
to work within their limitations to achieve possible outcome: -in •man-y instances (the
manager is satisfying (solution that is good enough) instead of looking for optimum
result.
Revision Questions
1. Discus the concept of decision making in business.
2. Discuss the following:
(a) Decision making under certainty
(b) Decision making under risk

53
 (c) Decision making under uncertainty
(d) Heuristic decision.
3. What are the essential elements for an effective decision making?
4. What are the advantages and limitations of group decision?
5. Would you encourage more or less decisions by committee in your orgariisation?
Why?
6. "The chairman of a committee is a head among equals." Do you agree? Why?
7. What is creative decision making? Show how this could be encouraged in a Nigeria?!
organisation.
3. Distinguish between brainstorming session and creative decision making. P.
Discuss some of the quantitative methods in decision making.
10. Discuss the factors that affect decision making in Nigerian organisations.
11. Describe the different decision making styles that you know.
12. How can personal characteristic affect decision making?

Notes

1. Howard M. Carlisle: Management Concept and Situations. Chicago.. S. R. A.

1976. p. 131.
2. N. Mcx Agnew and J.L. Brown: Bounded Rationality: Fallible Decisions in
Unbounded Decision Space Behavioural Science. July1986Pp. 148-61.
3. B.M. Stow "The Escalation of Commitment to a Course of Action. Academy of
Management. Review Oct. 1981 pp. 577-87.
4. Elwood S. Buffa. Modem Production Management. New York: John Wiley
and Sons, 1973, p. 20.
5. Charles* S. Wilson and Marcus Alexis, "Basic Frame Works for Decisions."
Journal of the Academy of Management. August 1962, pp. 150-164.
6. S. P. Robbins ana D.A. De Cenzo: Supervision Today. N. J. Prentice Hall,
1998 Pp.166.
I. D. Baack and B -L Wisdom, Organisation at Behaviour: Creating Quality and Value
i?i The Workplace, Houston, Tx. DAME Publications, inc. 1995.
8. W.F. G:ueck: Business Policy: Strategy Formation and Management
54
 Action 1976 p. 183. ^
9.. W.F. Glueck op. cit. p. 259.
10. Cyril L. Hudson. Business Organisation and Operation. London: Staples Press,
1977 p.140.
II. Fred Luihans, Organisational Behaviour. New York: Mc Graw-Hill Book Company.
1977 p. 371.
12. Alex F. Osbom. Applied Imagination^ New York: Charles Scribner's
Sons, 1953, p 2S4. •• .
13. George M. Rince,[Link].N. Y. Baspar and Bow, 1970,p.9-
] 4. C. West Churchman et al. Introduction to Operations Research N. Y. ' John Wiley
and Sons,-Inc., 1957, p. 18r

ORGANISING FUNCTION
Designing an Organization
Every organization is made up of human and physical resources. These
resources are brought together in order to accomplish a predetermined goal. In order to
accomplish these objectives, tasks must be identified, the tools and technology required
must be provided and a structure of relationships must be identified. It is the function of
management to determine the best structure that will optimize the utilization of
resources. Management organizes these resources. This organisation is a means of

55
achieving the best result from concerted effort. Organisation deals with people and their
relationship in an enterprise. It is the organisation that determines the type of people
required and their relationship. Thus, the type of personnel and structure required in a
hospital is different from the personnel and structures required in a weaving enterprise or
a university. Organizing is a process of creating an organization’s structure to achieve
objectives.

Meaning of Organisation
An organisation can be seen as an entry. This is true of all business enterprises,
churches, hospitals or clubs. It can be seen as a process of coordinating individual
efforts to accomplish a common objective. An organisation is a group of people
bound together to provide unity of action for the achievement of a predetermined
objectives. All management theorists – Fayol, Foliet, etc recognize this important
management function. Organisation is very fundamental to human nature. Man is a
social animal and shares relationship with his neighbours. The subject of organisation is
central to sociology, psychology and even anthropology.
Purposes of Organising
There are many reasons why managers undertake the process of organizing;
i. to divide the work to be done into specific and identifiable jobs and departments
ii. assign tasks and responsibilities associated with individual job
iii. coordinates diverse organizational tasks
iv. cluster jobs into units
v. establish relationships among individuals, groups and departments
vi. allocate and deploys organizational resources
vii. establish formal lines of authority

Kinds of Organisation
Organisations can be classified into two broad headings such as (a) formal
and informal organisation

Formal and Informal Organisations

The latter is human interaction that occurs simultaneously and naturally without
overt influence. Formal organisation can be seen as a direct opposite of informal
organisation. It is a planned pattern of group behaviour designed to achieve an objective.
Most relationships found in many business enterprises are formal. The reasons
for formal organisations are;
56
 1. To establish efficient and logical patterns of interrelationships among members of
the group
2. To secure advantages of specialization or division of labour whereby the optimum
utilization of talents can be realized
3. To coordinate activities of the component parts in order to facilitate the realization
of the goals of the organisation.

In Nigeria, the problem of formal organisation is not to acute because of the

nature of Nigerian business. As an organization grows, the component parts become
complex, the technology changes and requires special expertise and consequently,
more attention. Small enterprises do not require the same magnitude of tasks as large
ones and are therefore easier to design.
Organisation Charts
An organizational chart is a visual device that shows the various departments and
how they relate to one another. The organisation charts helps the employees, the board
of directors and stakeholders to see at a glance, the division of responsibility and lines of
authority. One of the major advantages of an organisation chart is that it helps in
studying how to modify or improve the relationships and areas of responsibilities within
the organizational structure. An organisation can operate without a formal, drawn
organisation chart, but the presence of the chart gives an evidence of a thoughtful
planned structure. The chart does in no way indicate the existence of a workable
structure. Nevertheless, it shows the existence of certain positions identified by boxes
and line of authority shown by solid straight line connections. Fig 5.1 shows an example
of an organisation chart.

Figure 5.1: Organisation Chart

57
Organisation Structure
Sound organisation structure-: involves dividing activities into departments, divisions,
units and sub-units, defining relationships between the heads and members that make
up the units. A good structure
a) identifies the operating departments (sales department, production department
and finance department).
b) isolates the service department (personnel, research),
c) places emphasis on balancing the-structure.
d) shows the role of committees in the organisation.
One of the major problems confronting, .management is to decide the organisational
structure to be adopted. Important questions relating to duties and role of each
department and line executive have to be clearly defined. A decision has to be made
whether the organisation is to be decentralised or centralised and the type of staff
required for each task. As Simon succinctly summarised it, the important features of an
organisation to be designed include: division into sections and units, number of levels,
locations of decision making authority, distribution of and access to information,
physical layout of building, type of people recruited, what behaviours are rewarded and
so on.
In the process of designing an organisation, managers invent, develop and analyse
alternative forms for combining this element.
A good organisational design, is one that leads to the attainment of organisational
objectives. A good organisational design is not one that is fixed and will never require a

58
change. The system is subjected to change when the environment in which it operates
changes or when the company is expanding its operations or changing its objectives or
during the process of re-organisation. A good organisation is judged by its economic
performance, ability to survive in a dynamic environment and the growth and
satisfaction of the members-

Forms of Organisation
Line Organisation: In a typical line organisation, authority flows in a straight line
from the board of directors to the managing director and to lower management levels.
Every line executive has identified responsibilities and authority assigned to him and
has the supporting staff to execute the- functions. A manager with line authority is
answerable for the performance of his subordinates. Those employees with line
function are responsible for the immediate attainment of organisation's objective. The
flow of authority and responsibility is usually straight or direct and accountability is
easily established.

The Advantages of Line Organisation

There are three basic advantages of line organisation:
1) This structure is simple and easily understandable by all; accountability is easily
established. Conflict of authority is reduced. Conflict of authority is reduced to a
minimum.
2) It lends itself to quick decision -making. Decision making is vested in one person
who is in charge of the department.
3) Expenses related to overhead are reduced to a minimum as the role of executive
specialists is eliminated."

Line and Staff Organisation: This form of structure resembles the line structure only
that specialists are included in the organisational arrangements. Decisions are made
by line executives with the advice of staff executive. Staff executives are experts in
their fields - accountants, lawyers, personnel specialists, engineers etc. They advise -
the line executives who are directly responsible for the immediate attainment of the
organisational goals. Figure 5.2 shows the line and staff structure.

Figure 5.2 Line and Staff Organisation

59
 In this chart, the solid lines represent the flow of authority and dashed or broken
lines indicate a staff or advisory relationship.
The advertising manager can advice salesmen but he has no direct control.
over them. Authority relationships are discussed in full below.
Line and staff structure is best used when the organisation is relatively
large and serving a big market

Line Authority: As pointed out, Line Authority connotes "command" relationship. This
is the authority that makes one expect obedience from subordinates. Line authority has
been described as the chain of command as it- flows from the stockholders to the
board of directors, to the managing director all : the way to the operative employees. As
Fox observed, "line positions in ah- organisation are those concerned directly with the
creation and distribution of salable utilities or with the management of such actively."3

Staff Authority: This position is advisory in nature. Generally, staff executives are
specialists who study a problem, identify the alternative and make recommendations to
the chief executive for decision. He advises, and to advise is not to decide - only the
line executive is vested with that authority unless this power is delegated to him.
Functional Authority: This process allows a staff executive (engineers, lawyers,
accountants and advertising managers) to make decisions and implement them within
clearly defined, guidelines. This process reduces the work load of line executive by
taking advantage of the expertise of the staff executive. The staff authority aims at
supplementing the activities of line authority. This process helps to reduce the usual
conflict between line and staff executive.

60
 It should be observed that line authority is the back-bone of hierarchy: staff and
functional authority only supplement the line. In Nigeria, especially in small and medium
organisations, a person serves as line, staff and functional personnel at the same time.
A personnel executive advises the production manager on personnel matters,
supervises his own department and sets out policy guidelines on personnel matters.

Table 5,1: Summary of Line, Staff and Functional Authority

Line Authority
Advantages Disadvantages
1. Maintains simplicity 1. Neglects specialists in planning
2. Makes clear division of authority 2. Overworks key men

3. Encourages speedy action. 3. Depends on retention of a few key

men.

Staff Authority
1. Enables specialists to give expert advise. [Link] organisation if functions
are not clear
2. Frees'-the-H'neexecutive of detailed analysis. 2. Reduces power of experts to place
recommendations into action

3. Affords young specialists a means [Link] towards centralisation of

training organisation organisation

Functional Authority
1. Relieves line executives of routine. 1. Makes relationships more complex
specialised decisions

2. Provides framework for applying expect 2. Makes limits of authority of each

knowledge specialist a difficult coordination
problem

3. Relieves pressure of need 3. Tends toward centralisation of for

large numbers of well rounded executives. Organisation6

Authority and Responsibility

Authority as used in the text is the right to act c® decide. It describes the relationship
between and among people or groups. A person has authority if he has the right to
command and expect obedience from the subordinate.

61
 No organisation could survive if authority had not been vested in some people. In
fact, an organisation is nothing but a structure of authority relationships.' .In business
organisation, authority Sows from the top downward. In designing an organisation, the
authority relationship-'is clearly defined It is the responsibility of those in whom
authority is vested to coordinate the activities of the organisation in order to accomplish
organisational goals.
Organisational authority is vested in the positron not on individuals. The authority
is given to an employee because he needs, the degree of authority in order to achieve
a given level of productivity or sales. When the individual resigns, the authority is
inherited by another employee who occupies the position. In this case we speak of the
authority of the manager, the powers of the president. or the governor.

Power and Influence

At this juncture, it is necessary to distinguish-between power and influence in order to
contrast them with authority. Power is the ability an individual has to compel another to
do something against his will despite an}' resistance, A man who holds a businessman
at gunpoint that the businessman should surrender his goods has power to take
possession of the goods. Power is evident in a situation, when ‘A’ has control over ‘B’
or can force ‘B’ to do something he does not want to do despite resistance.
Influence, unlike authority, is not vested in an individual. A has influence over B if
he can modify or affect B's behaviour. Thus, influence is a. very moderate form of
power. A person influences his friend because of the rapport they have established
over the year. One who influences uses-persuasion 'and suggestion to achieve a
desired end Influence takes place in all interpersonal relationships.
Unlike power which implies a fear of punishment, harm or loss of status, influence does
not.
In an organisation the interpersonal relationship sometimes dictates the use of
authority, power or influence. A supervision has power -over an employee because he
has authority to use reward or punishment A supervisor can also influence an
employee because he has authority to use reward or punishment A supervisor can also
influence an employee to accept a position. Authority is a source of influence and a
potential source of power. A physician may persuade a patient to submit himself to
operation. He has in this instance knowledge-based influence just as personal
characteristics such as self-confidence, honesty, appearance, or dynamism can give
one ch2iisma-based influence. In Nigeria, a | person's appearance influences the
receptionist to decide whether the visitor why j see 3r'manager without waiting or not.

62
So it-is in service establishments such as the post-office, banks, and even restaurants
and hotels.

Context of Power in Organisations

The have been many research efforts not only to define power but also to know :
sources of power in organisations. In industrial organisations, power is seen as the
capacity to influence the behaviour of others at work, either formally or informally. Two
theories of power in organisations are considered here.

Zero Sum Game: This model believes-that there is. a fixed amount of power in any
organisation. Consequently, the model believes that a person can only gain power by
taking it from someone else in the organisation. (One looses, one gains.) This may be
true in politics but not necessarily in industrial organisation for there are many ways of
gaining power.

Balloon Concept: This concept believes that the amount of power in the organisation
fluctuates. One can create power, without infringing on another's power. Each has an
element of truth.
Source of Power
Different scholars have the following as the sources of power

Table 53: Source of Power in Organisations

(1) FRENCH AND RAVEN (2) J.D. THOMPSON
Legitimate Boundary spanning
Coercive (control over punishments) Translate uncertainty
Reward Go between
Referent
Expert
(3) Fred E. FIEDLER8 (4) ASTON GROUP
Position power (control over destiny) Closeness to production

(5) OTHERS Control over policy making.

Control over money Control over status symbols
Source: Donald Baack and Barry Wisdom. Organisational Bahaviour DAME 1995 p.
389.

63
Legitimate Power: This power originates from the organisation and comes from the
Rank one occupies in the organisation. Because of their positions, production
managers, vice chancellors, priest/pastors, army captains and Bank managers, expect
their subordinates to carry out their instructions in the organisation. They have the right
to direct the activities of others using formal sanctions.
Coercive Power: Leaders have the power to punish subordinates to obtain 3
compliance. Managers have the power to suspend, demote, or re-assign employees
under them. The fear of negative consequences shape behaviour.
Reward Power: Reward power is the power to control formal and informal! rewards
such as pay increases, promotions, recognition, interesting work assignments (juicy
postings), good work shifts etc. The power to disseminate!
organisational favour.

Expert Power: Power of those who have control over information, special skills or
knowledge to achieve organisational goals. Such people have the ability to influence
others when the special talents or competencies are required. They as a result have
expert power over the less initiated colleagues in the company.

Referent Power: Where people are admired and are identified within the! organisation,
they have referent power. People with special charisma, or who have special resource or
personal traits, special communication skills (orators have referent power

Boundary Spanning: This is the power which a person has because of h initiative or
vision to discover advantages for the organisation and help them to optimise it. An
employee who facilitates the relationship between groups by acting as a "go between"
has power as a man in the middle. The employee who acts as a link between the host
community and the company has this type of power.
Position Power: This is the power possessed by a person who controls destiny of
others. The person who ultimately decides whether an employee with be discharged,
promoted, transferred, etc., may have power over the people to be affected. One
placed in a position to decide on transfers to favourable (upland) or unfavourable
(riverine) in the case of nurses may find considerable power to be part of the position

Policymaking Position: People who are lucky to be in policy making position as in

politics or civil service, have power. The special assistant to the preside the wife of the

64
governor, or even the driver in government house has power due to the informal
access to policy making. Power is abused when one starts to personalise it.

Trust: Research has shown that once a leader is trusted, he has power based on the
trust. The factors that make up the divisions of trust include:

Competence - technical and interpersonal knowledge and skills

Integrity- - honesty and truthfulness. '
Consistency -'reliability, predictability and good judgement
Loyalty - willingness to protect a person physically and emotionally
Openness - willingness to share ideas and information freely.
Consistently, effective leaders have power, and also have credibility. In Nigeria, power,
influence and leadership, go together in organisations. Personal qualities such as
openness, being-fair, maintaining confidence, telling the truth always, and speaking
one's feeling are traits that enhance influence and power and promote ' trust.

Sources of Authority
As pointed out, organisational authority is a right to act, to punish and to reward. A
person who possesses this authority usually has equal responsibility to match.
Authority is vested in a position and the position becomes the source of authority for
whoever steps into it. .

Institutional Source
It is often said that authority is derived from the ownership of property. This is the case
because, in Nigeria, the constitution permits the ownership of private property and its
management. Once an entrepreneur has been given a license to operate a business, he
has authority from the country to own and manage the enterprise. This authority he can
delegate to his agents or subordinates as he deems fit. Any person who accepts
employment with the organisation is subject to the authority of the owner or his
representative.
In organisations, people often refer to responsibility being delegated instead of
authority because authority and responsibility go hand-in-glove. One cannot operate
without the other. An entrepreneur cannot operate his business without authority to use
labour. In the use of this labour he owes them a -reasonable wage and he has authority
to enforce compliance for the rules- and regulations that govern interpersonal
relationships. The origin of authority, whether in economic institution or in social

65
institution where private property is non-existence may be traced to the elements of
basic group behaviour. As these elements change, the institution must change.12
This authority transmitted from the basic social institution to entrepreneurs and
managers is aptly called formal authority. This-formal authority so. granted could be
called institutional or societal.

Subordinate – Acceptance Source

The acceptance of authority theory postulates that the source of managerial authority
emanates from the subordinate acceptance of the authority that the manger holds over
them. One of the great authorities in the field of management. Chester L Barnard, made
the following observation or on the acceptance theory: If a directive communication is
accepted by one to v/horn it is addressed its authority for him is confirmed or establish.
His admitted as the basis of action. Disobedience of such as communication is a -denial
of its authority for him. Therefore, under this definition the decision as to whether an
order has authority or not lies with-person to whom, it is addressed, and does not reside
in “person of authority” or those who issue this orders11.
The acceptance theory places great emphasis on subordinate acceptance of the
authority of the superior. Generally, a subordinate will recognise and accept Ms
supervisor's authority if he perceives that his -directives are in keeping with
organisational purposes and will lead to the attainment of his own objectives. The
authority an individual-has to effect compliance could be reinforced by other means such
as persuasion, coercion, use of power, economic or special sanctions. A manager does
not depend on acceptance for the execution of his functions; if he did, there would be
conflicts and organisational objectives would suffer.
The basic error of the acceptance theorists consists not only in conceiving
authority without sanctions but also in overlooking the powerful effect of social
institutions, which confer powers that supersede individual desires.
The effectiveness of one’s authority could-be influenced by acceptance but may
not necessarily be nullified by the acceptance agent’s attitude. Acceptance theory
appears to place emphasis on leadership which. deals with the ability to influence others
behaviour in order to achieve a given objective. Management has authority and if this
authority is not fully accepted by subordinates, it could use power or sanctions to secure
compliance. The acceptance of employment in an organisation Implies the acceptance
of authority establishment
The acceptance of authority is enhanced by the personal qualities of the j
manager, such as technical competence, supportive behaviour and dynamism. These

66
qualities of leadership are fundamental to effectiveness of management | and not
necessarily in the source of authority

Limits of Authority
Formal authority is very fundamental to the attainment of organizational objectives. All
managers who occupy positions of responsibility are vested with it. Effective utilisation of
authority promotes organisational harmony and consequently the realisation of intended
goals. Certain factors limit the amount of authority a particular executive possesses.
These factors include one's level in the organisation, superior authority and subordinate
acceptance
Level m the Organisation "
As discussed previously, authority is delegated from top to bottom. The higher a
manager is within the organisational hierarchy, the more authority he possesses.
The managing director has more authority than his deputy and the deputy posseses more
authority than the managers and supervisors. The higher the functions a manager has,
the more the authority, that is vested in him for the effective execution of these functions
Superior Authority
The authority an executive has is influenced by the authority of those above him. A
superior authority influences the authority delegated to lower executives in any
organisation: The production manager's authority to produce is influenced by the
organisation's established policies and procedures. He cannot recruit employees. in order
to achieve production quota without following the guidelines for recruitments- He could
also be asked by a superior authority to stop production until certain conditions are
fulfilled.
Closely allied to the influence of the superior authority that limits his (authority is
overlapping authority. Where authority overlaps, authority is held in j abeyance until it is
resolved. Situations arise in an organisation where two j executives engage in a dispute
as to who has the authority to approve expenditure, to authorise the purchase of
equipment or to hire employees. A labour union on strike has the ability to frustrate the
efforts of management to function effectively. It has to be noted that authority is not
cancelled by power conflict between executive, management or labour unions, or
government and entrepreneurs. When conflicts arise, authority is held in abeyance until
the conflict is resolved.
A good executive does not have to punish all the time but when the need arises, it
is reassuring to know that one could exact compliance. Four conditions must be met
before a message is accepted as authoritative
67
 1. It must be understood by the recipient.
2. It must be consistent with the purpose of the organisation.
3. It must not be incompatible with the personal interests of the recipient.
4. It must be within the mental and physical abilities of the recipient

Many experts have stressed. fact that the acceptance theory could be misleading as
the management could be tempted to manipulate the situation in order to obtain
acceptance from subordinates 13.
Other factors that limit effectiveness of authority include technological
constraints, economic limitations, social limitations and organizational constraints.

Readability
People in authority are answerable to somebody for their use of authority. This is
responsibility. Responsibility implies obligation. A person to whom one delegates
authority is obliged to execute satisfactorily the assigned duty. Responsibility originates
from a superior - subordinate relationship. A subordinate must answer to his boss for
the use of formal authority just as a man answers to his friends for informal authority. In
organisations, responsibility is shared. When a manager authorises an employee to
execute a task, the obligation created by this delegation from the supervisor to
subordinate is shared.

NOTES
2. Joseph L. Massie and John Douglas. Managing: A Contemporary
introduction, 2nd ed. New Jersey: Prentice Hall 1977, p. 13.
3. Herbert Simon. The New Science of Management Decision. New York:
Harper and Brothers, I960, p. 7S.
4. Simon. 1960, p. 46.
5. Will jam McNair Fox. The Management Process. Illinois: Richard D. Irwi'n
Inc.. 1963. p. 78.
6. Harold- Koonts and Cyril O'Donnell. Principles of Management, 4th j ed.
New York: Mc Graw-Hill Book Company, 1968, p. 61.
7. J. R. P. French and B. H. Raven. ;The Basis of Social power in Studies in
Social Power," D. Camight (ed) Ann Arbor. M.' Institute of Social Psychology 1959
150-167.
8. James D. Thompson, Organisation in Action. N. Y. McGxaw Hill, Inc, 1967. '
9. Fred E. Fiedler, The Theory of Leadership Effectiveness. N.Y. McGraw-Hill

68
 Inc. 1967. •
10. Koonts and O'Donnell. 1968, p. 62.

IL Sherman Krupp. Pattern in Organisational Analysis: A Critical Examination.

New York: Holt, Rinehart and Winston, Inc., 1961, pp. 101-105. 12. Chester I.
Barnard. The Functions of the Executive. Cambridge: Harvard
University Press, 1938, p. 163. / • .13. Schindler and Thomas. "The Structure of
Interpersonal Trust in the Workplace." Psychological Reports. Oct 1993, pp.563

69
 ORGANISATION PROCESS

Delegation and Decentralisation of Authority .

Delegation: Delegation is the organisational process that permits the transfer of
authority from a superior to a subordinate. Delegation of authority empowers a
subordinate to make commitments, use resources and take action in relation to duties
assigned to him. No organisation can function effectively without delegation. The
division of an organisation, into units (departmentalisation) involves delegation.
Delegation originates from the fact that one person alone cannot successfully discharge
all the responsibilities in an organisation- "In essence delegation of authority means
that a subordinate has the power to make decisions and to act within explicit limits
without checking with superiors."
Delegated authority enables the superior to share responsibility with his
subordinate. When one delegates, three major factors are implicit:
(a) There is assignment of responsibility
(b) There Is a delegation of authority.
(c) There is a creation of accountability.
Delegation involves accountability. Accountability means answering for the use of
your formal authority by someone else. Delegation of formal authority to another person
does not relieve one of the necessities of accounting for it A subordinate must account
for the use of delegated authority because an obligation is created. A subordinate is
held responsible for assigned tasks and he is accountable for the satisfactory
completion of the duty.

Key Principles of Delegation

Parity of Authority and Responsibility: One of the problems often associated with
delegated authority is that people like to delegate responsibility but not authority. One
of the major principles of delegation states that "for effective delegation, authority
granted to a subordinate must be equal to the responsibility as signed to him - no more
no less”.
It is to be expected that when responsibility is. given to a subordinate, he is to
have commensurate authority to discharge it. Failure equate responsibility with
authority leads to inefficiency. In Nigeria, subordinates often complain of having no
appropriate authority to discharge assigned duties. Lack of authority denies the
subordinate position-based influence to gain the necessary co-operation from others. In
some instances, the subordinate, does not understand the limit of his authority. A

70
production manager cannot force an obsolete equipment to be as effective as a new
machine, and a sales manager cannot force customers to buy. These are limitations
imposed by circumstances- Parity of authority and. responsibility is not, however, a
panacea for the achievement of assigned duties.

Absoluteness of Accountability: This principle states that "although responsibility

may be assigned and authority may be delegated to subordinates, accountability to
one's superior can neither be assigned nor delegated." When one delegates one's
assigned responsibility to someone else, one is still fully accountable *to one's superior
for its execution. When the managing director delegates to the production manager, for
instance: and the production manager to his plant supervisor; If the production quota is
not met, the managing director's accountability to his superior cannot be delegated or
assigned. It is as a result of this that If the organisation is not being productive, the
managing director is replaced while the lower executives keep their positions, this
principle prevents the executive from "passing the buck.7' In order to delegate properly,
one has to retain a reservoir of authority to ensure that the task is properly carried out.
Accountability to one's superior is absolute and not transferable.

Principle of Unity of Command: This principle states that "a subordinate should ' be
accountable to one and only one, superior at a time." It is important for the subordinate
to report to only one superior in order to maintain the chain of command. The essence
of unity of command is to avoid conflicting instructions. It is essential in all organisations
for an employee to receive delegated authority from one boss and be accountable to
the same boss for the assigned' task.
The principle of unity of command is sometimes violated where functional authority
exists. The subordinate receives instruction from his line superior and also from his staff
executive. This could happen without any major consequence if the authority to the staff
executive is clearly defined. The principle could also be violated each time one bye-
passed a level of intermediate supervision. A managing director, who for instance,
usually ignores the sales manager and speaks directly to the salesmen, is violating the
unity of command principle.

Failure to Delegate
Despite the fact that delegation is a very important organisational process, some
executives find It difficult to delegate. Some of the major reasons are summarised below2
1. Some executive get trapped in die "I can do it better myself fallacy."

2. Lack of ability to “direct or encourage co-operation among subordinates."

71
 3. Fear that delegation diminishes managerial authority.
4. Absence of selective controls to warn of impending difficulties.

5. Lack Of confidence in subordinates.

6. A temperamental aversion to taking a chance

A supervisor who refuses to delegate frustrates his subordinates as he denies

them the intrinsic and extrinsic satisfaction derived from accomplishing a help in training
employees to assume responsibility and learn to be accountable for assigned tasks.
Failure to delegate makes the executive indispensable in an organisation and should he
resign, die or is dismissed, a vacuum is created. Delegation does not relieve managers
of their original responsibility. They could withdraw delegated authority at any time.

Effective Delegation
Effective delegation helps managers to spend less time on specific technical activities or
routine decision making and concentrate their efforts on other strategic management
problems. This is summarised in Figure 6.1 below.

Figure 6.1: Delegating Characteristics

To accomplish effective delegation, it is important-that the subordinate should

understand the purpose of delegated function and the objectives to be achieved. The
determination of objectives helps the subordinate to relate the assigned task to the
accomplishment of the overall company objectives and his own personal interest. This is
also in keeping with the principle of objectives which states that "before initiating any
course of action, the objectives in view must be clearly determined, understood, and
stated."
Secondly, the duties assigned must be commensurate with authority delegated. An
employee who is assigned plenty of tasks but little authority gets easily frustrated,
especially as he seeks and fails to obtain the willing co-operation of his peers or even
subordinates. It is important that management assigns the whole task not the routine or

72
portions of it since this could create conflict. The ideal manager is one who does not only
delegate authority and assign responsibility but also wishes to add to them always.
Many managers especially in small organisations and sole proprietorships in
Nigeria 'assign only routine or details of a job and retain the main decision-making
aspect of it. This is one of the major, reasons why indigenous entrepreneurs find it
difficult to recruit university graduates.
Thirdly, the employees to whom responsibility is to be assigned and authority,
delegated must be judiciously selected. Not every employee is expected to have the
mental preparedness and competence to be assigned a task and held accountable.
Employees who lack skill, knowledge, experience or are poorly motivated should not be
selected until they are ready.

Employees Not Ready for Delegation.

As a guide employees who exhibit the following traits should not be chosen until they
are ready:
1. Employees who cannot accept criticisms for their mistakes.
2. Employees who lack self-confidence.
3. Employees who lack initiative or take undue pleasure in being told than finding
solutions to their problems.
4. Employees who cannot easily he motivated by the usual company incentives.
5. Employees who like to follow rather than lead.
Fourthly, the supervisor must have built-in checks to ensure that delegated tasks
are being carried out. As pointed out, delegated responsibility is shared. A manager
does not abdicate his responsibility and accountability by delegation. The best manager
is one who knows how much responsibility to delegate and how to be in control at all
times. Constant feedback is necessary in order to avert costly mistakes of subordinates.
It has to be re-emphasised here that delegation of authority does not relieve managers
of their original responsibilities, nor does it reduce their overall authority in the
organisation. The essence of all delegated function is to share task in order to achieve
greater overall efficiency.
Combating Barriers to Delegation
To overcome the barriers to delegation, the following guidelines are suggested, as
shown below.
1. Realise that subordinates have much to contribute to decision making in their
area of specialization

73
2. Learn to plan ahead so that delegation can take place before, rather than after,
the act.
3. Build confidence in employees through training, recognition, and counseling.
4. Develop control systems that will point out impending problems
5. Be willing to take a chance in subordinates.
6. Force subordinates to make decisions while giving them help when needed.
7. Do not be critical when subordinates make mistakes.
8. Let subordinates know what is to be done and the result that are expected.
9. Supply subordinates with adequate resources to fulfill their responsibilities.
10. Provide adequate incentive so that employees are willing to accept increased
delegation.
11. Develop an organisartion structure that provides for personal growth and
challenges, thereby helping subordinates become more self-reliant.

Source: Robert L. Trentha and M. Gene Newport Management, Functions and

Behaviour. Dallas Texas Business Publications, Inc., 1976, pp 353 – 354

74
Departmentalisation
This deals with the organisation of jobs into logical groups or departments. There are
basically five common methods of departmentalization:
functional - grouped according to functional specialties
product - grouped according to products
customer - used where there are differing customers
Geographical (regional) - grouped according to customers/locations -
matrix - grouped according to the mixture of bosses and functional and project
managers.

Figure 6.2: Functional Departmentalisation

The function departmentalisation helps to put together people with the same specialties
skills, knowledge and orientation. It promotes coordination within the departments. It is
very ideal for single product companies. In large x organisations it affects communication
and as functional specialists tend to be interested only in the welfare of their
departments/ units.

Figure 6.3: Production Departmentalisation

A company that produces many products or services may elect to organise Its
departments according to the products, services rendered. An insurance company may
have four units as shown above, brewery like Nigeria Breweries could have a
department for each brand of beer and soft drinks, the-same is true of Uniliver. In

75
universities, we have faculties, in hospitals, there are departments and units. The
advantages of product/service departmentalisation include:
i. It Promotes specialisation in the departments, thus making the managers
better experts in their fields.
ii. It results in both employee satisfaction and more customer satisfaction
resulting from closer attention.
It could lead to duplication of functions and increased costs of operation

Figure 6.4: Customer Departmentalisation

This is ideal when a product is sold to different classes of customers. Here each
customer group-retail, government, wholesale and international receives appropriate
attention. The drawback is the duplication of functions and the resultant cost implication
and limited view of organisational goals.

Figure 6.5: Geographical Departmentalisation

In this method, term like region, zone area or district may be used to designate
managers handling the products in those areas. The basic advantage in geographical
departmentalisation is that it is easy to appoint managers according to their ability as
some zones may be better developed than others and may make less demand on the
managers. This structure makes it possible for customers, needs to be more efficiently
met by people who understand the zone. The disadvantages include duplication of
efforts and limited view of organisational goals

76
Matrix Organisational Structure
As Glueck1 pointed out, the matrix organisation is an attempt to cross the product and
functional approaches to organisation in order to get the best (and avoid the worst) of
both. This is sometimes called two boss” system as each employee answer to a
functional are supervisor as well as a project manager. The basic advantage of the
matrix organisation structure is that it gives maximum flexibility and adapatability in
operations. It however violate many traditional authority, principles and is a more
complex form of structure that can lead to power struggles. As shown on figure 4, the
functional manager is still in charge of the technical operations relating to his function.
The project manager coordinates and is accountable for the work to be undertaken by
the project team. He is also involved with one or more functional managers. He is
responsible for providing the leadership required to steer the project through during its
temporary lifetime.
Figure 6.6: Simple Matrix Structure

GENERAL
MANAGE

ENGINEERING PRODUCTIVITY FINANCE

Project RESPONSIBILI
PROJECT
A TY
RESPONSIBILITY

RESPONSIBILITY

RESPONSIBILITY
FUNCTIONAL

Project
FUNCTIONAL

FUNCTIONAL

RESPONSIBIL
B PROJECT ITY

Project
RESPONSIBILI
C PROJECT TY

Source: A Cole TYPICAL STRUCTURE. Management: Theory and

Practice.

77
 The matrix structure is not good in small organisations as "it is a complex, difficult and
sometimes frustrating form of organisation to live with - but when well implemented, it does
offer much of the best of both worlds.” (Glueck)27.
Managers are encouraged to select the best design that suits their organisation. A
chosen structure should be determined by the need for efficiency, company strategies, company
size, technology employed and the organisation's environment. These factors impact directly on
employees and can influence motivation, commitment and job satisfaction

Decentralisation
An organisation is said to be dencentralised if authority to make decision is delegated to managers
at the lower ladders of the organisational hierarchy. What really constitutes decentralization is
relative. In contrast to a centralised organisation, top management is either fully centralised or fully
decentralised. Certain decisions are often centralised and others are decentralised. As a general
rule, factors such as the size of the organisation, the degree to interaction between members,
management philosophy and the personality of the members determine the degree of
decentralization.
Dencentralisation is encouraged in all modern organisations because it promotes initiative
and flexibility and helps in the development of subordinates by helping them to participate m
decision making. Centralisation, on the other hand, promotes directional control, coordination,
specialisation, standardisation, economies of scale and the use of various cost saving devices.
It is impossible to look at an organisation chart and determine whether as organisation is
centralised or decentralised. It is the practice that determines that One of the major criticisms often
brought against the Nigerian civil service is that it is over centralized, thus denying middle
management of initiative and independent thought. It is not unusual for letters originating even from
key personnel in the organisation to start with I am directed ..." The civil service develops
"administrators" instead of managers. Large business enterprises have a greater tendency to be
decentralised than small enterprises. Companies with different product lines and services are more
decentralized, in their operations to encourage profit Rehires - a practice which is often referred to
as profit decentralisation. A company like the VAC of Nigeria. Ltd with very many divisions and
subsidiaries is an example of a company with decentralised product division - with each manager
responsible for profits in his own division.
Decentralisation of operations to small units facilitates decision making and brings the
decision making authority very close to the point of operation. In a sales operation, credits of a very
reasonable sum of money could be approved on the spot without referring to the headquarters. It
gives the ivisional managers the opportunity to tailor their decisions to suit the local environment in
which they serve.
78
 As a general rule, decisions that affect only one department such as sales could be
decentralised as it involves the customer, the salesman and the area manager. Decisions that
would affect more than one department located in different geographical areas are best
centralised for easier coordination. A decision involving promising delivery dates to key
customers on contractual obligation would involve production, sales, supplies and finance
departments and is best handled at the top level to avoid costly mistakes that may involve millions
of naira and loss of goodwill.
There is no single criterion to use in deciding whether to be fully centralised or completely
decentralised. Each situation is to be evaluated on its own merit.
As a guide, research findings show that the following factors must be considered before
decentralisation is undertaken
(1) Where there is a need for speed and flexibility in decision making, decentralisation
is necessary.
(2) When divisional of area managers require initiative or creativity in order to achieve
profit quotas, decentralisation is necessary.
(3) , In companies, with differentiated product lines, that are- independent of one

another and are capable of becoming profit centres, decentralisation could be

instituted.
(4) Where there is ample supply of capable managers with knowledge, experience and
dedication, decentralisation is recommended to motivate
them. Middle managers are the most frustrated in centralised organisations as
achievement is not easily recognised and there is the paucity of opportunity for
advancement or even of intrinsic reward.
(5) . Research shows that the size of business organisation, products, location of

customers and the size of-the market have a definite relationship to the
degree of decentralization.4
(6) Where there is a desire to improve the communication channel in an organisation
there is a reason for greater decentralisation.

A study of top and middle management executives reveals that of die 205
executives who responded, 65% believe that Nigerian. organisations are too centralised.
The situation is worse in the civil service where 85% of the respondents believe that the
organisation is too centralised. What appears very disturbing is the pessimism
expressed by all to the effect that this situation is bound to continue. In the more
advanced countries, [Link] of computerization, which had made possible more
refined management information systems, is leading to greater centralisation and

79
 making many middle management positions increasingly obsolete, for the less advanced
countries where centralisation is being justified on the grounds that there is a
paucity of qualified management to make decisions, there is need for decentralisation.
This appears to be one of the most expeditious ways of enhancing the decision making
skills of managers — thus giving them the opportunity to learn from their mistakes.
Experience has shown that the cost of poor decisions in a decentralised
organisation is less than the cost of frustration arising from referring all decisions
to the company headquarters (in a centralised situation)

Mechanistic and Organic Organisations

These terms were popularised by the work of Joan Woodward. 5 They describe two organisational
forms. The mechanistic view assumes that the process of an 100Management: Theory and
Practice organisation is a fixed arrangement - rigid and tightly control. The organic view is that
organisation is flexible and adaptive
The characteristics of mechanistic and organic organizations:

Mechanistic Organic
* Rigid departmentalisation Hierarchical teams
* Clear chain of command Free flow of information
* Highly specialised Cross functional Teams
* Centralisation Decentralisation
* Narrow spans of control Wide Spans of control
* High formalisation Low formalisation
Mechanistic organisations characteristically have substantial number of rules, titles,
procedures, and ranks present in the company, which shapes the degree of flexibility and
adaptability present in the company. On the contrary, Organic companies have fewer rules, and
procedures, small organisational ranks' and titles which make for more informal environment The
organic' companies appear, to be more modern in their structure, encourage employee participation
in problem-solving and. decision making. As Robbins and Coulter3 succinctly put it Mechanistic
types of organisational structures tends to be efficiency machines, well oiled by rules, regulations.
Standardised tasks; and similar controls.
There is no one perfect structure for all organisation. Research studies by Chandler 7,
Miles and Snow8 Nwachukwu9 have shown that many companies use different organisational
structures. Factors such as size, organisations strategy, technology and environment, determine
the "best' structure to be used.
Task Specialisation

80
One of the major factors that promote decentralisation is task Specialisation. Each department
deals with a defined group of organisational activity. It is believed that the specialisation of activities
would lead to increased production. This, in turn, would give rise to the design of specialised
equipment, labor and facilities. It has even been earned further to includes specialisation in other
levels of an industrial economy such as geographical specialisation, specialisation by process and
work specialization.
It has many salutary effects in our economic life which include that;
(a) It makes training of employees easy as it takes less time to train an
employee on a specific task.
(b) It is easier to replace an employee who must leave the organisation or be
transferred since the employee executes a small task requiring a small skill.
(c) . Because the task discharged by an employee 'is small, his total
compensation is relatively small too;
(a) Because of the small skill, and the limited time required for training, no single
employee is considered indispensable in the organisation.
(b) Specialisation promotes delegation and . supervision with predictable results.
'
(c) Specialisation permits the use of special equipment and machines ' which
help to reduce duplication to a minimum.
Span of Control
Span of control deals with the number of subordinates that an executive can manage
effectively. There is a positive relationship between the span of control and delegation. A
broad span of control forces managers to allow their subordinates to enjoy the full
benefits of the delegated responsibility. There is also a close relationship between the
number of employees answerable to an executive and the number of management
levels. It is as a result of this that Graicunas 8 believes that all organisational structures
improve management supervisory efficiency because they entail a narrow span.
Narrow span of management has been advocated by most of the classical
management writers. Tayol in support of narrow span of management states that:
Whatever his rank, a man has only to command a very- small number of direct
subordinates, usually less than 6. except that a foreman, who is dealing with quite a
simple operations, is in direct command of 20 or 30 men

In support of this statement, L. Urwick stated that:

81
No superior can supervise directly the work of more than five or at the most, six
subordinates whose work interlocks

Despite all these, it appears that the number of people a person can effectively manage
cannot be determined by an arithmetical precision. It requires common sense approach
that takes many variables into consideration

Factors that Affect Span of Management

There are many factors that determine the span of management These factors are
discussed below: .
(1) Ability of the Supervisor: Individuals differ in their ability to execute tasks
successfully. Some supervisors are capable of controlling more subordinates then
others, even if their work "interlocks." Generally, in- designing the organisation, it
is the ability of the average supervisor that will be used to determine the span of
control.

(2) Ability of the employees. Employees with adequate skill, experience and training
require little or no supervision in the discharge of their regular functions. A
supervisor in charge of these professionals can supervise a - large number of
employees.

(3) Type of sork The type of work employees are doing will' influence the span of
control. For employees working in an assembly line, there will be limited
supervision compared to when they are working individually in a service oriented
task.

(4) Geographical Location. It is easier to supervise people working together than

people scattered ail over a large geographical region. A sale executive can
supervise more salesmen all in Lagos than if the same number of salesmen are
located in the thirty states of Nigeria.

(5) Congruency of Goals. Employees who believe in the organisation and see it as
the ladder through which they will attain their goals, are self motivated to work
without supervision. It is different from' a group of dissatisfied employees who will
work hard only in the presence of the supervisor.

(6) Importance of the work: Some jobs required closer supervisor than others. A man
supervising people working in the field of agriculture picking tomatoes, onions or
82
 cotton will not need to give them as close supervision as a man supervising
employees producing high precision equipment. In the latter case, quality control
is important while in the former it is only general supervision that is required.
- Graicunas Theory
- Graicunas13 used a mathematical equation to arrive at the conclusion that only a
narrow span of management would make for efficient management. He postulates
that as a supervisor deals with subordinates, not only will die number of direct
relationships increase, but also the number of group relationships and cross
relationships will rise.

Table 6.2 shows Graicunas direct cross and group relationships. Many research
findings have shown that Graicunas was wrong.

Table 6.1: Graicunas Direct, Cross and Group Relationships

No of No of Direct No of Cross No of Direct No of Total
Subordinate simple Relationship Relationship Group Relationship Relationship

1 0 1 0 1
1 6
2 2 2 2 2
3 6 3 9 18
3 44
4 4 12 4 28
5 20 5 75 100
5 222
6 6 30 6186
7 42 7441 490
7 1,080
8 8 56 81,016

Modern Organisational Designs

The dynamic and complex environment of business- have made it necessary for
organisations to seek new ways of structuring the organisations in order to be more
responsive to consumer needs. Managers are being more innovative and more flexible
in order to respond more appropriately to the needs of customers for more reasonable
prices, employees needs for more meaningful participation in decision making and the
other stakeholders for corporate responsible and responsive citizenship. Some of the
more contemporary organisation team designs are introduced below,

A. Team Based Structure- Team based structure, sometimes called "employee

teams," is a design whereby work functions are structured for group rather than for
individuals and team members are given discretion in matters traditionally considered
management prerogatives such as process implementation, product or service
83
development and individual work assignments. Team based organisation structure has
received popularity in recent times because of the pioneering efforts of Japanese
companies. Today many companies in the U. S. A. that use the team based structure
include Whole Foods Market Inc. Saturn, Motorola, and Xeron etc, The entire
organisation is made up of teams. The teams design the work, and make out their own
schedules and targets and are held accountable for their performance. The closeness
o decision making to implementation results in a high level morale and motivation
among team members. Only very few companies in Nigeria- such as SPDC, Mobile,
etc can be said to use the team based structure fully as it is in Japan and the U. S
B. Cross-Functional Team,. A group staffed with a mix of specialists (e.g. marketing,
production, and engineering) and formed to accomplish a specific objective- Gross- -
functional teams are based on assigned rather than voluntary membership.

Project Team. A group formed specifically to design a new product or service. Members"
are assigned by management on the basis of their ability to contribution to success.
The group normally after task is completed.

Self-Directed Team. Groups of highly trained individuals performing a set of

interdependent job tasks within a natural work unit Team members use consensus
decision -making to perform work duties, solve problems, or deal with internal or
external customers. Task Force Teams. A task force is formed by management to
immediately resolve a major problem. The group is responsible for developing a long-
term plan for problem resolution that may include a charge for implementing the solution
proposed.

Process-improvement Team. A group made up of experienced people- from different

departments or functions and charged with improving quality, decreasing waste, or
enhancing productivity in processes that affect all departments or functions involved.
Team members are normally appointed by management.
Regardless of the structure or purpose of the team, the following characteristics
have been identified with successful teams:
* commitment to shared goals and objectives
* consensus decision -making
* open and honest communication
* shared leadership

84
 * climate of cooperation, collaboration, trust, and support valuing of
individuals for their diversity recognition of conflict and its positive
resolution.
C. Project structure: Many companies now design all the services they render to customers
as projects. Employees work on specific projects. Using this format, the employee does not
belong to any department that he returns to at the completion of a project but he is rather
redeployed- to another project where his skills and abilities are best utilised. Employees
belong to project team as their skills and abilities dictate and once a project is completed, they
"join"' another project team. Thus project teams are made and disbanded as new jobs dictate.
The basic advantage of the project structure is that it removes the problem of job design- to
suit individuals in a department.; The problems associated with redesigning jobs, job
enlargement, job enrichment and job dilution are automatically taken care of as the truest for
efficiency eliminates jobs not needed by the group. As Robbins pointed14 out, “There is no
departmentalisation or rigid organisational hierarchy to slow down decision-making. Managers
serve as facilitators, mentors and coaches”.

D. Autonomous Internal Units: This structure is used by organisations that operate In

different businesses at a time or have diverse customers and there is need for real
decentralisation and autonomy to respond quickly to customer needs. Companies that
produce different types of goods for different customers located in Various parts of the
world use the autonomous internal units to remain competitive and exploit market
opportunities promptly.

Boundryless Organisation
As the name "suggests, a boundryless organisation design may be seen as one whose
design is not defined by or limited to the horizontal, vertical or external boundaries
imposed by predefined structure. Jack Welch15 of General Electric use the design to
eliminate vertical and horizontal boundaries within the company and breakdown
external barriers between the company, its customers and suppliers. The. boundryless
organisation seeks to eliminate the chains of command, to have appropriate spans of
control and to replace departments with empowered teams. The assumption is that
when the vertical lines are removed, this facilitates the Interaction between function
teams and departments which promotes cooperation and eliminates unnecessary
barrier created by hierarchy.

Learning Organisation

85
A learning organisation is an organisation that has developed the capacity to
continuously adapt and change because all members take an active role in identifying
and resolving work related issues. Senge14. In learning organisations management
evolve a design structure that is amicable to new ideas and change. Employees angle
for new knowledge, enjoy sharing the newly acquired knowledge for the "benefit of the
organisation. In some organisations that have perfected the art of learning and
applying the knowledge acquired: they use it as a competitive edge especially in the
field of technology and computer design and application. Learning organisations
characteristically are boundryless and team structure organisations. They attempt to
eliminate structures that may impede free flow of ideas, Employees work in teams and
are empowered to make decisions on how best to do their work to achieve optimum
organisational advantages. Information is shared timely and. openly without let or
hindrance caused by hierarchy or bureaucracy. The role of management in learning
organizations, is to promote information sharing, facilitate shared vision, culture,
oneness of purpose functions and activities
Organisation design is a tool to achieve ends — predetermined organisational
goals. Research has shown that there is positive relationship between work design, job
satisfaction and productivity. An ideal organisational design is one that enables the
organisation to achieve its objectives efficiently and most effectively.
Empirical Research Findings
Empirical, research findings show that to limit the span of management to five or six is
rather too restrictive. Instead research findings show that:
(1) span of control of executive and supervisors varied with the nature of the production
process.17
(2) mass-production companies have a higher span of management than process
firms.16
(3) successful firms have spans at or near the medium while less successful firms had
spans which were either too low or too high for their production system.
(4) spans of 10 to 11 are indicative of low structure; spans of 3 are indicative of high
structure
(5) spans tend to increase with increasing task certainty.
(6) there is a positive correlation between span or control and geographical separation
of subordinates.19
(7) there is a positive correlation between span and the use of personal assistants by
supervisors.

86
(8) similarity of functions supervised influences subordinates experience on the job.
In summary, because of the preponderance, of evidence from empirical research on
this subject it is how believed that the span of control depends on the complexity of the
task, ability of the supervisor, proximity of the tasks, variety of the jobs, quality of
personnel and the use of personal assistants. All repetitive jobs
require large spans of management whereas the "reverse is the case for high
technical work
Revision Questions .
1. What is delegation? Why is delegation not effective in many Nigerian organisations?

2. Discuss the three key principles of delegation. Are these applicable in Nigerian

organisations? Why?
3.. Adduce reasons for the apparent failure of some executives to delegate. How can
this be corrected?
4. What is span of control? Discuss the factors that determine the span of control in an

organisation.
5. Discuss Graicunas' theory of supervision.

6. Discuss the concept of decentralisation of authority. What are the factors to be

considered before a company decides to centralise or decentralise?

7. Discuss the major methods of departmentalisation. What are the advantages and

limitations of each method?

8. What is matrix organisation structure?

9. What are the characteristics of mechanic and organic organisations?

10. Discuss the modern organisation structures.

NOTES
1. J. L. Massie and J. Douglas. Managing: A Contemporary Introduction, Second
ed. New Jersey: prentice Kali. 1977. p 107-
2. Gary Dessler. Organisation and Management: A Contingency Approach. New
Jersey: Prentice Hall, 1976, p. 113.
3. W.F. Glueck. Matrix Organisation. Business Policy: Strategy Formulation and
Management. N.Y. McGraw-Hill, 1976 PI20-47.
4. R.A. Ehrie. "Management Decentralisation: Antidote to Bureaucratic Ills,"
Personnel Journal May, 1970, pp. 396-397.
87
5. Joan Woodward. Industrial Organisation: Theon' and Practice. Oxford: University
Press, I965,pp. 39-47.
6. Robbins and Coulter. Mechanistic types of organisational structure: op. cit. p.
263
7. A.D Chandler, Strategy and Structure. M.A. MIT Press, 1962.
8. R.E. Miles and C.C. Snow, Organisational Strategy Structure and Process.
N.Y. McGrawhiH 1978.
9. C.C. Nwachukwu Hianan Resources Management. University of Port Harcourt
Press.2000
10. V.A Graicunas. “Relationship in Organisation” in [Link] ND l. Urwick eds.
Papers on the Science of Administrations. New York: Institute of Public
Administration. 1937,pp. 181-188.
11. F. Tayol, General and Industrial Management, London: Sir Isaac Pitman and Sons,
1949. P. 127.
12. Lyndall F. Urwick. “The Manager’s Span of Control,” Harvard Business Review,
Vol. Xxxv, May/June, 1966, pp. 39-47.
13. Graicunas, 1937, p.179.
14. Robbins op. cit. 262.
15. Jack Welch. C.E.O. General Electric leader of a model U.S. Corporation.
16. P.M. Senge. The fifth Discipline. The Art and Practice of learning Organisation.
N.Y. Double any 1990.
17. J.G. Udell. “An Empirical Test of Hypothesis Relating to Span of Control”,
Administrative Science Quarterly. Vol 12,1967, pp. 420-439.
18. P.R. Lawrence and Lorsch. Organisation and Environment. Boston: division of
Research, Graduate School of Business Administration, Harvard University, 1967,
pp.37.
19. [Link]. 1965, pp.39-47.
20. Udell. 1967, p. 428. [Link].

PART SIX

THE CONTROL FUNCTION

88
This part deals with the control function. The relationship between planning and control
is highlighted. The method of establishing control standards and the techniques used in
control process are examined.
The last chapter in the book deals with business and social responsibility. This is
often a neglected management function. The role of social responsibility in Nigeria is
examined and how to encourage it is highlighted.
The chapter also examines business ethics and the factors that determine ethical
conduct in Nigeria.

89
 DIRECTING FUNCTION
Directing is said to be a process in which the managers instruct, guide and oversee the
performance of the workers to achieve predetermined goals. Directing is said to be the
heart of management process. Planning, organizing, staffing has got no importance if
direction function does not take place. Directing initiates action and it is from here actual
work starts. Direction is said to be consisting of human factors. In simple words, it can be
described as providing guidance to workers in doing work. In field of management,
direction is said to be all those activities which are designed to encourage the
subordinates to work effectively and efficiently. According to Human, ―Directing
consists of process or technique by which instruction can be issued and operations can
be carried out as originally planned‖ Therefore, Directing is the function of guiding,
inspiring, overseeing and instructing people towards accomplishment of organizational
goals. Directing has got following characteristics; it is:
1. Pervasive in nature - Directing is required at all levels of organization. Every
manager provides guidance and inspiration to his subordinates.

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

the life of organization.

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

to human factor. Since human factor is complex and behaviour is unpredictable,
direction function becomes important.
4. Creative Activity - Direction function helps in converting plans into performance.
Without this function, people become inactive and physical resources are meaningless.
5. Executive Function - Direction function is carried out by all managers and executives
at all levels throughout the working of an enterprise; a subordinate receives instructions
from his superior only.
6. Delegate Function - Direction is supposed to be a function dealing with human
beings. Human behaviour is unpredictable by nature and conditioning the people‘s
behaviour towards the goals of the enterprise is what the executive does in this function.
Therefore, it is termed as having delicacy in it to tackle human behaviour.
Importance of Directing as Managerial function

90
Directing or Direction function is said to be the heart of management process and
therefore, is the central point around which accomplishment of goals takes place. A few
philosophers call Direction the Life spark of an enterprise. It is also called actuating
function of management because it is through direction that the operation of an
enterprise actually starts. Being the central character of enterprise, it provides many
benefits to a concern, which are as follows:
1. It Initiates Actions – Directions is the function which is the starting point of the work
performance of subordinates. It is from this function the action takes place, subordinates
understand their jobs and do according to the instructions laid. Whatever are plans laid,
can be implemented only once the actual work starts. It is there that direction becomes
beneficial.
2. It Ingrates Efforts – Through direction, the superiors are able to guide, inspire and
instruct the subordinates to work. For this, efforts of every individual towards
accomplishment of goals are required. It is through direction the efforts of every
department can be related and integrated with others. This can be done through
persuasive leadership and effective communication. Integration of efforts brings
effectiveness and stability in a concern.
3. Means of Motivation – Direction function helps in achievement of goals. A manager
makes use of the element of motivation here to improve the performances of
subordinates. This can be done by providing incentives or compensation, whether
monetary or non – monetary, which serves as a ―Morale booster‖ to the subordinates
Motivation is also helpful for the subordinates to give the best of their abilities which
ultimately helps in growth.
4. Coping up with the changes – It is a human behaviour that human beings show
resistance to change. Adaptability with changing environment helps in sustaining
planned growth and becoming a market leader. It is directing function which is of use to
meet with changes in environment, both internal as external. Effective communication
helps in coping up with the changes. It is the role of manager here to communicate the
nature and contents of changes very clearly to the subordinates. This helps in
clarifications, easy adoptions and smooth running of an enterprise. For example, if a
concern shifts from handlooms to power looms, an important change in technique of

91
production takes place. The resulting factors are less of manpower and more of
machinery. This can be resisted by the subordinates. The manager here can explain that
the change was in the benefit of the subordinates. Through more mechanization,
production increases and thereby the profits. Indirectly, the subordinates are benefited
out of that in form of higher remuneration.
5. It Provides Stability – Stability and balance in concern becomes very important for
long term sun survival in the market. This can be brought upon by the managers with the
help of four tools or elements of direction function – judicious blend of persuasive
leadership, effective communication, strict supervision and efficient motivation. Stability
is very important since that is an index of growth of an enterprise. Therefore a manager
can use of all the four traits in him so that performance standards can be maintained.
6. Efficient Utilization of Resources – Direction finance helps in clarifying the role of
every subordinate towards his work. The resources can be utilized properly only when
less of wastages, duplication of efforts, overlapping of performances, etc. don‘t take
place. Through direction, the role of subordinates become clear as manager makes use
of his supervisory, the guidance, the instructions and motivation skill to inspire the
subordinates. This helps in maximum possible utilization of resources of men, machine,
materials and money which helps in reducing costs and increasing profits.
From the above discussion, one can justify that direction, surely, is the heart of
management process. Heart plays an important role in a human body as it serves the
function pumping blood to all parts of body which makes the parts function. In the similar
manner, direction helps the subordinates to perform in best of their abilities and that too
in a healthy environment. The manager makes use of the four elements of direction here
so that work can be accomplished in a proper and right manner. According to Earnest
Dale, ―Directing is what has to be done and in what manner through dictating the
procedures and policies for accomplishing performance standards‖. Therefore, it is
rightly said that direction is essence of management process.
Directing function of Management relates to providing LEADERSHIP to achieving the
goals of an organization. What then is leadership?
Leadership and Its Characteristics

92
Leadership is a process by which an executive can direct, guide and influence the
behavior and work of others towards accomplishment of specific goals in a given
situation. Leadership is the ability of a manager to induce the subordinates to
work with confidence and zeal.
Leadership is the potential to influence behaviour of others. It is also defined as the
capacity to influence a group towards the realization of a goal. Leaders are required to
develop future visions, and to motivate the organizational members to want to achieve
the visions. According to Keith Davis, ―Leadership is the ability to persuade others to
seek defined objectives enthusiastically. It is the human factor which binds a group
together and motivates it towards goals.
Characteristics of Leadership
1. It is a inter-personal process in which a manager is into influencing and guiding
workers towards attainment of goals.
2. It denotes a few qualities to be present in a person who includes intelligence, maturity
and personality.
3. It is a group process. It involves two or more people interacting with each other.
4. A leader is involved in shaping and moulding the behaviour of the group towards
accomplishment of organizational goals.
5. Leadership is situation bound. There is no best style of leadership. It all depends upon
tackling with the situations.
Importance of Leadership
Leadership is an important function of management which helps to maximize efficiency
and to achieve organizational goals. The following points justify the importance and
functions of leadership in a concern.
1. Initiates action- Leader is a person who starts the work by communicating the
policies and plans to the subordinates from where the work actually starts.
2. Motivation- A leader proves to be playing an incentive role in the concern‘s working.
He motivates the employees with economic and non-economic rewards and thereby gets
the work from the subordinates.

93
3. Providing guidance- A leader has to not only supervise but also play a guiding role
for the subordinates. Guidance here means instructing the subordinates the way they
have to perform their work effectively and efficiently.
4. Creating confidence- Confidence is an important factor which can be achieved
through expressing the work efforts to the subordinates, explaining them clearly their role
and giving them guidelines to achieve the goals effectively. It is also important to hear
the employees with regards to their complaints and problems.
5. Building morale- Morale denotes willing co-operation of the employees towards their
work and getting them into confidence and winning their trust. A leader can be a morale
booster by achieving full co-operation so that they perform with best of their abilities as
they work to achieve goals.
6. Builds work environment- Management is getting things done from people. An
efficient work environment helps in sound and stable growth. Therefore, human relations
should be kept into mind by a leader. He should have personal contacts with employees
and should listen to their problems and solve them. He should treat employees on
humanitarian terms.
7. Co-ordination- Co-ordination can be achieved through reconciling personal interests
with organizational goals. This synchronization can be achieved through proper and
effective co-ordination which should be primary motive of a leader.
Leadership Roles in an Organization
The following are the main roles of a leader in an organization:
1. Required at all levels- Leadership is a function which is important at all levels of
management. In the top level, it is important for getting co-operation in formulation of
plans and policies. In the middle and lower level, it is required for interpretation and
execution of plans and programmes framed by the top management. Leadership can be
exercised through guidance and counseling of the subordinates at the time of execution
of plans.
2. Representative of the organization- A leader, i.e., a manager is said to be the
representative of the enterprise. He has to represent the concern at seminars,
conferences, general meetings, etc. His role is to communicate the rationale of the

94
enterprise to outside public. He is also representative of the own department which he
leads.
3. Integrates and reconciles the personal goals with organizational goals- A leader
through leadership traits helps in reconciling/ integrating the personal goals of the
employees with the organizational goals. He is trying to co-ordinate the efforts of people
towards a common purpose and thereby achieves objectives. This can be done only if
he can influence and get willing co-operation and urge to accomplish the objectives.
4. He solicits support- A leader is a manager and besides that he is a person who
entertains and invites support and co- operation of subordinates. This he can do by his
personality, intelligence, maturity and experience which can provide him positive result.
In this regard, a leader has to invite suggestions and if possible implement them into
plans and programmes of enterprise. This way, he can solicit full support of employees
which results in willingness to work and thereby effectiveness in running of a concern.
5. As a friend, philosopher and guide- A leader must possess the three dimensional
traits in him. He can be a friend by sharing the feelings, opinions and desires with the
employees. He can be a philosopher by utilizing his intelligence and experience and
thereby guiding the employees as and when time requires. He can be a guide by
supervising and communicating the employees the plans and policies of top
management and secure their co-operation to achieve the goals of a concern. At times
he can also play the role of a counselor by counseling and a problem-solving approach.
He can listen to the problems of the employees and try to solve them.
Qualities of a Leader in an Organization
A leader has got multidimensional traits in him who makes him appealing and effective in
behavior. The following are the requisites to be present in a good leader:
1. Physical appearance- A leader must have a pleasing appearance. Physique and
health are very important for a good leader.
2. Vision and foresight- A leader cannot maintain influence unless he exhibits that he is
forward looking. He has to visualize situations and thereby has to frame logical
programmes.
3. Intelligence- A leader should be intelligent enough to examine problems and difficult
situations. He should be analytical who weighs pros and cons and

95
then summarizes the situation. Therefore, a positive bent of mind and mature outlook is
very important.
4. Communicative skills- A leader must be able to communicate the policies and
procedures clearly, precisely and effectively. This can be helpful in persuasion and
stimulation.
5. Objective- A leader has to be having a fair outlook which is free from bias and which
does not reflects his willingness towards a particular individual. He should develop his
own opinion and should base his judgement on facts and logic.
6. Knowledge of work- A leader should be very precisely knowing the nature of work of
his subordinates because it is then he can win the trust and confidence of his
subordinates.
7. Sense of responsibility- Responsibility and accountability towards an individual‘s
work is very important to bring a sense of influence. A leader must have a sense of
responsibility towards organizational goals because only then he can get maximum of
capabilities exploited in a real sense. For this, he has to motivate himself and arouse and
urge to give best of his abilities. Only then he can motivate the subordinates to the best.
8. Self-confidence and will-power- Confidence in himself is important to earn the
confidence of the subordinates. He should be trustworthy and should handle the
situations with full will power.
9. Humanist-This trait to be present in a leader is essential because he deals with
human beings and is in personal contact with them. He has to handle the personal
problems of his subordinates with great care and attention. Therefore, treating the
human beings on humanitarian grounds is essential for building a congenial
environment.
10. Empathy- It is an old adage ―Stepping into the shoes of others‖. This is very
important because fair judgement and objectivity comes only then. A leader should
understand the problems and complaints of employees and should also have a complete
view of the needs and aspirations of the employees. This helps in improving human
relations and personal contacts with the employees.
Leadership Styles

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All leaders do not possess same attitude or same perspective. As discussed earlier, few
leaders adopt the carrot approach and a few adopt the stick approach. Thus, all of the
leaders do not get the things done in the same manner. Their style varies. The
leadership style varies with the kind of people the leader interacts and deals with. A
perfect/standard leadership style is one which assists a leader in getting the best out of
the people who follow him. Some of the important leadership styles are as follows:
Autocratic leadership style: In this style of leadership, a leader has complete
command and hold over their employees/team. The team cannot put forward their views
even if they are best for the team‘s or organizational interests. They cannot criticize or
question the leader‘s way
of getting things done. The leader himself gets the things done. The advantage of this
style is that it leads to speedy decision-making and greater productivity under leader‘s
supervision. Drawbacks of this leadership style are that it leads to greater employee
absenteeism and turnover. This leadership style works only when the leader is the best
in performing or when the job is monotonous, unskilled and routine in nature or where
the project is short-term and risky.
The Laissez Faire Leadership Style: Here, the leader totally trusts their
employees/team to perform the job themselves. He just concentrates on the
intellectual/rational aspect of his work and does not focus on the management aspect of
his work. The team/employees are welcomed to share their views and provide
suggestions which are best for organizational interests. This leadership style works only
when the employees are skilled, loyal, experienced and intellectual.
Democrative/Participative leadership style: The leaders invite and encourage the
team members to play an important role in decision-making process, though the ultimate
decision-making power rests with the leader. The leader guides the employees on what
to perform and how to perform, while the employees communicate to the leader their
experience and the suggestions if any. The advantages of this leadership style are that it
leads to satisfied, motivated and more skilled employees. It leads to an optimistic work
environment and also encourages creativity. This leadership style has the only drawback
that it is time-consuming.

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Bureaucratic leadership: Here the leaders strictly adhere to the organizational rules
and policies. Also, they make sure that the employees/team also strictly follows the rules
and procedures. Promotions take place on the basis of employees‘ ability to adhere to
organizational rules. This leadership style gradually develops over time. This leadership
style is more suitable when safe work conditions and quality are required. But this
leadership style discourages creativity and does not make employees self-contented.

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 CONTROLLING FUNCTION
The Controlling Process
Control is one of the key functions of management. Planning and control go hand-in-
hand for without efficient planning and control the organization cannot achieve any
objective. Controlling starts as soon as the executive phase starts so as to determine if
plans are being realized.
Definition: Controlling is defined as that phase of the management process which
maintains organization activity within allowable limits as measured from expectations.
These expectations may be implicit or explicit in terms of objectives, plan, procedures,
rules and regulations.
It has also been defined as: The monitoring and modification of organizational
activity and resource utilization to ensure that predetermined standards are met and
plans are carried out.
Controlling can be seen as part of management activities undertaken to ensure
that outcomes are consistent with planned organizational objectives. Control requires the
establishment of standards, information process and taking of corrective action.
Fayol, observed that: The control of an undertaking consists of seeing that
everything is carried out in accordance with plan which has been adopted, the orders
which have been given, and the principle which have been laid down, its objective is to
point out mistakes, in order that they may be rectified and prevented from occurring
again.3
In controlling, management is not only concerned with measuring performance
against standard but also evaluating the performance to see if there are deviations or
exceptions from the original plan.
The reasons for deviation are sought so that appropriate corrective action could
be taken. If a machine is programmed to produce 2,000 ball points per hour and it is
found out that it only produces 1,500 pens, the reasons for the deviation are sought and
corrective action is taken to bring productivity to expected standard.
Control Circle
As indicated, control starts from execution, phase. Control aims at measuring
performance and evaluating it to determine if action is required. Figure 15.1 shows the
control circle.

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Figure 15.1: Planning, Execution and Control Circle

Source: Adapted from Howard M. Carlisle. Management Concept and Situation Chicago.
S.R.A. Inc., 1976. 553.
As the Figure shows, control affects future action and consequently influences
planning. It also highlights the three major steps in controlling which are to:
(a) Establish goals and standards,
(b) Monitor results and compare them to established standards, and
(c) Take corrective action.
Establishment of Standards
A standard is an established criterion for measuring output or unit of measure to act as a
model. The establishment of standards is a planning function. Standards are expected to
be measurable and should be quantitative or qualitative.
Measures such as production per man-hour, quality output as measured either by
the quality control department, by the number of rejects or customer satisfaction or
service rendered in accordance with established company work schedule or procedure
are used. There is a need in every organization to measure not only total output, but also
individual performance. The measurement of individual performance helps in ensuring
that a job is properly defined in order to assign to each personnel manageable and
meaningful tasks.

Measurement of individual contribution acts as the basis for;

(a) Setting objectives and planning work schedule,
(b) Rewarding workers,
(c) Promotion, separation and transfer,
(d) Evaluating different work methods, different tools, and equipment and
different conditions of work,
(e) Estimating and allocating costs, and
(f) As a means of determining when a problem arises.4

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 Standards are very difficult to establish because they involve the use of both
objective and subjective criteria. For operative employees, it is easy to establish the
standards expressed in terms of pieces per person or time per unit. Establishing
standards for executives and other management personnel is often difficult for they
require more subjective criteria. What is expected to be a fair day’s job for a key
executive is not easy to determine. Even standards could be too low or too high. If they
are too low, they cease to be a challenge for employees. If they are very high, they
become unattainable, a source of frustration that denies employees intrinsic and
extrinsic rewards. Employees like to achieve and receive the satisfaction associated with
such achievement. Too high or too low a standard could act as a determinant of
productivity. In golf for example, 72 strokes par for an 18-hole golf course is the
accepted standard. This is perceived by authority to be an excellent performance and
people operate above or below par. The par is not an average performance for golfers. It
is an attainable but difficulty standard to accomplish and serves as the criterion or model
of achievement for golfers.
In boxing, ten to fifteen rounds are accepted standard for title fights. This
standard has been set to give a clear test of endurance for the boxers.
It is expected that standards be set in all the major result areas in an
organization. These areas include;
1. Profitability
2. Product leadership
3. Productivity
4. Market share
5. Personnel development
6. Employee attitude
7. Public responsibility.
By the use of these control measures, the overall effectiveness of management
could be ascertained and corrective measures used when necessary.
Classification of Control
Control, as has been highlighted, is the process of monitoring activities to ensure that
they are being accomplished as planned and of correcting any significant deviations. The
best control system is one that enables management to achieve predetermined goals
optimally. Generally, control system in an industrial organization could conveniently be
classified into three major groups. Oudi.5
(i) Market: This control system uses the external market competitive mechanism to
ensure that there is adequate control. In this situation, factors such as price
competition and relative share of the market. Companies in soft drink and beer
industry could use this method as their products are distinct and they face a
reasonable competition in the market place. Companies that render services –
construction companies for example – could also use the method effectively.
(ii) Bureaucratic: This approach places emphasis on organizational authority. The
companies rely on administrative and hierarchical mechanisms such as rules,

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 regulations, policies, standardization of activities, as well as appropriate
behaviours to meet expected performance standards.
(iii) Ethical/character control: In this process employees behaviours are controlled by
shared values, norms, traditions, rituals, beliefs and many other aspects of
organization culture. Organizational culture help the individual to know how to
behave, what norms to follow, to know the dominant value of the company, the
nature of rules and the discipline system. Company rituals such as long services
awards, annual bonuses, one extra month salary (thirteenth month) etc are used
to control behavior of employees during the year or throughout his tenure in the
company.
Types of Control
There are basically three types of control. There are feed forward control, concurrent
control and feedback control.
Feed-Forward Control: This may be seen as a preventive control. It is the type of
control that aims at preventing the occurrence of a mistake. Its primary objective is to
insure that the work is done correctly the first time. It is anticipatory and therefore pre-
emptive as it takes place in advance of the actual work. Manufacturers take preventive
steps to ensure that only quantity products are introduced into the Airlines have schedule
preventive maintenance, etc.
Concurrent Control: This is the type of control that takes place just as the product is
being produced. These controls may include close supervision, use of machines to
detect defective or non-conforming products. Some organizations have quality
assurance departments with functional authority to ensure that products that come out of
the assembly line are of the right quality.
Feedback Control: This type of control lets the organization know if their products in the
market are of the right quality sometime through customer acceptance, reaction of
competitions, market share, recorders and surveys. The basic problem in the use of
feedback control is that it comes after the damage must have been done. In this
situation, corrective actions may be very costly. Feedback controls can lead to the recall
of products and the modification of special brands. One of the advantages is that it acts
as a motivator for employees as they are informed about the acceptance of the products
or the rejection by consumers. It not only promotes the sharing of information but also
helps to promote goal congruency.
Advantage of Control
The advantages of control to management cannot be over emphasized. Planning without
control is useless since there is no other effective means of determining if the planned
objective is being realized. Some of the major advantages of control to the organization
are that control:
1. guides behavior toward useful organizational eds. Lack of control results in
erratic behavior that may be only tangent to organizational goals.

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 2. Ensures that resources are effectively utilized. It helps to avoid the waste of
useful resources in useless endeavours or inefficient operations.
3. Focuses attention on factors essential in achieving organizational
effectiveness. It helps to focus attention in meeting performance criteria,
quality standards, and achieving goals.
4. Encourages the action necessary to maintain performance.

Characteristics of Good Control

The installation of good control measures is a difficult task for management. Some of the
“bench marks” of good control as summarized by H. T. Amrine include:
1. Simplicity: The control method must be as simple last possible. The simplicity is
measured by the ability of the organization to use it effectively. It should not
involve too much explanation for an average employee to understand and carry
out. One of the best control measures is one that will make it possible for the
employee to evaluate himself or for the department or unit to appraise its
contribution in terms of the standard set.

2. Low Cost: A good control system should be installed at the cheapest possible
cost. A control system does not have to be expensive to be useful or effective.
The contribution of controls to overall organizational performance is sometimes
not easy to quantify or is intangible. Because of this, high cost would discourage
cost conscious management to install one.

3. Flexibility: A good control system should be capable of being adjusted to meet

changing circumstances in the organizational operation. If a company’s plans or
operations are modified the controls should be modified without any undue
inconvenience to management or employees.
4. Management by Exception: The essence of control is to detect deviation or
variance from established norm. a good control system is one that helps to detect
the variation with ease and promptness. If there are so many deviations, it means
that the standard is not realistic. Only situations requiring corrective action should
be brought to the attention of management. The “red light” is sparingly used.

5. Force Planning and Corrective Action: A good control system should force
management to take corrective action. It should induce management to review
their plans and modify their operation to achieve organizational goals more
promptly.

6. Trends and Status: A good control system should indicate the status of
production or sales for example, and also show actual daily and weekly
production. A graphic method of presentation is advocated because it shows

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 trends and the actual production and offers one the opportunity to easily compare
a day’s or a week production against the previous day’s or week’s production. A
good control measure would also indicate the cost of direct material and labour
that were used in such a production to yield a more valid evaluation
measurement.

Types of Control
The most common ways of control are discussed below: these act as restraints or
checks on what is done in the organization.

Budget: Budget is a planning and a control tool. In the face of competing need for
resources, management asks such penetrating question as “what profit, sales volume,
and expense level should out form achieve in a given year?” the answer to this question
will determine the type of resources needed to achieve the objectives. Thus budgeting
often connotes cost minimization. The functions of a budget are:
(1) It facilitates co-ordination, typing together the various units of the organization
that must interact in harmony in order for the firm to function successfully.
(2) It is a basic instrument of planning, a coherent framework of information
regarding future operation.
(3) The comprehensive budget allows for maintenance of control – not merely
assuring that expenditures are limited in total amount, but helping management to
make decisions that are both economical and consistent with overall company
policies.
As a cost control device, budgets have a psychological impact on departments. The
review of performance has an impact upon the way managers will perform. This induces
them to be on the lookout for deficiencies that would result in deviation or a “run” on the
budget and take appropriate steps to rectify them. Managers review their cost as it
relates to cost standard in direct labour, direct material and budgeted costs. These are
the backbone of any cost control system. If actually costs are in excess of standard
costs, then management has not reached a high level of efficiency, and the unfavorable
variance from standard costs must be explained.8

Financial Control: This is a very good instrument for control of the resources. It entails
the use of quantifiable measures to monitor deviations. To aid this process devices such
as ratios, cash flow, return on investments, and payback period are used.
Inventory Control: Inventory management or control is a form of administrative control
that is particularly essential in all manufacturing, wholesale and retail establishments.
The essence of all inventory control is to have the right goods in the right quantity at the
right time and place. Failure to have the right quantity of inventory could cause the loss
of valued customers because it results in the failure of the organization to deliver on
time. The maintenance of optimum inventory levels for the operation of the business
reduces the amount of money that would be tied-up in inventory and makes for the
advantages that could accrue from large quantity purchases.
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Inventory Classification
Inventories can be classified into:
1. Raw material inventory: This includes all items purchased by the plant for further
processing. For the baker, flour, yeast, eggs are part of raw material inventory.
2. Work-In-Process Inventory: This is an intermediate stage of raw material
inventory that is yet to be finished by the plant to enter the last stage.
3. Finished goods inventory: This is the stock of finished goods. These could be
goods awaiting shipment, or they could be goods held in the warehouse owned
and operated by the manufacturer.
The management’s interest in inventory control is to determine the optimum level
of inventory and appraise the decisions and rules for ordering inventory. Not having
enough inventory as pointed out, lead to profit losses. Unfortunately, the lose is a hidden
cost because it is not reflected in the normal accounting reports to management. The
accountant therefore is interested in determining the inventory turnover, turnover period
and minimum inventory.
Techniques for Inventory Control
The techniques for inventory control are:
1. Perpetual Inventory Method:
In the perpetual inventory method which covers raw materials and supplies, the
store card is the most used method of control in small business. A typical store
card would contain the data for all receipts and issues of material, and a section
for new balances. The card would contain what is on order, received, on hand,
issued, allocated and available. It is best to have a perpetual inventory card for
each major item. Car part dealers, bakers, and assembling plants are expected to
have many cards showing all the items they carry and balances. Perpetual
inventory are generally called stock cards. A glance at each card would help the
organization to know the level of inventory and help to determine when to place
an order.

2. Physical Inventory Method:

This is the most frequently used method of inventory control. Two employees
take the stock. One does the physical counting item by item and the other records
it. In Nigeria, companies close for many days once a year in order to check their
inventory store-wide. The advantage of physical inventory method is that it leads
itself to periodic physical inventory count to ascertain the accuracy of unit
balances shown on each card.

In recent times, computers are used by companies for inventory control especially
where many items are involved as in car assembling plants or large car part dealership
stores. For the small businessman, the physical inventory method is still the ideal
method. Efficient inventory management involves four key issues.

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 1. Determination of optimum inventory levels and procedures for their review and
adjustment.
2. Determination of the degree of control that is required for the best result.
3. Planning and design of the inventory control system.
4. Planning of the inventory control organization.
The most important of all these steps is the initiation of corrective actions.
Adult
Auditing is a very important control system. The audit examines records and statements
and expresses an opinion regarding their fairness and accuracy. Audits are not limited to
financial statements. Large corporations have internal auditors who give information on
company operations and reports. Their principal tasks is to ensure that company control
system function as expected and give timely information on deviation and suggest
connective actions.
It is through the activities of the internal auditors that some large organizations have
discovered that some manager collected the payment of some employees who
abandoned their duties, retired or who for one reason or the other were no longer
employees of the company. It has been reported that in large organizations such as the
army, police or universities, divisional heads have failed to report the withdrawal of their
staff or those who got missing during the war as in the case of the armed forces, and
collected their salary for a long period of time. Audits therefore help to remove “ghost”
employees from company pay rolls. The internal auditors ensures that the various
operating divisions observe the polices and procedure prescribed by management.
Thus an internal auditor goes beyond what an external auditor does by evaluating
non-quantitative areas of managerial performance. This type of audit is often referred to
as management audit. Management audit also examines the company’s position in such
areas as market trends, political and social factors influencing the industry and
technological and economic factors. Management audit takes place every two to three
years. Some organizations are very detailed in the exercise that they even examine:
(a) Demand for their products or services;
(b) Stage in product life cycle;
(c) Cost structure vis-a-vis other companies – unique cost advantages;
(d) Competitive conditions in the industry;
(e) Market position – strength of company in major market;
(f) Special competitive considerations such as relative financial strength and the
overall ability of company management.
Break-even Point Analysis (BEP)
The break-even point analysis is another control technique that is often used in some
organizations. Every profit-making organization is anxious to know at what level of
operation that the volume of total revenue will be greater than total costs. The break-
even point is that level of volume at which the total revenue equals the total expenses. At
this point, the company makes no profit and suffers no loss. At the break-even point, it is

106
necessary to classify costs into variable and fixed costs. Variable costs vary in direct
relation to production.
In determining the BEP, the company has to know;
(a) Total fixed costs
(b) Selling price per unit,
(c) Variable cost per unit.
BEP is determined in simple mathematical terms.

BEP = TFC
P-VC
Where TFC = total fixed costs
P = price per unit
VC = variable cost per unit.
The difference between price and variable cost is called contribution margin.
Contribution margin is expressed thus;

Contribution Margin = Volume x price – (volume x variable cost per unit)

= volume x (price – variable cost per unit)

Illustration: A poultry farmer has found out that his total fixed cost per month is N10,000.
Each chicken he produces is sold at N3.00, and the variable cost of production is No. 50
per unit. How many chickens must he sell a month to break even?

BEP = N10,000
N3-N0.50

= N10,000
N2.50 (Contribution Margin)

= N4,000 Units per months.

Beyond the break-even point, any additional unit yields a profit and any volume below
the BEP gives rise to a loss.

Graphic Analysis: The BEP can be represented on a graph as shown in Figure 15.2.

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 BEP is a very useful control device because it points out to the organization the
importance of contribution margin per unit – in this case (N2.50). it helps to establish the
guideline for control – to obtain the BEP at 4,000, the fixed cost must remain constant at
N10,000 and the variable cost must be N0.50 for the organization to have a contribution
margin of N2.50. The profit should occur after 4,000 units are sold. If cost changes,
management will be expected to make necessary changes to bring them back to
established standards. If the organization reduces the variable cost by prudent
management practices, the break-even point will be lower.
The BEP is a good control measure as it helps the organization to monitor cost
increase or decreases. There is often the added incentive to reduce cost by
management in order to show efficiency.
The Imperatives of Effective Control
The best control system is one that is tailored to meet the needs of the organization.
Effective control systems observe the following conditions:
Exception Principle: The exception principle in control demands that management
should concentrate its efforts on matters which deviate significantly from the normal. The
exception principle is often referred to as Management By Deception. Management
devotes its abilities to those issues that deviate from stated standards and delegates to
its subordinate’s routine matters. Where the organization has been set up in a way as to
monitor the deviations from the norms, control becomes very effective as the exceptions
are rectified in time in order to attain optimum results. In organizations with good control
systems, results are measured on the basis of exception. Once the deviation is
identified, it becomes necessary to take corrective action by investigating into the cause
of the error. In sales planning, for example, the deviation may be because of too
optimistic forecast, strike, lack of raw material, or machine break-down which may cause
unexpected delays in production. The identification of the cause of the deviation is an aid
to the correction.

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Feed-back: An ideal control system must provide a timely feed-break. This is necessary
if the problem must be eradicated before it becomes acute. In the production department
for example, the feed-back could be a sensing or measuring system which measures
actual performance in qualitative or quantitative terms. These measurements are
compared with the desired performance. The feed-back system in this case involves
some kind of measurement to what is actually happening. A feed-back could be done by
high technology and could be virtually automatic in other instance, it could be done by an
employee or require managerial intervention.
If a bank or a supermarket wishes to offer an efficient service by ensuring that the
waiting time per customer is not more than five minutes standards, additional cashiers
could be required. This feed-back could be monitored by observation.
Timeliness: Effective control is one that reports deviations promptly. A delay in
identifying a problem could lead to irreversible problems. It is necessary that a good
control system be capable of identifying potential problem areas before they manifest
themselves. Organizations that use the most optimistic forecast in their anticipated cash
flow could discover before the problem becomes acute based on actual sales, if they
could meet the employee payroll one month before the time. This discovery could help
the organization to negotiate a loan with the bank or make other alternative
arrangements.
Economy: Any control system must be worth the expense. Thus the marginal expense
must be equal to the marginal revenue associated with it. It is a waste of resource for a
small organization to install a very expensive control device best suited for large
corporations. A small bakery does not require a sophisticated feed-back system to know
when the number of loaves of bread being produced deviate from the standard. What is
the best control system for checking tardiness in an organization? What will be achieved
by asking employees to sign in, use time cards, or any other device which has to be
evaluated in terms of cost. Anything gained by insisting that all employees report for
work at the same time has to be evaluated against allowing them to report for work
before a specified time and asking them to put in normal eight hours, especially if their
jobs are not interdependent.
It is now an accepted system to ask sales managers to submit monthly progress
reports. The cost-benefit ratio of these reports has not been evaluated by many
organizations. In some instances, the cost in terms of man- hours required to evaluate
them is more than the benefits associated with them as a control measure.
In summary, control is necessary to ensure that actual performance at each
strategic activity point. Actual accomplishment should be evaluated against the
standards and the deviation or variance should be communicated to all concerned
promptly in order to effect corrective actions. This could necessitate changing machines,
employees or installing motivation factors.
It has to be stressed that control is required not only in areas that can easily be
quantified but also in areas that cannot easily be quantified. Thus both quantitative and
qualitative measures are necessary. Areas which are often neglected such as employee
development, both technical and managerial employee attitude and relations and public
attitudes should be included.
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 Control is so important that without it, management functions cannot easily be
appraised. It serves as very good feed-back as to the adequacy of planning, organizing
and directing. If control measures detect any flaws in these areas, a new circle of
management activities starts.
Other factors in good control system include flexibility, understandability, strategic
placement and the use of multiple enter.

Figure 15.3: Qualities of Effective Control System

ACCURAC
Y

CORRECTIVE ACCURACY
ACTION

ECONOMY
MULTIPLE EFFECTIVE
CRITERIA CONTROL
SYSTEM FLEXIBILITY

EMPHASIS ON
UNDERSTANDAB
EXCEPTION
ILITY

REASONABLE
STATEGIC CRITERIA
PLACEMENT

Source: Adapted from: Stephen Robbins and Mary Coulter Management N.I. Prentice-
Hall. 2002, p. 508.

There are no single control measures that will be ideal for all types of organizations.
Before adopting any measure, management should consider contingency factors such
as the size of the organization, degree of centralization, organizational climate and
culture, and the importance of the activity.

Revision Questions
1. Why do planning and controlling functions of management go close together?
Illustrate with concrete example.
2. What do you understand by the control circle? Illustrate with example.
3. (a) What are the advantages of control?
(b) Discuss the characteristics of good control.

4. Discuss some of the techniques or methods of control.

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5. What is the break-even point? Discuss its usefulness.
6. Outline and discuss the features of good control measures.
7. Discuss the relevance of the establishment of standard in control functions. List
the areas where such standards could be established.
8 Write short notes on the following topics as they relate to control
(a) Timeliness of information
(b) Reliability of information
(c) Economic administration
(d) Stressing the exception
(e) Strategic placement
(f) Multiple criteria
9. What challenges could cultural differences present to the control measures in an
organization?

FURTHER REVISION QUESTIONS

1. Define “Management” from the point of view Harold Koontz, Stanley Vance and Henry
Fayol.
2. List and describe five characteristics of Management.
3. Discuss five functions of management.
4. Define Planning and explain five characteristics of planning
5. What is decision making? List and discuss five stages in the decision-making process.
6. List five benefits of Committee system
7. What is an Organization? State the definition of Organizational Chart with a clear
example from a product manufacturing concern
8. Explain the terms “Delegation” and “Decentralization”.
9. What is “Span of control”? Discuss five factors that affect span of Management.
10. Define leadership. Discuss four leadership styles. Briefly explain five functions of
leadership in an organization.
11. Define “Controlling” as a function of Management. State four advantages of control in an
organization.
12. What constitutes the total cost of a product? In Product cost Estimation, how would
define: i. Fixed costs ii. Variable Costs iii. Mixed costs. How would you explain the
“breakeven point” to a first year student?

NOTES
1. [Link] and J.E. Roseuzweia. Organization and Management: A Systems
Approach. New York: McGraw-Hill Book Company, 1970.p. 468.
2. H. M. Carlisle. Management: Concepts and Situations. Chicago: S. R.A. Inc,
1976, p. 555.

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3. Henri Fayol. Industrial and General Administration. Geneva: International
Management Institute, 1929.9.77
4. Carlisle. 1976, pp.561-562.
5. H.T. Amrine et al. Manufacturing: Organization and Management, New Jersey:
6. L.W. Rue and L. L. Byars Management: Theory and Application. Illinois: Richard
D. Irwin, Inc., 1977, p. 300
7. H. Bierman, Jr. and A. R. Drebin. Management According: An Introduction. New
York: The MacMillan Company, 1972, p. 78.
8. Bieman and Drebin. 1972, p. 83.
9. Amrine et al. 1975, p. 225.

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