Thursday, 22 December 2011

17: Productivity, Operations Management and Total Quality Management


Productivity Problems and Measurement

Undoubtedly, productivity is one of the major concerns of managers.

Productivity Problems
Productivity implies measurement. Although, there is a general agreement about the need for improving productivity, there is little consensus about the fundamental causes of the problem and what to do about them. The blame has been assigned to various factors. Some people place it on the greater proportion of less skilled workers with respect to the total labor force, but others disagree. Another reason given for the productivity dilemma is the growing affluence of people, which makes them less ambitious. Still others cite the breakdown in family structure, the worker’s attitude, and govt. policies and regulations. Increasingly, attention shifts to management as the cause of the problem—as well as the solution.

Measurement of Productivity of Knowledge Workers
Productivity is the input-output ratio within a time period with due consideration for quality. Measurement of skills work is relatively easy, but it becomes more difficult for knowledge work. Thus person on the production line would be considered a skills worker, while the assistant to the manager with planning as his or her main function would be a knowledge worker. Managers, Engineers and programmers are knowledge workers. In general productivity of the knowledge workers is more difficult to measure than that of the skills worker. One difficulty in measuring the productivity of knowledge workers is that some outputs are really activities that help achieve end results. Still another difficulty is that the quality of the knowledge workers output is often hard to measure. Productivity improvement is achieved by the good management practice.

Production and Operations Management—Manufacturing and Service

One of the major areas in any kind of enterprise is production and operation management. In the past, production management was the term used to refer to those activities necessary to manufacture products. However, in recent years, the area has been generally expanded to include such activities as purchasing, warehousing, transportation and other operations from the procurement of raw materials through various activities until a product is available to the buyer. The term operation management refers to activities necessary to produce and deliver a service as well as physical product.

Quality Measurement in the Information Age

Quality concepts are not just for products it is also equally applicable to services. This means such things as the measurement of expectations, experiences and emotions. Software package quality does not only include reliability but also technical support services, compatibility, upgradeability of the software and the integration of the information infrastructure not only with the company but also with its suppliers and customers. Focusing on the quality of the information infrastructure is critical for company success in the new information age.

Operations Management Systems

Operations management has to be seen as a system of inputs, transformation process, outputs and external factors. Inputs include needs of customers, information, technology, management and labor, fixed assets and variable assets that are relevant to the transformation process. Managers and workers use the information and physical factors to produce outputs. The transformation process incorporates planning, operating and controlling the system. There are many tools and techniques available to facilitate the transformation process. Outputs consist of products and services and may even be information, such as that provided by a consulting organization. Operations are influenced by external factors such as safety regulations or fair labor practice. Thus operation management is an open system interacting with its surroundings.

Planning Operations
Objectives, premises and strategies of an enterprise determine the search for and the selection of the product or service. After an end product has been selected, the specifications are determined and the technological feasibility of producing it is considered. The design of an operations system requires decisions concerning the location of facilities, the process to be used, the quantity to be produced, and the quality of the product.

Special Interest in a Product Decision
One of the basic decisions an enterprise makes is selecting a product or products it intends to produces and market. This requires gathering product ideas that will satisfy the needs of customers and contribute to the goals of the enterprise while being consistent with the strategy of the firm. In a product decision, the various interests of functional managers must be considered. The divergent interests of these functionally oriented managers and professionals influence what product will be produced and marketed, but it is the general manager who has to integrate the various interests and balance revenues with costs, profits with risks and long-term with short-term growth.

Product and Production Design
Following are the steps:
1. Create product ideas by searching for consumer needs and screening the various alternatives.
2. Select the product on the basis of various considerations, including data form market and economic analysis and make general feasibility study.
3. Prepare a preliminary design by evaluating various alternatives, taking into consideration reliability, quality and maintenance requirement.
4. Reach a final decision by developing, testing and simulating the process to see if they work.
5. Decide whether the enterprise’s current facilities are adequate or if new or modified facilities are required.
6. Select the process for producing the product; consider the technology and the methods available.
7. After the product is designed, prepare the layout of the facilities to be used, plan the system of production and schedule the various things that must be done.

System Design
One alternative is to arrange the layout in the order in which the product is produced or assembled e.g. a truck assembly. A second alternative is to lay out the production system according to the process employed e.g. in a hospital, specific steps are likely to be followed: the admission of the patient, the treatment of the patient (which involves sub-processes), billing for service, and dismissal and may be post-hospitalization treatment. A third kind of layout (sometimes called fixed-position layout) the product stays in one place for assembly. This layout is used for the assembly of extremely large and bulky items. The forth kind of layout is arranged according to the nature of the project. Building a bridge or tunnel is normally a one-time project designed. In fifth kind of layout the production process is arranged to facilitate the sale of products. A six basic approach to production layout is to design the process so that it facilitates storage or movement of products. Storage space is costly, and an effective and efficient design can keep the storage costs low.

Operating the System
After a product has been selected and the system for producing it has been designed and built, the next major step is to operate the system. This requires setting up an organization structure, staffing the positions and training people. Managers are needed who can provide the supervision and leadership to carry out activities necessary to produce desired products or provide services. The aim is to obtain the best productivity ratio within a time period with due consideration for quality.

Controlling Operations with Emphasis on Information Systems
Controlling operations requires setting performance criteria, measuring performance against them, and taking actions to correct undesirable deviations. Thus, one can control production, product quality and reliability levels, inventory levels and workforce performance.

Tools and Techniques for Improving Productivity

Tools and techniques include: inventory planning and control, just-in-tie inventory system, outsourcing, operational research, value engineering, work simplification, quality circles, total quality management, lean management, computer-aided design, computer-aided manufacturing and manufacturing automation protocol.

Inventory Planning and Control
Qe = Square Root of ( 2 D S / H )
Where,
Qe = Economic Order Quantity (EOQ)
D = Demand per year
S = Setup Costs
H = Inventory holding (carrying) cost per item, per year
The Economic Order Quality (EOQ) approach is used to determine inventory levels when demand is predictable and fairly constant throughout the year (that is, there are no seasonable patters). However, for determining inventory levels of parts and materials used for some production processes, the EOQ approach does not work well e.g. poor quality of parts may increase the demand for the production inputs.

Just-in-Time (JIT) Inventory System
In this system, the supplier delivers the components and parts to the production line “just-in-time” to be assembled. Other names for this or very similar methods are zero inventory and stockless production. In JIT, the quality of the parts must be very high also there must be dependable relationships and smooth cooperation with suppliers. Ideally suppliers should be located near the company.

Outsourcing
Outsourcing means that products and operations are contracted to outside vendors that have expertise in a particular area. The aim may be to reduce costs by saving on personal benefits. Outsourcing is an important tool for a company to make it grow and to maintain a competitive position. It enables a firm to focus on its core competencies and let outside companies do what these firms can do best. For example, Nike, is using outsourcing for all of its shoe production, and only keeps the production of the sophisticated Nike Air system. Other reason of using outsourcing is gaining access to the best sources available worldwide, sharing of risks between the firm and its suppliers, allocating capital to key success factors, outsourcing functions that are difficult to manage, or a firm just may not have the capability to carry out certain tasks. Outsourcing may also serve as a strategic weapon. It has been suggested that before deciding on outsourcing, a business-practice-reengineering study should be conducted. The finding of this analysis may indicate which tasks are best suited for being continued within the company and which should be contracted to an outside source.

Operation Research
Operation Research is the application of scientific methods to the study of alternatives in a problem situation, with a view to obtaining a quantitative basis for arriving at a best solution. Thus, the emphasis is on scientific method, on the use of quantitative data, on goals, and on determination of the best means of reaching the goals. It is also called as “Quantitative Common Sense”

Value Engineering 
Value Engineering consists of analyzing the operations of the product or services, estimating value of each operation, and attempting to improve that operation by trying to keep cost low at each step or part. The following steps are suggested:
1. Divide the product into parts and operations.
2. Identify the costs for each part and operation.
3. Identify the relative value of the contribution of each part to the final unit or product.
4. Find a new approach for those items, which appear to have a high cost and low value.

Work Simplification
Work Simplification is the process of obtaining the participation of workers in simplifying their work.

Quality Circles
Quality Circles (QC) is a group of people from the same organizational area who meet regularly to solve problems they experience at work. Quality Circles evolved from suggestion programs. In Work Simplification and Quality Circles workers participate in solving work-related problems.

Total Quality Management (TQM)
TQM, Total Quality Management, involves the organization’s long-term commitment to the continuous improvement of quality, throughout the organization, and with the active participation of all members at all levels—to meet and exceed customer’s expectations. This top-management driven philosophy is considered a way of organizational life. TQM program requires a careful analysis of the customer’s needs, and assessment of the degree to which these needs are currently met, and a plan to fill the possible gap between the current and the desired situation. To make the TQM program effective, top managers must be involved. They must provide a vision, reinforce values emphasizing quality, set quality goals, and deploy resource for the quality program. It is obvious that TQM demands a free flow of information—vertically, horizontally and diagonally. Organization needs to be a learning organization. Learning how to use tools and techniques, teamwork are prerequisites for an effective and efficient operation. When done effectively, TQM should result in greater customer satisfaction, fewer defects and less waste, increased total productivity, reduced costs and improved profitability and an environment in which quality has high priority.

Lean Manufacturing
Lean Manufacturing emphasizes on continuous improvements with strategic breakthroughs. It aims at zero defects, just-in-time inventory system and recognizing everyone is responsible for problems; especially management.

Computer-aided Techniques
Product design and manufacturing have been changing greatly, largely because of the application of computer technology. CAD/CAM help engineers design products much more quickly. Capturing the market quickly is crucial in very competitive environment.

Supply Chain and Value Chain Management

The term Supply Chain and Value Chain Management are sometimes used interchangeably. However, Supply Chain Management focuses on the sequence of getting raw material and subassemblies through the manufacturing process in an economical manner. Value Chain Management, on the other hand, has a broader meaning by analyzing every step in the process ranging from the handling of raw material to end users, providing them with the greatest value at the lowest cost. Thus, Supply Chain Management focuses more on the internal process with an emphasis on efficient flow of resources, such as materials, while value chain management has similar aims with an additional concern for the external environment such as the customer. Professor Michael Porter popularized the value chain process model that includes the primary activities of inbound logistics, operations, outbound logistics, marketing/sales and services. The process is supported by the enterprise infrastructure, the management of human resources, technology and procurement. The goal of Value Chain Management is to create a seamless chain of activities from the supplier, to the manufacture to the customer to meet and exceed his or her expectation.

16: Control Techniques and Information Technology



All control techniques are tools for planning. Obviously control must reflect plan and planning must precede control.

Budget as a Control Device

The Concept of Budgeting
Budgeting is the formulation of plans for a given future period in numerical terms. Budgets are statements of anticipated results, either in financial terms—as in revenue and expense and capital budgets—or in non-financial terms—as in budget of direct-labor-hours, materials, physical scales volume or units of production.

Dangers in Budgeting
Budgetary control programs are so complete and detailed that they become cumbersome, meaningless and unduly expensive. Budgetary control may be used for the wrong reasons. They measure inputs but ignore outputs such as the quality of the product or customer satisfaction. Some of these items should be included in the long-range plan rather than in the one-year budget.

Zero-Base Budgeting
The idea behind zero-base budgeting is to divide enterprise programs into “packages” composed of goals, activities and needed resources and then to calculate costs for each package from ground up. By starting the budget of each package from base zero, budgeters calculate costs afresh for each budget period; thus they avoid the common tendency in budgeting of looking only at changes from a previous period. This technique has generally been applied to so-called support areas, rather than to actual production areas like marketing, research and development, planning and finance. The various programs thought to be desirable are costed and reviewed in terms of their benefits to the enterprise and are then ranked in accordance with those benefits and selected on the basis of which package will yield the benefit desired. The principle advantage of this technique is, of course, the fact that it forces managers to plan each program package afresh.

Traditional Non-budgetary Control Devices
Examples of non-budgetary control devices are use of statistical data of many aspects of the operation, special reports and analysis of specific areas, the operational audit and personal observation.

Time-Event Network Analysis

Time-Event Network Analysis is also called the Program Evaluation and Review Techniques (PERT).

Gnatt Charts
This chart shows time relationships between “events” of a production program. Gnatt recognized that total program goals should be regarded as a series of interrelated supporting plans (or events) that people can comprehend and follow. The most important development of control reflects this simple and basic principle of control, such as picking out the more critical elements of a plan to watch carefully.

Milestone Budgeting
follows them. In this approach to control, “milestones” are defined as identifiable segments. When accomplishment of a given segment occurs, cost or other results can be determined.

Program Evaluation and Review Technique (PERT)
This is developed by Special Project Office of the US Navy.

Major Features of the PERT This is a time-event network analysis system in which the various events in a program or project are identified, with a planned time established for each. These events are placed in a network showing the relationships of each event to the other events. Each circle represents an event—supporting plan whose completion can be measured at a given time. The circles are numbered in an order in which the events occur. Each arrow represents an activity—the time consuming element of a program, the effort that must be made between events. Activity time, represented by the numbers beside the arrows, is the elapsed time required to accomplish an event. This activity time, can be expressed all in “optimistic” time, and estimate of the time required if everything goes exceptionally well; “most likely” time, an estimate based on the time the project engineer really believes is necessary for the job; and “pessimistic” time, a time estimate based on the assumption that some logically conceivable bad luck—other than a major disaster—will be encountered. These three estimates are required where; it is very difficult to estimate time accurately. The next step is to compute the critical path, that is, sequence of events which takes the longest time and which has zero (or the least) slack time. It is customary to identify several crucial paths in order of importance. Although the critical path has a way of changing as key events are delayed in other parts of the program, identifying it at the start makes possible close monitoring of this particular sequence of events to ensure that the total program is on schedule. When more than 200 to 300 events are involved, it is virtually impossible to handle the calculation without a computer.

Strength and Weaknesses of PERT There are five important advantages of PERT.
1. It forces managers to plan, because it is impossible to make a time event analysis without planning and seeing how the pieces fit together.
2. It forces planning all the way down the line, because each subordinate manager must plan the event for which he or she is responsible.
3. It concentrates attention on critical elements that may need correction.
4. It makes possible a kind of forward looking control; a delay will affect succeeding events and possibly the whole project if manager doesn’t take appropriate action.
5. The network system with its subsystems enables managers to aim reports and pressure for action at the right spot and level in the organization structure at the right time.

Limitations of PERT
1. This technique is not useful when a program is nebulous and no reasonable “guess-time” of schedule can be made.
2. Major disadvantage of PERT is, it emphasis on time only, and not on cost. While this focus is suitable for programs in which time is of the essence or in which, as so often is the case, time and costs have a close, direct relationship. The tool is more useful when considerations other than time are introduced into the analysis.

Information Technology

Communication and the Management Information System (MIS) are the linkage that makes managing possible. At the outset one has to realize the distinction between data and information. Data are the row facts that may not be very useful until they become information, that is, they are processed and become meaningful and understandable by the receiver. Information technology encompasses a variety of technologies including various kinds of hardware, software, telecommunication, database management and others (like 3G or 4G). Information technology has prompted the development of the Management Information System (MIS). It is defined here as a formal system of gathering, integrating, comparing, analyzing and dispersing information internal and external to the enterprise in a timely, effective and efficient manner to support managers in performing their jobs. MIS has to be tailored to specific needs and may include routine information, such as monthly reports; information that points out exceptions, especially at critical points and information necessary to predict the future. The computer can, with proper programming, process data toward logical conclusions, classify them, and make them readily available for a manager’s use. The data do not become information until they are processed into a usable form that informs.

Expansion of Basic Data
Traditional accounting information, aimed at the calculation of profits, has been of limited value for control. Yet in many companies this has been virtually the only regularly collected and analyzed type of data. Managers need all kinds of non-accounting information about the external environment, such as social, economic, political and technical developments. In addition, managers need non-accounting information on internal operation. The information should be qualitative and quantitative.

Information Indigestion and Intelligence Services
Information indigestion means manager being buried under printouts, reports, projections and forecasts that they do not have time to read or cannot understand or which do not fill their particular needs. On attempt at solving the problem of information overload is the establishment of intelligence services and the development of a new profession of intelligence experts.

The Use of Computers in Handling Information

The computer can store, retrieve and process data so that it becomes information. The mainframe is full-scale computer, often costing millions of dollars, that is capable of handling huge amounts of data. The minicomputer has less memory and is smaller than mainframe, often connected with peripheral equipment. The microcomputer is even smaller and may be desk computer, home computer, personal computer, portable computer or small computer for a business system. Some tasks that previously required a powerful computer can now be carried out by smaller computers that are hooked together. Grid Technology can be used to gain such computing power. Rather than buying bigger computers, smaller computers are connected. Among the many business applications of the computer are, material requirements planning, manufacturing resource planning, and computer aided control of manufacturing machinery, project costing, inventory control and purchasing.

The Impact of Computers on Mangers at Different Organizational Levels
At supervisory level, activities are usually highly programmable and repetitive. Consequently, the use of computers is widespread at this level. Middle-level managers, such as department heads or plant mangers are usually responsible for administration and coordination. But much of the information important to them is now also available to top management if the company has a comprehensive information system. For this reason, some people think that the computer will reduce the need for middle-level mangers. Top-level managers are responsible for the strategy and overall policy of the organization. In addition to determining the general direction of the company, they are responsible for the appropriate interaction between the enterprise and its environment. Clearly many of the tasks of CEOs are not easily programmable. Yet top managers can use the computer to retrieve information from a database that facilitates the application of decision models.

The Application and Impacts of Microcomputers
Personal Computers (PC) is becoming increasingly appealing to managers. Its application include: spreadsheets, graphic presentations, financial analysis, budget preparation, forecasting, simulation modeling, word processing, e-mail, database access and time sharing. The direction between line and staff is becoming less clear. The information that was formerly fathered by staff can now be obtained with ease by other managers when they access a common database. Information that was the prerogative of upper-level managers can also be made available to personnel at lower level, possibly resulting in the shift of power to lower levels. Thus, one of the problems currently faced by many firms is maintaining the security of information.

Opportunities and Challenges Created by Information Technology

Preventing the unauthorized use of information is just one of the many challenges created by information technology.

1. Resistance to Computer Application: People over age of 50, may have a phobia. Also in the past, typing was considered as the task of the secretary, not manager. When benefits were realized, resistance decreased.

2. Speech Recognitions Devices: Speech recognition is increasingly used at call-centre and car.

3. Telecommuting: This means that a person can work at a computer terminal at home instead of commuting to work. It may be useful for avoidance of traffic congestion and reduce need for office space but its use may lead to miss office gossip and the human interactions with workers.

4. Computer Networks: The interconnection allows users at several workstations to communicate with each other as well as to access other computers. Moreover, workstations can be connected to costly hardware that may be underutilized by single user.

5. Internet: The internet is the largest network of computers. The internet is also excellent tool for doing company research and doing business. Building community is one purpose of the internet. It has created internet related companies such as Google, Yahoo, etc. Use of internet requires understanding of English language, as almost all scientific material on the internet is in English.

6. Other Types of Networks: The intranet is a network that applies the computer and technologies of the internet to an organization or selected groups within the organization. The extranet also uses the computer and Internet technologies but it connects selected users inside and outside the company.

7. Groupware: A group of people on a network can collaborate over long distance at the same time using groupware. Thus, people who may be located in different parts of the world can collaborate on the same task simultaneously.

8. Information Security: Protection of computers can be afforded through encryption. The use of firewall also provides some protection. There is a concern about people working with information systems in organization. Individual and companies also should protect data by regularly making copies and storing them in a secure place.

The Digital Economy, E-Commerce and M-Commerce

The e-commerce—business transactions on the web—is changing the way we do business.

The Emerging Digital Economy
Information technology affects most aspects of business and personal life. For example, the price in computer power is dropping dramatically. One of the major impacts of the Internet is on the way business is conducted. Relationships with suppliers and customers are changing dramatically. The economic gains of e-commerce come from the lower costs of online companies, reduction in distribution costs and the elimination of intermediaries. The internet facilitates four kinds of transactions.

1. Business to Consumers (B2C): e.g. ordering books from Amazon.com
2. Consumer to Business (C2B): e.g. bidding for airline tickets through Priceline.com
3. Consumer to Consumer (C2C): e.g. auction through eBay.com
4. Business to Business (B2B): e.g. GM and Ford, plan to transfer all purchasing to the web within the next few years.

The five largest US airlines—Continental, Delta, Northwest, United Airlines and American Airlines have a common website called orbitz.com

M-Commerce and Wireless Communication
While e-commerce is changing the way business is conducted, wireless communications and m-commerce are emerging to take it further. Managers need to observe the trends and develop strategies to take advantage of those new technologies.

15: The System and Process of Controlling


The managerial function of controlling is the measurement and correction of performance in order to make sure that enterprise objective and the plans devised to attain them are being accomplished.

The Basic Control Process

Basic Control Process involves three steps: establishing standards, measuring performance against these standards and correcting variations from standards and plan.

Establishment of Standards
The first step in the control process logically would be to establish plans. Since managers cannot usually watch everything, special standards are established. Standards are simply criteria of performance. They are the selected points in an entire planning program at which measures of performance are made so that managers can receive signals about how things are going and that do not have to watch every step in the execution of Plans. Verifiable goals or objectives are the best examples of standards.

Measurement of Performance
The measurement of performance against standards should ideally be done on a forward-looking basis so that deviations may be detected in advance of their occurrence and avoided by appropriate actions.

Correction of Deviations
Standards should reflect the various positions in an organization structure. If performance is measured accordingly, it is easier to correct deviations. Correction of deviations is the point at which control can be seen as a part of the whole system of management and can be related to the other managerial functions. Correction can be done by exercising organizing function through reassignment or clarification of duties, by additional staffing, by better selection and training of subordinate, or by that ultimate re-staffing (firing)

Critical Control Points, Standards and Benchmarking

For a manager careful personal observation of subordinate is not possible because of the complexity of the operations and the fact that a manager has far more to do than personally observe performance for a whole day. A manager must choose points for special attention. The points selected for control should be critical, in the sense either of being limiting factors in the operation or of showing better than other factors whether plans are working out. The principle of critical point control is: Effective control requires attention to those factors critical to evaluating performance against plan. Another way of controlling is comparing company performance with that of other firms through benchmarking.

Types of Critical-Point Standards
Standards to be of following points: physical standards, cost standards, capital standards, revenue standards, program standards, intangible standards, goals as standards and strategic plans as control points for strategic control.

Physical Standards: Physical standards are non-monitory measurements and are common at the operating level. This may reflects quantities such as labor hours per unit of output. Physical standards may also reflect quality, such as hardness of bearings.

Cost Standards: Cost standards are monitory measurements and, like physical standards, are common at the operating level. They attach monitory values to specific aspects of operations such as direct or indirect costs per unit produced, labor cost per unit or per hour, etc.

Capital Standards: There are a variety of capital standards, all arising from the application of monetary measurements to physical items. They have to do with the capital invested in the firm rather than with operating costs and are therefore primarily related to the balance sheet rather than to the income statement. Most widely used standard is return on investment. Other capital standards are ratio of current assets to current liabilities, debt to net worth, fixed investment to total investment, cash and receivables to payables.

Revenue Standards: Revenue standards arise from attaching monetary values to sales.

Program Standards: A manager may be assigned to install a variable budget program, a program for formally following the development of new products or a program for improving the quality of a sales force.

Intangible Standards: More difficult to set are standards not expressed in either physical or monetary measurements e.g. determining whether the advertising program meets both short and long term objectives.

Goals as Standards: Modern managers are finding that through research and thinking it is possible to define goals that can be used as performance standards.

Strategic Plans as Control Points for Strategic Control: Strategic Control requires systematic monitoring at strategic control points and modifying the organization’s strategy based on this evaluation. Since controls facilitate comparisons of intended goals with actual performance, they also provide opportunities for learning, which, in turn, is the basis for organization change.

Benchmarking
It is an approach for setting goals and productivity measures based on best-industry practices. There are three types of benchmarking. First, strategic benchmarking compares various strategies and identifies the key strategic elements of success. Second operational benchmarking compares relative costs or possibilities for product differentiation. Third, management benchmarking focuses on support functions such as market planning and information systems, logistics, human resource management and so on. The steps in benchmarking include the identification of what is to be benchmarked. Then superior performers have to be selected. During the implementation of the new approach, performance is periodically measured and corrective actions are taken at that time.

Control as a Feedback System

Managerial control is essentially the same basic control process as that found in physical system. Many systems control themselves through information feedback, which shows deviations from standard and initiates changes. Managers do measure actual performance, compare this measurement against standards, and identify and analyze deviations.
Real-time Information and Control

Real-time information is information about what is happening while it is happening. Supermarkets and department stores have electronic cash register facility, where inventory, sales, gross, profit and other data can be obtained as they occur. Real-time information can also be a means of getting real-time control in areas of importance to managers. But most of the cases, real-time information does not, except possible in the simplest and most unusual cases, make possible real-time control. The analysis of causes of deviation, the development of program of correction and the implementation of these programs are likely to be time consuming tasks. It may take considerable time to discover what is causing factory rejects and more time to put corrective measures into effect. Once it is learned that an inventory is too high, the steps involved in getting it back to the desired level may take a number of months. Thus time lags are unavoidable. This does not mean that prompt measurement of performance is unimportant. The sooner managers know that activities for which they are responsible are not proceeding in accordance with the plans, the faster they can take action to make correction. Information on seat availability is likely to be crucial to serving customers. It was through that the benefit of gathering real-time data was not worth the expense because the correction process took so long.

Feed-forward or Preventive Control

The time lag in the management control process shows that control must be directed towards the future if it is to be effective. It illustrates the problem of only using feedback for the output of a system and measuring this output as a means of control. What managers need for effective control is a system that will tell them, in time to take a corrective action that problem will occur if they do not do something about them now. Feedback from the output of a system is not good enough for control it is little more than postmortem and no one has found a way to change the past.

Feed-forward in Human Systems
While driving, knowing that hill represents a disturbing variable in the system, the driver would probably correct for this by pressing the accelerator before speed falls.

Feed-forward versus Feedback Systems
Simple feedback systems measure output of a process and feed into the system or the inputs of the system corrective actions to obtain desired output. Feed-forward systems monitor inputs into a process to ascertain whether the inputs are as planned; if they are not, the inputs or perhaps the process are changed in order to obtain desire results. Also even with feed-forward system, a manager would still want to measure the final system output, since nothing can be expected to work perfectly enough to ensure that the final output will always be exactly as desired.

Feed-forward in Management
If managers are to exercise effective control over inventories, they must identify the variables in the system. Each enterprise should design its own system by portraying the system variables and their impact on a process. Of course, to make feed-forward work in practice, inputs must be carefully monitored. On of the problems in all feed-forward control systems, is the necessity of watching for what engineers call disturbance. These are factors which have not been taken into account in the input model but which may have an impact on the system and the desired end result. Obviously, it would be impracticable to take into account in a model all inputs that might possibly affect the operation of a program.

Requirements for Feed-forward Control
1. Make a through and careful analysis of the planning and control system and identify the more important input variables.
2. Develop a model of the system.
3. Take care to keep the model up to date. The model should be reviewed regularly to see what the input variables identified and their interrelationships continue to represent realities.
4. Collect data on input variables regularly and put them into the system.
5. Regularly asses the variations of actual input data from planned-for inputs and evaluate the impact on the expected end result.
6. Take action. Like any other technique of planning and control, all that the system can do is indicate problems; must obviously take action to solve them.

Control of Overall Performance

Planning and control are increasingly being treated as an interrelated system. There are many reasons for control of overall performance. First, just as overall planning must apply to enterprise or major division goals, so must overall controls be applied. Second, decentralization of authority—especially in product or territorial divisions—creates semi-independent units, and these must be subjected to overall controls to avoid the chaos of complete independence. Third, overall controls permit measuring an integrated area manager’s total effort, rather than parts of it. Many overall controls in business are, financial. Financial measurements also summarize the operation of a number of plans. Further they accurately indicate total expenditures of resources in reaching the goals. Financial controls like any other control, have to be tailored to the specific needs of the enterprise or the position.

Profit and Loss Control

The income statement for an enterprise as a whole serves important control purposes, mainly because it is useful for determining the immediate revenue or cost factors that have accounted fro success or failure.

The Nature and Purpose of Profit and Loss Control
The survival of business usually depends on profits and since profits are a definite standard against which success is measured, many companies use the income statement for divisional or department control. Because it is a statement of all revenues and expenses for a given time, it is a true summary of the results of business operations.

Limitations of Profit and Loss Control
Profit and loss control suffers from the cost of the accounting and paper transactions involving intra-company transfer of costs and revenues.

Control through Return on Investment (ROI)

The return-on-investment approach, often referred to simply as ROI, has been the core of the control system. This yardstick is the rate of return that a company or a division can earn on the capital allocated to it. The goal of a business is seen, not just as optimizing profits but as optimizing returns from capital devoted to business purpose.

Management Audits and Accounting Firms

The greatest interest in pursuing management audits has been demonstrated by accounting audit firms.

Bureaucratic and Clean Control

Bureaucratic control is characterized by a wide use of rules, regulations, policies, procedures and formal authority. This kind of control requires clear job descriptions, budgets and often standardized tasks. Employees are expected to comply with the rules and regulations and may have limited opportunities for participation. Clean control on the other hand, is based on norms, shared values, expected behavior and other aspects like organization culture.

Requirements for Effective Controls

All alert managers want to have an adequate and effective system of controls to assist them in making sure that events conform to plans. Controls used by managers must be designed for the specific task and person they are intended to serve. While the basic process and the fundamentals of control are universal, the actual system requires special design.

Tailoring Controls to Plans and Positions
All control techniques and systems should reflect the plans they are designed to follow. They should also be tailored to positions. Controls should also reflect the organization structure which shows who is responsible for the execution of plans and for any deviation from them.

Tailoring Controls to Individual Mangers
Controls must also be tailored to individual managers. Control systems and information are, of course, intended to help individual managers carry out their function of control.

Designing Controls to Point Up Exceptions at Critical Points
Controls that concentrate on exceptions from planned performance allow managers to benefit from the time-honored exception principle and detect those areas that require their attention. But it is not enough merely to look at exceptions, some deviations from standards have little meaning, and others have great deal. Small deviations in certain areas may have greater significance than larger exceptions in other areas. The exception principle should be accompanied in practice by the critical-point control. But one must look for exceptions at critical points.

Seeking Objectivity of Controls
Management necessarily has many subjective elements, but whether a subordinate is doing a good job should ideally not be matter for subjective determination. Effective control requires objective, accurate and suitable standards.

Ensuring Flexibilities of Controls
Controls should remain workable in the face of changed plans, unforeseen circumstances, or outright failures. If controls are to remain effective despite failure or unexpected changes of plans, they must be flexible.

Fitting the Control System to the Organizational Culture
To be most effective, any control system or technique must fit the organizational culture. For example, in an organization where people have been given considerable freedom and participation, a tight control system may go so strongly against the gain that it will be doomed to failure.

Achieving Economy of Controls
Controls must be worth their cost.

Establishing Controls that Led to Corrective Action
Control is justified only if derivations from plans are corrected through appropriate planning, organizing, staffing and leading.

14: Communication


Communication is the transfer of information from a sender to a receiver, with information being understood by the receiver.

The Purpose of Communication

The purpose of the communication in an enterprise is to effect change—to influence action towards the welfare of the enterprise. Communication is essential for the internal functioning of enterprise, because it integrates the managerial functions. Especially, communication is needed to: establish and disseminate goals of an enterprise; develop plans for their achievement; organize human and other resources in the most effective and efficient way; select, develop and apprise members of the organization; lead, direct, motivate and create a climate in which people want to contribute and control performance. Communication also relates an enterprise to its external environment. It is through information exchange that managers become aware of the needs of customers, the availability of suppliers, the claims of stockholders, the regulations of govt. and concerns of a community.

The Communication Process

The Sender of the Message
Communication begins with the sender, who has a thought or an idea which is then encoded in a way (English language or even computer language) that can be understood by both the sender and the receiver.

Use of Channel to Transmit the Message
The information is transmitted over a channel that links the sender with the receiver. The message may be oral or written, and it may be transmitted through a memorandum, a computer, a telephone etc.

The Receiver of the Message
The receiver has to be ready for the message so that it can be decoded into thought. Decoding occur only when both the sender and the receiver attach the same or at least similar meanings to the symbols that compose the message. So communication is not complete unless it is understood.

Noise Hindering Communication
Unfortunately, communication is affected by “noise” which is anything—whether in the sender, the transmission or the receiver—that hinders communication. For example: noise, ambiguous symbols, inattention, etc.

Feedback in Communication
To check the effectiveness of communication, a person must have a feedback. Similarly, feedback indicates whether individual or organizational change has taken place as a result of communication.

Situational and Organizational Factors in Communication
Many situational and organizational factors affect the communication process. Such factors in external environment may be educational, sociological, legal-political and economic. Another situational factor is geographic distance. Time must also be considered in communication.

Communication in the Organization

Information must flow faster than ever before. It is essential that production problems be communicated quickly for corrective action. Another important element is the amount of relevant information. It is necessary to determine what kind of information a manager needs to have for effective decision making. Obtaining this information frequently requires getting information from manager’s supervisors and subordinates and also from departments and people elsewhere in the organization.

The Manager’s Need to Know
To be effective, a manager needs information necessary for carrying out managerial functions and activities but managers often lack vital information for decision making, or they may get too much information, resulting in overload. A simple way for a manager to start is to ask, “What do I really need to know for my job?” or “What would happen if I did not get this information on regular basis?”

The Communication Flow in the Organization
In an effective organization, communication flows in various directions: downward, upward and crosswise. If communication flows only downward, problems will develop.

Downward Communication: This kind of communication exists especially in organizations with an authoritarian atmosphere. Oral downward communication: instruction, speeches, meetings and even he grapevine.

Upward Communication: Upward communication travels from subordinates to superiors and continues up the organizational hierarchy. Upper management needs to know specially production performance facts, marking information, financial data, what lower level employees are thinking and so on. Typical means are suggestion systems, appeal and grievance procedures, complaint systems, counseling sessions, joint setting of objectives. Effective upward communication requires an environment in which subordinates feel free to communicate. Organizational climate is greatly influenced by upper management, the responsibility for creating a free flow of upward communication rests on a great extent—although not exclusively—with superiors.

Crosswise Communication: Crosswise communication includes the horizontal flow of information. This kind of communication is used to speed information flow, to improve understanding, and to coordinate efforts for the achievement of organization objectives. Oracle communication include from informal meetings, lunch hours, task teams across departments etc. Written forms include the company newspaper, magazine, bulletin board notice. Crosswise communication may create difficulties, e.g. subordinates not refraining from making commitment beyond there authority, but it is necessary.

Written, Oral and Nonverbal Communication
Written, oral and nonverbal communications are used together so that the favorable qualities of each can complement the other. When message is repeated through several media, the people receiving it will more accurately comprehend and recall it. An executive who feels uncomfortable in front of a large audience may choose written communication rather than a speech. On the other hand, certain audience who may not read a memo may be reached and become motivated by direct oral communication.

Written Communication: It has advantage of providing records, references, and legal defenses. The disadvantages are that written messages may create mountains of paper, may be poorly expressed by ineffective writers. It may provide no immediate feedback. Also it may take a long time to know whether a message has been received and properly understood.

Oral Communication: It can occur face-to-face meeting, presentation. Its advantage is it makes possible speedy interchange with immediate feedback. A meeting with the superior may give the subordinate a feeling of importance. However, it does not always save time.

Nonverbal Communication: Facial expressions and body gestures are examples of Nonverbal communication. Nonverbal communication is expected to support the verbal, but it does not always do so. Nonverbal communication may support or contradict verbal communication, giving rise to the saying that actions often speak louder than words.

Communication Methods
There are different methods and channels for communication—some are oral, some are written and some use information technology. Technology is used for certain kinds of communication such as the use of the wired and wireless telephone, fax, voice mail, e-mail etc. Every method has its own value at certain situation.

Barriers and Breakdowns in Communications

Managers frequently cite communication breakdowns as one of their most important problems. However, communication problems are often symptoms of more deeply rooted problems. For example, poor planning may be the cause of uncertainty about the direction of the firm. Similarly, a poorly designed organization structure may not clearly communicate organizational relationships. Thus, perspective manager will look for the causes of communication problems instead of just dealing with the symptoms.

Lack of Planning
Too often people start talking and writing without first thinking, planning and stating the purpose of the message.

Unclear Assumptions
Often overlooked, yet very important, are the un-communicated assumptions that underlie message.

Semantic Distortion
Another barrier to effective communication is semantic distortion, which can be deliberate or accidental. Message can be deliberately or accidentally ambiguous.

Poorly Expressed Messages
No matter how clear the idea in the mind of the sender of communication, the message may still be marked by poorly chosen words, omissions, lack of coherence, poor organization, awkward sentence structure, platitudes, unnecessary jargon and failure to clarify its implications.

Communication Barriers in the International Environment
Communication in the international environment becomes even more difficult because of different languages, cultures and etiquette.

Loss by Transmission and Poor Retention
In the series of transmissions from one person to the next, the message becomes less and less accurate. Poor retention of information is another serious problem.

Poor Listening and Premature Evaluation
There are many talkers but few listeners. Listening demands full attention and self-discipline. It also requires that the listener avoid premature evaluation of what another person has to say. Listening with empathy can reduce some of the daily frustrations in organized life and result in better communication.

Impersonal Communication
Effective communication requires face-to-face contact in an environment of openness and trust.

Distrust, Threat and Fear
Distrust, threat and fear undermine communication. Distrust can be the result of inconsistent behavior by the superior, or it can be due to past experiences in which the subordinate was punished for honestly reporting unfavorable, but true, information to the boss. What is needed is a climate of trust, which facilitates open and honest communication.

Insufficient Period for adjustment to Change
The purpose of communication is to effect change that may seriously concern employees: shift in the time, place, type and order of work or shifts in group arrangements or skills to be used.

Information Overload
Unrestricted flow may result in too much information. People respond to information overload by disregarding certain information, by ignoring letters that people make errors in processing it, by delaying processing of information, by filtering information. One way to approach the overload problem is to reduce the demands for information.

Other Communication Barriers
In selective reception people tend to perceive what they expect to perceive. They hear what they want to hear and ignore other relevant information. Closely related to perception is the influence of attitude, which is the predisposition to act or not to act in certain way.

Toward an Effective Communication

Guidelines for Improving Communication
1. Senders of message must clarify in their minds what they want to communicate. Purpose of the message and making a plan to achieve the intended end must be clarified.
2. Encoding and decoding be done with symbols that are familiar to the sender and the receiver of the message.
3. For the planning of the communication, other people should be consulted and encouraged to participate.
4. It is important to consider the needs of the receivers of the information. Whenever appropriate, one should communicate something that is of value to them, in the short run as well as in the more distant future.
5. In communication, tone of voice, the choice of language and the congruency between what is said and how it is said influence the reactions of the receiver of the message.
6. Communication is complete only when the message is understood by the receiver. And one never knows whether communication is understood unless the sender gets a feedback.
7. The function of communication is more than transmitting the information. It also deals with emotions that are very important in interpersonal relationships between superiors, subordinates and colleagues in an organization.
8. Effective communicating is the responsibility not only of the sender but also of the receiver of the information.

Listening: A Key to Understanding
Time, empathy and concentration on the communicator’s message are prerequisites for understanding. It is wise both sender and receiver to give and ask for feedback, for without it one can never be sure whether the message is understood. Out of ten guides to improve listening, by John W Newstrom, important are, stop talking, hold your temper, go easy on arguments and criticism, ask questions and finally again stop talking.

Tips for Improving Written Communication
Common problems in written communications are that writers omit the conclusion or bury it in the reports, are too wordy, and use poor grammar, ineffective sentence structure and incorrect spelling.

1. Use simple words and Phrases.
2. Use short and familiar words.
3. Give illustration and examples.
4. Use short sentence and paragraphs.

Forceful Style: The tone is be polite but firm. This is to be used when writer has a power.
Passive Style: This is to be used when writer in the position lower than that of recipient of the message.
Personal Style: This is to be used for communicating good news and making persuasive request for action.
Lively/Colorful Style: This is to be used for good-news items, advertisement and sales letter.
Less Colorful Style: This is appropriate for common business writing.

Tips for Improving Oral Communication
Giving speeches and having fun doing it, can be learned. To be a good orator what is required is practice, practice and practice. Most of the tips for written communication also apply for oral communication.

Electronic Media in Communication

Telecommunication
There are many applications of telecommunication. But to make telecommunication systems effective, technical experts must make every effort to identify the real needs of managers and customers.

Teleconferencing
In Teleconferencing, a group of people integrating with each other by means of audio and video media with moving or still pictures. Advantages include saving in travel expenses and travel time. Also, conferences can be held whenever necessary. Drawbacks include, equipment is subject to breakdowns, poor substitute for meeting with other persons face-to-face.

The Use of Computers for Information Handling and Networking
One can obtain, analyze and organize timely data quite inexpensively. Reporting system are can have colorful graphics e.g. pie charts, bar charts etc. The new information technology fundamentally changes communication. The computer is expanding its role from simply managing information to a communication role. Its challenges include need for maintaining privacy, security and even freedom.

13: Committees, Teams and Group Decision Making


A committee is a group of persons to whom, as a group, some matter is committed. Definition of team is similar, “ a small number of people with complementary skills who are committed to a common purpose, set of performance goals and approach for which they hold themselves mutually accountable.”

The Nature of Committee and Groups

Group Process in Committees
Groups go through four stages: Forming (the members of the group get to know each other), storming (the members of the group determine the objective of the meeting; conflicts arise), norming (the group agrees on norms and some behavior rules) and performing (the group gets down to the task). People play certain role in committees e.g. information giver, information seekers, coordinator etc. To be effective in a group, one must not only listen to what is said but also observe the nonverbal behavior. The seating arrangement may have an impact on the group interaction.

Functions and Formality of Committees and Groups
Some committees undertake managerial functions, and others do not. Some make decisions, while others merely deliberate on problems without authority to decide. A committee may have either line or staff functions, depending on its authority. If its authority involves decision making affecting subordinates responsible to it, it is a plural executive—a line committee that also carries out managerial functions such as the board of directors; if its authority relationship to a superior is advisory, then it is a staff committee. Committee may also be formed or informal, if establish as a part of the organization structure, with specifically delegated duties and authority, they are formal. Most committees with any permanence fall into this class. Those that are informal are organized without specific delegation of authority. Committees may be relatively permanent or they may be temporary.

Reason for Using Committees and Groups

Although the committee is sometimes regarded as having democratic origins, committees are widely used even in authoritarian organizations.

Groups Deliberation and Judgment
The most important reason for the use of committees is the advantage of gaining group deliberation and judgment—“two heads are better than one.” Most problems require more knowledge, experience and judgment than any individual possesses. It should not be inferred that group judgment could be obtained only though the use of committees. the staff specialist who confers individually with many persons in committees. at time group judgment can thus be obtained more efficiently, in terms of time, than by using the deliberations of a committee.

Fear of Too Much Authority in a Single Person
Another reason for the widespread use of committees is the fear of delegating too much authority to a single person.

Representation of Interested Groups
Boards of directors are often selected on the basis of groups interested in company and perhaps more often, on the basis of groups in which the company has an interest.

Coordination of Departments, Plans and Policies
Committees are very useful for coordinating activities among various organizational units. They are also useful for coordinating plans and policies as well as their implementation.

Transmission and Sharing of Information
Committees are useful for transmitting and sharing information.

Consolidation of Authority
A manager in a department, branch or section often has only portion of the authority necessary to accomplish a program. This is known as a splintered authority. One way to handle problem in this situation is to refer it upward in the organizational hierarchy until it reaches a point at which the request authority exists. But his place is often in the office of the president, and the problem may not be of sufficient importance to be decided at that level.

Motivation through Participation
Committees permit wide participation in decision making.

Avoidance of Action
One of the surest ways to delay the handling of a problem and even to postpone a decision indefinitely is to appoint a committee and to study the matter. At times, committee members are chosen in a way aimed at delaying action.

Disadvantages and Misuse of Committees

Although there are good reasons for using committees, there are also disadvantages of doing so. They are costly; they may lead to indecision; they also can split responsibility; finally, they can lead to situation in which a few persons impose their will on the majority, not allowing participation of its members. In general, committees should not be used as replacement for manager for research study, for unimportant decisions and for decisions beyond the participants’ authority.

Successful Operation of Committees and Groups

The use of committee has growing emphasis on group management and group participation in organizations.

Authority
A committee’s authority should be spelled out so that the members know whether their responsibilities is to make decision, make recommendations or merely deliberate and give the chairperson some insights into the issue under discussion.

Size
If the group is too large, there may not be enough opportunities for an adequate communication among its members. On the other hand, if the group consists of only three persons, there is the possibility that two may form a coalition against the third member. A committee should be large enough to promote deliberation and include the breadth of expertise required for the job but not so large as to waste time or foster indecision.

Membership
The members of a committee must be selected carefully. Members should have the capacity for communicating well and recharging the group.

Subject Matter
The subject must be carefully selected. Jurisdictional disputes and strategy formulation, for example, may be suitable for group deliberation, while certain isolated technical problems may be better solved by an expert in the specialized field.

Chairperson
The selection of the chairperson is crucial for an effective committee meeting. Such a person can avoid the wastes and drawbacks of committees.

Minutes
Effective communication in committees usually requires circulating minutes and checking conclusions.

Cost Effectiveness
A committee must be worth its cost. But the committee can be justified only if the costs are offset by tangible and intangible benefits.

Additional Group Concepts

In addition to committees, there are teams, conferences, task forces, and negation sessions all involving group activities. A group may be defined as two or more people acting interdependently in a unified manner towards the achievement of common goals. The goals may pertain to specific tasks, but they may also mean that the people share some common concerns or values or an ideology.

Characteristics of Groups
1. Group members share one or more common goals.
2. They normally require interaction and communication among members.
3. Members within a group assume roles.
4. Groups usually are part of large group.
5. Groups interface with other groups.

Groups develop norms, which refer to the expected behavior of the group members. Ambitious, highly motivated employees may be pressed to produce in congruence with generally accepted norms rather than according to their abilities.

A Special Kind of Group: The Focus Group
Focus groups have been used for some time in market research. Focus groups may also be used for evaluating managerial aspects within an organization. By this way company may implement a more flexible benefits program, a program for job redesign and a new decision making process. Rather than imposing organizational changes, the company allowed the employees to become actively involved in the change process.

Functional Advantages of Groups
Groups have many functions. They are powerful in changing behaviors, attitudes and values and in disciplining members. In addition, groups are used for decision making, negotiating and bargaining. Group members with diverse backgrounds may bring different perspectives to the decision making process. Different group structures influence communication patterns. Thus, communication will differ when it is channeled through one key member or when it flows feely among all the group members. Effective group interactions may also affect motivation. Group member participating in setting objectives may become committed to the achievement of group goals. Finally, leadership must be seen in the context of group processes. In short, an understanding of groups is important for carrying out all managerial functions, particularly the function of leading. Groups do provide social satisfaction for their members, a feeling of belonging. Another benefit of groups is that they promote communication. Informal communication within group helps group members become aware of “what is really going in the firm.”

Teams

A team consists of a number of people who are empowered to achieve team goals. A team is “a small number of people with complementary skills who are committed to common purpose, set of performance goals, and approach for which they hold themselves mutually accountable.” Some teams are created to solve problems, such as quality circles, other engage in activities in cross-functional areas such as design, marketing, finance, manufacturing, personnel and so on.

Team Building
Team members must be convinced that the team’s purpose is worthwhile, meaningful and urgent. Team members should also be selected according to the skills needed to achieve the purpose. Team should have the right mix of skills such as functional or technical skills, problem-solving and decision making skills, and of course, human relations skills. The team needs to be guided by rules for group behavior, such as regular attendance, confidentiality, discussion based on facts, and everybody’s contributions. Goals and required tasks should be identified early in the team formulation. Members should encourage each other through recognition, positive feedback and reward.

Self Managing Team
Self managing teams usually consist of members who have a variety of skills needed to carry out relatively complete task.

Virtual Teams
Virtual teams have the ability to run a team whose members aren’t in the same location, don’t report to you and may not even work for your organization. Therefore, it is important to have a clear purpose, clearly define the tasks and assumptions and communicate effectively by such means as e-mail, faxes, website etc.

Conflicts in Committees, Groups and Teams

Despite of many advantages of committees, group and teams conflicts are sure to arise. Disadvantages of committees are also apply to groups and tasks. Conflicts may arise between and among individuals (interpersonal conflicts), among groups (inter-group conflicts) and the organization and its environment such as with other organization.

12: Leadership


The ability to lead effectively is one of the keys to being an effective manager. The essence of leadership is followership. People tend to follow those whom they see as providing a means of achieving their own desires, wants and needs. Leadership and motivation are closely interconnected. By understanding motivation, one can appreciate better what people want and why they act as they do.

Defining Leadership

Leadership is defined as influence, that is, the art or process of influencing people so that they will strive willingly and enthusiastically toward the achievement of group goals. Ideally, people should be encouraged to develop not only willingness to work but also willingness to work with zeal and confidence.

Ingredient of Leadership

Leaders must instill values—whether they must be concern for quality, honesty and calculated risk taking or concern for employee or customers. Leadership skill seems to be a compound of at least four major ingredients: the ability to use power effectively and in responsible manner, the ability to comprehend that human being have different motivation forces at different time and different situations, the ability to inspire and ability to act in manner that will develop a climate conducive to responding to and arousing motivations.

Power and Understanding People
The first ingredient of leadership is power. The second ingredient of leadership is a fundamental understanding of people. As in all other practices, it is one thing to know motivation theory, kinds of motivating forces, and the nature of system of motivation but another thing to be able to apply this knowledge to people and situations. Manager must aware of the nature and strength of human needs and is better able to define and design ways of satisfying them and to administer so as to get the desired responses.

Inspiring Followers
Third ingredient of leadership is the rare ability to inspire followers to apply their full capabilities to a project. While the use of motivators seems to center on subordinates and their needs, inspiration also comes from group heads. They may have quality of charm and appeal that give rise to loyalty, devotion, and strong desire on the part of followers to promote what the leaders want. This is not a matter of need satisfaction; it is rather, a matter of people giving unselfish support to a chosen champion. The best examples of inspirational leadership come from hopeless and frightening situations.

Style of the Leader 
The fourth ingredient of leadership has to do with the style of the leader and the climate he or she develops. Strength of motivation greatly depends on expectancies, perceived rewards, the amount of effort believed to be required, the task to be done, and other factors which are part of an environment, as well as on organizational climate.

Relationship with the boss
Effective managers must develop a healthy relationship with their boss. Manager must understand the boss’s goals and pressures and give attention to his or her concerns.

Principle of Leadership
Principle of Leadership is: Since people tend to follow those who in their view, offer them a means of satisfying their own personal goals, the more managers understand what motivates their subordinates and how these motivations operate, and the more they reflect this understanding in carrying out their managerial actions, the more effective they are likely to be as leaders.

Trait Approaches to Leadership

Prior to 1949, studies of leadership were based largely on an attempt to identify the traits that leaders posses. Starting with the “great man” theory that leaders are born and not made, tried to identify physical, mental and personality traits of various leaders. The “great man” theory lost much of its acceptability with the rise of the behaviorist school of psychology. Specific traits related to leadership ability: physical traits (energy, appearance, height, etc.), intelligence, ability and personality, task related characteristics, social characteristics. Not all the leaders possess all the traits, and many nonleaders may posses most or all of them.

Charismatic Leadership

Charismatic leaders may have certain characteristics such as being self-confident, having strong convictions, articulating a vision, are able to initiating change, communicating high exceptions, having a need to influence followers and supporting them, demonstrating enthusiasm and excitement and are in touch with reality.

Leadership Behavior and Styles

There are several theories on leadership behavior and styles.

Styles Based on Use of Authority
The autocratic leader commands and expects compliance, is dogmatic and positive and leads by the ability to withhold or give rewards and punishment. The democratic or participative leader consults with subordinates on proposed actions and decisions and encourages participation from them. This type of leaders ranges from the person who does not take action without subordinates’ concurrence to the one who makes decisions but consults with subordinates before doing so. The free-rein leaders use his or her power very little, if at all, giving subordinates a high degree of independence in their operations. Such leaders depend largely on subordinates to set their own goals and the means of achieving them. There are variations within this simple classification of leadership styles. Some autocratic leaders are seen as “behavioral autocrats”. Although they listen considerately to their followers’ opinions before making a decision, the decision is their own. The use of any style will depend on the situation. A manager may be highly autocratic in an emergency; e.g. fire chief or managers may also be autocratic when they alone have the answers to certain questions. Furthermore, manger deleing with a group of research scientists may give them free rein in developing their inquires and experiments.

Do Women Lead Differently?
One study found that, women see leadership as changing the self-interest of followers into concern for the total enterprise by using interpersonal skills and personal traits to motivate subordinates. Men in contrast, are more likely to see leadership as a sequence of transactions with their subordinates.

The Managerial Grid
Managerial concern for both production and for people is devised by Robert Blake and Jane Mouton in the form of Managerial Grid.

The Grid Dimensions
The grid has two dimensions: concern for people and concern for production. “Concern for” is meant to convey “how” managers are concerned about production or “how” they are concerned about people, and not such things as “how much”. “Concern for production” includes the attitude of a supervisor towards a wide variety of things, such as quality of policy decisions, procedures and process, creativeness of research, quality of staff services, work efficiency and volume of output. “Concern for people” includes degree of personal commitment towards goal achievement, maintenance of the self esteem of workers, placement of responsibility of the basis of trust rather than obedience, good working conditions.

The Four Extreme Styles
Under the 1.1 style (referred to as “impoverished management”), managers concern themselves very little with either people or production and have minimum involvement in their jobs. At the other extreme are the 9.9 managers, who display in their actions the highest possible dedication both to people and to production. They are the real “team mangers”, who are able to mesh the production needs of the enterprise with the needs of individuals. Another style is 1.9 management (called “country club management”) in which managers have little or no concern for production but are concerned only for people. At other extreme are the 9.1 managers (referred to as “autocratic task managers”), who are concerned only with developing an efficient operation, who have little or no concern for people, and who are quite autocratic in their style of leadership. Clearly 5.5 managers have medium concern for production and for people. They obtain adequate, but not outstanding, moral and production. The managerial grid is a useful device for identifying and classifying managerial styles, but it does not tell us why a manger falls into one part or another.

Leadership as a Continuum
Leadership Continuum concept is developed by Robert Tennenbaum and Warren Schmidt. They see leadership as involving a variety of styles, ranging from one that is highly boss-centered to one that is highly subordinate-centered. The styles vary with the degree of freedom a leader or manger grants to subordinates. The continuum theory recognizes that the style of leadership depends on the leader, the followers, and the situation. The most important elements that may influence a manager’s style can be seen as forces operating in the manger’s personality, including his or her value system, confidence in subordinates, the forces in subordinates (such as their willingness to assume responsibility, their knowledge and experience and their tolerance for ambiguity) that will affect manager’s behavior; and forces in the situation, such as organization value and traditions, the effectiveness of subordinate working as unit, the nature of a problem and the feasibility of safely delegating the authority to handle it and the pressure of time.

Situational or Contingency Approaches to Leadership

As disillusionment with the “great man” and trait approaches to understanding leadership increases, attention turned to the study of situations and the belief that leaders are the product of given situations. It supports the follower theory that people tend to follow those whom they perceive (accurately or inaccurately) as offering them a means of accomplishing their own personal desires. The leader, then, is the person who recognizes these desires and does those things, or undertakes those programs designed to meet them.

Fiedler’s Contingency Approach to Leadership
Contingency theory of leadership holds that people become leaders not only because of the attributes of their personalities but also because of various situational factors and the interactions between leaders and group members.

Critical Dimensions of the Leadership Situation
Three critical dimensions of the leadership situations that help determine what style of leadership will be most effective:
1. Position Power: In the case of managers this is the power arising from organizational authority. Leaders with clear an considerable position power can obtain good followership more easily than one without such power.
2. Task Structure: If tasks are clear, the quality of performance can be more easily controlled and group members can be held more responsible for performance.
3. Leader-member relationship: Since position power and task structure may be largely under the control of an enterprise. It has to do with the extent to which group members like and trust a leader and are willing to follow what leader.

Leadership Style
There are two major styles of leadership, task oriented where leader gain satisfaction from seeing tasks performed and the other is oriented towards good interpersonal relations and attaining a position of personal prominence. To measure leadership style and determine whether a leader is chiefly task oriented, Fiedler used an unusual testing techniques. He based his findings on two types sources: source on the least preferred co-worker (LPC) scale—these are ratings made by people in a group as to those with whom they would least like to work; and score on the assumed similarity between opposite scale(ASO) scale, which are rating based on the degree to which leaders see group members as being like themselves, on the assumption that people will like best, and work best with. Fiedler found that people who rated their coworkers high (that is, favorable terms) were those who derived major satisfaction from successful interpersonal relationships. People who rated their “least preferred coworkers” low (that is, unfavorable terms) were seen as deriving their major satisfaction from task performance.
Leadership performance depends as much on the organization as it depends on the leader’s own attributes. Except perhaps for the unusual case, it is simply not meaningful to speak of an effective leader or an ineffective leader; we can only speak of a leader who tends to be effective in one situation and ineffective in another. If we wish to increase organizational and group effectiveness, we must learn not only how to train leaders more effectively but also how to build an organizational environment in which the leader can perform well.
In “unfavorable” or “favorable” situations the task oriented leader would be the most effective. Favorableness of situation was defined by Fiedler as the degree to which a given situation enables a leader to exert influence over a group. In other words, when leader position power is weak, the task structure is unclear, and leader-member relations are moderately poor, the situation is unfavorable for the leader and the most effective leader will be one who is task-oriented. At the another extreme, in which position power is strong, the task structure is clear, and leader-member relations are good—a favorable situation for the leader—Fiedler found that the task oriented leader will also be most effective. However, if the situation is only moderately unfavorable or favorable, the human relations-oriented leader will be most effective.
In a highly structured situation, such as in the military during a war, where the leader has strong position power and good relations with members, there is a favorable situation in which task orientation is most appropriate. The other extreme, an unfavorable situation with moderately poor relations, and an unstructured task, and weak position power, also suggest task orientation by the leader, who may reduce anxiety or ambiguity that could be created by the loosely structure situation. Between the two extremes the suggested approach emphasizes cooperation and good relations with people.

Fiedler’s Research and Management
There is nothing automatic or “good” in either the task-oriented or the people-satisfaction-oriented style. Cast in the desired role of leaders, managers who apply knowledge to the realities of the group reporting to them will do well to recognize that they are practicing an art. But in doing so, they will necessarily take into account the motivations to which people will respond and their ability to satisfy them in the interest of attaining enterprise goals. It is important to recognize that effective leadership is depends on the situation.

The Path-Goal Approach to Leadership Effectiveness
The Path-Goal theory suggests that the main function of the leader is to clarify and set goals with subordinates, help them find the best path for achieving the goals and remove obstacles. The theory proposes that situational factors contributing to effective leadership should be considered. These factors include characteristics of subordinates, such as their needs, self-confidence, and abilities and the work environment, including such components as the task, the reward system and the relationship with co-workers.
The theory categorizes leader behavior into four groups
1. Supportive leadership behavior gives consideration to the needs of subordinates, shows a concern for their well-being, and creates a pleasant organizational climate. It has greatest impact on subordinate’s performance when they are frustrated and dissatisfied.
2. Participative leadership allows subordinates to influence the decision of their superiors and can result in increased motivation.
3. Instrumental leadership gives subordinates rather specific guidance and clarifies what is expected of them; this include aspects of planning g, organizing, coordinating and controlling by the leader.
4. Achievement-oriented leadership involves setting challenging goals, seeking improvement of performance and having confidence that subordinates will achieve high goals.

Rather than suggesting that there is one best way to lead, this theory suggests that the appropriate style depends on the situation. The theory proposes that the behavior of the leader is acceptable and satisfies subordinates to the extent that they see it as source for their satisfaction. Behavior of the leader increases the effort of subordinates, that is, it is motivating, in so far as this behavior makes satisfaction of the needs of subordinates dependant on effective performance and the behavior enhances the subordinate’s environment through coaching, directing, supporting and rewarding. The key to the theory is that the leader influences the path between behavior and goals. The leader can do this by defining positions and task roles by removing obstacles to performance by enlisting the assistance of group embers in setting goals by performing group cohesiveness and team effort. The path-goal theory makes a great deal of sense to the practicing manager.

Transactional and Transformational Leadership

Transactional leaders identify what subordinates need to do to achieve objectives, clarify organizational roles and tasks, set up an organizational structure, reward performance, and are considerate for the social needs of its followers. Transformational Leaders articulate a vision and inspire followers. They also have the capacity to motivate, shape the organizational culture, and create a climate favorable for the organizational change.