Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 1: Introduction to Organization and Organizational Behaviour 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 1
Introduction to Organization and
Organizational Behaviour

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Concept and Scope of Organisation and
- - 4-7
Organization Behaviour
3 Importance of Organizational Behaviour - - 7-8
4 Key Elements of Organizational Behavior 1 1 9-11
5 Challenges and Opportunities for OB and its
- 2, I 11-14
implication for managers
6 Summary - - 15
7 Glossary - - 15
8 Terminal Questions - - 16
9 Answers - - 16
10 References - - 17

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1. INTRODUCTION
Recall your school days, when you have participated in cultural events, played matches in
the team, or represented your class for a quiz. You will be able to recall many instances when
you have worked together with your classmates for different activities. We all see different
groups around us, where people work together towards common goals or interests. The very
first organizations we see in our lives are family, schools, small clubs, etc. Other examples of
organizations are colleges, hospitals, hotels, government, manufacturing companies, etc.

In this unit, we will be discussing the nature of organizational behaviour and its importance
for managers. You must know that the most difficult task for a manager is to motivate people,
who have different personalities, needs, perceptions, values, and attitudes. No two
individuals are alike, hence organizational behaviour is introduced in this scenario. O.B. is
made up of two words: organization and behaviour, which means understanding the
organization and understanding behaviour of people in the organization.

1.1 Objectives
After studying this unit, you should be able to:
❖ Explain the concept of Organization and Organizational Behaviour
❖ List out the key elements of OB
❖ Discuss the challenges for OB and examine the Implications of OB for Managers

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

2. CONCEPT AND SCOPE OF ORGANIZATION

An organization is a group of two or more people, that consciously contribute their efforts
towards the achievement of certain goals. Talcott Parsons defines organization as, “a social
unit which is deliberately constructed and reconstructed to seek specific goals.”

The concept of organization refers to the systematic and structured arrangement of people,
resources, and activities to achieve specific goals or objectives efficiently and effectively.
Organizations can take various forms, including businesses, government agencies, non-profit
organizations, educational institutions, and more. Here are some key aspects and principles
related to the concept of organization:
1. Purpose and Goals: Organizations are typically created with a specific purpose or
mission in mind. They define their goals and objectives to fulfill this purpose, guiding
their actions and decision-making.
2. Structure: Organizational structure refers to how an organization is divided into
departments, teams, or units and how these units interact with one another. Common
structures include hierarchical, flat, matrix, and functional structures.
3. Hierarchy: In many organizations, there is a hierarchy of authority and responsibility,
with levels of management or leadership. This hierarchy helps define roles,
responsibilities, and reporting relationships.
4. Coordination: Effective coordination is essential to ensure that various parts of the
organization work together cohesively to achieve common goals. It involves
communication, collaboration, and the alignment of activities.
5. Decision-Making: Organizations make decisions at various levels, from strategic
decisions made by top management to operational decisions made by frontline
employees. Decision-making processes can be centralized or decentralized.
6. Culture: Organizational culture encompasses the values, beliefs, norms, and shared
attitudes that shape the behavior of individuals within the organization. It influences
how employees interact and make decisions.
7. Resources: Organizations require various resources, such as human resources
(employees), financial capital, technology, and physical assets, to operate effectively.
Managing and allocating these resources efficiently is crucial.

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8. Efficiency and Effectiveness: Organizations strive to be both efficient and effective.

Efficiency involves achieving objectives with minimal resources, while effectiveness
focuses on achieving the right objectives to fulfill the organization's mission.
9. Change and Adaptation: In a dynamic environment, organizations must be adaptable
and open to change. They need to evolve their strategies, structures, and processes to
stay relevant and competitive.
10. Stakeholders: Organizations have stakeholders, including employees, customers,
shareholders, suppliers, and the community. Managing relationships with these
stakeholders is essential for the organization's success and reputation.
11. Leadership and Management: Leadership involves setting a vision, inspiring and
motivating others, and providing direction. Management involves planning, organizing,
controlling, and leading to achieve organizational goals.
12. Communication: Effective communication is crucial for sharing information, clarifying
expectations, and ensuring that everyone within the organization is on the same page.
13. Accountability: Accountability ensures that individuals and teams are responsible for
their actions and outcomes. It helps maintain transparency and fosters a culture of
responsibility.

2.2. Concept and Scope of Organizational Behaviour (OB)

Organizational Behavior (OB) is the study and application of knowledge about how people,
individually and in groups behave as individuals as well as groups in the organizations. Its
main purpose is to build better relationships by achieving individual objectives, group
objectives, organizational objectives, and at last, social objectives. According to Stephen P
Robbins - “Organizational behaviour is a field of study that investigates the impact that
individuals, groups, and structure have on behaviours within the organizations for the
purpose of applying such knowledge towards improving an organization's effectiveness”.

Here are some key concepts related to Organizational Behavior:

1. Individual Behavior: OB focuses on the behavior of individual employees within an
organization. It examines factors such as motivation, personality, perception, attitudes,
and decision-making processes. Understanding these factors helps organizations
manage and optimize individual performance.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

2. Group Behavior: Groups and teams are integral parts of any organization. OB explores
how individuals come together to form groups, how they communicate, collaborate,
and make decisions collectively. Effective team dynamics are crucial for achieving
organizational goals.
3. Organizational Structure: The way an organization is structured and organized can
significantly impact employee behavior. Concepts like hierarchy, authority, and
reporting relationships are studied in OB to understand how they influence behavior
and performance.
4. Leadership and Management: Effective leadership and management play a critical
role in shaping organizational behavior. OB explores leadership styles, communication,
power, and influence, as well as how leaders can motivate and inspire employees.
5. Motivation: Understanding what motivates employees is a fundamental concept in OB.
It includes intrinsic (internal) and extrinsic (external) motivators that drive individuals
to perform at their best.
6. Communication: Effective communication is essential for smooth operations within
an organization. OB examines how communication flows within an organization,
including formal channels (such as emails and meetings) and informal channels (such
as grapevine communication).
7. Culture and Diversity: Organizational culture refers to the shared values, beliefs, and
norms that define an organization's identity. OB studies how culture influences
behavior and how organizations can promote diversity and inclusion.
8. Conflict and Negotiation: Conflicts are inevitable in any workplace. OB helps
organizations understand the sources of conflict and provides strategies for managing
and resolving disputes. Negotiation skills are also crucial in reaching mutually
beneficial agreements.
9. Change Management: Organizational Behavior addresses how individuals and groups
react to change, whether it's a change in leadership, technology, or processes. Managing
change effectively is critical for an organization's success.
10. Ethical Behavior: OB considers the ethical dimensions of behavior within
organizations. It examines issues related to ethics, corporate social responsibility, and
how organizations can foster an ethical climate.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Understanding these concepts allows organizations to improve employee satisfaction,

enhance productivity, and achieve their goals more effectively. By applying the principles of
Organizational Behavior, businesses can create a healthier and more productive work
environment.

3. IMPORTANCE OF ORGANIZATIONAL BEHAVIOUR

As discussed earlier, organizations are comprised of people who show differentiated
behaviours. Dealing with such varied behaviors is an essential activity of managers.
Therefore, organizational behaviour helps managers to understand and manage human
behaviour in the workplace. Let us now have a look at how the study of OB is useful to
managers:

Understanding of self and others – OB is a useful tool for understanding human behaviour,
that can be studied at the individual, group, or organizational level. The organizational
behaviour helps an individual to understand himself as well as others better. This also
improves interpersonal relations among all levels of employees. The most significant topics
covered under this aspect are values and attitudes, perception, communication, leadership,
transactional analysis, power, and conflict. An understanding of these aspects will help the
managers in grooming their personality and managing others effectively.

Motivation of human resources – The task of a manager is to get the work done through
subordinates by inspiring them to achieve organizational goals. But this can only be
practiced by a manager if he is aware of the different patterns of an individual’s needs and
desires. Hence, OB helps the manager to understand these differing need patterns and
suitable methods of rewarding employees by fulfilling their needs.

Effective communication – Communication is vital for all managers. It is only through

communication that two people can exchange their views and opinions. Good
communication can lead to wonders in the organization, whereas poor communication can
create blunders. Therefore, to run the organization effectively, managers need to learn first
how to communicate formally and informally with individuals and groups.

Effective organizational climate – This covers a broader view rather than focusing on
narrow aspects. OB stresses creating a healthy climate comprising harmonious

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

interpersonal relations, hygienic working conditions, fair and adequate compensation,

better and safe equipment for performing the job, effective leadership, employee’
participation, etc.

Good human relations – OB strives to maintain harmonious interpersonal relationships.

The study of OB revolves around the people at work and their relations with each other.
Thus, it provides directions to managers as to how to deal with employee problems in
different situations. For example, a worker remains absent for several days and even when
he turns up, he keeps himself away from work. The reason might not always be less
compensation/family problems/strict supervision etc.; it might so happen that the employee
needs recognition for his work. Thus, OB helps managers to understand the different motives
of different individuals and the ways to control them.

Introduction of change in the organization – Change is the law of nature and is inevitable.
This is the result of social, technological, political, economic, or other environmental factors.
Dealing with human resistance is the toughest and the most challenging task for a manager.
Therefore, OB guides managers on how to cope with human resistance by adopting different
techniques for the timely and smooth introduction of change.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

4. KEY ELEMENTS OF ORGANIZATIONAL BEHAVIOR

The key elements or determinants of OB are people, structure, technology, and the external
environment in which the organization operates. People who come together to achieve some
specific goals or to accomplish an objective need a structure where there is a clear flow of
authority and responsibility, a chain of command, division of labour, etc. People use
technology to produce the required goods and services. In addition, these elements influence
and equally get influenced by the external environment. Let us now discuss each of the four
elements briefly. Figure 1.1 illustrates the key elements of Organizational Behavior.

Fig 1.1: Key elements of Organizational Behavior

1. People – As stated earlier, people are the most important resource of an organization.
People make up the internal environment of the organization. They work as individuals
or in groups. For managing people at work, managers must deal with:
i) Every Individual employee who must perform the tasks assigned to him.
ii) Dyadic relationships such as superior-subordinate interactions, employee and
employer relations, employee, and employee relations etc.
iii) Groups and teams who have the responsibility of getting the job done, and
iv) People outside the organization such as customers, suppliers, distributors, and
government officials.
2. Structure – Structure defines the formal relationships of people within organizations.
The jobs are assigned to individuals according to their expertise and specialization.
These people are related based on the roles they perform. The main structure relates

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to authority and responsibility. For example, one person has the authority to make
decisions that affect the work of other people who in turn will obey him. Some of the
key concepts of organizational structure are listed below:
(a) Hierarchy of Authority: Authority is the power and right to make certain
decisions, to punish or reward the employees, and to give directions to others. The
higher the position in the hierarchy, the greater is the authority.
(b) Division of Labor: This refers to the distribution and assignment of responsibilities
to different members of the organization as per that of the social structure.
(c) Span of Control: It is the extent to which a superior can supervise the maximum
number of subordinates efficiently and effectively.
(d) Specialization: This refers to the number of specialties or expertise in the work
performed by individuals within the organization.
(e) Formalization: This refers to the extent to which rules, procedures, policies,
norms, and communications are written down for the ease of employees.
(f) Centralization: It is the degree to which the decision-making authority is
concentrated at the top level.
3. Technology:
Technology is a very important primary aspect of organizational structure in the modern
age. Technology supplies essential resources and equipment to the employee to do their
work efficiently.

Thus, technology affects their activity.

Employees are not able to finish their work with bare hands. Technology makes people’s
work and tasks easier.

Technology effects notably on the correlation of workers in the workplace.

4. Environment:
There is no organization that can survive alone. The environment plays a crucial role in
organizational behavior. The internal environment and the external environment are two
types of environments in which organizations exist. Every organization must work on the
internal that encompasses its culture, its structure, and its resources and external
environment that comprises socio-cultural, economic, political, legal, technological, and

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

geographical forces. These forces influence people’s attitudes, motives, and working
conditions in an organization in many ways.

Management must ensure a good working environment.

SELF-ASSESSMENT QUESTIONS – 1

1. _______________________ are the most important resources of an organization.

2. Structure defines the ____________________ relationships of people within
organizations.
3. The degree to which the decision-making authority is concentrated at the top level
is known as___________________.
4. ____________________is the extent to which a superior can supervise the maximum
number of subordinates efficiently and effectively

5. CHALLENGES AND OPPORTUNITIES FOR OB

There are a lot of challenges and opportunities for today’s managers in using OB concepts.
There are several dramatic changes taking place in the form of threats as well as
opportunities. To name a few, aging of old workers, entry of women in organizations and
that too at high positions, labour getting more and more skilled, corporate downsizing,
innovations in technology, global competition, etc. But the biggest challenge of all is to work
in such types of situations and to manage people during uncertain times.

Let us now discuss the various challenges in detail:

A. Globalization – The world has become a global village. The needs and desires of
customers are changing, organizations are no longer confined to their domestic
boundaries, and labour is becoming more and more mobile. We do see the amount of
sales McDonald’s being a U.S.-based company has in India, Burger-King (a British firm)
sells its burgers in the United States, similarly, Nokia (Finland-based company) recruits
many workers from India, Ford builds its cars in Brazil, Coke (U.S. based company) has
made a remarkable presence in the Indian market with its products.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Implications for managers – Globalization affects managers in two ways: i) an

expatriate manager has to manage a workforce that is likely to have very different
needs, aspirations, and desires from the ones that they are used to managing in their
home countries. ii) they must understand the culture of the local people and accordingly
learn to adapt their management style to these differences, which proves to be very
critical for the success of business operations. One of the main personality traits to be
possessed by expatriate managers is to have the sensitivity to understand the individual
differences among people and exhibit tolerance to them.

B. Managing workforce diversity – Workforce diversity refers to the heterogeneous mix

of employees in terms of gender, race, ethnicity, religion, community, physically
disadvantaged, elderly people, etc. Managing this diversity is becoming a global and
serious concern. For example, managers in Canada, Australia, and United States have to
manage a large number of Asian workers, women are moving to high-profile jobs with
handsome salaries, the ‘blacks’ are holding important technical and managerial
positions in South Africa, similarly youth are making a place into organizations. But the
main reason why organizations are employing this heterogeneous mix of employees is
to tap their talents and potentialities, enhancing the innovativeness of its employees,
securing synergetic effect among the diverse workforces. In spite of working in different
cultural, demographic, or political settings, employees wish to retain their individual
and cultural identity, values, lifestyles, etc. Thus, the major challenge for organizations
is to become more flexible in accommodating diverse groups of people by looking after
their personal, social, and organizational desires.

Implications for managers: Managers must be more personalized rather than being
generalized. This means that they should recognize individual differences and should
treat everyone equally, without discriminating. By doing so, organizations can retain
their employees and improve productivity too. If workforce diversity is not managed
effectively by giving unequal treatment or favoring a few categories of people, then it is
likely that there will be high turnover, low production, and more interpersonal conflicts.

C. Stimulating innovation and change – Today’s organizations must be capable of

implementing innovation and change to be successful in a world of tough competition.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Nowadays only those organizations that maintain flexibility, continuously upgrade

their products and processes, keep on focusing on quality, and beat their competitors
by continuously coming out with new products or services can survive. For example,
Amazon.com is putting up a lot of bookstores by selling its books through the internet,
Nokia keeps on launching new series with enhanced features and better quality, and
beat their competitors with a constant stream of innovative products and services.

Implications for managers: The major challenge for managers is to stimulate

employee creativity and tolerance for change.

D. Improving ethical behavior: The complexities in business have forced the workforce
to face many ethical problems, where they are supposed to define what is right and what
is wrong. The unethical practices found in organizations are:
(a) treating employees unequally
(b) giving unequal pay for equal work
(c) discrimination
(d) producing products that are harmful to the society
(e) openly targeting their competitors and customers
(f) forced selling.

Following unethical practices has become a common practice for many successful
executives, who use inside information for personal financial gain, tap the competitor’s
employees to know their strategies, and whistle-blowing (whistleblowing is a code of
misconduct). (To make this point more clear you can watch the Bollywood movie
‘CORPORATE’, which shows how executives use their own, as well as their competitor’s
employees to win the game). There is no clear demarcation between good/bad or ethical
behaviour being practiced in corporate; differentiating between right and wrong or just
and unjust or fair and unfair has become more ambiguous.

Another example of unethical practice may be of the product MOOV, where they
advertised clearly against IODEX, which, if you apply would spoil your clothes. Similarly,
COKE in one of their ads showed a little boy who wants to drink COKE but is unable to
press the button of the vending machine due to his short height. He presses the Pepsi
button, which he can easily reach and receives two cans. After that, he stands on those 2

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

cans of Pepsi and presses the coke button, and gets a can of coke. The Pepsi cans remain
as they are and eventually, the boy satisfies his thirst and leaves the place with coke!
These examples are cases of unethical behaviour as companies cannot directly attack
their competitors.

Implications for managers:

Managers must evolve the code of ethics to guide employees. Managers should organize
various training programs, seminars, and workshops that will help the employees to
improve their ethical behavior. Companies can also take assistance from consultants,
lawyers, and voluntary service organizations to deal with ethical issues more adequately.
But first, it is the top management who must practice and exhibit positive ethical behaviour
to create an ethically healthy climate for its employees, where they can do their work
productively and can minimize the ambiguities of right or wrong behaviour.

Activity 1

Surf the internet and find information on unethical practices of the corporate world.
• http://www.buzzle.com/articles/ethical-and-unethical-business- practices.html
• http://ezinearticles.com/?Human-Nature-and-Unethical-Behavior-in-
Organizations&id=5928129

SELF-ASSESSMENT QUESTIONS – 2

5. Due to globalization the entire world has become a _______________ village.

6. Workforce diversity refers to the __________________ mix of employees in terms of
gender, race, ethnicity, etc.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

6. SUMMARY
Let us now recall the main points of the unit discussed:
• In section 1.2 we have discussed the meaning and concept of Organization and
organizational behaviour, and in section 1.3 we have discussed the importance of
studying OB for managers.
• In section 1.4, we have talked about the 4 determinants of OB; people, technology,
structure and environment.
• Lastly, in section 1.5, we have discussed the various challenges being faced by managers
and strategies to cope with them.

7. GLOSSARY
• Compensation – Payment made to employees for their work
• Culture – Values universally shared by people
• Dictatorship – Autocracy, absolute rule
• Dyadic – relationships – relationships among people in different positions
• Entrepreneur – A person who starts his own venture
• Expatriate – A person who is sent abroad for some foreign assignment
• Perception – Awareness, observation
• Values – Principles , ethics, morals

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

8. TERMINAL QUESTIONS
1. Define Organizational Behaviour. Why is the study of OB important for managers?
2. Explain the key elements of OB.
3. List out and elaborate on the various challenges faced by organizations and suggest
techniques to overcome them..

9. ANSWERS
Self-Assessment Questions
1. People
2. Formal
3. Centralization
4. Span of Control
5. Global
6. Heterogeneous

Terminal Questions:
1. Define organizational behaviour and discuss the importance of OB for managers to
manage people effectively. For details refer to sections 1.2 and 1.3.
2. There are four main elements of OB- people, technology, structure, and environment.
For details refer to section 1.4.
3. Organizations as well as managers must face several challenges which they have to
manage and respond to adequately. Refer section 1.5, which talks about the different
challenges and ways to face them.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

10. REFERENCES
References:
• Robbins P. Stephen & Judge. A. Tim Othy (2010), Organizational Behaviour, Prentice
Hall
• Singh B. P. & Chhabra T. N., (2005), Organization theory & Behaviour, Dhanpat Rai &
Co. (P) Ltd.
• Rao V. S. P., (2009), Organization Behaviour, Excel Books
• Parikh Margie, Gupta Rajen, (2003) Organization Behaviour Tata McGraw Hill
Education Pvt. Ltd.
• Ivancevich J., & Matteson, M. (1998). Organizational Behaviour and Management, 3rd
ed. Chicago and London: Irwin.

E-References
• http://www.buzzle.com/articles/ethical-and-unethical-business- practices.html
(Retreived on 28 Feb, 2011)
• http://ezinearticles.com/?Human-Nature-and-Unethical-Behavior-in
Organizations&id=5928129 (Retreived on 28 Feb, 2011)

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 2: Introduction to Management 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 2
Introduction to Management

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Case Study - 1 4-8
3 Evolution of Management Thoughts - 2 8-12
4 Role of Managers - 3 12-15
5 Levels of Management - - 16-17
6 Managerial Skills - 4, I 18-19
7 Summary - - 20
8 Glossary - - 20
9 Terminal Questions - - 21
10 Answers - - 21-22
11 References - - 22

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

1. INTRODUCTION
During the prehistoric days man’s living was based on hunting, life was rather simple but
then too, men hunted and women managed for food. They chose a leader who could lead
them to hunting, and they chose someone to make their hunting equipment sharp and
precise. They stored food for the lean days and sought new places to find food. At a very
rudimentary level, this was planning, specialization, and division of labour, all of which are
a part of management. As man progressed, his activities became more complex, and
multifunctional teams came into being. His management techniques, perhaps, became more
complex too, but their fundamentals remained the same. In the previous unit, we learned the
scope and concept of organization and organizational behaviour. This unit is on learning the
basics of management so that we can see how it is used in building organizations.

1.1 Objectives
After studying this unit, you should be able to:
❖ Explain the concept and scope of Management
❖ List the Evolution of Management Thoughts
❖ Discuss the role of Managers
❖ Understand the different Levels of Management and Managerial Skills

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

2. CASE STUDY
Green Path Hotels India Ltd.
The ambience of their economic but unique rooms interspersed with rough and tumbling
village house like verandas make it an ideal place to laze, relax, or use as a place to reinvent
oneself. As the soft tune of the flute flows by, the visitors, attracted to the source of the
flowing music, are even more surprised to see the man behind the melody - a blind beggar
turned court musician of the hotel. Against the gurgling of the artificially created water flow
in which a natural log boat rocks, the music seems to be enthralling. As you sit on the roughly
finished platforms called ‘thinna’, the staff, largely recruited from the villages nearby and
speaking fairly fluent English, float past and hand you over some fresh coconut water slightly
minted to tease your taste buds. As you open a book to catch up with something that you
always wanted to, the fragrance of the warm oil and the touch of softness on your feet turns
into a never-before experience of foot massage.

The restaurant is bubbly and built around huge trees that the hotel group refused to uproot
to give way for man’s favourite concrete, and the food is unbelievable with a little over 25
varieties of dosas served, each with an explanation of its uniqueness and contribution to your
tongue and health. The lobby is like a park interspersed with collections of the past. There is
something unique about his place. There is peace everywhere, and there are people
everywhere, and they go about doing their job as if in heaven supervised by angels.

You hear no telephone rings even as it is picked up at the first call and the soft and persuasive
talk of the front office lady persuading someone to pay up USD 150 for a night may make you
wonder as to how do they manage things here, how does everything look so smooth? Why
do people come here again and again and pay such high tariff? How do they inculcate this
spontaneity, commitment, elegance, and sheer business persuasiveness (or is it subtle
arrogance?) of not relenting to a cajoling customer even at the heat of a half-occupied hotel
premises in the midst of the off season period.

When the owner of the Green Path was asked as to how he does all these so smoothly, his
answer was simple, ‘we manage things well here’. He continued, “We have a series of hotels
all with different ambience themes but with the same level of experience”. They plan their
expansion systematically and induct people to build capacity before they open another. The

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

plethora of employees is not an accident or over employment. This is their training ground
where the passion to deliver this exceptional hospitality experience is injected into their
selected employees.

You may be aware that behind these seemingly simple ways of creating a competitive
advantage, there were men and women and behind them there were deliberate strategy,
smoothened systems, complex processes, and detailed planning. You may then realise that
this is management.

From the case and the introduction, we can realise that management has been happening
right through the history of man and it is all about making things smooth or shall we say
efficient. It is also about achieving our goals which in modern management literature we call
‘effectiveness’.

According to Harold Koontz, “Management is an art of getting things done through and with
people in formally organised groups. It is an art of creating an environment in which people
can perform as individuals and can co-operate towards the attainment of group goals”.
Management is a broad and fundamental concept that plays a crucial role in the functioning
of organizations, whether they are businesses, government agencies, non-profits, or any
other type of entity. It involves planning, organizing, coordinating, and controlling resources
(including human, financial, and physical resources) to achieve the organization's goals and
objectives efficiently and effectively. It involves coordinating the efforts of people to
accomplish common goals and objectives efficiently.

Let us modify the definition of Harold Koontz and define management as ‘the process of
designing and maintaining an environment in which the individuals working in groups
efficiently employ resources and accomplish the selected goals of self and the organisation’.
This definition brings to the fore the following key issues of management:
• It is about people and other resources.
• There are goals but the goals of the individual and the organization have to be managed
• It involves creating an environment where people and resources interact to produce
the goals.

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2.1 Key Functions of Management

Management can be broken down into several key functions:
Planning: This involves setting goals, defining strategies, and developing plans to achieve
the organization's objectives.

Organizing: It includes designing the structure of the organization, allocating resources, and
creating a framework to execute the plans.

Staffing: It is obtaining the appropriate people with the apt skills are obtainable in the
proper places and times to achieve the goals of the company.

Directing: Leadership involves motivating and directing employees, so they work effectively
and contribute to the achievement of organizational goals.

Controlling: This function focuses on monitoring performance, comparing it to the

established goals, and taking corrective actions as needed.

2.2 Importance of Management

From the definition, we can derive the importance of management. If you see the definition
and carefully read the case, we find that management is important because of the following
reasons:
• It helps in achieving group goals – GreenPath Hotels was on expansion and to create the
capacity for service, they had hired more people and were training them in one place so
that when the new hotels are opened, these trained men can go there and be productive
from day one. This is about achieving the goals set, i.e., smooth expansion.
• Optimum utilisation of resources – GreenPath could have avoided hiring these people
in advance and thus saved money but then if they had hired them late, these resources
would not have been ready to render the service and would probably have earned a bad
name in those initially. So there is a trade-off between maintaining the brand name and
the service quality and hiring in advance and bearing the cost. The overstaffing was
therefore deliberate and planned and not the result of a haphazard planning. This is
optimisation of resources.
• Reduces costs – It gets maximum results by using minimum input through proper
planning. You saw how Green Path uses physical, human, and financial resources in such

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a manner that it creates great results at low costs. Management is about cost reduction.
You can see how the physical resources, the flute playing blind man, the foot massage,
and the people are judiciously combined to create happiness to the hotel guests (in hotel
parlance we call the customers guests). These reduced the cost of building expensive
rooms to create the ambience, hiring expensive hotel school graduates to serve the
guests, etc.
• Establishes sound organisation – No overlapping of efforts (smooth and coordinated
functions) is an important lesson from the case. You saw how the service staff moved
around with calmness and rendered the service smoothly which avoided all duplication
of effort and perhaps how they covered each other’s deficiency in service through
teamwork.
• Establishes equilibrium – It enables the organisation to survive in a changing
environment. Green Path was able to see the new era coming with its focus on
environment and social responsibility. It keeps in touch with the changing environment.
Green Path is an example of how it changes to the demand of market/changing the
needs of societies and becomes responsible for growth and survival of organisation. You
saw how Green Path is riding the new wave of sensitivity to environment, social
responsibility of caring for the blind beggar, etc. This is the new reality that Green Path
has been able to capture in its service.
• Essentials for prosperity of society – Efficient management leads to better economical
production and also increases the economic, social, and general welfare of the people.
Good management makes a difficult task easier and more importantly, avoids wastage
of scarce resources. It improves the standard of living. You saw how GreenPath uses the
local men and woman and creates prosperity to the village folks.

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SELF-ASSESSMENT QUESTIONS – 1

1. Efficient __________________ leads to better economical production and also increases

the economic, social, and general welfare of the people.
2. ________________involves setting goals, defining strategies, and developing plans to
achieve the organization's objectives
3. ________________ focuses on monitoring performance, comparing it to the
established goals, and taking corrective actions as needed.
4. Reduction of costs gets __________________ results through _________________ input
through proper planning.

3. EVOLUTION OF MANAGEMENT THOUGHTS

Management is a recent discipline and it draws from the disciplines of Economics,
Psychology, Sociology, Anthropology, etc. However, as we Management Process and
Organisational Behaviour have seen earlier, management has evolved as an independent
discipline. Let us now track how this progression has taken place.

Classical Approach
a. Scientific management theory
The focus of this thought is to increase productivity and efficiency through applying scientific
methods on the shop floor or workplace. It tries to identify the best way of doing a job;
however, emphasizes worker cooperation, management-labour relations and developing
workers, and motivating. However, the focus is on shop floor efficiency through scientific
methods and even motivation is proposed to be executed through a piece rate system or
paying based on the number of pieces of work produced. The thought was led by Fredrick
W. Taylor, and he enunciated the principles of scientific management in 1911 after
experimenting on the shop floor of a steel company as a supervisor. He was influenced by
Frank and Lillian Gilbreth and their ‘Time and Motion’ study (a study that identifies the least
time required for a motion in workplace and make it scientific) of 1900 and that of Henry L.
Gantt who propounded the idea of scientific selection of workers and harmonious
cooperation in 1901. Scientific management in Taylor’s parlance means:

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• Develop a science for each element of a man’s work which replaces the old rule of
thumb method
• Scientifically select and then train, teach, and develop the workman, whereas in the
past, he chose his own work and trained himself as best as he could.
• The workers heartily cooperate with the men so as to ensure that all of the work are
done in accordance with the principles of science which has been developed.
• There is an almost equal division of work and responsibility between the
management and the workmen. The management takes over all work for which they
are better fitted than the workmen, while in the past, almost all of the work and the
greater part of the responsibility were thrown upon the men.
b. Administrative Management, and Bureaucracy
Social scientist Max Weber, between the late 1980s and early 1990s, propounded the idea of
bureaucracy. He was trying to find the systems that put order in a complex industrial
economy. Weber's ideal bureaucracy envisaged hierarchical organization and delineated the
lines of authority in a fixed area of activity, action based on written rules, implementation by
neutral officials, and career advancement based on the idea of primacy of the organization
over the individuals. His thoughts are considered in the scientific school but transcend into
behavioural science area also since he is talking about how people should behave in an
organization and how that should be structured. This includes a system of labour division,
rules, authority hierarchy, and employees placement based on their technical capabilities.

Neo-Classical Approach- Human relations movement and Behavioural approach

Human Resources (Supportive) Approach: The scientific management movement
analyzed the activities of workers, but no attention was ever given to the man working
behind the machines. Individual as well as group relationships were never acknowledged,
the social aspects of a worker’s job at the workplace were completely ignored and full
emphasis was given to maintaining discipline and control. In 1924, Elton Mayo, at Western
Electric’s Hawthorne plant, in Chicago, identified and carried out some experiments to
analyze the importance of human relations at work. The results were shocking and revealed
the importance of working in a group, sharing informal relations, having a friendly
supervisor, creating of group norms, etc. It is from here that even OB came into the scenario,
as OB also studies about human behaviour at work.

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The Human Resource Approach is concerned with the growth and development of people
because people are the central resource of any organization. This approach believes in
creating a climate where people can grow on their own by exercising self-control, possessing
a sense of responsibility, contributing to the best of their capacities, etc. All this will end in
employee satisfaction. Hence, the human resource approach means that better people should
achieve better results.

Behavioural Science theory

The thought was originated by Vilfredo Pareto in 1896, and he researched on organisation
and management relationship. Later, Hugo Munsterberg applied psychology to increase
industrial production in 1912, and around the same time, Walter Dill Scott applied
psychology to advertising, marketing, and personnel in 1910 and 1911. But it was Elton
Mayo and F.J Roethlisberger who made an impact on the behavioural science theory through
their Hawthorne experiments in Western Electric Company in 1933. These experiments
proved that good working relationships with the supervisor and colleagues and the idea of
challenge in the job accounted for higher productivity. The challenge is created by setting
high goals that cannot be normally achieved but which can be achieved with a little
additional effort. These experiments brought to the fore the importance of behavioural
science in management.

Modern Approach-
Quantitative approach
The quantitative approach, also referred to as the management science approach, arose in
prominence during and following World War II. Its origins can be traced back to the pressing
need to make informed decisions concerning strategic and tactical military operations. In
response to this demand, multidisciplinary groups of scientists were assembled to conduct
applied scientific research in this field. The primary objective of these research groups was
to devise optimal solutions for the deployment of military resources. They sought to tackle
complex military and logistical problems by applying mathematical modelling techniques.
These models aimed to represent and analyze the intricacies of the challenges at hand.

By utilizing mathematical models, researchers were able to simulate various scenarios,

evaluate different options, and identify optimal solutions based on specific objectives and

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constraints. Techniques like optimization, simulation, and statistical analysis were employed
to gain valuable insights and support the decision-making process. Following the war, the
quantitative approach transcended its military origins and found applications in diverse
sectors, including business, industry, healthcare, transportation, finance, and government. It
emerged as an invaluable tool for addressing complex problems and enhancing decision-
making processes by providing a systematic and data-driven framework.

Systems theory
Though the systems theory can be traced to biology, where we have cardiovascular system,
nervous system, etc which are fairly independent yet interdependent, it was Chester Barnard
who extended this into management area through his writing ‘Functions of the Executive’ in
1938. In systems theory, we perceive that organisations have a number of fairly independent
systems such as purchase system, operations system, marketing system financial system, etc.
The working of these are independent, but it has to be integrated by the manager. This
theory, perhaps, brings the idea of integration as a key component of management.

Contingency Approach
Traditional management emphasized the basic principle of having one best way to manage
things, and that too across all organizations and in all situations. The situational effect was
completely overlooked. With the changes in the external environment, even the
organizations are changing, and such situational effects require careful analysis of the
changes to bring about effectiveness.

Contingency theorists argue that the external environment and many aspects of the internal
environment influence the structure of the organization, as well as the process of
management. They further suggest that effective management will vary in different
situations depending on the individual and groups, the nature of jobs, type of technology
being used, the type of environment in the organization and its structure.

For example, if the employees are highly mature, responsible and work-oriented, then the
managers can go for participative leadership and decentralization, or can opt for large span
of control to give full freedom to their employees. But, if the employees are not so mature or
avoid taking any responsibility, the managers will have to follow a directive style of

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leadership with centralized authority and narrow span of control. Therefore, the varied
situations affect the structure directly, and hence, the organizations.

SELF-ASSESSMENT QUESTIONS – 2

5. Frederick Winslow Taylor is best known for the introduction of _________________

approach to job design.
6. ____________________is known as 'the Father of Modern Theory of Management’.

4. ROLE OF MANAGERS
In the late 1960s, Henry Mintzberg1, conducted a survey on five executives to determine
what managers do while carrying out their jobs. Based on the results, he concluded that
managers perform 10 different and highly related roles that are attributable to their jobs.
According to their relativeness, he then categorized these ten roles into three broad
categories i.e., interpersonal role, informational role and decisional role. Let us have a close
look at these roles:

Interpersonal role
This role deals with maintaining good relations between the employee and the employer,
and the employee and the employee,internal and external groups etc. The following are the
three important activities to be performed by managers under interpersonal role-

i) Figurehead – this symbolizes social, inspirational, legal and ceremonial obligations to

be fulfilled by managers. Here, the manager is seen as an icon of status and authority.
The manager has to represent the department or organization to others.

For example – the CEO of a company congratulating a new group of trainees, a professor
of one department meeting with other professors to discuss a common issue, a reputed
restaurant’s head chef greeting its customers.

ii) Leader – a leader is one who can protect the organization during crisis time. Leaders
can be within as well as outside the organization. It is the prime duty of a manager to
motivate and direct the employees. They need to recruit people and assign appropriate

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jobs to them, encourage them for self-development, provide them training if needed
and appraise their performance regularly.

For example: Mahatma Gandhi, Winston Churchill, Adolf Hitler, Nelson Mandela are
world leaders and Vijaya Mallya of Kingfisher group, Ratan Tata of TATA Steels, Bill
Gates of Microsoft, etc., are wellknown and famous leaders of the corporate world.

iii) Liaison – the manager acts as a network that gathers the information, exchanges it with
others and develops its knowledge base.

For example: a class representative acting as a liaison officer between the class and the
departmental teachers.

Informational Roles
The next set of roles discuss the importance of information sharing and handling. In this
context, the following are the roles to be performed by individuals:
i) Monitor – this calls for assessing of the internal operations, analyzing their success ratio
and the problems, as well as opportunities, which may arise. All the information
gathered in this capacity is stored and maintained for future references.

For example – a manager informing the marketing head about the specific marketing
strategy a competitor is planning to implement, a PRO (public relation officer)
gathering information from the internet, news bulletins, media for the company’s
reference.

ii) Disseminator – the next important role to be performed by the manager is to procure
relevant information required by the company people from the external environment
and then distributing it wherever necessary. This is usually done by the different heads
/ PROs / supervisors etc.
iii) Spokesperson – a manager has to be capable enough to represent his own department
/ unit / division / company in front of the external groups regarding the company’s
plans, policies, profits, results, decisions etc.

For example – Maneka Gandhi acting as a spokesperson for the WWF (World Wide
Fund for wild life) to save the lives of the rarest species and especially the Royal Bengal

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Tigers, Amitabh Bachchan acting as a spokesperson for ICICI Prudential, Nirupama Rao
(IFS) acting as a spokesperson in negotiations between India and Pakistan.

Decisional Roles
A major part of the manager’s time is spent in taking some or the other type of decisions.
These are the types of managerial roles that rotate around making decisions. There are four
types of decisional roles:
i) Entrepreneur: Like entrepreneurs, managers also initiate many of the new projects and
assignments for improving the performance and image of their organization. Like an
entrepreneur, a manager has to continuously predict unforeseen circumstances, should
be ready to face risks, take sound decisions, acquire and utilize the resources of the
organization in an optimum manner.

For example: Dhirubhai Ambani (founder of Reliance company), M.S. Oberoi (founder
of the Oberoi Group of Hotels), Narayana Murthy (One of the founders of Infosys
Technologies Limited), Verghese Kurien “father of white revolution in India”( chairman
of the Gujarat Co- operative Milk Marketing Federation Ltd(GCMMF).

ii) Disturbance Handler: Managers are responsible for maintaining the culture of the
organization. In this context, if any dispute arises among the subordinates due to
information sharing, allocation of resources, transfer of authorities etc., the manager
has to analyze the cause and resolve the conflict there and then. Here, the manager is
even expected to give fair judgment.

For example: The recent incident in Egypt showed that there was a strong desire among
the public to dethrone their president who was a dictator more than a good leader.
Under the influence of the opposition parties, the public of the country reacted sternly
to oust the dictatorship of Mubarak and invite democracy to their country. Here, it was
the public who acted as a disturbance handler.

iii) Resources Allocator: It’s the manager who is responsible for the allocation of
organizational resources – physical, human, monetary resources. In order to perform
this activity, he has to schedule meetings, ask for the requirements of each department

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or unit, make a search for suitable suppliers, prepare budgets, distribute the acquired
requirements to the concerned departments/units etc.

For example: Now-a-days, almost in every organizations there are purchase

departments or committees and the manager heading those departments is supposed
to initiate all the activities discussed above.

iv) Negotiator: Managers also needs to act as negotiators when they enter into discussions
and bargains with other groups. Managers out here have to negotiate in such a way that
they can gain maximum advantage for their own units.

For example – Manager’s negotiations with union leaders, suppliers, customers or with
other companies while entering joint alliances.

SELF-ASSESSMENT QUESTIONS – 3

7. Match the following

• A. Figurehead (i) Managing conflict
• B. Liaison (ii) Innovator
• C. Disseminator (iii) Representative
• D. Entrepreneur (iv) Link between two groups
• E. Disturbance handler (v) Information gathering and distribution
• F. Spokesperson (vi) Symbolic in nature

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5. LEVELS OF MANAGEMENT
Management is typically divided into several levels within an organization, each with its own
set of responsibilities and functions. The specific names and number of management levels
may vary depending on the organization's size, structure, and industry. However, there are
generally three common levels of management:

Top-level Management (Strategic Management):

Also known as senior management, top-level management consists of the highest-ranking
executives in an organization, such as the CEO, President, Vice Presidents, and members of
the board of directors.

They are responsible for making strategic decisions that impact the entire organization,
setting long-term goals and objectives, and defining the overall direction of the company.

They focus on issues like corporate strategy, financial planning, and external relationships
with stakeholders.

Middle-level Management (Tactical Management):

Middle-level management is responsible for implementing the strategies and policies set by
top-level management.

This level includes positions such as department heads, division managers, and regional
managers.

Their role is to coordinate and manage the work of lower-level employees, allocate
resources, and ensure that the organization's objectives are being met within their specific
areas.

They bridge the gap between top-level management and front-line employees.

Front-line Management (Operational Management):

Front-line management, also known as operational management, includes first-line
supervisors, team leaders, and managers of specific workgroups.

They are responsible for the day-to-day operations and activities of their respective teams
or departments.

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Front-line managers typically deal with issues related to production, quality, scheduling, and
employee performance.

Their focus is on executing the plans and strategies set by top and middle-level management,
ensuring that tasks are completed efficiently and effectively.

In some organizations, there may be additional layers of management, or the titles and
responsibilities of managers may vary. The number and arrangement of management levels
can depend on the size and complexity of the organization. Smaller companies may have
fewer management levels, while larger corporations may have more hierarchical structures.

It's worth noting that as organizations evolve and adapt to changing business environments,
management structures can also change. In modern, more flexible organizations, there's
often an emphasis on decentralization, empowerment, and collaboration, which may blur
the traditional lines between these management levels.

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6. MANAGERIAL SKILLS
The knowledge and ability of the individuals in a managerial position to fulfill some specific
management activities or tasks. This knowledge and ability can be learned and practised.
However, they also can be acquired through practical implementation of required activities
and tasks. Therefore, you can develop each skill through learning and practical experience
as a manager.

When we talk about managerial skills, we talk about the skills of a manager to maintain high
efficiency in the way how his or her employees complete their everyday working tasks.
Because of that, managers will need skills that will help them to manage people and
technology to ensure an effective and efficient realisation of their working duties.

Types of managerial skills

Robert Katz identifies three types of skills that are essential for a successful management
process:
• Technical skills
• Conceptual skills
• Human or interpersonal management skills

Technical skills
As the name itself indicates, these skills give the manager knowledge and ability to use
different techniques to achieve what they want to achieve. Technical skills are not related
only to machines, production tools, or other equipment, but they are also skills that will be
required to increase sales, design different types of products and services, market the
products and services, etc.

Technical skills are most important for first-level managers. When it comes to the top
managers, these skills are not something with a high significance level. Therefore, as we go
through a hierarchy from the bottom to higher levels, technical skills lose their importance.

Human or interpersonal managerial skills

Human or interpersonal management skills facilitate a manager’s knowledge and ability to
work with people. One of the most critical management tasks is working with people.
Without people, the existence of management and managers becomes redundant.

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These skills enable managers to become leaders and motivate employees for better
accomplishments. Additionally, they help them to make more effective use of human
potential in the company. Simply said, they are essential skills for all hierarchical levels in
the company.

Conceptual skills
Conceptual skills enable a manager to use their knowledge or ability for more abstract
thinking. That means they can easily envisage the whole by means of analysis and diagnosis
of the different states. As such, they would be in a position to predict the future of a business
or department as a whole.

Conceptual skills are vital for top managers, less critical for mid-level managers and not
required for first-level managers. As we go from the bottom of the managerial hierarchy to
the top, the importance of these skills will rise.

SELF-ASSESSMENT QUESTIONS – 4

8. ________________ management consists of the highest-ranking executives in an

organization, such as the CEO, President, Vice Presidents, and members of the
board of directors.
9. As we go through a hierarchy from the bottom to higher levels, ________________ skills
lose their importance
10. Front-line management, also known as___________________, includes first-line
supervisors, team leaders, and managers of specific workgroups.

Activity 1
Interview any of the two:
A Teacher, Officer, Industry Manager or an Entrepreneur to find out which roles they
play most often. Cite examples. Also, compare the roles performed by one with the
other.

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7. SUMMARY
Let us now recall the main points of the unit discussed:
• In section 2 we have discussed the concept and scope of management and in section 3
we have discussed the evolution of Management thoughts.
• In section 4, we have talked about the roles of managers
• Lastly, in section 5, we have discussed the various levels of management and in section
6 we have talked about managerial skills.

8. GLOSSARY
• Management Function: Management is about creating some valuable output from
some input and for this, management must plan, organize, staff, lead, and control. These
are called management functions.
• Management Process: The management functions occur in a logical sequence and
hence, it is also called the management process. A process means a series of logical
steps. The terms management functions and management process are often used
interchangeably.

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9. TERMINAL QUESTIONS
1. Define management. Determine the importance of management.
2. Explain the different roles of managers.
3. List out and elaborate on the different levels of management.
4. Give details about the evolution of management thoughts.
5. Discuss the types of Managerial Skills.

10. ANSWERS
Self-Assessment Questions
1. Management
2. Planning
3. Controlling
4. Maximum, minimum
5. a-(vi), b-(iv), c-(v), d-(ii), e-(i), f-(iii)
6. Scientific management
7. Henry Fayol
8. Top level
9. Technical
10. operational management

Terminal Questions
1. According to F. W. Taylor, “Management is an act of knowing what to do, when to do,
and see that it is done in the best and cheapest way’’. Refer to Section 2 for more details.
2. Henry Mintzberg conducted a survey on five executives to determine what managers
do while carrying out their jobs. Refer to Section 4 for more details.
3. Management is typically divided into several levels within an organization, each with
its own set of responsibilities and functions. The specific names and number of
management levels may vary depending on the organization's size, structure, and
industry. Refer to Section 5 for more details.
4. Management is a recent discipline and it draws from the disciplines of Economics,
Psychology, Sociology, Anthropology, etc. Refer to Section 3 for more details.

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5. When we talk about managerial skills, we talk about the skills of a manager to maintain
high efficiency in the way how his or her employees complete their everyday working
tasks. Refer to Section 6 for more details

11. REFERENCES/ E-REFERENCES

• James P.S, (2012), Understanding Systems, Instructor Notes to the Students of T.A. Pai
Management Institute.
• Koontz, H. and Heinz, W. (2010), Essential of Management – An International
Perspective, Tata McGraw Hill, New Delhi.
• Nicholas, A. and McGahan, (2002) A. M. An Interview with MichaelPorter, Academy of
Management Executive, P. 47.
• Peters, T. J. and Waterman, R. H. Jr., (1982), In Search of Excellence, Harper and Row,
New York.

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 3
Introduction to Organization Design

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Meaning of Organization Design and Structure 1, 2, 3, 4 1, I 4-8
3 Basic Elements of Organization Design and
5, 6, 7, 8, 9, 10 2, II 9-15
Structure
4 Types of Organization Design 11 III 16-18
5 Forms of organization – Sole Proprietorship,
Partnership, Co-operative Organization and - 3 18-20
Company
6 Summary - - 20
7 Glossary - - 21
8 Terminal Questions - - 22-23
9 Answers - - 23

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1. INTRODUCTION
Organizing is one of the important functions of management. Organizing involves
determining the work to be completed to achieve the organization’s goals. Organizing in its
broadest sense is the process of making the organization’s structure appropriate to its
objectives, strategy, resources, and environment. Design refers to a plan for the construction
of any object or system. Organization design refers to the construction or change of a
structure within which the work of the organization takes place.

It is a process of integrating the people, information, and technology of an organization. It is

used to match the form of the organization to the purpose it seeks to achieve. Through the
design process, organizations try to improve the likelihood that the collective efforts of
members will be successful. Usually, design is considered an internal change under the
guidance of an external facilitator. Managers and all the members work together to describe
the needs of the organization and then create such systems that meet those specified needs
most effectively.

In Units 1 and 2 we have elaborately discussed the concept and scope of organization and
management. In this unit we will discuss how to divide the work among employees equally;
we will also look at the various types of formal structures that facilitate a structure to fit the
organization’s strategies, technology, environment, and people (i.e. the four determinants of
organization, as discussed in section unit 1). We will also discuss the conventional as well as
the contemporary approaches to the design of organizations.

1.1 Objectives
After studying this unit, you should be able to:
❖ define Organization Design
❖ list basic attributes of Organization design
❖ describe various types of Organization Design

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2. MEANING OF ORGANIZATION DESIGN AND STRUCTURE

Organizational design refers to the managerial decisions that determine the structure and
processes which in turn control the activities in an organization. The outcome of
organization design is a system where processes are linked to the jobs and work groups.
These processes include authority and responsibility relationships, communication
networks, planning, and controlling mechanisms.

Organization design begins with the formulation of a strategy (strategies are the plan of
action that are implemented to bridge the gap between the present state and the desired
future state). The strategy is derived from clear, concise statements of vision, and mission,
and forms the organization’s basic philosophy. Strategy unites the aim of the organization
and the actions of the members to accomplish desired outcomes. It is the strategy that
encourages those actions that support the purpose of the organization and discourages those
that do not. Creating a strategy is the task of planning, not organizing. To organize we must
connect people with each other in meaningful and purposeful ways. Further, we must
connect people with the information and technology necessary for them to become
successful.

Organization structure defines the formal relationships among people and specifies both
their authorities and responsibilities. Administrative systems administer the organization
through guidelines, rules and regulations, procedures, and policies. Information and
technology define the processes through which members achieve their outcomes. Each
element must support each of the others, and together they must support the organization’s
purpose.

Organization Structure – an organization is a structural framework for carrying out the

functions of planning, decision-making, controlling, directing, communication, motivation,
etc. According to Koontz and O’Donnell, ‘organization is a structural relationship by which
an enterprise is bound together and the framework in which individual effort is coordinated’.
The formal structure of an organization is of two types- vertical and horizontal in nature. The
horizontal dimension shows the differentiation of jobs resulting into different departments
whereas; the vertical dimension depicts the relationships between authority and
responsibility across all the levels in a hierarchical manner right from top to bottom. Though

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authority and responsibility flow parallel to each other, both vary with the change of
positions. The higher the position, the greater the authority and less the responsibility. The
lower the position, the less is the authority and higher the responsibility. Figure 2.1
demonstrates the three levels of management.

Fig 2.1: Illustrates the three levels of management

The authority and responsibility patterns give rise to three types of organization structure
i.e. (a) line organization (b) staff organization and (c) functional organization. Let us now
discuss these three structures in brief.

(a) Line organization – line organizations are the simplest and conventional forms of
organization. According to J. M. Lundy, “it is characterized by direct lines of authority
flowing from top to bottom of the organizational hierarchy and lines of responsibility
flowing in an opposite but equally direct manner”. The characteristic feature of this
type of organization is the superior-subordinate relationship. The superior delegates
some amount of authority to his junior and likewise, it gets delegated from the

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Fig 2.2: Illustrates the line organization

very top to the very bottom level, forming a line. This established line of authority is known
as line organization. In such type of organization, authority moves upward and responsibility
moves down in a straight line. This organization is also referred to as a military organization.
An example of line organization in the case of the military is shown in Figure 2.2.

Activity 1
Visit the websites of some renowned organizations and make a note of their organization
structure. Later you can compare them and identify what type of structure it is.

(b) Functional organization – F. W. Taylor, who is known as the father of scientific

management developed the concept of functional organization. Functional
organization entails that the organization should be based on various functions. This
approach is based on the principle of specialization. The whole work in the organization
is divided into various departments depending upon the type of work being performed.
A similar type of work is put under one department/unit/division that is controlled by
a departmental head or manager. Various departments like purchase, production, sales,
human resources, finance etc. are formed and respective managers are responsible for

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conducting the activities of their departments. E.g., production manager is responsible

for carrying out activities related to production of goods, HR managers are supposed to
look after all personnel matters of all the departments and so on.

Fig 2.3: illustrates the functional organization1

(c) Line and staff organization – the line and staff organization is a combination of line
and functional organization. Line organization stresses more on command and control
whereas, functional system emphasizes upon decentralization of authority. Hence, a
need was felt to strike a balance between the two, and thus, line and staff organization
came into existence. In this type of structure, the line managers (those who perform the
actual work in the organization) are assisted by the staff to carry out the task in an
efficient manner (as shown in Figure 2.4). The staff’s role out here is advisory in nature.
They assist the line managers who must perform the primary duties of the organization.

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Fig 2.4: Illustrates the line and staff organization

The staff is usually of three types:

i) Personal staff – this includes the personal staff related to the line officers, such as
personal assistant to the general manager.
ii) Specialized staff – this includes various experts who possess specialized knowledge in
different fields like law, medicine, accounting, marketing, etc. For example, a company
engaging a lawyer to render legal advice on any legal matter, hiring a chartered
accountant to look after the accounting problems, a few consultants to provide
suggestions in crisis situations, etc.
iii) General staff – comprises staff that supports the top management people in
performing their day-to-day tasks, such as clerks, attenders, peons etc.

SELF-ASSESSMENT QUESTIONS – 1

1. __________________ are the simplest and most conventional forms of organization.

2. F. W. Taylor, known as the father of _________________, has developed the concept of
functional organization.
3. Specialized staff includes various experts who possess ____________________
knowledge in different fields.

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3. BASIC ELEMENTS OF ORGANIZATION STRUCTURE

There are a few important factors that influence the choice and design of an organization’s
structure. For smooth conduction of activities, one needs to be aware of these elements. Let
us now discuss the basic and important elements of organizational structure.

a) Hierarchy – it is an important concept as it depicts the creation and linkage between

other components of the organization. It is also known as the ‘chain of command’. As
we know, an organization is sliced into three levels viz, top, middle, and bottom level.
Across these levels are many positions that are held by people. Depending upon these
positions people enjoy their authority and responsibilities. As depicted in Figure 2.1,
people placed at the top of the pyramid enjoy a large amount of authority. The moment
we climb down the pyramid, employees start having more obligations to be fulfilled
toward their seniors and enjoy a minimum amount of authority. This unbroken line of
authority and responsibility establishes the pattern of hierarchy in every organization.
It is helpful in establishing the relationship between a senior and his subordinates.
b) Division of work or Specialization – As human beings, we have our own physical as
well as mental limitations. Due to this, a person needs to perform the task where he is
well qualified/skilled/experienced. F.W. Taylor introduced the concept of
specialization in his scientific management theories. Since then, companies have
universally practiced this system. Division of work is also required to bring about
efficiency in performing a task. By repeating the task again and again, the person
becomes specialized in it. Thus, to increase productivity, to reduce complexities and
confusion at work, division of work is essential. It not only trains a person at work but
also provides satisfaction. By specializing in a task, segregation of activities becomes
easier, and it becomes simple to form a structure.
c) Unity of command – ’no man can serve two masters alone’, Henri Fayol borrowed this
idea from the Bible and implemented it in his principles of administrative management.
Unity of command means that a subordinate must be responsible to one senior only. He
will be getting orders from one boss and will be answerable to that boss only (as shown
in Figure 2.5). This is done to minimize misunderstandings and chaos. By providing a
single source of authority through which the instructions and orders will flow towards

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the subordinates, they will get proper guidance and will be easily managed and
controlled by their senior.

Fig 2.5: Illustrates unity of Command

d) Authority and Responsibility – Authority refers to the right to give orders and the
power to receive obedience. Authority comes to an individual by virtue of his position,
and role played. Responsibility is the obligation of a subordinate towards his seniors to
fulfill their orders. There must be parity between authority and responsibility. Because
when having authority and no responsibility, people will start showing dictatorship
and might become autocratic, and having responsibilities and no authority, the person
might not be able to carry out his task properly and will become frustrated. Hence, some
amount of authority should always be delegated to subordinates, so that they can
discharge their duties effectively by making timely decisions.
e) Span of control – this is also known as the span of management/supervision. The span
of control refers to the maximum number of employees that can be supervised
efficiently and effectively by a senior (as shown in Figure 2.6).

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Fig 2.6: Illustrates the span of Control

There are two types of spans – narrow span of control and wide span of control. In a narrow
span of control, there is a smaller number of subordinates to be supervised by a senior and
hence, due to a smaller number of subordinates, the number of levels in the organization gets
increased. This takes the shape of a tall organization. On the other hand, where there is a
larger number of subordinates being directed by a senior, there will be few layers in the
organization, and this will shape it as a wide or flat organization (as shown in Figure 2.7).
Studies reveal that companies like Du Pont, General Motors, Hindustan Lever Ltd., and Bank
of America have wide spans. It has been a debatable issue as to how many subordinates
should report to one senior. Some modern theorists believe that the span of control is
dependent on a few factors such as (i) capacity of the senior to direct a greater number of
subordinates (ii) capacity of subordinates to do the tasks themselves (iii) size of the
organization (iv) nature of work (v) time available for supervision (vi) control mechanism –
if a senior wants direct supervision then he can only go for narrow span and if there is a
thorough reporting system, then wide span can be managed and (vii) effectiveness of
communication – in case of clear and transparent communication, large number of levels can
be managed easily.

Fig 2.7: Illustrates the Tall and Flat structure

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f) Centralization and Decentralization – the main managerial function is concerned

with making decisions. Centralization and decentralization are concerned with the way
decision-making authority is divided at different hierarchical levels. Centralization
refers to the degree to which authority is concentrated at one position i.e. the top
position, whereas, in decentralization, the authority is distributed and passed on to
other levels of the organization. In the words of Henri Fayol, “Everything that goes to
increase the importance of the subordinates is known as decentralization and
everything that goes to reduce it is known as centralization. Whether to have
centralization or decentralization also depends on the size of the organization. Apart
from this, neither of the two can be practiced alone, because if the senior will exercise
the entire authority, then the subordinates will not be able to give their best and there
will be more conflicting situations. Likewise, if the manager passes all his power to his
subordinates, then he might cease to exist. Hence, it is important to create a balance
between the two and accordingly practice depending upon the situation, nature of
work, type of subordinates/seniors, and size of the organization.

Activity 2
Interview a senior manager and find out any incidents related to improper
centralization/decentralization, duality of command, improper span of control, authority
without responsibility and responsibility without authority. Prepare a report on this.

g) Departmentation – departmentation is the process of classifying and grouping all the

activities of an organization into different units and sub-units. There are certain
fundamental methods of dividing the duties and responsibilities within an
organizational structure. The important ones are as follows:
i) Departmentation by function
ii) Departmentation by product or service
iii) Departmentation by region or territory
iv) Departmentation by customers
v) Departmentation by process
vi) Departmentation by time

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Let us now go through these one by one.

i) Departmentation by function – this is the most common form of Departmentation. The
structure is built around the important functions that are carried out in the
organization. The common and similar jobs are grouped together and are put under
one department that is headed by a responsible person. Figure 2.8 illustrates the
functional departmentation of an academic institution where each department is
headed by its respective HOD’s.

Fig 2.8: Illustrates the departmentation by function

ii) Departmentation by product or service – this type of categorization takes place in

large business units that are engaged in the process of manufacturing several unrelated
products or services. In such cases, similar products are grouped together and sections
like finance, production, marketing, R&D etc. are established separately for each
division. Companies like TATA, ITC, and Reliance have adopted this method as they
have diversified themselves into different product lines. In figure 2.9 we have shown
the product departmentation done by ITC Company.

Fig 2.9: Illustrates the product-wise departmentation of ITC Company

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iii) Departmentation by region or territory – this type of departmentation is done where

the organization has dispersed its various business units across the country. Then each
zone/region/territory is headed by a single person who keeps on reporting to the main
office. This is done to capture the sales in most parts of the country and to manage the
geographically dispersed units efficiently. The best example is that of the Indian
railways that have categorized themselves as southern, northern, eastern, western, and
central regions. Another example of regional departmentation is Sheela Foam Pvt. Ltd.,
which is the largest manufacturer of Flexible Polyurethane Foam in India. Its head office
is centered in Greater Noida and seven other units across the country. Figure 2.10
describes the same.

Fig 2.10: Illustrates the regional departmentation of Sheela Foams Pvt. Ltd.

iv) Departmentation by customers – this type of method is adopted when an organization

caters to the different needs of its customers. For example. banks look after the needs
of different sets of customers. They have different policies for senior citizens,
school/college students, working professionals, business organizations, government,
etc. thus, banks departmentalize them according to the varying needs of their
customers.
v) Departmentation by process – in this type of departmentation, the companies whose
products pass through several stages during the production process, categorize
themselves based on the various processes. Taking the example of Nissan Motor
Manufacturing (UK) Ltd, or NMUK which produces automobiles, a car must pass
through various stages to get assembled. For instance, the assembling operation starts
at the press shop where the outer and inner body panels of the vehicle are pressed, then

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it moves on to the second stage which is known as the body shop. At this stage, the
pressed panels are welded together in a body shell. The next stage is the paint shop
where the body shells are painted in a semi-clean environment using solvent-based
based. Likewise, it keeps on moving through the plastic shop, casting shop, unit shop,
and axle shop to get manufactured.
vi) Departmentation by time – in this method the organizations who work for 24 hours
round the clock, segregate their activities based on time. Their employees work on a
shift basis. Examples of this could be call centers where the work is carried out
throughout the day and night.

In hospitals, the nurses work on a shift basis and a patient might get admitted at any time.
Even in residential colleges where there are hostels, the hostel attendees are rotated on
shifts to look after the security of students.

SELF-ASSESSMENT QUESTIONS – 2

4. Match the following

a) Hierarchy (i) Power to receive obedience
b) Division of work (ii) One boss
c) Unity of command (iii) Chain of command
d) Authority (iv) Small number of subordinates
e) Narrow span (v) Specialization

Choose the right answer from the given options:

5. Where employees work on shift basis, it is known as departmentation by
____________________ (a) Number (b) Time (c) Process.
6. Where the organization has dispersed its various business units across the
country, it is known as departmentation by _______________________ (a) Product
(b) Function (c) Region

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4. TYPES OF ORGANIZATION DESIGN

Organization structure was earlier designed as the mechanistic structure that was the most
conventional form of structure. Later on, with more changes and due to environmental
changes the structure got modified and took the form of an organic structure. The organic
structure is the modern form and comprises several ways in which organizations have
designed their structures. Let us now have a close look at these various forms of structures
in this section.

a) Project organization – this is oriented towards completing a big project or several

small projects. Such projects are carried out by a team that comprises individuals who
are experts from different fields and belong to different areas. These people, when
becoming part of the team, have no link with their respective functional departments
till the completion of the project. The number of members of such teams depends upon
the type of project. Each project is headed by a project manager, who is free to take
assistance from inside or outside specialists. The need for project organization is felt
when the organization must meet high standards of performance as in the case of the
construction of buildings, dams, metros, flyovers, etc. Even the IPL (Indian Premiere
League) is an example of a project organization, where one team say in Delhi Dare
Devils, the cricketers belong to different countries and come together to play IPL. Till
the IPL is on they are not supposed to play any other match for their country, and as
soon as the IPL is over, cricketers can move back to their own national teams.
b) Matrix organization – matrix organization is a combination of functional and project
organization. This organization violated the principle of unity of command. Due to
increased competitiveness and pressures, companies prefer having employees who can
work together on different projects simultaneously. In a matrix organization, people
are brought together for a common purpose from different departments/areas/
divisions that are specialized in their own fields. These people must report to their own
respective heads, as well as to their project heads. To minimize conflicts and confusion,
as will arise due to the presence of more than one head, both heads streamline the
activities the individual will be performing, and to whom and when he will be reporting.
Once the task is over, the person joins his own department, and the leftover resources
are utilized in other future assignments. Say, for example, SMIT wants to conduct an

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international conference and for conducting that the top management will select
members from different departments. Till the completion of this conference, the
selected members will be working for their respective departments, as well as will help
the conference head in organizing it. Figure 2.11 shows an example of matrix
organization.

Fig 2.11: Illustrates a matrix organisation2

c) Virtual or Boundaryless organization – this type of organization comprises people

who are physically dispersed across the country or outside the country. They appear to
be a single, unified organization with a real physical location. The members of the
organization are connected by computers, video conferencing, telephones, computer-
aided design systems, etc. These are the independent organizations that share their
resources with other companies to achieve their business goals. Companies nowadays
prefer to become virtual to minimize the cost of establishment and to become

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globalized firms. For example - some web-based brands like Hotmail, Rediff mail,
Yahoo, Google are virtual in nature.

From the above discussion due to changing trends and volatility of the external environment,
the design and structure of organizations is getting highly influenced and is changing at a
rapid pace.

Activity 3
Visit the internet and through the websites of different companies, identify all the three types of
the organizational designs mentioned above.

5. FORMS OF ORGANIZATION
It refers to the different legal structures under which businesses and other entities can
operate. Here are brief explanations of four common forms of organization:

5.1. Sole Proprietorship:

A sole proprietorship is the simplest and most common form of business organization. It is
owned and operated by a single individual who assumes all responsibilities and liabilities.
The owner has full control over the business and receives all profits but also bears all
financial risks and obligations. There is no legal distinction between the owner and the
business entity itself. Taxation is usually straightforward, as the owner reports business
income and expenses on their personal tax return.

5.2 Partnership:
A partnership is a business structure in which two or more individuals or entities (partners)
come together to operate a business for profit. Partnerships can be general partnerships or
limited partnerships, with varying degrees of liability and control for each partner.
Partnerships require a formal partnership agreement that outlines each partner's roles,
responsibilities, and the distribution of profits and losses. Profits are typically distributed
among the partners based on the terms of the partnership agreement. Partnerships may be
subject to pass-through taxation, where profits and losses are reported on the partners'
individual tax returns.

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5.3 Cooperative Organization (Co-op):

A cooperative is a business organization owned and operated by its members, who typically
share common economic, social, or cultural objectives. Members of a cooperative participate
in the decision-making process and share in the profits and benefits generated by the
cooperative. There are different types of cooperatives, such as consumer cooperatives,
worker cooperatives, and agricultural cooperatives, each with its own focus and structure.
Cooperatives emphasize democratic decision-making and the equitable distribution of
benefits among members. Taxation and legal regulations for cooperatives vary by country
and region.

5.4 Company (Corporation):

A company, often referred to as a corporation, is a legal entity that exists separately from its
owners (shareholders). It offers limited liability protection to its owners, meaning their
personal assets are generally shielded from business debts and liabilities. Companies can
issue stock, and ownership is determined by the number of shares held. Companies have a
board of directors that oversees major decisions, and they may have a CEO or management
team responsible for day-to-day operations. There are various forms of companies, including
C corporations (standard (or default) corporations under IRS rules) and S corporations (has
special tax status with the IRS and therefore has some tax advantages), each with its own tax
treatment.

Each form of organization has its advantages and disadvantages, and the choice of which one
to use depends on factors like the nature of the business, the number of owners, liability
concerns, and taxation preferences. It is essential to consider these factors carefully and seek
legal and financial advice before deciding on the most appropriate form for your business or
organization.

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SELF-ASSESSMENT QUESTIONS – 3

7. Profits are typically distributed among the partners based on the terms of the
___________________agreement.
8. A _________________is a business organization owned and operated by its members,
who typically share common economic, social, or cultural objectives.
9. A company, often referred to as a__________________, is a legal entity that exists
separately from its owners (shareholders).
10. _______________________ is owned and operated by a single individual who assumes
all responsibilities and liabilities.

6. SUMMARY
Let us now recall the main points of the units discussed:
• Organization structure is essential to achieve the organizational goals. The organization
structure basically shows the relationships between different jobs.
• In section 3.1 and 3.2 we have discussed the concept of organization design and
structure. Under organization structure we have also discussed the line, functional and
line and staff organization.
• Organization structure of any business enterprise is affected by a number of factors. In
section 3.3 we have studied seven types of elements i.e. hierarchy, division of work,
unity of command, authority & responsibility, span of control, centralization &
decentralization and departmentation.
• In section 3.4 we have discussed the organizational designs that give a shape to the
organization. Here we have looked at mechanistic, organic, project, matrix and virtual
organizational designs.
• In section 3.5 we have discussed Forms of organization – Sole Proprietorship,
Partnership, Co-operative Organization and Company

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7. GLOSSARY
Contemporary Modern, current
Conventional Traditional
Dictatorship Autocracy
Hierarchy Chain of command
Mission Assignment, undertaking
Parity Uniformity
Segregation Separation

8. TERMINAL QUESTIONS
1. Define organization structure. Discuss briefly the three forms of organization structure.
2. Differentiate between (a) authority & responsibility (b) centralization &
decentralization and (c) narrow span of control & wide span of control.
3. Discuss the various types of departmentation with suitable examples.
4. Explain the difference between project organization, virtual organization and matrix
organization.
5. Highlight the important features of forms of organization.

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9. ANSWERS
Self-Assessment Questions:
1. Line organizations
2. Scientific management
3. Specialized
4. (a)Chain of command (b) specialization (c) One boss (d) Power to receive orders (e)
Less number of subordinates.
5. (b) Time
6. (c) Region
7. partnership
8. cooperative
9. corporation
10. Sole Proprietorship

Terminal Questions:
1. Organization structure refers to the formal relationships among people and specifies
both their authorities and responsibilities. There are three forms of organization
structure- line, functional and line and staff organization structure. Refer to section 3.2
for more details.
2. Authority refers to the right to give orders and the power to receive obedience.
Responsibility is the obligation towards a senior to fulfill his orders. In a narrow span
of control, there is a smaller number of subordinates to be supervised by a senior.
Where there is a bigger number of subordinates being directed by a senior, it is known
as wide span of control. Centralization refers to the degree to which authority is
concentrated at one position, whereas decentralization refers to the distribution of
authority to other levels of the organization. Refer to section 3.3 for further details.
3. Departmentation is the process of classifying and grouping all the activities of an
organization into different units and sub-units. The various bases of departmentation
are – Departmentation by function, Departmentation by product or service,
Departmentation by region or territory, Departmentation by customers,
Departmentation by process, Departmentation by time.

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4. A project organization is oriented towards completing a big project or several small

projects. Whereas a matrix organization is a combination of functional and project
organization. Refer to section 3.4.
5. Forms of organization are the different legal structures under which businesses and
other entities can operate. Refer to section 3.5 for more details.

10. REFERENCES
• Singh B.P. & Chhabra T.N., (2005), Organization theory & Behaviour, Dhanpat Rai & co
(p) Ltd.
• Rao.V.S.P., (2009), Organization Behaviour, Excel Books.
• Gupta R.S., Sharma B.D., and Bhalla N.S., (2002), Principles and practice of
Management, Kalyani Publishers.
• Ramasamy T., (1998), Principles of Management, Himalaya Publishing House.
• Tripathi P.C. and Reddy P.N., 4th edition, Principles of Management, Tata McGraw Hill
Publishing Company Limited.

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 4: Functions of Management: Planning 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 4
Functions of Management: Planning

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Case Study - - 4-5
3 Definition and Importance of Planning - 1 6-7
4 Process/Steps in Planning - 2 8-13
5 Strategies, Policies and Planning Premises - 3 14-15
6 Decision-Making - 4 16-18
7 Summary - - 19
8 Glossary - - 19
9 Terminal Questions - - 20
10 Answers - - 20-21
11 References - - 21

Unit 4: Functions of Management: Planning 2

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

1. INTRODUCTION
In Unit 3, we dealt with the introduction to organizational design and structure. In this unit,
we will deal with the definition and importance of planning, steps in planning, decision-
making, and introduction to Strategies, Policies and Planning Premises

Planning is the process of accomplishing goals. It is, in fact, a blueprint of a business, how it
grows, how it implements various actions required for growth, etc. Planning sets goals and
therefore is the cornerstone of management. The unit also discusses some of the well-known
frameworks for strategic planning. Planning should always end in a decision because that
indeed is the purpose of planning. Hence, the unit discusses how decisions are made and
covers the steps to do it.

1.1 Learning Outcomes

After studying this unit, you will be able to:
❖ Define planning and describe the importance of planning.
❖ Describe the different steps in planning
❖ Describe decision-making.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

2. CASE STUDY
Sambhavi Bakers
Sambhavi Bakers was one of the prosperous bakeries in Salem. People from neighbouring
districts often came to Sambhavi to order cakes and other items for their weddings and
parties. The brand name was well known in the neighbourhood. People used to suggest its
owner, Rakhi to open her outlets in other districts so that they could avoid the travel. Rakhi
smiled it away for several years. But as her children grew and she could get more time, she
began to consider the suggestion more seriously. She had the good will, good knowledge of
the product, and a loyal customer base from other districts. But she was not familiar with
business in multiple towns, the problem of logistics, the need for scaling up the production
without compromising her quality, the headache of finding places to locate these outlets,
having managers to run it and who knows that they will not pilfer the money. She intuitively
knew that she could open her outlets in three of four neighbouring districts where she is
known well. She was wondering how to go about doing this.

Her daughter who was doing an MBA programme from the city college suggested her to make
a detailed plan and see if it will work rather than sit and worry and talk about it all day. She
was familiar with this word plan since she was a child but this is different. She had to actually
do it. When she started her Salem venture, she had not made any formal plan but started it
in her house after the death of her husband primarily to earn additional money but as her
popularity grew, she set up a larger shop in the town and used her old home and the area
around it for production of her confectionery. She managed without a loan as she was in no
hurry to grow. The production place and the shop was just a kilometre apart. If there was a
problem in the production, she rushed there and sorted it out and if something was amiss,
she could rush to the production, pick it up, and send the customer happy. At last, yielding to
the wisdom of her daughter, which she hardly trusted, she decided to ask a local consultant
to help her.

The consultant asked her several questions. What is the purpose of this expansion? Which
customers do you want to serve? If it is the rich ones, in any case they come and buy from
you here. Which are the towns she wants to have it and in what time frame does she plan to
do it? What is the likely cost per shop and how will she find money? Who will run it and how

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will she account for it, deposit the money in the bank daily, pay wages, etc? Of greater worry
for her were the latest bout of increase in the raw materials and fuel prices. She had been
holding prices even at the cost of her margin and did not increase her prices over the last
three years despite six to seven fuel price hikes and the increase in raw material cost over a
100%. Fortunately, her products were so unique that she had little competition and the
workers were loyal and committed.

Why cannot she simply franchise it and stick to only production while letting someone else
run the shops? Oh! Unthinkable that someone else sells her stuff and how she could be living
without all those dotting and caring remarks by the customers who loved her product. The
questions kept whizzing in her mind.

Finally, the consultant told her that she needed to plan and decide on all these and that he
would be back after a week. He said, “in the meanwhile, you should think of other planning
issues so that next time we meet, we can draw out a final plan”. As the consultant left, the
word plan rung in her ears, yet she knew little about what she had to do though she knew
that she was a successful baker without doing all these……or had she done all these
unconsciously?

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3. DEFINITION AND IMPORTANCE OF PLANNING

Planning can be defined as a basic management function that enables one to select the
purpose of the business, and how the resources should be collected to achieve that purpose
and to use the available resources optimally to do that. Planning implies goal setting for the
organisation keeping in mind the constraints, opportunities, and threats as much as what the
person or business which is planning wants to do. Thus, a plan is a blueprint for goal
achievement, a blueprint that specifies the necessary resource allocations, schedules, tasks,
and other actions to achieve the purpose.

A goal is a desired future state that the organisation attempts to reach. Goals are important
because an organisation exists for a purpose, and goals define and state that purpose. Goals
specify future ends; plans specify the means to do that. Therefore, planning is about looking
ahead.

Planning answers six basic questions regarding any activity:

• What needs to be accomplished? What are the alternative routes to it?
• When is the deadline?
• Where will this be done?
• Who will be responsible for it?
• How will it get done?
• How much time, energy, and resources are required to accomplish this goal?

Planning is important for the following reasons:

• It helps the management to clarify, focus, and research their businesses or project's
development and prospects.
• It provides a considered and logical framework within which a business can develop.
• It offers a benchmark against which the actual performance can be measured and
reviewed.
• It plays a vital role in helping to avoid mistakes or recognize hidden opportunities.
• In the business context, it guides the development of products, management, finances,
and most importantly, markets and competition.
• It helps in forecasting the future and makes the future visible to some extent.

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• It bridges where we are and where we want to go.

SELF-ASSESSMENT QUESTIONS – 1

1. Planning is a _____________________ management function that enables one to select

the purpose of the business, and how the ____________________ should be mustered
to achieve that purpose.
2. A ______________________ is a desired future state that the organization attempts to
reach.
3. Planning helps management to clarify, ________________________ and _________________
their businesses or project's development and prospects.
4. In the business context, planning guides most importantly __________________ and
________________________.

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4. STRATEGIES, POLICIES, AND PLANNING PREMISES

4.1 Strategy
Strategy is a “military” term. It was Peter Drucker who pointed out the importance of
strategic decision in 1955 in his book, “The Practice of Management”. Here he defined
strategic decision as “all decision on business objectives and on the means to reach them.” It
involved the use of formal and systematic design techniques. It concentrated on long-term
plans and was not concerned with implementation. It ignores the human element. It is also
based on the quantitative aspect and focused externally. On the other hand, later writers
emphasized human and qualitative aspects of strategy. They saw “strategy” as evolutionary.
It showed that “organisational behaviour” is a part of organisational processes.

Strategic planning means planning for strategies and implementing them to achieve
organisational goals. It starts by asking oneself simple questions like what are we doing?
Should we continue to do it or change our product line or the way of working? What is the
impact of social, political, technological, and other environmental factors on our operations?
Are we prepared to accept these changes etc.? Strategic planning helps in knowing what we
are and where we want to go so that environmental threats and opportunities can be
exploited, given the strengths and weaknesses of the organisation. Strategic planning is “a
thorough self-examination regarding the goals and means of their accomplishment so that
the enterprise is given both direction and cohesion.” It is “a process through which managers
formulate and implement strategies geared to optimising strategic goal achievement, given
available environmental and internal conditions.” Strategic planning is formalisation of
planning where plans are made for long period of time for effective and efficient attainment
of organisational goals. Strategic planning is based on extensive environmental scanning. It
is a projection into environmental threats and opportunities and an effort to match them
with organisation’s strengths and weaknesses. Planning is something we do in advance of
acting; that is, it is anticipatory decision-making. It is a process of deciding what to do and
how to do it before action is required. Strategic planning can be defined as a managerial
process of developing and maintaining a viable fit between organization’s objectives, skills
and resources and its changing environment. The company’s strategic plan is the starting
point for planning. It serves as a guide to the development of sound sub-plans to accomplish
organizational objectives. The aim of strategic planning is to help a company select and

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organize its businesses in a way that would keep the company healthy despite unexpected
changes in the environment. It intends to shape or reshape the company’s businesses and
products so that they yield target profits and growth.

Conceptually, strategic planning is very simple: Analyze the current and future
environmental situation, assess the firm's capabilities, determine the direction of the
firm (mission), and develop means of achieving the mission. In practice, it is a complex
process.

Determination of the mission is done periodically, and the mission remains the same for
many years. Strategies are more dynamic and every year as part of the annual plan strategy
is explicitly stated.

Key components and steps typically involved in strategic planning:

1. Mission Statement: Define the organization's purpose, values, and core principles. The
mission statement provides a broad framework for the organization's activities.
2. Vision Statement: Develop a vision for the future that outlines where the organization
aspires to be. This provides a long-term perspective and helps guide decision-making.
3. SWOT Analysis: Conduct a comprehensive analysis of the organization's Strengths,
Weaknesses, Opportunities, and Threats (SWOT). This analysis helps identify internal
and external factors that can affect the organization.
4. Goals and Objectives: Establish specific, measurable, achievable, relevant, and time-
bound (SMART) goals and objectives. These should align with the mission and vision of
the organization.
5. Action Plans: Develop detailed plans outlining how the organization will achieve its
goals and objectives. This may involve breaking down larger goals into smaller,
manageable tasks.
6. Resource Allocation: Allocate resources, including financial, human, and
technological, to support the action plans. Consider the most effective and efficient
ways to utilize resources to achieve the strategic goals.
7. Monitoring and Evaluation: Implement systems to monitor progress toward goals
and evaluate the effectiveness of the strategic plan. This allows for adjustments and
improvements to be made as needed.

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8. Communication: Clearly communicate the strategic plan to all stakeholders, both

internal and external. This helps ensure that everyone understands the organization's
direction and is aligned in their efforts.
9. Adaptability: Recognize that the business environment is dynamic, and plans may
need to be adjusted in response to changes in the internal or external landscape.
10. Implementation and Execution: Execute the strategic plan with diligence and
commitment. This may involve organizational changes, new initiatives, and ongoing
efforts to align the entire organization with the strategic goals.
11. Feedback and Learning: Encourage a culture of learning and improvement by
collecting feedback from the implementation process. Use this feedback to make
necessary adjustments and continuously improve the strategic planning process.

4.2 Policies
Policies are guidelines, principles, or rules that are established to help organizations achieve
their goals and objectives. They serve as a framework for decision-making and provide a
basis for consistent and effective actions within an organization.

Policies themselves are plans. They are also the result of planning and decision-making.
Policies also have levels. A policy can be as major as that of financing growth through
retained profits.

What constitutes a business policy?

Business policy establishes the parameters or areas which subordinates in an organisation
can make decisions. It enables lower-level management to handle concerns and problems
without constantly seeking advice from upper-level management.

Business policies are the rules that an organisation creates to direct its activities. They
specify the parameters that must be followed while making decisions. The procurement of
resources necessary to accomplish organisational objectives is another area covered by
business policy.

Business policy is the study of top-level management's roles and responsibilities, important
issues influencing an organization's success, and long-term organisational decisions.

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Characteristics of Business Policies

The following characteristics are essential for a successful company policy:
Specific: A policy ought to be precise and unambiguous. The implementation will become
challenging if it is unclear.

Clear: The policy needs to be very clear. Jargon and implications should not be used. There
need to be no confusion when adhering to the policy.

Reliable/Uniform: The policy needs to be sufficiently uniform for the subordinates to

follow it effectively.

Appropriate: The policy ought to align with the current organisational objective.

Simple: All members of the organisation should be able to understand a policy that is
straightforward.

Inclusive/Comprehensive: A policy needs to be comprehensive in order to have a broad

scope.

Flexible: The way a policy is applied and operated should be flexible. This is not to say that
policies should always be changed; rather, they should have a broad application to guarantee
that line managers follow them.

Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of
those who look into it for guidance.

4.3 What is Planning Premises?

According to Koontz O'Donnell, "Planning premises are the anticipated environment in
which plans are expected to operate. They include assumptions or forecast of the future and
known conditions that will affect the operations of plans. E.g. as prevailing policies and
existing company plans that control the basic nature of supporting plans.

The purpose of premises is to facilitate the planning process by guiding, directing,

simplifying and reducing the degree of uncertainty in it. Premises guide planning.

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Planning premises may be classified as follows:

1. Internal and External.
2. Tangible and intangible
3. Controllable and uncontrollable
4. Constant and Variable Premises
1. Internal and External premises
Internal premises exist within a business enterprise. These include resources and
abilities of enterprise in the form of men, material, machine, money and methods.
Competence of management personal and skill labor force may be regarded as the most
important internal premises

External premises are those which lie outside of the firm, There are many kinds of
external premises.
(a) General business environment including economic technological, political, and
social conditions
(b) The product market consisting of the demand and supply forces for the product or
service and
(c) The factor market for land, labor, capital etc.
2. Tangible and Intangible premises
Tangible premises are those which can be expressed in quantitative terms like
monetary units. Unit of product, labor hour, machine hour and so on.

Intangible premises are those which cannot be measured quantitative The example of
such premises is reputation of the concern, public relations, employee morale,
motivation etc.

3. Controllable and uncontrollable premise

This classification is based on controllability.
Control1able premises are those which are entirely within the control and realm of
management. These include organizational policies, structure, systems, procedures etc.
Such premises are mostly internal.

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Uncontrollable premises are those which cannot be controlled by an organizations

action. These include the rate of economic growth. Population, growth, taxation policy
of government, natural climate, war etc.

4. Constant and Variable Premises

• These premises which do not change irrespective of actions taken are constant
premises like men, money, etc. These premises behave similarly under all
circumstances.
• Based on the course of action taken, some premises change which is termed as
Variable premises. These premises cannot be controlled or predicted, for example,
the sales volume of a firm, union and management relations, etc.

Importance of Planning Premises

The premise of planning is the framework on which planning is based. Amid uncertainty
surrounding business and management, it is these planning premises that imply not just
assumptions about the future but also predictions. They are the bedrock on which managers
plan the future course of action. Without proper planning premises, the planning does not
have a solid foundation. If panning premises change, the plans need to change as well. Here
are the primary reasons for establishing planning premises:
• They help in well-organised planning.
• The risk of uncertainty is reduced considerably.
• There is a reduction in the risk of flexibility.
• Managers can do effective coordination.
• It also increases profitability.

SELF-ASSESSMENT QUESTIONS – 2

5. For _________________ analyze the current and future environmental situation, assess
the firm's capabilities, determine the direction of the firm (mission), and develop
means of achieving the mission.
6. __________________ serve as a framework for decision-making and provide a basis for
consistent and effective actions within an organization.
7. The purpose of premises is to facilitate the _____________________ by guiding,
directing, simplifying and reducing the degree of uncertainty in it

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5. STEPS/PROCESS IN PLANNING
Figure depicts the steps/process in planning.

Fig. Steps/Process in Planning

Let us now discuss these steps in detail.

• Being aware of opportunities – This means being aware of the customer needs,
market, competition, our strengths, and weaknesses. For example, Sambhavi being
aware of the customer need to have the outlets in other districts. This is usually done
through market research, competitor analysis, and analysis of own strengths and
weaknesses through a formal process called SWOT analysis (Strength, Weaknesses,
Opportunity, and Threat).
• Establishing objectives – This implies establishing what we want to be and what we
want to accomplish and when and in relation to which market segment. At the highest
level, this is done through vision and mission building. This process takes place at
business level, project level, etc also. For example, establishing the vision and mission
of Raju’s carpenter shop which we did in Unit 1 or establishing the objectives of each
store that Sambhavi intends to open (each of which is a project).
• Developing premises – Deciding on the environment (both external and internal) in
which our plans are going to operate. Business has external environment created by
political factors to include legislation, legal framework, etc. For example, foreign
companies cannot invest directly in multi-brand retail in India. There can be economic

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reasons such as general slowdown in which case the shoppers to the bakery may
decrease, there can be factors such as nuclear family and eating out habit which helps
Sambhavi to have a greater market, etc. The external analysis is done through a process
called PEST analysis (Political, Economic, Social, and Technological). Some add culture
as an additional separate factor while others include it in Social. PEST is a framework
and helps you to think systematically through the factors that could affect. In relation
to the business mission, each of the factors may become a threat or opportunity (or of
course may be neither).
• Determining alternative courses – Identifying the most promising alternatives to
accomplish what we want to. This is done by combining the information about the
opportunities, threats, and own strength and weaknesses. This is done through another
framework called TOWS matrix which we will handle in some detail in a subsequent
section in this unit.
• Evaluating alternative courses – Comparing the alternatives to find out which of them
will meet our goals and at optimal cost and profit keeping sustainability into mind.
• Selecting a course – Selecting the course that we want to follow.
• Formulating plans – This implies making plans that support the course of action by
buying equipment, space, planning the type of HR, etc.
• Qualifying plans by budgeting – Identifying the cost involved, how the financial
resources will be mobilised, what is capital expenditure, what is operational
expenditure, the working capital, etc.

SELF-ASSESSMENT QUESTIONS – 3

8. The term being aware while describing the steps of planning means knowing the
customer needs, market, ______________________, our strengths and weaknesses.
9. Deciding on the environment (both external and internal) in which our plans are
going to operate is called ____________________.

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6. DECISION MAKING
Decision-making can be defined as the way of choosing from the alternatives. Since no action
can be taken without a decision, planning will not go any further without a decision and
hence, decision-making is an integral part of planning even if it is done quickly or with little
thought. The process leading to the decision can be thought of as:
1) Premising (or make a premise on what is right or wrong and acting on it),
2) identifying alternatives,
3) evaluating alternatives in relation to the goal sought, and
4) choosing an alternative, i.e., decision making.

Decision-making process
Decision-making is a crucial aspect of management, and the process involves several steps.
The specific steps can vary depending on the nature of the decision and the context of the
organization, but generally, decision-making in management follows a systematic approach.
Here are the key steps in the decision-making process:
1. Identifying the Problem or Opportunity:
• The process begins with the recognition that a decision needs to be made. This could
be triggered by a problem that needs to be solved or an opportunity that needs to
be seized.
2. Defining the Decision Criteria:
• Managers need to establish the criteria that will be used to evaluate potential
solutions. These criteria should align with the goals and objectives of the
organization.
3. Gathering Information:
• Decision-makers need relevant information to make informed choices. This may
involve collecting data, conducting research, and consulting with experts or
stakeholders.
4. Identifying Alternatives:
• Generate a range of possible solutions or alternatives to address the problem or
opportunity. Brainstorming and creative thinking can be valuable in this step.

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5. Evaluating Alternatives:
• Assess each alternative against the established criteria. Consider the potential risks
and benefits associated with each option.
6. Making the Decision:
• Choose the best alternative based on the evaluation. The decision-maker may need
to use judgment, experience, and intuition, along with the available data.
7. Implementing the Decision:
• Once a decision is made, it needs to be put into action. This involves developing a
plan and allocating resources to execute the chosen alternative.
8. Monitoring and Evaluating the Decision:
• Keep track of the implementation to ensure it is progressing as planned. Evaluate
the outcomes and make adjustments if necessary.
9. Feedback and Learning:
• After the decision is implemented and its outcomes are observed, gather feedback.
Analyze what worked well and what could be improved. Use this information for
continuous learning and improvement.
10. Communication:
• Throughout the process, effective communication is crucial. Ensure that relevant
stakeholders are informed about the decision, the reasons behind it, and how it will
be implemented.

It's important to note that decision-making is not always a linear process, and steps may
overlap or be revisited based on new information or changes in the situation. Additionally,
the level of complexity and the time frame for decision-making can vary, ranging from
routine operational decisions to strategic, high-stakes choices.

Importance of decision-making:
In essence, management is a collection of decision-making procedures. An organization's
managers are in-charge of making decisions and making sure those decisions are
implemented in a way that advances the stated aims or objectives.

Making decisions is arguably the most significant aspect of a manager's job. It is the most
crucial component of the planning process. When managers plan, they make decisions about

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a variety of things, including the objectives their company will pursue, the resources they
will employ, and the personnel who will carry out each necessary activity.

The management must determine how to address deviations from plans when they go awry.
In actuality, the managers are continuously involved in a succession of decision-making
throughout the planning process. The efficacy of the plans that managers create is
significantly impacted by the caliber of those judgements. The manager is responsible for
determining the process's structure, task allocation, accountability, and connection types, as
well as how these things are established.

Making decisions is crucial to coordination in order to maintain unity of action. It will be

responsible for determining how the standard will be formed, how deviations from the
standard will be corrected, how the principles will be established, how instructions will be
delivered, and so forth.

Effective decision-making is essential for effective managerial performance. The majority of

profit-seeking companies' managers are constantly faced with making a wide range of
crucial decisions regarding things like capital investments, dividend policy, personnel issues,
cost control, advertising, and pricing. Similar to this, managers of public companies and non-
profit organisations must make critical judgements on a variety of crucial issues.

Making decisions is another factor used to classify someone as being in management or not.
He is considered to be a member of the management team if he makes decisions. In the words
of George Terry: “If there is one universal mark of a manager, it is decision-making.”

SELF-ASSESSMENT QUESTIONS – 4

10. Brainstorming and creative thinking can be valuable while __________________in

decision-making process.

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7. SUMMARY
Let us recapitulate the important concepts discussed in this unit:
• Planning is a very basic step in business. The process attempts to answer several
questions such as the business one wants to enter, the strategy that one should follow
taking into consideration the external factors, and the competitive position in the
market. Thus, planning is an essential step that cannot be skipped.
• Planning ensures that the scarce resources deployed are not wasted and that it is
utilised to the full.
• While these give us the framework to plan, we have to make a decision. Typically, the
process of decision is about identifying the alternatives and then making a choice from
these alternatives.
• Planning without decision making is ineffective and the managers are paid to plan and
decide and hence, the importance of learning the nuances of doing it well.

8. GLOSSARY
• Planning: Process which enables one to select the purpose of the business, and how
the resources should be mustered to achieve that purpose to include using the available
resources optimally to do that.
• Strategy: Strategy refers to the course of action which is required to achieve the
objectives of an organisation and implement its goals. In other words, strategy is a
means to achieve goals.

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9. TERMINAL QUESTIONS
1. Describe the importance of planning.
2. Discuss the different types of planning premises.
3. Describe the steps in decision-making process.
4. Explain the importance of Strategies and Policies.
5. Explain the steps in planning.

10. ANSWERS
Self-Assessment Questions
1. Basic, resources
2. Goal
3. focus, and research
4. Markets and competition
5. strategic planning
6. Policies
7. premises
8. Competition
9. Developing premise
10. identifying the alternatives

Terminal Questions
1. Planning provides a logical framework within which a business can develop. Refer
Section 3.3 for more details.
2. Planning premises provide a background against which the estimated events take
place. These are the events that affect planning. Refer Section 3.5 for more details.
3. Decision-making is the process of making choices by identifying a decision, gathering
information, and assessing alternative resolutions. Refer Section 3.6 for more
details.
4. Creating a strategy and drafting the policy can help you make the policy option you
selected actionable. Refer Section 3.5 for more details.

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5. Planning is an essential step what managers at all levels take. It requires making
decisions since it includes selecting a choice from alternative ways of performance.
Refer Section 3.4 for more details.

11. REFERENCES/ E- REFERENCES

• Chan, K. W. and Renee, M. (2005), Blue Ocean Strategy: How to Create Uncontested
Market Space and Make Competition Irrelevant, Harvard Business Review, Boston
• Harold, K and Heinz, W. (2010), Essential of Management – An International Perspective,
Tata McGraw Hill, New Delhi.
• Alex O. F, (1963), Applied Imagination, 3rd edition, Scribner, New York.
• “Mr. Creativity”, The Economist, August 17, 1996, p. 55
• Management: A Global Perspective, Heinz Weihrich, and Harold Koontz,
• TenthEdition, McGraw-Hill, 1993
• Principles of Management, Harold Koontz and Cyril O'Donnell, Fourth Edition, McGraw-
Hill, 1968 Updated on 15 May 2019, 24 July 2014, 12 Dec 2011

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Unit 5
Functions of Management: Staffing, Leading,
Coordinating and Controlling

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Definition of Organising 1, 2 1 4-6
3 Organization division, span of control and - 2 6-8
organization process
4 Manpower Planning and Staffing in an - 3 9-10
organisation
5 Selection and Training - 4 11-14
6 Performance appraisal - 5 14-17
7 Leading - 6 17-20
8 Principles of coordinating - - 21-22
9 Definition, Importance and Process of - 7 23-26
Controlling
10 Summary - - 26-27
11 Glossary - - 27
12 Terminal Questions - - 28
13 Answers - - 28-29
14 References - - 29

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1. INTRODUCTION
In the previous unit, we dealt with planning and decision-making. We discussed the
importance of planning and the steps in planning.

Once a plan evolves, it is very important to implement the plan because plans without actions
are taboo in the business world. To implement a plan, one must have an organisational set-
up. Organising is centered on the concept of specialisation and division of work. By dividing
and grouping based on similarity, we arrive at organising. Organising is thus an effective and
necessary tool to implement the plan. To run any organisation we need men and machines.
Machines may be computers for knowledge work or mechanical instruments or devices in a
factory, which are manned. Besides various other activities of the organisation such as
managing, planning, making strategy, etc., people are also needed. To find people and to put
them in a job is a scientific process. The entire gamut of HR and HR management is about
staffing the organisation to get maximum productivity from people. Most young managers
are involved in staffing more than in planning and organising and therefore they need to
know this thoroughly.

1.1 Learning Outcomes

After studying this unit, you will be able to:
❖ Describe Organising in terms of management and organization process
❖ Describe Manpower Planning and Staffing in an organisation
❖ Understand the importance of Selection, Training and Performance appraisal
❖ Describe Leading and principles of coordinating
❖ Describe the Controlling Process

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2. DEFINITION AND IMPORTANCE OF ORGANISING

The term organisation is used in a generic sense by many to mean anything from a company
such as Vodafone to a cultural organisation. The word organising often refers to conducting
a party or meeting. But for practising managers, the term organisation means the formalised
and intentional structure of roles and positions.

Organising is a function of the management that follows planning. To execute the plan and
move towards the goal of the business or any concern, several activities must be performed.
These include human activities, activities by machines, financial activities, marketing of
products and services, etc. Thus, we get results only when all the resources are put into
action through numerous activities. The term organising means doing these activities
logically and systematically to get the maximum results. By implication, it also means
communicating between various activities to achieve co-ordination. Thus, the organising
function helps in achievement of results. According to Chester Barnard, “Organizing is a
function by which the concern can define the role positions, the jobs related and the co-
ordination between authority and responsibility.” Hence, a manager always must organise
to achieve results.

Organising can thus be described as:

• Identifying and classifying required activities.
• Grouping of activities to attain the objective.
• Assigning each group to a person (or manager) with the required authority to
supervise, execute, and be held responsible for the output.
• Providing coordination horizontally (at the same level in the concern) and vertically
(between higher and lower organisational hierarchy) by creating an order.

Thus, organising is about creating an intentional structure of roles. It means that the
activities that people do and the roles they occupy are deliberately created.

Organising is important for the following reasons:

• Creates roles – Organising enables a business to create roles or in other words, it links
a person to an activity with its own set of responsibility. Thus an activity and a person
who must perform the activity are linked.

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• Facilitates specialisation – Through organising, all the roles can be categorised into
cohesive whole based on similarity. Thus, the activities along with the roles can be
divided into units and departments. This division helps in bringing specialisation in
various activities of the business and thus enhances efficiency.
• Clarifies authority –- Organisational structure helps in clarifying the role positions of
every manager by defining the powers of each role, the reporting structure, with whom
a manager should communicate and coordinate so that all the activities run smoothly
such that the productivity increases.
• Enables co-ordination – By defining the above relationship, organising automatically
brings co-ordination in activities and ensures mutual co- operation among individuals
(roles). It prevents role conflicts and if it exists, it gives a method to redefine the roles
and the relationship to remove such conflicts.
• Facilitates effective administration – Organising is helpful in defining the job
positions. Thus, it enables a concern to administer the entire system smoothly.
• Supports growth and diversification – It facilitates the growth of a company by
creating functional and homogenous entities of business with clear demarcation and
yet clear linkages. Thus, organising facilitates creating well defined structures without
which a concern cannot grow.
• Provides sense of security – It gives a sense of security to the employees and managers
by clearly indicating their areas of control and its relative importance.
• Defines power, authority and responsibility, delegation and decentralisation –
Organising defines the power of each manager and thereby not only prevents abuse
and conflicts. It also defines the authority and the responsibility. By doing so, it makes
a person accountable for a task and thus facilities goal setting, goal achievement, and
reward management. It also enables delegation and decentralisation. In fact, delegation
and decentralisation will not be easy without a clear organisational structure.
• Enables change – Organising facilitates change. For example, if a new technology has
to be introduced, it is possible to restructure the organisation and create a new and
more effective way of organising to make best use of the technology. This is true for
changing a process or any other change.

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SELF-ASSESSMENT QUESTIONS – 1

1. Organising is a function of the management that follows _______________________.

2. Activities along with the roles can be divided into units and departments. This
division helps in bringing specialisation in various activities to enhance
____________________.
3. Delegation and decentralisation will not be easy without a clear
_____________________.
4. One of the ways to facilitate change due to introduction of new technology and
process is to _____________________ the organisation.

3. ORGANISATIONAL DIVISION, SPAN OF CONTROL, AND ORGANISING

PROCESS

While organising, we group similar activities as we saw in earlier sections. When a

substantial amount of similar activities are grouped we call it a division. E.g., finance division,
which may have several sections such as accounting, recovery, internal audit, payroll, etc. or
marketing division with sections handling sales, branding, product development, etc. The
term department is a loosely used term to indicate the same. Finance department, marketing
department, etc. are often used to mean the same. A department or division indicates a high
degree of homogeneity and a high degree of difference from other divisions and has its head
with considerable autonomy in decision-making and accountability for output in terms of
targets to be achieved.

A department may have several homogenous sections of managers, junior managers, and
employees. This leads us to the questions of how many employees should work under a
manager, how many managers should work under a senior manager, then a division head,
etc.

The term span of control indicates the number of employees or managers who work under
one head. When a very few people report to a head and a chain is made that way upward,
then it is called narrow span. Thus, in a narrow span, a department may have three or four

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sections, under each section head, there could be another two or three sub-sections and
under each sub-section there could be nine or ten employees. In a wide span there may be
20, 30, or more subordinates under one head. Table 5.1 depicts the advantages and
disadvantages of a narrow span and wide span.

Table 5.1: Advantages and Disadvantages of Narrow Span and Wide Span

There is some optimal limit to the number of subordinate a manager can have. But
considering the communication and control in mind, usually we say that the number should
be within a range of seven to ten. This however depends on the nature of the industry and
technology level. In a computerised environment, it is possible to have even 40 to 50 people
under one head. More the number of subordinates under one head, the flatter the
organisation becomes. But keeping the factors that influence the span of control, a balance
must be struck.

Process of organising –- Organising follows four steps after the planning stage. These steps
are self-explanatory. Once organising is completed, staffing process can be done.

Figure 5.2 depicts the four steps in organising.

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Fig. 4.3: Four Steps in Organising

SELF-ASSESSMENT QUESTIONS – 2

5. The term ____________________ indicates the number of employees or managers who

work under one head.
6. Organisations having narrow span require higher quality managers than the ones
having wide span. (True/False)

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4. MANPOWER PLANNING AND STAFFING IN AN ORGANISATION

The entire gamut of HR management emanates from the staffing concept. If staffing is the
process of ensuring that there are people for all activities, this is done through the HR process
of planning, recruiting, selection, performance evaluation and management, reward
management, training and development, and motivation. Hence staffing directly connects to
HR.

HR planning is the process by which the requirement of manpower for an organisation is

forecasted and a plan is created to recruit and select the required people. Thus, the execution
of the staffing process starts with HR planning. Once a plan is created, the people must be
recruited. Therefore, we have a recruiting plan, which is the process of calling for
applications and ensuring that enough qualified applications are made available. From these
qualified applicants, the best is selected based on several factors through the selection
system. They must be oriented, trained, and positioned in various jobs and only then we can
say that we have staffed the various activities.

Even after the employees are positioned, we cannot say that staffing is complete. If an
organisational activity must be done to make the organisation effective, they must perform.
Therefore, the performance management system comes into play and sets objectives,
targets, etc. and defines the way of measuring the achievement of these objectives. The
employees must be rewarded so that they remain motivated and continue to deliver the
objectives. Often you might find that the people manning the activity are not effective for
various reasons and therefore the role of training and development comes in.

Thus, we find that staffing is a complex process and does not end by merely picking up people
and placing them in job roles to do some activities but goes beyond to ensure that people
produce effectively in these roles. Thus, staffing and HR management are inseparable.

Staff function of the management consists of the following activities:

• Prepares manpower planning to match the organisational and departmental
requirements.
• Determines manpower requirements of organisation in terms of quantity and quality
for various activities identified.

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• Makes all the necessary arrangements for acquiring needed human force through
proper and effective recruitment and selection.
• Maintains human force in an effective state including formulating effective labour
policies for a long period and ensuring their implementation.
• Develops manpower to its maximum by providing scientific training and conducting
various development programmes.

The following are the importance of staffing:

• Fills the various positions with competent people who ensure that the activities are
done as efficiently and effectively as possible. If the activities identified by organising
are not filled by manpower who can do the activities, it would follow that no activity
will take place and no goals will be achieved.
• Ensures the quality of manpower by providing appropriate goals, motivation, training,
and other aspects that are essential to keep the staff from delivering.
• Impacts the productivity directly.
• Plays a vital and considerable role, especially about the development of executives and
non-executive employees.
• Helps in matching the expenditure incurred in maintaining human resource and the
benefit derived out of it.
• Creates synergy with other functions of management and makes them strong e.g.,
without staffing, there can be no planning, leading, or controlling. Therefore it is central
to the management process.

SELF-ASSESSMENT QUESTIONS – 3

7. HR planning is the process by which the requirement of ___________________ for an

organisation is forecasted and a plan is created to recruit and select the required
people.

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5. SELECTION AND TRAINING

Selection is the process of putting the right person on the right job. It is a procedure of
matching organisational requirements with the skills and qualifications of people. Effective
selection can be done only when there is effective matching of requirement and potential. By
selecting the best candidate for the required job, the organisation gets the quality
performance of employees. Moreover, organisations face less of absenteeism, less employee
turnover problems, increased motivation and job involvement and higher productivity. By
selecting right candidate for the required job, organisations also save time and money.
Proper screening of candidates takes place during selection procedure. All the potential
candidates who apply for the given job are tested after they are screened through the
selection procedure. According to Dale Yoder, “the hiring process is one or many ‘go, no-go’
gauges. Candidates are screened by the application of these tools. Qualified applicants go on
to the next hurdle, while the unqualified are eliminated.” However, selection must be
differentiated from recruitment, though these are two phases of employment process.
Recruitment is a positive process as it motivates more and more candidates to apply for the
job. It creates a pool of applicants. It is just sourcing of data. However, the selection is a
negative process as many candidates who are deemed to be “Not fit” for the job are rejected
in the process of selecting the “Best fit”. Recruitment precedes selection in staffing process.
Selection involves choosing the best candidate with best abilities, skills and knowledge for
the required job.

Table 5.3 shows the differences between recruitment and selection.

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Selection of Manpower: Every organisation creates a selection process because they have
their own requirements. Although, the main steps remain the same. So, let’s understand in
brief how the selection process works.

1. Job Analysis:
• Begin by conducting a thorough job analysis to understand the skills, qualifications,
and attributes required for each position.
2. Recruitment:
• Utilize various recruitment methods to attract a diverse pool of candidates, including
online job portals, social media, employee referrals, and recruitment agencies.
3. Application Screening:
• Review applications to shortlist candidates based on their qualifications, experience,
and alignment with the job requirements.
4. Interviews:
• Conduct interviews to assess not only technical skills but also soft skills, cultural fit,
and alignment with organizational values.
5. Testing and Assessments:
• Use relevant tests and assessments to evaluate candidates' technical proficiency,
cognitive abilities, and personality traits.

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6. Background Checks:
• Conduct background checks to verify the accuracy of information provided by
candidates and ensure they meet ethical and legal standards.
7. Selection Decision:
• Make informed decisions based on a comprehensive evaluation of each candidate's
qualifications, skills, and suitability for the organization.

Training
Training helps people in choosing, utilizing and evaluating their experiences. Different
people have defined training in different ways. According to H. John Bernardin, “Training is
any attempt to improve employee performance on a currently held job or one related to it.”
In other words, we can say that training focuses on current jobs and it is concerned with
specific job skills and behavior.

Objectives of Training: Training improves the quality of work, changes and molds the
employee’s skills, knowledge and attitude. It also helps employees to increase their
performance. Some of the objectives of training are:
i. To prepare the employee for the changing requirements of the job and the
organisation.
ii. To impart basic knowledge to the new employees and ensure job specific intelligent
performance.
iii. To prepare employee for higher level tasks.
iv. To ensure effective performance in their respective field.
v. To provide an opportunity for interchange of ideas for senior managers and
broadening their minds.
vi. To identify and develop the potential of the employees.
vii. To ensure smooth and efficient functioning of the organisation.
viii. To improve the morale of the employees
ix. To ensure quality in production and operations.
x. To reduce accidents, wastage and supervision.

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SELF-ASSESSMENT QUESTIONS – 4

8. Recruitment precedes ____________________ in staffing process.

9. __________________is required to prepare the employee for the changing requirements
of the job and the organization.

6. PERFORMANCE APPRAISAL
Performance appraisal is the process of obtaining, analysing and recording information
about the relative worth of an employee. The focus of the performance appraisal is
measuring and improving the actual performance and the future potential of the employee.
It aims to measure what an employee does. According to E. B. Flippo, "performance appraisal
is the systematic, periodic and an impartial rating of an employee’s excellence in the matters
about his present job and his potential for a better job." Performance appraisal is a
systematic way of reviewing and assessing the performance of an employee during a given
period and planning for the future as well.

Purpose of Performance Appraisal

The purposes of performance appraisal are as follows:
• Providing feedback to employees about their performance
• Determining who gets promoted
• Facilitating layoff or downsizing decisions
• Encouraging performance improvement Motivating superior performance
• Setting and measuring goals
• Counseling poor performers
• Determining compensation changes
• Encouraging mentoring and coaching
• Supporting manpower planning or succession planning
• Determining individual and organisational training and development needs
• Providing legal defensibility for personnel decisions
• Confirming that good hiring decisions are being made

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• Improving overall organisational performance by aligning individual goal with

organizational goal.

Process of Performance Appraisal Performance appraisal is planned, developed and

implemented through a series of steps. The steps that are involved in the process of
performance appraisal are given in figure 5.5

i) Establish performance standards: In an appraisal system, performance standards are

required to serve as a benchmark. Every performance is measured against these
benchmarks. These benchmarks or standards should relate to the outcome or desired
result of the job. To avoid any kind of embarrassments, the appraiser and appraisee
must have clear knowledge about the standards of the appraisal. The standards should
be written and developed after thorough analysis of the job. For example, a manager
needs to have the ability to plan, direct, control and delegate. The manager should be
cost conscious and result oriented.
ii) Communicate the standards: The performance standards must be communicated to the
employees so that they can prepare themselves according to the standards. If appraisee
has any reactions, it should be noted and if necessary, certain changes or modifications

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may be done (if the organisation’s policy allow). The appraiser should be ready with
job description and help the employees in setting their goal or target.
iii) Measure actual performance: The third step is to measure the actual performance.
Various dependable tools are available and any one can be chosen to appraise the
performance. Managers usually use personal observation, statistical reports, written
reports and oral reports to measure the actual performance. These measurements can
be of two types: subjective and objective. Objective performance measures are
quantitative where job performance can include length of service, quality of
production, absenteeism etc. Subjective measurements are based on the opinion of the
evaluators which cannot be verified by others. It can be knowledge of goals or rating by
the superiors based on level of commitment, competence etc. Subjective measures are
more suitable for middle level jobs.
iv) Compare actual performance with standard: The next step is comparing the actual
performance with the expected one. It may be better than the standard or may not be.
It is a difficult task to appraise the performance of another person. If the contribution
and ability of a person is not appraised well, then it may be demotivating and put a
negative impact on the self-esteem of the appraisee.
v) Discuss the appraisal and take action for correction: The result of the appraisal is
communicated and discussed with the employees on a one-to-one basis. The focus of
this discussion is on communication and listening. The results, problems and the
possible solutions are discussed with the aim of solving problems and reaching
consensus. The feedback should be given with a positive attitude as this can have an
effect on the employees’ future performance. The purpose of the meeting should be to
solve the problems and motivate the employees to perform better.
vi) Decision making: The last step of the process is to take decisions which can be taken
either to improve the performance of the employees, take the required corrective
actions or the related HR decisions like rewards, promotions, demotions, transfers etc.
Thus, we can see that the appraisal system should be effective because many crucial
decisions in the organisation are taken on the basis of performance appraisal of the
employees. Appraisal system should be cost effective and quick. The strength of
appraisal system is open communication and post appraisal interviews.

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SELF-ASSESSMENT QUESTIONS – 5

10. The focus of the performance appraisal is measuring and improving the actual
___________________ and the _______________________ of the employee.

7. LEADING
Leading can be defined as the process of setting direction, creating alignment, and creating
engagement to deliver high productivity and to facilitate change. Directing can be defined as
the process by which the managers instruct, guide, and oversee the performance of the
workers to achieve predetermined goals. It is the heart of management process. Planning,
organising, and staffing have got no importance if direction function does not take place.

Directing initiates action and it is from here that the actual work starts. In other words, we
can say that it is the way of converting decisions into actions through people. Directing has
a strong human component and can be perceived as:
• A mechanism by which people are given orders using the authority and held
accountable for the orders given using all means including rewards and punishments.
In this sense, it has a coercive component and submission connotation i.e., the manager
coerces and the employee submits.
• It can also be perceived as a mechanism of guiding workers in doing any work. In the
field of management, direction is said to be all those activities, which are designed to
encourage the subordinates to work effectively and efficiently. This implies support to
the employee. Though it still has a component of coercion, it is much less and the
submissive component is even lesser.
• Another form of directing is defined as a 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 organisational goals.

Importance of Leading
Leading or leadership function is said to be the heart of management process. Therefore, it
is the central point around which accomplishment of goals take place. A few philosophers
call leading as “Life spark of an enterprise”. It is also called as an actuating function of

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management because it is through direction that the operation of an enterprise actually

starts. Being the central character of an enterprise, it provides many benefits to a concern
which are as follows:
1. Initiates actions – Leading is the function which starts the work performance of the
followers or subordinates. Mrs. Rakhi of Sambhavi initiated the actions by giving goals
to the employees. She could have given direction, rules, and regulations. The work
would perhaps still have been done but not with so much enthusiasm. Further, leading
has a self perpetuating component in that the led knows where to do and therefore,
even if they take different routes, ensure that the destination is reached more efficiently
and effectively. This happens because of the human characteristics discussed in earlier
section where we discussed the goal oriented behaviour under ‘human factor’. Through
this function subordinates understand their jobs and work according to the guidelines
and agreed methods. Plans can be implemented only when the actual work starts. Thus,
leading initiates action.
2. Sustains action – Direction, much like leading initiates action but these directions have
to be repeated if the actions have to go on. Leading on the other hand ensures that the
actions go on and course corrections are done automatically by the followers because
of their innate belief in the goal being something desirable to follow. When they face
obstacles, they would either fall back on the leader if the obstacles are too huge to
overcome. This is done when the leading process would ensure that additional
resources including pooled wisdom are pumped in to resolve it.
3. Integrates efforts – Through leading, the superiors are able to guide, inspire, and
instruct the subordinates to work. When every employee, team leader, and division
leader knows that his/her reaching the goal is dependent on other’s effort, there is a
natural flow of inter team and interdepartmental information. If you had been
directing, this relation will not only be forced but also monitored. Literature on
directing will often speak of the need for effective communication and often
communication is considered as the key to directing. The role of communication is no
different in leading but communication often is tacit much like the head of Sambhavi
bakers helping with sales and cleaning when she visits her outlets. Therefore,
integration is much easier and far more effective through leading.

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4. Means of motivation – Leading helps in achievement of goals. A manager makes use of

the element of motivation 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.
You saw how the employees of Sambhavi are praised and rewarded.
5. Provides stability – Stability and balance in a concern becomes very important for a
long-term survival in the market. This can be brought upon by the managers with the
help of four tools or elements of leading function - judicious blend of persuasive
leadership, effective communication, clear performance goals, 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/her so that the performance standards
can be maintained.
6. Copes with the changes – It is a human behaviour to show resistance to change.
Adaptability with changing environment helps in sustaining planned growth and
becoming a market leader. It is a directing function which is of use to meet the changes
in the environment, both internal and external. But when it comes to leading, there is a
much natural flow to change as people automatically embrace change and adapt to their
journey towards the goal. It is the role of the manager to communicate the nature and
contents of changes required for reaching the goal very clearly to the subordinates. This
helps in clarifications, easy adaptations, and smooth running of an enterprise. For
example, Sambhavi shifted from a single outlet to multi-outlets, which means several
changes at all levels. Mrs. Rakhi’s earlier employees would not have seen the
merchandise or kid care. Yet their goal of providing a great service eggs them on. Let us
take the case of a handloom shifting to power loom. This is an important change in the
technique of production. The resulting factors are less of manpower and more of
machinery. This can be resisted by the subordinates. The manager can explain that the
change was in the benefit of the subordinates. Through more mechanisation,
production increases and thereby the profits. Indirectly, the subordinates benefit in the
form of higher remuneration and better quality of life. If you were directing, you will
explain it in this way but if you were leading, you will talk about the automation,
employees’ children going to good schools and studying abroad because of the higher

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income, the modern facilities and healthier environment and better health and less
diseases, etc. Here the individual and organisational goals are merged using motivation
and communication while in the former the effort is still the same but without a vivid
description of the goal. The former makes it far less effective.
7. Utilises resources efficiently – Leading through goal setting helps in clarifying the role
of every subordinate towards his work. The resources can be utilised properly only
when less of wastages, duplication of efforts, overlapping of performances, etc. don’t
take place. Through the goal setting, the role of subordinates becomes clear as
managers make use of their supervisory skills, the guidance, the instructions and
motivation skill to inspire the subordinates. This helps in maximum possible utilisation
of resources of men, machine, materials, and money, which helps in reducing costs and
increasing profits.

From the above discussion, one can justify that leading, surely, is the heart of management
process. Heart plays an important role in a human body as it serves the function of pumping
blood to all parts of the body. In a similar manner, leading helps the subordinates to perform
in the best of their abilities and that too in a healthy environment. Hence, leading is the
essence of management process.

SELF-ASSESSMENT QUESTIONS – 6

11. Leading through _____________________ helps in clarifying the role of every subordinate
towards his work.
12. Through leading, the __________________ are able to guide, inspire, and instruct the
subordinates to work.

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8. COORDINATION
Coordination in management refers to the process of integrating and harmonizing the
activities of different individuals, departments, and functions within an organization to
achieve a common goal. It ensures that various elements work together efficiently and
effectively to accomplish organizational objectives. Coordination is a fundamental
managerial function and is crucial for achieving synergy and optimizing resources. Here are
key aspects related to coordination in management:

Definition:
Coordination can be defined as the integration of activities, efforts, and resources to ensure
that organizational goals are achieved in a harmonious and efficient manner. It involves
bringing together the diverse components of an organization to work cohesively towards a
common purpose.

Brech defines Coordination is balancing and keeping together the team by ensuring suitable
allocation of tasks to the various members and seeing that the tasks are performed with the
harmony among the members themselves.

Principles of Coordination:
1. Harmony of Objectives: All individuals and departments should work towards
common organizational goals. Coordination ensures that the efforts of different parts
of the organization are aligned.
2. Unity of Command: Each employee should have one direct supervisor to avoid
confusion and conflicting instructions. This principle helps in maintaining a clear chain
of command and reduces the likelihood of conflicting directives.
3. Clear Communication: Effective communication is crucial for coordination. Clear and
timely communication helps in understanding expectations, sharing information, and
resolving conflicts.
4. Flexibility: Coordination should be flexible to adapt to changing circumstances.
Organizations need to be responsive to market conditions, technological
advancements, and other external factors.

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5. Mutual Trust and Confidence: A culture of trust and confidence among employees
and departments is essential for effective coordination. Trust fosters collaboration and
open communication.
6. Continuous Process: Coordination is an ongoing process and not a one-time event.
Managers must continuously monitor and adjust coordination mechanisms to ensure
effectiveness.

Functions of Coordination:
1. Integrating Activities: Coordination ensures that the activities of different
departments or individuals are seamlessly integrated to avoid duplication of effort and
resources.
2. Conflict Resolution: Conflicts can arise due to differences in goals, priorities, or
methods. Coordination involves resolving conflicts to maintain a smooth flow of
operations.
3. Optimizing Resources: Coordination helps in optimizing the use of resources by
avoiding redundancies and ensuring that resources are allocated efficiently to achieve
organizational objectives.
4. Improving Communication: Effective communication is a cornerstone of
coordination. It involves disseminating information, clarifying expectations, and
ensuring that everyone is on the same page.
5. Facilitating Change: In a dynamic business environment, organizations need to adapt
to change. Coordination facilitates the smooth implementation of changes by ensuring
that all stakeholders are informed and involved.

In summary, coordination is a crucial aspect of management that involves aligning the efforts
of individuals and departments towards common organizational goals. It is guided by
principles such as unity of objectives, clear communication, and mutual trust, and it serves
functions like integrating activities, resolving conflicts, optimizing resources, improving
communication, and facilitating change. Successful coordination contributes to
organizational efficiency and effectiveness.

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9. DEFINITION, IMPORTANCE, AND PROCESS OF CONTROLLING

Controlling can be defined as measuring and correcting of performance to achieve the
organisational goals. According to Brech, “Controlling is a systematic exercise which is called
as a process of checking actual performance against the standards or plans with a view to
ensure adequate progress and also recording such experience as is gained as a contribution
to possible future needs.” According to Donnell, “Just as a navigator continually takes reading
to ensure whether he is relative to a planned action, so should a business manager
continually take reading to assure himself that his enterprise is on right course.”

It is often considered as a part of planning. Though planning and controlling can be

considered as two sides of a coin, it is possible for us to make a clear distinction between
them because control has to be done against some parameter, which is laid down by
planning. The following is the inter relation between them.
• Planning precedes controlling and controlling succeeds planning.
• Planning and controlling are inseparable functions of management.
• Activities are put on rails by planning and they are kept at a right place through
controlling.
• The process of planning and controlling works on systems approach, which is as
follows:
Planning → Results → Corrective Action (through control)

• Planning and controlling are integral parts of an organisation as both are important for
smooth running of an enterprise. Planning and controlling reinforce each other. Each
drives the other function of management.

Importance of control
Control is important because of the following reasons:
• Creates the basis for the future – It provides a basis for future planning and action
because it identifies and reports the efficiency of a project or any action.
• Guides to keep goals on track – The continuous flow of information about projects and
performance keeps the goals on track by enabling timely corrective action. Thus, it
guides the management in achieving predetermined goals.

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• Prevents repetition of mistakes – It also enables the management to avoid repetition

of past mistakes by enabling one to decide on the future course of action.
• Enables future planning and follow up action – It enables planning for the future and
facilitates follow up action.
• Enables decentralisation – In large organisations where decentralisation is inevitable,
control becomes the key to success because it establishes accountability. The
management cannot delegate authority without ensuring proper control. The targets
or goals of various departments are used as a control technique.
• Enable management by exception – If the work is satisfactory then the top
management should not feel worried. The management by exception enables top
management to concentrate on policy formulation. Various control techniques like
budgeting, cost control, pre-action approvals, etc. allow decentralisation without losing
control over activities.
• Assists co-ordination – Control helps in co-ordination of activities through unity of
action. Every manager will try to co-ordinate the activities of his/her subordinates in
order to achieve departmental goals. Similarly, the chief executives also co-ordinate the
functioning of various departments. The control acts as a check on the performance and
proper results are achieved only when activities are co-ordinated.
• Enables HR functions and motivation – Various control devices act as motivators to
managers as they measure their performance, which itself is a motivator. Besides, it
ensures equity in reward, training, performance evaluation, promotion, and a plethora
of other HR functions. It automatically leads to improvement of performance, which
enables career progression and also prevents arbitrary decisions of many HR functions.

Process (steps) of controlling

1. Establishment of standards – Standards can be defined as selected points that are
critical in execution of a plan measurement, which identifies the efficiency of execution
of the plan. Standards are criterion for performance and can be divided into the
following two types:
• Tangible standards – These standards can be measured, such as profit, return on
investment, rejection rate, customer complaints, etc.

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• Intangibles standards – These include attitude of workers, job satisfaction,

managerial effectiveness, etc. Some caution is required when we call them intangible
as explained below.
2. Measurement of performance – ‘What is measured cannot be improved’ is a well
known axiom. Measurement is necessary for finding out deviations and is perhaps the
most difficult step in controlling. Measurement of tangible standards is easy as it can be
expressed in units, cost, money terms, etc. Quantitative measurement becomes difficult
when performance of manager. Though literature tends to suggest that items such as
attitude of the workers, their morale towards work, the development in the attitudes
regarding the physical environment, communication efficacy, etc. cannot be measured,
this is a misnomer. Attitude surveys, job satisfaction scales, morale scales, etc. do exist
and are used by several large companies. These measures are different from measuring
in terms of specific financial performance, or quantitative output. In many ways, the
focus on intangible measures of performance is a hangover of the past.
3. Comparison of actual and standard performance – Deviation can be defined as the
gap between actual performance and the planned targets. Hence, comparison of actual
performance with the planned targets is very important. We have to find out the extent
of deviation and the cause of deviation. Extent of deviation means whether the deviation
is positive or negative, whether the actual performance is in conformity with the
planned performance and the degree of variance, if any. Once the deviation is identified,
a manager has to think about various causes, which have led to deviations such as
erroneous planning, lack of co- ordination, implementation defect, supervision and
communication ineffectiveness, etc.
4. Taking remedial actions – Once the causes and extent of deviations are known, the
manager has to detect those errors and take remedial measures. First is by taking
corrective measures for deviations which have occurred; and second is by evaluating
the target or standard itself because if things are not rectified even after corrective
actions, it could be due to erroneous target. However, one should take the second option
only with due caution.

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SELF-ASSESSMENT QUESTIONS – 7

13. Coordination is a fundamental ___________________ function and is crucial for

achieving synergy and optimizing resources.
14. Planning precedes _________________ and controlling succeeds planning.
15. Standards are criterion for performance and can be divided into the following two
types: _______________.

10. SUMMARY
Let us recapitulate the important concepts discussed in this unit:
• Organising is a very important process by which the organisation groups its activities
required to achieve the mission so that these activities can be better co-ordinated.
• There are several ways of doing this and every organisation evolves itself depending
on the product, geographical spread, business complexity, and goal of the organisation.
• Organising enables smooth communication between departments. Organisation
structure needs people for manning various activities and this is done through staffing.
• Leading: The process of motivating, guiding, and influencing individuals or groups to
achieve organizational goals.
Staffing Role: Staffing plays a role in leading by fostering a positive work environment,
facilitating communication, and ensuring that employees have the necessary skills and
training to perform their roles effectively.
• Coordinating: The process of harmonizing and integrating activities and efforts to
ensure the smooth functioning of the organization.
Staffing Role: Staffing contributes to coordinating by aligning individual and team goals
with organizational objectives, fostering collaboration, and addressing any conflicts
that may arise among staff.
• Controlling: The process of monitoring, comparing, and correcting work performance
to ensure that organizational goals are being met.

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Staffing Role: Staffing plays a role in controlling by establishing performance standards,

conducting performance appraisals, and addressing any issues related to employee
performance or behavior

11. GLOSSARY
• Authority: That character of communication by which an order is accepted by an
individual and is adhered to.
• Leading: The process of setting direction, creating alignment, and creating
engagement to deliver high productivity and to facilitate change.
• Delegating: Process of handing over specified duties and required authority and
resources to a subordinate with a view to increase organisation’s efficacy.
• Organising: Process of grouping activities so that different groups of activities can be
done cohesively and co-ordinated.
• Selection involves choosing the best candidate with best abilities, skills and knowledge
for the required job.

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12. TERMINAL QUESTIONS

1. Define organisation. Give any three reasons why organising is important.
2. Identity the process of selection of manpower using a schematic diagram.
3. Discuss the principles and process of Performance appraisal.
4. Explain the principles of Coordination.
5. Elucidate the importance and process of Controlling.

13. ANSWERS
Self-Assessment Questions
1. planning
2. efficiency
3. Organizational structure.
4. Restructure
5. Span of control.
6. False
7. manpower
8. selection
9. training
10. performance, future potential
11. Goal setting
12. superiors
13. managerial
14. controlling.
15. Tangible standards and Intangible standards.

Terminal Questions
1. According to Chester Barnard, “Organizing is a function by which the concern can define
the role positions, the jobs related and the co- ordination between authority and
responsibility.” Refer to section 2 for more details.
2. Selection is the process of putting the right person on the right job. It is a procedure of
matching organisational requirements with the skills and qualifications of people.
Refer to section 5 for more details.

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3. Performance appraisal is the process of obtaining, analysing and recording information

about the relative worth of an employee. The focus of the performance appraisal is
measuring and improving the actual performance and the future potential of the
employee. Refer to section 6 for more details.
4. Coordination in management refers to the process of integrating and harmonizing the
activities of different individuals, departments, and functions within an organization to
achieve a common goal. Refer to section 8 for more details.
5. Controlling can be defined as measuring and correcting of performance to achieve the
organisational goals. Refer to section 9 for more details.

14. REFERENCES/E-REFERENCES
• Chester B. I., (1964). “The Functions of the Executive”, Harvard University Press,
Cambride.
• James P.S., (2011). “Instructor notes on the relation between staffing and HR”.
• Koontz, Harold, & Heinz, W., (2010). “Essential of Management – An International
Perspective”, Tata McGraw Hill, New Delhi.

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 6: Introduction to Interpersonal Behaviour 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 6
Introduction to Interpersonal Behaviour

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Nature and Meaning of Interpersonal Behaviour - - 4
3 Concept of Self - 1, I 5-7
4 Transaction Analysis (TA) - 2, 3
4.1 Ego-states 1 - 7-11
4.2 Types of Transactions 2, 3, 4 -
5 Benefits and Uses of Transactional Analysis - II 12
6 Johari Window Model 5, 6, 7, 8, 9 4, III 13-17
7 Summary - - 18
8 Glossary - - 18
9 Terminal Questions - - 19
10 Answers - - 19-20
11 References - - 20

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1. INTRODUCTION
Organizational behaviour focuses on studying the behaviour shown by people in
organizations in different settings. In this unit, we will study the behaviour patterns of
individuals towards each other. Interpersonal Behaviour is how "two persons" interact in
any situation. It is an extremely important issue to strengthen interpersonal relationships in
families, schools, and educational institutions or organizations. When there is strong and
pleasant relationship between two people, it will lead to good behaviour. This behaviour will
result in job satisfaction and productive work, which is eventually what organizations are
looking for. These results would be in terms of less absenteeism, less turnover, better-quality
work, high morale and excellence in working procedures. Such behaviours are always
interrelated. To make this clear, let us take a very simple example of a family. If two people
do not want to marry each other and if they are forced to do so, they might not accept each
other and will start having disputes on even minor issues. This may lead to either separation
or solitude. Similarly, if two people do not want to be in a group and if they are forced to do
so for a group assignment, they may complete it half-heartedly or leave it entirely. This will
surely affect the other group member’s grades and will promote hatred and mistrust which
will have a long-term effect on the entire group.

Therefore, it is essential to develop good interpersonal relationships with others to meet

individual as well as organizational needs.

1.1 Objectives
After studying this unit you should be able to:
❖ Define interpersonal behaviour and Transactional Analysis.
❖ describe the concept of self and the different levels of self-awareness.
❖ demonstrate the ego-states and the various transactions based on them.
❖ Explain Johari Window.

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2. NATURE AND MEANING OF INTERPERSONAL BEHAVIOUR

Interpersonal behaviour determines the depth of relationships. A relationship is normally
viewed as a connection between two individuals such as a parent–child relationship,
teacher-student relationship or employer-employee relationship. People in a relationship
influence other, share their thoughts and feelings, and tend to engage in common activities
together. These relationships usually involve some level of interdependence on the part of
each member of the group. This interdependence results in positive behaviour shown by
group members towards each other, which at last develops good interpersonal relationships.

An interpersonal relationship is an association between two or more people for temporary/

short-term/long-term or permanent durations that may be based on love, affection,
harmony, regular business interactions, or some other type of social commitment.
Interpersonal relationships are formed in the framework of social, cultural, political or other
organizational influences. The framework may consist of family relations, friendship or
marriage relations, relations with associates, work groups etc. These associations may be
regulated by law, custom, norms or mutual agreement.

George Levinger1 has proposed a model of relationship development that consists of five
stages: (a) Acquaintance- at this stage, two people meet each other and start interacting. If
they start liking each other their interactions will move to the next stage, (b) Buildup-this
stage is marked by trust, care, and sensitivity towards each other. Continuity of relationships
depends upon the degree to which each member shares (c) Continuation – this stage
follows mutual trust and understanding to form long-term relationships. This is usually a
long and relatively stable period, (d) Deterioration – not all relationships pass through this
stage but those where mistrust, betrayal, bitterness, or dislike creeps in cease to exist
(e)Termination – the final stage is marked by the end of relationship. In the case of a healthy
relationship, it might occur due to any unfortunate happening such as death, and in the case
of an unhealthy relationship, it will lead to separations.

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3. CONCEPT OF SELF
Self-awareness refers to the conscious understanding of one’s personality, desires, habits,
likes and dislikes. As and when individuals expand their self-awareness, they have a better
understanding of what they did and why they did so. This in turn also empowers the
individuals to lead life the way they want.

But unfortunately, there are lots of people who are unaware of their own desires. As a result,
they get tangled in their own internal dilemmas, unsure about what they want in their life.
They live their life on someone else’s instructions; moreover, allow unknown thoughts to
govern their lives which are none other than the rules set by the family, society, or
organizations. Such people tend to have very low self-awareness. Try to have a look around
people you know, just think whether what they are doing today is an outcome of their own
interest or because it was their parents, wish. Even look at yourself, are you where you
wanted to be or is it the dream of somebody else that you are working upon? If yes, then
surely your self-awareness could be low. Now the question arises - what can you do about
it? The simple answer is to enhance your self-awareness and for that, first, you need to know
the different levels of self-awareness to check out where you are standing.

Levels of Self-awareness2
There are seven levels of self-awareness. Each level shows the thoughts we imagine.
• Reactive – people who exist in this lowest level of self, never take any initiative. They
only become active when their survival is threatened by any external element.
• Follow the Crowd - in this level, people form an example. When they see others heading
towards a certain direction, they assume it to be the right path and immediately start
walking in that direction. Such people are unaware of what they are living for.
• Uniqueness –at this stage, individuals start recognizing their ambitions. They try to
explore and express their individuality by working out their plans. Say, for example,
some might start their own business, some may change their careers, and some may
devote their lives towards society. And by doing so they show their high level of
courage, faith and confidence. Baba Ram Dev’s example can be considered here, he
initiated yoga to cure several diseases and made it popular throughout the world. But
this level is very critical also, as due to enormous pressure one can easily give up too.

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• Discipline – at this level, many individuals have the will to stay and continue in the set
course of direction. They move towards their targets with a disciplined approach and
never get sidetracked by the false beliefs that others show to them.
• Learn – by this time individuals can draw conclusions from the results obtained. They
start learning new things they have discovered from their results. This cycle of learning
continues as the person keeps on performing a task, observes it and analyses the
results. By doing this again and again, they gradually master themselves in the said
process and develop a route that works wonderfully for them.
• Mastery – the last stage of self-awareness is where one attains the level of mastery.
Because by this time, people train themselves to handle any challenges ahead. They can
exercise self-control over their thoughts and are sure of their future targets.

Activity 1
Imagine that you were driving down the road in your car on a wild, stormy night,
when you passed by a bus stop and saw three people waiting for the bus:
• An old lady who looks as if she is about to die.
• An old friend who once saved your life.
• The perfect partner you have been dreaming about.

Knowing that there can only be one passenger in your car, whom would you
choose?

Note: the old lady symbolizes responsibility, old friend symbolizes your peer
relationship and the perfect partner symbolizes the dream of your life. Based on
your decision, analyse your self-awareness and to what extent your decisions are
logical.

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SELF-ASSESSMENT QUESTIONS – 1

1. Match the following:

(a) Build-up (i) Last stage of self-awareness
(b) Reactive (ii) Recognizing ambitions
(c) Termination (iii) Lowest level of self
(d) Uniqueness (iv) End of relationships
(e) Mastery (v) Continuity of relationship

4. TRANSACTIONAL ANALYSIS
Transactional Analysis (TA) is a theory developed by Dr. Eric Berne in the 1950s. It is a
technique or tool used by people to better understand their own and others’ behaviour,
especially in interpersonal relationships. TA has its roots deeply fixed in the field of
Psychotherapy.

A transaction is an exchange of goods, services, information, feelings, or opinions between

two or more people to satisfy individual requirements. A social transaction takes place when
two people interact with each other. The study of these interactions is known as
Transactional Analysis. Thus, Transactional Analysis is the study of social interactions
between people and is used to understand interpersonal relationships. A transaction starts
with a stimulus and ends with a response to the stimulus.

For example, if A sends a message to B and receives a response from B accordingly, then we
can say that a transaction took place as shown in figure 3.1.

Fig 3.1: Illustrates a simple transaction

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4.1 Ego-States
Psychologists have argued that an individual’s personality is a combination of various
behaviours, thoughts, and feelings. These are well depicted through Ego-states. Every
individual holds three ego states- Parent ego-state, Adult ego-state and Child ego-state as
shown in Figure 3.2. An ego-state is a pattern of behaviour that a person develops as he or
she grows up, based on his or her accumulated network of feelings and experiences.3 These
ego-states dominate the individual one at a time, depending upon the situation. For example,
when interacting with our parents our child ego may dominate our behaviour, but when we
are interacting with our friends, seniors, or boss, then adult ego might govern our behaviour.
Let us now discuss the three types of ego-states-

Fig 3.2: Illustrates the three ego-states

(a) Parent-Ego-State – this is the state which is marked by being judgemental, making
rules, insisting on morals and ethics, and laying down the values to be followed. People
in this stage act like parents by advising others regarding the “dos and don’ts.” There
are two main parental functions – nurturing and regulating. (i) Nurturing is done by
providing support, for example, when we are not able to make the right decision
regarding any problem then our parents help us in doing so. (ii) Regulating is done by
providing instructions in detail about what should be done and how. Say for example,
if you want to go abroad to pursue further studies after BBA, then people under this ego
stage may instruct you in everything related to this matter.
(b) Adult Ego State - in this stage people are logical and rational in behaviour. This state
is marked by authenticity, and directness and is based on facts and realities. People
under this state are problem solvers, fact finders and rational decision-makers. The
Adults perform the function of collecting and processing information thoroughly.

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(c) Child Ego State – in this state people behave, feel, and think similarly to how they did
during their childhood times. Individuals in this state are emotional, creative,
spontaneous, effortless, and restless in nature. Individuals can occupy many roles of a
Child ego that are based on emotions. For example (i) Natural child who is very
curious and fun-loving, (ii) Rebellious child who revolts against others, (iii) Adapted
child who is entirely under the influence of the Parent.

Note that the ego states do not move in a sequential manner. All three are always present in
every individual, but anyone predominates the others at a specific time. You might have
observed that a person is very reserved in nature, and has been so since his childhood, as
this is where his other ego states have been overshadowed by the adult ego state. Similarly,
there are people who always act like a child, are very jolly and impulsive in nature and tend
to remain like this throughout their lives. This is so because the Child ego state is dominating
over the others. Even in different situations, one ego state may dominate others and change
with the change of situation.

SELF-ASSESSMENT QUESTIONS – 2

2. The theory of Transactional Analysis was developed by ______________________.

3. The two main parental functions are ___________________and regulating.
4. In the _________________________ people behave like a computer and work without any
values or emotions.
5. The ______________________ is very curious and fun-loving

4.2 Types of Transactions4

A transaction is a basic unit of interaction that arises between two individuals through
verbal, written or non-verbal communication i.e. through words or behaviour. A transaction
starts with a person initiating the communication process and sending stimuli towards the
receiver. On the other hand, the receiver will provide a response back to the sender, as shown
in Figure 3.1. This entire process is highly influenced by the three ego states already
discussed. For a transaction to be completed successfully, it is important that the stimuli and
response should be parallel to each other through the ego states. For example, if A is

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interacting with B on an adult-to-adult basis, and is receiving the same response from B, then
it will be a successful transaction.

Depending upon the ego state of both parties there are four types of transactions which take
place during interactions between people. They are-

• Complementary Transactions – in a complementary transaction, the message sent by

a person receives the expected response from another person, and the pattern of
behaviour between the ego states is also parallel. These are the most positive and
healthy transactions as both the sender and receiver interact willingly with each other
and depict mature behaviour. As shown in Figure 3.3, a complementary transaction is
taking place between the teacher and the student, doctor, and patient.

Fig 3.3: Illustrates a complementary transaction

[Note: In the first example, the teacher interacted with the student as a parent and expected
a child response from the student, which he received. In the second example, the doctor
communicated with the patient on an adult-to-adult basis and received a reciprocal
response. In these two examples, the transactions are moving parallel to each other as
expected and thus form a complementary transaction.]

• Non-complementary Transactions – also known as crossed transactions occur when

the stimulus and response are not parallel. This type of transaction occurs when the
respondent is not interested in interacting with the sender or has negative
feelings/hatred towards him. As a result, there will be negative conversations resulting
in blocked communication and confrontation or bad feelings arising between the two
parties. Figure 3.4 shows a crossed transaction.

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Fig 3.4: Illustrates a non-complementary transaction

[Note: in the examples above there is a crossed transaction taking place. In the first example,
the daughter is interacting with her mother assuming a parent-to-child response, but she is
receiving an adult response. Similarly, in the second example, the doctor is interacting with
the nurse on an adult basis and is receiving a response on a child basis from the nurse.]

• Ulterior Transactions – In an ulterior transaction, the communication has a two-fold

meaning. At the basic level, there is a very clear message but at the psychological level,
there is a hidden message. For example, one may show his care and concern towards
the other but at the psychological level he might be jealous of the person.

For example, A person has been given some work and has been advised to do it very
minutely without any mistakes by the boss. In this explanation, the boss was asked by his
superior to present the work to him without any mistakes. To save himself work and time,
he gets the same job done by his junior by telling him that it is an important document to be
kept in the department.

SELF-ASSESSMENT QUESTIONS – 3

6. Identify the type of transaction taking place in the statements mentioned below: :
a) Boss: "Have you been able to write the report?" (Adult to Adult) Subordinate:
"Yes - I'm about to email it to you." (Adult to Adult)
b) Father: "I can never trust you to do things!" (Parent to Child) Son: "As such you
never believe anything I say!" (Adult to Adult)

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5. BENEFITS AND USES OF TRANSACTIONAL ANALYSIS

We can seek the following benefits by understanding and practising Transactional Analysis:
• The study of TA helps in improving relationships by giving fresh insights into one’s own
behaviour.
• As a manager, you can make out what causes crossed transactions and can restore the
complementary transactions.
• TA helps to evaluate our own strengths and weaknesses in the form of ego states we
practice in different situations.
• Through TA we can try to minimize the conflicts by understanding other persons’ ego
states as well as their behavioural patterns.
• Individuals can discover their self and to what extent they need to improve it.
• TA is an important technique used to train executives for
a) enhancing their communication skills
b) improving interpersonal relationships and self-understanding
c) coping with organizational problems and
d) dealing with other people more judiciously.

Activity 2
From your real-life examples, think of the following three transactional situations that
were faced by you and their consequences: parent to parent, adult to adult, and child
to child transaction.

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6. JOHARI WINDOW MODEL

The Johari Window is a communication model that can be used to improve understanding
between individuals. The Johari Window model was devised by American psychologists
Joseph Luft and Harry Ingham in 1955 while researching group dynamics at the University
of California Los Angeles. The word “Johari” comes from the initial letters of Joseph Luft and
Harry Ingham. The model was named as window for the purpose that we can see others
clearly through the window, and others can also view us from the other side of the window.
Thus, this Johari window is also a simple and useful tool for analyzing our as well as others’
behaviour. The Johari Window comprises four quadrants which represent an individual’s
personal awareness across four different stages- open, hidden, blind, and unknown. The lines
dividing the four quadrants are like window shades, which can move as communication
progresses. (Shown in Figure 3.5). Individuals are compared with others based on their
behaviour, motivation, feelings, needs, interests, etc. There are two techniques used in the
Johari window - feedback and disclosure. Feedback is used to make people aware about their
behaviour of which they are unaware and disclosure is used to disclose our own information
to others.

Fig 3.5: Illustrates the model of Johari Window

Johari Window can be used to:

• Assess and improve a group's relationship with others.
• Improve self-awareness and mutual understanding among individuals of a group.
• Build trust between individuals by disclosing and providing feedback.

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In this model, each person is represented by their own window. Let us now discuss all the
four quadrants:

Quadrant 1: Open Area: the "open" area represents things that we know about ourselves,
and others know about us as well. For example, our name, age, hobbies, qualifications,
strengths, weaknesses etc., are the ones that are known to us and the same to others. The
information that the window represents, may include not only information but also
knowledge regarding our feelings, motives, behaviours, wants, needs, and desires. When we
meet a person for the first time, the size of this open area is not very large as there is little
time to exchange information. But gradually when we start interacting with others and
exchanging information, the window shades move down or to the right, including more
information in the open area of the window, as described in Figure 3.6.

Fig 3.6: Illustrates the widening of open area

Quadrant 2: Blind Area, or "Blind Spot"- the "blind" quadrant reveals those things that
others know about us, but to which we are unaware. This can be some simple information,
or can be any deep issue (for example, our failure, incompetence, unworthiness,
eliminations, etc) which is quite difficult for individuals to face directly but can be seen by
others. For example, many people, when nervous, have the habit of biting their nails/rubbing
their nose/or scratching their head or chin in front of others of which they are totally
unaware. A person might be a very good singer but doesn’t know about his talent and prefers
being a bathroom singer. Others who have heard him singing know how good a singer he is.
But what should be done in such situations where we are unaware of our behaviour but that
is easily noticed by others? The only solution to this is to interact more with others to allow

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them to give their frank and honest feedback about us. Our emphasis should always be on
getting continuous feedback to reduce the blind area and increase the open area (as shown
in Figure 3.7).

Fig 3.7: Illustrates the decrease of the Blind area

Quadrant 3: Hidden/ Closed or Avoided Area- the "hidden" quadrant represents those
behavioural patterns that we know about ourselves, but others do not know. The hidden or
avoided self is concerned with those feelings, behaviour, needs, and interest that is known
to oneself but is not disclosed to others. Say for example, if I do not tell others which my
favourite colour/food/dress/place to visit etc. is, how will others come to know about it?
When I do reveal this, I will effectively pull the window shade down and increase the open
area as shown in Figure 3.8. Thus, one needs to disclose their information to others to reduce
the hidden quadrant. This process is called: "Self-disclosure." But the hidden area could also
include sensitivities, worries, hidden agendas, fears, confidential matters, manipulative
intentions, - any such thing that a person knows but does not want to reveal to others
because of some reason. Therefore, the hidden area cannot be eliminated fully but can be
reduced to a large extent.

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Fig 3.8: Illustrates the decrease in a hidden or closed area

Quadrant 4: Unknown Area - the "unknown" quadrant reveals a variety of issues that are
close to the surface level such as information, feelings, latent abilities, aptitudes, and
experiences etc., or deeper aspects of a person’s personality that influence his/her behaviour
to a large extent and to various degrees. These issues are unknown to the person him/herself
and unknown to others in the group. Large unknown areas generally exist among younger
people and people who lack experience or self-reliance. Being the closed pane of the window,
it needs to be opened by using both techniques equally i.e. feedback and self-disclosure (as
shown in figure 3.9)

Fig 3.9: Illustrates the decrease in dark area

[Note: The open area is the only ‘space’ where healthy communication and cooperation
occurs that is free from confusion, conflict, and misinterpretation. When we work in the open
area with others, it allows for enhanced individual and team effectiveness and productivity,
thus leading to good interpersonal relationships. The aim in groups should be to develop the
open area as far as possible for every person.]

Thus, the Johari window is a very useful tool in the hands of managers to increase their own
as well as others’ self-awareness. And by doing so, there can be the emergence of shared
values, harmonious interpersonal relationships, enhanced teamwork and commitment,
increased satisfaction among the people and high motivation. These all together will make
the organization grow as a whole.

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Activity 3
Make a group of four including you. Write down your own five likes and dislikes. Now
ask other three group members to write five likes and dislikes of yours. Then compare
the results of others with those of yours. Based on the conclusions drawn, find out
which area of the Johari Window you represent. If it is not the open area, then adopt
the techniques of feedback and self-disclosure to increase your open area.

You may also use the online resource and share the link with friends.
http://kevan.org/johari

SELF-ASSESSMENT QUESTIONS – 4

Choose the right answer from the options given:

7. The two techniques used in Johari window are ___________________ and feedback.
(a) enclosure (b) disclosure (c) closure.
8. When we meet a person for the first time, the size of the open area is not very
________________________.
(a) large (b) small (c) deep.
9. The hidden self is also known as the ___________________ self.
(a) dark (b) ignored (c) avoided.
10. Large unknown areas generally exist among younger people and people who
lack experience or ________________________.
(a) self-reliance (b) trust (c) self-concept

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7. SUMMARY
Let us now recall the important points of the unit discussed:
• We have analysed the meaning of interpersonal behaviour and its importance for
managers to deal with people effectively.
• We have also illustrated the concept of self and various levels of self-i.e. Reactive, follow
the crowd, uniqueness, discipline, learn and mastery.
• The unit also describes the different transactions based on the three ego states of an
individual which are – parent ego state, adult ego state and the child ego state.
• The uses and benefits of studying transaction analysis are identified.
• Finally, Johari Window and its practical use by managers for improving interpersonal
relationships is discussed.

8. GLOSSARY
Judiciously Wisely / thoughtfully/ with
care
Morale Self-esteem
Rebellious Disobedient

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9. TERMINAL QUESTIONS
1. Define interpersonal behaviour. Enumerate the stages through which a relationship
develops.
2. What is self-awareness? Discuss the seven levels of self-awareness.
3. Define ego states. Describe the three ego-states and their characteristic features.
4. Explain the various types of transactions under TA. Quote examples for each.
5. How can the understanding of TA be important for modern managers?
6. Discuss the Johari Window Model in detail.

10. ANSWERS
Self-Assessment Questions
1. (a) - Continuity of relationship
(b)- Lowest level of self
(c)- End of relationships
(d)- Recognizing ambitions
(e)- Last stage of self-awareness
2. Dr. Eric Berne
3. Nurturing
4. Adult ego stage
5. Natural child
6. (i) Complementary transaction (ii) Crossed transaction
7. Disclosure (b)
8. Large (a)
9. Avoided (c)
10. Self-reliance (d)

Terminal Questions:
1. Interpersonal behaviour is the relationship viewed between two individuals. George
Levinger has proposed a 5-stage model of relationship development. Refer to sections
1 and 2 for the answer.

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2. Self-awareness refers to the conscious understanding of one’s personality, desires,

habits, likes and dislikes. There are seven levels of self-awareness i.e. Reactive, follow
the crowd, uniqueness, discipline, learn and mastery. Refer to section 3.
3. An ego-state is a pattern of behaviour that individuals develop across their life that is
based on their feelings and experiences. There are three types of ego-states- parent ego
state, adult ego state and child ego state. Refer to section 4.1.
4. Refer to section 4.2 to study the types of transactions in TA i.e. Complementary, crossed,
and ulterior transactions.
5. The study of TA proves to be very beneficial for managers of modern organizations to
retain the employees and to enhance the productivity of the employee as well as the
organization. Refer to section 5.
6. Johari Window is yet another important tool that provides awareness of self and others
in order to improve interpersonal relationships. Refer to section 6 for further details.

11. REFERENCES
References:
• Robbins P. Stephen & Judge. A. Tim Othy, (2010), Organizational Behaviour, Prentice
Hall
• Singh B.P. & Chhabra T.N., (2005), Organization theory & Behaviour, Dhanpat Rai &
Co(P)Ltd
• Rao V.S.P., (2009), Organization Behaviour, Excel Books
• Parikh Margie & Gupta Rajen, Organization Behaviour, Tata McGraw Hill Education Pvt.
Ltd.

E References:
• http://kevan.org/johari

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 7
Learning and Motivation

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3-5
1.1 Objectives - -
2 Learning and Learning Cycle 1 1 6-7
3 Components of Learning - I 8-11
4 Theories of Learning - 2, II 11-15
5 Definition and Meaning of Motivation - 3, III 16-17
6 Theories of Motivation 2, 3, 4, 5, 6 4, IV, V 18-27
7 Application of theories in Organizational - - 27-29
Scenario
8 Summary - - 30
9 Glossary - - 31
10 Terminal Questions - - 31
11 Answers - - 32-33
12 References - - 33

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1. INTRODUCTION
In the earlier units, you have learned about organization and interpersonal behavior. In this
unit, we will get an understanding about the concept of learning and motivation. Let us
investigate what keeps employees motivated and how they learn when they become a part
of an organization.

The term 'learning' is a commonly used one. We can say that we have learnt something when
we behave differently. We start learning from the day we are born. Sometimes we learn
because our parents and teachers reward us with chocolates, praise or marks, at other times
we learn because if we do not, we will be spanked or we may be stopped from going cycling
in the evening or may be denied access to computer. But we also learn by looking at our
parents, teachers and others. It is the latter that distinguishes human beings from animals.
Equally, our drive to learn and also do various things depends on what we want; this is what
we call in simple terms motivation. When we are motivated we work towards the goal that
motivates us. When we are not motivated, we avoid working towards it. If there are any
obstacles, we learn how to overcome that obstacle. For example, if we want to learn cycling
and the obstacle is balance, we seek help of a friend or go to an open ground where we may
not get badly injured if we fall. Since organisations exist for effective achievement of goals, it
is necessary that its workforce is motivated to work towards the goals and learn to overcome
the obstacles.

1.1 Learning Outcomes

After studying this unit, you will be able to:
❖ Define learning.
❖ Explain the learning cycle and various theories of learning.
❖ Define motivation.
❖ Explain various theories of motivation.

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Case Study
Sambhavi Bakers
Sensing the impending problems the consultant suggested some major reorganisation. He
emphasized that the company had grown exponentially and the speed and the number of
outlets came as a surprise. In order to continue in the path of ‘enriching lives’, it is necessary
to have a systematic team based structure with appropriate incentives that drive the
organisation. So, after much discussion, it was felt that the reward system should be put into
place straight away so that appropriate behaviour can be reinforced and people will be
motivated. The need to have strong team based structure to drive growth was accepted but
it was decided to put that into place after the reward system that created a learning culture
was in place. Learning culture was important because Sambhavi is like an elephant that can
dance. He said, “Elephants don’t dance naturally. They have to learn to dance and when we
have a few old timers who know this, and we want Sambhavi to continue its traditions, the
new comers have to learn to dance. So my reward structure is based on the need to make
them dance and motivate them to keep dancing.” Then he went on to lay out his plan in brief.

He continued, “the outlets will continue to be the basic profit centre and it will have teams
that cater for bakery sales, snack meal sales, kid care and merchandise i.e., four teams under
four team leaders. Each team is responsible for the productivity. Out of these, the bakery
sales bring the largest revenue but only if the snack meal team attracts sufficient numbers to
the place. They have to attract, sell and up sell and even coax the customers to open their
purse at the bakery counter often offering to pack up something while they were still
munching. So, these people have to learn more than others and adjust to the customer needs
and no one should come in the way of their creativity and independence. My ideas on these
are as follows.”

“We will have then organised into teams. There will be goal setting by the teams and the
individual and though we cannot start with a classical MBO, we will set goals nevertheless
and then graduate into an MBO. We will train them for it of course. But instead of having
these goals assessed annually, we will do it every quarter and then give them feedback so
that they can improve. Of course they should be fully involved in their goal setting and
assessment; that is the reason for training”.

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“When we give feedback we will also give rewards in the form of money, best employee of
the month, quarter etc. I have to fine tune it a little. We should also organise a picnic for the
families twice a year and an all India trip for the best 10 employees from each group. We
should have an annual visit if the members of each group to other locations and then have
them make a report so that they learn from each other. Many of our employees are intelligent
though not highly qualified and therefore we should encourage them to go for some studies,
and we will fund 50percent and if they get above 70% in the course or program, we will fund
it fully. One of my friends is a good trainer, coach, and listener. I will request him to run a few
training sessions on these and train our outlet manager to coach and mentor the others and
encourage them to have an open-door policy. We should have quarters open house where
one of the top management should be present and MD should reach all the outlets at least
once in a year and have an open house. I will work straight away to increase the computer
knowledge of our employees and then have a Sambhavi discussion group in the mother
tongue besides our usual suggestion and complaint box. It is good to get a lot of anonymous
input and in due course we will introduce the powerful 360 degree of evaluation. I don’t
think we are ready for it yet”.

“On the incentive front, we should do the following:

• For every Rs. 100 increase in the purchases while they are munching, we will pay Rs. 2
to the snack meal team. We will calculate this on a weekly basis and pay them the next
week. One week lag and no more.
• If the purchase did not increase, they will not get any incentive, but there will be a board
in their change room, “I missed to enrich lives last week, I will try better this week”. If
the purchase fell, for every Rs. 100 fall, there will be a fine of Rs. 1.
• If the customer satisfaction survey improved the standard, for every 1% increase there
will be Rs. 2000 for this team and if it fell, there will be a fine of Rs. 1000 for every 2%
fall.

I know you will ask me to find out its financial implications. Our CA has done some job and it
looks fine. I feel very confident that Sambhavi will move into the next trajectory with all
these”. In a month’s time the MD gave the go ahead to lay out the plan, but after having a
series of discussion rounds to elicit opinion of the manages and employees for which the first
round of ‘tell us how we can improve’ meetings were launched

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

2. LEARNING AND LEARNING CYCLE

Learning is defined as a relatively permanent change in behaviour (Akin 1987). In the context
of organisation, one of the managerial challenges is to instill productive work behaviours in
his employees.

Learning is also defined as the process of acquiring, assimilating, and internalizing

cognitive, motor, or behavioural inputs for their effective and varied use when required,
leading to an enhanced capability for further self- monitored learning.

The Learning Cycle: Psychologists have identified that infants, children, adolescents and
adults learn in different manners. Since only adults are involved in organizational learning,
in this discussion we will focus on only a model for adult learning. One of the most widely
accepted models (fig 4.1- Kolb’s Model) of learning was the cycle of experiential learning
proposed by Kolb (1976).

According to this model, adult learning has four parts:

• Experiencing: A learner is exposed to a learning experience by his own or a facilitator’s
efforts
• Processing: After the experience the learner has time to process. He does so by
reflecting upon and analysing his experience
• Generalizing: Processing helps him in abstract conceptualization and formation of a
tentative theory to explain his success or failures
• Applying: Finally he applies this learning in an everyday scenario which results in new
experiences, and the cycle begins all over again.

Figure 4.1: Kolb’s Learning Cycle

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Fig 4.1

SELF-ASSESSMENT QUESTIONS – 1

Fill in the Blanks

1. Learning is defined as relatively _________________in behaviour.

2. helps retaining the acquired inputs in our memory for a longer period of time.
3. Cycle of experiential learning proposed by Kolb has four steps __________________,
__________________, _____________________ and _____________________.
4. _______________________ helps an organization to remain innovative and maintain an
edge over their competitors.

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3. COMPONENTS OF LEARNING
Think of your school. What made your learning possible there? You obviously were very
important. Without your commitment and inputs you would not be in the college now. How
important were your teachers? All of us value the contribution made to our learning by our
teachers. If we were good in a particular subject its quite likely we liked the teacher and
he/she had sound teaching skills. But was your learning possible only because of you and
your teacher? The atmosphere provided by your school and by your parents at home was
important too. School discipline, curriculum, examination, administration played a
significant role. To this we can add the teaching mechanism – classroom lectures,
experimental work, co-curricular activities, models, charts, teaching assignments, class tests,
results - all were important in the learning process. From your personal school experience
we can say that learning comprises four broad components:
• Learning Atmosphere
• Learning Mechanism
• Teacher/Trainer
• Learner

Learning Atmosphere: Learning atmosphere is usually ignored even in schools, institutions

and colleges also. Yet its importance to learning cannot be over-emphasized. A right learning
atmosphere can make learning motivating and a happy experience. A poor learning
atmosphere, on the other hand, can stifle the learning drive of even the most enthusiastic
learners. In organizations the following subcomponents of the learning atmosphere
generally need to be inculcated:
• Organisational Culture: Can we learn honesty in a dishonest organisation? Can we
learn team work in an organisation where personal issues dominate over
organisational issues? Learning leadership would be useless in an organisation where
the leadership is in shambles. The culture prevailing in an organisation therefore plays
a very important role. Managers must examine their organisational culture to see
whether creativity, self- learning, feedback of learners, varied perspectives etc. prevail
or not. A very important subcomponent is discipline also.

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• Non-threatening Climate: Learning is not possible when the mind is filled with fear.
An organisation where a learner is scared to make a mistake, to take learning risks, to
express doubts or ask questions cannot be a sound learning organisation.
• Challenge in Learning: Learning is most effective when it provides enough challenge
to make learning satisfying. Challenge can also be brought in through healthy
competition and the right amount of cooperation.
• Gradual Success: Success is the most motivating factor and therefore a learning
atmosphere should ensure gradual and periodic success. Thus, any learning program
should be developed in such a way that he/she can move from one success to the other
through increasing difficulty.

Learning Mechanism: The extent of learning also depends upon the mechanism of learning.
Learning is substantial when mechanisms are right and it is weak when mechanisms are
wrong. Subcomponents of learning mechanism are:
• Pedagogical Techniques: Pedagogical techniques refer to the teaching techniques. A
learning program that is built on a diversity of pedagogical techniques and their
appropriateness will be far more effective than ordinary such programs.
• Practice: Most of our learning is based on practice. The more we practise the better
skills we have. Thus, a learning program that provides adequate opportunities for
practising skills will be an effective one.
• Application: We always learn with a purpose. The purpose often is to apply the
knowledge and skills in a real-life situation to attain desired results. What happens if
we learn something but do not apply it? We do not learn it completely and often we
forget what we had learnt. A simple instruction like smiling when talking to a client
needs to be applied before it becomes a behaviour. Thus a good learning program
should include on-job training.
• Self-learning: Any learning program is designed to provide basic inputs. Thereafter a
learner has to learn on his own through self-learning. To do this the learner should have
sufficient motivation, skills and capability. Self-learning makes learning economical,
faster and better.
• Feedback: Why do learning programmes have tests and examinations? Not to grade us!
A test helps us to know what we have learnt, how much we have learnt, which are the

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areas we have not understood, which topics we have not practised well and so on. After
every test, therefore we should self-learn the topics where there is room for
improvement. Feedback of this kind makes learning programmes more effective.

Teacher/Trainer: India has a tradition of honouring the teachers. This tradition underlines
the importance of teachers in a learning society. A good teacher has the following traits:
• Competence: The teacher must possess in abundance the set of competencies, skills
and knowledge that have been planned to be imparted in a learning program. A
confused teacher can only lead to confused learning.
• Style: Style of teaching too is regarded as significant. A teacher may teach just
theoretical principles whereas another teacher may have a fine balance of theory and
practice in his teaching style. A teacher may teach his subject in isolation whereas
another may interlink it with other aspects of life.
• Need: Learning also depends on the teaching needs of a teacher. A teacher may teach
just because he needs the job, others may teach because they need respect and
recognition. There can be still others who need to teach to contribute to the society by
training the best possible experts in that field.
• Values: All of us have sets of values. Some of us know our set of values. Some others do
not. A teacher or a trainer who values integrity, honesty, essential goodness of
humankind, essential goodness in divine order etc has been found to be more
respected, and hence more effective.

Learner: Learners are central to any learning efforts. If the learner lacks capability, skills,
motivation or willingness then learning is beyond question. Sometimes learners are averse
to learning for various reasons. Learners therefore should have the right amount of
commitment, motivation, enthusiasm and capabilities. In terms of learning characteristics,
learners can be divided into four categories - diverger, assimilator, converger and
accommodator.

The divergers are the people who learn better by reflecting on specific experience and
drawing new inferences. They have high levels of imagination. The assimilators learn better
by combining reflective observations with abstract concepts. They are good at creating

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theoretical models. The convergers focus on specific problems and look for answers and
solutions. The accommodators believe in active experimentation.

Activity 1
Identify four people who are excellent learners and interview them to find the process
they use to learn quickly. Find if they are divergers, assimilators, convergers or
accommodators. Also identify the extent to which they follow the cycle of experiential
learning proposed by Kolb.

4. THEORIES OF LEARNING
As learning became important for human civilization, it invited the attention of many
researchers. They identified several approaches to learning. They are as follows:
I. Classical conditioning
II. Operant conditioning
III. Social learning
IV. Cognitive learning
V. Programmed learning

I. Classical Conditioning: This approach explains the learning of reflex behaviour. An

example of a reflex behaviour is- when stuck with a pin we flinch without thinking. Pavlov
– a Russian scientist conducted a remarkable experiment on his dog. Pavlov observed
that his dog began to salivate as soon as food was offered to it. It did not salivate when a
bell was rung. Thereafter he trained his dog by ringing a bell and then offering food to
the dog. After sometime he noticed that dog would salivate as soon as the bell was rung.
Thus the dog had learnt to associate ringing of the bell with food. In other words Pavlov
paired a ringing bell (conditioned stimulus) with food (unconditioned stimulus).

Is classical conditioning relevant for human learning? It is. We are filled with pride and
patriotism when we hear our national anthem. This is the result of learning through classical
conditioning. But is classical conditioning important in organizations? Most mission and
vision statements have components that employees learn through classical conditioning.

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Since in organisations managers are interested in instilling voluntary behaviours, classical

conditioning has a very limited role in organizational learning.

II. Operant conditioning: B. F Skinner is closely associated with this learning theory.
Operant conditioning is based on the fact that voluntary behaviours are learnt. As human
beings we learn behaviour because we find it rewarding. In the same way we can unlearn
behaviour if its consequence becomes unrewarding or punishing. Thus a child learns to
become obedient because he is rewarded with parental love and appreciation. Similarly
a child stops bad behaviour when punished. In organisations also Operant conditioning
is found frequently. When an individual works hard he or she is paid accordingly. When
an individual takes the initiative he or she is appreciated. Similarly, if a person remains
absent he may lose his pay. If he is late he may not be allowed to enter the organisation.
Operant conditioning therefore is an important tool for managers, who want the
employees to learn productive voluntary behaviours and give up voluntary unproductive
behaviours.
III. Social learning: This theory of learning is an extension of operant conditioning. Albert
Bandura demonstrated that people learn or unlearn behaviours even by watching others
being rewarded or punished for a particular behaviour. We decide on our behaviour by
watching others. In other words we keenly watch others around us then develop a mental
picture of a behaviour and its result and finally we try the behaviour ourselves. Managers
use rewards and punishments to set an example also. When we see others being
rewarded we are motivated to pick up that behaviour. When we see others being
punished we are discouraged to acquire that behaviour. Researchers such as M.L Bigge
have suggested the following steps for applying social learning theory in organisations:
• Identify the behaviour that enhances performance/productivity.
• Select a suitable model for others in the organisation to observe.
• Ensure that employees possess the required skills.
• Provide positive feedback to the model and other employees who learn the
behaviour.
• Maintain such beneficial behaviours by developing appropriate practices in the
organisation.

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Activity 2
Visit an organization and find out the operant and social learning strategies that they
utilize so that their employees learn productive behavior and give up harmful
behaviour.

IV. Cognitive learning: So far in the theories we have discussed that the learner plays
merely a passive role. But do we learn only passively? Cognitive learning is built
around what happens within the individual while learning and it investigates the
motives, feelings, attitudes, memory and cognition of the learner. In cognitive
learning analysis and interpretation of data helps us to learn new patterns of thoughts
and relationships. As human beings we are capable of rearranging thought patterns
into new shapes or patterns. This emergence of new patterns can happen suddenly
or may evolve gradually. The following processes of cognitive learning have been
identified:
• Insight: This is best demonstrated by Eureka (I have found it!)-the exclamation of
Archimedes. Very often a wonderful solution comes to our mind like lightning. This
concept of insight is associated with W Kohler. While experimenting on a
chimpanzee called Sultan, he placed a short stick within the reach of Sultan and a
long stick and bananas beyond its reach. Sultan made several unsuccessful
attempts to get bananas using the short stick. Later he gave up and sat down
looking tired and disappointed. Then he suddenly got up, pulled the long stick with
the help of the short stick and then, using that long stick, he could get to the
bananas. Insight involves two processes - discrimination and generalisation.
Discrimination is a process in which previously structured elements are placed
into new structures. For example a child initially is familiar with cars but later he
begins to discriminate (distinguish) between Maruti-800, Indica, Zen, Alto and
other cars. Generalisation is when we transfer our learning to a new situation.
Insight and generalisation are therefore opposite to each other. Discrimination
divides general into specific; generalisation on the other hand unites previously
unrelated elements into a meaningful cluster. Managers in organisations utilize
both these approaches. Discrimination is used to distinguish between two similar

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looking situations, people, position, policies or power. Generalisation on the other

hand can be used to relate certain organisational problems with poor
communication, team work or interpersonal skills. It is also useful in tackling
problems such as conflict or poor leadership. The capacity to develop insight using
discrimination and generalisation is vital for mastering conceptual skills.
Successful scientists, managers, economic analysts use these learning approaches
very often.
V. Programmed learning: We are most familiar with this kind of learning approach. Ever
since you entered school and then college you have undergone a very structured learning
process in which you played a very active role. This learning also involves successive
steps and immediate feedback. Hefzallah defined programmed learning as a planned
sequence of experiences leading to the students’ mastery of a topic. Modern technology,
particularly information and communication technologies (ICT) have made programmed
learning possible through a distant mode also. You are undergoing this course in BBA
precisely through programmed learning assisted by ICT.

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SELF-ASSESSMENT QUESTIONS – 2

Multiple Choice Questions

5. A right _________________________ can make learning motivating and a happy

experience.
6. explains learning of reflex behaviour.
a) Classical Conditioning
b) Operant Conditioning
c) Social learning
d) Cognitive Learning
7. Insight involves two processes
a) discrimination and simplification
b) characterization and generalisation
c) discrimination and generalisation
d) discrimination and actualization
8. Social learning is an extension of
a) Cognitive learning
b) Operant conditioning
c) Classical conditioning
d) Programmed learning

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5. DEFINITION AND MEANING OF MOTIVATION

The term ‘motivation’ has its origin in the Latin word “mover” which means to “move”. Thus,
motivation stands for movement. One can move people by incentives or threats which can
have a limited effect. These work for a while and then need to be repeated, increased or
reinforced to secure further movement.

The term motivation may be defined as “the managerial function of ascertaining the motives
of subordinates and helping them to realize those motives”.

According to Dubin, motivation could be defined as “the complex of forces starting and
keeping a person at work in an organisation. Motivation is something that moves the person
to action, and continues him in the course of action already initiated”.

There are two main kinds of motivation: intrinsic and extrinsic.

Intrinsic Motivation:
It is internal. It occurs when people are compelled to do something out of pleasure,
importance, or desire. For example: If Meera is excited about graduating, she wants to keep
her grade point high so that she can feel proud of herself and she can get into the best
Management College, it is intrinsic motivation.

Extrinsic Motivation:
It occurs when external factors compel the person to do something.

External motivation is generally materialistic in nature. Not better or worse then internal,
but just what makes a person want to take action.

For example: Meera is very excited about graduating, because her parents have promised
her that if she completes graduation with good grades she will be given a new laptop. It is
extrinsic motivation.

In today ‘s world of LPG (liberalization, privatization and globalization) work environment

has become highly competitive, and in this competitive environment maintaining a highly
motivated workforce is the most challenging task for managers. It is all about Motivating by
influencing the behavior of the individual.

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Activity 3
Write down five items which you believe are very important in motivating you to do
your task in a better manner. Compare it with your friend’s list.

SELF-ASSESSMENT QUESTIONS – 3

Fill in the blanks.

9. The term ‘motivation’ has its origin in the Latin word ___________________which
means to _________________________.
10. Intrinsic motivation occurs when people are compelled to do something out of
____________________ or desire.
11. Extrinsic motivation occurs when _____________________ compel the person to do
something.

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6 THEORIES OF MOTIVATION
All the theories of motivation can be classified into two broad categories, content theories
and process theories.

Content theories
Content (or need) theories of motivation focus on factors internal to the individual that
energize and direct behavior. In general, such theories regard motivation as the product of
internal drives that compel an individual to act or move (hence, "motivate") toward the
satisfaction of individual needs. The content theories of motivation are based in large part
on early theories of motivation that traced the paths of action backward to their perceived
origin in internal drives.

Content theories include Maslow’s need hierarchy theory, Herzberg’s two factor theory,
Alderfer’s ERG and Achievement Motivation theory. Process theories include Vroom’s
Expectancy Model, Adam’s Equity theory and Portor’s Performance and Satisfaction model.

1. Maslow’s Need Hierarchy Theory

Abraham Harold Maslow in the year 1954 proposed the need Hierarchy theory of Motivation.
This theory says that
a) Human behavior is influenced by their wants and desires.
b) Any unsatisfied need acts as a motivator.
c) Needs are hierarchical.
d) People can move from lower needs to upper needs.

Maslow identified five levels of needs which are the source of motivation.

These needs are

1) Physiological Needs: These are lower level needs. They include food, air, water, shelter
and other bodily needs.
2) Safety Needs: Once physiological needs are met, another set of needs called safety needs
becomes the motivating factor. It includes needs for protection, a secure and stable
environment. In the organizational context it includes job security, safe working
conditions, pension scheme, provident fund etc.

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3) Social Needs: This is the third level of the hierarchy of the needs. It includes respect,
affection, friendship or interaction with people.
4) Esteem Needs: The next level in Maslow’s hierarchy is esteem or ego needs. These needs
arise when we want to be appreciated for what we can do. These needs include self-
respect, personal achievement, status, recognition and attention.
5) Self-actualization Needs: When all the earlier needs are fulfilled people move to next
level of need that is self actualization needs. These needs represent self fulfillment
which includes growth and achievement.

Thus Maslow classified these needs into higher and lower level needs. After satisfying the
lower level needs a person moves to higher level needs.

Figure 7.2 illustrates Maslow’s Need Hierarchy pyramid

Fig 7.2: Maslow’s Need Hierarchy

2. Two-factor theory
The two two-factor theory was proposed by Frederick Herzberg. This theory is also known
as the Motivation-Hygiene Theory. According to this theory, motivation depends upon two
factors - Motivators and Hygiene Factors.

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Hygiene Factors- Herzberg said that the presence of these basic factors might not be a
guarantee of satisfaction but absence can cause dissatisfaction.

These factors are – Rules and policies,

i) Relationship with co-workers,
ii) Supervision,
iii) Salary,
iv) Security
v) Working conditions.

Motivators – The presence of these factors provides satisfaction to the people. These factors
are-
i) Achievement,
ii) Advancement,
iii) Autonomy,
iv) Challenge,
v) Feedback,
vi) Responsibility.

Applying the Dual – factor Theory

This theory proposes that the best way to stimulate motivation among employees is to
improve the nature of the job .According to Herzberg the best way to improve the job was to
enrich it (1987). Job enrichment includes giving a job greater variety, responsibility and
control.

Activity 4
Interview two people and identify the factors contributing to their dissatisfaction and
satisfaction. Relate your findings to Herzberg’s Theory.

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3. Achievement Motivation Theory

David McClelland’s theory of Achievement Motivation says that there are three important
needs which motivate a person to perform. But the degree to which they are motivated varies
from person to person. These Needs are:
1. Need for Achievement.
2. Need for Power.
3. Need for Affiliation.

Need for Achievement: - People with high need for achievement are self- motivated people.
McClelland believed that people can develop need for achievement in them.

Need for Power: - It is a desire to be influential and to control others. Political organizations
may attract people whol are guided by the need for power.

Need for Affiliation: - It is a need which tells us about deriving satisfaction from the quality
of social life and interpersonal relationship.

McClelland’s Theory has significant implications for managers. If the needs of employees can
be measured, organizations can improve the selection and placement processes. People with
a high need for achievement may be placed on challenging, difficult jobs. People with a high
need for power may be trained for leadership positions. If the organization is able to achieve
a fit between need intensities and job characteristics, improved performance can be
observed. According to McClelland, people should be taught and offered training in
achievement motivation.

4. ERG Theory
The ERG Theory was developed by Clayton Alderfer in the late 60’s. This theory differs from
Maslow’s theory. It says that instead of hierarchy of needs, there are only three parameters
to motivate people. Alderfer believes that there can be more than one need which motivates
people at a time.

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Figure 7.3 illustrates the ERG theory of Motivation.

Fig 7.3: ERG Theory of Motivation

Process Theories
Process (or cognitive) theories of motivation focus on conscious human decision processes
as an explanation of motivation. Process theories are concerned with determining how
individual behavior is energized, directed, and maintained in the specifically willed and self-
directed human cognitive processes. Process theories of motivation are based on early
cognitive theories, which posit that behavior is the result of conscious decision- making
processes. The major process theories of motivation are expectancy theory, equity theory,
goal-setting theory, and reinforcement theory. Content Theories emphasized the importance
of inner needs. But the approach of process theories view motivation as an individual’s
decision to perform by putting in his own effort. The three theories under Process Theories
are Expectancy Theory, Equity theory and Performance Satisfaction Model.

1. Expectancy Theory
The Expectancy Theory is also known as instrumentality theory, path-goal theory and
valence- instrumentality-expectancy theory. This theory was developed by Victor H. Vroom.
According to this theory, work effort in an organization is directed towards behaviours that

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people believe will lead to desired outcomes.(Vroom 1964). In other words we can say that
people adopt such behaviour in their work effort which gives desired outcomes.

In this theory there are two stage sequences of expectation-(effort- performance and
performance- outcome)

Vroom has used a mathematical equation MF=V x I x E

Where,

MF = Motivational force V = Valence

I = Instrumentality E = Expectancy

Let’s understand these three concepts of Vroom’s equation:

Expectancy: It is believed that a particular level of effort will be followed by a particular
level of performance. It means expectancy= effort to perfom. We can say it for example that
you can work hard if you believe that it will lead to success.

Instrumentality: It is the relationship between first level outcomes and second level
outcomes. In other words, it is the perception of an individual that first level outcomes are
associated with second level outcomes. For example if you pass the entrance test of IIM you
will get admission in IIM. If there is be no relation between the two, their instrumentality
will be zero.

Valence: It is the preference of an individual for a particular second level outcome. Valence
can have values ranging from negative to positive. An outcome is positive when it is
preferred and negative when it is not preferred.

Managers of successful organizations try to ensure that employee’s levels of expectancy,

instrumentality and valence are high so that they will be highly motivated.

On the basis of this model four assumptions can be derived about the causes of behaviour in
an organization.

A. A combination of forces in the individual and the environment determines behaviour.

B. Individuals decide their own behaviour in the organization.

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C. Different individuals have different needs and goals. So they expect different rewards
for their work.
D. On the basis of their perception of which behaviour will lead to the desired outcome
they decide about the alternatives.

Figure 7.4 illustrates the Path Goal Theory.

Fig 7.4: Path-Goal Theories

There are several practical implications of the expectancy theory. It provides clear guidelines
for increasing employee motivation by altering the person’s expectations, instrumentality
and outcome valences. Organizations should keep watch of employee satisfaction levels
through job satisfaction surveys.

2. Equity Theory: This theory was formulated by Adams. It is also known as Social
Comparison Theory. This theory is based on the perception that people are motivated to
maintain a fair or equitable relationship between themselves and others and to avoid
relationships that are unfair or inequitable. For example if employees perceive that they
are overpaid or underpaid they are motivated to avoid this inequity.

Fig. 7.5: Illustrates inequity as a motivational process.

Fig 7.5: Inequity as a motivational process

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In this figure we can see how inequity acts as a motivational factor, but it is not that a person
who feels inequity alone gets motivated to restore equity. Even a person with a feeling of
equity gets motivated to maintain the status.

The advantage of this theory is that extensive research has been done on it. It recognizes the
influence of social comparison process on motivation. Compared to the content theories, the
equity theory adopts a realistic approach to motivation. It says that mostly motivated
behaviour is based on the perceived situation rather than on the actual set of circumstances.

Regardless of certain criticisms the equity theory continues to offer us some important
insights into employee motivation.

Activity 5
Think of a job of a person and think of a job of another person who is working in the
same organization. Conduct an equity theory comparison. (Hint: Job of an Engineer and
Job of Asst. Manager)

3. Performance- Satisfaction Model

Porter and Lawler have given a comprehensive theory of motivation. It says that motivation,
performance and satisfaction are all separate variables and they relate in ways different from
what was traditionally assumed.

Figure 7.6 illustrates the performance satisfaction model.

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Fig 7.6: performance – satisfaction model

As shown in the multi variable model of Porter and Lawler, an effort doesn’t directly lead to
a performance. It is mediated by abilities, traits and role perceptions. In this model the
satisfaction is determined by the rewards and how they are perceived by any individual.

Porter and Lawler Model have contributed to the better understanding of work motivation
and the relationship between performance and satisfaction.

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SELF-ASSESSMENT QUESTIONS – 4

12. Content theories include _______________________, ______________________,

_____________________ and _____________________ theory.
13. _________________ in year 1954 proposed the need Hierarchy theory of Motivation.
14. ____________________ says that instead of hierarchy of needs, there are only three
parameters to motivate people.
15. According to ______________________ work effort in an organization is directed
towards behaviours that people believe will lead to desired outcomes.

7. APPLICATION OF THEORIES IN ORGANIZATIONAL SCENARIO

In the previous section we discussed various theories which are helpful in understanding
human behaviour. Let’s see how the application of these theories can be useful in real work
environment.
• Recognize Individual Differences: No two employees are the same. They have their
own needs. They also differ in terms of attitudes, personalities, value system etc.
Recognizing these differences and dealing with the motivational issues according to it
can be useful.
• Match People to Jobs: People who have high growth need can perform well on
challenging jobs. So when the right job is given to the right person every organization
gets the benefit of it.
• Motivation by Goal Setting: By providing specific goals, organizations can make people
understand that what they expect from them. Goals should always be challenging
enough to motivate people because they need high levels of effort. Goals are very
important because they increase clarity and reduce uncertainty. Goals can be an
organizing function; it also provides a benchmark to measure the performance of
individuals and teams. So it can be an effective tool for motivation.

Reward System for Behaviour Modification: Behavioural modification acts as a tool of

motivation. Rewards or reinforcement can be used for shaping the behaviour of the
employees. It can be positive reinforcement such as praise, appreciation etc. Negative

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reinforcement such as punishment can be used to decrease any undesirable behaviour. We

can also use Omission. It is a neutral response towards any desired or undesired behaviour.

• Reward based on Job status, Competency, and Performance: Through Job Evaluation
every company tries to evaluate the worth of jobs. Jobs with higher status are rewarded
with attractive perks and other facilities. When rewards are based on status, it
motivates employee to work harder to reach at the higher position in the organization.

Rewards based on competences are not based on status but on skill, ability, creativity,
competency and the technical knowledge of a person to perform a task. It facilitates
continuous learning. The employee’s pay increases with enhanced skills.

Rewards based on performance can be of three types –individual rewards, team rewards and
organizational rewards. Any incentive paid in terms of bonus, commission or royalty, paid
for achieving a certain goal is an individual reward. Gain sharing can be another method of
team reward. Profit sharing, right to purchase and purchase right of company’s shares at a
discounted rate can be such rewards which create ownership culture and make employees
work for the success of the company.

• Check the System for Equity: Before deciding about the compensation organizations
carefully observes the inputs of particular job equity.
• Motivation through Monetary Rewards:
Food, shelter and clothing till recently were recognized not just as the primary (which they
certainly are!) motivators but also as the only motivators. Taylor argued that because people
worked for money to satisfy basic needs, they would work harder, if they were paid more.
The traditional approach to motivation was thus based upon the magic of liquid cash. It was
thought to be the sole remedy to improve morale, productivity lags and employee
dissatisfaction.

• Reward on Seniority: In any organization a senior employee get more than his /her
junior. Many organizations pay their employees according to the number of years they
have served the organization, though in recent years many companies have adopted
performance based pay. Indian companies are using both seniority and performance

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based pay to attract people. Seniority based pay builds loyalty and motivates employees
to perform well.
• MBO: Management by Objective is a participative process. MBO was propounded by
Peter F. Drucker in 1954. This also can be motivational because in this employees are
involved in setting their own goals and so feel responsible for the completion of the
task.
• Empowerment: Empowerment tries to make people feel competent. Managers play a
very important role in empowering employees.

Managers can give power and autonomy to their subordinates. The role of Information and
Technology is an important factor for empowerment because it gives access to all the
desirable information. It helps in bringing about a positive attitude which leads to better
performance. Two changes can be noticed in an empowered person. The first is motivation
enhancement and the second is more energized, committed and problem solving behaviour.

• Job Design: A Job is a set of tasks which is performed by any person. Keeping the
principles of scientific management in view, Job Design is breaking the job into sub
tasks. Then by combining these sub tasks departmental sub units are decided. It helps
in motivating the employees by making their jobs more interesting. As a part of Job
Design Job Rotation, Job Enlargement and Job Enrichment can be important ways of
motivating employees.

Job Rotation involves moving employees from one job to another in a very systematic
manner and thus providing them with more interesting and satisfying work.

Job Enlargement is an effective tool for reducing the monotony and boredom of performing
by expanding the worker’s job. It increases interest and provides variety by increasing the
number of tasks in a job. In spite of all the benefits, job designing is not an easy task.

Other than these, there can be other methods which can be used for motivating the
employees. These are participative management, quality of work life, flexible working hours,
flexible pay etc.

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8. SUMMARY
Let us now recall the main points of the unit discussed:

• Learning is defined as relatively permanent change in behaviour. Learning is also

defined as the process of acquiring, assimilating, and internalizing cognitive, motor, or
behavioural inputs for their effective and varied use when required, leading to an
enhanced capability for further self-monitored learning.
• Cycle of experiential learning proposed by Kolb has four parts - Experiencing,
Processing, Generalizing and Applying.
• Learning is important because it helps us to survive. It is also essential for our well-
being, our prosperity as it helps us make informed choices.
• Four broad components of learning are - Learning atmosphere, Learning mechanism,
Teacher/Trainer and Learner. (Section 4.3)
• Theories of learning are - Classical conditioning, Operant conditioning, Social learning,
Cognitive learning, Programmed learning.
• Motivation is an important task of managers to inspire and encourage employees to
attain the desired goal.
• Maslow’s Need Hierarchy Theory, Herzberg’s Two Factor Theory and ERG Theory are
very popular among content theories.
• In process theories Vroom says that motivation is due to valence, expectancy and
instrumentality. Adam identified that motivation depends upon how inequity is
perceived by a person
• Portor and Lawler stress that valence and expectancy lead to effort and then
performance leads to satisfaction.

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9. GLOSSARY
• Motivation: The set of forces- acting on or within a person that energize, direct and
sustain behaviour.
• Ethico-legal - Related to ethics and legal issues
• Learning - Relatively permanent change in behaviour
• Pedagogical - Instructional
• Imitate - Mimic

10. TERMINAL QUESTIONS

1. Define Learning. Explain the cycle of experiential learning proposed by Kolb
2. List the components of learning and discuss them briefly.
3. Describe various learning theories and mention these theories’ relevance in
organizations.
4. Define Motivation. Why is motivation important for an organization? Discuss intrinsic
and extrinsic motivation.
5. Discuss the theories of motivation.

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11. ANSWERS
Self-Assessment Questions
1. Permanent
2. Assimilation
3. Experiencing, Processing, Generalizing and Applying
4. Continuous learning
5. Learning atmosphere
6. Classical Conditioning
7. Discrimination and generalisation
8. Operant learning
9. Mover, move.
10. Pleasure, importance.
11. External factors.
12. Maslow’s need hierarchy theory, Herzberg’s two-factor theory,Alderfer’s ERG theory
and McClelland’s achievement theory.
13. .Abraham Harold Maslow.
14. ERG Theory.
15. Expectancy Theory.

Terminal Answers
1. Learning is defined as a relatively permanent change in behaviour (Akin 1987). (Refer
Section 2 for details of importance of learning). Model proposed by Kolb on adult
learning has four parts: Experiencing, Processing, Generalizing and Applying
2. Learning comprises four broad components: (Refer Section 3)
• Learning atmosphere
• Learning mechanism
• Teacher/Trainer
• Learner
3. Various learning theories are: (Refer Section 4)
4. In the words of Dalton E. McFarland, “Motivation is the way in which urges, desires,
aspiration, striving or needs direct, control or explain the behaviour of human beings”.
(Refer Section 5)

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5. Theories of motivation. (Refer Section 6)

12. REFERENCES
• Robbins P. Stephen & Judge. A. TimOthy, (2010), Organizational Behaviour, Prentice
Hall
• Singh B. P. & Chhabra T.N., (2005), Organization theory & Behaviour, Dhanpat Rai & co
(P)Ltd
• Rao.V.S.P., (2009), Organization Behaviour, Excel Books
• PareekUdai, (2003), Organizational Behaviour, Oxford University Press.
• Ashkanasy N. M. and Daus C. S., Emotions in Workplace: The new challenges for
managers, Academy of Management Executive, February, 2002, page 77

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 8: Introduction to Personality 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 8
Introduction to Personality

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Definition and Meaning of Personality - 1
4-5
2.1 Importance of Personality - -
3 Determinants of Personality - 2 6-8
4 Theories of Personality 1 3, I 9-15
5 Personality Traits Influencing OB - 4, II 15-17
6 Summary - - 18
7 Glossary - - 19
8 Terminal Questions - - 19
9 Answers - - 20-21
10 References - - 21

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1. INTRODUCTION
The study of individual behaviour is based on Psychology and analysis of the differences in
individual behaviour across different situations. Many socio-psychological theories have
described how values, attitudes, motivation, and perception are able to influence human
behaviour. In the previous Units, we have studied the impact of interpersonal relationships
and learning on the behaviour shown by individuals towards others. Different individuals
show different behaviours and such differences may or may not be acceptable to society. An
individual’s behaviour is purely an outcome of some internal as well as external factors. The
external factors refer to the external environment of which an individual is a part. On the
other hand, some of the internal factors are within the individual control such as innate
needs, feelings, motives, desires and most importantly one’s own personality.

Personality is defined as the combination of emotional, attitudinal, and behavioural response

patterns of an individual towards any individual/ event or situation. Almost every day we
come across people of different personalities and try to assess the way they behave. No two
people are alike in terms of their personality. The way people deal with situations/ events/
people/ information etc. also tends to be different. For instance, a

female boss will behave differently than a male boss if any of their juniors is in trouble
because generally, it is the female members who are more empathetic and emotional in
nature. Different people behave differently in different situations due to their different
motives and needs. And this brings the biggest challenge in front of managers to manage the
people they are working with. In this unit, we will be discussing the various aspects of
personality. Understanding the personality of every individual becomes an important issue
for managers to handle them accordingly.

1.1 Objectives
After studying this unit you should be able to:
❖ Explain the determinants of Personality
❖ Explain the theories of personality.
❖ Evaluate the impact of personality on OB.

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2. DEFINITION AND MEANING OF PERSONALITY

The word ‘personality’ has been derived from the Latin word persona which means to speak
through. The concept goes back to the people of ancient Greece and Rome. During those days
the public of Greece and Rome entertained themselves through stage shows. The actors of
the show used to wear huge masks to represent their ideas very sharply. Thus, it was treated
to influence people. From there the term personality got evolved. Personality refers to
individuals’ personal traits that can be both external and internal. It helps in differentiating
between two individuals as the individuals are unique, personal and a major determinant of
personality.

According to Floyd L. Ruch, “Personality includes external appearance and behaviour, the
inner awareness of self as a permanent organizing force and the particular pattern or
organization of measurable traits, both inner and outer.” Thus, from the definition, how a
person influences others depends upon his physical (external) appearance such as facial
features, complexion, height, weight etc., and his behaviour that shows his courteousness,
discipline, values, cooperativeness, friendliness, etc. According to Fred Luthans, “personality
means how a person affects others and how he understands and views himself as well as the
pattern of inner and outer measurable traits, and the person-situation interaction.” Thus, we
can say that personality symbolizes the concept of a ‘whole person’.

2.1 Importance of Studying Personality

The knowledge of personality is not only important for managers but for every individual
who continuously interacts with others. Through this, we come to know about our own
characteristic features as well as those of others. The following are the benefits derived from
studying personality-
• The study of personality gives an insight into human behaviour.
• It helps in selecting the right person for the right job.
• It is suitable while allocating the tasks to individuals as individuals perform activities
that are congruent to their personality. For example, if a marketing job is offered to a
person who is very shy and introvert, the maximum chances are that the person won’t
be able to do it. Thus, the personality needs to be matched with the task being offered
to perform.

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• It helps in identifying an individual’s strong as well as weak points.

• By understanding the personalities of different people, managers come to know how
individuals react in typical situations.
• Depending on employees’ behaviour and motives, various motivational programmes
are designed.
• Personality leads to greater self-awareness, which in turn results in increased personal
integrity.
• By studying personality, an individual can discover or rediscover himself.

SELF-ASSESSMENT QUESTIONS – 1

1. Personality has been derived from the ___________________ word persona.

2. The concept of personality emerged from the theatre shows done by people of
_________________ and _____________________.
3. The study of personality helps in selecting ____________________ for the right job.

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3. DETERMINANTS OF PERSONALITY
Factors that shape the personality of an individual are- (a) Biological (b) Cultural (c) Family
and social and (d) situational factors.

I. Biological Factors – the three main factors that shape the personality of an individual
are:
a) Heredity – it refers to the transmission of an individual’s traits from ancestors to
descendants. For example our height, facial features, skin colour, muscle composition
etc., we get from our ancestors. Usually, heredity does not govern the values or beliefs
of a person.
b) Brain – not many researchers have proved the importance of brain in shaping the
personality of an individual, but still many believe that it plays a significant role in the
development of personality.
c) Physical Features – physical features or external appearance is a very important part
of one’s personality. A person with tall height, fair colour, and sharp features, gets
praised by everyone and hence, becomes confident enough to go forward and interact
with anyone. Similarly, there are many jobs that are offered to individuals on the basis
of their attractive and appealing personality - for example, the job of air hostess,
receptionist, front desk attendant, salesperson, model, etc. Note that personality is
not only determined by biological factors only, there are other determinants also that
influence the personality of an individual more than the biological factors. Let us go
through these factors now:
II. Cultural Factors – culture is the set of beliefs, values and norms that are shared
universally and are transmitted from one generation to another. The culture in which
we are raised consists of the norms of our family, ethics designed by society, and
experiences we get from our friends, neighbours, schools, colleges, organizations etc.
The norms and values teach a person the moral and ethical lesson of life. They teach
what is right and wrong. For example - it is the culture which guides that an individual
should not lie to others, should not cheat others, should respect his elders etc. Thus,
the culture in which he/she is brought up determines the personality of an individual.
III. Family and Social Factors – an individual’s personality is influenced by his family
and other social groups. Since after the birth of a child, he comes in contact with his

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parents, and relatives; gradually he comes in contact with his school teachers, friends,
college and so on. During this learning stage, the infant requires those learning
behaviours that are acceptable to the family as well as society. Family and Social
factors shape the personality through socialization and identification process.

Socialization is a process through which an infant acquires those behavioural patterns that
are acceptable to others. The initial learning of an infant starts when he comes in close contact
with his mother after birth, and then later with other members of the family and social
groups. Here the environment of the family deeply influences the nature of the child. For
example, if in a family the parents keep on fighting with each other and abuse each other and
the kid is deprived of the love and care he needs, then chances are that the child will grow
up to be unsocial and will live in solitude. On the other hand, a child, who is brought up with
full care, love and affection and is surrounded by healthy relationships among other
members of the family, will turn out to be happy, honest, confident and a man of principles.

The identification process occurs when a person tries to identify himself with someone who
he feels is the most ideal person for him in the family. It can be his father, mother,
grandparents etc. Many times, you might have observed kids who wear their fathers'
clothes/shoes/cap and pretend to be like him, similarly, girls who imitate their mothers by
cooking food using their toy kitchen set, wrapping cloth in the form of saree etc., they do so
to acquire the characteristic features of their ideals. The identification process passes
through three stages- in the first stage the child shows some similar behaviour to that of his
ideal person, in the second stage he shows his desire to be like his ideal man and in the last
stage he acquires many of the attributes of his ideal man. For example, the child can acquire
the style of walking, eating, talking, laughing, etc. of his admired model.

Apart from the socialization and identification processes, there are some situational factors
that influence the personality a lot.

IV. Situational Factors–an individual’s personality is largely affected by the situations

he faces. Many people react according to the situations, thus discovering a new aspect
of their personality. According to Milgram, “situation exerts an important pressure on
the individual. It exercises constraints and may provide push. In certain
circumstances, it is not so much the kind of person a man is, as the kind of situation

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in which he is placed, that determines his actions.” For example, a person thought of
himself as a very good risk-taker by nature. One day he encountered a snake and was
so scared that he started running away and shouted for help. Though the person was
very confident of himself in this situation he discovered that he was not brave enough
to face this particular risk.

From the above discussion, we can conclude that personality cannot be viewed in isolation.
It is a combination of all the four determinants. The biological factors determine an
individual’s personality from within, and family and social factors affect the personality from
the very infant stage, cultural and situational factors influence the personality in the later
stages of an individual’s life i.e., when he enters school, college or mixes with peer groups.

SELF-ASSESSMENT QUESTIONS – 2

4. Brain refers to the transmission of an individual’s traits from ancestors to

descendents. (True/False)
5. External appearance is a very important factor in developing one’s personality.
(True/False)

Choose the correct option

6. Family and social factors shape the personality through ________________ process
and identification process. (a) Polarization (b) Civilization (c) Socialization (d)
Personalization
7. Many people react according to the ________________, discovering a new aspect of
their personality.
(a) Situation (b) Condition (c) Evaluation (d) Opportunity

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4. THEORIES OF PERSONALITY
What is personality? How is an individual’s behaviour affected by personality? What are the
contributing factors of personality? To answer all these questions, several researchers have
developed many theories on personality. Let us discuss some of the important theories in
detail-

Fig 5.1

a) Psychoanalytical Theory – this theory was propounded by Sigmund Freud. Freud has
stressed on the unconscious part of human brain which determines human behaviour.
He justifies his theory by further stating that personality is the result of interaction
between three states of human mind i.e. the id, ego and super-ego. Id is the pleasure-
seeking element, ego is the compromising element and super-ego is the noble and
idealistic element.

Id is inherited psychologically by every individual since the time of their birth. It builds up
the base of unconscious mind and strives for seeking pleasure, avoiding pains, demanding
all luxuries and comforts, ignoring social and cultural norms etc. Id basically shows the
negative aspect of an individual as it tries to make the person more self-centric. Id is very
childish and demanding as it represents an individual’s needs and feelings. But Id can never
work alone, it can only provoke the person towards their ambitions.

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Ego is the logical, rational, realistic and mature aspect of personality. It takes decisions after
analysing the facts in a realistic and objective manner. Ego keeps a check on the Id and
exercises control over it. Only those demands of the Id are supported by the ego that are
acceptable, genuine, and worthy to be taken care of. Thus, ego represents a mature behaviour
that is more individualistic and realistic in nature.

Super-ego shows the moral side of the personality. It details the actions taken by the ‘ego’
i.e., whether it is right or not. It stresses upon the values, beliefs, and moral part of
personality. The super ego always demands that everything must be done with full honesty
and ethics. Thus, it limits the freedom of ego as well as Id. It is said to be the opposite of Id. It
is the super ego which makes a person realize when he does something wrong and leads to
self-punishment too. Id commands satisfaction, the ego tries to delay it by not finding it to be
worthy and above all super-ego stresses maintaining the moral part.

As discussed earlier, these three are present in the unconscious mind of every individual. But
in each time or situation, one will start dominating over the other two, hence shaping the
personality of the individual accordingly. Say for example, in the case of people who become
saints or servers of the society like Mother Teresa, their super-ego is more powerful.
Individuals who are very demanding, impulsive and self- centred are ruled by their Id.
whereas, many people act in a much mature way and thus their ego determines their
decisions. However, the theory was attacked by many researchers arguing that Freud’s
theory cannot be verified on scientific grounds, as it is very difficult to measure the hidden
elements of one’s personality.

b) Type Theories- types refer to categories that are discrete and discontinuous - e.g. you are
one or the other. The most common and popular Type theories are those of Sheldon’s
physiognomy theory and Carl Jung’s extrovert and introvert theories. Let us discuss the
contribution of these two theories in detail-
(i) Physiognomy theory- deals with the physique or body type of a person and his
associated personality temperaments. Sheldon has identified three body types –
Endomorph, Mesomorph and Ectomorph. He called this a person’s somatotype.

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Table 5.1

According to Sheldon, there is an association between physiological traits and characteristics

of an individual with his behavior. Let us now understand this somatotype-

• Endomorph – they are bulky in nature, and thick in proportion to their height. They
seek comfort, eat too much, and are cheerful, affectionate and favourites of all.
Endomorphs are good-tempered, show a relaxed posture, read slowly and are tolerant
of others. They are easy to get along with others and prefer to be led than to lead.
• Mesomorphs – these are basically strong, athletic, and tough people. These people are
admired by all; this personality type is desired and liked by all other “morphs”.
According to Sheldon, such a person seeks a lot of muscular activity; and tends to be
highly aggressive and self-assertive. Mesomorphs run faster, smile brighter, are
courageous and seek a lot of outdoor activity. These people desire action, power, and
domination.
• Ectomorph – ectomorphs are thin, tall, and are physically poorly developed. Such
persons show their desire for control. They do not trust others easily. They are used to
working in close areas as their comfort zone is very small. Ectomorphs are very
impulsive in nature and prefer solitude when their mind is not at peace. They are
typically restless, determined and committed.

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One important limitation of this theory is that not all individuals can be categorized under
these three heads only. There are people who do not fall under any of these somatotypes.
The second criticism could be that it is difficult to judge an individual’s personality based on
their body type. Thus, Sheldon’s theory gives a rough sketch of one form of a personality trait
that is based on generalizations only and is not accurate.

(ii) Extroverts vs. Introverts–according to Carl Jung, people can be either Extroverts or
Introverts, depending on the nature of their activity. Extroverts are sociable, full of
life, outgoing, and out-spoken, impulsive, seeking change and emotionally expressive
in nature. On the contrary, introverts are quiet, shy, submissive, inexpressive,
introspective, and value-oriented and prefer to remain aloof. Some people are
complete extroverts or introverts, and some are a combination of both. The
differences are shown in Table 5.2:

The biggest limitation of this theory was that it emphasized one aspect of behaviour only and
ignored other elements that would have been equally important to shape the personality.

Activity 1
Apply the type theory (physiognomy and extrovert-introvert theory) to any of your 4
friends/known people. Find out in which category they fall into and to what extent they
possess the qualities of the identified personality type.

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c) Trait Theories - it is distinguishing characteristics or qualities that are related to one’s

personal nature. Traits also design the personality of an individual. According to the trait
theory –
• Traits differentiate between two individuals.
• Traits are used to review behaviour.
• Traits and relative behaviour patterns are said to be stable over time. So, based on
trait theory, people can be described as aggressive, impetuous, sentimental, or
passionate.
• There are several traits that are unique to individuals.

The biggest problem with this theory is that there is an exhaustive list of individual traits
that become very complex in nature. Researchers have identified thousands of traits which
further have been classified into broad categories. A list of primary traits has been given by
Raymond Cattell, who has identified 16 sets of behaviours, as shown in Table 5.3:

Trait theory has been criticized on the grounds of being too descriptive rather than being
analytical, because not every trait can be measured. For example - it is very difficult to
measure feelings and emotions. Secondly, the effect of one trait on another and the
relationship between one trait and another is not established. Again traits cannot be treated
as the only important element to measure personality aspects.

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d) Self-Theory – self-theory has been propounded by Carl Rogers. An individual’s self-

concept is the centre of attraction in this theory. Self consists of the feeling of ‘Me’ and ‘I’,
where Roger has named the ‘Me’ concept as social self and ‘I’ as the personal self. Social
self is the way a person views others or is viewed by others, whereas personal self is
the way of looking at one’s own values, beliefs, morals, etc. It is one’s own mirror. There
is a close link between the ‘I’ and the ‘Me”, which shapes one’s personality. As individuals
interact within the environment they receive certain responses back, either positive or
negative. Negative responses result in a low self-image that in turn creates tension,
conflict, harshness, and anxiety. Whereas on receiving positive responses, individuals
will grow in their self-image and will rather be happy, confident, friendly, cooperative,
and empathetic. This theory suggests that what an individual receives from their
environment, affects the individual’s behaviour and they start responding in the same
manner.

For example, if a person is continuously neglected by everyone in his family, friends, and
society just because he is ugly, this will affect his self-image and he will start hating those
who are good-looking. Similarly, if a teacher is continuously disliked by his students despite
his dedication towards them, he will develop a self-image that he is not a good teacher and
will thus start hating all the students.

The biggest contribution of this theory is that it has identified a different and important
element of personality which is the self-concept. Till now all the theories have stressed upon
the individual only. If used properly, managers can benefit themselves by understanding the
self-concept of every individual and how they are driven by their different needs and
motives. This can be used as a technique to motivate and reward others properly. Say for
example a person is working to get recognition and if the manager never appreciates his
work, then the worker will become demotivated. Hence, this technique can be used
efficiently for identifying individual requirements.

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SELF-ASSESSMENT QUESTIONS – 3

8. Match the following:

a) Pleasure-seeking element (i) Endomorph

b) Idealistic element (ii) Raymond Cattell
c) Favourite of all (iii) Id
d) Introvert & Extrovert (iv) Social self
e) Trait theory (v) Super-ego
f) ‘Me’ self (vi) Carl Jung

5. PERSONALITY TRAITS INFLUENCING ORGANIZATIONAL BEHAVIOUR

The various personality traits that influence the behaviour of people in organizations are:

• Locus of Control – locus of control is of two types: Internal locus of control and external
locus of control. People with internal locus of control believe that what all happens in
their life can be controlled by them and they are the masters of their destiny. Whereas
the people with external locus of control believe that whatever happens to them is due
to their destiny or luck. They give up everything very easily. Internals are more satisfied
than externals as they establish a link between their efforts and performance.
• Authoritarianism – It refers to the belief that power and status differences should
prevail in organizations. Such people are fascinated by jobs and positions that demand
high status and a great amount of authority. Authoritarian people give more respect to
their seniors who exercise more control over others. They stick to their beliefs and work
with rigidity. Such people follow autocratic or directive leadership to command others.
• Self-Esteem – refers to the degree to which an individual likes or dislikes himself. The
way a person interacts with others largely depends on how he perceives himself. A
person who is confident and happy about himself will always interact with others
happily. People with high self-esteem are self-assertive, courageous, seek
responsibility, optimistic and very open-minded. Whereas people having low self-
esteem are introverts, lack confidence, and are submissive and pessimistic in nature.
High self-esteem people believe in themselves and are ready to accept jobs that are
unconventional. On the contrary, low self-esteem people always dislike the task and
other people.

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• Machiavellianism – Niccolò Machiavelli proposed a brutal strategy in the early 1500s

for seizing and holding political power. Since then, many people followed this strategy
to satisfy their urge to get power by manipulating others. Such people are known as
high Mach people. According to Niccolo if a person wants something, he can get it at the
cost of exploiting and manipulating others. His strategy is based on three approaches-
(i) never show modesty – arrogance is needed for dealing with others, (ii) morality and
ethics are for the weak –a powerful person should be ready to cheat and mislead others
for achieving his work, (iii) it is better to be disliked than loved. High Mach people have
an edge over those who are moralistic and ethical. High Mach people usually are good
for negotiation processes. On the other hand, low-mach people are highly moralistic and
care for others. They never believe in cheating or lying to others and take decisions very
thoughtfully so that others do not get negatively affected by their actions. Low Mach
people fit well into jobs where they are ready to follow directions.
• Introversion and Extroversion – these terms are associated with an individual’s
interpersonal orientation. Extroverts as discussed in section 5.4 are expressive,
sociable, out-going, and friendly in nature, whereas Introverts are shy, submissive,
quiet, timid and retiring. The career patterns of both introverts and extroverts are
totally different. Extroverts are suitable for jobs where frequent interaction with others
is required such as in sales, marketing, Human Resources. On the other hand, introverts
can perform tasks well that are analytical in nature and require less interaction with
others, such as a finance officer, research analyst, quality controller etc.
• Type ‘A’ and Type ‘B’–type A people are impatient, aggressive, hard-working, and very
competitive. Type B people are easy-going and uncompetitive in nature. On the other
hand, Type A has the limitations of being irritable, poor team workers and impulsive,
because of which they can be given only simple tasks and those where speed is required.
Those tasks which are complex and need hard work are performed well by Type B
people.

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Table 5.4

Thus, to get the best results and the best out of the people at work, managers need to identify
the personality of each member so that they can place the right person in the right job.

Activity 2
Visit the mentioned site (http://www.leadership-and-motivation- training.com/locus-
of-control-quiz.html) and find some established tests on locus of control. Using any one
test, analyze which type of locus of control you have. Also do it for any of your 7
friends/known ones and tell them about their personality traits in terms of their locus
of control.

SELF-ASSESSMENT QUESTIONS – 4

9. ________________________ refers to the degree to which an individual likes or dislikes

himself.
10. _______________________ people are impatient, aggressive, hard-working and very
competitive.
11. People with ______________________ the locus of control believe that whatever happens
to them is due to their destiny or luck.

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6. SUMMARY
Let us now recall the main points of the unit discussed:
• Personality refers to those patterns of behaviour that give a unique identity to an
individual. In section 5.1 and 5.2 we have discussed the concept of personality and how
the study of personality can help managers to manage people efficiently.
• In section 5.3 we have listed out the determinants that shape an individual’s
personality. Determinants of personality are categorised as (a) Biological factors (b)
Cultural factors (c) Family and social factors (d) situational factors.
• Very many researchers have proposed their own views on personality in the form of
different theories. In section 5.4 we have discussed a few important theories namely:
(a) Psychoanalytical theory (b) Type theory (c) Trait theory and (d) Self theory.
• There are certain personality traits that managers need to be aware of in order to
understand employees and workplace behaviour. In section 5.5 we have talked about
personality traits such as Locus of control, Authoritarianism, Self-concept,
Machiavellianism, Extroverts and Introverts and Type A and Type B behaviours.

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7. GLOSSARY
Conscientious Hard-working/Reliable
Expedient Practical
Forthright Straight-forward
Manipulate Art of influencing/controlling others
Modest Reserved
Optimistic A person with positive attitude
Pessimistic A person with negative attitude
Solitude Loneliness, isolation

8. TERMINAL QUESTIONS
1. Explain the concept of personality. How is the study of personality helpful for
managers?
2. Discuss the importance of biological and cultural factors as an important determinant
of personality.
3. How does socialization and identification process take place? Explain with suitable
examples.
4. Critically examine the impact of Psychoanalytical theory and Type theory on
personality.
5. Enumerate the personality traits that influence the behaviour of people working in
organizations.

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9. ANSWERS
Self-Assessment Questions
1. Latin
2. Rome & Greece
3. Right person
4. False
5. True
6. Socialization
7. Situation
8. (a) – iii
9. (b) – v
10. (c) – I
11. (d) – vi
12. (e) – ii (f) – iv
13. Self-Esteem
14. Type A
15. External

Terminal Questions:
1. The concept of personality goes back to ancient Rome and Greece. Personality is a set
of physical and psychological factors that guide an individuals’ behaviour. The study of
personality equips a manager to manage other people at work. Refer to section 1 and
5.2 here.
2. Personality is determined by biological, cultural, family and social and situational
factors. Each determinant is unique in nature and shapes the personality in a different
way. For more details Refer to section 3.
3. Socialization and identification are the two techniques through which social factors
shape an individual’s personality since birth. Refer to section 3 to see more.
4. In section 5.4 we have discussed four main theories of personality- Psychoanalytical
theory, Type theory, Trait theory and Self theory. Psychoanalytical theory consists of
three elements i.e. Id, Ego and Super-ego. There are two type theories- Physiognomy
theory and Introvert & Extrovert theory. Read the full theories in the particular section.

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5. There are a number of personality traits that influence the behaviour of people in
organizations such as locus of control, authoritarianism, self- esteem etc.

10. REFERENCES
• Robbins P. Stephen & Judge.A.TimOthy (2009) ,Organizational Behaviour, Prentice Hall
• Singh B.P. & Chhabra T.N., (2005), Organization theory& Behaviour, Dhanpat Rai &
co(p)Ltd
• Rao.V.S.P., (2009), Organization Behaviour, Excel Books
• McShane L Steven, Glinow M.A.V & Sharma R Radha, (2008), fourth edition,
Organization Behaviour, McGraw Hill companies.

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 9: Introduction to Emotions 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 9
Introduction to Emotions

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3-4
1.1 Objectives - -
2 Nature and Meaning of Emotions - 1
5-7
2.1 Characteristics of Emotions - -
3 Theories of Emotions - 2 8-9
4 Emotions in the Context of OB 1 3 10-16
5 Summary - - 17
6 Glossary - - 18
7 Terminal Questions - - 18
8 Answers - - 19-20
9 References - - 20

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1. INTRODUCTION
Do you think emotions are important? Are they relevant in the context of organizational
behavior? In the movie Aankhen released in 2002, Vijay Singh Rajput (Amitabh Bachchan),
is totally committed to the bank he is employed in. Yet when he is thrown out of it, for some
reason he turns against the very organization he loved and helped in building into a great
institution. He seeks revenge and had he succeeded; the bank would have been destroyed
completely. Emotions of the employees, thus, if not channeled properly, can have terrible
consequences.

You may find this to be an extreme example, but you will agree that emotions are inevitable
and they do impact the work performance of individuals. Soldiers fearlessly agree to die to
defend their nations primarily because of an emotional commitment.

Interestingly, emotions were not considered relevant by the scientists who initially laid the
foundation of organizational behaviour. As a result, emotions were given little or no
attention by early OB scientists. This was for two reasons. Firstly, with the arrival of the
scientific approach in management, the focus in research was shifted to rationality, and
secondly, the prevailing belief in the organizations was that success is linked to decline, if
not outright elimination, of emotions such as anger, jealousy, malice and so on.

We, human beings, differ from machines primarily because of our emotions. As humans, we
have been endowed with emotions, both positive and negative, and hence there is hardly any
moment, even in our professional life, when we are not emotional. Emotions are our personal
and subjective experiences and have their roots in the intricate, dynamic interaction of
physiological, cognitive, and situational variables. Emotions can result in a happy and
fulfilling life as they transform our thought processes, improve perception, enhance memory
and learning, augment performance, and increase adaptability. They inspire us, enhance our
confidence, propel us to attain our objectives and mould our attitudes and actions. Further,
in personal and professional life they influence our self-esteem, our ability to perform, and
our interpersonal relationships.

But emotions have a negative side too! If not handled properly they result in unmitigated
disasters. From our personal experience we know that evil and gloomy emotions often

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distract us, make us susceptible, put us at risk, distort our judgments, and interfere with our
thought process. Under the influence of negative emotions we underperform, lack
confidence and conviction and our interpersonal relations are damaged.

The emotional process does not operate in a vacuum. It is a component of broad-ranged

experience, continually influencing and being influenced by other processes going on at the
same time. Human existence and human functions without emotions are impossible and
unthinkable. You eliminate emotions from your lives and the very existence of us as humans
will be a question mark. “Emotional Social Intelligence is necessary for human survival and
adaptation”, Charles Darwin (1872).

Clearly, we want emotions to operate in our favour and not against us. Thus, it is vital in
organizations that emotions are channeled carefully and properly. As professionals, we carry
emotional components to our workplaces, and hence the study of organizational behavior
will be incomplete without a thorough understanding of emotions.

1.1 Objectives
After studying this unit, you should be able to:
❖ define emotion
❖ explain the theories of emotion
❖ discuss its importance in the context of OB

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2. NATURE AND MEANING OF EMOTIONS

Emotions are defined as a complex pattern of arousal, subjective feeling, and cognitive
interpretation involving physiological and psychological reactions. They can also be
explained as intense feelings that are directed at someone or something (object). Emotions
are often confused with moods and affect. Affect is a broad concept and includes a wide range
of feelings that we experience under normal and abnormal circumstances. They include
emotions. Thus, emotion is a component of affect. Moods, on the other hand, are feelings less
powerful than emotions and are not directed at an object. But they are related to emotions.
Suppose you were making a presentation to an important client. A colleague begins to
criticize your approach. There is a heated argument. You, no doubt, will be angry at your
colleague (object). This anger is emotion. Because of this incident, later in the day, you will
experience unhappiness, and dejection in general. This will not be directed at anyone or
anything. This is mood. Thus, your negative mood was related to your earlier negative
emotion. You can experience a happy mood after undergoing a positive emotion.

Characteristics of Emotions:
a) Emotions are diverse: We feel a wide variety of emotions some of which are
diametrically opposite. We feel love and hatred; fear and anger; happiness and sadness;
jealousy and sympathy.
b) Emotions are subjective: They vary from person to person depending upon their
personality, perceptions, his/her past experiences, and even gender.
c) Emotions vary in their intensities: Emotions could be low or high, severe, or mild,
intense, or moderate. Thus, we come across people who maintain a calm expression in
the face of extreme happiness or sadness. Some others are ecstatic when happy and cry
bitterly when sad. The difference could be because of several situational, cognitive, or
physiological variables. For example, except for anger, women feel all the emotions
more deeply than men. This is because of the physiological and social variables.
d) Emotions could be positive or negative. Emotions are labeled as positive and negative,
both for their feel as well as for their consequence. Positive emotions motivate us to be
happy and considerate towards others. Negative emotions on the other hand make us
miserable and inconsiderate towards others. Why do we have negative emotions such
as fear, anger, disgust, shame, guilt, and sadness? The answer is that these are useful

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for our survival. Thus, our fear of snakes helps us keep away from snakes and protect
ourselves. They are negative because extreme or improper use of these emotions is
harmful to us and our socio-familial setting. Thus, deep fear or hatred for people of
other communities, races, regions, and nationalities has terrible consequences.
Terrorism is a prime manifestation of such emotions. Such emotions also limit or even
eliminate our ability to think, reason, and act, which again can have harmful outcomes.
Positive emotions such as joy, hope, optimism, satisfaction, gratefulness, empathy,
courage, etc. are positive emotions and they help us in the following ways-
i. Strengthen us and add to our physical well-being and psychological growth.
ii. Enhance our ability to think and to get a large variety of ideas and actions for
solving problems.
iii. Coping with stress and quickly returning to a normal state.
iv. Setting up long-term plans and goals.
v. Developing healthy relationships.
e) Emotions are basic as well as learned: Certain Emotions, especially the ones involving
facial expressions, have strong biological roots. Studies have found that even children
born blind and who never saw anyone smiling or frowning, smile and frown in the same
manner as children with normal eyesight. The emotions such as joy, fear, anger, disgust,
sadness, and surprise, which are natural and universal are called basic emotions.
Learned emotions on the other hand are learned in our socio-cultural environment.
Some of these emotions may even be specific to a particular culture. These include
shame, guilt, greed, sympathy, and jealousy. We even learn to express these emotions
in a culturally specific manner. Emotional expressions communicated by way of
gestures, body language, and eye contact differ from culture to culture. Thus,
professionals in France are considered rude by Americans because there is cultural
pressure in the US on professionals to maintain positive (even if false) emotions. In
France, the duality of emotions (felt and displayed) is considered inappropriate.
f) Emotions are felt and displayed: Felt emotions are an individual’s real emotions
whereas displayed emotions are emotions being expressed by the person. Very often
in a professional setting felt and displayed emotions are different – at times even
diametrically opposite. When handling a particularly difficult but important client we
may be angry and annoyed from inside, but we keep our expression happy and

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respectful. A child is not capable of displaying false emotions. That is why they often
create embarrassing situations for their parents in the presence of guests! Society (and
organizations) put constraints on felt emotions. For example, manuals of certain
service-based organizations insist that employees maintain emotions such as sincerity,
happiness, enthusiasm, confidence, etc. There is research-based evidence that
organizations put constraints on negative emotions such as anger, impatience, fear, etc.
Is this duality of felt and displayed emotions good? It is essential in a professional or
even a social setting, but it can have a terrible impact on our health in the shape of
emotional labour. Emotional labour refers to the effort required to express unfelt
emotions. It could be a tiring experience. People in jobs requiring constant, cheerful,
and respectful expressions on their faces are particularly susceptible. Its long-term
impact includes bottled-up frustration, anger, resentment, depression, emotional
exhaustion, and even burnout.

SELF-ASSESSMENT QUESTIONS – 1

Fill in the Blanks

1. _______________________ is a broad concept and includes wide a range of feelings that

we experience under normal and abnormal circumstances.
2. ____________________ are feelings less powerful than emotions and are not directed
at an object.
3. _________________________ is the effort required to express unfelt emotions.
4. Emotions vary from person to person depending upon their ________________,
______________________, and even _________________________.

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3. THEORIES OF EMOTIONS
Scientific theories on emotions have interestingly been diverse. Emotions have primarily
been associated with physiological changes. We experience biological changes that include
increased heart rate, increased perspiration, palpitation, muscle tension shallow breath etc.
Scientifically speaking, emotional experiences are a result of neurophysiologic activations
in which the thalamus, hypothalamus, limbic system, and cerebral cortex play important
roles. It has been observed that physical damage in these brain areas may result in less
intense emotions or perhaps no emotions at all in extreme cases. Autonomic and Somatic
Nervous System in our body also play a significant role in the emotional process. Because of
this strong association of emotional experiences with physiological changes in our body, the
following theories have been forwarded:
a) James-Lange theory of emotion: When a particular event occurs, our body responds
by bringing about physiological changes such as palpitations, increased heartbeat, etc.
According to this theory, emotions are experienced because of these physiological
changes. Thus, if we see a poisonous snake inside our house, our palpitation, and
heartbeat undergo certain definite changes and we feel intense fear. This happens so
quickly that we believe the emotion of fear was an immediate reaction to sighting a
snake. This theory, though it appears illogical, has some truth in it. We learn to
overcome our fear, anger, and nervousness by carefully training ourselves to control
physiological changes such as breathing patterns. If you are nervous before entering a
stage, take ten deep breaths! This theory, however, does not represent the complete
picture. If this was the whole truth, why are emotions subjective?
b) Cannon- Bard theory: This theory is just the opposite of the other one. According to
this theory, when subjected to a particular event, the thalamus in our brain interprets
this emotion-provoking stimulus and transmits this information to the cerebral cortex
as well as the sympathetic nervous system. The cerebral cortex ascertains the nature of
the perceived stimulus considering our past experiences. Thus, when we find a snake
inside our home our past experiences (harboring a deep fear of snakes) invoke fear in
our mind. When fear is generated, it leads to certain physiological changes. Thus, it is
emotions that generate physiological changes and not the other way around as is
propounded in the previous theory. A person who loves snakes, therefore, has no fear

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or no corresponding physiological changes when encountering a snake. The

sympathetic nervous system, on receiving the message, provides physiological changes
that prepare the individual to act. In this case, for a person fearing a snake, it could be
a fight or flight action. This theory has some truth as it explains the subjective
experience of the emotions.
c) Schachter and Singer forwarded the two-factor theory of emotions which is founded
on cognitive analysis. This theory explains that emotions comprise two components -
physical arousal and cognitive label. Since physiological arousal in all types of emotions
is similar, the body, therefore is physiologically stimulated after experiencing an
emotion-provoking stimulus. At this point, our mind consciously tries to interpret the
situation by processing the information (cognitive interpretation). This theory,
therefore, draws from both the former ones.

SELF-ASSESSMENT QUESTIONS – 2

True or False

5. James-Lange theory of emotion suggests that the cerebral cortex ascertains the
nature of the perceived stimulus in the light of our past experiences.
6. Schachter and Singers’ two-factor theory propounds that emotions comprise two
components - physical arousal and cognitive label.
7. Cannon- Bard theory is like James-Lange theory of emotion.

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4. EMOTIONS IN THE CONTEXT OF OB

We have already seen that emotions are vital to our existence. They are inevitable and have
tremendous positive or negative impacts on individual and group performances. Thus,
emotions are important in the context of OB. The association between emotions and OB is
best explained by the Affective Events Theory (AET). AET has been explained in Figure 6.1.
The model traces the emotions of employees to the work environment. This environment
results in events that can be hassles, uplifts, or both, and they result in

positive or negative emotions. This is also influenced by the personality and moods of
individual employees. Positive and negative emotions influence the number of performance
and satisfaction variables.

Let us discuss the importance of emotions in the following areas:

• Ability and Selection
• Decision making
• Motivation
• Leadership
• Competence Enhancement
• Interpersonal Conflict
• Customer Service
• Deviant Workplace Behaviour.
• Stress Management

Figure 6.1 illustrates the affective events theory (AET)

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Fig 6.1

Source: N. M. Ashkanasy and C. S. Daus, Emotions in Workplace: The new Challenges

for Managers, Academy of Management Executive, February, 2002, page 77

a) Ability and Selection: In the movie Shaurya a brigadier has been shown to develop an
intense hatred for people of a particular community because a boy of that community,
whom he treated as a family member, misbehaves with his daughter, and kills her and
his wife. So intense is his anger that he justifies killing even innocent members of that
particular community and even their children. The question is that, even if we can
sympathize with the person, was he the right person to be selected for the Indian army?
Does he have the ability to do justice to his job? The answer is obviously ‘no’ in both
cases. Is it possible to identify and screen such people during the selection process
itself? To a certain extent yes.

From the example we have cited, it is obvious that certain jobs require people with very
positive emotions. For such sensitive jobs, the selection process must measure the emotional
intelligence of all the applicants by appropriate means. Emotional Intelligence is the ability
to perceive, appraise, and express emotions accurately, so that we can understand, recognize

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and control our own feelings and emotions and those of others to generate feelings that
facilitate thoughts and motivate ourselves and others as well. It is also defined as an array of
non- cognitive abilities, competencies and skills that influence one’s ability to succeed in
coping with environmental demands and pressure to promote growth. A simple and all-
inclusive definition of emotional intelligence was given by Daniel Goleman in 1998 when he
defined emotional intelligence as a person’s self-awareness, self- confidence, self-control,
commitment and integrity, and person’s ability to communicate, influence, initiate change and
accept change.

According to Goleman, based on the Recognition and Regulation of emotions, the four major
skills that make up emotional intelligence are:

• Self-Awareness
• Self-Management
• Social Awareness
• Relationship Management

Based upon these skills, he has included a set of twenty Emotional Competencies as shown
in table 6.2.

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Tools have been developed for measuring the emotional intelligence of individuals
accurately. This could be the base for selection, promotion, job-rotation etc.

b) Decision-Making We have already seen that organizations insist on decisions that are
rational. Yet is it rational to expect people to become emotionless while making
decisions? No! It is not. Organizations, therefore, accept that decisions will be made by
people who are emotional, and thus decisions will differ depending upon the
predominant emotion being felt by the decision-maker at the time of making decisions.
Also, we generally make decisions with our ‘heads’ as well as with our ‘hearts’. A
rational decision may not be the correct decision because an important component
(heart) of decision-making has been suppressed by us.

Further, there is evidence that ethical decisions are associated with emotional
intelligence. High emotional intelligence results in highly ethical decisions whereas low
emotional intelligence often leads to unethical decisions.

c) Motivation: how can people be motivated to perform better? The rational approach
suggests that people can be motivated by rewards and inducements. Thus, higher
wages, bonuses, insurance etc. traditionally have been in operation to provide the
required motivation. To a large extent, this approach has been successful. Yet it fails to
explain why a soldier is ready to die for his country even if he is paid low wages? We
know a sense of honour; dignity and patriotism are more potent tools to motivate
individuals than money. A person performs better because he does not want to fail his
team and his organization, because he wants to rise above his selfish existence and
serve selflessly, because of his emotional commitments, and so on. A mother is
motivated to nurture a child for emotional reasons alone. You cannot ‘buy’ a mother!
d) Leadership: leadership has emerged as the most important resource in determining
the success of a modern organization. Organizations with strong leadership are
flourishing whereas the ones with weak leadership face a bleak future. Do emotions
play any role in leadership? Would Gandhi have succeeded without his intense
emotions and their display? In the movie Chak de India, was Kabir Khan (played by
Shahrukh Khan) an emotionless person? No, all our leaders including Gandhi and
Mother Teresa, used expressions of emotions successfully to convey their messages.

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We know that the sincerity, happiness, and enthusiasm of our leaders are contagious.
It makes us sincere, happy, and enthusiastic and thus we perform better. When a whole
lot of followers are energized, an organization outperforms itself. It is for this reason
that the mission and vision statements of organizations have strong emotional
components. By invoking emotions and associating them with a lovely vision, leaders
can make their employees accept change. “I have a dream”, the famous speech of Martin
Luther King Jr. was able to inspire the Afro-Americans in the USA to attain equality and
justice, as never before.
e) Competence Enhancement: In an interesting study Frederickson found that positive
emotions broaden people’s momentary thoughts and actions, broaden their mindsets,
and build their resources. For example, the positive emotion of interest creates the
urge to explore, take in new information and experiences, and expand the self.
Similarly, the positive emotion of joy gives rise to an impulse to play and be creative.
The emotion of love experienced within our near and dear ones initiates a wish to save
our loved ones at any cost. Emotional Intelligence of individuals can be enhanced by
appropriate training and counselling programs and this results in enhanced work
performance.
f) Interpersonal Conflict: Interpersonal conflicts are widespread in organizations. These
conflicts have their roots in emotions. Thus, wherever you see a conflict you can be sure
of strong currents of emotion also. To manage conflicts therefore a manager must learn
to manage emotions. His ability to identify the emotional component of a conflict and
the ability to make conflicting parties work through their emotions is essential to
managing conflict. In the movie Chak de India Kabir Khan, the hockey coach identifies
the emotional components of the team’s two conflicting forward players and is able to
resolve this conflict by appealing to their love for the country.
g) Workplace behaviour: It is common to find some employees in any organization who
willfully violate established norms. Such actions are called employee deviance, and
these are a threat to the wellbeing of any organization. Thus, some people arrive late,
leave early, work slowly, steal or damage organizational property, indulge in sabotage,
gossip, and sexual or verbal harassment. Such behavior if not addressed immediately
can cripple any organization and can be traced to negative emotions. Thus, for any
manager to overcome such a behaviour, he must identify the emotion that triggers such

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behaviour. Quite often it can be overcome by appealing to the positive emotions of the
deviant employee. In the movie Sholay, Jai and Veeru (Amitabh Bachhan and
Dharmendra) intended to steal money from the sale of Thakur (Sanjeev Kumar).
However, they give up all such emotions when Thakur’s daughter-in- law (Jaya
Bhaduri) makes them realize the wickedness of their act against a person who trusted
them.
h) Stress Management: The skills required for handling stress is another important
aspect of emotional intelligence as it helps people to meet their environmental
demands and manage work pressure successfully. Psychological stress is accompanied
by negative emotions like anger, aggression, hostility, depression, anxiety, and negative
behaviours like panic attacks, mood swings, and sleeplessness. Negative moods and
emotions release stress hormones that weaken our immune system and ultimately lead
to poorer health outcomes, increased risk of injury, and even death due to chronic blood
pressure and heart attacks. Researchers have shown that emotionally intelligent people
have fewer health problems and better work performance as they are able to manage
and express their emotions appropriately.

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SELF-ASSESSMENT QUESTIONS – 3

Multiple Choice Questions

8. Daniel Goleman defines emotional intelligence as person’s

a) self-awareness, self-confidence, self-delusion, commitment and integrity
b) self-awareness, self-confidence, self-promotion, commitment and
integrity
c) self-awareness, self-confidence, self-control, commitment and integrity
d) self-gratification, self-confidence, self-delusion, commitment and
integrity
9. Self-awareness includes competencies such as:
a) Emotional self-awareness, Accurate self-assessment and self- control
b) Emotional self-awareness, Accurate self-assessment and self- confidence
c) Emotional self-awareness, self-confidence and self-control
d) Emotional self-awareness, Accurate self-assessment and empathy.
10. Social-awareness includes competencies such as:
a) Empathy, Service Orientation and organizational awareness
b) Empathy, Initiative and organizational awareness
c) Influence, Service Orientation and organizational awareness
d) Empathy, Service Orientation and adaptability.

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5. SUMMARY
Let us now recall the main points of the unit discussed:

• Section 9.1 introduces emotions as our personal and subjective experiences and which
have their roots in the intricate, dynamic interaction of physiological, cognitive and
situational variables. Emotions can result in a happy and fulfilling life as they transform
our thought processes, improve perception, enhance memory and learning, augment
performance and increase adaptability. Emotions have negative consequences too in
the context of OB.
• Section 9.2 discusses the nature and meaning of emotions. It further differentiates
emotions from mood and affect which are often confused for emotions. Later in the
section Characteristics of Emotions (Emotions are diverse; Emotions are subjective;
Emotions vary in their intensities, Emotions may be positive or negative, Emotions are
basic as well as learned, Emotions are felt and displayed) have been explained.
• Section 9.3 discusses three major theories of emotions namelyJames- Lange theory of
emotion, Cannon- Bard theory, and Schachter and Singer’s theory.
• In section 9.4 emotions in the context of OB have been elucidated. It first clarifies the
Affective Events Theory (AET) and then it sheds light on the relevance of emotions in
the context of Selection, Decision making, Motivation, Leadership, Competence
Enhancement, Interpersonal Conflict, Customer Service, Deviant Workplace Behaviour
and Stress Management.

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6. GLOSSARY
Emotions Complex pattern subjective feeling and cognitive
interpretation involving physiological and
psychological reactions
Moods Feelings less powerful than emotions and not
directed at an object
Affect Includes a wide range of feelings including
emotions
Subjective Varying from person to person
Basic Emotions Natural and universal emotions such as anger,
fear.
Learned Emotions Emotions learnt in our socio-cultural environment
Felt Emotions Real emotions
Portrayed Emotions being expressed by the person
Emotions
Emotional labour Effort required to express an unfelt emotion

7. TERMINAL QUESTIONS
1. Define emotion. How does it differ from affect and moods? Explain giving examples.
2. Discuss the characteristics of emotions
3. Elucidate the theories of emotions.
4. Explain Affective Events Theory (AET) with the help of a neat diagram.
5. What is emotional intelligence? Discuss four skills and twenty competencies that
comprise emotional intelligence.
6. Discuss the role of emotions in Leadership, Motivation and Conflict Management.
7. How is emotional intelligence useful for OB?

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8. ANSWERS
Self-Assessment Questions
1. Affect
2. Moods
3. Emotional Labour
4. personality, perceptions, past experiences, gender
5. False
6. True
7. False
8. (c) self-awareness, self-confidence, self-control, commitment and integrity
9. (b) Emotional self-awareness, Accurate self-assessment and self- confidence
10. (a) Empathy, Service Orientation and organizational awareness

Terminal Questions
1. Emotions are a complex pattern of arousal, subjective feeling and cognitive
interpretation involving physiological and psychological reactions. Affect is a broad
concept and includes a wide range of feelings that we experience under normal and
abnormal circumstances. Moods are feelings less powerful than emotions and are not
directed at an object. Think of appropriate examples from your own experience.
2. Characteristics of emotions are: (Refer to section 2)
a. Emotions are diverse
b. Emotions are subjective
c. Emotions vary in their intensities
d. Emotions may be positive or negative
e. Emotions are basic as well as learned
f. Emotions are felt and displayed
3. Refer to section 3 for James-Lange theory of emotion, Cannon-Bard theory, and
Schachter and Singer theory
4. Affective Events Theory (AET) (figure 9.1) traces emotions of employees in the work
environment. (Section 4)

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5. Emotional Intelligence is a person’s self-awareness, self-confidence, self-control,

commitment, and integrity, and a person’s ability to communicate, influence, initiate
change and accept change. Refer to Section 4 (a)
6. Understanding of emotions helps in leadership, motivation, and conflict management.
Refer to section 4 c, d and f.
7. Emotions are important for the following OB related issues:
a. Ability and Selection
b. Decision making
c. Motivation
d. Leadership
e. Competence Enhancement
f. Interpersonal Conflict
g. Customer Service
h. Deviant Workplace behaviour.
i. Stress Management

9. REFERENCES
• N. M. Ashkanasy and C. S. Daus,(2002)Emotions in Workplace: The new challenges for
managers, Academy of Management Executive, page 77
• Robbins P. Stephen & Judge. A. Tim Othy (2010 ), Organizational Behaviour, Prentice
Hall
• Singh B.P.& Chhabra T.N., (2005), Organization theory & Behaviour, Dhanpat Rai & co
(P) Ltd

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BACHELOR OF BUSINESS
ADMINISTRATION
SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 10: Leadership 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 10
Leadership

Table of Contents

SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Definition and Meaning 1, 2, 3 1, I 4-10
3 Theories of Leadership 4, 5 2, II 10-17
4 Contemporary Business Leaders - 3, III 18-20
5 Summary - - 20
6 Terminal Questions - - 21
7 Answers - - 21-22
8 References - - 22

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1. INTRODUCTION
How many of you have had a chance to hear the Spiritual Guru Dalai Lama? When Barak
Obama was in India and addressed the students at Mumbai, what was your reaction? Do you
have any desire to meet Bill Gates? All these people are great leaders.

We all idolize some or the other people and try to follow them.

Leadership is a highly discussed and complex issue. Researchers have different views
regarding leadership. There are two conflicting views about leadership development some
say leaders are born, while others say leaders are made from situations. The general belief
is that leaders are both born and made. A different group of researchers say that the way you
behave, and direct others reflects your leadership style.

Leadership is a process of influencing people towards the fulfillment of goals in each

situation. Earlier it was thought that leaders are blessed with some supernatural powers and
hence they can see the future. It was considered as the characteristic of a person. These types
of leaders are known as visionary leaders.

In recent years we have more rational explanations of leadership. It is understood as a social-

influence process. In other words, we can say that leadership is a continuous process of
influencing the behavior of other persons. Leadership is the ability to lead others effectively.
Leadership is not confined to the top level only, it is desirable at every level of an
organization. Any person can show this ability, but it is a very rare quality. Organizations
today emphasize leadership training and development to fulfill the future HR needs.
Succession planning is a part of it.

There are many theories of leadership that bring insight into it from various aspects.

1.1 Objectives
After studying this unit, you should be able to
❖ Explain Leadership.
❖ Describe theories of Leadership.
❖ Recall Contemporary Business Leaders.

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2. DEFINITION AND MEANING

Leadership, as a concept, is as old as human civilization. Its need is felt more strongly in
today’s highly complex, specialized and adjustment-oriented surroundings. Leaders indeed
are the scarcest resources in the world.

According to Koontz and O’Donnell “Leadership is the process of influencing others towards
the accomplishment of the goal. It is the ability of a manager to induce subordinates to work
with zeal and confidence”.

In other words, we can say that leadership is a process that influences people to work for the
fulfillment of the goal. Every leader is known by his followers, so leaders continuously
influence the behavior of the followers.

In the words of Selznick “Leadership can be defined as a process in which a person tries to
influence a set of individuals in the pursuit of achieving individual, group, and organizational
objectives. Effective leaders help groups of people to define their goals and find ways to
achieve them”.

Thus, we can say that it is the task of directing and coordinating relevant group activities.

Terry says that it is the activity of influencing people to strive willingly for group objectives.

According to Hemphill: “It is the initiation of acts which result in a consistent pattern of
group interaction directed towards the solution of a mutual problem”.

According to Louis A. Allen “A leader is one who guides and directs other people. He gives
the efforts of his followers a direction and purpose, by influencing their behaviour”.

There are certain characteristics of leadership which help us in understanding leadership.

1. Leadership is a process of influence.
2. Leadership is related to a situation. The ability of a leader is determined by his skills or
capacity to handle a situation to allow his subordinates to work with freedom and
independence.

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3. Leadership is a function of stimulation. A leader should set attainable goals and inspire
people in such a manner that individuals and organizational goals do not contradict
each other.
4. Leadership gives an experience of helping others in attaining their common objective.
It gives a sense of identification and recognition to the people.
5. There should be the existence of followers because it is a two-way relationship that
may involve psychological or economic exchange.

So, we can see that leadership brings life into a group and motivates it to achieve the goal.
The behaviour of a leader is determined by three factors- qualification, skil,l and knowledge.

The terms leader and manager are generally used interchangeably. A leader influences
others whereas a manager can manage also. A manager can be a leader but a leader may not
be a manager. In other words, all managers are leaders but all leaders are not managers. We
can differentiate leaders and managers on the following points.
• Leadership is a narrow term, but a manager is more than a leader.
• Leadership doesn’t require any organized structure. It exists in unorganized groups.
Managers have a need of an organized structure.
• Leader influences others to make every effort for group goals, whereas managing
includes planning, organizing, staffing, directing and controlling. Leadership is one
aspect of it.
• The authority of the leader depends upon the followers who give consent to be
influenced. A manager has formal authority from the top management.

A leader performs various functions while motivating people toward achieving

organizational goals. A Leader helps in creating a healthy environment so that employees
can work with efficiency. He is the representative of the group. Leaders also act as counselors
who listen to their subordinates, remove obstacles and keep the employees happy at the
workplace. A leader makes the followers obey his orders. A leader manages time and strives
for effectiveness by enforcing discipline and control. A leader creates positive energy, with
his confidence and enthusiasm; he creates charisma and leads people toward
accomplishment of the goal. For example, yoga guru Ramdev, motivated people towards

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

yoga and changed the life of many people. A leader always moves forward to show the right
path to his followers.

The overall performance of an organization depends upon the type of leadership it has. A
leader inspires employees, secures cooperation, creates confidence, and provides good
working conditions. He manages time and money, enforces positive changes, makes people
realize their potential, and forces them to act.

Thus, leadership transforms potential into reality and develops confidence in employees for
successful work accomplishment. A leader creates a difference while working with others.
We can take the example of Mahatma Gandhi, who inspired people to follow the path of non-
violence.

Styles of Leadership: Leadership style refers to the behaviour of the leader. It is a pattern
that a leader reflects. The leadership style is of different types. It varies from leader to leader.
In other words, we can say that leadership is the behavior shown by a leader while
supervising subordinates. How many times have you noticed the behavior /style of the
leaders around you?

There are three different types of leadership styles: Autocratic, Participative and Laissez-
faire.

a) Autocratic Style: Autocratic leadership style is also known as authoritarian style. An

autocratic leader believes in strict commands. He passes orders and relies on negative
influences. He gives orders which must be obeyed by his subordinates. He determines
policies of the group without consulting them. He passes orders to the group without
revealing their future plans. In this style, the leader remains aloof from the group. He
gives criticism and praise individually. Decision-making is centralized in the hands of
the leader and he does not give subordinates the freedom to influence their behavior.
So, we can say that it is a one-way process.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Fig 8.1: Autocratic style

In Figure 8.1 we can see that it is a one-way process of communication. Subordinates totally
depend upon the leader for every decision.

This style has its own advantages and disadvantages.

Advantages:
• In this style of leadership there can be quick decision making.
• In any crisis or problem, the leader can have direct control over the group.
• It can be directly applied to group activity.
• There is one decision-making authority, so consistency in procedure can be maintained.
• It is best suited for managing incompetent and inexperienced subordinates.

Disadvantages:
• In this style the leader makes all the decisions which are very demotivating for the
subordinates.
• There can be misunderstanding among the people due to the one-way communication.
• People get less chance of growth of their potential in this style of leadership.
• There can be high dependency on the leader for everything and people start avoiding
responsibility. They can be defensive.

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Autocratic leadership style is again divided into three types.

i) Strict autocratic: The leader of this style believes in passing the orders.
Communication is downward and he uses fear and threats.
ii) Benevolent autocratic: In this style, the leader uses rewards and punishment to work
effectively. Limited upward communication where the leader hears what he wants to
hear. In most of the cases, decisions are made by the leader.
iii) Manipulative autocratic: In this style, the leader shows that the suggestions of the
employees are welcomed but he makes his own decisions. In this leadership style, there
is no motivation for the employees They are not well informed. They have no decision-
making ability. They are not treated like members of a group.
b) Participative style: Participative style is also known as democratic style. In this style,
the decision-making power is dispersed among the group members. Policies are
worked out in group discussions and with the acceptance of the group. Praise or blame
is a group factor. Decisions are not unilateral as they arise out of group consensus. In
Figure 8.2 we can see that the leader is at the center and flow of information is at every
level.

Fig 8.2: Participative style

Advantages:
• In this style employees feel motivated and satisfied, which increases productivity.
• The morale of the group is high.
• Group decision-making reduces conflicts.

Disadvantages:
• Subordinates can use participative leadership as a tool of manipulation.
• Top-level decision-making is difficult.

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• There can be chaos and bias.

Thus, this leadership style has its own advantages and disadvantages, but this style is highly
appreciated.

c) Laissez-faire style: This leadership style is also known as free-rein leadership. The
leader acts as a supervisor. Generally, self-managed teams have this kind of leadership.
It is also called permissive leadership. A free-rein leader does not lead but leaves the
group entirely to itself. We can understand it from the following figure.

Fig 8.3: Laissez-faire style

Free-rein leaders avoid power. In this leadership style, the group establishes its own goal
and works out its problems on its own. The leader leaves all responsibilities to his
subordinates. In other words, we can say that the leader exists as a contact person who
brings the required information and resources from outside.

This leadership style has the advantage that brilliant and qualified people can be acquired
but a demerit can be that the group might lack motivation.

So, we can say that in today’s dynamic world, every organization needs strong and dynamic
leadership. A formal appointment can be made to lead the group, or a leader can also emerge
from within a group. We can take the example of Dhiru Bhai Ambani, Ratan Tata and Barak
Obama.

Activity 1
Select two people whom you consider as great leaders. Identify their leadership styles.
Compare them and give suggestions for improvement in their profile.

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SELF-ASSESSMENT QUESTIONS – 1

1. According to ____________________ “Leadership is the process of influencing others

towards the _______________________. It is the ability of a manager to induce
subordinates to work with zeal and confidence”.
2. An _______________________ believes in strict commands. He passes orders and relies
on negative influences. He gives orders which must be obeyed by their
subordinates. He determines the policies of the group without consulting them.
3. In ____________________ decision-making power is dispersed among the group
members. Policies are worked out in _____________________ and with the acceptance
of the group.

3. THEORIES OF LEADERSHIP
There are various theories of leadership. There can be three broad classifications of these
theories: trait theory, situational theory, and behavioural theory. According to trait theory,
leadership is a combination of certain personality traits. Situational theory says that there
are certain situational factors that decide a person’s leadership style. Behavioural theory
identifies the behaviour of an individual which is associated with the leadership style.

1) Great Man Theory of Leadership:

The Great Man theory of leadership was formulated in the year 1950 according to which
leaders are born and not made. This theory says that leaders have certain inherent traits
which make them leaders. This approach emphasizes that a person is born with or without
the necessary traits of leadership. Here we can take the example of Napoleon, who is
considered a born leader. This theory says that leadership is God-gifted. This theory talks
about certain qualities such as intelligence, charm, courage, persuasiveness, commanding
personality, aggressiveness, etc.

It also presents that generally leaders or great leaders are born not made. They have certain
inborn leadership qualities which they receive due to some divine power. To be a successful
leader, it is necessary to have inborn leadership qualities.

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According to this theory, leadership qualities and their effectiveness are independent
variables. These qualities cannot be acquired by formal training.

2) Trait theory:
Trait theory is based on the Great Man theory. In the year 1930-40, much research was
conducted to find out the factors which are responsible for making a leader and it was said
that if a person possesses particular traits, he can become a leader. In other words, this
theory believes that leadership is the result of certain traits. This theory says that leaders
differ from their followers because of certain generally acceptable traits. For example, Ratan
Tata, Narayan Murthy, Steve Jobs, Nelson Mandela, and Indira Gandhi are well-known
leaders because of their personal qualities and characteristics. It can also be said that
Mahatma Gandhi did not receive any formal training for developing leadership skills; also,
he was a charismatic leader. Researchers have identified almost 40 traits that are important
to have in you if you want to become a leader. Some of these traits are:

Traits
– Adaptable to situations
– Alert to social environment
– Ambitious and achievement-orientated
– Assertive
– Cooperative
– Decisive
– Dependable
– Dominant (desire to influence others)
– Energetic (high activity level)
– Persistent
– Self-confident
– Tolerant of stress
– Willing to assume responsibility

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Skills
– Clever (intelligent)
– Conceptually skilled
– Creative
– Diplomatic and tactful
– Fluent in speaking
– Knowledgeable about group tasks
– Organised (administrative ability)
– Persuasive
– Socially skilled

The criticism of this theory is that only having these traits cannot make you a leader. It is the
situation that helps one to become a leader. Another criticism was that there is no universal
set of traits for leaders, not only that, defining and measuring the traits is also a difficult task.

3) Behavioural Theory:
In the years 1940-1960, a lot of research was conducted on whether individuals can be
trained to become leaders. This was a different approach as compared to the trait theory.
The studies were conducted to know that if leaders are not born, then training could be given
to develop individuals to make them leaders. Thus, it was very exciting to know that training
can help in increasing the supply of effective leaders in organizations. So, it was a new
approach where the emphasis was not on the traits but on behaviour, which can be
measured.

a. Ohio State Studies

The Ohio State Studies identified various independent dimensions of a leader’s behaviour.
After analyzing the leadership behavior in various situations they narrowed down the list to
two leadership behaviors a) Initiating structure and b) Consideration.

Initiating structure indicates the role of the leader and his subordinates, concern for
establishing well-defined norms, implementing new ideas and practices, developing
channels of communication and ways of performing the task. High rank on initiating
structure shows that the leader is task-oriented.

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Consideration indicates friendship, respect, and mutual trust and worth a leader can show
to be friendly and approachable. High consideration helps in developing good rapport with
the subordinates.

In this research, to describe the behaviour displayed by leaders, the scholars of Ohio State
developed a questionnaire known as Leader Behaviour Description Questionnaire, in which
they included 15 items related to the consideration and 15 items for initiating structure. To
know the self-perception of the leaders they also developed the Leader Opinion
Questionnaire. The research indicates that initiating structure (IS) and consideration (C) are
independent and two different dimensions. A high score in one is not an indicator of a low
score in another one. Initially, it was believed that a leader could not be considerate if he
scores high on initiating structure, and if he is considerate, it means he is not good at
initiating structure. But very soon people realized that a combination of both is possible.
Let’s see the Figure 8.4 to understand it.

Fig 8.4: consideration and initiating structure

Source : singh k (2010) organizational Behaviour. pg.272

Ohio State researchers predicted that a leader with High IS-High C would be the most
effective leader in all the situations, but this hypothesis was not validated. The Ohio State
studies had extensive influence. It was considered useful, and many training programs have
made use of it.

In spite of all this, this theory was also criticized that it is an over simplification of reality,
and the impact of environmental factors on the behavior of the leader is totally ignored.

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b. Managerial Grid:
The managerial grid theory was created and developed by Robert Blake and Jane S. Mouton.
This theory was considered the most significant and practical contribution to organization
development and effective management principles. As shown in Figure 8.5, the managerial
grid theory is a presentation of a two-dimensional view of leadership style. These two
dimensions are:
a) Concern for people
b) Concern for production

Fig 8.5: Managerial Grid

Source : singh k (2010) organizational Behaviour.pg.272

The x (horizontal) axis of the grid represents the leader’s concern for production and the y
(vertical) axis represents the leader’s concern for people. It is expressed as nine-point scale.
The minimum concern is represented by number 1 and the maximum concern is represented
by number 9. In this grid, there can be eighty-one possible positions but we concentrate on
five leadership styles only. They are:

a. Impoverished: The leader has very little concern for both results and relations with
people. They are the least required ones. They put the least effort towards completion
of task and maintaining the high morale of the employees.
b. Country club: The leader has very little concern for production and very high concern
for employees. Importance is given to informal groups. They try to create a comfortable
and friendly work environment.

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c. Middle road: The leader has middle-level concern for people as well as the production.
Adequate functioning is achieved by careful balancing.
d. Task manager: These leaders are mainly concerned about production and least
concerned about people. Such leaders are feared and hated though they run efficient
organizations.
e. Team manager: This style reflects maximum concern for both. This style is considered
as the best leadership style. Work accomplishment is from committed people. He enjoys
the trust and respect of his subordinates.

Thus, we can say that this grid can help managers in identifying their own leadership
style. This is instructive and attractive, which makes it popular among practitioners.

4) Situational Theory: The situational theories emphasise that there is no specific style
of leadership; it is the situation that decides whether a person is a leader or not. In other
words, leadership is strongly affected by the situation in which a leader emerges and in
which he works. The situational theory says that the success of an organization depends
upon the leadership of that organization. So, the leader should be flexible enough to
understand the situation and his followers. The emphasis is on the type of situation,
and behaviour of the leader and the followers. The leader is a means of achieving the
goals of the group and the members. In other words, we can say that according to this
theory, a leader becomes a leader due to the various situational factors, and the
interaction between the leader and the group members. It can be said that a single
contingency model may not be suitable all the time because the demands of different
situations may vary greatly.

A. Path Goal Theory:

The path-goal theory was proposed by R. J. House. This theory says that a leader should
motivate his subordinates to attain the work goal by clarifying the path so that they can get
personal rewards. This can be done by removing confusion or conflicting ideas. The rewards
for the subordinates should be increased and proper guidance and counseling should be
provided so that they can obtain the rewards. In other words, a leader should analyse the
situation, the needs of the follower and the task, and provide support , clear the path, clarify
the path so that the follower can get the rewards. For this a leader can adopt following styles:

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➢ Supportive: It is like people-oriented leadership. The leader provides emotional and

psychological support, is friendly and approachable, shows respect and concern for
employees.
➢ Directive: It is like task-oriented leadership. In this style the leader sets the standard,
clarifies the goal, and provides the means of achieving them.
➢ Participative: This style of leadership believes in involvement of the employees. The
leader invites them for suggestions and considers their ideas before making any
decision.
➢ Achievement-oriented: In this style the leader sets high and challenging goals and
expects a very high level of performance.

According to House, any leadership style will be effective in any situation, not in the other
one. These situations are determined by two variables:
a) Characteristics of Followers: The style of leadership should be according to the ability
and personality of the followers.
b) Employee’s Working Environment: The factors that are not under the control of the
subordinates but affect their performance and satisfaction are the environmental
factors. These factors can be the work environment and other organizational factors.

Thus, the path goal theory says that a leader should consider both the individual subordinate
and the situation. The path-goal theory was criticized on the grounds that it is complicated,
less research has been done and it gives an incomplete picture. But this theory gives an idea
about the type of leadership that is effective in each situation. This theory also tries to explain
why the leader is effective. In other words, we can say that the path goal theory gives a
practical view of the use of leadership style.

According to situational theories a leader‘s skill, ability, or characteristics are determined by

the situation in which he has to work. A leader must try to keep a balance between tasks and
group relationship. His ability to understand a situation and act accordingly, determines the
success of a leader.

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Activity 2
Test your leadership style- visit www. leaderx.com

SELF-ASSESSMENT QUESTIONS – 2

4. According to ____________________ theory, leadership qualities, and its effectiveness

are independent variables. These qualities cannot be acquired by formal training.
5. In ___________________ a style of the leadership is matched with the maturity of the
followers. The maturity of the follower is decided by his ability to take
responsibility, his education, willingness to do a task and capacity to set high but
attainable goalsl.
6. __________________ was created and developed by Robert Blake and Jane S. Mouton.

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4. CONTEMPORARY BUSINESS LEADERS

We have already discussed the theories of leadership. There have been various new
developments in studying and developing leadership. When we talk about modern business
leaders, they are expected to have certain personal as well as role-related qualities, such as
internality, self-restraint, value orientation, social concern, rootedness, empowering,
strategy, customer orientation, networking competence, synergy-building, culture-building
capacity, etc. These are the competencies that have made Indian business leaders successful
not only at national but at international levels. There are various approaches of leadership.
Let us discuss the emerging approaches of leadership.

a) Charismatic Leadership: Charismatic leadership is influencing the followers so that

they can admire their actions. In charismatic leadership when followers observe certain
behaviour, they may have attributions of heroic or extraordinary leadership abilities.
Charismatic leaders influence followers by their unique personal qualities and by
showing great passion and devotion.

Charismatic leaders possess certain extraordinary qualities. They are dynamic and
risk-takers. They are confident and expert. They emphasize shared vision and values.
Charismatic leaders show physical and social courage; they create the impression of
self-confidence. They express high performance expectations. They are outstanding in
their communication. Virgin Group’s Chairman Sir Richard Branson is one of the
examples of charismatic leaders. Steve Jobs, co-founder of Apple Computers is also
considered a charismatic leader. The question arises as to whether charismatic leaders
are born or made. Different authors have different opinions, but the answer to both is
‘yes’.

b) Transactional Leadership: Transactional leaders are the ones who inspire and direct
their followers on the path of established goals. They guide and motivate their followers
in the direction of goals by clarifying role and task requirements. They monitor the
work of the subordinates and use corrective measures if required. Among Indian
leaders we can consider Anil Ambani, of Ambani group and Venu Srinivasan of TVS
group as transactional leaders.

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c) Transformational Leadership: Every leader today is a transformational leader

because it is the demand of the modern business world. It can be found at every level
of an organization. They are the ones who try to transform individuals to extract their
potential and develop them to become better leaders. Transformational leaders pay
more attention to the developmental needs of individual followers. They give new
insight to the old problems. They inspire and motivate their followers to put in extra
effort towards the attainment of goals. They guide followers by providing a sense of
respect, providing vision and mission, and showing trust among the employees. For
example, Kumar Mangalam Birla, a soft spoken, chartered accountant and MBA from
London School of Economics is a true transformational leader. Azim Premji of Wipro
and Ratan Tata of the Tata group can also be considered as transformational leaders.
d) Visionary Leadership: This leadership style is taken from the word vision. Visionary
leaders are the ones who can create and articulate a realistic, credible and attractive
vision of the future. The effectiveness of the visionary leader depends upon his ability
to explain his vision to others. They emphasize the vision not only verbally but also
through action. In many of the organizations, every day during the pledge, the vision
statement is repeated. It is nothing but the extinction of the vision of the leader. N.R.
Narayan Murthy of Infosys and Subhash Chandra of Zee group are visionary leaders.

Thus, we can see that there are various styles of leadership followed by contemporary
business leaders. There are many other styles that are adopted by modern business leaders,
such as 360 degree leadership which believes that every individual has certain leadership
qualities and potential all over the organization. Here we must understand that leadership
depends upon the perception of every individual. She or he may be a leader according to
one’s perception. That is why, whether a person is a leader or not, is decided by the followers.

Activity 3
Analyze the leadership style of managers from public and private sector. Prepare a
report and highlight the difference from your self-perception of an effective leadership
style.

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SELF-ASSESSMENT QUESTIONS – 3

7. Charismatic leaders influence followers by their _________________ and by showing

great passion and devotion.
8. Transformational leaders guide followers by _________________, provide vision and
mission and show trust among the employees.
9. Visionary leaders are ones who have the _________________a realistic, credible and
attractive vision of the future.
10. _________________________leaders are the ones who inspire and direct their followers
on the path of established goals.

5. SUMMARY
Let us now recall the main points of the unit discussed:

• Leadership is an activity which influences the behaviour of the followers.

• Every leader is known by his followers.
• There can be different styles of leadership: autocratic, participative and laissez faire.
• Behavioural theory includes Ohio State studies and Managerial grid theory.
• Charismatic leaders are ones who treat persons individually and guide them to take
action.
• Transactional leaders try to identify specific goals for the followers and show the path
to achieve it.
• Transformational leaders motivate and stimulate the followers to be good leaders in
the future.
• The ability to understand the situation and act accordingly determines the success of a
leader.

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6. GLOSSARY
• Autocratic – dictatorial
• Benevolent – caring, compassionate
• Laissez faire – lenient , liberal
• Charismatic – charming, fascinating.

7. TERMINAL QUESTIONS
1. Define leadership. How is a leader different from a manager?
2. Discuss in detail the various styles of leadership.
3. Explain the trait theory of leadership. How it is different from Ohio State Studies.
4. Discuss the managerial grid theory. Also discuss the different leadership styles
according to this theory.
5. Discuss charismatic and transformational approaches of leadership.

8. ANSWERS
Self-Assessment Questions
1. Koontz and O’Donnell, accomplishment of thegoal.
2. Autocratic leader
3. Participative style, group discussions
4. The Great man Theory
5. Situational model
6. The managerial grid theory.
7. Unique personal quality
8. Providing a sense of respect.
9. Ability to create and articulate
10. Transactional

Terminal Questions
1. Refer to 2, definition, difference between leader and manager.
2. Refer to 2 style of leadership.
3. Refer to 3, trait theory, Ohio state theory.
4. Refer to 3 managerial grid theory.

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5. Refer to 4 charismatic and transformational approaches.

9. REFERENCES
• Robbins Stephen P, Judge Timothy A -(2007),Organizational Behaviour. Prentice Hall.
• Pareek Udai. – (2004), Organizational Behaviour. Oxford.
• Singh Kavita.-(2010), Organizational Behaviour. Pearson.
• Rao VSP.-(2009), Organization Behaviour. EXCEL.
• Slocum John W Jr, Hellriegel Don.-(2000) Fundamentals of Organizational Behavior.
Cengage Learning.
• www.rediff.com/money/2007/may/28bspec.htm.

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BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 11
Organizational Stress

Table of Contents

SL Topic Fig No / Table SAQ / Page No

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Definition and Meaning - 1 4-5
3 Sources of Stress - 2, I 6-9
4 Types of Stress 1 3 9-10
5 Impact of Stress on Organizations - 4 11-13
6 Stress Management Techniques - 5 14-16
7 Summary - - 16
8 Glossary - - 17
9 Caselet - - 17-18
10 Terminal Questions - - 18
11 Answers - - 18-19
12 References - - 19

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1. INTRODUCTION
In the earlier units, you have studied about interpersonal behavior, personality, theories of
learning and emotion. These are the important aspects that have an impact on the behavior
of an individual in an organization. In this unit, we will study about another important aspect
- stress. You must have come across this word very frequently in different discussions, news
articles, situations etc. Stress is a part of our everyday life. Living in a fast-paced, hi-tech
society with many demands on our time, the majority of people can state, “I am stressed out.”

From morning to evening, we keep on managing time to accomplish our unending

responsibilities in a harsh world. There are various problems, which we face in our daily
lives. These include traffic jams, problems at home, health problems, behaviour of the
supervisor, attitude of the colleague etc. This makes us frustrated, anxious and scared all the
time.

As a student, many times you also find it difficult to meet the academic demands. These
factors act as stressors. Remember, stress is not harmful or negative all the time, it can be
positive too! Acertain amount of stress is necessary for better performance. It acts as a
motivator or energizer, propels people to put up the best possible efforts and complete the
work.

By learning to manage stress at the work place or in our day- to-day life, we can learn to
manage our responses to stress, which will result in better physical and mental health, and
also to foster healthy relationships with others.

1.1 Objectives
After studying this unit, you should be able to:
 state the meaning of stress
 identify the sources of stress
 list the types of stress
 discuss the impact of stress on organization
 explain stress-management techniques.

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2. DEFINITION AND MEANING

As we have seen, life in an organization is very stressful. In other words, we can say that
stress has become a part of our life. Thus, when we come across any uncomfortable
situations, we often show varied responses. These responses can be positive or negative.
Hence, we can say that, though stress is considered to be negative, it has positive values too.

Stress is our mind and body’s response or reaction to a real or imagined threat, event or
change. Such threat, event or change is commonly called a stressor. Stressors can be internal
such as thoughts, beliefs, and attitudes, or external such as loss, tragedy or change.

In other words, we can say that stress is the physiological and behavioural response of an
individual seeking to adopt and adjust to both internal and external pressures. Stress is the
“wear and tear” that our minds and bodies experience.

Stress is the reaction, people have to excessive pressures or other types of demands placed
upon them. It arises when they worry that they can’t cope with the fast changing
environment.

According to Robbins, “Stress is a condition in which an individual is confronted with an

opportunity, constraint or demand related to what he or she desires and for which the
outcome is perceived to be both uncertain and important”.

Stress is associated with two factors- demands and resources.

Demands are the pressures, responsibilities and uncertainties, faced by an individual at the
work place.

Resources are anything, which can be used to resolve the demand. To understand it, let’s
take an example, you could be in stress due to the extra responsibility, which may be the
result of your promotion. This stress can be reduced by talking to your family or friends, as
also by enhancing your capabilities.

Dr Hans Selye, in the year 1974, said that in a stressful situation there can be physiological
responses in people that act as a defence system to cope with the demands of the

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environment. This response is known as general adaptation syndrome. There are three
stages of it:
a) Alarm Reaction
b) Resistance
c) Exhaustion
a. Alarm Reaction: In today’s busy life, when we begin to experience a stressful event or
perceive something to be stressful, certain physiological changes occur in our body. This
experience or perception disrupts our body’s normal balance and immediately our body
begins to respond to the stressors as effectively as possible. For example: our heart beat
increases, respiration escalates, and body temperature decreases. There can be
hormonal changes causing various other problems.
b. Resistance Stage: In this stage, our body tries to cope or adapt to the stressors. They
start a process of repairing the damage caused by the stressors. A change in our
behaviour can be noticed by our friends, family or co-workers. For example:
Behavioural indicators such as lack of enthusiasm for family, school, work or life in
general, withdrawal, anger, fatigue etc. Cognitive indicators such as tearfulness, fear,
anxiety, panic, guilt, agitation, depression, overwhelm etc., too are common.
c. Exhaustion Stage: In this stage, we are not able to manage the stressor effectively. It
becomes difficult to be normal. Our body and mind are not able to repair the damage.
The reaction can be digestive disorder, withdrawal, headache, tension, insomnia, loss of
temper etc.

SELF-ASSESSMENT QUESTIONS – 1

State whether the following statements are True or False.

1. Dr. Hans Selye said that in a stressful situation, there can be a physiological
response in people, which acts as a defence system which copes with the demand
of the environment. (True/ False)
2. Demands are the pressures, responsibilities and uncertainties, faced by an
individual at the work place. (True /False)
3. In the exhaustion stage, our body and mind are able to repair the damage caused
by stress. (True/False)

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3. SOURCES OF STRESS
For a manager it is very important to recognize and understand the stressor, which causes
job related stress, and ultimately affects the work attitude as well as behaviour. It is not that
stress is caused by external environmental factors. It is our reaction to the environmental
factors. It depends upon the way we perceive it and react to it. The same situation can affect
two people in two different manners. Suppose an assignment is given to you and to one of
your friend. You can take it as an opportunity and enjoy it, but it could be a cause of stress
for your friend.

Stressors can be both internal and external factors. The various factors, which can be
stressors are- money, traffic, job related stress, health or medical issues, lack of free time,
relationships, family or friends etc. The organizational stressors can be:
a) Physical environment such as light, noise, temperature, polluted air, overcrowded work
place etc.
b) Individual factors such as role conflict and role ambiguity, work overload or work
under load, responsibility, working conditions, task demands, job future ambiguity,
autonomy, frequent disagreements etc.
c) Group’s factors such as poor relations with peers, subordinates or boss, poor structural
design, politics, lack of specific policies, organizational leadership, organizational life
stage etc.

Let us look at some of the major sources of stress in detail:

A) Organizational factors:
i) Occupational Demands: Certain jobs are more stressful than others. If physical
environment is not satisfactory, it can increase the anxiety. Even overcrowding can
lead to frequent interruptions in work, which can be very stressful.
ii) Role Conflict: a role is a set of guidelines, which indicates how a person holding a
position should behave. For example, a marketing person is expected to be friendly
and cheerful. A nurse is expected to be caring and sympathetic. Role conflicts exist
when a job includes such duties and responsibilities, which conflict which each
other. Conflict arises when individuals have contradictory expectations from a
person. For example, when an employee has to fulfil the demand of the boss by

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buying raw material from his nephew’s shop, and at another side he is expected to
be honest to the organization.
iii) Role Ambiguity: Role ambiguity arises when a person is not certain about his duties
and authority, rules and policies of the company, job security and methods of
appraisal. It has been found that role ambiguity is related to low job satisfaction, job
anxiety and physical and mental health.
iv) Role Overload: When a person is expected to perform beyond his competence and
skills, it can create work overload. Constant pressure and unreasonable deadlines
can cause stress in the organization.
v) Role Under load: This is another extreme situation where an employee has little or
nothing to do. This can also be very stressful. It leads to low self esteem and
increased health problems. This kind of job can be unpleasant, boring and stressful.
vi) Interpersonal Relationships: Poor interpersonal relationships with superiors
subordinates, co-workers or client can be a source of stress. In the absence of
healthy and benign relationships, employees develop anxiety and hostility, which
leads to stress.
vii) Poor Communication: Stress can be the result of poor communication or no
communication in an organization. In such a situation, we start interpreting issues
wrongly. We misunderstand others and develop a stressful situation.
viii) Responsibility: Sometimes high responsibility also acts as a stressor. It has
been seen that people with more responsibility suffer from high blood pressure and
high cholesterol levels.
ix) Job change: In the fast changing society, employees are expected to be ready for
new job requirements. Job reengineering, computerization and modernization
create uncertainty amongst the employees, which ultimately leads to stress.
x) Working Environment: The overall climate in the company can also be a cause of
stress.

Faulty job design, physical setting such as heat, noise, pollution, safety measures or work
shift can be the cause of stress. It is not only the physical environment, but also the
psychological climate inside the company which is very important. If employees are not

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motivated to participate, they may feel left out and neglected. Even unfriendly attitude or
unsupportive behaviour can create tensions and result in stress.

B) Personal Factors:
i) Impact of Life Change: Traumatic experiences in life can be extremely stressful and
can affect your psychological wellbeing. Any kind of loss, any death in the family,
divorce, marriage or retirement can also be a cause of stress. For example, the
recent earthquake, tsunami and explosion in the nuclear reactors in Japan has not
so much damaged the physical setup of the country, but has created unimaginable
trauma in the minds of the people. In this situation of fear and anxiety, the people
of Japan naturally will be in extreme stress.
ii) Personality Type: According to Friedman and Roseman, there are two different
personality types Type A personality and Type B personality. The main
characteristics of Type A personalities are that they are hard working, ambitious
and set high targets for themselves. They are impatient, aggressive, restless and
competitive. Type B personalities work at a slow pace and set reasonable targets
for themselves. They avoid fighting on every issue. They are more patient and try to
maintain good interpersonal relationships with others. It has been said that Type A
people are more stressful than Type B people.
iii) Other Reasons: Sometimes managing time can also be full of stress. In a limited
time, people experience role conflicts due to the overlapping demands of the work
and family. Excessive rules and regulations can be a cause of stress. Thus, the race
of reaching the top can cause frustration and fear of failure. This will contribute to
a situation of overall stress.

Thus, we can see that there can be various sources of stress in organizations.

Activity 1
 List out 5 situations when you felt under stress.
 Try to identify the causes of stress.

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SELF-ASSESSMENT QUESTIONS – 2

4. ________________________ exist when a job includes such duties and responsibilities,

which conflict which each other.
5. _______________________ is related to low job satisfaction, job anxiety and physical and
mental health.
6. The main characteristics of Type A personalities are that they are
____________________, _______________________ and set high targets for themselves.
7. The Type B personalities work at a _____________________, and set reasonable target
for themselves.

4. TYPES OF STRESS
Stress is not destructive all the time. The employees also agree that a certain amount of stress
is good for the achievement of individual and organizational goals. Stress is divided into two
types:
i) Eustress: It is also known as positive stress. Low to moderate stress is constructive in
nature. It can increase the effort and stimulate creativity. For example, you must have
experienced a certain amount of stress before your examination. I am sure that it must
have contributed in getting a positive result. Thetress of being punctual to class, paying
attention in class or submitting projects on time comes under positive stress. In other
words, we can say that positive stress occurs when the level of stress is high enough to
motivate the employee to move into action to get things done.
ii) Distress: Distress is negative in nature. It is not considered healthy for an individual or
an organization. If a person is under high or excessive stress, he may feel ill, and the
reactions can be absenteeism, turnover, errors, accidents, poor performance or
dissatisfaction. In other words, it can be explained that distress or negative stress
occurs when the level of stress is either too high or too low, and the body or mind begins
to respond negatively to the stressors.

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In figure 1, we can see that a moderate level of stress is required for high productivity, but a
high level of stress can affect the performance negatively.

Fig 1: Types of Stress

SELF-ASSESSMENT QUESTIONS – 3

8. Positive stress occurs when the level of stress is high enough to the employee to
move into action to get things done.
9. If a person is under high or excessive stress, he may feel ill and the reactions can be
_____________________, ___________________________ errors, accidents, poor performance or
dissatisfaction.

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5. IMPACT OF STRESS ON ORGANIZATIONS

The symptoms of stress remain unnoticed for many years. If a person is under stress, he will
be frustrated and aggressive. It can also happen that he can be dissatisfied and detached. He
will always be complaining and forgetful. He will not be able to concentrate. Fear, anxiety
and obsessions are also common symptoms of stress. Generally, people feel that it is part of
their day- to-day life, but actually special attention should be paid to any physiological,
psychological or behavioural change. The cost of stress is not only borne by individuals, but
it is borne by organizations as well. The effect can be seen in terms of lower productivity,
turnover, absenteeism and lower participation in organizational activities.

The cost of stress can be evaluated from three aspects:

5.1 In terms of health insurance: If the employee is under stress, and any serious illness
arises, then the employer has to pay for it.

5.2 Majority of accidents caused by employees: Stress can affect the task productivity of
the employee. There is a chance of accident due to the emotional disorder of the employee.

5.3 There can be a legal issue between employer and employee due to stress related worker
compensation claims.

Stress and our health are directly related. It is a silent killer; it leads to job dissatisfaction.

The psychological effects of stress are anxiety, poor concentration, poor nervous symptoms,
and lower self esteem. Excessive stress results in job burnout where work environment
becomes adverse and the employee finds it difficult to confront and manage stress.

Behavioural effects can be alcoholism, drug abuse, accident proneness, irritability and
forgetfulness. Negative stress affects the decision making ability of the employee. Even a
polite and respectful employee can shout at others if he/she is under stress. It may also result
in violence or physical attack at the work place.

Excessive amount of stress is always very harmful for the organization.

To make it clearer, signs and symptoms of stress can be broadly divided into four categories:
Feelings, Thoughts, Behaviour, and Physiology.

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Feelings
 Feeling anxious
 Feeling scared
 Feeling irritable
 Feeling moody
 Dependence on drugs and alcohol
 Depression
 Obsessions
 Difficulty in making simple decisions

Thoughts
 Low self-esteem
 Fear of failure
 Inability to concentrate
 Embarrassed easily
 Worrying about the future
 Preoccupation with thoughts/tasks
 Forgetfulness

Behavior
 Stuttering and other speech difficulties. (Rapid/Slow)
 Crying for no apparent reason, aggressiveness
 Acting impulsively, grinding teeth
 Laughing in a high pitch and nervous tone of voice
 Increased smoking / use of drugs and alcohol
 Decreased productivity, being accident prone.
 Losing appetite or overeating. Nervous mannerisms
 Absent-mindedness, forgetfulness
 Hair pulling, nail biting, etc.
 Sleep disturbance
 Decreased ability to concentrate
– making more mistakes

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– increased illness
– withdrawal from usual activities

Physiology
 Perspiration /sweaty hands, increased heart beat.
 Trembling, nervous tics, dryness of throat and mouth.
 Tiring easily. Urinating frequently.
 Sleeping problems.
 Diarrhea / indigestion / vomiting. Butterflies in stomach. Headaches.
 Pain in the neck and / or lower back.
 Loss of appetite or overeating.
 Muscular problems
 Heart disease
 High cholesterol
 Asthma, breathlessness
 Tendency to get cold and flu.

SELF-ASSESSMENT QUESTIONS – 4

State whether the following statements are True or False.

10. The adverse effect of stress can be seen in terms of lower Productivity, Turnover,
Absenteeism and Lower Participation in Organizational Activities. True / False.
11. Excessive stress results in job burnout where the work environment becomes
adverse and the employee finds it difficult to confront and manage stress. True /
False.
12. Negative stress will not affect the decision making ability of the employee. True /
False.

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6. STRESS MANAGEMENT TECHNIQUES

As we have seen, stress is not bad all the time. An optimum level of stress is always
motivational for the employees. Stress is an aspect of our life which cannot be eliminated
completely. So, it is very important for us to know the techniques and strategies to manage
stress at the work place and in our personal life. To manage the negative impact of stress,
there is a three step process:
i) Be aware of the symptoms of stress.
ii) Identify the sources of stress.
iii) Develop strategies to cope with stress.

A question arises here, “How do you identify stress in the organization?” The following signs
will help you to identify any Job stress.
1. The employee will resist going to work.
2. He will feel tired for the whole day.
3. He will keep watching the clock.
4. There will be no concentration.
5. The employee will not be open to changes.
6. There will be excessive absenteeism.
7. He will be complaining all the time.
8. There will be job dissatisfaction.

If the stress is due to environmental or job related factors, the individual can adopt the
following coping strategies:
a) Time Management: If a person is unable to manage time, it creates frustration and
anxiety at the work. So, it is important to understand that by proper management of
time a person can avoid critical comments from boss and colleagues. To eliminate stress
one must prioritize the task and plan, organize and control time in such a manner that
the goals can be achieved without any delay.
b) Change the Job: If a person is dissatisfied with his current job, he must try to look for
an alternative employment. Through this process, he can avoid stress by avoiding
physical and mental torture.

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c) Exercise: Most of the studies indicate that by being active we can avoid anxiety and
depression. Thus, we can avoid stress. Many companies like Philips, Tata group of
companies, Infosys etc., have developed in - house physical fitness facilities for their
employees.
d) Meditation and Relaxation: Meditation is the method of concentrating on something
in a very relaxed frame of mind. From ancient times in india, meditation has been
followed as a tool of mental relaxation. In a hectic and busy work schedule, by devoting
some time to meditation, individuals can cope effectively with stress .
e) Increase your Comfort Zone: Every individual has his or her comfort zone. As a social
being we must try to adjust to varied situations. This can help us in alleviating stress in
our work place.

In modern organizations, the top management is realizing that to make people more
productive, it is important to be involved in managing employee’s stress. To minimize the
work pressure, organizations are adopting the following strategies:
a) Role Clarity: The employees must have a clear understanding of the expectations of the
company. So, the role should be clearly defined. If the employee is under excessive
stress, the management can redefine his role, redistribution of the work can be done or
his job can be made more challenging and rewarding.
b) Supportive Work Environment: A friendly supportive atmosphere with clear
communication and participative decision making can make an employee happy at the
work place. All these efforts can reduce the level of stress in the organization.
c) Career Planning: Clear career path can reduce the uncertainty among the employees.
When employees are fairly rewarded, then we can expect them to be committed to their
job, and it helps in managing stress at the work place.
d) Institutional Programs: Various types of programs can be used for managing stress at
the work place. These programs can be counseling of the employees, job enrichment,
work rescheduling, proper training and development program, or service benefits such
as marriage gifts, service bonus, health club membership or even stock options can be
provided. Many organizations now –a-days are organizing yoga sessions for their
employees with the help of Art of Living Foundation, Patanjali Yoga Peeth etc. Exercise
can act as a great stress buster.

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Thus, we can say that there are various strategies, which can be adopted by individuals and
organizations to cope with work stress. Other than these, there are certain activities, which
can be very useful in coping with our day- to-day stress. These include spending time with
the children, keeping a pet, right sleep, being religious, making friends, etc.

SELF-ASSESSMENT QUESTIONS – 5

13. In order To eliminate stress, one must prioritize the task and _________________,
________________________ and _____________________, the time in such a manner that goals
can be achieved without any delay.
14. A friendly supportive atmosphere with clear communication and participative
decision making can make the employee happy at the work place. True/ False

7. SUMMARY
Let us now recall the main points of the unit discussed:
 Employee stress is an increasing problem in today’s organization.
 Stress can have a disastrous impact on our life and work life.
 Stress is of two types-eustress and distress.
 Many people see the stress or pressure of heavy work or deadline as a positive
challenge, which enhances the quality of their work.
 The causes of stress can be organizational, environmental and personal factors A
person experiencing a high level of stress may develop physiological symptoms such as
high blood pressure, breathing problems etc. ii) Psychological symptoms such as
boredom, anxiety, depression tension etc. and iii) behavioural symptoms such as sleep
disorder, losing appetite, absent mindedness, forgetfulness etc.
 To make people more productive at the work place and to deal with job related stress,
individuals and organizations can adopt various strategies. These strategies are
defining the role, career planning, various institutional programs, exercise, time
management, job change etc.

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8. GLOSSARY
 Stress: experience of pressure, anxiety
 Job burnout: the end result of the stress experienced, but not properly coped with;
exhaustion due to the adverse effect of the working environment.
 Overload: expectation of more than the ability of the employee.
 Role conflict: such duties and responsibilities which conflict with each other.
 Stressor: stimulus, which produces stress
 Role ambiguity: lack of clarity about the different expectations of people from a job.
 Symptom: indicators

9. CASE STUDY
BPO Workers and Stress
Business process outsourcing firms (BPOs) in India have become a fertile ground for stress-
related disorders. Irregular working hours, lack of sleep, irate customers, lack of motivating
factors are some of the main stressors affecting employees in the BPO industry, despite the
employees having put in their best. A predominantly young work force, not exposed to life-
skill development and stress- handling abilities has only added to the woes of the
outsourcing industry.

The industry is plagued with high rates of absenteeism with an estimated 60 to 70 workers
per 1,000 IT/ITES workers availing sick leave per day in India. Somatised depression, with
symptoms such as dullness, low morale, lack of self-esteem, lack of confidence, poor appetite,
unexplained aches and gastric- related problems, have been found to be the main causes of
absenteeism.

Companies have a crucial role in creating a stress- free work-place. They should ensure that
employees are not exposed to injuries at work and try to foster a creative and challenging
work environment. Team leaders have the crucial role of helping each member become an
integral part of the team by giving them challenging, but accomplishable gaols.

Source: Adapted from Tejaswi, Mini Joseph (2005). “Most BPO Workers suffer from Stress”,
28 November, Times News Network. Available at
http://timesofindia.indiatimes.com/article-show1309913.cms.

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Q.1 What are the problems that the BPOs face due to stress amongst employees?

Q.2. What steps must be taken to overcome stress?

10. TERMINAL QUESTIONS

1. Define stress. What are the different stages in the general adaptation syndrome?
2. Discuss the various sources of stress in detail.
3. What are the different types of stress? Discuss with suitable examples.
4. What can be the adverse impact of stress on the organization?
5. How can we identify that an employee is under stress? Discuss various coping
strategies for job related stress.

11. ANSWERS
Self-Assessment Questions
1. True
2. True
3. False
4. Role conflicts.
5. Role ambiguity.
6. Hard working, ambitious.
7. Slow pace, reasonable targets.
8. motivate
9. absenteeism, turnover
10. True.
11. True.
12. False
13. plan, organize ,control
14. True

Terminal Questions
1. Refer section 2 - definition, meaning, and three adoption stages.
2. Refer section 3 - sources of stress, organizational factors, and personal factors.
3. Refer section 4 - types of stress, eustress, distress

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4. Refer section 5 - impact of stress on organizations

5. Refer section 6 - signs of stress, coping strategies.

12. REFERENCES
 Parikh Margie, Gupta Rajen, (2003) Organization Behaviour Tata McGraw Hill
Education Pvt. Ltd.
 Robbins P. Stephen & Judge. A. Tim Othy (2010 ), Organizational Behaviour, Prentice
Hall
 Rao.V.S.P., (2009), Organization Behaviour, Excel Books
 Singh B.P.& Chhabra T.N., (2005), Organization Theory & Behaviour, Dhanpat Rai & co
(P) Ltd
 Singh Kavita.- (2010), Organizational Behaviour. Pearson.
 Slocum John W Jr, Hellriegel Don.- (2000) Fundamentals of Organizational Behavior.
Cengage Learning.
 http://timesofindia.indiatimes.com/article-show1309913.cms

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BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 12
Introduction to Organizational
Communication and Culture

Table of Contents

SL Topic Fig No / Table SAQ / Page No

No / Graph Activity
1 Introduction to Organizational Communication - -
and Culture 3-4
1.1 Objectives - -
2 Meaning and Importance of Communication - 1 5-6
3 Process of Communication 1 2 7-8
4 Types of Communication 2, 3 3, 4 9-12
5 Meaning and Nature of Organization Culture - - 13
6 Functions of Organization Culture - - 14
7 Types of Culture 4, 5 5, I 15-16
8 Creating and Maintaining Organizational Culture 6, 7 6, II 18-22
9 Managing Cultural Diversity - - 23-24
10 Glossary - - 24
11 Terminal Questions - - 25
12 Answers - - 25-26
13 References - - 26

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1. INTRODUCTION TO ORGANIZATIONAL COMMUNICATION AND

CULTURE

You can hardly overlook the importance of communication in any managerial process.
Communication is one of the most important functions of management. It is not only
important to all managers but is equally important for all employees of the organization. An
individual spends a large amount of time in some or the other forms of communication-
reading, writing, listening or speaking. In the previous chapters also, you have read how
communication builds up interpersonal relationships, helps in motivating employees by
clarifying the targets, helps maintain emotional cues, enhances the possibilities of becoming
a good leader and even helps in assessing your personality.

As individuals have their personality traits of being confident, sociable, empathetic,

competitive in nature, similarly organizations also have their personality traits of being
disciplined, concerned, highly productive, efficient, and good organizations. The culture of
an organization refers to the collective understanding or values that are shared by a
community at large. It determines what its employees think about their organization and to
what extent most employees support it. Nowadays, several organizations emphasize
maintaining their culture to retain the best employees with them. Modern organizations are
continuously developing their unique cultures to differentiate themselves from those of
other organizations. For e.g., the CEO of General Electric (GE) informed their employees that
‘bureaucracy is production enemy’ and conveyed the message of bringing democracy into
their organization. Thus, Communication culture in your workplace has a significant impact
on your employees’ experience, motivation, engagement, and overall business success.
Organizations with open, honest, and transparent communication cultures enjoy the benefits
of happy and satisfied employees. In this unit, we will be discussing the role and importance
of communication in maintaining the culture of an organization.

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1.1 Objectives
After studying this unit, you should be able to:
 explain the importance of communication
 describe the process of communication and identify the types of communication.
 state the meaning of Organization culture
 state the levels of organizational culture

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2. MEANING AND IMPORTANCE OF COMMUNICATION

The word communication is derived from the Latin word “communis”, which means
common. Communication, therefore, refers to the transmission and reception of ideas, facts,
opinions, feelings, emotions and attitudes by two or more individuals. According to L. A.
Allen, “Communication is the sum of all the things one person does when he wants to create
understanding in the mind of another.” Therefore, communication acts as a bridge of
meaning for two or more individuals to understand and be understood by others. It is a
systematic and continuous process of telling, listening and understanding. Thus, we can say
that communication as a tool in the hands of managers, not only attempts to get the work
done but also enhances the morale, satisfaction, efficiency and development of employees.
To achieve the organizations' objectives and integrate all the activities, systems and
procedures, the top management must continuously inform the other employees about what
is expected from them for the same. By introducing transparency in communication patterns,
the management not only creates faith and confidence in employees but also prepares them
for future changes, makes them aware of the enterprise problems and policies, avoids
misunderstanding, and if at all it happens, then, takes immediate action to resolve it.

Functions of Communication
Thayer has classified the functions of communication into four categories: the information
function, the command and instructive function, the influence and persuasion function, and
the integrative function.

a) The information function provides knowledge to the employeesregarding the work

they need to perform, organizational policies,organizational objectives, guidance to
perform necessary actions, etc. Italso creates awareness among employees to match
their individualgoals with organizational goals.
b) The command and instructive functions help the employee tobecome aware of his
accountability and responsibility towards the formalorganization, directs him how to
perform his duties accordingly andfacilitates additional guidance towards
organizational norms.
c) The influence and persuasion function also known as motivationalfunction, inspires
the individuals to exhibit and portray positive andacceptable behaviour. Individuals are

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informed through variousmessages that their actions and behaviour can be beneficial
or harmfulto a large extent for the organization. Thus, in this way the employeesare
motivated to practise their values and beliefs continuously. It alsofosters motivation by
clarifying to employees what is to be done, howwell they are doing, and what can be
done to improve performance.
d) The integrative function insists on the fact that messages should becommunicated in
such manner, that, the employees are able to relatetheir activities with the
organizational objectives and similarly their effortswith the outcome. However, all this
can only happen when thecommunication patterns are well established and the
communicationsystem is handled properly.

SELF-ASSESSMENT QUESTIONS – 1

Choose the right answer from the given options:

1. Communication has been derived from the__________________ word that means

‘common’.

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3. PROCESS OF COMMUNICATION
A process is a sequence of related or structured activities, which lead to a specified and
expected outcome. The main components of the communication process are as follows:

Fig 1: Illustrates the process of Communication

1. Context – communication gets affected by the context in which it takes place. This
context may be physical, social, chronological or cultural. Every communication
proceeds with the context. The sender chooses the message to communicate within a
context to maintain its viability and reliability.
2. Sender / Encoder – Sender / Encoder is a person who sends the message. A sender
makes use of symbols (words, graphic, or visual aids) to convey the message and
produce the required response. The Sender can be any individual, a group or an
organization. The views, background, approach, skills, competencies, and knowledge of
the sender have a great impact on the message.
3. Message – The message is a key idea that the sender wants to communicate. It is a sign
that elicits the response of the recipient. Therefore, the communication process begins
with deciding about the message to be conveyed. It must be ensured that the main
objective of the message is clear.
4. Encoding – the sender encodes his ideas and thoughts into some form of a logical and
coded message- which may be oral, written, or in some other form of expression. Berlo
describes four conditions, which affect the encoded message – skill, attitudes,
knowledge, and socio-cultural system. Finally, one’s position in the socio-cultural
system also influences the communication source.
5. Medium – medium is a means used to exchange/transmit the message. The sender
must choose an appropriate medium for transmitting the message, or else the message

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might not be conveyed to the desired recipients. The choice of an appropriate medium
of communication is essential for making the message effective and correctly
interpreted by the recipient.
6. Recipient / Decoder – recipient / decoder is a person for whom the message is
intended. He may be a reader, a listener, or an observer.
7. Decoding – decoding is the process where the receiver translates the message into
symbols, ideas, and forms which are understood by him. This requires that the receiver
should have proper knowledge of the language and terminology used in the message.
Even the receiver’s predisposed attitudes, cultural background, motives, mood, and
interest, can distort the message being transferred.
8. Feedback – feedback is the response by the receiver to the sender’s message. Feedback
is the main component of the communication process as it permits the sender to
analyze the efficacy of the message.

Davis2 has given the Rule of Five in Communication, which means that there is a sender goal
for the receiver to (i) receive, (ii) understand, (iii) accept, (iv) act, (v) feedback. If a
communication accomplishes these five steps with a receiver, it can be said that the entire
process has been successful.

SELF-ASSESSMENT QUESTIONS – 2

2. _______________________ is the process where the receiver translates the message into
symbols, ideas, and forms which is understood by him.
3. ______________________ is a key idea that the sender wants to communicate.

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4. TYPES OF COMMUNICATION
Communication can be categorized broadly under three heads:

Fig 2: Illustrates the Types of Communication

On the basis of direction and authority, communication has been discussed in the subsequent
sections of this unit. On the basis of expression, communication takes place in three forms
viz, verbal or oral which takes place through spoken words (for e.g. talking over phone,
delivering a lecture, speech, presentation etc.), written communication, which is done in
writing in the form of reports, mails, applications, letters, manuals etc. and non-verbal, which
mis your body language and includes your gestures, postures, hand movements, head
movements etc.

Communication based on direction – The four directions in which communication can

travel are: downward; upward; lateral or horizontal; and diagonal.

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Fig 3: Illustrates the four direction of communication flow

Let us now discuss these four types of direction-based-communications one by one:

1) Downward communication – this represents the flow of information from the top level
to the lower level of the organization, as shown in fig10.3. The main objective of
downward communication is to issue instructions, orders and show directions to the
subordinates for getting the work done. Besides this, it also communicates the policies,
plans, objectives, procedures, programmes and strategies to the subordinates. A major
part of formal communication done in organizations is through downward
communication. This takes place through verbal or written orders and instructions,
notices, circulars, memos, letters, e-mails, periodicals, publications, bulletins, group
meetings, etc.
2) Upward communication – feedback from the workers to the immediate senior or the
higher authorities is known as upward communication. This is the only tool in the
hands of top management to keep themselves informed about employees’ problems
and grievances, their reaction towards organizational policies, norms, changes to be
introduced, etc. If there is poor upward communication then the top management will
remain isolated from all the above-mentioned factors. This is in the form of employee’s
complaints and grievances, opinions, ideas and suggestions, reports on quality,
production, distribution, man-hours, etc.

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3) Lateral or Horizontal communication – this communication takes place between

employees at the same level in an organization. This is the most convenient and
informal style of communication, as it does not involve any positions or protocols to be
maintained. Such type of communication takes place due to clear understanding among
the superiors of other departments or if cross contacts are allowed by the management.
4) Diagonal communication – diagonal communication takes place between employees
from the lower level to the top level. This communication may cause conflict as there
can be friction between employees in terms of the work to be carried on, the feedback
to be given or the directions to be imposed upon. Such type of communication can only
prove to be a success when employees share good relationships and are ready to co-
operate with each other. For example an HR manager asks the General Manager (GM)
of the Finance department to release the budget for conducting training sessions. This
can give rise to disputes if both of them do not have a mutual understanding or
willingness to co-operate with each other.

SELF-ASSESSMENT QUESTIONS – 3

4. _________________________communication represents the flow of information from the

top level to the lower level of the organization.
5. _________________________communication is the most convenient and informal style of
communication as it does not involve any positions or protocols to be maintained.

Communication based on Types: Communication in an organisation may be used to

influence, inform, control or inspire. Organisational communication can be divided into two
broad categories - formal or structured (within the 'systems' established by the
management) and informal and unstructured (as when co-workers chat about company
matters or about their personal matters). Both areas are significant and both need to be
'healthy' for the organisation to be healthy.

The formal communication channels are established by the management and are generally
depicted in organisation charts. Formal communication prescribes the direction of flow of
communication in the organization. As the name implies itself, it is deliberately created and

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established by the management, and communication flows between different positions

according to the set hierarchies. In such official channels, commands, instructions, decisions
and orders travel downward; reports regarding performance, grievances and employees
feedback, suggestions, problems, etc travel upward; and support, co-operation and co-
ordination travel horizontally. Most of the formal communication is done in written form as
it can be filed and recorded for future reference purposes.

Informal communication exists outside the formal lines of the organizational structure. An
example of this is friendship and interest groups. The informal channels serve the social
needs of employees within the organization and improve the organization’s performance by
speeding up the flow of information. One of the most common forms of informal
communication is 'the grapevine’. According to Keith Davis,” grapevines are a natural and
inevitable part of organizational life”. A live grapevine shows the innate need of employees
to talk about their bosses, jobs, co-employees, company etc. It can serve as an outlet for
frustration; it is an important device for developing strong group identity, and for gaining
social acceptance and recognition. The biggest limitation of the grapevine is that it tends to
spread rumours and half-truths which can tarnish the image and reputation of the people as
well as the organization.

SELF-ASSESSMENT QUESTIONS – 4

6. _______________________communication is a natural and inevitable part of organizational

life.

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5. MEANING AND NATURE OF ORGANIZATION CULTURE

Organization culture is the set of shared values and norms that controls organizational
member’s interactions with each other and with people outside the organization. It is
referred to as the common perception held by the members towards their organization.
Values are the beliefs that guide our behaviour and decisions across a variety of situations.
Values are intensely held in the organization culture and are known as shared values. Shared
values are those values that are practiced in common by all the employees of the
organization. Thus, organization culture defines what is ‘right’ or ‘wrong’, what is ‘important’
or ‘unimportant’ and what is ‘favourable’ or ‘unfavourable’ in the company. Kellogg’s
company has been awarded for being one of the most ethical companies because they work
with integrity, passion, and most primarily, they stick to their vision and values.

According to Robbins, “organization culture is a common perception held by the

organization’s members; a system of shared meaning. People working in organizations
having good cultures tend to be more satisfied and productive than those who work in poor
cultures.

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6. FUNCTIONS OF ORGANIZATION CULTURE

The following are the important functions performed by the culture of an organization -
 It defines a boundary between one organization and others.
 It conveys a sense of identity to its organizational members
 It enhances commitment to organizational goals that is superior to an individual’s self-
interest.
 It provides standards and benchmarks to employees as to what they are supposed to
do.
 Organization culture cannot be created overnight, because it comprises values and
beliefs that are shared universally.
 It is not possible for an individual to create the culture of an organization alone.
 The founder of the organization and members of the top management of the
organization have to play an important role in shaping the culture.
 There are many subcultures present within the organizational culture. These
subcultures are formed as a result of the different desires and needs of the employees.
 The culture of the organization is passed through generations, i.e. from old employees
to new employees, through the process of socialization (the socialization process is
discussed in section 11.5.2).
 Organization culture once formed is not easy to change because cultural change
requires the people to change their behaviour. As we all know, it is quite difficult for us
to change our old way of doing things and get adapted to new things.

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7. TYPES OF CULTURE – STRONG AND WEAK CULTURE

Strong Culture - the culture of an organization is strong when the majority of people in the
organization are liable to practice the same beliefs and values that are useful to the
organization. In other words, in a strong cultured organization, the employees respond very
strongly to the values and pass them on successfully to the rest of the people. In a strong
culture, the values are translated directly into every person’s day-to-day life. For example,
the military has a definite set of values and a very strong culture. Whether or not they agree
with these values, norms etc, they are forced to incorporate these in their daily schedules
very thoroughly and consistently; they are trained through external rules and regulations, as
well as educated to absorb these elements internally.

For example, Toyota enjoys a strong culture where it is known as a ‘work hard culture’;
similarly the bonding among the employees of Southwest Airlines is so deep that their
culture is known as the ‘closeness culture’.

Weak Culture - on the contrary, an organization has a weak culture when its employees are
not ready to support the values and beliefs of the organization. People develop and start
giving priority to their norms, principles, values, beliefs, and behavioural patterns. As a
result, to control them, restrictions, strict rules, regulations, and supervision are imposed. A
weak culture is formed when there is little or no alignment with organizational values, and
control is exercised through extensive procedures and bureaucracy. In another sense, a
culture becomes weak when self-interest gets promoted over organizational interest.

IBM, in the late 1980’s turned out to be a weak cultured organization because they started
focusing only on their internal goals, were overconfident about their strategies, and to
manage people and to get the work done they became bureaucratic. Similarly, Hindustan
Motors had to stop their production because of some unethical practices like bribery, thefts,
and transfer of advanced technology.

On one hand, it is the strong culture that is successful at translating their abstract beliefs into
daily actions; weak cultures on the other hand are not able to implement their values
effectively.

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Note: The foundation of strong culture depends on two factors, i.e.(a) the degree to which
the values of the culture are effectively transmitted to all and (b) the degree to which people
are ready to accept the harsh penalties of violating the rules. The best way to examine the
culture of an organization is done by analyzing - the employee turnover ratio, loyalty and
commitment of employees towards the contribution, the degree of interpersonal
relationships and the satisfaction level of employees at the workplace with each other.

Dimensions of Organization Culture

Seven dimensions of organization culture decide whether the culture is a strong or a weak
one:
 Innovation and risk taking
 Attention to detail
 Outcome orientation
 People orientation
 Team orientation
 Aggressiveness
 Stability

Fig 4: illustrates the dimensions of organization culture 2

In figure 11.4, the dimensions clearly show the seven elements working together. Except
aggressiveness, in all other 6 elements, the degree needs to be towards the higher side, as it

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will show a positive result and will lead to a strong culture. On the contrary, aggressiveness,
being a negative component in itself, needs to be at the lowest degree to build up a strong
culture. When all these dimensions are present in the organization at a higher level, they
result in enhanced performance and increased satisfaction. On the other hand, if these
elements are not present or if they are towards the negative side, they will surely lead to
poor performance and dissatisfaction among employees, thus creating a weak culture (as
shown in figure 5).

Fig 5: Illustrates the relationship between dimensions of culture and their outcome

Activity 1
Read the profiles of Daimler (German company) and Chrysler (American company)
and list out the features of each company’s culture. Visit the web site mentioned below
and find out what changes were introduced in the organization culture after the
takeover of Chrysler by Daimler. Also identify whether the companies are enjoying a
strong culture or suffering from a weak culture.
(http://findarticles.com/p/articles/mi_m3012/is_n6_v178/ai_20846032/)

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SELF-ASSESSMENT QUESTIONS – 5

6. An organization becomes ______________ in culture when its employees are not

ready to support the values and beliefs of the organization.
7. Strong cultures are successful at translating their ___________________ into daily
actions.
8. The degree to which employees are encouraged to be innovative andrisk-taking
is known as ____________________________.
9. The degree to which work is organized around teams rather than individuals is
known as _______________ orientation.

8. CREATING AND MAINTAINING THE CULTURE

Creating and maintaining the culture of an organization plays a very vital role. As the growth
of a tree depends on the way it has been nurtured and given proper care by its owner,
likewise the culture of an organization totally depends upon the founder who creates it and
other employees who have to continuously maintain it. There are many steps towards the
development and preservation of organizational culture. They are-

Creating culture
The Role of the Founder – the founder of an organization plays a very crucial role in forming
the culture. Usually, the culture of an organization speaks about its founder’s dreams and
aspirations. Those who are not aware about their dreams are responsible for creating a weak
culture. The founders of any organization convey their values in a written and expressed
form that gets shaped into the vision and mission of their company. They find those people
who fit well into their organization’s values and are ready to carry it forward. The ones who
prove to be a misfit tend to leave the organization. The founder recruits the top management
on some criteria that support the founder’s philosophies. The top management creates a
good organization culture by using socialization process to train the other employees of the
organization. The outcome of this entire process is a strong organization culture.

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Fig 6: Illustrates how organization culture gets formed

Maintaining culture –
Organization culture could be maintained in two ways- (a) by learning culture and (b)
through socialization process. Let us now discuss both the methods one by one.

(a) How Employees learn Culture – Culture is transmitted to employees in several ways.
The most significant ones are -
 Stories – the most important and effective method of learning culture is by telling
stories to the employees about the heroes of the organization, who have done
wonders, or of those people who came out with some outstanding performances.
When an employee learns about these stories, he gets influenced by the actions,
decisions, performance and adventures of his ideals and starts acting accordingly.
These stories reflect the values the company holds for itself. As in cricket there are
many legends whose stories are told to other people like that of Kapil Dev, Sunil
Gavaskar, and Sachin Tendulkar etc.
 Rituals – Rituals or ceremonies are those facets of an organization that try to create
a feeling of togetherness and bonding among all the employees. This is done to bring
the members close to each other and retain their values. For example, in
schools/colleges or institutes there is a trend that the new batch will be welcomed
by their seniors and the passing out batch will be given a farewell by their juniors.
This is a continuous process. This ritual helps in retaining the value of showing love
and care towards the youngsters and respect and concern towards the elders.
Likewise, many ceremonies or customs are celebrated together like Holi, Id,

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Christmas, Lohri, and Losaretc, in order to develop the feeling of unity and
togetherness among people of different cultures, castes and religions.
 Symbols – Symbols are the most apparent way of expressing the culture of an
organization. Symbols can take the form of uniforms, awards, logos, punch lines,
and infrastructure etc. The top management uses these symbols to inform their
employees about the kind of behaviour that is desirable, the degree to which
equality is practised by all, who matters the most in the company, and what the
goals and targets of the company are. Nokia by using the punch line ‘connecting
people’ exhibits its aim to bring physically dispersed people closer to each other.
The logos of Manipal University of Jaipur along with its punch line ‘Inspired by life’
symbolizesth creation and dissemination of knowledge across the world and make
it a premier university. Similarly, different airlines use different coloured attire for
their air hostesses to give them an identity of their company.

 Language – organizations often use special terms to describe their culture. They
develop their own unique terminologies to convey messages to their employees. In
a few private organizations, employees are not supposed to address their seniors as
‘sir or madam’; they simply have to address them by their first name. This is done
to create equality among the employees. Likewise in the military forces, they
practice their own unique terminology. For example when the cadets are briefed
about an activity, their senior asks ‘KOI SHAQUE’ to get immediate feedback, in turn,
the cadets say ‘ROGER’, which means that the directions are understood and finally
say ‘WILCO’, which means that they will immediately implement the orders.

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Activity 2
Watch the movie ‘LAKSHYA’. In this movie Rhithik Roshan first joins the Indian Army
but very soon returns home. Later on he realizes the aim of his life and again goes back
to the academy. This time he proves himself and succeeds in his lakshya. From the
movie, understand those cultural factors/issues that have influenced him in both the
situations.

(b) Socialization Process – it is the process by which members learn and internalize the
values, beliefs, and norms of their organization. An individual passes through three
stages that are known as the pre-arrival stage, encounter stage and metamorphosis
stage (as shown in figure 11.5). Orientation programmes are used to socialize the
individuals successfully. The socialization process starts when the new recruit is about
to enter the organization. Let us have a look at how this process works for making the
employee learn the culture of the concerned organization-
 Pre-arrival Stage – at this stage the newcomer learns about the organization from
the material that is readily available or the people who he already knows are linked
with the company. In due course, the individual develops his mind frames and
assumptions about the company. With all these, he enters the organization and thus
steps in the second stage of socialization.
 Encounter Stage – the next stage in socialization is known as the encounter stage
because the newcomer confronts the reality of the organization. At this stage, the
imagination of the individual will match with the reality of the company or else
there will be differences between the two, and if this happens, the individual will
undergo a ‘Reality Shock’. This reality shock will shake the mindset of the person
and his values. This is the most crucial stage as this decides the continuation of the
person in the organization. After encountering and being exposed to the realities of
the company, the individual moves to the last stage, which is known as
metamorphosis.
 Metamorphosis - the last stage of socialization symbolizes conflicts and
adjustments. The new arrival will start learning the values and principles of the
organization. After a turbulent experience, there will be a few people who will try

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to adjust to the values of the company and incorporate them internally. In this
situation, the result will be in the form of high productivity, increased commitment,
and low turnover. On the other hand, there will be some who won’t be able to adjust
to the values of the organization, and would prefer giving priorities to their own
norms, resulting in less productivity, low commitment and high turnover. Due to
such clashes and maladjustments, either the person will leave the organization
voluntarily or would be fired.

Fig 7: Illustrates the socialization process

SELF-ASSESSMENT QUESTIONS – 6

11. Match the following

1. Stories i) Uniforms
2. Rituals ii) Reality shock
3. Symbols iii) Heroes of organization
4. Language iv) Conflicts and adjustments
5. Encounter v) Unique terminology
6. Metamorphosis vi) Feeling of togetherness

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9. MANAGING CULTURAL DIVERSITY

The business leaders must face several challenges due to increased diversity. Though not all
problems occur due to cultural changes, there can be clashes due to different personalities,
gender, competence, ability or other perceived factors. But we cannot even take the cultural
aspect lightly as it proves to be a very sensitive issue. Hence, to manage the cultural
diversities efficiently, managers should carry out the following methods –
 Company policies should be designed in such a way that they forbid discriminatory
behaviour. These policies must be included in the company’s manual, mission
statement and in other written documents.
 New orientation programmes should be designed to introduce people from different
cultural and ethnic backgrounds to the organizations expectations and values to be
sustained.
 Training programmes should be modelled in order to train people about cultural
differences and to prepare them work with the other gender also.
 Try to involve the minority groups by getting inputs from them. This will create a sense
of belongingness in their minds.
 Design the performance appraisal and reward systems in such a way that every
individual gets the chance to develop his career.
 To bring ethnically and culturally diverse people together, organizations should
sponsor and organize some social events like get-together, picnics, parties, indoor and
outdoor games, festivals etc. By doing so not only will everyone come closer, they will
even get an opportunity to know and understand each other well.
 There should be flexible work environment, so that people from other backgrounds can
get time to adjust themselves in the new environment.
 To manage people from diverse backgrounds efficiently, never assume that similar
values, beliefs and opinions will be shown and practised by others.
 Conduct periodic attitude surveys among your employees to ensure that they are
getting a good and healthy environment to work in.

No doubt, managing diverse culture at the workplace is a very tedious and tough job. If
organizations tackle it properly, they can reap the fruits of having a qualified, talented and

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committed workforce that can help the organization grow and shine at its peak. By doing so;
the organization will definitely be able to create a strong, healthy and vigorous
organizational culture.

10. GLOSSARY
Agenda Plans or list of items prepared
for discussion
Authenticity Validity
Decoder Receiver who receives the
sender’s message
Dissemination Distribution or circulation of
information, resources, etc
Empathizing Placing oneself in others
position
Manifestation Demonstration
Monopoly Domination
Passion Obsession
Ritual Ceremony/customs
Symbolize Represent/ a sign of

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11. TERMINAL QUESTIONS

1. Define communication and discuss the communication process.
2. Explain the different types of communication concerning directions.
3. State the differences between formal and informal communication.
4. Define organizational culture and differentiate between strong and weak cultures with
suitable examples.
5. What are the different ways through which an employee can learn culture?

12. ANSWERS
Self-Assessment Questions
1. Latin
2. Decoding
3. Message
4. Downward
5. Diagonal
6. Grapevine
7. Weak
8. Abstract beliefs
9. Innovation & risk-taking
10. Team
11. a) Heroes of an organization
b)Feeling of togetherness
c)Uniforms
d)Unique terminology
e)Reality shock
f)Conflicts and adjustments

Terminal Questions
1. In section 1 we have understood the meaning and the importance of communication in
organizations and our day-to-day life as well. Communication is the process of sharing
and transmitting our views, opinions, ideas, feelings and information to other people.
Section 3 talks about the process of communication that involves various steps starting

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from context, sender, message, encoding, and channel, receiver, decoding and ending at
feedback.
2. Section 4 describes the categorization of communication based on direction i.e.,
upward, downward, horizontal and lateral.
3. To locate the differences between formal as well as informal communication channels.
Refer sections 4
4. Organization culture is a common perception held by the organization’s members.
Refer to section 5 for more details. Organizations usually fall under two categories-
ones that have a strong culture and the others which have a weak culture. Creation of
strong or weak cultures largely depends upon the perceptions of its employees and
their common beliefs. Refer to section 7 for further details.
5. Creating organization culture proves to be a very tedious and difficult task. To create a
strong culture, employees need to learn the values of the organization through stories,
rituals, symbols and language. Refer to section 8 for more details.

13. REFERENCES
 Robbins P. Stephen & Judge. A. Tim Othy (2010), Organizational Behaviour, Prentice
Hall
 Singh B. P. & Chhabra T. N., (2005), Organization theory & Behaviour, Dhanpat Rai & co
(P)Ltd
 Rao V. S. P., (2009), Organization Behaviour, Excel Books
 Parikh Margie, Gupta Rajen, (2003) Organization Behaviour Tata McGraw Hill
Education Pvt.Ltd.
 Mamoria C. B., Gankar S.V. (2009), Personnel Management: (Himalaya publishing
house)
 Luthas F . (2008), Organizational Behaviour , (McGraw Hill)

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BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Unit 13
Role of Power and Politics in Organizational
Conflict

Table of Contents

SL Topic Fig No / Table SAQ / Page No

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Power and its Two Faces - 1, I 4-5
3 Sources of Power - 2, II 6-8
4 Organizational Politics 1 3, 4, III 8-13
5 Sources of Conflict - 5, IV 13-15
6 Types of Conflict - 6 15-16
7 Conflict Management Approaches 2 7, V 17-20
8 Summary - - 21
9 Glossary - - 22
10 Terminal Questions - - 22
11 Answers - - 23-24
12 References - - 24

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1. INTRODUCTION
In the earlier units we have studied different aspects of organization and individuals as well,
like, personality, emotions conflict, organization culture, etc. In this unit, we will study
power, politics, and conflict. Power, politics, and conflict are the three vital pillars on which
the organizational activity rests. They play an important factor in deciding the structure of
the environment of a particular organization. They also differ from each other in terms of
their manifestation in the organizational activity. Moreover, they are so real in the
organization that whether the formal organizations like government organization or non-
formal organization like non-profit organization falls under its ambit. Often power, and
politics are closely related to each other, and they interplay with each other. People often
practice them in organizations to achieve their favoured ends which gives rise to
organizational conflict. In this chapter, we would like you to understand that power and
politics are natural in any social or organizational setting. Since we are concerned with
promoting good and positive aspects of our collective objectives, we need to learn how
power is acquired and put into effect. Similarly, Conflict is not always negative. In fact, it can
be healthy when effectively managed. Healthy conflict can lead to Growth and innovation,
New ways of thinking, Additional management options, and High productivity.

1.1 Objectives
After studying this unit, you should be able to:
 define power and politics
 list the various sources of power.
 list out the types and sources of conflict.
 explain levels of conflict.
 discuss conflict management approaches

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2. POWER AND ITS TWO FACES

Can we think of an organization - be it business, political, educational, technological, financial
or even spiritual – without power? No, we cannot. The reason is that the social cooperation
and harmonization that we seek are not possible without influence (power). The quality of
life that we have today, is the direct result of the power that some have over others in various
organizations. But unfortunately, it is also directed toward warfare, crime, confiscation,
oppression, manipulation and tyranny. Thus, our worst experiences too are a direct result of
the power that some have!

The two faces of power have been best explained by McClelland’s research. He found that
power is an instinctive need to dominate over submissive others. It, therefore, has negative
consequences. But power is also linked to social needs to initiate, influence and lead. Thus,
the challenge managers face is to ensure that positive transformation comes about in an
organization through the positive face of power.

Power is defined (Salanick and Pfeffer, 1971) as the “ability of those who possess power to
bring about the outcome they desire”. Later in 1987 Pfeiffer defined power as the “capability
of one social actor to overcome resistance in achieving a desired objective.” According to
Robbins power is the capacity that A has to influence the behavior of B. From these definitions
it may be concluded that power implies:

 Potential: Power has potential (as against actual) that may or may not be exercised. A
teacher has power over students which he may not use. We have come across teachers
who never punished any student. In the Mahabharata, Krishna was all powerful, yet
was reluctant to influence any event through his power..
 Discretion: Though B is under the influence of A, B still retains some discretion over
his behaviour. For example, in the case we have referred to earlier, Megha has the
discretion to reject indecent proposals. For his behaviour, the owner of the school is
liable to be punished under the Sexual Harassment act.
 Dependency: To a certain extent B is dependent on A. The greater the dependency B
feels, the greater is the power A has. In the example we have cited, the dependency of
Megha is very high because of the financial crisis her family is undergoing due to her
father’s untimely death.

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 Specific: Power can be exercised by some people on a few others and that too in certain
circumstances. Megha, therefore, can be pressurized only if she needs the job and
cannot seek social and legal support.
 Reciprocal: Power in most organizations is a two-way concept. We influence others but
in turn are influenced ourselves. If Megha is successful in having the school owner
punished then she will have influenced immediate and future behaviour.

Activity 1
Consider your relationship with your parents and teachers. Do they have power over
you? Does this power imply Potentiality, Discretion, Dependency, Specificity,
Reciprocity?

SELF-ASSESSMENT QUESTIONS – 1

Fill in the Blanks

1. Power is the ___________________ that A has to ____________________ the behaviour of B.

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3. SOURCES OF POWER
We have already seen that power is the ability to influence others. This ability is derived from
different sources. Ability also varies from person to person. Some possess greater capability
whereas others possess less or little capacity. As a result of these, power is unequal in any
and every organization. Social scientists have identified the following sources of power:
 Legitimate power: This power is derived from the socio – legal rights of a manager. He
holds power by his position. Power in this case therefore is positional and not personal.
If a person is removed from that position he loses all the power. Dr. Manmohan Singh
had immense legitimate power by being the Prime Minister of India. He decided the
foreign policy; had control over allocation of funds to different sectors and different
states. The quantum of legitimate power depends upon:
A> Willingness of a manager to exercise power;
B> Nature of the task and;
C> Nature of the organization.

 Charismatic power: Mother Teresa, Jawaharlal Nehru, Mahatma Gandhi are the best
examples of this power. People were ready to be influenced by them because of their
goodness, enthusiasm, personal charm and for their high levels of morality. When
Mahatma Gandhi began the Dandi march, he started it alone, but by the time he walked
240 miles to reach Dandi, he was accompanied by thousands of followers! Charismatic
power is linked to the person and not to the position. Such leaders are very effective
during a crisis or when a transition is taking place.
 Expert power: Expert power is a result of specific skill, knowledge or expertise that a
person has. Others accept the recommendation of such a person because they trust his
or her expertise. In the Mahabharata, Arjun and Bhim derived their power from their
expertise as warriors. A physician holds a lot of power during a medical emergency or
crisis. Very often we find in organizations that a very junior employee has tremendous
power because of his technical or organizational skills. To gain expert power, therefore,
one has to visibly demonstrate his competence. Such persons can be powerful for a long
time only if they maintain their competency (by updating themselves). Those who
pretend to have the expertise can have power only for a short time.

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 Reward power: An individual who controls the reward or rewarding system also has
lot of influence on others. People are willing to follow him because they expect to be
rewarded. Rewards in organizations may include pay rise, bonuses, promotions etc.,
although an appreciative smile from Mother Theresa would outdo any such rewards!
Reward power is linked to the number and quality of rewards under the control of an
individual. Reward power can be used effectively by making feasible, ethical and
reasonable requests and also by offering only credible rewards.
 Information power: A manager having access to the most important information
wields immense power. In a marketing organization, the market research expert
impacts the decision most powerfully because he has information about future demand.
In organizations, the personal secretary of a CEO exercises a lot of power because of his
or her access to important information.
 Coercive power: This power is derived from the ability to punish others. Such a power
is legitimate and is needed by managers to deal with unproductive, disturbing and anti-
social elements in the organization. In the movie Chak de India, Kabir Khan (Shahrukh
khan) uses coercive power (sends the players out of the field) to deal with players
indulging in petty quarrels, Coercive power is effective when rules and penalties are
known to subordinates and punishment is administered uniformly and consistently.
 Connection power: Very often a person is able to exercise power over others because
of the number and quality of connections he has. A person who carefully develops
important networks is able to enjoy substantial power. The network could be within
the organization or with people outside the organization. Several corporate houses
quickly employ just retired government officers to take advantage of their connections
in the government. Connection power is useful, as long as the connections one has
remain intact and useful.

A question that is often asked is regarding which type of power is better than others. People
differ in opinion but there are evidences to believe that personal power sources are better
than formal power sources. Expert and charismatic powers, therefore, are considered better
than formal, reward and coercive powers. This is so because personal powers are more
effective and long lasting. They also bring better satisfaction and commitment.

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Activity 2
Discuss with your friends, and for each type of source of power identify 3 leaders. Also
ask your 5-7 friends/family members to name their favourite leaders and find if these
leaders exercised personal power or positional power.

SELF-ASSESSMENT QUESTIONS – 2

2. Legitimate power is derived from the ____________________rights of a manager.

3. ______________________and______________________ powers, therefore, are considered better
than formal, reward and coercive powers.

4. ORGANIZATIONAL POLITICS
Power and Politics are inseparable. Organizational politics is power in action. People indulge
in politics to have their way in an organizational setting. Like power, politics also has two
faces – the good and the bad.

You might have come across genuine, sincere and hardworking people complaining about
politics in their organization. Despite putting in the best of their performances, many people
are denied promotion or a raise in salary. Those, not so competent, appear to have the best
of everything in the organization. It is natural for such people to wish for a ‘politics-free’
organization.

Can we have a ‘politics-free’ organization? Theoretically ‘yes’ but practically ‘no’. We can
have a politics-free environment if somehow all of us in an organization share the same
values, goals and interests and the organization has unlimited resources. This, you will agree,
is possible but not likely. We have politics because we have different view-points, interests,
goals and values. What is ‘scheming’ for me could be ‘planning ahead’ for another; similarly,
‘blaming others’ is viewed as ‘fixing responsibility’; ‘ambitious’ is ‘career-minded’; ‘forming
coalitions’ is ‘facilitating team-work’ and so on. Thus, all organizations are carpet-bombing
of potential conflicts.

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Further, an organization always faces stiff resource constraints. If resources were unlimited,
personal interests and goals could be fulfilled. But, as it is not so, one gains at the cost of
another. This leads to competition and potential conflicts, which in this process, are
transformed into real conflicts. This is further compounded, as in organizations decisions are
based on ‘facts’ that are debatable. What makes a ‘good’ performance? Which is an
unsatisfactory result? Such ambiguity and subjectivity further create a fertile ground for
politics.

Therefore, politics is neither good nor bad. Politics too is natural and ever presenting all
organizations, as power is. Use of illegitimate means and illegitimate objectives makes
politics bad. Pfeffer maintained that for the effective and efficient functioning of an
organization, politics is essential and indispensable.

French and Bell define organizational politics as involvement in intentional acts of influence
to enhance or protect the self-interest of individuals or groups. Mayes and Allen defined
organizational politics as the management of influence to obtain ends not sanctioned by the
organization or to obtain ends through non-sanctioned influence. Both these definitions imply
that politics is negative and undesirable.

Earlier we have given reasons as to why politics is a natural reality. But then we do come
across organizations that are rife with politics, and certain others where politics play a very
small role in deciding outcomes. Why is it so? Researchers have identified several factors
that lead to increased political behavior. They are as follows:

 Individual Factors
a. People sensitive to social cues and displaying high levels of social conformity
b. People believing they have the power to manipulate the outcome
c. People comfortable using politics to further their personal interest.
d. People having less dependence on the organization
e. Powerful individuals with polished political skills.
 Organizational factors
a. Organizations with declining resources or undergoing changing pattern of resources
b. Organizations providing low promotion possibilities
c. Organizations having low trust

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d. Organizations having vague performance-appraisal systems

e. Organizations indulging in zero-sum reward practices
f. Organizations loaded with self-serving senior officials.
g. Organizations creating high performance pressures.

Activity 3
Find a friend who is fed up with the politics of his/her organization. Ask him about
his/her colleagues and organization and note how many of the individual and
organizational factors mentioned in this section your friend identifies with his
colleagues/organization.

Managing political behaviour: Political behaviour cannot be eliminated, but it needs to be

managed properly to take advantage of its positive aspects and reduce the possibility of its
negative impact. The following steps are suggested:
 Defining job duties clearly
 Designing job clearly
 Encouraging ethical behaviour
 Promoting understanding and trust between formal and informal groups
 Allocating resources judiciously.
 Implementing appropriate performance appraisal system
 Optimizing job pressures.

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SELF-ASSESSMENT QUESTIONS – 3

Multiple Choice Questions

4. Use of __________________ means and ________________________ objectives make

politics bad.
a) Objective and subjective
b) Formal and informal
c) Positional and personal
d) Legitimate and Illegitimate
5. Which of the following is not an individual factor that leads to increased
political behaviour?
a) People believing they have the power to manipulate the outcome
b) People comfortable using politics to further their personal interest.
c) People having a strong sense of justice
d) People having less dependence on organization

Organizational Conflict: Definition and Meaning

Conflict can be defined as a process in which one party perceives that another party has
negatively affected, or is about to negatively affect, something that the first party cares about.

Conflict can be within an individual, between two individuals, within a team or group of
individuals, or between two or more groups/teams within an organization.

In an organization conflict can arise due to various factors. It can be due to the conflict of
aims. When people have different interpretations of the same thing then there can be conflict,
which is known as conflict of ideas. They can have different opinions or there can be certain
behaviour which is unacceptable to others.

The features of conflict are as follows:

I. Conflict is incompatible in nature. It occurs when two or more people have mutually
exclusive goals to be achieved.
II. Conflict arises due to scarcity of resources.

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III. Conflict can be verbal or non-verbal behaviour.

IV. Conflict is deliberate. Conflict exists when some negative behaviour is shown
intentionally.
V. It is based on perception. It arises when people have differences in the interpretation
of facts.

There are various levels of conflicts which are as follows:

a) Latent conflict: In every organization conflict begins with latent conflict. Conflict can
be created by any unexpected incident such as change in direction of the organization
or over loaded employee being given another project, or promise of salary increase
which was not implemented etc.
b) Perceived conflict: At this level the conflict arises as a misunderstanding between two
parties. This misunderstanding can be resolved by improved communication.
c) Felt conflict: At this stage both the parties start highlighting the perceived conflict.
They are emotionally involved and focus on differences of opinion. Here emotion
becomes very important because negative emotion leads to low trust and wrong
perception of the other party, and positive emotion will lead to more balanced
behaviour in that particular situation..
d) Manifest conflict: The conflict becomes obvious to everybody or we can say it is a stage
of open confrontation, where both the groups/ parties show aggression and act
towards achieving their own goal and destroying the other party.
e) Conflict outcome: When a conflict reaches this stage, conflict resolution becomes very
difficult. It may be either positive or negative. If the conflict is handled properly then it
can help in developing great cooperation between the employees, and if not then it will
lead to frustration and negative sentiments.

Fig 1: Levels of conflict

Thus we can see that conflict has different levels. A manager should try to understand it, and
a moderate level of stress should be maintained so that organizational performance should
be high. With higher level of stress people spend more time defending themselves and
attacking others.

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SELF-ASSESSMENT QUESTIONS – 4

6. Conflict is a perceived _________________ between two or more parties that results in

mutual opposition.
7. At _____________________stage both parties start highlighting the perceived conflict.
8. When a conflict reaches _____________________stage, conflict resolution becomes very
difficult. It may be either positive or negative.

5. SOURCES OF CONFLICT
As we know, conflict is present in every organization. Let us discuss some of the sources of
conflict which have been identified in organizations:
a) Interdependence: In organizations, for the accomplishment of the goal, a certain
amount of interaction is necessary. It is basically the dependence of one party on the
other for resources and information. There is no such direct relationship between
interdependence and conflict, but it is said that interdependence increases the chance
of conflict. According to J. Thompson, there are three different types of
interdependence among groups.
i) Pooled interdependence: When departments have very little interaction with each
other, but can be affected by each other’s action, then it is known as pooled
interdependence.
ii) Sequential interdependence: When the output of one department becomes the
input of another department, it is known as sequential interdependence. Here there
is one way flow of information, output and services. The total performance of the
receiving department depends upon the supplying department, which can be a
cause of conflict between the receiving department and the supplying department.
iii) Reciprocal interdependence: When two or more people are mutually
interdependent in accomplishing the task, it is known as reciprocal
interdependence. They share information and resources. Success depends upon
good communication and joint decision making; lack of these will always lead to
conflict.
b) Scarcity of resources: Conflict over resources is very common in organizations, and if
the sources are scarce in nature then the chances of conflict increase. This is because

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these scarce resources are shared by various groups, departments and individuals in
the organization.
c) Specialization: One of the major causes of disagreement in the organization can be high
degrees of specialization. A person with a high degree of specialization will not give
importance to the advice of others. Not only this, he will not be aware of the other areas.
Due to his specialized training and development he has his own values and beliefs, so
he always tries to work in his own way and ignore others. This ultimately leads to
conflict.
d) Competitive incentive and reward system: Competitive incentive and reward system
can be one of the causes of inter- group conflict. If the reward plan is associated with
group performance and the tasks are interdependent, then instead of cooperation,
competition increases and people try to succeed at the expense of others.
e) Incompatible personalities: As we all know, no two people are the same. There are
certain people who consider themselves as perfectionists. They are achievement
oriented and hard working. These people are not aware of the feelings of others. They
are highly critical of others, which create stress among others and leads to conflict.
f) Lack of clarity of roles and responsibilities: A clear line of role and responsibility is
very important for any organization. In the absence of it there is no one to take the
responsibility if required. Employees start passing the buck. Instead of solving the
problem they tend to blame others and conflicts can arise on assigning the
responsibilities.
g) Differences of perception, value and attitude: The personality of an individual plays
a very important role in creating perception. Different people have different
expectations, and when they are not fulfilled, it generates conflict. When there is a
difference in value and attitude, there is always a chance of conflict.
h) Poor communication: In the absence of good communication there is always a chance
of interpersonal conflict. Communication barriers such as wrong interpretation of the
message, structural or emotional barriers, language barrier or mind set of the receiver,
can be the cause of arguments and lead to conflicts.
i) Cultural barriers: Modern organizations operate with a diverse work force. People
come from different cultures and become a part of a group, but they have their own way

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of thinking. Anything which is acceptable in one organization might not be acceptable

in another. This can be a cause of clash and leads to conflict.

Activity 4
In a group of two or three, discuss some of the conflicts, which you faced as a team.
Identify the sources of conflict.

SELF-ASSESSMENT QUESTIONS – 5

9. When departments have very little interaction with each other, but can be affected
by each other’s action, then it is known as____________________.
10. When two or more people are _____________________ in accomplishing the task it is
known as reciprocal interdependence.

6. TYPES OF CONFLICT
Generally we discuss conflict as a negative force in the organization, which affects the
psychology of the people and leads to wastage of time and money. But it is not correct all the
time; it can act as a positive for the organization. In the organization conflict can be in
different forms. Let us discuss different types of conflicts:
i) Intrapersonal conflicts: It is the most difficult type of conflict. It is internal to an
individual and the result of internal frustration and tensions. A person plays various
roles in his life. A role is the expected behaviour of a person in a position. There can be
certain expected roles - for example a doctor is expected to play the role of a counsellor,
perceived roles for example a doctor who is expected to play the role of a counselor,
but then he has his own perception of the role and he will behave in that manner, and
actual roles which a person actually plays at one point of time. It is simply impossible
to live up to everyone’s expectations.
ii) Interpersonal conflict: Inter personal conflict is the result of personality clashes. It
can also arise when there is lack of clarity of the role played by an individual in respect
of another. This conflict can also arise due to the perception of a person, scarcity of

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resources or due to the difference in power and status. In this conflict people can be
aggressive and hostile in communication.
iii) Intra-group conflict: Intra group conflict is a conflict among the group members. In
other words it is a disagreement within the group regarding certain issues which leads
to conflict. For example improper succession planning can be a cause of conflict in a
family owned business.
iv) Inter-group conflict: In an organization people work with limited resources and every
group fights for power and prestige. The conflict between groups or departments is
known as inter group conflict. Inter group conflict can have positive or negative
impacts. The positive impact can be that it increases the group cohesiveness. People
become more loyal to their group. The negative impact can be that it increases the
distance between different departments. A high level of inter group conflict can be very
harmful for the organizations. The dispute between management and union comes
under inter group conflict.
v) Inter-organizational conflict: Inter organizational conflict is conflict between two or
more organizations. It may arise due to a merger and acquisition or corporate takeover
etc. It depends upon the uncertain behaviour of the competitors, suppliers or
customers. If we can manage this conflict, it can have a positive impact on
organizational performance.Oth er than these, there can be some hidden conflicts such
as grievance against a supervisor. This may result in resistance to change. A manager
should be aware of this, otherwise it will harm the organization in the long run.

SELF-ASSESSMENT QUESTIONS – 6

11. ________________________conflict is conflict between two or more organizations. It may

arise due to a merger and acquisition or corporate takeover etc.
12. __________________________is the most difficult type of conflict

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7. CONFLICT MANAGEMENT APPROACHES

It is said that conflict is harmful for any organization, but at times conflict can be very useful
in the organization. A manager should have the ability to identify constructive conflict and
he should use it for organizational effectiveness. Optimum level of conflict can stimulate
competition which can have a positive impact on the organization. It helps in minimizing
group think, people can be more innovative and creative. It results in better decision making.

According to Thompson there are five different styles of conflict management. In figure 2 we
can see that it is a two dimensional model:
i) concern for self ii) concern for others.

Fig 2: Conflict handling style

The conflict-handling strategies are chosen according to the requirements of the situation
and person. Suppose we have a conflict with our friend, then we will not adopt the same
strategy that we will adopt with strangers.

Let’s discuss the strategies which can be adopted:

a) Competing: This style is highly assertive and uncooperative. This style is power
oriented and includes dominance. Those who believe in this style of conflict resolution
rely heavily on punishment to have control over others. People use fight, argument
even physical aggression to achieve their goal. Here one party wins and another loses.

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This style is popular in a few situations only such as during emergencies, or when there
is a need to protect yourself and stop others from taking undue advantage.
b) Avoiding: In this style people try to ignore arguments and disagreements. They stay
neutral, which sometimes emerges as a cause of frustration and tension, because
ignoring important issues can be disastrous for the organization. This method can be
very useful in certain situations such as when a person has incomplete or no
information, when there is no power to take decision or an individual feels that this
conflict can be solved by others in a better way.
c) Accommodating: This style is less assertive and highly cooperative. People try to be
generous and sacrificing. This style can be very useful for temporary solution of conflict
in the short run. People using this style may be perceived as submissive and weak
persons. This style is used in a situation when an issue is important for the other person,
and you want the other person to learn from his mistakes.
d) Compromising: This style uses compromise and bargaining. This is a traditional
method of conflict handling where both the parties are losing. It believes in give and
take strategy. This style helps in maintaining good relationships in the future. It
provides partial satisfaction to both the parties. It is a widely used means of conflict
handling.
e) Collaborating: It is a win-win position for both the parties, where people share
information, try to listen to others and show cooperation. In a very constructive
environment, extensive problem solving approach is adopted which is assumed to be
beneficial for both the parties. A person adopting this style of conflict handling is
considered to be dynamic and helpful. He becomes the favourite of every body. Even
the researches show that collaboration is the best method of handling interpersonal
conflict.

Thus, we can say that there are various methods of handling conflicts in the organization. As
we know, conflicts can have positive as well as negative impact on the organization, so it is
very important that such steps or approaches should be adopted, which can eliminate the
adverse and disastrous impact of conflict in the long run. These approaches are as follows:

Ignore: If the conflict is not very serious then the manager should try to ignore it. This is a
strategy which can make the situation worse in the long run.

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Withdrawal: It is a situation when you withdraw from a conflict. It may be withdrawing

from a promotion, from a relationship with a group or from a fight for resources.

Physical separation: This approach can be useful in a situation when two parties can attain
their goal without interaction with each other.

Dominance: It is a method in which the manager uses his power and forces the troublemaker
to leave the company. He sometimes tries to separate the conflicting groups, so that a more
powerful solution can be obtained.

Compromise: In this method both the parties try to come to a decision which is accepted by
both the parties. This decision may not be ideal for both the parties. Temporary solutions
can be obtained.

Appeal: The higher authority can be asked to solve the dispute.

Liaison group: In modern organizations many disputes are handled through arbitration.
They are the neutral party so both the parties accept the decision.

Introducing change: By bringing change in a particular procedure or structure we can

resolve conflicts in the organization.

Integrated problem solving: It is a method which can come up with solutions which are
accepted by both the parties. Both the parties work for mutually accepted solutions.

Conflict resolution through negotiation:

In our day –to-day life we see people spending a lot of time negotiating, even without
realizing it.Through negotiation we can get the most satisfactory solution. A manager can
choose negotiation for conflict handling, but he has to follow certain steps. They are as
follows:

Unfreezing: people should be made free to express their expectations so that they mix and
understand each other’s perspectives.

Being Open: Members should open up to each other, because openess can help in solving the
conflict

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Empathy for Others: While sharing their goals and concerns they can gain empathy for
others which will give new insight.

Search for common goal: people involved in conflict can search for common goals.

Generating alternatives: After understanding each other, we can look for alternatives
which can provide solutions to the problem.

Breaking the silence: A third party intervention can be done if both the parties are not
moving towards the solution.

Accepting the solution within a group: Group members should clarify all the doubts and
show their genuine commitment.

Thus, negotiation is used for solving conflicts, though it is not an easy process, but very useful
in handling conflicts. Other than these methods, prevention of the conflict is also necessary.
An action should be taken in advance to avoid the potential causes of conflicts.

Activity 5
Visit an organization and interview two employees and collect information regarding
any conflict they face. Analyze the approaches they adopt to solve it. Suggest another
method of conflict management.

SELF-ASSESSMENT QUESTIONS – 7

13. The optimum level of conflict can ____________________ which can have positive impact
on the organization.
14. _________________________ style is used in a situation when an issue is important for
other person and you want the other person to learn from his mistakes
15. ________________________ is a win-win position for both the parties where people share
information, try to listen to others and show cooperation.

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8. SUMMARY
 Power is the capability of one social actor to overcome resistance in achieving a desired
objective. According to Robbins, power is the capacity that A has to influence the
behavior of B.
 Power is derived from various sources. They are Legitimate power, Charismatic power,
Expert power, Reward power, Information power, Coercive power, and Connection
power.
 Power and Politics are inseparable. Organizational politics is power in action. People
indulge in politics to have their own way in an organizational setting. Therefore, politics
is neither good nor bad. Politics too is natural and ever present in all organizations, as
power is. Use of illegitimate means and illegitimate objectives make politics bad.
 Conflict is a part of our day today life. Conflict can be either constructive or destructive.
Constructive conflict is desirable for a growing organization.
 The process of conflict has five levels -latent , perceived, felt, manifest and conflict
outcome.
 The sources of conflict can be scarcity of resources, lack of clarity of roles and
responsibilities, interdependence, specialization, incompatible goals, difference of
perception, values and attitude, poor communication, cultural barriers etc.
 There are various approaches of managing conflicts. People can use any style according
to the requirement of the environment and the people involved in it.

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9. GLOSSARY
Feuds Quarrels
Withdrawal Getting away
Discretion Good judgment
Influence Behavioural reaction to the exercise of power
Tyrannical Oppressive
Attribute Characteristic
Immense Huge
Legitimate Lawful
Charismatic Charming, Fascinating

10. TERMINAL QUESTIONS

1. Explain power in detail. Briefly discuss the sources of power.
2. What is politics? Can we have a politics-free organization?
3. Define conflict. Discuss the different sources of conflict in an organization.
4. Explain the types of conflicts with the help of suitable examples.
5. How can we manage conflict in an organization?

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11. ANSWERS
Self-Assessment Questions
1. Capacity, Influence
2. socio-legal
3. Expert, Charismatic
4. Legitimate and Illegitimate
5. People having strong sense of justice
6. Difference of values
7. Felt
8. Conflict outcome
9. pooled interdependence
10. mutually interdependent
11. Inter-organizational
12. Intrapersonal conflict
13. Stimulate competition
14. Accommodating
15. Collaborating

Terminal Questions
1. Power is defined as the “ability of those who possess power to bring about the outcome
they desire”. According to Robbins power is the capacity that A has to influence the
behaviour of B. This definition implies Potential, Discretion, Dependency, Specific, and
Reciprocal. (Refer Section 2) Sources of power include Legitimate power, Charismatic
power, Expert power, Reward power, Information power, Coercive power, and
Connection power. (Refer Section 3)
2. Political behaviour in organizations refers to activities that are not required as part of
one’s formal role in organization, but that influence, or attempt to influence, the
distribution of advantages and disadvantages within the organization. It is possible to
have politics-free organization, but not likely. (Refer Section 4)
3. Conflict can be defined as a process in which one party perceives that another party has
negatively affected, or is about to negatively affect, some thing that the first party cares
about. Refer section 5.

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4. Conflict can be defined as a process in which one party perceives that another party has
negatively affected, or is about to negatively affect, some thing that the first party cares
about.Refer section 6
5. A manager should have the ability to identify constructive conflict and he should use it
for organizational effectiveness. Optimum level of conflict can stimulate competition
which can have a positive impact on the organization. Refer section 7

12. REFERENCES
 N. M. Ashkanasy and C. S. Daus, (2002) Emotions in Workplace: The new challenges for
managers, Academy of Management Executive, February, 2002, page 77
 Robbins P. Stephen & Judge. A. Tim Othy (2010 ), Organizational Behaviour, Prentice
Hall
 Singh B.P.& Chhabra T.N., (2005), Organization theory & Behaviour, Dhanpat Rai & Co
(P) Ltd
 Rao.V.S.P., (2009), Organization Behaviour, Excel Books

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BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

Unit 14: Introduction to Groups and Teams 1

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 14
Introduction to Groups and Teams

Table of Contents

SL Topic Fig No / Table SAQ / Page No

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Meaning and Importance of Groups - - 4-5
3 Reasons for Group Formation - 1 6
4 Types of Groups 1 2
4.1 Formal Groups - - 7-10
4.2 Informal Groups - -
5 Stages of Group Development 2 3 11-13
6 Meaning and Importance of Teams 3 I 13-15
7 Types of Teams 4 - 15-16
8 Creating an Effective Team - 4 17
9 Summary - - 18
10 Glossary - - 18
11 Terminal Questions - - 19
12 Answers - - 19-20
13 References - - 20

Unit 14: Introduction to Groups and Teams 2

Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

1. INTRODUCTION
In the previous units, we have learnt different aspects of individual and organizational
behavior like personality, motivation, organizational conflict and power and politics. In this
unit, we will be studying about the different types of groups and teams that exist in an
organization, and their relative importance. The concept of group emerges from way back in
the era of early civilization. The early man realized the importance of a group and created it
for his safe and secure survival. We all know that “man is a social animal” and prefers to live
in a group rather than in isolation. Therefore, every individual is a member of one or the
other group and performs his activities within these groups. The most common examples of
such groups are our family, our friends, work group, caste group, club group, sports group
etc. The behaviour of people is largely influenced by the type of group they belong to.

Social needs are among the most important and powerful motivating forces that prevail on
the job. For the satisfaction of these social needs, workers tend to form small groups in the
job place. Groups perform many of the activities in the workplace, and these can have a
significant and positive impact on individual work performance. Communication and
interaction, whether in a group or team, have many advantages, but some limitations too.
They offer the opportunity for better decision-making, and for the members a sense of
belongingness. However, they can lead to disadvantages such as peer group pressure and
undue conformity to the group by an individual. A team is also a specific type of group. In
today’s modern era, even organizations recognize the benefits of having teams at their
workplaces, as they are helpful in outperforming the individuals.

1.1 Objectives
After studying this unit, you should be able to:
 explain the meaning of Groups and Teams
 distinguish between formal and informal groups
 classify the stages of group development
 discuss the various types of teams.

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2. MEANING AND IMPORTANCE OF GROUPS

A group can be defined as a collection of two or more people who have a common explicit
goal and interact with each other for achieving the goal; members are aware of each other
and perceive themselves to be a part of the group. According to David H. Smith, “A group is a
set of two or more individuals who are jointly characterized by a network of relevant
communications, a shared sense of collective identity and one or more shared dispositions
with associated normative strength.” According to Kreitner & Kinicki a group is, “A collection
of people who interact for a common purpose, and between whose members there is
interdependency.” Interdependency is the degree to which any individual member can rely
on others to reach the group goals.

For example, if we look into our family, which is the most primary group of society, there is
full interdependency among members. Every member of the family contributes according
to his/her capacities. We have faith in the decisions taken by our parents, for food, we
depend on our mother, for sharing views and playing, we need our siblings; spouses also
support each other for the benefit of the family, etc.

Advantages of groups
Groups can be very useful in organizations. The following are the various benefits of groups:
 Groups are able to utilize individual talents and resources in a better way.
 You must be aware of the fact that human beings are blind towards their own mistakes.
Hence, if we are working in a group, these errors can be identified by other members
of the group and thus, can be rectified immediately.
 Groups give a direction to their members and continuously insist on achieving the
objectives.
 It is through groups that the members are able to satisfy their social needs.
 It facilitates good quality of decision making, since we all know that “ten brains are
always better than one”, and once a fair decision has been taken, it also increases the
loyalty of members towards it.
 A group, specially the informal ones, provides a platform to the employees for releasing
their frustration in front of their friends or peers, which people cannot do in front of
their seniors.

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 Groups are helpful in sustaining cultural values, as people tend to celebrate each other’s
happy occasions together.

Disadvantages of groups:
 Due to the involvement of many people, taking decisions in a group becomes a very
time consuming process.
 Groups often lack individual accountability for mistakes.
 Group conformity becomes very high, as the members are pressurized to obey the
group norms instead of the organizational norms.
 It becomes difficult to make any person responsible for getting or not getting the work
done.
 The synergy level of groups is generally neutral or negative because members are more
committed towards their individual outcome.
 The level of interdependence is very low as people are more inclined towards achieving
their own goals and receiving the rewards. This even leads to lack of sharing
information.

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3. REASONS FOR GROUP FORMATION

Individuals join groups for the following reasons:
 For sharing our views, ideas, feelings, opinions etc., we need a group.
 Through groups, particularly small ones, we are identified very easily, which in turn
increases our morale. For example, you can be very well identified as students of BBA,
SMU.
 Small groups are a very important source of information. If one member of the group
has any information, he can spread it to all other members very quickly.
 Working in groups results in higher motivation of the employees and thus, yields job
satisfaction.
 Groups help to protect their members from outside pressures or external threats by
standing united during such situations.
 Groups provide a platform to individuals for releasing their frustrations, which might
occur due to family, personal, or any official problem.
 Groups come out with more creative and innovative ideas, as there are many people to
think over a topic.

SELF-ASSESSMENT QUESTIONS – 1

1. A group is a collection of people who interact for a common purpose and among
whose members there is no dependence. True/ False
2. The synergy level of groups is generally negative or neutral (True/False).
3. Individuals join groups because they want job _____________________.
(a) authentication (b) clarification (c) satisfaction (d) modification

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

4. TYPES OF GROUPS
Groups can be classified under two heads, formal groups and informal groups. Formal work
groups are established to achieve organizational goals. They may take the shape of command
groups, task groups, and functional groups. Informal groups are an outcome of the social
needs of people to interact freely with each other. They can be in the form of interest group,
friendship group and reference group. Figure 1 illustrates the types of groups

Fig 1: Types of Groups

4.1 Formal Groups

Formal groups are those groups, which are purposely created by the management for
achieving some of its objectives. According to Chester I. Barnard, it is “a system of consciously
coordinated activities or forces of two or more persons.”

Characteristics of formal groups:

 Top management, for achieving its goals, creates formal groups.
 In order to ensure efficiency in all its operations, the organizational structure of formal
groups is based on the principle of division of labour.
 In formal groups, the emphasis is laid on getting the job done and no concern is shown
towards the individuals who perform these jobs.
 Formal groups have their own hierarchies of authority and responsibility, which are to
be followed by everyone in the organization.

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 These groups are concerned about only the work, and not the individuals who perform
it.

Let us now discuss the different types of formal groups:

(a) Command groups

Command groups are specified by the organizational chart and often consist of a supervisor
and the subordinates who report to that supervisor. In a command group, the subordinates
are responsible to carry out the orders given by the seniors and continuously have to report
to them. .

An example of a command group can be an academic department head and the faculty
members in that department.

(b) Task groups

Task groups are also commonly referred to as task forces. Task groups consist of people who
work together to achieve a common task. Members are brought together to accomplish a
specified task within a specified time. The boundaries of the task group are not confined to
its immediate senior; rather it also enters into different departments and units.

Examples of assigned tasks are preparation of monthly budget or weekly reports, launching
of a new product or service, identifying sales problems, managing quality at different levels
of production, etc.

(c) Functional groups

A functional group is created to accomplish specific goals within an unspecified period. They
survive until the life of an organization goes on. Functional groups remain in existence even
after achievement of current goals and objectives.

Examples of functional groups would be a marketing department, a customer service

department, or an accounting department.

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4.2 Informal Groups

Informal groups are formed spontaneously and in response to the common interests and
shared values of individuals. These groups are based on common tastes, culture, language,
habits, attitudes, likes, dislikes or some other factor. They are created for purposes other
than the accomplishment of organizational goals, and do not have a specified time frame.

Characteristics of informal groups –

 Organizational members create informal groups to satisfy their personal needs.
 Informal groups are natural as they arise spontaneously.
 Informal groups are concerned about individuals and their social needs to be fulfilled.
 Entry and exit to these groups is voluntary in nature.
 Due to voluntary membership, informal groups become very flexible, and thus are
unstable in nature.
 Members of informal groups create their own group norms, which are to be followed
by every group member.

The different types of informal groups are:

1. Interest Groups
Interest groups usually continue over time and may last longer than general informal groups.
An interest group consists of people having some common interest. These members may not
be part of the same organizational department, but they come together because of some
common interest. The goals and objectives of interest groups are specific to each group and
may not be related to organizational goals and objectives.

An example of an interest group would be students who come together to form a study group
for a specific class, say mathematics.

2. Friendship Groups
Members who enjoy similar social activities, political beliefs, religious values, or other
common bonds form friendship groups. These groups may even cross the organization
boundaries and extend outside the organization. The group members tend to enjoy each
other's company; they know each other very well and maintain good relations among
themselves.

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For example, a group of employees who form a friendship group may have an exercise group,
a musical group etc.

3. Reference Groups
Individuals for their self-evaluation create reference groups. According to Cherrington, the
main purposes of reference groups are social validation and social comparison. Social
validation permits individuals to justify their attitudes and values, while social comparison
helps individuals to evaluate and compare their values and attitudes with others. By
comparing themselves with other members, individuals are able to analyze whether their
behavior is acceptable or not, and whether their attitudes and values are right or wrong.
Reference groups thus, are able to influence their members’ behaviour very strongly.

For example, our family, friends, religious groups, are the primary reference groups that
guide our actions. In organizations, for a new employee, the reference group may be a group
of employees who work in the same or different departments or even in different
organizations.

SELF-ASSESSMENT QUESTIONS – 2

1. Match the following:

I. Command group (a) Permanent in nature
II. Interest group (b) Used for self-evaluation
III. Reference group (c) Receive orders from seniors
IV. Functional group (d) Specific purpose

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5. STAGES OF GROUP DEVELOPMENT

Bruce Tuckman (1965) 1 developed a 5-stage model of group development. He labeled the
stages Forming, Storming, Norming, Performing and Adjourning. According to Tuckman,
a group or team will pass through these stages, but these need not be followed rigidly. Yet,
this is a generalized categorization of different phases of a team or group. These distinctive
stages in the evolution of a team are illustrated in figure 2.

Fig 2: Stages of Group Development2

We will now learn in detail, all the five Stages of Group Development

 Forming – The initial stage of group development is marked as the forming stage. As
the name depicts, ‘forming’ means the initial formation of the group. In this stage, the
group members are brought together on one platform. They start discussing the
objectives, and the strategies framed to achieve the laid goals. This is the stage where
all the members become aware of each other and behave very politely and patiently.
 Storming – The second stage of group development is named storming, as the group
undergoes a storm of conflicts, disputes, arguments and differences in opinion. This
stage is the most crucial stage, as the group can move on to the next stage only if the
members are successful in suppressing the conflict, and try to understand each other.
Or else, the group will be disbanded. Conflict usually arises as every member will try to
influence others, and would like his/her suggestions to be accepted for achieving the

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target. Struggles will start among a few members for gaining leadership, which will at
last lead to interpersonal conflicts also.
 Norming – The third stage of group development is marked by harmonious
relationships. A group entering the stage of norming is able to resolve all conflicts and
arguments, which took place at the storming stage. The members of the group are ready
to listen to each other and plan the objectives and strategies mutually. Roles are clearly
assigned to every member, activities are planned out, meetings are fixed, deadlines are
set, and the group frames its own norms for maintaining the group discipline and
achieving the target on time.
 Performing – The fourth stage of group development is the action stage where every
member starts performing this/her assigned duties. The group interacts frequently and
smoothly in case of difficulties. The members also try to implement some problem
solving techniques that they have learnt and experienced in the previous stage. Efforts
are made to complete the task effectively and to meet the deadlines successfully. Each
member tries to perform his /her role well, so that the group can achieve success.
 Adjourning – Lastly, every group has to get disbanded either on completion of the task,
or if any group member leaves. This is a very painful stage, as by this time members
have developed sentiments towards each other and are comfortable in performing
activities together. At this stage, the members are expected to break off their socialties
and go back to their original work places.

You should note that all groups have to enter the adjourning stage if they continuously have
to work on some regular assignments. Since the members are known to each other, there
will be no introductory or conflicting stage. However, if a new member joins the framed
group, then that member or the entire group might undergo the storming stage.

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SELF-ASSESSMENT QUESTIONS – 3

5. ________________________ is the initial stage of group development.

6. The third stage of group development, that is marked by harmonious relationships,
is known as ____________________.
7. In the _____________________ stage, members are expected to break off their social-ties
and return to their original work places.

6. MEANING AND IMPORTANCE OF TEAMS

A team is a specific type of group becoming more and more popular in modern organizations.
According to Katzenbach and Smith, a team is, “A small number of people with
complementary skills, who are committed to a common purpose, performance goals, and
approach, for which they hold themselves mutually accountable.” Therefore, it is said that,
to become a team, the members of the group should hold themselves accountable towards
each other. We can illustrate this in a much better way with these two statements: 'The boss
holds me accountable' is the situation in groups as opposed to 'We hold ourselves
accountable' in teams. Teams have an advantage over groups, as they have been able to
outperform individuals. Nowadays, almost every organization insists on having teams as it
speeds up the work, increases mutual trust and co-operation, and yields creative ideas
because of the existence of multiskilled people.

Characteristics of a Team:
 A team comprises people who are mutually accountable to each other. Let us take the
example of Indian cricket team - when the team wins, it is the entire team that is
declared as a winning team.
 There is a high level of interdependence among members of the team and each member
is motivated enough to contribute towards the group goals. Take the example of your
family, where you depend on your mother, father, elders, etc., to fulfill your needs. In
addition, every member is also ready to contribute.
 Members of the team are able to examine errors without having personal attacks.
Again, going back to the example of your family, if you commit a mistake, then your
elders try to make you understand what is right, instead of simply being upset with you.

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

 A team produces positive synergy due to the coordinated efforts extended by team
members. The Indian army is the best example portraying positive synergy.
 The members of the team share complementary skills. For example, imagine a hospital
where there are only doctors with no nurses, lab technicians, attenders or clerks to
assist. In this case, the doctors cannot manage the hospital. Therefore, to make it a
success, the team consists of people who can complement each other.
 In a team, the rewards and punishments are given to all the members of the team. If
only the captain is appreciated or rewarded on winning a match, then it will definitely
demoralize the other team members.
 The leader of the group holds good people skills and adopts a team approach. Greg
Chappell, the former coach of the Indian cricket team was criticized as very autocratic
and dominant and thus, failed to be a good coach for the team.

Difference between a group and a team:

Figure 3 shows the differences between a group and a team based on their performance for
achieving certain goals: Synergy, which is positive or negative; accountability, which can be
individual or mutual; and skills, that are varied or balanced.

Fig 3: Differences between groups and teams

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Activity 1
From Hindi/English movies based on teamwork, identify the characteristics of a good
team mentioned under section 14.6. For example, the Bollywood movies Chak-De and
Lagaan portray many of the characteristics that we have discussed in the previous
section.

7. TYPES OF TEAMS
There are four types of teams commonly found in organizations. Figure 4 shows the different
types of teams.

3G mobile Phone

Boardroom

Home / Desktop

Fig 4: Different Types of Teams3

In this section, we shall discuss different types of teams that may be found in an organization.

(a) Problem solving teams – These teams comprise 5-12 employees from the same
department. The team members are informed about the departmental problems such
as problems related to cost, quality, absenteeism of workers, dissatisfaction among
employees, delayed delivery of finished goods, inadequate working conditions, poor
supervision, etc. These members meet frequently with each other to discuss different
aspects of the problem. The main aim of such teams is to work out the problem and
provide suggestions to it. However, , these teams rarely are given the authority to
implement any of their suggested actions. The biggest advantage of such team is that it

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

enhances employee involvement. These teams can later on become self-managed

teams, if they work successfully.
(b) Self-managing teams- These comprise 5 to 20 multiskilled members. The team works
on its own once the team members receive targets to be achieved. The team members
nominate their own leader, lay down plans, formulate strategies, allocate the resources,
hold meetings to control group proceedings, give and take feedback, check out
deviations, take their own decisions, choose members for their team, etc. In short, we
can say that the self-managed team members take on the responsibilities of their
former supervisors. As a result, the importance of supervisory positions is reduced, or
may even be eliminated. All the members are held responsible for the team’s overall
performance. In such teams, the members are trained, so that they can take up varied
jobs. The main advantage of these teams is that it reduces supervision on the part of the
superiors and enhances responsible attitudes on the part of the employees.
(c) Cross-functional teams – These teams consist of employees from the same
hierarchical levels, but from different sections/units/ departments of the organization.
These teams are created for specific purposes, and once the target is achieved, the team
is disbanded. An example of such a team could be a committee. The biggest
disadvantage of this team is that it becomes quite difficult to manage people from
diverse backgrounds, especially during the formative stage of the team.
(d) Virtual teams- The members of virtual teams are geographically dispersed across the
organization/nation or world. The team members are linked together through
electronic devices or internet. There is absence of face-to-face interaction between the
team members. Virtual teams are helpful where the group members cannot meet each
other, and thus, speed up the pace of activity. Undoubtedly, virtual teams have sped up
the work and have become quite cost effective, but on the other hand, due to lack of
social support, the team members face many social and emotional problems.
Miscommunication also affects the team performance because of the absence of direct
interaction among the team members.

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8. CREATING AN EFFECTIVE TEAM

To create an effective team, we should practice the following methods:
 Members of the team should be allowed to communicate frequently and openly with
each other.
 Give the group tasks that involve a high level of interdependency.
 Establish realistic and attainable goals for the team.
 Organize certain activities like games/exercises/assignments that can enhance the
teamwork among individuals.
 Accordingly, give rewards or punishments to the entire group and not to any individual.
 Assign roles to every individual according to his/her capacities.
 Increase employee participation by giving them an opportunity to give suggestions,
take decisions, formulate and implement various plans, etc.
 Try to avoid unhealthy competition between the team members by reframing the
targets repeatedly.
 Examine errors without making any personal attacks.
 At times, organize some informal gatherings for the team members so that they can
understand each other well.

SELF-ASSESSMENT QUESTIONS – 4

State whether the given statements are true or false:

8. A team always shows neutral or negative synergy. True/ False

9. Problem-solving teams are created for solving the employee’s personal issues.
True/False
10. The members of virtual teams are geographically dispersed across the
organization/nation or world. True/False
11. Self-managed teams depend on their seniors for achieving the targets. True/False

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

9. SUMMARY
Let us now recapitulate the important concepts discussed in the unit:
 In section 1 and 2, we have discussed the meaning and importance of groups and teams.
We have also learnt the benefits and limitations of having groups or teams in
organizations.
 Section 3 talks about the various reasons behind group formation.
 In section 4, we have discussed the classification of groups into two types i.e., formal
and informal groups and their sub-classifications.
 Section 5 enumerates the five stages of group development given by Tuckman.
 Section 6 and 7 signifiy the importance of teams and detail the different types of teams
created in organizations.
 In section 8, we have listed out some techniques, which can be used for building up
effective teams.

10. GLOSSARY
Accountability – Being responsible to someone
Attitudes – Way to respond towards something or
someone
Authority – Power
Autocratic – Person who dominates/rules over others
Values – Shared beliefs practised by individuals
Voluntary – Any act done willingly

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

11. TERMINAL QUESTIONS

1. Define and differentiate between groups and teams.
2. Give the classification of groups and discuss the types of formal groups, with suitable
examples.
3. Explain the stages of group development.
4. Discuss various types of teams created in an organization.
5. What techniques will you adopt to build an effective team?

12. ANSWERS
Self-Assessment Questions
1. False
2. True
3. Satisfaction
4. i-c ii-d iii-b iv-a
5. Forming
6. Norming
7. Adjourning
8. False
9. False
10. True
11. False

Terminal Questions
1. Define the terms groups and teams. Draw out differences between the two based on
goal, synergy, skills required and type of responsibility. Refer to sections 2 and 6.
2. There are two types of groups- formal groups and informal groups. Formal groups are
further classified as command, task and functional groups. Refer to section 4.
3. There are five stages through which a group progresses - forming, storming, norming,
performing and adjourning. For details, refer to section 5.
4. Organizations create teams for various purposes. There are four types of teams for
performing specific tasks. Refer to section 7.

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5. There are a number of techniques that can be adopted to build effective teams. Refer to
section 8.

13. REFERENCES
 French Wendell L., Bell Cecil H. (2004) Organization Development, Prentice Hall
 Robbins P. Stephen & Judge. A. Tim Othy (2010), Organizational Behaviour, Prentice
Hall
 Singh B. P.& Chhabra T. N., (2005), Organization theory & Behaviour, Dhanpat Rai &
co (P) Ltd
 Rao V.S.P., (2009), Organization Behaviour, Excel Books
 Parikh Margie, Gupta Rajen, (2003) Organization Behaviour Tata McGraw Hill
Education Pvt. Ltd.

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BACHELOR OF BUSINESS ADMINISTRATION

SEMESTER 1

FUNDAMENTALS OF BUSINESS
ORGANIZATION & MANAGEMENT

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Fundamentals of Business Organization & Management Manipal University Jaipur (MUJ)

Unit 15
Organization Change and Development

Table of Contents

SL Topic Fig No / Table SAQ / Page No

No / Graph Activity
1 Introduction - -
3
1.1 Objectives - -
2 Definition and Meaning - 1 4-5
3 Need for Change - 2
3.1 Factors of Change - - 6-8
3.2 Resistance to Change - -
4 Strategies to Overcome Resistance - 3, I 8-11
5 Process of Change 1 4
12-14
5.1 Lewin’s 3 Stage Model of Change - -
6 Meaning and Definition of OD - 5, II 15-16
7 OD Interventions 2, 1 6 17-19
8 Summary - - 20
9 Glossary - - 20
10 Terminal Questions - - 21
11 Answers - - 21-22
12 References - - 22

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1. INTRODUCTION
Change is a reality of life which every individual must accept in order to survive, and we must
try to cope with it. Organizational change is one of the most critical aspects of any
organization's development. Change can be initiated in an organization due to external or
internal pressure. In any of the situations, the management tries to move from the status
quo. The management’s effort to manage change decides the long-term survival of any
organization. The main purpose of any change program is to attain some specific goals. For
the attainment of these goals, change must be managed properly.

Change is a multi-dimensional process. Organizational change can be any type of change such
as change in strategy, culture, structure, task, technology, or even change in employees.

1.1 Objectives
After studying this unit, you will be able to
 discuss and evaluate the process of change.
 debate strategies to overcome resistance to change.
 define OD interventions
 analyse how change is linked with organizational Development

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2. DEFINITION AND MEANING

Organizational change is a process by which organizations move from their present state to
some desired future state to increase their effectiveness

There are certain characteristics of change:

 It is constant but varies in degree and direction.
 It produces uncertainty, yet it is not completely unpredictable.
 It creates both threats and opportunities.

When change activities are intentional and goal-oriented then it is known as planned change.

The main goal of a planned change in the organization is to improve the ability of the
organization to adapt to changes in the environment.

People who act as catalysts and assume the responsibility for managing change activities are
called change agents.

These change agents are of three types:

i) Managers – who are also called internal entrepreneurs.
ii) Non-managers – who are change specialists.
iii) Outside consultants – They are the experts who implement change.

The role of a change agent is very important in the whole change process. He can be any
internal or external person, but he should possess certain qualities:
 Eager for improvement.
 Realistic approach
 Effective communicator
 Attentive listener
 Person of ideas
 Good collaborator
 Restless.

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Types of Change:
1. Change can be revolutionary or evolutionary.
2. Evolutionary changes are gradual, incremental, and specifically focused.
3. Revolutionary change is sudden, drastic, and organization wide.

The different Types of Organizational Changes are:

I. Structural: Changing the organization’s structure or its structural components is
known as structural change.
II. Technological: Adopting new equipment or operating methods that displace old skills
and require new ones is called technological change
III. Automation: Replacing certain tasks done by people with machines is an automation
change.
IV. Workforce: Changing attitudes, expectations, perceptions, and behaviour of the
workforce

SELF-ASSESSMENT QUESTIONS – 1

1. Organizational change is a process by which organizations move from their

present state to ______________________ to increase their effectiveness
2. The main goal of a planned change in an organization is to improve the ability of
the organization to _____________________.
3. Evolutionary change is gradual, incremental, and specifically focused and
___________________ is sudden, drastic, and organization-wide.

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3. NEED FOR CHANGE

In the fast-moving world any organization not ready to change will find it difficult to survive.
Liberalization, privatization, and globalization have changed the level of competition. A
need for change has been felt due to the changes in (A) the external environment such as
change in- market place, governmental laws and regulations, technology, labour market and
economical changes. (B) Internal environment such as changes in – organizational strategies,
workforce changes, new types of equipment, and change in employee attitudes.

3.1 Factors of Change

The factors which force organizations to bring in change are:
i) Competitive factors: Every organization must make changes to attempt to match or
exceed its competitors on at least one of the following dimensions:
 Efficiency
 Quality
 Innovation
 Customer responsiveness

Economic, political, and global forces affect organizations by forcing them to change the
process they adopt for producing goods and services. They also affect the choice of location
for the production. There is a need to change organizational structure due to the following
causes:
a) To allow expansion in the foreign market.
b) To adapt to different types of national cultures.
c) To help expatriates in adapting to the cultural values of the place, where they are
located.
ii) Demographic and social factors: As we know, changes in the composition of the
workforce and the increasing diversity of employees has presented many challenges
for organizations. Managing diversity has become a challenge for the organization.
iii) Ethical factors: It is very important for an organization to take steps to promote
ethical behavior. The organization should create position of office for managing
ethical issues/dillemas in the organization. The employees should be encouraged to
report unethical behaviour.

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iv) Technology: Fast changing technology has created havoc in organizations. To avoid
obsolensce, it is very important for organizations to adapt change.

When change is introduced, people must know why change is required. They must
understand the benefits of change. They should know how to change. There should be a
willingness to change. Certain opportunities should be provided so that behavioral change
can occur. For a planned change the benefits of change must be measurable and positive
changes should be recognized.

3.2 Resistance to Change

In any organization where change is introduced, people and groups can react in different
ways. There can be great support and active resistance too. If people do not have enough
information regarding the process and impact of change, people resist change. There can be
various other reasons for resistance to change. People resist change due to:
 The ambiguity and uncertainty that change introduces
 The comfort of old habits
 A concern over personal loss of status, money, authority, friendships, and personal
convenience
 The perception that change is incompatible with the goals and interest of the
organization.
 Lack of information.

Organizations also resist change in many cases. Many of the reasons are the same as those of
individuals. Some of organizations believe in minimizing risks so they will not like to change
if the working process is satisfactory. Organizations can resist change due to environmental
factors. Sometimes they believe that change can bring about an imbalance in power and can
affect the organizational stability by affecting the culture of the organization.

What are the symptoms of resistance? There are certain indicators such as:
 Hostility or Aggression
 An individual may develop apathy towards his work.
 Absenteeism and Tardiness
 Development of Anxiety and Tension

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 Slowdown or Strikes

SELF-ASSESSMENT QUESTIONS – 2

4. Economic, political, and global forces affect organizations ____________________ the

process they adapt for producing goods and services.
5. The factors which force organizations to bring about change are ____________________.
6. If people do not have enough information regarding the process and impact of
change, people to ________________________.

4. STRATEGIES TO OVERCOME RESISTANCE

Change is resisted intensely. This is because we look upon the future with uncertainty, doubt,
and fear. To ensure that such apprehensions do not come true we naturally want to maintain
the existing (known) status, and we do it by resisting change. The known devil is believed to
be better than the unknown devil. Four common reasons behind resistance to change are:
 Selective perception: It implies considering available information only partly. Most of
us are only interested in knowing what we get when the change is implemented. When
we find little or no advantage for ourselves, we resist change. We refuse to see the
bigger picture of how beneficial the change will be for the organization, and perhaps
for some of our friends and colleagues. For example, if the proposal is to make
promotions based on merit, competent individuals will welcome it but the senior staff,
particularly the not-so-competent ones will resist it tooth and nail.
 Lack of information: When people do not have adequate information they substitute
it with speculations and guesses, which are mostly negative and fearsome. They doubt
the intentions of the manager and believe in the worst possible impact on themselves.
Since they do not even know how to change, they fear making mistakes and hence are
reluctant to try to change.
 Fear of the unknown: Managers must realize that it is human instinct to perceive the
unknown as dangerous. When a change is proposed they fear the possibility of a loss of
job, lack of ability to change, losing status, position, income, power, convenience, and
so on. The possibility of losing friends or having to work with hostile colleagues also
generates fear.

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 Habit: Habits are very difficult to break or to form. While working in a particular
environment we develop certain habits. In a changing environment, we are required to
unlearn those habits and learn new habits which, as we have already said is a difficult
and unpleasant task. We therefore resist change.
 Resentment towards the manager: Very often workers do not see the benefits of
change and consider it unfair and unreasonable. Even if they accept the benefits, they
may still question its timing, manner of implementation and lack of concern for
themselves. They therefore develop anger and resentment towards the manager, which
adds to their already existing resistance.

A common experience is that it is not just the individuals but also the organizations that
resist changes. There are many forces inside an organization that create resistance to change.
These include:
 Power maintenance
 Structural stability
 Functional sub- optimization
 Organizational culture
 Group norms

Thus, resistance to change is a natural and a spontaneous process. Rather than resenting it,
we should accept it and overcome it, using the following strategies:
 Education and communication: Ignorance is very often at the root of our fears and
apprehension. Therefore we can address them through education and communication.
In other words, people who will be affected by the change must learn about the need
for change, how the change will be undertaken, and also its likely effect. A change is
meant to improve the status and therefore -these likely effects should be communicated
as positive. This strategy is useful when there are rumours and a general lack of
information in the organization. The benefits of this strategy are that, once educated
individuals and groups not only accept change but even cooperate enthusiastically. This
strategy requires a lot of time and effort, and some individuals simply refuse to see
reason.

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 Participation and involvement: If individuals and groups themselves are involved in

the designing and implementation of change, they overcome their feelings of
uncertainty and helplessness. Such an approach also fosters understanding and a
feeling of ownership. This approach is useful when managers do not have the resources
to design and implement the change, and when others have substantial ability to resist.
The benefit of such an approach is that those who participate themselves become
agents of change and develop a commitment to implementing the change. Participation
also fosters better education and communication. This approach suffers from the
disadvantage that it is time and effort consuming, as also the risk of designing an
inappropriate change.
 Facilitation and support: People will give up resistance to change when they feel
empowered. This empowerment is possible through encouragement, support, training,
development, counseling and availability of resources. This approach is useful when
resistance is rooted in problems related to adjustment. This approach is also time-
consuming and expensive.
 Negotiation and agreement: Very often offering incentives in return for agreement to
change is employed to overcome resistance. This strategy is useful for addressing the
resistance offered by people who stand to lose as a result of change. Sometimes it
provides the only option to avoid resistance. Its disadvantage is that even people who
pretend to be losers or who imagine losing out also want to be compensated.
 Manipulation and co-optation: Very often managers use information and implied
incentives selectively to maximize the likelihood of acceptance. During the recent
recession, most employees were ready to accept a pay cut to avoid being thrown out.
Co-optation means asking resistant groups to accept changes by providing them with
the benefits they desire, along with a non-influential role in the process. This could
relatively be a quick and inexpensive solution to the resistance problem, but it may
result in future complications if people find out that they were manipulated.
 Explicit and Implicit coercion: Many times use of authority and threat of negative
incentive are employed to overcome resistance to the desired change. Thus, when Tata
suggested the relocation of the Singur plant in West Bengal, it was to overcome the
resistance he faced. This approach, if within the bounds of legitimacy and ethics, can be

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a very powerful tool to overcome resistance. However the disadvantage is that it may
result in an equally strong response from the resistors.

Activity 1
Identify recent changes which you have noticed in your organization. Discuss them with
your friend and identify the occasions when you have resisted change.

SELF-ASSESSMENT QUESTIONS – 3

7. When people do not have adequate information, they substitute it with

speculations and guesses which are mostly _____________________.
8. If individuals and groups themselves are involved in designing and implementing
of change, they overcome their feelings of _________________.
9. People will give up resistance to change when they feel empowered. This
empowerment is possible through encouragement, support, training,
development, counseling and ______________________.

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5. PROCESS OF CHANGE
There are various models of the organizational change process. All these models consider
change as a continuous process. The process of change involves these eight steps:
i) Initiation: In this stage people realize the need for change. Organizational chance is
always initiated by the top management. A need for change can be proposed by
anybody in the organization, but action is taken by the top management only. The top
management on the basis of observation or discussion, decides about change
management and it leads to the hiring of a change consultant.
ii) Motivation: It is a stage when the management and the expert, take necessary action
to involve people from all levels of the organization. Management takes necessary
action to involve all the employees to discuss the different dimensions of change.
iii) Diagnosis: At this stage, the management tries to search for the major cause which
needs attention while bringing about a change in the organization.
iv) Collection of Information: All the facts and data are collected at this stage. Detailed
information regarding the problem or issue is collected, which can affect the change
process.
v) Evaluation of Alternatives: This stage is also known as the deliberation stage. At this
stage, various alternatives are generated so that any problem or issue related to change
can be solved in the best possible way.
vi) Action proposal: At this stage, the whole structure of the proposal is prepared, so that
any problem can be identified and solved. It is a strategy for generating and acquiring
knowledge that managers can use to define an organization’s desired future state.
vii) Implementation: it is a stage where all the ideas or proposals are converted into action.
Change is implemented and the whole organization starts functioning on the new
method.
viii) Stabilization: In this stage, change is internalized, and it becomes an important part
of the organization.

Thus, we see that change is implemented in the organization and people start working in the
new setup.

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When change is introduced in the organization, it should be accepted by the people in the
organization, so it is necessary to ensure that it becomes a part of the work of the
organization. The implementation of change is a multidimensional, complex process. The
result of the implementation is institutionalization and stabilization. Institutionalization, in
other words, is making change a permanent part of the organization. Stabilization means
internalization, so that change becomes a natural part of the organization. To achieve this, it
is important to have continuous evaluation of the change, and action should be taken to make
necessary adjustments.

5.1 Lewin’s 3-Stage Model of Change

As we have discussed earlier, various environmental factors force organizations to bring in
change.

To help us understand the process of change, Psychologist Kurt Lewin developed the Force
Field Analysis Model.

This theory argues that there are two sets of opposing forces within an organization, which
determine how the change will take place. There are forces for change that are known as
driving forces; these can be any information technology, competition, or demographical
factors etc. There are also forces which resist change. The organization must increase forces
for change, and minimize forces resisting change. Kurt Lewin suggested that to bring about
planned change in the organization, there should be a multi stage process. His model of
planned change has three steps: - unfreezing- change-refreezing.

Unfreezing It is a process where people are aware of the need for the change. People who
will get affected by the change should be made aware of the need for change. Thus, they can
be motivated to accept change.

Change At this stage the organization is transformed from the status quo to the desired state.
Change may include installation of new equipment, implementing a new policy or
restructuring the organization.

Refreezing It is a stage where the change intervention is stabilized. This change is

permanent in nature and it is brought about by balancing the driving force and resisting

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force. This we can see in figure 1. It is an important stage because without it people can go
back again to the old method of doing things and the new way can be forgotten.

Figure 1: Lewin’s model of change

Fig 1: Lewin’s model of change

SELF-ASSESSMENT QUESTIONS – 4

10. Organizational chance is always initiated by the ________________. A need for change
can be proposed by _____________________ in the organization but action is taken by
the top management only.
11. Kurt Lewin suggested that to bring about planned change in the organization there
should be a multi stage process. His model of planned change has three steps:
___________________, ____________________, ____________________.
12. The implementation of a change is a multidimensional, complex process. The end
result of the implementation is _____________________ and ______________________.

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6. MEANING AND DEFINITION OF OD

In recent years, organizations have extensively used organizational development as a tool of
introducing planned change in the organization

Many people have defined OD in different ways. Some say that OD is a technique that helps
individuals to learn to change their attitude and behavior, so that they can function
effectively both, as individuals and as organization members.

It said that OD is a technique that helps two interdependent groups explore their perceptions
and relations to improve their work interactions. OD helps people become aware of ways to
improve their work interactions.

According to Pareek, “OD is a planned effort initiated by process specialists to help an

organization develop its diagnostic skills, coping capabilities, linkage strategies, in the form
of temporary and semi–permanent systems, and a culture of mutuality”.

In this definition, it is said that OD is a planned effort, which means that a deep thinking and
planning is necessary for OD. It is initiated by experts who must have knowledge of
behavioural science and its application in the organizational scenario. OD helps in
developing the ability to diagnose the problems of the organization, and not only that, it helps
in increasing the ability to confront and solve problems as soon as they arise.

It is a process which helps in developing a link between organizational goal and individual
goals.

OD encourages some specific values such as

 Openness: facing the problem instead of avoiding it.
 Confrontation: searching for the solution of the problem and developing good
relationships among employees.
 Trust
 Authenticity: dependency on each other.
 Proactivity: taking initiative, the not merely reacting to an incident.
 Autonomy: strength of a person to collaborate with others without feeling inferior.

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 Collaboration: an activity where people prefer to work in a group rather than working
alone.

There are various techniques of OD. Some of them are:

 Counseling
 Sensitivity Training
 Process Consultation
 Team Building
 Inter Group Training
 Organizational Mirroring
 Organizational Confrontation Meeting

An OD program can be successful when certain conditions are fulfilled such as – commitment
of the top management, strong roles which connect various parts of the organization,
willingness and resources in the department, involvement of an external consultant and
strong internal human resource.

Activity 2
From the internet collect information of any two companies regarding their effort
toward using OD for implementing change in the organization.

SELF-ASSESSMENT QUESTIONS – 5

13. OD is a planned effort initiated by _________________ to help an organization develop

its diagnostic skills, coping capabilities, linkage strategies, in the form of temporary
and semi –permanent systems, and _______________________.
14. An OD program can be successful when certain conditions are fulfilled such as
____________________, Strong roles which connect various parts of the organization,
__________________ in the department, involvement of an external consultant and
strong internal human resource.

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7. OD INTERVENTIONS
Organizational development is a complicated issue. If not handled properly it can have
disastrous results. While planning organizational development therefore, we need to
introduce very specific interventions to facilitate the OD process. An intervention is a
planned structural group of activities designed to achieve the goals of OD.

Interventions could be structured training, coaching, problem solving, task force

establishment, techno-structural activity, consultation, life and career planning, planning
and goal setting and strategic management.

Several experts have suggested classification systems for these interventions:

OD Cube: Schmuck and Miles (1971) proposed a 9x6x8 cube, suggesting the following
dimensions:

Figure 2

Fig 2

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Consul cube: Blake and Mouton (1976) proposed a comprehensive system covering a large
number of interventions at different levels. Theirs is an excellent sourcebook for
interventions. They classified interventions using three dimensions to make it a cube
(5x4x5).

Table 15.1

Consulting approach (5) Acceptant, catalytic, confrontation,

prescription, theories and principles
Focal issues (4) Power/Authority, morale/cohesion,
norms,and goals/objectives
Units of change (5) Individual, group, intergroup,
organization,and larger social systems

Intervention families: French and Bell (1989) have proposed 13 families, or types, of
intervention in terms of activities: diagnostic, team-building, intergroup, survey feedback,
education and training, techno-structural change, process consultation, grid OD, third-party
peacemaking, coaching/ counselling, life and career planning, planning and goal setting and
strategic management.

A question that a manager faces is how to identify appropriate methods of intervention. The
most important factor regarding the choice of intervention strategy is the culture of an
organization. Does the organization have a traditional culture or does it imbibe modern
approach and methods? This can be best understood by analyzing their past successes and
failures. This decision is important because otherwise it may lead to undesirable
consequences. Thus unstructured interventions if applied tom traditional and highly
structured organizations, may appear threatening and hence will be rejected.

There are three dimensions of culture that need to be considered while making decisions
about OD intervention strategy. They are:
 Ambiguity tolerance: Sometimes even competent people become incompetent
because of vagueness and doubts of the situation. Another individual on the other hand
may not be so competent but does very well during vague and uncertain circumstances.
The first individual displays low ambiguity tolerance, whereas the second one displays
high ambiguity tolerance. Organizations also differ considerably in this respect. Some

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organizations have the capacity and need for high ambiguity tolerance. These may
include armed forces and police forces. Certain other organizations have little capacity
to tolerate ambiguity. These include banks, schools, institutions, and they work on the
basis of clearly defined directions.
 Risk taking capacity: Many competent people become ineffective in a risky situation,
while certain others do well when the risk is high. Since OD essentially demands
massive changes, it is viewed as full of risks for real or imaginary reasons. Thus
organizations that have the capacity to take risks require less intervention than the
ones that are not used to taking risks.
 Openness: Many organizations foster strong and closed relationships amongst their
employees. In such organizations there is a climate of support and mutual trust. There
are other organizations where employees interact with each other just formally. They
exhibit just enough politeness that is required in a professional setting, but otherwise
have no positive feelings towards others in the organization. Organizations having a
warm and trustful climate need less structured intervention strategies. Organizations
having a very formal climate require strong and structured interventions.

SELF-ASSESSMENT QUESTIONS – 6

15. Interventions could be ____________________ coaching, problem solving, task force

establishment, ____________________ consultation, life and career planning, planning
and goal setting and strategic management.
16. Unstructured interventions, if applied to traditional and highly structured
organizations, may appear and hence will be rejected.

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8. SUMMARY
Let us now recall the main points of the unit discussed:

 Organizational change is a continuous and complex process. It is one of the most

important aspects of management.
 There are several environmental factors which force organizational change.
 Roles of the top management and change agent are very critical in bringing about
change in the organization.
 Due to the fear of the unknown and uncertainty people resist to change.
 OD is a planned, process oriented effort of developing individuals and groups in the
organization.
 Several OD interventions have been developed, which help in internal resource
building.

9. GLOSSARY
 Change: Process of moving from current position to desired position.
 Diagnosis: Effort to search for the main cause of any situation.
 Interventions: Integrated group activity to bring about change.
 OD: Planned effort supported by the top management and initiated by experts.

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10. TERMINAL QUESTIONS

1. What do you understand by organizational change? List out the different types of
organizational changes.
2. Why has the need for change been realized in today’s organizations. Discuss the factors
of change.
3. Why do people resist change? Discuss the strategies which can be adapted to overcome
resistance to change.
4. Discuss Kurt Lewin’s model of change.
5. Define organizational development .Discuss different OD interventions.

11. ANSWERS
Self-Assessment Questions
1. Some desired future state
2. Adapt to changes in the environment
3. Revolutionary change
4. By forcing them to change.
5. Competitive factors, demographic and social factors, ethical and technological factors.
6. Resist to change
7. Negative and fearsome
8. Uncertainty and helplessness
9. Availability of resources
10. Top management, anybody
11. Unfreezing-change-refreezing
12. Institutionalization, stabilization
13. Process specialists, a culture of mutuality
14. Commitment of the top management, willingness and resources.
15. Structured training, techno structural activity.
16. Threatening

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Terminal Questions
1. Refer to2
2. Refer to3
3. Refer to 3,4
4. Refer to5
5. Refer to 6, 7

12. REFERENCES
 Robbins P. Stephen & Judge A. Tim Othy (2010), Organizational Behaviour, Prentice
Hall.
 Singh B. P. & Chhabra T.N., (2005), Organization theory & Behaviour, Dhanpat Rai &
Co (P) Ltd.
 Rao V.S.P., (2009) Organization Behaviour, Excel Books.
 Parikh Margie, Gupta Rajen, (2003) Organization Behaviour Tata McGraw Hill
Education Pvt. Ltd.
 Ivancevich, J., & Matteson, M. (1998). Organizational Behaviour and Management, 3rd
ed. Chicago and London: Irwin.

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