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AN INTRODUCTION TO DIFFERENTIATED LEARNING TOOLS
Participants in flexible learning programs have limitations on the nature of the
time they can spend on learning. Typically they are employed fully or partially,
pursuing higher studies or have other social and familial responsibilities.
Availability of time is a great constraint to these students.
To aidthe participants,we have developedfour unique learningtools as below:
 Bullet Notes : Helps in introducing the important concepts in each unit
of curriculum, equip the
student during preparation of
examinations and
 Case Studies : Illustrate the concepts through real life experiences

 Workbook : Helps absorption of learning through questions based on reallife nuggets
 PEP Notes :Sharing notes of practices and experiences in the Industry will help the student to
rightly perceive and get inspired to learn concepts at the cutting edge
application level.placementinterviews
Why are these needed?
 Adults learn differently from B. School or college going
students who spend long hours at campus.
 Enhancing analytical skills through application related learning
kits trigger experiential learning
 Availability of time is a challenge.
 Career success increasingly depends on continuous learning
and success
What makes it relevant?

How is it useful?


Where does this lead to?
As and when you get 5 to 10 minutes you can read one of these and absorb and comprehend.
Spending more time is your choice.
You can use the time in travel, waiting for meetings, lunch time, small breaks or at home
usefully.
Through these tools, the learning bytes are right sized for ease of learning for time challenged
participants.
The content starts from practice and connect to precept making it easy to connect to industry
and retain.
They can be connectedto continuous assessment process of the academic program.
Practitioners can use their real life knowledge and skill to enhance learning skills.
Immediate visualization of the practical dimension of the concept will offer a rich learning
experience.
 Easier to move ahead in the learning process.

 Will facilitate the student to complete the program earlier than
otherwise.Helpsstay motivated and connected.
When is it useful?

PEP Notes
PrinciplesofManagement
 
1
PEP Notes: Principles of Management
© The ICFAI Foundation for Higher Education (IFHE),
Hyderabad, April, 2015. All rights reserved
No part of this publication may be reproduced, stored in a retrieval system, used in a spread sheet, or
transmitted in any form or by any means – electronic, mechanical, photocopying or otherwise – without
prior permission in writing from The ICFAI Foundation for Higher Education (IFHE), Hyderabad.
Ref. No. POM-PN-IFHE – 042015
For any clarification regarding this book, the students may please write to The ICFAI Foundation for Higher
Education (IFHE), Hyderabad giving the above reference number of this book specifying chapter and page
number.
While every possible care has been taken in type-setting and printing this book, The ICFAI Foundation for
Higher Education (IFHE), Hyderabad welcomes suggestions from students for improvement in future
editions.
Our E-mail id:cwfeedback@icfaiuniversity.in
i
INTRODUCTION
Participants in ICFAI University Programs are eager to apply theory to practice. They realize that
application orientation can enhance their learning and subsequent usage of management precepts and
practices. Picking out the principle behind real world events is critical to this learning. Towards this end
the institution has introduced the PEP Notes.
The PEP Notes (Practice, Experience and Perspective Notes) is a collection of annotative notes on
practices, experiences and perspectives fromindustry as appearing in articles fromreputed sources such as
Harvard Business Review, Economist, Mckinsey Quarterly, Accenture, Bain Consulting etc.
 Practice : Organizations follow practices based on their past learning

 Experience: Based on changing context, they face fresh experiences

 Perspective: Organization learns from the experience and the practice to gain fresh perspective
These notes connect the three dimensions of the real world to key concepts in the subject. Each note is
brief – about one to two pages and is adapted from the article referred to in the note. The concept
underlying the note is highlighted in a box. The concept is also connected to the article through an
introductory abstract in a boxat the beginning.
The learning outcomes expected are:
1. Real world Application based approach significantly enhances absorption and retention.
2. Exposure to the current trends,practices with illustrations connect back to theory.
3. Thoughts from leading sources.
The PEP Notes may be used for Assessment.
ii
PEP Notes: Principles of Management
CONTENTS
Block I: Introduction to Management
1. The Role of Management in Manufacturing Industry 6
2. Management Functions Require Different Skill set in Managers 7
3. Engaging Middle-Level Managers 8
4. Management Skills for Effective Indian Managers 10
5. Operational Excellence Model as Management Approach 11
6. Charles Dupin‘s Work: An Origin to Social Sciences 12
7. The Human Factor in Classical Approach of Scientific Management 13
8. Are there any Deviations in Maslow‘s Hierarchy of needs in Current Days? 14
9. Quantitative Approaches in Operations Management 15
10. Applications of Systems Theory Integral to Modern Approaches to Management 16
11 Social Responsibility of Corporates 17
12. Different Perspectives on Corporate Social Responsibility 19
13. Social Stakeholders as Drivers of Long Term Business Value 20
14. Quality of Work Life as a Measure of Social Responsiveness 21
15. Personal and Organizational Factors impacting Managerial Ethics 25
Block II: Planning
16. Strategic Planning for Better Organizational Business Value 27
17. Technology and Innovation Strategies of an Organization 29
18. HR alignment for Effective Implementation of Strategy 31
19. Decision-Making Process in Automotive Industry 32
20. Risk Culture for Decision Making in an Organization 33
21. Data Analytics as Systems Approach to Decision Making 36
Block III: Organizing
22. Reaching High Performance in an Effective Organization 39
23. Prioritizing Management Issues to Avoid Organizational Inflexibility 41
24. Factors impacting Organizational Culture 43
25. Factors impacting Intrapreneurship in Organizations 45
Block IV: Staffing
26. Innovative HRM Policies and Practices 47
27. Key Success Factors of Training and Development 48
28. Different Sources of Recruitment in Current Days 51
iii
29. The Role of Selection Science in Selection Process 52
30. Benefits of Effective Socialization Process of New Employees 53
31. Factors Impacting Organizational Change 55
32. Achieving Planned Organizational Change through Focus 56
33. Team Building as an Organizational Development Process 58
34. Management Development Approaches of Leaders and Managers for International NGOs 60
35. Handling Organizational Conflicts 61
Block V: Leading
36. Nature of People: Abraham Lincoln 64
37. Douglas McGregor‘s Theory X and Theory Y Revisited 65
38. Meaningful Work Motivates Employees 66
39. Herzberg New Theory of Motivation 68
40. Self-Determination Theory: A New Motivational Theory 70
41. Meaning Quotient as a Motivational Technique 71
42. Effective Leader‘s Systems and Contingency Approach to Motivation 73
43. The Internals in Meaning of Leadership 74
44. Organizational Conversation as Key Element of Leadership 76
45. Leadership Traits for Crisis Situation 78
46. Insights from Transformational Leadership Theory 80
Block VI: Controlling
47. Factors impacting Production in Indian Manufacturing Sector 83
48. Productivity Problems in Italian Manufacturing Industry 85
49. Importance of Operations Management in Global Manufacturing 87
50. Corporate Website:A type of Information System 89
51. Advantages ofManagement Information Systems 91
iv
Block I: Introduction to Management
Block I: Introduction to Management
1. The Role of Management in Manufacturing Industry
2. Management Functions Require Different Skill set in Managers
3. Engaging Middle-Level Managers
4. Management Skills for Effective Indian Managers
5. Operational Excellence Model as Management Approach
6. Charles Dupin‘s Work: An Origin to Social Sciences
7. The Human Factor in Classical Approach of Scientific Management
8. Are there any deviations in Maslow‘s hierarchy of needs in Current Days?
9. Quantitative Approaches in Operations Management
10. Applications of Systems Theory as Modern Approaches to Management
11. Social Responsibility of Corporates
12. Different Perspectives on Corporate Social Responsibility
13. Social Stakeholders as Drivers of Long Term Business Value
14. Quality of Work Life as a Measure of Social Responsiveness
15. Personal and Organizational Factors impacting Managerial Ethics
5
Block I: Introduction to Management
1. The Role of Management in Manufacturing Industry
The role of management is strongly associated with organizational productivity and organizational success in
manufacturing industry.
Organizations having best management practices perform better. This is the outcome of the research carried
out by McKinsey and Center for Economic Performance at the London School of Economics with regard to
the manufacturing industry. The survey includes interviewing more than 800 middle and senior plant
managers working in 700 manufacturing organizations in US, UK, Germany and France. These
organizations have 100 to 10,000 employees. It is found that organizational performance is related to the
quality of management practices employed and the competition that stimulates the best management
practices. The findings include:
 There is a positive correlation between management practices and productivity and return on capital
 employed.
There is a positive correlation between management practices and sales growth, sales per employee,
 capital market evaluation and market share growth

Employees in better managed companies have better work-life balance.
The research model they followed is as shown in following figure.
Organizational Productivity
Management Practices
Organizational Success
Return on CapitalEmployed (ROCE)
The survey considered the impact of manufacturing practices such as shop floor operations, organizational
practices such as target setting and performance management and talent management practices such as hiring
and retaining the people on organizational productivity and organizational performance/organizational
success. It was found that best companies excel at either shop-floor operations or at people management.
The best management practices followed with increasing order of scores is in countries such as UK, France,
and Germany and topped by US. US firms are particularly good at people management practices such as
talent management and target setting. France and Germany firms are good at shop-floor operations. Industry
sub-sector impacted the management practices that were followed more than the geography. It is also
observed that younger companies deploy better management practices.
Role of Management is vital to any organization. Without management, an organization is like a boat
without a sail. Management provides the direction, vision, mission and strategy to the organization. They
prepare the blue print of the organization. They design the organizational processes, businesses, product
lines, marketing channels and supply chain networks. They are the people who bring visibility to the
organization and brands in the industry, market and community. They delegate, motivate and track the
progress of the tasks in an organization.
DiscussionQuestions
1. Discuss the relationship between organizational performance and quality of management practice.
(Hints: Better work-life balance in well managed firms- Positive correlation between
management practices & productivity)
2. Discuss the best management practices followed in countries like the US and France.
(Hints: Talent management-Target setting-Shop-floor operations)
Source: Dowdy, J., Dorgan, S., Rippin, T., Reenen, J.V., and Bloom, N., “Management Matters”, McKinsey & LSE
Topic Course
Unit-1: Management: An Overview;
Principles of Management
Section-4: Role of Management
6
PEP Notes: Principles of Management
2. Management Functions Require Different Skill set in Managers
Different management functions require different skill set in managers at all levels in an organization.
Managing involves coordinating individual efforts. As organized groups are growing in organizations, the
responsibility of management is also growing to be able to manage them. Management involves the creating
and maintaining of the environment for individuals to perform as part of groups in order to achieve the
organizational goals. Managers at all levels in the organization perform management functions such as
planning, organizing, staffing, leading and controlling. The time they spend in each of the function may vary
based on their position in the organization. Top level managers spend more time in planning and organizing.
First level and middle level managers spend more time in leading. All the managers spend considerable time
in controlling; however this time may vary from manager to manager. The skills required by the managers at
different levels of the organization vary based on their position in the organizational hierarchy.
 Managers must operate both external and internal environments of the organization.

 In order to carry out the organizational tasks,managers must understand the socio,technological,
legal, political and ethical environments.

 Management applies to both small and large organizations, commercial and non-commercial, profit
and non-for-profit organizations, services and manufacturing sectors as well.
 Managers should have a global mind set and cross cultural intelligence
 Should have critical and analytical thinking and be technologically savvy.
 The aim of management is to achieve organizational and group goals with least resources,time,
money, material and personaldissatisfaction.

 Anotheraim of managers is to be productive, effective and efficient. (Example: USA is the most
productive after World War-II)
 Productivity can be defined as output units divided by input units of time with an acceptable
quality.
 Effectiveness can be the achieved performance and efficiency corresponds to the least amount of
resources used in achieving the set objectives.

 Hence, managers should achieve productivity, effectiveness and efficiency using their skills in the
organization.
Functions of managers include planning, organizing, directing, staffing, controlling, motivating and
leading. Every manager in the organization whether he is lower, middle or top level manager performs the
tasks pertaining to these functions. Even CEO also performs these management functions. All functional
managers such as marketing managers, engineering managers, HR managers, Finance managers, IT
managers, operations managers and functional heads performthese functions in an organization.
DiscussionQuestions
1. Discuss the various functions of managers.
(Hints: Planning-Organizing-Directing-Staffing-Controlling)
2. What skills should managers possess to carry out the various managerial
functions? (Hints: Global mind set-Cross-cultural intelligence-Analytical thinking)
Source: Weihrich, H., “Management: Science, Theory and Practice”, Weihrich, H. and Koontz, H.(eds), Management:
A Global Perspective, McGraw-Hill, NY
Topic Course
Unit-1: Management: An Overview;
Principles ofManagement
Section-5: Functions of Managers;
7
Block I: Introduction to Management
3. Engaging Middle-Level Managers
Middle level managers provided with right levers and authority can improve theemployee engagement in the
organization.
Middle level managers play crucial role in organizational engagement and organizational performance.
Middle level managers see the vision of their top management and also pain at times, the problems faced by
their teams. Middle level managers sometimes do not have the senior management support or the required
levers to carry out their tasks. In leading the organization to future, they play a crucial role in bringing the
engagement back. Boston Consulting Group and World Federations of People Management Associations
(WFPMA) have conducted a survey of 5,500 executives from more than 100 countries to find out the
opportunities and challenges ahead for middle managers. They have found the impact of 18 factors which
come into 4 components such as objectives and aspirations, accountabilities and collaboration, performance
management and recognition, and people manager capabilities and interactions on employee engagement. It
is found that the employees are dissatisfied with their organizational performance in areas such as
performance management, recognition and people manager capabilities.
What Middle Managers Do?
Middle managers transform
communicate with employees
plans and strategies.
the strategy set by the top management into concrete business plans,and
manage the businesses.Teammembers execute those devised business
Setting Right Environment for Middle Managers to Perform
BCG and WFPMA proposed a DEAL (Delayer, Empower, Accelerate and Leverage) for middle managers to
improve engagement of middle managers in the organization.
1. Delayer the organization and create exciting roles for middle managers.
Example: Qantas Airways, An Australian Airliner, reduced the number of layers in top
management by 15% to 20% and increased span of control to improve employee engagement.
2. Empower the middle managers by providing levers and authority to manage performance, make
organizational changes,recognize and compensate the team, and provide development opportunities
to team members.
Example: An European retail bank realized that the reason for lack of middle managers
engagement is that middle managers do not have a proper reward and recognition process in place
for their efforts.
3. Accelerate leadership skills of middle managers by providing training and tools.
Example: Allianz, a German Insurance company, provides training to their lower level managers at
least once every year. They invest most on these managers.
4. Leverage the middle managers to utilize new skills, roles and responsibilities leading to
organizational transformation.
Example: BMW, a German Car maker, to build trust and confidence brought together 350 senior
executives and 5,500 middle managers to a workshop for discussions on innovation, leadership,
profitability, customers, product development and growth.
Middle level managers act as interface between workers, lower level supervisors and the senior
management. Their interaction with their subordinates is more when compared with their interaction
with senior management. The low level employees in an organization look for direction, vision and
clarifications from middle level managers. They mediate difficult interactions, escalating them when
warranted. Middle level managers have to consolidate information and provide status to senior
management. They maintain working knowledge of metrics, data collection, facts, figures and
analysis.
8
PEP Notes: Principles of Management
DiscussionQuestions
1. Discuss the role of a middle level manager in an organization.
(Hints: Strategy to concrete plans-Employee engagement-Interface between workers and supervisors)
2. What measures can be taken to improve the engagement of middle level managers?
(Hints: Accelerate leadership skills-Delayering the organization)
Source: Caye, J., Strack, R., Orlander, P., Kilmann, J., Espinosa, E.G., Francoeur, F., Haen, P. (2012),
“Creating a New Deal for MiddleManagers”, Boston Consulting Group &WFPMA,
Topic Course
Unit-1: Management: An Overview;
Principles ofManagement
Section-6: Levels of Management-Middle Level Managers
9
Block I: Introduction to Management
4. Management Skills for Effective Indian Managers
Effective managers require high degrees of managerial skills such as technical, human and conceptual skills.
Kaifi, B.A. and Mujtaba, B.G. (2010) have done a survey of 200 technologically savvy Eastern Indians in
the bay area ofCalifornia, USA to find out there were any differences in technical,human and conceptual skills of
Indians over gender. This study is relevant because by 2025, 25% of the world‘s workforce would
be Indians. India provides educated competitive workforce to the world. Indian men and women can be
found in different managerial capacities in different industries across the globe. The study considered the
management skills such as technical, human and conceptual skills of Indian men and women to find out
whether these skills vary according to gender. It was found in the survey that Indian women possessed
comparatively higher technical and human skills and that Indian men possessed comparatively higher
conceptual skills.
This kind of survey is relevant in current socio-economic conditions because problem solving skills vary
based on economic, social and public policy situations. Effective managers and leaders require technical,
human and conceptual skills according to their position in the organizational hierarchy. The proportion of
these skills varies from organization to organization based on the position of the respective manager in the
 Technical skills are more of job specific knowledge and techniques.The requirement for technical

 skills varies based on the position of the manager in the organization.
Human skills express the ability to communicate, coordinate and motive the employees in getting
 the work done.

Conceptual skills allow managers to distinguish between cause and effect and allow themto analyze the situation.organizationalhierarchy.
It was also observed in the study that Indian women lag behind in the decision making bodies in Indian
organizations. Overall the group consisting of Indian men and women scored more on technical skills when
compared to conceptual skills. This is because Indian youth are well exposed to Internet, technology, and
social networking sites. It was also expressed that the most effective managers possess high degrees of
technical, human and conceptual skills in organizations.
Managerial skills should comprise of technical, conceptual and human skills. As a manager grows up the
ladder, the need for technical skills reduces. The need for more conceptual skills arises. The human or
people skills are required at all levels in the management irrespective of lower, middle or top
management. The technical skills required are knowledge and usage of hardware, software, machinery
and tools. Human skills include communication, team dynamics, recruitment and selection skills,
motivating, conflict management, leadership, presentation, influencing, and negotiating skills. Other
managerial skills include decision making under uncertainty, problem solving, risk taking and taking
initiative.
DiscussionQuestions
1. What skills do effective managers require?
(Hints: Technical-Human-Conceptual)
2. Discuss the findings of the survey conducted by Kaifi, B.A. and Mujtaba, B.G.
(Hints: Indian women have higher technical skills-Indian men had relatively higher conceptual
skills)
Source: Kaifi, B.A. and Mujtaba, B.G. (2010), “A study of management skillswith Indian Respondents: Comparing
their technical, human, and conceptual scores based on gender”, Journal of Applied Business and Economics,
Vol. 11, Issue 2.
Topic Course
Unit-1: Management: An Overview;
Principles ofManagement
Section-7: Management Skills and Organizational Hierarchy
10
PEP Notes: Principles of Management
5. Operational Excellence Model as Management Approach
Operational Excellence Management System(OEMS) is an approach to management for achieving organizational
objectives.
“Excellence is an art won by training and habituation.……………..We are what
we repeatedly do. Excellence,then, is not an act but a habit.” ------
- Aristotle (2300 years ago).
Organizations are under pressure to improve their financial, safety and environmental performance amid
competition, increasing costs and tough circumstances. Operational Excellence Management System
(OEMS) creates repeatable and optimized behaviour in employees in reaching their goals. Organizational
executives need their businesses to run effectively and safely by achieving operational excellence. Large and
complex organizations require an operational excellence management system. For example, Exxon, an oil
company, deployed operational excellence management system in their organization in order to address the
Valdez oil spill. National and International oil companies have operational excellence management systems
consisting of components such as:

Strategy and Leadership
Performance Management
 Change Management
 Operational Risk
 Contractor Management
 Supply Chain Management
 External Stakeholders Responsibility
 Organization and Capabilities

 Planning and Optimization
 AssetIntegrity and Reliability
 Capital Projects
 Compliance management
 Incidents andEmergencies
 Health and Safety Security
and Environment
What is Operational Excellence Management System?
It is a systemwith defined global expectations, defines common language,considers accountability, shares
behaviours and practices and encourages continuous improvement. +*
 Operational Excellence Management System should be simple, focused,and designed for wide
 applications.

The pitfalls in implementation of OEMS include unclear definitions, unclear accountability, lack of
understanding to front-line workers, lack of executive support and implementation which runs as a
 parallel organization.

Implementation of operational excellence management systemin an organization is a 3 to 5 years
process with stages such as design,deployment, compliance and continuous improvement.
Approaches to Management include systems approach, empirical approach, case study based approach,
group behaviourapproach,interpersonalbehaviour approach, decision theory approach, cooperative social
systems approach, socio-technical systems approach, mathematical approach, statistical approach,
management science approach, contingency approach, situational approach, managerial roles approach
and McKinsey‘s 7-S approach. McKinsey 7-S approach consists of structure, strategy, systems, style,
staff, skills and shared values.
DiscussionQuestions
1. What are the key elements of an effective Operational Excellence Management System
(OEMS)? (Hints: Simple-Focused-Designed for wide applications)
2. Discuss the components of OEMS adopted by National and International oil companies.
(Hints: Strategy and leadership-Capital Projects)
Source: Caruso, P., Cigala, F. and Gay, J.C. (2013), “What „good‟ looks like: Creating an operational excellence
management system”, Bain & Company
Topic Course
Unit-1: Management: An Overview;
Principles ofManagement
Section-8: Approaches to Management
11
Block I: Introduction to Management
6. Charles Dupin’s Work: An Origin to Social Sciences
Charles Dupin‟searly approach to management served to develop19th century social, scientific and economic
knowledge in France.
Charles Dupin (1784-1873) was a French engineer and mathematician who lived in the late 18th and early
19th centuries who worked in various areas like Mathematics, Statistics, Geometry, Algebra and Economics.
He made many interventions related to child labour and female labour during French revolution of 1848. He
highlighted the need for child guidance and discipline instead of making them join the workforce. He has
interests ranging from science and politics to tax policies and social reforms in France. His activities and
accomplishments have lot of impact. He has worked for the development of social, scientific and economic
knowledge in July Monarchy, Second Republic and Second Empire in France.
He worked as a marine engineer and has memberships in Académie Royale des Sciences and Académie des
sciences morales et politiques. He taught courses on applied mechanics at Conservatoire des arts et métiers to
workers. He undertook brief stints in government offices and worked for child labor reforms and protection
of sugar industries. He had a wide range of activities and interests. He used his wide knowledge in
improvement of France. His work examined the relationships between science and politics and became the
origin for 19th century social sciences.
His work on political economy and politics influenced Britain greatly. He continued working on social
reforms with his membership in Académie des sciences morales et politiques. He formulated an inventive
and imaginative approach to Mathematics. He was also an innovator in Statistics. His inventions included
early Choropleth maps that were used to take public opinion which represented variations in quantitative
data using shared blocks. He was the first person who linked numbers and partisan politics. He was also
popular as an economist and a social reformer. He held contradictory positions related to free labour, free
trade and political economy. He insisted on using facts and statistical data in the parameters of liberalism.
He insisted on workers having bank accounts. His liberalization acts included opposition to child labour in
1840, supporting limited work hours in 1848 and opposition for legalizing unions in 1864. He favoured
small industries rather than large, supported the poor and developing working class to meet the challenges.
He was a philanthropist who argued for women as saviours and savers of working class. He had a different
productive public life. His works were inputs for statisticians, economists, political scientists, sociologists
and science historians.
Early Approaches to Management included the work of Robert Owen (1771-1858) on human resource
management, the work of Charles Babbage (1792-1871) on computing, management science and
inventions, the works of Andrew Ure (1778-1857), a British academician, and Charles Dupin (1784-
1873), a French engineer on principles of manufacturing and the work of Henry Robinson Towne (1844-
1924)on manufacturing. Towne‘s presentation was responsible to have influenced Frederick W.
Taylor to develop scientific management theory.
DiscussionQuestions
1. Discuss the contributions of Robert Owen, Charles Babbage, etc. to the early approaches of
management.
(Hints: Contributed to human resource management-Worked on computing and management
science)
2. How did Charles Dupin contribute to the early approach of management?
(Hints: Interventions in child and female labour-Developed scientific and economic knowledge in
France)
Source:
i. DeGroat, J. (2012), Book review of Charles Dupin (1784-1873), Ingénieur, savant, économiste, pédagogue et
parlementaire du Premier au Second Empire,
ii. Sous la direction de Carole Christen et François Vatin, préface de Robert Fox, Presses universitaires de
Rennes, 2009, H-France Review, Vol. 12, No. 26, pp. 1-5
Topic Course
Unit-2:Evolution of Management Thought
Principles ofManagement
Section-3: Early Approaches to Management
12
PEP Notes: Principles of Management
7. The Human Factor in Classical Approach of Scientific Management
Classical approach of scientific management concentrated on the scientific methods and techniques such as time and
motion studies and work balancing.
Frederick W. Taylor (1911), the father of scientific management reinitiated the division of labour concept,
which was first coined by Adam Smith (1776). Taylor did extensive work in 19th and 20th centuries. In
1879, Taylor joined Midvale Steel Company at the age of 23, where he applied his principles, designed
models, and ideologies that changed the way production took place in the industries in the century that
followed. He was an aristocratic engineer and a technocrat who was also rational, dogmatic, curious,
famous and genial. He was a key player in building the American greatness.
He recognized the human factoras part ofscientific management,which has political,social,economic and ethical
implications. It became the fundamental factor related to labour inthe19th century. Taylor‘s scientific
management model ensures the equilibrium of workers with products, machines, processes and tools. He
combined common sense and folk psychology with trade practices. They gave theoretical path to many
disciplines such as organizational behaviour, applied psychology, management and sociology. The
highlights of scientific management include logical thinking and problem solving in novel situations. These
lead to the great changes, innovation and capital accumulation in the 19th and 20th centuries.
Taylor studied production factors such as efficiency, worker well-being and wealth creation. In his book
(1911) The Principles of Scientific Management, he also discussed about reducing poverty and increasing
prosperity not only with his men but also with the entire community. Taylor‘s work in scientific
 related to human factors includes:

 Workerselection and evaluation,which lead to the developmentofapplied psychology.
 Naming the worker as Schmidt afterworker selection process.
Selection of inspectors for bicycle balls, where he counted speed and processing times. He also
observed the perception and reaction times of workers. He observed the relationship between
 perception and reaction time of the workers. He laid off the workers whose reaction time was low.

 Evaluation ofindividualworkerefficiency as part of performance measurement
Evaluation of foremen, that is, supervisors to find out what qualities and skills they should possess.
 (Foreman used to lead the group of workers).

 Studied characteristics that lead to optimized performance
For worker selection, he reviewed applications, verified background history of workers such as
 character, ambition and habits.

Postulatedthat goodmanners, training, education, neat appearance are not as important for executive position as
determination, grit, bulldog endurance, and tenacity are.
management
Classical approach ofmanagement includes FrederickW. Taylor‘s scientific management,time and
motion studies and Henry Gantt‘s work on Gantt charts.Scientific management replaced the traditional
approaches with scientific methods and techniques, used tools to improve productivity, and ensured
equal work between supervisors and workers. The time and motion studies concentrated on executing
the tasks in few numbers of motions on the line. Henry Gantt‘s Gantt chart is widely used in project
planning and scheduling.
DiscussionQuestions
1. What were the implications of the ‗human factor‘ as a part of scientific management?
(Hints: Political-Social-Economic-Ethical)
2. Discuss Fredrick Taylor‘s contribution to scientific management.
(Hints: Time and Motion Study-Worker selection and evaluation)
Source: Zuffo, R.G. (2011), “Taylor is dead, hurry Taylor! The “Human Factor” in ScientificManagement: Between
Ethics, ScientificPsychology and Common Sense”, Journal of Business and Management, Vol. 17, No.1
Topic Course
Unit-2:Evolution of Management Thought
Section-4: Classical Approach
Principles of Management
13
Block I: Introduction to Management
8. Are there any Deviations in Maslow’s Hierarchy of needs in Current Days?
Everyone does not have the same Maslow‟s hierarchy of needs and in the same order.
The answer is ‗Yes‘ as foundin an interesting contrasting study carriedout in Nigeria. Ifedili, C.J. and
Ifedili, C.I. (2012) made a study of 900 Nigerian university workers (450 male and 450 female) from3 Nigerian
federal universities to find out whether Maslow‘s hierarchy of needs is still applicable today andto
find out if there were any deviations in the needs of university workers. The intention was also to find out
what motivated the university workers and to make a study of the factors that impacted their hierarchy of
needs. To study this, they used a questionnaire known as Maslow‟s Hierarchy of Needs Inventory (MHNI).
In the study it was observed that Maslow‘s hierarchy of needs is not applicable to the current day workers.
The needs hierarchy hadan impact on the culture and personal attributes of the workers. The Maslow‘s
hierarchy of needs is as shown in following figure.
Self-
Actualization Needs
Esteem Needs
Social Needs
Safety Needs
Physiological Needs
According to Maslow‘s hierarchy of needs, the lower needs are to be fulfilledbefore moving onto higher
needs. At any point of time, there is an active need for a human being that needs to be satisfied. According to
Maslow, satisfied needs do not motive further. He did not consider the factors such as bravery and charitable
acts in designing the needs hierarchy. For example, in a Country like Nigeria, belonging to one group and
gaining recognition are more important than fulfilment of their basic needs. High insecurity and culture have
impact on the hierarchy of needs among workers. Hence, he felt that it was better to ask the workers on what
motivated them.
85% of the surveyed respondents expressed that Maslow‘s hierarchy of needs may not come in the
same order of priority for them. 87% of the respondents expressed that satisfied needs reoccur. 85% of the
respondents expressed that it motivates themto satisfy the reoccurred needs. 93% of the respondents
expressed that everyone do not have the same hierarchy of needs. It was found that there are no significant
differences in the hierarchy of needs of male andfemale workers. It was also found that an individual‘s
educational status, social status, values, personal attributes and environment are impacting the hierarchy of
needs in Nigeria.
Maslow’shierarchy ofneeds is one among the early theories of human motivation. It was published in his
paper titled―The Theory of Human Motivation‖ in a Journal known as Psychological Review in
1943. According to this theory the basic needs of an individual are the physiological needs. If they are
fulfilled, his next needs are safety needs. If they are also fulfilled, his next requirement is social needs.
If these needs are also fulfilled, an individual needs esteemfollowed by self-actualization.
DiscussionQuestions
1. What were the guiding principles of Maslow‘s hierarchy of needs theory?
(Hints: Lower needs fulfilled first-Active needs to be satisfied-Satisfied needs do not motivate)
Discuss the findings of the Nigerian study.
Source: Ifedili, C.J. and Ifedili, C.I. (2012), “Perception of Maslow‟s Hierarchy of Needs Theory By Nigerian University
Workers – A challenge to University Administrators”, Interdisciplinary Journal of Contemporary Research in
Business, Vol. 4, No. 1
Topic Course
Unit-2:Evolution of Management Thought;
Principles ofManagement
Section-5: Behavioural Approach-AbrahamMaslow;
14
PEP Notes: Principles of Management
9. Quantitative Approaches in Operations Management
Quantitativeapproaches such as transportation problem, assignment problem, network analysis, dynamic
optimization models, waiting line models and linear programming can be used in operations management.
Quantitative approaches play a major role in operations management. Organizations use quantitative tools
and techniques for competitive advantage. Organizational work involves planning, scheduling, monitoring
and staffing the tasks with limited resources such as human resources, machinery, time, money and material.
Network analysis, transportation problem, assignment problem, linear programming, integer programming,
inventory management and waiting line problem help the managers in their decision making for executing
operations. Let us see the objectives of transportation problemand assignment problem.
Transportation Problem: This involves solving problems related to transport of goods and services from
multiple supply locations to multiple demand locations. The amount of goods produced at a specific supply
location varies from those produced at other supply locations. Similarly the need at one demand location
may vary from the need at another demand location. The cost for transfer of one unit of goods from one
supply location to one demand location varies from place to place. The main objective is to find out how
many units of goods from one supply location to one demand location are to be transferred so that the cost of
transfer of goods would be minimal. That is, the total transportation costs should be minimal. The quantities
required at the demand locations are to be satisfied. The problems involved in the application areas of
transportation include network flow problems, inventory scheduling, cash management and multi-period
production.
Example: Foster Generators, a generator manufacturer, has plants in 3 places in the US such as in
Cleveland, Ohio; York, Pennsylvania and Bedford, Indiana. It has 4 regional distribution centers in Chicago,
Boston, Lexington and St. Louis. The production cost is same at all three manufacturing plants. Hence, the
organization would like to transport the goods fromplants to distribution centers with minimal transportation
cost fulfilling the demands of all distribution centers. Thus, the problembecomes a transportation problemof
operations management.
Assignment Problem: Operations management decision making involves solving many assignment
problems such as assigning human resources to tasks, assigning jobs to machines, assigning contracts to
bidders, assigning sales men to sales territories, etc. One agent can be assigned to one task. The objective of
assignment problem is to assign the agents to tasks or tasks to agents so that the costs and time are minimal
and the profits are maximal.
Example: Fowle Marketing Research has three project leaders to be assigned to three research studies.
Their objective is to complete allthe three studies at the earliest.The completion of each research study is based
on the project leader‘s skills andcompetencies. They generally assign a research study to each project
leader so that all the three research studies are completed sooner. Thus, the problembecomes an assignment
problem in operations management.
Quantitative Approaches use mathematical and statistical techniques in solving problems of operations
management. They include techniques such as probability, linear programming, integer programming,
decision theory, correlation, regression and association techniques. They also use permutations and
combinations, functions and calculus, logarithms and complex algorithms. The logistics, transpo rtation
problems and travelling sales person problems can be solved using these techniques.
DiscussionQuestions
1. Discuss the role ofquantitative approaches in operations management.
(Hints: Competitive advantage-Help in decision-making)
2. Discuss the transportation and assignment problems that an organization
encounters.(Hints: Cost of transfer-Assigning jobs to machines)
Source: Raman, V.V.R. and Manikanta, B.V. (2011), “Impact of quantitativemethods in Operations Management”,
ICOQM-10, June28-30, 2011
Topic Course
Unit-2:Evolution of Management Thought
Principles ofManagement
Section-6: Quantitative Approach
15
Block I: Introduction to Management
10. Applications of Systems Theory Integral to Modern Approaches to Management
Modern approaches to management include applyingsystems theory to organization, organizational sociology and
organizational modelling.
When asked ―what is an organization?‖ many managers correspond it to structures, roles and reporting
relationships. Taking the organizations through change requires more than knowing the formal
organizational structures. Systems theory is applicable to organizations, organizational sociology and
organizational modelling. The origin of systems theory is natural science, which identified the objects,
relationships between the objects and their relationship with the environment. Examples of Systems include
human body and solar system. The applications of systems theory are as follows:
Organizations: Systems theory is widely applicable to organizations. An organizational systemhas
the processes such as:
a. Productive Processes:these are the processes used in transforming the input into output
in the form of products and services. It follows input-process-output cycle.
b. Energizing Processes: these are the processes that can effect or be affected by the
organization involving organizational boundaries such as psychological, social, physical
and work dimensions.
c. Enabling Processes:these processes enable and control the interactions between
individuals, groups,departments and profit centers.
d. Developing Processes: these processes help in the development and growth of individuals
and groups with differentiation.
 The applications of systems theory in organizations will be around these processes. Organizational
Sociology: Systems theory suggests viewing an organization through four different lenses.

a. Rational Lens: managers concentrate on organizational structure, roles, hierarchies, rules
and efficiency.
b. Human Resource Lens: managers pay attention to take care of people, their wellbeing
and in fitting them into the organizational structure.
c. Symbolic Lens: managers concentrate on interaction, mutual growth, organizational
culture, and individual and organizational learning.
d. Political Lens: managers look at the organization as a battlefield with conflicts,

negotiations,power struggles and messy ideas.
Open System Diagnostic Model: Systems theory can be applied to designing the organization. The
organizational design components include systems, structure, culture, behaviors, direction and
work.
Modern approaches to management include organizational sociology, organizational modelling and
systems thinking. Organizational sociology deals with demographics of CEO, top management and
individuals in the organization, their childhood, social relationships, and formal and informal group s in
the organization. Organizational modelling deals with organizational structures, reporting relationships,
communication and authority. Systems thinking approaches involve systems planning, systems design,
systems implementation and systemevaluation. It includes systems and subsystem‘s behavior and
communication.
DiscussionQuestions
1. In what fields can the systems theory be applied?
(Hints: Organizations-Organizational sociology-Organizational modelling)
2. What areas do the modern approaches to management deal with?
(Hints: Demographics within an organization-Organizational structure)
Source: John Corlett, “Systems Theory Applied to Organizations”,
http://warrington.ufl.edu/centers/purc/purcdocs/papers/0018_corlett_systems_theory_applied.pdf
Topic Course
Unit-2:Evolution of Management Thought
Principles ofManagement
Section-7: Modern Approaches to Management
16
PEP Notes: Principles of Management
11 Social Responsibility of Corporates
Corporatesocial responsibility is no more a philanthropicactivity; it is social responsibility of organizational
management
The important objectives of business are: maximization of profits, sales and revenue; increasing market
share and growth rate; avoiding risk for long time survival; and image building. Companies today have
realized that they will be successful in realizing these objectives only when they meet to societal needs.They
consider this as their corporate social responsibility. Existing social problems hinder business operations and
opportunities for growth. Most of the companies have switched to ‗shared value concept‘. Michael
Porter and Mark Kramer in their article ‗creating shared value‘ point out that business is at its best
when companies innovate to meet society‘s needs while building profitable enterprises.
Based on their research, Marc Pfitzer and others in their recent article in HBR ‗Innovating for Shared
Value‘ give severalexamples of companies thatderived business value through the embedding of social values:
Company Social value Business value
Dow Chemical Removed 600 million tons of trans fats Nexera sunflower and canola seeds-best
and saturated fats from US diet selling products
Nestle Helped millions of malnourished families Turned to be a profitable business
by providing inexpensive spices
Novartis Provided essentialmedicines to 42 Became profitable after 31 months
million people in 33000 rural villages
Mars Transformed farms and communities Avoided cocoa shortages
to Ivory coast
Intel Trained 10 million teachers in the use of Became profitable business in education
technology
Becton Protected millions of health workers by Resulted in $2 billion business,accounting
Dickinson creating needleless injections for 25% of company revenue
Vodafone Extended mobile banking services to 14 One of the company‘s best offerings.
million people in East Africa
According to them, companies rely on five reinforcing elements in creating shared value:
 Embedding a social purpose: Many companies build large scale business on social issues. While
companies like Nestle, Unilever, Dan one have made profitable business on health and nutrition
aspects, technology and telecommunication firms like IBM, Intel, Verizon have made education
and health care their mission. Many companies make profitable business on issues related to
Millennium Development Goals.

 Defining the social need: Many firms conduct extensive research on existing social problems like
malnutrition, anaemia, poverty and the like to understand the underlying social conditions and on
finding ways on how best to improve them along with good business.

 Measuring social value: To derive social and business benefits, they need to be monitored closely
through standard procedures. For instance, Coca-Cola measures its initiatives for increasing
employability of low-income youths and young adults and for increasing sales through
company‘s distribution channels and brand awareness.

 Creating the optimal innovation structure: Avoiding risk is an important business objective.
Care needs to be taken for initiating business of social value in issues of financing, governance,
managing systems and location.

 Co-creating with external stake holders: Co-creation is involving the stakeholders in all the
dimensions of the problem and designing and implementing solutions. Companies involve
stakeholders to understand the social needs and execute strategies for implementation.
Many companies are making profitable businesses by incorporating social values in their bus iness,
combining their corporate social responsibility with business expansion.
17
Block I: Introduction to Management
Social responsibility of organizational management includes employment generation, improving life
style of individuals, economic development, social empowerment (including women empowerment),
education, health and family care, sustainable livelihood and involvement in community. This social
responsibility is in addition to their business responsibility. Social responsibility, if not legal it is a
moral responsibility to any organization. It indicates their commitment to the society and the country
they operate in. It improves the organizational citizenship behavior. There are incidents in the business
history that socially responsible organizations were rescued by governments in turbulent times.
DiscussionQuestions
1. What are the important objectives of businesses?
(Hints: Profit maximization-Increasing market share-Image building)
2. What five reinforcing elements do companies rely on to create shared value?
(Hints: Embedding social purpose-Defining social need-Measuring social value-Innovation
structure-Co-creation with external stake holders)
Sources:
i. Pfitzer, M., Bockstette, V. and Stamp, M. (2013), “Innovating for Shared Value”, Harvard Business Review,
September 2013
ii. Porter, M.E. and Kramer, M.R. (2011), “Creating Shared Value”, Harvard Business Review, Jan-Feb 2011
Topic Course
Unit-3: Social and Ethical Responsibilities of Management; Principles of Managem ent
Section-3: Social Responsibilities of Management;
18
PEP Notes: Principles of Management
12. Different Perspectives on Corporate Social Responsibility
Organizations are looking at community as a whole instead of their own benefits while being socially responsible.
Devin Thorpe (2013) interviewed dozens of executives from small and large organizations in US in order to
know their corporate social responsibility activities and the benefits thereof to the organization. Overall,
organizations look at the community as a whole instead of looking at their own benefits. Different CSR
 Organization: Verdigris Group, A real estate company

CSR Practices: They developed sustainable practices based on their triple bottom-line approach,
which included planet, people and profit to operate their business; they focused on daily operations
with environmental consciousness.
Benefits: Clients want to work with them for their healthier and productive practices. Clients come
to them for their environmental, energy efficient, health and safety practices. Social goodwill is the
benefit of their CSR activities.

 Organization: West Monroe Partners, a consulting firm
CSR Practices: They launched ―1+1+1‖ program. They contribute 1% of their talent, 1% of
their treasure and 1% of their time to the community.
Benefits: It gave deeper sense ofpurpose and motivation in employees. They brought loyalty and
compassion in the organization.
 Organization: Entre Quest, a consulting firm
CSR Practices: They have ―Give Back Days‖ in which employees serve meals at Our Daily Bread, work
with Habitat for Humanity for ‗home‘ building, mentor children at b4Stduents and work with
Big Brothers and Big Sisters.
Benefits: Organization is recognized as the best place to work for two continuous years; CEO is
recognized as the most admired CEO by The Daily Record.

 Organization: Gaia Development, a CA based sustainable development company
CSR Practices:They launched a non-profit company called Collective Solution,to workon povertyand
climate change.Employees went to Nicaragua to build solarovens to the families. Benefits:Improved
creativity and versatility in employees.Employees came to knowsimplest solutions to day-to-day
problems.activitiesanditsbenefitsasexpressedbythe respondents are as follows:
Socially responsible organizations play a major role in community building and economic
development of the country. These organizations exist not only for their benefits but also to serve the
needs of the society or they contribute to the development of the society. Indian Organizations such as
Infosys, InfoTech, TCS and Wipro have shown their socially responsible contributions in times of
tsunami in India. Microsoft in India is educating rural population through their Shiksha program.
Corporate social responsibility gives long term benefits for the organization such as reputation, good
will, new customers, brand building, loyalty of existing customers, increase in sales, and increased
employee and stakeholder satisfaction.
DiscussionQuestions
1. What are the contributions of socially responsible organizations?
(Hints: Community building-Serve society‟s needs)
2. Discuss some of the CSR activities undertaken by organizations. What benefits did these activities
offer?
(Hints: ‘1+1+1‟ program-Employee motivation-Loyalty and compassion)
Source: Devin Thorpe (2013), “Why CSR? The Benefits of Corporate Social Responsibility Will Move You to Act”,
Forbes
Topic Course
Unit-3: Social and Ethical Responsibilities of Management;
Principles of Management
Section-4: Arguments for and against Social Responsibilities of Business;
19
Block I: Introduction to Management
13. Social Stakeholders as Drivers of Long Term Business Value
Social stakeholders including shareholders create long-term value to business.
Stakeholders are the group which can impact or are impacted by the organizational objectives. Stakeholders
including shareholders matter most to the organizations. The identification of stakeholders involves
examining the industry, product portfolio, business model and competitive playing field. How do
stakeholders understand the company? How do stakeholders view the company? How do stakeholders view
the impact of organization on society and environment? These matter most to the organizational business
value. Environmental, Social and Governmental (ESG) factors and their impact on sustainability and
organizational performance are becoming important to the stakeholders.
It is important to understand what value means to stakeholders as the value organization is going to
 gain from stakeholders through its actions.

Stakeholders may have economic impact on the organization further impacting the organizational
 value.

Organizations require Environmental, Social and Governmental (ESG) performance in order to
 create long term value. ESG risks can impact 5% of the organizational revenues.

 The objective ofbusinessis to create shareholdervalue and be socially responsible.
The organization has to create value to investors,suppliers, customers,employees and community
 in order to create business value.

Organization can create value to employees through better HR practices, to suppliers through
efficient resource management, to community through investments in community, and to
 environment through eco-systemprotection and enhancement.

Stakeholders can impact organizational operations, enforce regulatory requirements, can influence
consumer boycott and impact supply-chain network.
Example: In the 1990s, ABN AMRO was targeted by the activists for its investments in paper and mining
companies to show commitment to protect the forests and ecosystems. In 2003, ABN AMRO partnered with
other banks to invest in forests, mining and energy sectors. Thus stakeholders can drive the organizational
long term business value.
Social Stakeholders are the stakeholders in the society which are external to the organization. These
stakeholders can impact the organization positively or negatively. Similarly, the organizational projects
can impact social stakeholders positively or negatively. For example, in projects such as heavy
construction, nuclear power, social transformation and environmental projects, the involvement of social
stakeholders can help in making the project successful. In projects such as HIV eradication, polio
vaccination, and flu epidemic without social stakeholders support, these projects cannot be successful.
Current day auto manufacturers and drug discoverers are involving social stakeholders in product design.
DiscussionQuestions
1. How do social stakeholders affect an organization?
(Hints: Affect project‟ssuccess or failure-Projects like HIV eradication cannot succeed without them)
2. Discuss the reasons for the growing importance of ESG factors.
(Hints: To create long-term value-Value to investors,suppliers, etc.)
Source: Hespenheide, E.J. and Koehler, D.A. (2012), “Drivers of long-termbusiness value: Stakeholders, stats and
strategy”, Deloitte
Topic Course
Unit-3: Social and Ethical Responsibilities of Principles of Management
Management; Section-5: Social Stakeholders;
20
PEP Notes: Principles of Management
14. Quality of Work Life as a Measure of Social Responsiveness
Quality of work life as a measure of social responsiveness can be achieved through workplace flexibility in the
organizations.
Introduction:
Severalrewards and recognitionsare being givenby organizations to improve the performance of the employees,
notable of them are recognizing and rewarding employees through incentives, gain-sharing, profit sharing,
offering benefits, perks and adopting flexibility at workplaces. Workplace flexibility improves quality of work
life. It is an important measure forbalancing work/family demands.Studies showwork/family programs decrease
family conflict, job dissatisfaction and stress related problems. What follows now is the summary of National
Study of Employers 2012 which deals essentially with workplace flexibility.
Summary of National Study of Employers 2012 (NSE):
Families and Work Institute‘s 2012 National Study of Employers (NSE) is the most comprehensive and far-
reaching study of the practices, policies, programs and benefits provided by U.S. Employers to address the
changing needs of today‘s workforce and workplaces.It is basedon the Institute‘s 1998 Business Work-Life
Study and has been conducted three additional times that is in 2005, 2008 and 2012. It is the only study of
employers in the U.S. designed to address the changing needs of employees among a nationally
representative group of employers.
NSE sample includes 1,126 employers with 50 or more employees—75% are for-profit employers and 25%
are non-profit organizations; 18% operate at only one location, while 82% per cent have operations at more
than one location. The Report mainly analyses the differences in workplace flexibility between profit and
non-profit organizations and large and small organizations.
Definition of flexibility:
Definition of flexibility is much broader and includes the following types of flexibility:
 Flex Time and Place includes various forms of flexibility that affect when and/orwhere employees
do their job, such as flex time, telecommuting and compressed workweeks.

 Choices in Managing Time reflects the degree to which employees can exercise some choice about
when they work—from scheduling hours and overtime to deciding when to take breaks— and about
how their time at work is spent.
 Reduced Time includes options such as access to part-time or part-year schedules.
 Care giving Leaves looks at whether the organization offers leaves for birth, adoption or care giving
to ill family members and whether any of this leave is paid.

 Time Off includes policies and practices that apply when employees take time away from work,
including scheduled absences (such as vacations and time for training) as well as formal policies for
taking sick days and planned sabbaticals. It also includes informal access to time off for
unanticipated or unplanned events.
 Flex Careers refers to flexibility over the course of an employee‘s career or working life,
including provisions that enable employees to enter, exit and re-enter the workforce and to increase
and decrease their workload or pace.

 Culture of Flexibility reflects whether supervisors are knowledgeable about flexible practices and
promote and communicate them effectively.
It is found in the study that employees in more effective and flexible workplaces are more likely than other
employees to have:
 greater engagement in their jobs;
 reduced absenteeism

 higher productivity
 improved working relations between employees and supervisors
21
Block I: Introduction to Management

 higher levels ofjob satisfaction;
 strongerintentions to remain with their employers;
 less negative and stressfulspill over from job to home;
 less negative spill over from home to job; and
Better mental health.
The 2012 Report addressedthe following questions related to quality ofworklife and rewards and recognitions:
 What practices, policies, programs and benefits do employers provide to address the personaland
 family needs of employees?

To what extent have employers changed over the past seven years (between 2005 and 2012) in the
provision of select practices, policies, programs and benefits?
Examined Predictors and Measured Outcomes
Predictors:
 The demographics of the workplace—industry, profit/non-profit
status, employer size, number of years in business and number of
 operating locations;

The demographics of the workforce—percentage, women, of
racial and ethnic minorities, unionized employees, hourly
employees, part-time employees, women and racial and ethnic
minorities in top positions or reporting to people in top
 positions;

The financial health of the employer—how well the organization
is doing in comparison with competitors, downsized or upsized;
 and

Human resource issues—difficulty or ease of filling high-skilled
job vacancies; filling entry level/ hourly positions;
Outcomes:
 Workplace flexibility;
 Care giving leaves;
Child and elder care
 assistance; and

Healthcareand
economic security
benefits.
Broad Trends:
Two broad trends are noticed in the provision of flexible work options from 2005 to 2012. First, employers
have increased their provision of options that allow employees to better manage the times and places in
which they work. These include flex time (from 66% to 77%); flex place (from 34% to 63%); choices in
managing time (from 78% to 93%); and daily time off when important needs arise (from 77% to 87%).
Second, employers have reduced their provision of options that involve employees spending significant
amounts of time away from full-time work. These include moving from part-time to full-time and back again
(from 54% to 41%); and flex career options such as career breaks for personal or family responsibilities
(from 73% to 52%).
Motivational Factors and Obstacles for Implementing Work/Life Initiatives:
 Factors:

 Retention (37%)
 Recruitment (11%)

 Desire to help employees
 Manage work andfamily life(16%) Improve
morale of employees (12%)
Motivational
Obstacles:
 Cost (25%)
Job requirements and work load do not allow these 
programs (12%)
 Lack of staff to implement these programs (11%)
Loss of productivity and difficulty supervising staff
(10%).
22
PEP Notes: Principles of Management
Predicting Programs, Policies and Benefits
Predicting Flexibility:
Those most likely to be moderately to highly flexible are
 that:
 are non-profit‘s;
 are larger;
 have more women in theirworkforces;
 have fewerracial or ethnic minorities in theirworkforces;
 have fewerunion members;
 have fewerhourly employees;
 have more part-timers; and
have more women and racial or ethnic minorities in top/senior
positions
employers
Predicting Care giving Leaves:
Those most likely to offer
generous care giving leave
benefits are employers that:
 are larger;
 have more hourly
employees; and

 Have experienced
downsizing in the past
12 months.
Predicting Child and Elder Care Assistance:
Those most likely to provide child and elder
 assistance are employers that:

 are larger;
 are non-profit‘s;
 are in more than one location;
 have been in businesslonger;
 have more women in theirworkforces; and
Have more women and racial or ethnic minorities in
top/senior positions.
care
Predicting Health Care and Economic
Security Benefits
Those employers most likely to provide
health care and economic security
benefits:  are larger;
 are non-profits;
 have been in business longer;
have more women and racial or
ethnic
 minorities in top/seniorpositions;

 are doing betterthan theircompetitors; and
have experienced upsizing ordownsizing
In sum, non-profits offer more programs, policies and benefits than profits do. Furthermore, employers with
more diversity in top/senior positions provide more support. When these initiatives cost money, employers
that are larger also are more likely to provide a higher level of support.
Small versus Large Employers:
In 2012, there are four statistically significant differences between small and large employers. Small
employers are more likely to allow employees to change starting and quitting times within some range of
hours have control over when to take breaks, return to work gradually after childbirth or adoption and take
time off during the workday to attend to important family or personal needs without loss of pay.
Some Significant Findings of the Study:
 Organizations where women make up less than 25% of the employees are more likely to have a low
level of flexibility than organizations where women represent a larger share of the workforce.
 Organizations, where racial and ethnic minorities make up more than 50% of the employees, are
more likely to have a low level of flexibility (33%) than organizations where racial and ethnic
minorities represent a smaller share (0%-50%) of the workforce.
 Organizations where hourly employees make up 50% or more of the workforce are more likely to
have a low level of flexibility (30%) to be in the low quartile.
 Organizations with no union representation are more likely (26%) to provide a high level of
flexibility, compared with 9% to 14% of those with unionized employers
 Larger organizations are more likely (44%) to offer generous care giving leaves (high level) than
smaller organizations (34%).
 Employers that have experienced downsizing in the past 12 months (44%) are more likely to offer
generous care giving leaves than employers who have not experienced such events (37%).
 Large employers are more likely (56%) to provide a high level of child and elder care assistance
than small employers (25%).
23
Block I: Introduction to Management
 Non-profit organizations (46%) are more likely to offer a high level of child and elder care
assistance than for-profit organizations (29%).
 Organizations that report doing better than their competitors are more likely to offer a high level of
health care and economic security benefits (27%) than those that report doing worse than their
competitors (19%).
Conclusion:
In the seven years between 2005 and 2012, the economy has been quite volatile, and common wisdomwould
have it that employers would cut back on the work life assistance they offer to employees. In fact, there are
serious reductions in how much employers pay toward benefits that cost money (e.g., their contribution to
health care and pension plans and leave options). On the other hand, we have found greater in vestment in
options that allow employees flexibility in when and where they work, such as flex time; flex place and time
off during the day to attend to important family and personal needs. Interestingly, employers with more
diverse leadership at the top and employers that are non-profits turn out to provide the best support for
making work ―work‖ for both the employer and the employees.
It is clear from the Report that the rewards and recognitions for employees would increase by implementing
flexi times rather than reduced times. However care needs to be taken so that these benefits do not adversely
affect the performance of employees and productivity of organizations. The flexi work places should be
effective to enhance the quality of work life of the organizations.
Quality of Work Life is possible through flexibility in the organization, self-management and
discipline. There are many factors such as organizational pressures, stress, and daily commute, personal
relationships such as marriage and divorce, child care, disability care and old age care that are impacting
the balance between work life and personal life in current days. Proper organizational skills, self-
discipline, flexible work hours and benefits can help in quality of work life.
DiscussionQuestions
1. What elements do workplace flexibility include?
(Hints: Flex time and place-Care giving leaves-Flex careers)
2. Discuss the motivators and obstacles in implementing work/life
initiatives. (Hints: Recruitment-Retention-Cost-Lack of staff)
Source: Maltos, K. and Galinsky, E. (2012), “2012 National Study of employers”, Familiesand Work Institute,
SHRM, When Work Works
Topic Course
Unit-3: Social and Ethical Responsibilities of Management;
Principles of Management
Section-6: Measuring Social Responsiveness-Quality of Work Life;
24
PEP Notes: Principles of Management
15. Personal and Organizational Factors impacting Managerial Ethics
Personal and organizational factors impact the managerial ethics in decision making of the organizational managers.
Ethics plays a major role in both public and private sector organizations. Unethical behaviors are very
expensive to the organizations, employees, investors and the society at large. Business ethics are positiv ely
correlated to organizational performance. The more global the organization is the more ethical problems the
organization can face. Unethical behavior of the organization can reduce the stock prices. Example:
SHELL has to relook at their core business principles after it had major ethical issues in 1995.
Ethical decisions decide between right or wrong while differentiating between moral or immoral issues at the
same time. Ethics indicates how we think and behave with others and how we want others to think and
behave with us. Yusoff, Salleh, Zakaria, Nair, Vadevello and Luqman (2011) have done a study of 210
managers working in 42 oil and gas companies in Malaysia to find out the relationship between personal and
organizational factors and ethical decision making of managers. The personal factors they considered include
job satisfaction and organizational commitment. Organizational factors they considered are code of ethics
and rewards. The research model is shown in following diagram.
Personal Factors
Job Satisfaction
Organizational Commitment Ethical
Decision
Organizational Factors
Making
Code of Ethics
Rewards
InManagerialthestudy,it ethicswasfoundisaboutthat jobdecidingsatsfactrighton, organizationalwrong,correctcommitment,orincorrect,code ofjustifethiedcs andor rewardsunjustified,have
influaccenceptableon orandunacceptable,positivecorrelationanddharmawith orethicaladharmadecision(ethicalmakingor unethical)ofmanagers. Ethicsinthehaveoil andlonggasbackgroundindustry in
Malaysiaofculture.Fewerand eligionrewards.Theseareassociatedethicscan withvary mfrorem indethicalvidualdecisiontoindividualmakingand.Mofreomrewardscountryareto associatedcountry.
withFor lexample,ssethicalgivingdecisiongiftmakingtocustomerbehavior isin ethicalmanagersin.one culture and unethical in another culture. The
factors such as individual values, attitude, behavior, country culture, organizational culture, group
culture, top management culture, job satisfaction, economic/financial situation, competition, self-interests
and personal life can impact the managerial ethics in an organization.
DiscussionQuestions
 Discuss the importance of ethics to an organization.
 (Hints: Effect on organizationalperformance-Effect on employees and investors)
Discuss the factorsthat influenced theethicaldecision making process.
(Hints: Personal factors-Organizational factors)
Source: Yusoff, Z.Z.M., Salleh, W.A., Zakaria, Z., Nair, G.K.S., Vadevello, T. and Luqman, A. (2011), “The influence of
personal and organizational factors on ethical decision making intentions amongmanager s”, International Journal of
Business and Management, Vol. 6, No. 9,
Topic Course
Unit-3: Social and Ethical Responsibilities of
Principles of Management
Management; Section-7: Managerial Ethics
25
Block I: Introduction to Management
Block II: Planning
16. Strategic Planning for Better Organizational Business Value
17. Technology and Innovation Strategies of an Organization
18. HR alignment for Effective Implementation of Strategy
19. Decision-Making Process in Automotive Industry
20. Risk Culture for Decision Making in an Organization
21. Data Analytics as Systems Approach to Decision Making
26
PEP Notes: Principles of Management
16. Strategic Planning for Better Organizational Business Value
Institutional logic as part of strategic planning enhances business value historically.
Traditionally, the sole purpose of business has been to make money and more profits -the more it made the
better-it used to be. Rosabeth Moss Kanter takes a different approach, which she terms as institutional logic
and says great companies believe that they are more than money-making machines.
Institutional logic states that companies are more than instruments for generating money; they are also
vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work
with them. According to institutional logic, the value that a company creates should be measured not just in
terms of short-term profits or pay cheques but also in terms of long term benefits. The Corporate leaders
have to build enduring institutions.
Aims of Great Companies:
Producing goods and services that improve the lives of users
Providing jobs to many and enhancing workers‘ quality of life.
Developing a strong network of suppliers and business partners
Ensuring financial viability
Promoting economic value along with societal and human values.
Six facets of institutional logic are a common purpose, long-term focus, emotional engagement, partnering
with the public, innovation, and self-organization.
Institutional Logic of Great Companies
Facets of
Institutional Purpose Examples
Logic
Common To provide Mahindra Group operates in many industries, including
Purpose coherence amidst automobiles, finance, IT, and several others.It invests in creating
diversity and to a culture based on a common purpose.Its Group Executive Board
enable people to rise is made up of people from all segments of industry to unite their
goals and forge strategic plans to enable people to rise.
Long-term To sacrifice short- In South Korea, after the Asian financial crisis of the late 1990s,
focus term financial when Shinhan Bank wanted to acquire Chohung Bank, there was
opportunities if they a huge protest and the management changed its approach without
are incompatible compromising on long term benefits. They negotiated an
with institutional agreement with the Chohung union, giving equal representation
values to both Shinhan and Chohung managers on a new management
committee and increased the salary of Chohung employees.
Within 18 months, Shinhan was outperforming not only the
banking industry but also the South Korean stock market.
Facets of
Institutional Purpose Examples
Logic
Emotional To evoke positive The CEOs of great companies‘ allocated considerab le resources
Engagement emotions, stimulate and time, engaging managers in the task of communicating
motivation and values.
propel As a Procter & Gamble executive, Robert McDonald had long
Self-regulation or believed that the company‘s Purpose, Values, and Principles
peer regulation. To become embedded in tasks,goals, and performance standards by
increase employee evoking strong emotions in employees and giving meaning to the
engagement company‘s brands.
Partnering To address societal International activities, conducted in collaboration with the
with the needs along with United Nations and other global organizations - Procter &
Public business interests Gamble‘s Children‘s Safe Drinking Water program with
UNICEF and several NGOs
Large domestic projects, undertaken in collaboration with
27
Block II –Planning
government ministries and development agencies- PepsiCo‘s
agricultural projects in Mexico with the Inter-American
Development Bank
Product or service development to address unmet societal needs-
P&G‘s linkages with public hospitals in West Africa
Short-term volunteer efforts- IBM‘s work following the Asian
tsunami, Hurricane Katrina, and earthquakes in China and Japan
to provide software to track relief supplies and reunite families.
Innovation To serve society to IBM‘s Corporate Service Corp- develops future leaders by
become credible sending diverse teams of the company‘s best talent on month
when leaders allocate long projects around the world.
time, talent, and Cemex- produced innovations such as antibacterial concrete,
resources to national which is particularly important for hospitals and farms; water-
or community resistant concrete, useful in flood-prone areas; and road surface
projects material derived from old tires, desirable in countries that are
building roads rapidly.
Novartis employees- serve in hospitals,where they see first-hand
the challenges of disease and how their drugs are used
Self-- To create networks Three PepsiCo managers in Latin America had shared a dream
organization to share information, for around a decade of developing new kinds of potatoes that
new initiatives or were suitable for southern climates. In August 2010, CEO Indra
innovations to Nooyi announced the establishment of a global potato
facilitate them development center in Peru, headed by one of the three
through champions
communication
platforms or meeting
spaces.
Leaders in great companies use an institutional or social logic to supplement economic or financial logic in
guiding and growing their enterprises. Institutional logic cannot be captured by cost-benefit equations or
reduced to the language of economics, and yet it turns out to be a powerful driver of financial performance.
All the six facets are interlinked and together they help in institution building and realizing business values.
Strategy Planning is about long term planning for the organization. It is best practice to include
organizational logic, innovation, networking and social media in strategy planning. These give better
inputs to the planning process in addition to the internal marketing and product development teams. The
early days of strategic planning was known as top management planning. Current day organizations are
involving other important stakeholders also into strategy planning. Some organizations even take
customers and their product lines and strategies into consideration while devising their own
organizational strategies. It is also better to follow industry trends and technology trends for strategic
planning. Strategy involves deciding on products and services to offer, sources of income, profit making,
processes to deal with customers and employees.
 Discuss the importance of strategy planning to an organization.

(Hints: Better inputs to planning process-Long-term planning for the organization)
 What are the six facets of institutional logic?
DiscussionQuestions

(Hints: Common purpose-Long-term focus-Self-organization-Emotional engagement-
Public partnering-Innovation)
Source: Kanter, R.M. (2011), “How Great Companies Think Differently”, Harvard Business Review, November 2011
Topic Course
Unit-6: Strategies, Policies and Planning Premises; Principles of Management
Section-6.5: Strategy Planning;
28
PEP Notes: Principles of Management
17. Technology and Innovation Strategies of an Organization
Balancing in the box and out of box thinking is critical to strategy.
Lego‘s fall and rise story speaks about how a global toy industry with its ‗out of the box thinking‘ and
‗innovation binge‘ became almost bankrupt and could once again rise to supremacy with ‗in box thinking‘ and
turning to ‗innovation inside the brick‘. The success behind the story is Lego‘s creativity and innovation
coupled with focus and control in business.
Out of the Box Strategy Vs. In the Box strategy
 An expression that describes
non-conformal creative thinking
 New Innovative strategies
 An expression that describes
conformal thinking
 Traditional strategies
Out of the Box expression is derived from the famous nine dot puzzle which asks for joining the
dots in four straight lines without lifting the pen when once started joining
. . .
This means that managers go beyond the normal borders to get solutions or if
they have to solve problems. In the case of Lego they shifted from excessive
. . . innovative methods and out of the box strategy and went back to their traditional brick assembling
toys.
. . .
David Robertson, the author of the book ‗Brick by Brick:How Lego rewrote the Rules of Innovation and
Conquered the Global Toy Industry‘ writes about the transformation of Lego from a small company that
made wooden toysto a worldwide giant and a recovery fromnearbankruptcy to supremacy in globalmarket.
Here goes the story.
The Lego Company: The Lego Group is a family-owned company based in Billund, Denmark, and best
known for the manufacture of Lego brand toys. The company was founded in 1932 by Ole Kirk
Christiansen. From 1978-1993 was a golden period for Lego where company grew at 14% per year, every
year for 15 years.
Fall of Lego: It went through a decline when sales did not grow and costs rose during 1993-98 even though
it tried to triple its number of new toys. One reason for the decline it reached could be attributed to the end of
a natural growth cycle and the other is rise in the cost without changing sales. Company laid off 1000
people. That time it was managed by Kjeld Kirk Christiansen, grandson of the founder Ole Kirk
Christiansen.
Importance and perils of Innovation: Looking at the losses he felt that he was not the right person to lead
the company and passed it on to a turnaround expert, Poul Plougmann. He embarked innovation and
experimented by introducing a lot of products, including Star Wars, Harry Potter and Bionicle. The company
tried to create whole set of complementary innovations that would reinforce each other. For instance,
Galidor toy had video games, TV show, telling the story behind the toy. Unfortunately, the TV shows were
so bad that Lego did not know how to make them. Harry Potter and Star Wars were successes only for a
short time as people lost liking for those toys when these movies were out dated. The company tried to
innovate in lots of ways and lost control of the innovation. Lego started losing money in 2003.
Rise of Lego : While other firms abandoned innovation, Lego continued in a different way. They shifted
from the ‗out of the box strategy‘ to be back ‗in the box‘ strategy. They went back to their old brick and
focused on police stations and trucks which their fans liked very much and they also profited from that
business. The importance and the dangers of innovation illustrate the story of Lego. Excessive innovation
29
Block II –Planning
bankrupted Lego. It could come back by adopting new strategies. The success of Lego lies in small
innovations and small ideas integrated well by focusing on what the customers wanted and needed. For the
past five years, Lego has sales growing at 24% per year every year and profits growing at 40% per every
year.
Strategy is thinking about long term. That is, devising long term plans for the organization. Strategies
include functional strategies and operational strategies. Functional strategies for an organization include
marketing strategy, finance strategy, product or engineering strategy, HR strategy, IT strategy or
technology strategy. Operational strategies deal with day to day operations of the organization. Usually
strategy formulation is done in a top-down approach. CEO, top and senior management are part of
strategy formulation. Board of directors can help and mentor the CEO in formulating a strategy. Every
employee in the organization is part of strategy implementation. Out of the box thinking is required for
strategy formulation.
DiscussionQuestions
1. Discuss the significance of functional and operational strategies.
(Hints: Deal with day-to-day operations-Help in formulating marketing and finance strategies,etc.)
2. How did ‗out of the box‘ strategy help Lego to resurrectitself?
(Hints: Focus on innovation-Experimentation-Small ideas)
Source: “How Lego clawed its way out of near Bankruptcy”, Knowledge@Wharton
Topic Course
Unit-6: Strategies, Policies and Planning Premises; Principles of Management
30
PEP Notes: Principles of Management
18. HR alignment for Effective Implementation of Strategy
Effective managers require high degrees of managerial skills such as technical, human and conceptual skills.
What makes employees to consider workplace as a great place to work? Organizations are realizing the
importance of aligning HR policies and procedures with organizational strategies for building their image.
Every organization probably aspires to enter into the list of Fortune 100 Best Companies to Work. A great
place to work is one where management and employees are happy and feel that they are mutually benefitting
with each other‘s contribution and where employees are proud to work.
Fortune Partners with the Great Place to Work Institute annually conduct a Survey in Corporate America to
pick the 100 best companies to work with.
The Top 10 BestCompanies for 2013 are:
Rank Name of the Company
1 Google. Inc
2 SAS
3 CHG Healthcare Services
4 The Boston Consulting Group, Inc.
5 Wegmans Food Markets, Inc.
6 NetApp
7 Hilcorp Energy Company
8 Edward Jones
9 Ultimate Software
10 Camden Property Trust
Methodology used for selecting Best Companies:
More than 277 000 employees from 259 firms participated in a survey this year. The eligibility criteria for
participating in the survey were: 1) the company should be 5 years old, and 2) the company should have
more than 1000 US employees. Data was collected through two questionnaires, one called Trust Index
Survey and the other Culture Audit Survey. The Trust Index Survey questions related to
management‘s credibility, job satisfaction and camaraderie. Two thirds of the score was based on this
survey. Questions on Culture Audit Survey included on Pay and Benefit programs, Hiring practices,
Methods of internal communication, Training programs, Recognition programs and Diversity efforts. One
thirds of the score was based on this survey. Ranking of companies was done on the basis of overall score
obtained by each company.
Effective implementation of strategy is possible only with involvement of all employees in the
organization. That is, HR strategy should be in line with organizational strategy to implement the
strategy in the organization. This is because any new strategy implementation involves some extent of
change management in an organization. In turn, change management in an organization has to do
something with people in the organization.Thus withouthuman resources effective strategy implementation
is not possible in an organization. HR professionals must understand the organisations‘ business, it‘s
competition and relevant trends. Organizational strategy implementation requires changes
to organizational structure, organizational culture, business processes, technical processes, marketing
strategies, product strategies, operational strategies and HR strategies.
DiscussionQuestions
1. What are the benefits of aligning HR strategy and organizational
strategy? (Hints: Effective strategy implementation-Image building)
2. Discuss the factors that are essentialfor implementation of strategy.
(Hints: Employee involvement-Understanding an organization‟s business)
Source: “Fortune 100 Best Companies to Work For”
Topic Course
Unit-6: Strategies, Policies and Planning Premises;
Principles ofManagement
Section-6.11: Effective Implementation of Strategy;
31
Block II –Planning
19. Decision-Making Process in Automotive Industry
Multidisciplinary collaborative and cohesive process is used as complex decision-making process in an automotive
industry.
Continuous technological and operational changes impact decision-making in the automotive industry. The
amount of software in parts of cars is growing rapidly. Software is replacing mechanical devices, thereby
making the integration tight and complex. There is a need for cohesion and cooperation between different
stakeholders in the automobile industry such as among automobile manufacturers, OEMs (Original
Equipment Manufacturers), suppliers and design partners. American and European OEMs are facing
competition from Asian countries such as from India and China. The demand for automobiles is shifting
from America and Europe to India, China, Latin America and even Africa. Under these scenarios, decision
making in the automobile industry is becoming more complex.
Decision Making Process: The decision making process in the automotive industry is a multidisciplinary
collaborative process. It includes all the stakeholders throughout the product development life cycle. The
complexities in product development process, supply chains, interoperability, connectivity and visibility are
impacting the decision making process. IT is widely used in the industry for connectivity, interoperability
and visibility. Tools such as CAD, CAM, analytics, supplier scorecards and costing are used in product
development process. If the stakeholder takes a single decision it is going to impact all the other stakeholders
in the product development life cycle. Hence, the decision should be timely and accurate and it should be
informed to all other stakeholders in the life cycle.
Decisions include both internal and external stakeholders and it should happen in a collaborative and
cohesive environment. Automotive manufacturers are looking to reduce the costs and increase revenues.
Hybrid cars and Electric cars are also putting more pressure on manufacturers and OEMs. It is best practice
to have a centralized product data management system connecting all the stakeholders for efficient decision
making in this complex automotive industry.
Decision-making process varies from organization to organization, situation to situation, issue to issue
and industry to industry. In some industries, decision making is very quick, such as in the nuclear energy,
defence and healthcare industries. Decision making process involves finding the issue, gathering facts,
finding alternative solutions, selecting best alternative and implementing the alternative. Sometimes
brainstorming, Delphi technique and group decision making can help.
DiscussionQuestions
1. What factors affect the decision-making process in the automotive industry?
(Hints: Technological changes-Operational changes-Shift in demand to newer markets)
2. Discuss the salient features of the decision-making process in the automotive industry.
(Hints: Multidisciplinary process-Collaborative process-Use of IT)
Source: Barkai, J. (2010), “The Automotive Industry: New Complexities Demand Better Decision Making”, IDC
Manufacturing Insight
Topics Course
Unit-7: Managerial Decision Making; Principles of Management
Section-7.5: Decision-Making Process;
32
PEP Notes: Principles of Management
20. Risk Culture for Decision Making in an Organization
Risk culture affects decision making under risk and uncertainty in an organization.
Risk Management
Strategy Drives
Policies
Risk
Culture
Chain
Procedure
Systems
Organizational
Cult ure Drives
Values
Practices
Behaviour
CORRECT TREATMENT ACTUAL TREATMENT
OF RISK OF RISK
If Strategy and culture are fully aligned then
Correct and Actual Treatment will be Match
Source: Google Images
KPMG launched a survey on Enterprise Risk Management across Europe, Middle East, Africa and India to
understand the current trends and practices and the imperatives for more effective risk management in
future. Some important findings of the survey are:
1. Risks are on the rise and becoming more complex
2. CEOs view risk as an opportunity whereas others want ‗safety first‘ approach
3. Boards are responsible to ensure alignment between strategy and risks. They doubt the reliability of
risk information as companies do not have confidence in the board‘s ability
4. Organizations are trying to improve risk management systems and processes but the issue of
embedding risk into the organization‘s culture and making it an integral part of the business
is not getting adequate attention.
5. Information sources are largely inward focused (but not forward looking) and external focused.
Sustainability and climate change issues are not covered
6. Organizations are developing responses at individual process level but not at higher levels and are
not aware of the interdependence between various risks
Risk culture encompasses constant and consistent communication about risk, ethics and values, practices,
behaviours, considering risk factors in decision making, clearly defined roles and responsibilities, clearly
documented policies, procedures and systems.
Global financial crisis brought the discipline of risk management to the agenda of all enlightened
organizations throughout the world. It is against this backdrop that creating a robust risk culture in the
organization assumes importance.
The study reveals that risk culture is inadequate even in well-established and reputed organizations.
Primarily there are three main actors/ factors in risk management:
33
Block II –Planning
1. Attitude at the top:
Compliance with the risk policies and appetite is independently presented and reviewed by the
 board

 Personnelreward structuresare aligned to riskadjusted measures
Organization has committed sufficient resources to riskmanagement
2. Risk ownership:
 
 Clarity on the risk appetite fromseniormanagement and the board
ERM is integrated into management‘s risk management processes
3. Risk facilitation:
 CROs have a role to play in strategic decisions-M&A, new products,entering new markets
etc. Risk management training in place, covering the policy, methodology, tools and practices 
The key challenges faced by the surveyed organizations in the area of risk culture are:

 Risk owners are unclear about the organization‘s risk appetite
Risk responsibility delegated authority limits and compensation structures are not seamlessly
integrated with risk appetite/tolerance
The study established the following imperatives towards ensuring effective risk culture:
Imperative 1: Enhancing board governance of risk: effective risk oversight by the board
Imperative 2: Linking objectives, strategy and risks to Key Risk Indicators
Imperative 3: Instilling robust risk culture by settling the conflict between organizational and individual
decision maker‘s appetite and attitude towards risks
Imperative 4: Position the CRO as a strategic business advisor
Imperative 5: Integrating risk management at the enterprise level
The study also suggested undertaking a risk culture survey before implementing risk management. This is
necessary to:
 Assessthe currentlevel of understanding of the organization‘s objectives, risk concepts andthe
 attitude towardsrisktaking
 A poorly integrated and forced risk management will not yield anticipated
results Dynamically respond to risks on a continuous basis
Focus

areas for risk culture survey:
Understanding the perception of risk of the CEO and senior management
 Understanding the pressure points in risk management-compensation policy, ability to discuss

emerging issues,clarity about roles and responsibilities etc.
Establishing the expectations from the CEO regarding risk management
34
PEP Notes: Principles of Management
The organizationalculture towardsrisktaking impacts the decisionmaking under risk anduncertainty.
Every organizationaltaskinvolvessome sort ofriskoruncertainty associated with it.Hence,taking
decisions on these kinds of tasks require courage, communication skills and influencing skills in the
manager. The task failure can impact the manager‘s career in the organization or organizational
reputation. Hence, decision making underrisk and uncertainty requires lot of patience, maturity,
listening, initiative, innovation,courage and confidence.
DiscussionQuestions
1. What were the findings of KPMG‘s survey?
(Hints: Rise of risks-Increase in the complexity of risks-Risks viewed as an opportunity)
2. What are the requisites of a risk taking organizational culture?
(Hints: Courage-Communication skills-Influencing skills)
Source: KPMG (2011), “Risk Management, A Driver of Enterprise Value in the Emerging Environment”, KPMG
Topic Course
Unit-7: Managerial Decision Making; Principles of Management
Section-7.7: Decision-Making Under Certainty, Risk and Uncertainty;
35
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ICFAI Principles of Management- Solved assignments and case study help
ICFAI Principles of Management- Solved assignments and case study help
ICFAI Principles of Management- Solved assignments and case study help
ICFAI Principles of Management- Solved assignments and case study help
ICFAI Principles of Management- Solved assignments and case study help
ICFAI Principles of Management- Solved assignments and case study help
ICFAI Principles of Management- Solved assignments and case study help

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ICFAI Principles of Management- Solved assignments and case study help

  • 1. Dear students, get ICFAI latest Solved assignments and case study help by professionals. Mail us at : help.mbaassignments@gmail.com Call us at : 08263069601
  • 2. AN INTRODUCTION TO DIFFERENTIATED LEARNING TOOLS Participants in flexible learning programs have limitations on the nature of the time they can spend on learning. Typically they are employed fully or partially, pursuing higher studies or have other social and familial responsibilities. Availability of time is a great constraint to these students. To aidthe participants,we have developedfour unique learningtools as below:  Bullet Notes : Helps in introducing the important concepts in each unit of curriculum, equip the student during preparation of examinations and  Case Studies : Illustrate the concepts through real life experiences   Workbook : Helps absorption of learning through questions based on reallife nuggets  PEP Notes :Sharing notes of practices and experiences in the Industry will help the student to rightly perceive and get inspired to learn concepts at the cutting edge application level.placementinterviews Why are these needed?  Adults learn differently from B. School or college going students who spend long hours at campus.  Enhancing analytical skills through application related learning kits trigger experiential learning  Availability of time is a challenge.  Career success increasingly depends on continuous learning and success What makes it relevant?  How is it useful?   Where does this lead to? As and when you get 5 to 10 minutes you can read one of these and absorb and comprehend. Spending more time is your choice. You can use the time in travel, waiting for meetings, lunch time, small breaks or at home usefully. Through these tools, the learning bytes are right sized for ease of learning for time challenged participants. The content starts from practice and connect to precept making it easy to connect to industry and retain. They can be connectedto continuous assessment process of the academic program. Practitioners can use their real life knowledge and skill to enhance learning skills. Immediate visualization of the practical dimension of the concept will offer a rich learning experience.
  • 3.  Easier to move ahead in the learning process.   Will facilitate the student to complete the program earlier than otherwise.Helpsstay motivated and connected. When is it useful? 
  • 5. PEP Notes: Principles of Management © The ICFAI Foundation for Higher Education (IFHE), Hyderabad, April, 2015. All rights reserved No part of this publication may be reproduced, stored in a retrieval system, used in a spread sheet, or transmitted in any form or by any means – electronic, mechanical, photocopying or otherwise – without prior permission in writing from The ICFAI Foundation for Higher Education (IFHE), Hyderabad. Ref. No. POM-PN-IFHE – 042015 For any clarification regarding this book, the students may please write to The ICFAI Foundation for Higher Education (IFHE), Hyderabad giving the above reference number of this book specifying chapter and page number. While every possible care has been taken in type-setting and printing this book, The ICFAI Foundation for Higher Education (IFHE), Hyderabad welcomes suggestions from students for improvement in future editions. Our E-mail id:cwfeedback@icfaiuniversity.in i
  • 6. INTRODUCTION Participants in ICFAI University Programs are eager to apply theory to practice. They realize that application orientation can enhance their learning and subsequent usage of management precepts and practices. Picking out the principle behind real world events is critical to this learning. Towards this end the institution has introduced the PEP Notes. The PEP Notes (Practice, Experience and Perspective Notes) is a collection of annotative notes on practices, experiences and perspectives fromindustry as appearing in articles fromreputed sources such as Harvard Business Review, Economist, Mckinsey Quarterly, Accenture, Bain Consulting etc.  Practice : Organizations follow practices based on their past learning   Experience: Based on changing context, they face fresh experiences   Perspective: Organization learns from the experience and the practice to gain fresh perspective These notes connect the three dimensions of the real world to key concepts in the subject. Each note is brief – about one to two pages and is adapted from the article referred to in the note. The concept underlying the note is highlighted in a box. The concept is also connected to the article through an introductory abstract in a boxat the beginning. The learning outcomes expected are: 1. Real world Application based approach significantly enhances absorption and retention. 2. Exposure to the current trends,practices with illustrations connect back to theory. 3. Thoughts from leading sources. The PEP Notes may be used for Assessment. ii
  • 7. PEP Notes: Principles of Management CONTENTS Block I: Introduction to Management 1. The Role of Management in Manufacturing Industry 6 2. Management Functions Require Different Skill set in Managers 7 3. Engaging Middle-Level Managers 8 4. Management Skills for Effective Indian Managers 10 5. Operational Excellence Model as Management Approach 11 6. Charles Dupin‘s Work: An Origin to Social Sciences 12 7. The Human Factor in Classical Approach of Scientific Management 13 8. Are there any Deviations in Maslow‘s Hierarchy of needs in Current Days? 14 9. Quantitative Approaches in Operations Management 15 10. Applications of Systems Theory Integral to Modern Approaches to Management 16 11 Social Responsibility of Corporates 17 12. Different Perspectives on Corporate Social Responsibility 19 13. Social Stakeholders as Drivers of Long Term Business Value 20 14. Quality of Work Life as a Measure of Social Responsiveness 21 15. Personal and Organizational Factors impacting Managerial Ethics 25 Block II: Planning 16. Strategic Planning for Better Organizational Business Value 27 17. Technology and Innovation Strategies of an Organization 29 18. HR alignment for Effective Implementation of Strategy 31 19. Decision-Making Process in Automotive Industry 32 20. Risk Culture for Decision Making in an Organization 33 21. Data Analytics as Systems Approach to Decision Making 36 Block III: Organizing 22. Reaching High Performance in an Effective Organization 39 23. Prioritizing Management Issues to Avoid Organizational Inflexibility 41 24. Factors impacting Organizational Culture 43 25. Factors impacting Intrapreneurship in Organizations 45 Block IV: Staffing 26. Innovative HRM Policies and Practices 47 27. Key Success Factors of Training and Development 48 28. Different Sources of Recruitment in Current Days 51 iii
  • 8. 29. The Role of Selection Science in Selection Process 52 30. Benefits of Effective Socialization Process of New Employees 53 31. Factors Impacting Organizational Change 55 32. Achieving Planned Organizational Change through Focus 56 33. Team Building as an Organizational Development Process 58 34. Management Development Approaches of Leaders and Managers for International NGOs 60 35. Handling Organizational Conflicts 61 Block V: Leading 36. Nature of People: Abraham Lincoln 64 37. Douglas McGregor‘s Theory X and Theory Y Revisited 65 38. Meaningful Work Motivates Employees 66 39. Herzberg New Theory of Motivation 68 40. Self-Determination Theory: A New Motivational Theory 70 41. Meaning Quotient as a Motivational Technique 71 42. Effective Leader‘s Systems and Contingency Approach to Motivation 73 43. The Internals in Meaning of Leadership 74 44. Organizational Conversation as Key Element of Leadership 76 45. Leadership Traits for Crisis Situation 78 46. Insights from Transformational Leadership Theory 80 Block VI: Controlling 47. Factors impacting Production in Indian Manufacturing Sector 83 48. Productivity Problems in Italian Manufacturing Industry 85 49. Importance of Operations Management in Global Manufacturing 87 50. Corporate Website:A type of Information System 89 51. Advantages ofManagement Information Systems 91 iv
  • 9. Block I: Introduction to Management Block I: Introduction to Management 1. The Role of Management in Manufacturing Industry 2. Management Functions Require Different Skill set in Managers 3. Engaging Middle-Level Managers 4. Management Skills for Effective Indian Managers 5. Operational Excellence Model as Management Approach 6. Charles Dupin‘s Work: An Origin to Social Sciences 7. The Human Factor in Classical Approach of Scientific Management 8. Are there any deviations in Maslow‘s hierarchy of needs in Current Days? 9. Quantitative Approaches in Operations Management 10. Applications of Systems Theory as Modern Approaches to Management 11. Social Responsibility of Corporates 12. Different Perspectives on Corporate Social Responsibility 13. Social Stakeholders as Drivers of Long Term Business Value 14. Quality of Work Life as a Measure of Social Responsiveness 15. Personal and Organizational Factors impacting Managerial Ethics 5
  • 10. Block I: Introduction to Management 1. The Role of Management in Manufacturing Industry The role of management is strongly associated with organizational productivity and organizational success in manufacturing industry. Organizations having best management practices perform better. This is the outcome of the research carried out by McKinsey and Center for Economic Performance at the London School of Economics with regard to the manufacturing industry. The survey includes interviewing more than 800 middle and senior plant managers working in 700 manufacturing organizations in US, UK, Germany and France. These organizations have 100 to 10,000 employees. It is found that organizational performance is related to the quality of management practices employed and the competition that stimulates the best management practices. The findings include:  There is a positive correlation between management practices and productivity and return on capital  employed. There is a positive correlation between management practices and sales growth, sales per employee,  capital market evaluation and market share growth  Employees in better managed companies have better work-life balance. The research model they followed is as shown in following figure. Organizational Productivity Management Practices Organizational Success Return on CapitalEmployed (ROCE) The survey considered the impact of manufacturing practices such as shop floor operations, organizational practices such as target setting and performance management and talent management practices such as hiring and retaining the people on organizational productivity and organizational performance/organizational success. It was found that best companies excel at either shop-floor operations or at people management. The best management practices followed with increasing order of scores is in countries such as UK, France, and Germany and topped by US. US firms are particularly good at people management practices such as talent management and target setting. France and Germany firms are good at shop-floor operations. Industry sub-sector impacted the management practices that were followed more than the geography. It is also observed that younger companies deploy better management practices. Role of Management is vital to any organization. Without management, an organization is like a boat without a sail. Management provides the direction, vision, mission and strategy to the organization. They prepare the blue print of the organization. They design the organizational processes, businesses, product lines, marketing channels and supply chain networks. They are the people who bring visibility to the organization and brands in the industry, market and community. They delegate, motivate and track the progress of the tasks in an organization. DiscussionQuestions 1. Discuss the relationship between organizational performance and quality of management practice. (Hints: Better work-life balance in well managed firms- Positive correlation between management practices & productivity) 2. Discuss the best management practices followed in countries like the US and France. (Hints: Talent management-Target setting-Shop-floor operations) Source: Dowdy, J., Dorgan, S., Rippin, T., Reenen, J.V., and Bloom, N., “Management Matters”, McKinsey & LSE Topic Course Unit-1: Management: An Overview; Principles of Management Section-4: Role of Management 6
  • 11. PEP Notes: Principles of Management 2. Management Functions Require Different Skill set in Managers Different management functions require different skill set in managers at all levels in an organization. Managing involves coordinating individual efforts. As organized groups are growing in organizations, the responsibility of management is also growing to be able to manage them. Management involves the creating and maintaining of the environment for individuals to perform as part of groups in order to achieve the organizational goals. Managers at all levels in the organization perform management functions such as planning, organizing, staffing, leading and controlling. The time they spend in each of the function may vary based on their position in the organization. Top level managers spend more time in planning and organizing. First level and middle level managers spend more time in leading. All the managers spend considerable time in controlling; however this time may vary from manager to manager. The skills required by the managers at different levels of the organization vary based on their position in the organizational hierarchy.  Managers must operate both external and internal environments of the organization.   In order to carry out the organizational tasks,managers must understand the socio,technological, legal, political and ethical environments.   Management applies to both small and large organizations, commercial and non-commercial, profit and non-for-profit organizations, services and manufacturing sectors as well.  Managers should have a global mind set and cross cultural intelligence  Should have critical and analytical thinking and be technologically savvy.  The aim of management is to achieve organizational and group goals with least resources,time, money, material and personaldissatisfaction.   Anotheraim of managers is to be productive, effective and efficient. (Example: USA is the most productive after World War-II)  Productivity can be defined as output units divided by input units of time with an acceptable quality.  Effectiveness can be the achieved performance and efficiency corresponds to the least amount of resources used in achieving the set objectives.   Hence, managers should achieve productivity, effectiveness and efficiency using their skills in the organization. Functions of managers include planning, organizing, directing, staffing, controlling, motivating and leading. Every manager in the organization whether he is lower, middle or top level manager performs the tasks pertaining to these functions. Even CEO also performs these management functions. All functional managers such as marketing managers, engineering managers, HR managers, Finance managers, IT managers, operations managers and functional heads performthese functions in an organization. DiscussionQuestions 1. Discuss the various functions of managers. (Hints: Planning-Organizing-Directing-Staffing-Controlling) 2. What skills should managers possess to carry out the various managerial functions? (Hints: Global mind set-Cross-cultural intelligence-Analytical thinking) Source: Weihrich, H., “Management: Science, Theory and Practice”, Weihrich, H. and Koontz, H.(eds), Management: A Global Perspective, McGraw-Hill, NY Topic Course Unit-1: Management: An Overview; Principles ofManagement Section-5: Functions of Managers; 7
  • 12. Block I: Introduction to Management 3. Engaging Middle-Level Managers Middle level managers provided with right levers and authority can improve theemployee engagement in the organization. Middle level managers play crucial role in organizational engagement and organizational performance. Middle level managers see the vision of their top management and also pain at times, the problems faced by their teams. Middle level managers sometimes do not have the senior management support or the required levers to carry out their tasks. In leading the organization to future, they play a crucial role in bringing the engagement back. Boston Consulting Group and World Federations of People Management Associations (WFPMA) have conducted a survey of 5,500 executives from more than 100 countries to find out the opportunities and challenges ahead for middle managers. They have found the impact of 18 factors which come into 4 components such as objectives and aspirations, accountabilities and collaboration, performance management and recognition, and people manager capabilities and interactions on employee engagement. It is found that the employees are dissatisfied with their organizational performance in areas such as performance management, recognition and people manager capabilities. What Middle Managers Do? Middle managers transform communicate with employees plans and strategies. the strategy set by the top management into concrete business plans,and manage the businesses.Teammembers execute those devised business Setting Right Environment for Middle Managers to Perform BCG and WFPMA proposed a DEAL (Delayer, Empower, Accelerate and Leverage) for middle managers to improve engagement of middle managers in the organization. 1. Delayer the organization and create exciting roles for middle managers. Example: Qantas Airways, An Australian Airliner, reduced the number of layers in top management by 15% to 20% and increased span of control to improve employee engagement. 2. Empower the middle managers by providing levers and authority to manage performance, make organizational changes,recognize and compensate the team, and provide development opportunities to team members. Example: An European retail bank realized that the reason for lack of middle managers engagement is that middle managers do not have a proper reward and recognition process in place for their efforts. 3. Accelerate leadership skills of middle managers by providing training and tools. Example: Allianz, a German Insurance company, provides training to their lower level managers at least once every year. They invest most on these managers. 4. Leverage the middle managers to utilize new skills, roles and responsibilities leading to organizational transformation. Example: BMW, a German Car maker, to build trust and confidence brought together 350 senior executives and 5,500 middle managers to a workshop for discussions on innovation, leadership, profitability, customers, product development and growth. Middle level managers act as interface between workers, lower level supervisors and the senior management. Their interaction with their subordinates is more when compared with their interaction with senior management. The low level employees in an organization look for direction, vision and clarifications from middle level managers. They mediate difficult interactions, escalating them when warranted. Middle level managers have to consolidate information and provide status to senior management. They maintain working knowledge of metrics, data collection, facts, figures and analysis. 8
  • 13. PEP Notes: Principles of Management DiscussionQuestions 1. Discuss the role of a middle level manager in an organization. (Hints: Strategy to concrete plans-Employee engagement-Interface between workers and supervisors) 2. What measures can be taken to improve the engagement of middle level managers? (Hints: Accelerate leadership skills-Delayering the organization) Source: Caye, J., Strack, R., Orlander, P., Kilmann, J., Espinosa, E.G., Francoeur, F., Haen, P. (2012), “Creating a New Deal for MiddleManagers”, Boston Consulting Group &WFPMA, Topic Course Unit-1: Management: An Overview; Principles ofManagement Section-6: Levels of Management-Middle Level Managers 9
  • 14. Block I: Introduction to Management 4. Management Skills for Effective Indian Managers Effective managers require high degrees of managerial skills such as technical, human and conceptual skills. Kaifi, B.A. and Mujtaba, B.G. (2010) have done a survey of 200 technologically savvy Eastern Indians in the bay area ofCalifornia, USA to find out there were any differences in technical,human and conceptual skills of Indians over gender. This study is relevant because by 2025, 25% of the world‘s workforce would be Indians. India provides educated competitive workforce to the world. Indian men and women can be found in different managerial capacities in different industries across the globe. The study considered the management skills such as technical, human and conceptual skills of Indian men and women to find out whether these skills vary according to gender. It was found in the survey that Indian women possessed comparatively higher technical and human skills and that Indian men possessed comparatively higher conceptual skills. This kind of survey is relevant in current socio-economic conditions because problem solving skills vary based on economic, social and public policy situations. Effective managers and leaders require technical, human and conceptual skills according to their position in the organizational hierarchy. The proportion of these skills varies from organization to organization based on the position of the respective manager in the  Technical skills are more of job specific knowledge and techniques.The requirement for technical   skills varies based on the position of the manager in the organization. Human skills express the ability to communicate, coordinate and motive the employees in getting  the work done.  Conceptual skills allow managers to distinguish between cause and effect and allow themto analyze the situation.organizationalhierarchy. It was also observed in the study that Indian women lag behind in the decision making bodies in Indian organizations. Overall the group consisting of Indian men and women scored more on technical skills when compared to conceptual skills. This is because Indian youth are well exposed to Internet, technology, and social networking sites. It was also expressed that the most effective managers possess high degrees of technical, human and conceptual skills in organizations. Managerial skills should comprise of technical, conceptual and human skills. As a manager grows up the ladder, the need for technical skills reduces. The need for more conceptual skills arises. The human or people skills are required at all levels in the management irrespective of lower, middle or top management. The technical skills required are knowledge and usage of hardware, software, machinery and tools. Human skills include communication, team dynamics, recruitment and selection skills, motivating, conflict management, leadership, presentation, influencing, and negotiating skills. Other managerial skills include decision making under uncertainty, problem solving, risk taking and taking initiative. DiscussionQuestions 1. What skills do effective managers require? (Hints: Technical-Human-Conceptual) 2. Discuss the findings of the survey conducted by Kaifi, B.A. and Mujtaba, B.G. (Hints: Indian women have higher technical skills-Indian men had relatively higher conceptual skills) Source: Kaifi, B.A. and Mujtaba, B.G. (2010), “A study of management skillswith Indian Respondents: Comparing their technical, human, and conceptual scores based on gender”, Journal of Applied Business and Economics, Vol. 11, Issue 2. Topic Course Unit-1: Management: An Overview; Principles ofManagement Section-7: Management Skills and Organizational Hierarchy 10
  • 15. PEP Notes: Principles of Management 5. Operational Excellence Model as Management Approach Operational Excellence Management System(OEMS) is an approach to management for achieving organizational objectives. “Excellence is an art won by training and habituation.……………..We are what we repeatedly do. Excellence,then, is not an act but a habit.” ------ - Aristotle (2300 years ago). Organizations are under pressure to improve their financial, safety and environmental performance amid competition, increasing costs and tough circumstances. Operational Excellence Management System (OEMS) creates repeatable and optimized behaviour in employees in reaching their goals. Organizational executives need their businesses to run effectively and safely by achieving operational excellence. Large and complex organizations require an operational excellence management system. For example, Exxon, an oil company, deployed operational excellence management system in their organization in order to address the Valdez oil spill. National and International oil companies have operational excellence management systems consisting of components such as:  Strategy and Leadership Performance Management  Change Management  Operational Risk  Contractor Management  Supply Chain Management  External Stakeholders Responsibility  Organization and Capabilities   Planning and Optimization  AssetIntegrity and Reliability  Capital Projects  Compliance management  Incidents andEmergencies  Health and Safety Security and Environment What is Operational Excellence Management System? It is a systemwith defined global expectations, defines common language,considers accountability, shares behaviours and practices and encourages continuous improvement. +*  Operational Excellence Management System should be simple, focused,and designed for wide  applications.  The pitfalls in implementation of OEMS include unclear definitions, unclear accountability, lack of understanding to front-line workers, lack of executive support and implementation which runs as a  parallel organization.  Implementation of operational excellence management systemin an organization is a 3 to 5 years process with stages such as design,deployment, compliance and continuous improvement. Approaches to Management include systems approach, empirical approach, case study based approach, group behaviourapproach,interpersonalbehaviour approach, decision theory approach, cooperative social systems approach, socio-technical systems approach, mathematical approach, statistical approach, management science approach, contingency approach, situational approach, managerial roles approach and McKinsey‘s 7-S approach. McKinsey 7-S approach consists of structure, strategy, systems, style, staff, skills and shared values. DiscussionQuestions 1. What are the key elements of an effective Operational Excellence Management System (OEMS)? (Hints: Simple-Focused-Designed for wide applications) 2. Discuss the components of OEMS adopted by National and International oil companies. (Hints: Strategy and leadership-Capital Projects) Source: Caruso, P., Cigala, F. and Gay, J.C. (2013), “What „good‟ looks like: Creating an operational excellence management system”, Bain & Company Topic Course Unit-1: Management: An Overview; Principles ofManagement Section-8: Approaches to Management 11
  • 16. Block I: Introduction to Management 6. Charles Dupin’s Work: An Origin to Social Sciences Charles Dupin‟searly approach to management served to develop19th century social, scientific and economic knowledge in France. Charles Dupin (1784-1873) was a French engineer and mathematician who lived in the late 18th and early 19th centuries who worked in various areas like Mathematics, Statistics, Geometry, Algebra and Economics. He made many interventions related to child labour and female labour during French revolution of 1848. He highlighted the need for child guidance and discipline instead of making them join the workforce. He has interests ranging from science and politics to tax policies and social reforms in France. His activities and accomplishments have lot of impact. He has worked for the development of social, scientific and economic knowledge in July Monarchy, Second Republic and Second Empire in France. He worked as a marine engineer and has memberships in Académie Royale des Sciences and Académie des sciences morales et politiques. He taught courses on applied mechanics at Conservatoire des arts et métiers to workers. He undertook brief stints in government offices and worked for child labor reforms and protection of sugar industries. He had a wide range of activities and interests. He used his wide knowledge in improvement of France. His work examined the relationships between science and politics and became the origin for 19th century social sciences. His work on political economy and politics influenced Britain greatly. He continued working on social reforms with his membership in Académie des sciences morales et politiques. He formulated an inventive and imaginative approach to Mathematics. He was also an innovator in Statistics. His inventions included early Choropleth maps that were used to take public opinion which represented variations in quantitative data using shared blocks. He was the first person who linked numbers and partisan politics. He was also popular as an economist and a social reformer. He held contradictory positions related to free labour, free trade and political economy. He insisted on using facts and statistical data in the parameters of liberalism. He insisted on workers having bank accounts. His liberalization acts included opposition to child labour in 1840, supporting limited work hours in 1848 and opposition for legalizing unions in 1864. He favoured small industries rather than large, supported the poor and developing working class to meet the challenges. He was a philanthropist who argued for women as saviours and savers of working class. He had a different productive public life. His works were inputs for statisticians, economists, political scientists, sociologists and science historians. Early Approaches to Management included the work of Robert Owen (1771-1858) on human resource management, the work of Charles Babbage (1792-1871) on computing, management science and inventions, the works of Andrew Ure (1778-1857), a British academician, and Charles Dupin (1784- 1873), a French engineer on principles of manufacturing and the work of Henry Robinson Towne (1844- 1924)on manufacturing. Towne‘s presentation was responsible to have influenced Frederick W. Taylor to develop scientific management theory. DiscussionQuestions 1. Discuss the contributions of Robert Owen, Charles Babbage, etc. to the early approaches of management. (Hints: Contributed to human resource management-Worked on computing and management science) 2. How did Charles Dupin contribute to the early approach of management? (Hints: Interventions in child and female labour-Developed scientific and economic knowledge in France) Source: i. DeGroat, J. (2012), Book review of Charles Dupin (1784-1873), Ingénieur, savant, économiste, pédagogue et parlementaire du Premier au Second Empire, ii. Sous la direction de Carole Christen et François Vatin, préface de Robert Fox, Presses universitaires de Rennes, 2009, H-France Review, Vol. 12, No. 26, pp. 1-5 Topic Course Unit-2:Evolution of Management Thought Principles ofManagement Section-3: Early Approaches to Management 12
  • 17. PEP Notes: Principles of Management 7. The Human Factor in Classical Approach of Scientific Management Classical approach of scientific management concentrated on the scientific methods and techniques such as time and motion studies and work balancing. Frederick W. Taylor (1911), the father of scientific management reinitiated the division of labour concept, which was first coined by Adam Smith (1776). Taylor did extensive work in 19th and 20th centuries. In 1879, Taylor joined Midvale Steel Company at the age of 23, where he applied his principles, designed models, and ideologies that changed the way production took place in the industries in the century that followed. He was an aristocratic engineer and a technocrat who was also rational, dogmatic, curious, famous and genial. He was a key player in building the American greatness. He recognized the human factoras part ofscientific management,which has political,social,economic and ethical implications. It became the fundamental factor related to labour inthe19th century. Taylor‘s scientific management model ensures the equilibrium of workers with products, machines, processes and tools. He combined common sense and folk psychology with trade practices. They gave theoretical path to many disciplines such as organizational behaviour, applied psychology, management and sociology. The highlights of scientific management include logical thinking and problem solving in novel situations. These lead to the great changes, innovation and capital accumulation in the 19th and 20th centuries. Taylor studied production factors such as efficiency, worker well-being and wealth creation. In his book (1911) The Principles of Scientific Management, he also discussed about reducing poverty and increasing prosperity not only with his men but also with the entire community. Taylor‘s work in scientific  related to human factors includes:   Workerselection and evaluation,which lead to the developmentofapplied psychology.  Naming the worker as Schmidt afterworker selection process. Selection of inspectors for bicycle balls, where he counted speed and processing times. He also observed the perception and reaction times of workers. He observed the relationship between  perception and reaction time of the workers. He laid off the workers whose reaction time was low.   Evaluation ofindividualworkerefficiency as part of performance measurement Evaluation of foremen, that is, supervisors to find out what qualities and skills they should possess.  (Foreman used to lead the group of workers).   Studied characteristics that lead to optimized performance For worker selection, he reviewed applications, verified background history of workers such as  character, ambition and habits.  Postulatedthat goodmanners, training, education, neat appearance are not as important for executive position as determination, grit, bulldog endurance, and tenacity are. management Classical approach ofmanagement includes FrederickW. Taylor‘s scientific management,time and motion studies and Henry Gantt‘s work on Gantt charts.Scientific management replaced the traditional approaches with scientific methods and techniques, used tools to improve productivity, and ensured equal work between supervisors and workers. The time and motion studies concentrated on executing the tasks in few numbers of motions on the line. Henry Gantt‘s Gantt chart is widely used in project planning and scheduling. DiscussionQuestions 1. What were the implications of the ‗human factor‘ as a part of scientific management? (Hints: Political-Social-Economic-Ethical) 2. Discuss Fredrick Taylor‘s contribution to scientific management. (Hints: Time and Motion Study-Worker selection and evaluation) Source: Zuffo, R.G. (2011), “Taylor is dead, hurry Taylor! The “Human Factor” in ScientificManagement: Between Ethics, ScientificPsychology and Common Sense”, Journal of Business and Management, Vol. 17, No.1 Topic Course Unit-2:Evolution of Management Thought Section-4: Classical Approach Principles of Management 13
  • 18. Block I: Introduction to Management 8. Are there any Deviations in Maslow’s Hierarchy of needs in Current Days? Everyone does not have the same Maslow‟s hierarchy of needs and in the same order. The answer is ‗Yes‘ as foundin an interesting contrasting study carriedout in Nigeria. Ifedili, C.J. and Ifedili, C.I. (2012) made a study of 900 Nigerian university workers (450 male and 450 female) from3 Nigerian federal universities to find out whether Maslow‘s hierarchy of needs is still applicable today andto find out if there were any deviations in the needs of university workers. The intention was also to find out what motivated the university workers and to make a study of the factors that impacted their hierarchy of needs. To study this, they used a questionnaire known as Maslow‟s Hierarchy of Needs Inventory (MHNI). In the study it was observed that Maslow‘s hierarchy of needs is not applicable to the current day workers. The needs hierarchy hadan impact on the culture and personal attributes of the workers. The Maslow‘s hierarchy of needs is as shown in following figure. Self- Actualization Needs Esteem Needs Social Needs Safety Needs Physiological Needs According to Maslow‘s hierarchy of needs, the lower needs are to be fulfilledbefore moving onto higher needs. At any point of time, there is an active need for a human being that needs to be satisfied. According to Maslow, satisfied needs do not motive further. He did not consider the factors such as bravery and charitable acts in designing the needs hierarchy. For example, in a Country like Nigeria, belonging to one group and gaining recognition are more important than fulfilment of their basic needs. High insecurity and culture have impact on the hierarchy of needs among workers. Hence, he felt that it was better to ask the workers on what motivated them. 85% of the surveyed respondents expressed that Maslow‘s hierarchy of needs may not come in the same order of priority for them. 87% of the respondents expressed that satisfied needs reoccur. 85% of the respondents expressed that it motivates themto satisfy the reoccurred needs. 93% of the respondents expressed that everyone do not have the same hierarchy of needs. It was found that there are no significant differences in the hierarchy of needs of male andfemale workers. It was also found that an individual‘s educational status, social status, values, personal attributes and environment are impacting the hierarchy of needs in Nigeria. Maslow’shierarchy ofneeds is one among the early theories of human motivation. It was published in his paper titled―The Theory of Human Motivation‖ in a Journal known as Psychological Review in 1943. According to this theory the basic needs of an individual are the physiological needs. If they are fulfilled, his next needs are safety needs. If they are also fulfilled, his next requirement is social needs. If these needs are also fulfilled, an individual needs esteemfollowed by self-actualization. DiscussionQuestions 1. What were the guiding principles of Maslow‘s hierarchy of needs theory? (Hints: Lower needs fulfilled first-Active needs to be satisfied-Satisfied needs do not motivate) Discuss the findings of the Nigerian study. Source: Ifedili, C.J. and Ifedili, C.I. (2012), “Perception of Maslow‟s Hierarchy of Needs Theory By Nigerian University Workers – A challenge to University Administrators”, Interdisciplinary Journal of Contemporary Research in Business, Vol. 4, No. 1 Topic Course Unit-2:Evolution of Management Thought; Principles ofManagement Section-5: Behavioural Approach-AbrahamMaslow; 14
  • 19. PEP Notes: Principles of Management 9. Quantitative Approaches in Operations Management Quantitativeapproaches such as transportation problem, assignment problem, network analysis, dynamic optimization models, waiting line models and linear programming can be used in operations management. Quantitative approaches play a major role in operations management. Organizations use quantitative tools and techniques for competitive advantage. Organizational work involves planning, scheduling, monitoring and staffing the tasks with limited resources such as human resources, machinery, time, money and material. Network analysis, transportation problem, assignment problem, linear programming, integer programming, inventory management and waiting line problem help the managers in their decision making for executing operations. Let us see the objectives of transportation problemand assignment problem. Transportation Problem: This involves solving problems related to transport of goods and services from multiple supply locations to multiple demand locations. The amount of goods produced at a specific supply location varies from those produced at other supply locations. Similarly the need at one demand location may vary from the need at another demand location. The cost for transfer of one unit of goods from one supply location to one demand location varies from place to place. The main objective is to find out how many units of goods from one supply location to one demand location are to be transferred so that the cost of transfer of goods would be minimal. That is, the total transportation costs should be minimal. The quantities required at the demand locations are to be satisfied. The problems involved in the application areas of transportation include network flow problems, inventory scheduling, cash management and multi-period production. Example: Foster Generators, a generator manufacturer, has plants in 3 places in the US such as in Cleveland, Ohio; York, Pennsylvania and Bedford, Indiana. It has 4 regional distribution centers in Chicago, Boston, Lexington and St. Louis. The production cost is same at all three manufacturing plants. Hence, the organization would like to transport the goods fromplants to distribution centers with minimal transportation cost fulfilling the demands of all distribution centers. Thus, the problembecomes a transportation problemof operations management. Assignment Problem: Operations management decision making involves solving many assignment problems such as assigning human resources to tasks, assigning jobs to machines, assigning contracts to bidders, assigning sales men to sales territories, etc. One agent can be assigned to one task. The objective of assignment problem is to assign the agents to tasks or tasks to agents so that the costs and time are minimal and the profits are maximal. Example: Fowle Marketing Research has three project leaders to be assigned to three research studies. Their objective is to complete allthe three studies at the earliest.The completion of each research study is based on the project leader‘s skills andcompetencies. They generally assign a research study to each project leader so that all the three research studies are completed sooner. Thus, the problembecomes an assignment problem in operations management. Quantitative Approaches use mathematical and statistical techniques in solving problems of operations management. They include techniques such as probability, linear programming, integer programming, decision theory, correlation, regression and association techniques. They also use permutations and combinations, functions and calculus, logarithms and complex algorithms. The logistics, transpo rtation problems and travelling sales person problems can be solved using these techniques. DiscussionQuestions 1. Discuss the role ofquantitative approaches in operations management. (Hints: Competitive advantage-Help in decision-making) 2. Discuss the transportation and assignment problems that an organization encounters.(Hints: Cost of transfer-Assigning jobs to machines) Source: Raman, V.V.R. and Manikanta, B.V. (2011), “Impact of quantitativemethods in Operations Management”, ICOQM-10, June28-30, 2011 Topic Course Unit-2:Evolution of Management Thought Principles ofManagement Section-6: Quantitative Approach 15
  • 20. Block I: Introduction to Management 10. Applications of Systems Theory Integral to Modern Approaches to Management Modern approaches to management include applyingsystems theory to organization, organizational sociology and organizational modelling. When asked ―what is an organization?‖ many managers correspond it to structures, roles and reporting relationships. Taking the organizations through change requires more than knowing the formal organizational structures. Systems theory is applicable to organizations, organizational sociology and organizational modelling. The origin of systems theory is natural science, which identified the objects, relationships between the objects and their relationship with the environment. Examples of Systems include human body and solar system. The applications of systems theory are as follows: Organizations: Systems theory is widely applicable to organizations. An organizational systemhas the processes such as: a. Productive Processes:these are the processes used in transforming the input into output in the form of products and services. It follows input-process-output cycle. b. Energizing Processes: these are the processes that can effect or be affected by the organization involving organizational boundaries such as psychological, social, physical and work dimensions. c. Enabling Processes:these processes enable and control the interactions between individuals, groups,departments and profit centers. d. Developing Processes: these processes help in the development and growth of individuals and groups with differentiation.  The applications of systems theory in organizations will be around these processes. Organizational Sociology: Systems theory suggests viewing an organization through four different lenses.  a. Rational Lens: managers concentrate on organizational structure, roles, hierarchies, rules and efficiency. b. Human Resource Lens: managers pay attention to take care of people, their wellbeing and in fitting them into the organizational structure. c. Symbolic Lens: managers concentrate on interaction, mutual growth, organizational culture, and individual and organizational learning. d. Political Lens: managers look at the organization as a battlefield with conflicts,  negotiations,power struggles and messy ideas. Open System Diagnostic Model: Systems theory can be applied to designing the organization. The organizational design components include systems, structure, culture, behaviors, direction and work. Modern approaches to management include organizational sociology, organizational modelling and systems thinking. Organizational sociology deals with demographics of CEO, top management and individuals in the organization, their childhood, social relationships, and formal and informal group s in the organization. Organizational modelling deals with organizational structures, reporting relationships, communication and authority. Systems thinking approaches involve systems planning, systems design, systems implementation and systemevaluation. It includes systems and subsystem‘s behavior and communication. DiscussionQuestions 1. In what fields can the systems theory be applied? (Hints: Organizations-Organizational sociology-Organizational modelling) 2. What areas do the modern approaches to management deal with? (Hints: Demographics within an organization-Organizational structure) Source: John Corlett, “Systems Theory Applied to Organizations”, http://warrington.ufl.edu/centers/purc/purcdocs/papers/0018_corlett_systems_theory_applied.pdf Topic Course Unit-2:Evolution of Management Thought Principles ofManagement Section-7: Modern Approaches to Management 16
  • 21. PEP Notes: Principles of Management 11 Social Responsibility of Corporates Corporatesocial responsibility is no more a philanthropicactivity; it is social responsibility of organizational management The important objectives of business are: maximization of profits, sales and revenue; increasing market share and growth rate; avoiding risk for long time survival; and image building. Companies today have realized that they will be successful in realizing these objectives only when they meet to societal needs.They consider this as their corporate social responsibility. Existing social problems hinder business operations and opportunities for growth. Most of the companies have switched to ‗shared value concept‘. Michael Porter and Mark Kramer in their article ‗creating shared value‘ point out that business is at its best when companies innovate to meet society‘s needs while building profitable enterprises. Based on their research, Marc Pfitzer and others in their recent article in HBR ‗Innovating for Shared Value‘ give severalexamples of companies thatderived business value through the embedding of social values: Company Social value Business value Dow Chemical Removed 600 million tons of trans fats Nexera sunflower and canola seeds-best and saturated fats from US diet selling products Nestle Helped millions of malnourished families Turned to be a profitable business by providing inexpensive spices Novartis Provided essentialmedicines to 42 Became profitable after 31 months million people in 33000 rural villages Mars Transformed farms and communities Avoided cocoa shortages to Ivory coast Intel Trained 10 million teachers in the use of Became profitable business in education technology Becton Protected millions of health workers by Resulted in $2 billion business,accounting Dickinson creating needleless injections for 25% of company revenue Vodafone Extended mobile banking services to 14 One of the company‘s best offerings. million people in East Africa According to them, companies rely on five reinforcing elements in creating shared value:  Embedding a social purpose: Many companies build large scale business on social issues. While companies like Nestle, Unilever, Dan one have made profitable business on health and nutrition aspects, technology and telecommunication firms like IBM, Intel, Verizon have made education and health care their mission. Many companies make profitable business on issues related to Millennium Development Goals.   Defining the social need: Many firms conduct extensive research on existing social problems like malnutrition, anaemia, poverty and the like to understand the underlying social conditions and on finding ways on how best to improve them along with good business.   Measuring social value: To derive social and business benefits, they need to be monitored closely through standard procedures. For instance, Coca-Cola measures its initiatives for increasing employability of low-income youths and young adults and for increasing sales through company‘s distribution channels and brand awareness.   Creating the optimal innovation structure: Avoiding risk is an important business objective. Care needs to be taken for initiating business of social value in issues of financing, governance, managing systems and location.   Co-creating with external stake holders: Co-creation is involving the stakeholders in all the dimensions of the problem and designing and implementing solutions. Companies involve stakeholders to understand the social needs and execute strategies for implementation. Many companies are making profitable businesses by incorporating social values in their bus iness, combining their corporate social responsibility with business expansion. 17
  • 22. Block I: Introduction to Management Social responsibility of organizational management includes employment generation, improving life style of individuals, economic development, social empowerment (including women empowerment), education, health and family care, sustainable livelihood and involvement in community. This social responsibility is in addition to their business responsibility. Social responsibility, if not legal it is a moral responsibility to any organization. It indicates their commitment to the society and the country they operate in. It improves the organizational citizenship behavior. There are incidents in the business history that socially responsible organizations were rescued by governments in turbulent times. DiscussionQuestions 1. What are the important objectives of businesses? (Hints: Profit maximization-Increasing market share-Image building) 2. What five reinforcing elements do companies rely on to create shared value? (Hints: Embedding social purpose-Defining social need-Measuring social value-Innovation structure-Co-creation with external stake holders) Sources: i. Pfitzer, M., Bockstette, V. and Stamp, M. (2013), “Innovating for Shared Value”, Harvard Business Review, September 2013 ii. Porter, M.E. and Kramer, M.R. (2011), “Creating Shared Value”, Harvard Business Review, Jan-Feb 2011 Topic Course Unit-3: Social and Ethical Responsibilities of Management; Principles of Managem ent Section-3: Social Responsibilities of Management; 18
  • 23. PEP Notes: Principles of Management 12. Different Perspectives on Corporate Social Responsibility Organizations are looking at community as a whole instead of their own benefits while being socially responsible. Devin Thorpe (2013) interviewed dozens of executives from small and large organizations in US in order to know their corporate social responsibility activities and the benefits thereof to the organization. Overall, organizations look at the community as a whole instead of looking at their own benefits. Different CSR  Organization: Verdigris Group, A real estate company  CSR Practices: They developed sustainable practices based on their triple bottom-line approach, which included planet, people and profit to operate their business; they focused on daily operations with environmental consciousness. Benefits: Clients want to work with them for their healthier and productive practices. Clients come to them for their environmental, energy efficient, health and safety practices. Social goodwill is the benefit of their CSR activities.   Organization: West Monroe Partners, a consulting firm CSR Practices: They launched ―1+1+1‖ program. They contribute 1% of their talent, 1% of their treasure and 1% of their time to the community. Benefits: It gave deeper sense ofpurpose and motivation in employees. They brought loyalty and compassion in the organization.  Organization: Entre Quest, a consulting firm CSR Practices: They have ―Give Back Days‖ in which employees serve meals at Our Daily Bread, work with Habitat for Humanity for ‗home‘ building, mentor children at b4Stduents and work with Big Brothers and Big Sisters. Benefits: Organization is recognized as the best place to work for two continuous years; CEO is recognized as the most admired CEO by The Daily Record.   Organization: Gaia Development, a CA based sustainable development company CSR Practices:They launched a non-profit company called Collective Solution,to workon povertyand climate change.Employees went to Nicaragua to build solarovens to the families. Benefits:Improved creativity and versatility in employees.Employees came to knowsimplest solutions to day-to-day problems.activitiesanditsbenefitsasexpressedbythe respondents are as follows: Socially responsible organizations play a major role in community building and economic development of the country. These organizations exist not only for their benefits but also to serve the needs of the society or they contribute to the development of the society. Indian Organizations such as Infosys, InfoTech, TCS and Wipro have shown their socially responsible contributions in times of tsunami in India. Microsoft in India is educating rural population through their Shiksha program. Corporate social responsibility gives long term benefits for the organization such as reputation, good will, new customers, brand building, loyalty of existing customers, increase in sales, and increased employee and stakeholder satisfaction. DiscussionQuestions 1. What are the contributions of socially responsible organizations? (Hints: Community building-Serve society‟s needs) 2. Discuss some of the CSR activities undertaken by organizations. What benefits did these activities offer? (Hints: ‘1+1+1‟ program-Employee motivation-Loyalty and compassion) Source: Devin Thorpe (2013), “Why CSR? The Benefits of Corporate Social Responsibility Will Move You to Act”, Forbes Topic Course Unit-3: Social and Ethical Responsibilities of Management; Principles of Management Section-4: Arguments for and against Social Responsibilities of Business; 19
  • 24. Block I: Introduction to Management 13. Social Stakeholders as Drivers of Long Term Business Value Social stakeholders including shareholders create long-term value to business. Stakeholders are the group which can impact or are impacted by the organizational objectives. Stakeholders including shareholders matter most to the organizations. The identification of stakeholders involves examining the industry, product portfolio, business model and competitive playing field. How do stakeholders understand the company? How do stakeholders view the company? How do stakeholders view the impact of organization on society and environment? These matter most to the organizational business value. Environmental, Social and Governmental (ESG) factors and their impact on sustainability and organizational performance are becoming important to the stakeholders. It is important to understand what value means to stakeholders as the value organization is going to  gain from stakeholders through its actions.  Stakeholders may have economic impact on the organization further impacting the organizational  value.  Organizations require Environmental, Social and Governmental (ESG) performance in order to  create long term value. ESG risks can impact 5% of the organizational revenues.   The objective ofbusinessis to create shareholdervalue and be socially responsible. The organization has to create value to investors,suppliers, customers,employees and community  in order to create business value.  Organization can create value to employees through better HR practices, to suppliers through efficient resource management, to community through investments in community, and to  environment through eco-systemprotection and enhancement.  Stakeholders can impact organizational operations, enforce regulatory requirements, can influence consumer boycott and impact supply-chain network. Example: In the 1990s, ABN AMRO was targeted by the activists for its investments in paper and mining companies to show commitment to protect the forests and ecosystems. In 2003, ABN AMRO partnered with other banks to invest in forests, mining and energy sectors. Thus stakeholders can drive the organizational long term business value. Social Stakeholders are the stakeholders in the society which are external to the organization. These stakeholders can impact the organization positively or negatively. Similarly, the organizational projects can impact social stakeholders positively or negatively. For example, in projects such as heavy construction, nuclear power, social transformation and environmental projects, the involvement of social stakeholders can help in making the project successful. In projects such as HIV eradication, polio vaccination, and flu epidemic without social stakeholders support, these projects cannot be successful. Current day auto manufacturers and drug discoverers are involving social stakeholders in product design. DiscussionQuestions 1. How do social stakeholders affect an organization? (Hints: Affect project‟ssuccess or failure-Projects like HIV eradication cannot succeed without them) 2. Discuss the reasons for the growing importance of ESG factors. (Hints: To create long-term value-Value to investors,suppliers, etc.) Source: Hespenheide, E.J. and Koehler, D.A. (2012), “Drivers of long-termbusiness value: Stakeholders, stats and strategy”, Deloitte Topic Course Unit-3: Social and Ethical Responsibilities of Principles of Management Management; Section-5: Social Stakeholders; 20
  • 25. PEP Notes: Principles of Management 14. Quality of Work Life as a Measure of Social Responsiveness Quality of work life as a measure of social responsiveness can be achieved through workplace flexibility in the organizations. Introduction: Severalrewards and recognitionsare being givenby organizations to improve the performance of the employees, notable of them are recognizing and rewarding employees through incentives, gain-sharing, profit sharing, offering benefits, perks and adopting flexibility at workplaces. Workplace flexibility improves quality of work life. It is an important measure forbalancing work/family demands.Studies showwork/family programs decrease family conflict, job dissatisfaction and stress related problems. What follows now is the summary of National Study of Employers 2012 which deals essentially with workplace flexibility. Summary of National Study of Employers 2012 (NSE): Families and Work Institute‘s 2012 National Study of Employers (NSE) is the most comprehensive and far- reaching study of the practices, policies, programs and benefits provided by U.S. Employers to address the changing needs of today‘s workforce and workplaces.It is basedon the Institute‘s 1998 Business Work-Life Study and has been conducted three additional times that is in 2005, 2008 and 2012. It is the only study of employers in the U.S. designed to address the changing needs of employees among a nationally representative group of employers. NSE sample includes 1,126 employers with 50 or more employees—75% are for-profit employers and 25% are non-profit organizations; 18% operate at only one location, while 82% per cent have operations at more than one location. The Report mainly analyses the differences in workplace flexibility between profit and non-profit organizations and large and small organizations. Definition of flexibility: Definition of flexibility is much broader and includes the following types of flexibility:  Flex Time and Place includes various forms of flexibility that affect when and/orwhere employees do their job, such as flex time, telecommuting and compressed workweeks.   Choices in Managing Time reflects the degree to which employees can exercise some choice about when they work—from scheduling hours and overtime to deciding when to take breaks— and about how their time at work is spent.  Reduced Time includes options such as access to part-time or part-year schedules.  Care giving Leaves looks at whether the organization offers leaves for birth, adoption or care giving to ill family members and whether any of this leave is paid.   Time Off includes policies and practices that apply when employees take time away from work, including scheduled absences (such as vacations and time for training) as well as formal policies for taking sick days and planned sabbaticals. It also includes informal access to time off for unanticipated or unplanned events.  Flex Careers refers to flexibility over the course of an employee‘s career or working life, including provisions that enable employees to enter, exit and re-enter the workforce and to increase and decrease their workload or pace.   Culture of Flexibility reflects whether supervisors are knowledgeable about flexible practices and promote and communicate them effectively. It is found in the study that employees in more effective and flexible workplaces are more likely than other employees to have:  greater engagement in their jobs;  reduced absenteeism   higher productivity  improved working relations between employees and supervisors 21
  • 26. Block I: Introduction to Management   higher levels ofjob satisfaction;  strongerintentions to remain with their employers;  less negative and stressfulspill over from job to home;  less negative spill over from home to job; and Better mental health. The 2012 Report addressedthe following questions related to quality ofworklife and rewards and recognitions:  What practices, policies, programs and benefits do employers provide to address the personaland  family needs of employees?  To what extent have employers changed over the past seven years (between 2005 and 2012) in the provision of select practices, policies, programs and benefits? Examined Predictors and Measured Outcomes Predictors:  The demographics of the workplace—industry, profit/non-profit status, employer size, number of years in business and number of  operating locations;  The demographics of the workforce—percentage, women, of racial and ethnic minorities, unionized employees, hourly employees, part-time employees, women and racial and ethnic minorities in top positions or reporting to people in top  positions;  The financial health of the employer—how well the organization is doing in comparison with competitors, downsized or upsized;  and  Human resource issues—difficulty or ease of filling high-skilled job vacancies; filling entry level/ hourly positions; Outcomes:  Workplace flexibility;  Care giving leaves; Child and elder care  assistance; and  Healthcareand economic security benefits. Broad Trends: Two broad trends are noticed in the provision of flexible work options from 2005 to 2012. First, employers have increased their provision of options that allow employees to better manage the times and places in which they work. These include flex time (from 66% to 77%); flex place (from 34% to 63%); choices in managing time (from 78% to 93%); and daily time off when important needs arise (from 77% to 87%). Second, employers have reduced their provision of options that involve employees spending significant amounts of time away from full-time work. These include moving from part-time to full-time and back again (from 54% to 41%); and flex career options such as career breaks for personal or family responsibilities (from 73% to 52%). Motivational Factors and Obstacles for Implementing Work/Life Initiatives:  Factors:   Retention (37%)  Recruitment (11%)   Desire to help employees  Manage work andfamily life(16%) Improve morale of employees (12%) Motivational Obstacles:  Cost (25%) Job requirements and work load do not allow these  programs (12%)  Lack of staff to implement these programs (11%) Loss of productivity and difficulty supervising staff (10%). 22
  • 27. PEP Notes: Principles of Management Predicting Programs, Policies and Benefits Predicting Flexibility: Those most likely to be moderately to highly flexible are  that:  are non-profit‘s;  are larger;  have more women in theirworkforces;  have fewerracial or ethnic minorities in theirworkforces;  have fewerunion members;  have fewerhourly employees;  have more part-timers; and have more women and racial or ethnic minorities in top/senior positions employers Predicting Care giving Leaves: Those most likely to offer generous care giving leave benefits are employers that:  are larger;  have more hourly employees; and   Have experienced downsizing in the past 12 months. Predicting Child and Elder Care Assistance: Those most likely to provide child and elder  assistance are employers that:   are larger;  are non-profit‘s;  are in more than one location;  have been in businesslonger;  have more women in theirworkforces; and Have more women and racial or ethnic minorities in top/senior positions. care Predicting Health Care and Economic Security Benefits Those employers most likely to provide health care and economic security benefits:  are larger;  are non-profits;  have been in business longer; have more women and racial or ethnic  minorities in top/seniorpositions;   are doing betterthan theircompetitors; and have experienced upsizing ordownsizing In sum, non-profits offer more programs, policies and benefits than profits do. Furthermore, employers with more diversity in top/senior positions provide more support. When these initiatives cost money, employers that are larger also are more likely to provide a higher level of support. Small versus Large Employers: In 2012, there are four statistically significant differences between small and large employers. Small employers are more likely to allow employees to change starting and quitting times within some range of hours have control over when to take breaks, return to work gradually after childbirth or adoption and take time off during the workday to attend to important family or personal needs without loss of pay. Some Significant Findings of the Study:  Organizations where women make up less than 25% of the employees are more likely to have a low level of flexibility than organizations where women represent a larger share of the workforce.  Organizations, where racial and ethnic minorities make up more than 50% of the employees, are more likely to have a low level of flexibility (33%) than organizations where racial and ethnic minorities represent a smaller share (0%-50%) of the workforce.  Organizations where hourly employees make up 50% or more of the workforce are more likely to have a low level of flexibility (30%) to be in the low quartile.  Organizations with no union representation are more likely (26%) to provide a high level of flexibility, compared with 9% to 14% of those with unionized employers  Larger organizations are more likely (44%) to offer generous care giving leaves (high level) than smaller organizations (34%).  Employers that have experienced downsizing in the past 12 months (44%) are more likely to offer generous care giving leaves than employers who have not experienced such events (37%).  Large employers are more likely (56%) to provide a high level of child and elder care assistance than small employers (25%). 23
  • 28. Block I: Introduction to Management  Non-profit organizations (46%) are more likely to offer a high level of child and elder care assistance than for-profit organizations (29%).  Organizations that report doing better than their competitors are more likely to offer a high level of health care and economic security benefits (27%) than those that report doing worse than their competitors (19%). Conclusion: In the seven years between 2005 and 2012, the economy has been quite volatile, and common wisdomwould have it that employers would cut back on the work life assistance they offer to employees. In fact, there are serious reductions in how much employers pay toward benefits that cost money (e.g., their contribution to health care and pension plans and leave options). On the other hand, we have found greater in vestment in options that allow employees flexibility in when and where they work, such as flex time; flex place and time off during the day to attend to important family and personal needs. Interestingly, employers with more diverse leadership at the top and employers that are non-profits turn out to provide the best support for making work ―work‖ for both the employer and the employees. It is clear from the Report that the rewards and recognitions for employees would increase by implementing flexi times rather than reduced times. However care needs to be taken so that these benefits do not adversely affect the performance of employees and productivity of organizations. The flexi work places should be effective to enhance the quality of work life of the organizations. Quality of Work Life is possible through flexibility in the organization, self-management and discipline. There are many factors such as organizational pressures, stress, and daily commute, personal relationships such as marriage and divorce, child care, disability care and old age care that are impacting the balance between work life and personal life in current days. Proper organizational skills, self- discipline, flexible work hours and benefits can help in quality of work life. DiscussionQuestions 1. What elements do workplace flexibility include? (Hints: Flex time and place-Care giving leaves-Flex careers) 2. Discuss the motivators and obstacles in implementing work/life initiatives. (Hints: Recruitment-Retention-Cost-Lack of staff) Source: Maltos, K. and Galinsky, E. (2012), “2012 National Study of employers”, Familiesand Work Institute, SHRM, When Work Works Topic Course Unit-3: Social and Ethical Responsibilities of Management; Principles of Management Section-6: Measuring Social Responsiveness-Quality of Work Life; 24
  • 29. PEP Notes: Principles of Management 15. Personal and Organizational Factors impacting Managerial Ethics Personal and organizational factors impact the managerial ethics in decision making of the organizational managers. Ethics plays a major role in both public and private sector organizations. Unethical behaviors are very expensive to the organizations, employees, investors and the society at large. Business ethics are positiv ely correlated to organizational performance. The more global the organization is the more ethical problems the organization can face. Unethical behavior of the organization can reduce the stock prices. Example: SHELL has to relook at their core business principles after it had major ethical issues in 1995. Ethical decisions decide between right or wrong while differentiating between moral or immoral issues at the same time. Ethics indicates how we think and behave with others and how we want others to think and behave with us. Yusoff, Salleh, Zakaria, Nair, Vadevello and Luqman (2011) have done a study of 210 managers working in 42 oil and gas companies in Malaysia to find out the relationship between personal and organizational factors and ethical decision making of managers. The personal factors they considered include job satisfaction and organizational commitment. Organizational factors they considered are code of ethics and rewards. The research model is shown in following diagram. Personal Factors Job Satisfaction Organizational Commitment Ethical Decision Organizational Factors Making Code of Ethics Rewards InManagerialthestudy,it ethicswasfoundisaboutthat jobdecidingsatsfactrighton, organizationalwrong,correctcommitment,orincorrect,code ofjustifethiedcs andor rewardsunjustified,have influaccenceptableon orandunacceptable,positivecorrelationanddharmawith orethicaladharmadecision(ethicalmakingor unethical)ofmanagers. Ethicsinthehaveoil andlonggasbackgroundindustry in Malaysiaofculture.Fewerand eligionrewards.Theseareassociatedethicscan withvary mfrorem indethicalvidualdecisiontoindividualmakingand.Mofreomrewardscountryareto associatedcountry. withFor lexample,ssethicalgivingdecisiongiftmakingtocustomerbehavior isin ethicalmanagersin.one culture and unethical in another culture. The factors such as individual values, attitude, behavior, country culture, organizational culture, group culture, top management culture, job satisfaction, economic/financial situation, competition, self-interests and personal life can impact the managerial ethics in an organization. DiscussionQuestions  Discuss the importance of ethics to an organization.  (Hints: Effect on organizationalperformance-Effect on employees and investors) Discuss the factorsthat influenced theethicaldecision making process. (Hints: Personal factors-Organizational factors) Source: Yusoff, Z.Z.M., Salleh, W.A., Zakaria, Z., Nair, G.K.S., Vadevello, T. and Luqman, A. (2011), “The influence of personal and organizational factors on ethical decision making intentions amongmanager s”, International Journal of Business and Management, Vol. 6, No. 9, Topic Course Unit-3: Social and Ethical Responsibilities of Principles of Management Management; Section-7: Managerial Ethics 25
  • 30. Block I: Introduction to Management Block II: Planning 16. Strategic Planning for Better Organizational Business Value 17. Technology and Innovation Strategies of an Organization 18. HR alignment for Effective Implementation of Strategy 19. Decision-Making Process in Automotive Industry 20. Risk Culture for Decision Making in an Organization 21. Data Analytics as Systems Approach to Decision Making 26
  • 31. PEP Notes: Principles of Management 16. Strategic Planning for Better Organizational Business Value Institutional logic as part of strategic planning enhances business value historically. Traditionally, the sole purpose of business has been to make money and more profits -the more it made the better-it used to be. Rosabeth Moss Kanter takes a different approach, which she terms as institutional logic and says great companies believe that they are more than money-making machines. Institutional logic states that companies are more than instruments for generating money; they are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work with them. According to institutional logic, the value that a company creates should be measured not just in terms of short-term profits or pay cheques but also in terms of long term benefits. The Corporate leaders have to build enduring institutions. Aims of Great Companies: Producing goods and services that improve the lives of users Providing jobs to many and enhancing workers‘ quality of life. Developing a strong network of suppliers and business partners Ensuring financial viability Promoting economic value along with societal and human values. Six facets of institutional logic are a common purpose, long-term focus, emotional engagement, partnering with the public, innovation, and self-organization. Institutional Logic of Great Companies Facets of Institutional Purpose Examples Logic Common To provide Mahindra Group operates in many industries, including Purpose coherence amidst automobiles, finance, IT, and several others.It invests in creating diversity and to a culture based on a common purpose.Its Group Executive Board enable people to rise is made up of people from all segments of industry to unite their goals and forge strategic plans to enable people to rise. Long-term To sacrifice short- In South Korea, after the Asian financial crisis of the late 1990s, focus term financial when Shinhan Bank wanted to acquire Chohung Bank, there was opportunities if they a huge protest and the management changed its approach without are incompatible compromising on long term benefits. They negotiated an with institutional agreement with the Chohung union, giving equal representation values to both Shinhan and Chohung managers on a new management committee and increased the salary of Chohung employees. Within 18 months, Shinhan was outperforming not only the banking industry but also the South Korean stock market. Facets of Institutional Purpose Examples Logic Emotional To evoke positive The CEOs of great companies‘ allocated considerab le resources Engagement emotions, stimulate and time, engaging managers in the task of communicating motivation and values. propel As a Procter & Gamble executive, Robert McDonald had long Self-regulation or believed that the company‘s Purpose, Values, and Principles peer regulation. To become embedded in tasks,goals, and performance standards by increase employee evoking strong emotions in employees and giving meaning to the engagement company‘s brands. Partnering To address societal International activities, conducted in collaboration with the with the needs along with United Nations and other global organizations - Procter & Public business interests Gamble‘s Children‘s Safe Drinking Water program with UNICEF and several NGOs Large domestic projects, undertaken in collaboration with 27
  • 32. Block II –Planning government ministries and development agencies- PepsiCo‘s agricultural projects in Mexico with the Inter-American Development Bank Product or service development to address unmet societal needs- P&G‘s linkages with public hospitals in West Africa Short-term volunteer efforts- IBM‘s work following the Asian tsunami, Hurricane Katrina, and earthquakes in China and Japan to provide software to track relief supplies and reunite families. Innovation To serve society to IBM‘s Corporate Service Corp- develops future leaders by become credible sending diverse teams of the company‘s best talent on month when leaders allocate long projects around the world. time, talent, and Cemex- produced innovations such as antibacterial concrete, resources to national which is particularly important for hospitals and farms; water- or community resistant concrete, useful in flood-prone areas; and road surface projects material derived from old tires, desirable in countries that are building roads rapidly. Novartis employees- serve in hospitals,where they see first-hand the challenges of disease and how their drugs are used Self-- To create networks Three PepsiCo managers in Latin America had shared a dream organization to share information, for around a decade of developing new kinds of potatoes that new initiatives or were suitable for southern climates. In August 2010, CEO Indra innovations to Nooyi announced the establishment of a global potato facilitate them development center in Peru, headed by one of the three through champions communication platforms or meeting spaces. Leaders in great companies use an institutional or social logic to supplement economic or financial logic in guiding and growing their enterprises. Institutional logic cannot be captured by cost-benefit equations or reduced to the language of economics, and yet it turns out to be a powerful driver of financial performance. All the six facets are interlinked and together they help in institution building and realizing business values. Strategy Planning is about long term planning for the organization. It is best practice to include organizational logic, innovation, networking and social media in strategy planning. These give better inputs to the planning process in addition to the internal marketing and product development teams. The early days of strategic planning was known as top management planning. Current day organizations are involving other important stakeholders also into strategy planning. Some organizations even take customers and their product lines and strategies into consideration while devising their own organizational strategies. It is also better to follow industry trends and technology trends for strategic planning. Strategy involves deciding on products and services to offer, sources of income, profit making, processes to deal with customers and employees.  Discuss the importance of strategy planning to an organization.  (Hints: Better inputs to planning process-Long-term planning for the organization)  What are the six facets of institutional logic? DiscussionQuestions  (Hints: Common purpose-Long-term focus-Self-organization-Emotional engagement- Public partnering-Innovation) Source: Kanter, R.M. (2011), “How Great Companies Think Differently”, Harvard Business Review, November 2011 Topic Course Unit-6: Strategies, Policies and Planning Premises; Principles of Management Section-6.5: Strategy Planning; 28
  • 33. PEP Notes: Principles of Management 17. Technology and Innovation Strategies of an Organization Balancing in the box and out of box thinking is critical to strategy. Lego‘s fall and rise story speaks about how a global toy industry with its ‗out of the box thinking‘ and ‗innovation binge‘ became almost bankrupt and could once again rise to supremacy with ‗in box thinking‘ and turning to ‗innovation inside the brick‘. The success behind the story is Lego‘s creativity and innovation coupled with focus and control in business. Out of the Box Strategy Vs. In the Box strategy  An expression that describes non-conformal creative thinking  New Innovative strategies  An expression that describes conformal thinking  Traditional strategies Out of the Box expression is derived from the famous nine dot puzzle which asks for joining the dots in four straight lines without lifting the pen when once started joining . . . This means that managers go beyond the normal borders to get solutions or if they have to solve problems. In the case of Lego they shifted from excessive . . . innovative methods and out of the box strategy and went back to their traditional brick assembling toys. . . . David Robertson, the author of the book ‗Brick by Brick:How Lego rewrote the Rules of Innovation and Conquered the Global Toy Industry‘ writes about the transformation of Lego from a small company that made wooden toysto a worldwide giant and a recovery fromnearbankruptcy to supremacy in globalmarket. Here goes the story. The Lego Company: The Lego Group is a family-owned company based in Billund, Denmark, and best known for the manufacture of Lego brand toys. The company was founded in 1932 by Ole Kirk Christiansen. From 1978-1993 was a golden period for Lego where company grew at 14% per year, every year for 15 years. Fall of Lego: It went through a decline when sales did not grow and costs rose during 1993-98 even though it tried to triple its number of new toys. One reason for the decline it reached could be attributed to the end of a natural growth cycle and the other is rise in the cost without changing sales. Company laid off 1000 people. That time it was managed by Kjeld Kirk Christiansen, grandson of the founder Ole Kirk Christiansen. Importance and perils of Innovation: Looking at the losses he felt that he was not the right person to lead the company and passed it on to a turnaround expert, Poul Plougmann. He embarked innovation and experimented by introducing a lot of products, including Star Wars, Harry Potter and Bionicle. The company tried to create whole set of complementary innovations that would reinforce each other. For instance, Galidor toy had video games, TV show, telling the story behind the toy. Unfortunately, the TV shows were so bad that Lego did not know how to make them. Harry Potter and Star Wars were successes only for a short time as people lost liking for those toys when these movies were out dated. The company tried to innovate in lots of ways and lost control of the innovation. Lego started losing money in 2003. Rise of Lego : While other firms abandoned innovation, Lego continued in a different way. They shifted from the ‗out of the box strategy‘ to be back ‗in the box‘ strategy. They went back to their old brick and focused on police stations and trucks which their fans liked very much and they also profited from that business. The importance and the dangers of innovation illustrate the story of Lego. Excessive innovation 29
  • 34. Block II –Planning bankrupted Lego. It could come back by adopting new strategies. The success of Lego lies in small innovations and small ideas integrated well by focusing on what the customers wanted and needed. For the past five years, Lego has sales growing at 24% per year every year and profits growing at 40% per every year. Strategy is thinking about long term. That is, devising long term plans for the organization. Strategies include functional strategies and operational strategies. Functional strategies for an organization include marketing strategy, finance strategy, product or engineering strategy, HR strategy, IT strategy or technology strategy. Operational strategies deal with day to day operations of the organization. Usually strategy formulation is done in a top-down approach. CEO, top and senior management are part of strategy formulation. Board of directors can help and mentor the CEO in formulating a strategy. Every employee in the organization is part of strategy implementation. Out of the box thinking is required for strategy formulation. DiscussionQuestions 1. Discuss the significance of functional and operational strategies. (Hints: Deal with day-to-day operations-Help in formulating marketing and finance strategies,etc.) 2. How did ‗out of the box‘ strategy help Lego to resurrectitself? (Hints: Focus on innovation-Experimentation-Small ideas) Source: “How Lego clawed its way out of near Bankruptcy”, Knowledge@Wharton Topic Course Unit-6: Strategies, Policies and Planning Premises; Principles of Management 30
  • 35. PEP Notes: Principles of Management 18. HR alignment for Effective Implementation of Strategy Effective managers require high degrees of managerial skills such as technical, human and conceptual skills. What makes employees to consider workplace as a great place to work? Organizations are realizing the importance of aligning HR policies and procedures with organizational strategies for building their image. Every organization probably aspires to enter into the list of Fortune 100 Best Companies to Work. A great place to work is one where management and employees are happy and feel that they are mutually benefitting with each other‘s contribution and where employees are proud to work. Fortune Partners with the Great Place to Work Institute annually conduct a Survey in Corporate America to pick the 100 best companies to work with. The Top 10 BestCompanies for 2013 are: Rank Name of the Company 1 Google. Inc 2 SAS 3 CHG Healthcare Services 4 The Boston Consulting Group, Inc. 5 Wegmans Food Markets, Inc. 6 NetApp 7 Hilcorp Energy Company 8 Edward Jones 9 Ultimate Software 10 Camden Property Trust Methodology used for selecting Best Companies: More than 277 000 employees from 259 firms participated in a survey this year. The eligibility criteria for participating in the survey were: 1) the company should be 5 years old, and 2) the company should have more than 1000 US employees. Data was collected through two questionnaires, one called Trust Index Survey and the other Culture Audit Survey. The Trust Index Survey questions related to management‘s credibility, job satisfaction and camaraderie. Two thirds of the score was based on this survey. Questions on Culture Audit Survey included on Pay and Benefit programs, Hiring practices, Methods of internal communication, Training programs, Recognition programs and Diversity efforts. One thirds of the score was based on this survey. Ranking of companies was done on the basis of overall score obtained by each company. Effective implementation of strategy is possible only with involvement of all employees in the organization. That is, HR strategy should be in line with organizational strategy to implement the strategy in the organization. This is because any new strategy implementation involves some extent of change management in an organization. In turn, change management in an organization has to do something with people in the organization.Thus withouthuman resources effective strategy implementation is not possible in an organization. HR professionals must understand the organisations‘ business, it‘s competition and relevant trends. Organizational strategy implementation requires changes to organizational structure, organizational culture, business processes, technical processes, marketing strategies, product strategies, operational strategies and HR strategies. DiscussionQuestions 1. What are the benefits of aligning HR strategy and organizational strategy? (Hints: Effective strategy implementation-Image building) 2. Discuss the factors that are essentialfor implementation of strategy. (Hints: Employee involvement-Understanding an organization‟s business) Source: “Fortune 100 Best Companies to Work For” Topic Course Unit-6: Strategies, Policies and Planning Premises; Principles ofManagement Section-6.11: Effective Implementation of Strategy; 31
  • 36. Block II –Planning 19. Decision-Making Process in Automotive Industry Multidisciplinary collaborative and cohesive process is used as complex decision-making process in an automotive industry. Continuous technological and operational changes impact decision-making in the automotive industry. The amount of software in parts of cars is growing rapidly. Software is replacing mechanical devices, thereby making the integration tight and complex. There is a need for cohesion and cooperation between different stakeholders in the automobile industry such as among automobile manufacturers, OEMs (Original Equipment Manufacturers), suppliers and design partners. American and European OEMs are facing competition from Asian countries such as from India and China. The demand for automobiles is shifting from America and Europe to India, China, Latin America and even Africa. Under these scenarios, decision making in the automobile industry is becoming more complex. Decision Making Process: The decision making process in the automotive industry is a multidisciplinary collaborative process. It includes all the stakeholders throughout the product development life cycle. The complexities in product development process, supply chains, interoperability, connectivity and visibility are impacting the decision making process. IT is widely used in the industry for connectivity, interoperability and visibility. Tools such as CAD, CAM, analytics, supplier scorecards and costing are used in product development process. If the stakeholder takes a single decision it is going to impact all the other stakeholders in the product development life cycle. Hence, the decision should be timely and accurate and it should be informed to all other stakeholders in the life cycle. Decisions include both internal and external stakeholders and it should happen in a collaborative and cohesive environment. Automotive manufacturers are looking to reduce the costs and increase revenues. Hybrid cars and Electric cars are also putting more pressure on manufacturers and OEMs. It is best practice to have a centralized product data management system connecting all the stakeholders for efficient decision making in this complex automotive industry. Decision-making process varies from organization to organization, situation to situation, issue to issue and industry to industry. In some industries, decision making is very quick, such as in the nuclear energy, defence and healthcare industries. Decision making process involves finding the issue, gathering facts, finding alternative solutions, selecting best alternative and implementing the alternative. Sometimes brainstorming, Delphi technique and group decision making can help. DiscussionQuestions 1. What factors affect the decision-making process in the automotive industry? (Hints: Technological changes-Operational changes-Shift in demand to newer markets) 2. Discuss the salient features of the decision-making process in the automotive industry. (Hints: Multidisciplinary process-Collaborative process-Use of IT) Source: Barkai, J. (2010), “The Automotive Industry: New Complexities Demand Better Decision Making”, IDC Manufacturing Insight Topics Course Unit-7: Managerial Decision Making; Principles of Management Section-7.5: Decision-Making Process; 32
  • 37. PEP Notes: Principles of Management 20. Risk Culture for Decision Making in an Organization Risk culture affects decision making under risk and uncertainty in an organization. Risk Management Strategy Drives Policies Risk Culture Chain Procedure Systems Organizational Cult ure Drives Values Practices Behaviour CORRECT TREATMENT ACTUAL TREATMENT OF RISK OF RISK If Strategy and culture are fully aligned then Correct and Actual Treatment will be Match Source: Google Images KPMG launched a survey on Enterprise Risk Management across Europe, Middle East, Africa and India to understand the current trends and practices and the imperatives for more effective risk management in future. Some important findings of the survey are: 1. Risks are on the rise and becoming more complex 2. CEOs view risk as an opportunity whereas others want ‗safety first‘ approach 3. Boards are responsible to ensure alignment between strategy and risks. They doubt the reliability of risk information as companies do not have confidence in the board‘s ability 4. Organizations are trying to improve risk management systems and processes but the issue of embedding risk into the organization‘s culture and making it an integral part of the business is not getting adequate attention. 5. Information sources are largely inward focused (but not forward looking) and external focused. Sustainability and climate change issues are not covered 6. Organizations are developing responses at individual process level but not at higher levels and are not aware of the interdependence between various risks Risk culture encompasses constant and consistent communication about risk, ethics and values, practices, behaviours, considering risk factors in decision making, clearly defined roles and responsibilities, clearly documented policies, procedures and systems. Global financial crisis brought the discipline of risk management to the agenda of all enlightened organizations throughout the world. It is against this backdrop that creating a robust risk culture in the organization assumes importance. The study reveals that risk culture is inadequate even in well-established and reputed organizations. Primarily there are three main actors/ factors in risk management: 33
  • 38. Block II –Planning 1. Attitude at the top: Compliance with the risk policies and appetite is independently presented and reviewed by the  board   Personnelreward structuresare aligned to riskadjusted measures Organization has committed sufficient resources to riskmanagement 2. Risk ownership:    Clarity on the risk appetite fromseniormanagement and the board ERM is integrated into management‘s risk management processes 3. Risk facilitation:  CROs have a role to play in strategic decisions-M&A, new products,entering new markets etc. Risk management training in place, covering the policy, methodology, tools and practices  The key challenges faced by the surveyed organizations in the area of risk culture are:   Risk owners are unclear about the organization‘s risk appetite Risk responsibility delegated authority limits and compensation structures are not seamlessly integrated with risk appetite/tolerance The study established the following imperatives towards ensuring effective risk culture: Imperative 1: Enhancing board governance of risk: effective risk oversight by the board Imperative 2: Linking objectives, strategy and risks to Key Risk Indicators Imperative 3: Instilling robust risk culture by settling the conflict between organizational and individual decision maker‘s appetite and attitude towards risks Imperative 4: Position the CRO as a strategic business advisor Imperative 5: Integrating risk management at the enterprise level The study also suggested undertaking a risk culture survey before implementing risk management. This is necessary to:  Assessthe currentlevel of understanding of the organization‘s objectives, risk concepts andthe  attitude towardsrisktaking  A poorly integrated and forced risk management will not yield anticipated results Dynamically respond to risks on a continuous basis Focus  areas for risk culture survey: Understanding the perception of risk of the CEO and senior management  Understanding the pressure points in risk management-compensation policy, ability to discuss  emerging issues,clarity about roles and responsibilities etc. Establishing the expectations from the CEO regarding risk management 34
  • 39. PEP Notes: Principles of Management The organizationalculture towardsrisktaking impacts the decisionmaking under risk anduncertainty. Every organizationaltaskinvolvessome sort ofriskoruncertainty associated with it.Hence,taking decisions on these kinds of tasks require courage, communication skills and influencing skills in the manager. The task failure can impact the manager‘s career in the organization or organizational reputation. Hence, decision making underrisk and uncertainty requires lot of patience, maturity, listening, initiative, innovation,courage and confidence. DiscussionQuestions 1. What were the findings of KPMG‘s survey? (Hints: Rise of risks-Increase in the complexity of risks-Risks viewed as an opportunity) 2. What are the requisites of a risk taking organizational culture? (Hints: Courage-Communication skills-Influencing skills) Source: KPMG (2011), “Risk Management, A Driver of Enterprise Value in the Emerging Environment”, KPMG Topic Course Unit-7: Managerial Decision Making; Principles of Management Section-7.7: Decision-Making Under Certainty, Risk and Uncertainty; 35