Principles of Business Management Solved Paper - May' 2013 Semester Exam

2013 (May)
Commerce (General/Speciality)
1.       Match the following:                              1*8=8
(i)            Management is what manager does.       (f) Louis allen 
(ii)          Management means decision making             (d) Ross Moore     
(iii)         Management means gettig things done throgh others people.(e) American Management Association
(iv)        Father of scientific management             (b) F.W Taylor
(v)          Planning is the thinking process               (a) Alford and Beatty
(vi)        Esprit De Corps                            (c) Henry Fayol
(vii)       Establishing standards      (h) Step of control process
(viii)     The human side of interprise        (g) Douglas McGregor

2.       Write short notes any four:                 4*4=16
(a)    Levels of management
(b)   Span of management
(c)    Management by objectives
(d)   Advantages of control
(e)   Herzberg theory of motivation

3.       (a)  Discuss the contribution of FW Taylor to the growth of management thoughts.                                  12
Taylor's Scientific Management
F.W. Taylor is one of the founders (the other two are Max Weber and Henry Fayol) of classical thought/classical theory of management. He suggested scientific approach to management also called scientific management theory. Frederick Winslow Taylor well-known as the founder of scientific management was the first to recognize and emphasis the need for adopting a scientific approach to the task of managing an enterprise. He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much of waste and inefficiency is due to the lack of order and system in the methods of management. He found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the job. As a result, it remained largely at the mercy of the workers who deliberately shirked work. He therefore, suggested that those responsible for management should adopt a scientific approach in their work, and make use of "scientific method" for achieving higher efficiency. The scientific method consists essentially of:
(a)    Observation
(b)   Measurement
(c)    Experimentation and
(d)   Inference.
He advocated a thorough planning of the job by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words:
(a)    Science, not rule of thumb
(b)   Harmony, not discord
(c)    Co-operation, not individualism
(d)   Maximum output, in place of restricted output
(e)   The development of each man to his greatest efficiency and prosperity.
Elements of Scientific Management: The techniques which Taylor regarded as its essential elements or features may be classified as under:
1. Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic, objective and critical examination of all the factors governing the operational efficiency of any specified activity in order to effect improvement. Work study includes.
(a) Methods Study: The management should try to ensure that the plant is laid out in the best manner and is equipped with the best tools and machinery. The possibilities of eliminating or combining certain operations may be studied.
(b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an operation with the purpose of eliminating useless motions.
 (c) Time Study (work measurement): The basic purpose of time study is to determine the proper time for performing the operation. Such study may be conducted after the motion study. Both time study and motion study help in determining the best method of doing a job and the standard time allowed for it.
(d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue, it may either be beyond the workers or the workers may over strain themselves to attain it. It is necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals.
(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who are not able to come up to the standard set.
2. Planning the Task: Having set the task which an average worker must strive to perform to get wages at the higher piece-rate, necessary steps have to be taken to plan the production thoroughly so that there is no bottlenecks and the work goes on systematically.
3. Selection and Training: Scientific Management requires a radical change in the methods and procedures of selecting workers. It is therefore necessary to entrust the task of selection to a central personnel department. The procedure of selection will also have to be systematised. Proper attention has also to be devoted to the training of the workers in the correct methods of work.
4. Standardization: Standardization may be introduced in respect of the following.
(a) Tools and equipment: By standardization is meant the process of bringing about uniformity. The management must select and store standard tools and implements which will be nearly the best or the best of their kind.
(b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is likely to result in damage to machinery.
(c) Conditions of Work: To attain standard performance, the maintenance of standard conditions of ventilation, heating, cooling, humidity, floor space, safety etc., is very essential.
(d) Materials: The efficiency of a worker depends on the quality of materials and the method of handling materials.
5. Specialization: Scientific management will not be complete without the introduction of specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in the organisation of the plant. The `functional foremen' are specialists who join their heads to give thought to the planning of the performance of operations in the workshop. Taylor suggested eight functional foremen under his scheme of functional foremanship.
(a) The Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it.
(b) The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work.
(c) The Time and Cost Clerk: To send all information relating to their pay to the workers and to secure proper returns of work from them.
(d) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.
(e) The Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their personal motions in the quickest and best way.
(f) The Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the workers.
(g) The Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness around him and his machines.
(h) The Inspector: To show to the worker how to do the work.
6. Mental Revolution: At present, industry is divided into two groups – management and labour. The major problem between these two groups is the division of surplus. The management wants the maximum possible share of the surplus as profit; the workers want, as large share in the form of wages. Taylor has in mind the enormous gain that arises from higher productivity. Such gains can be shared both by the management and workers in the form of increased profits and increased wages.
(b) Describe the contingent approach of management.                                 12

4.       (a) Describe Planning. Discuss the process of planning in detail.                                                       4+7=11
Ans: Introduction of Planning: Planning is the primary function of management.  Planning concentrates on setting and achieving objectives through optimum use of available resources.  Planning is necessary for any organisation for its survival growth and prosperity under competitive and dynamic environment.  Planning is a continuous process to keep organisation as a successful going concern,
In the words of:
Koontz and O’Donnel – “Planning is deciding in advance, what to do, how to do it, when to do it, and who is to do it.  It bridges the gap from where we are to where we want to go.”
Allen – “Management planning involves the development of forecasts, objectives, policies programmes, procedures, schedules and budgets.”
Haynes and Massie - Planning is a decision making process of a special kind.  It is an intellectual process in which creative thinking and imagination is essential.”
Alfred and Beatty - “Planning is the thinking process, the organized foresight, the vision based on fact and experience that is required for intelligent action.
Planning Process
Planning process involves the setting up of business objectives and allocation of resources for achieving them. Planning determines the future course of action for utilizing various resources in a best possible way. It is a combination of information handling and decision making systems based on information inputs, outputs and a feedback loop.
Steps in the process of Planning.
a)      Setting organisational objectives: The first and foremost step in the planning process is setting organisational objectives or goals, which specify what the organisation wants to achieve. For example, an increase in sales by 20% could be the objective of the organisation. Objectives may also be set for each individual department. They give direction to all departments.
b)      Developing planning premises: Planning is concerned with the future, which is uncertain. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises. Assumptions are made in the form of forecasts about the demand for a particular product, government policy, interest rates, tax rates, etc. Therefore, accurate forecasts become essential for successful plans.
c)       Identifying alternative courses of action: Once objectives are set and assumptions are made, then the next step is to identify all possible alternative courses of action. For example, in order to achieve the organisational objectives of increasing profit, the alternatives may be
a.       increase the sales of an existing product, or        
b.      produces and sells a completely new product.
d)      Evaluating alternative courses: The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved, its feasibility and consequences. For example, the risk-return trade-off is very common. The more risky the investment, the higher is the possibility of returns. To evaluate such proposals, detailed calculations of earnings, earnings per share, interest, taxes, dividends are made.
e)      Selecting the best possible alternative: This is the real point of decision making. The best/ideal plan has to be adopted, which must be the most feasible, profitable and with least negative consequences. The manager must apply permutations and combinations and select the best possible course of action. Sometimes, a combination of plans. may be selected instead of one best plan.
f)       Implementing the plan: Once the plans are developed, they are put into action. For this, the managers communicate the plans to all employees very clearly and allocate them resources (money, machinery, etc.
g)      Follow-up action: The managers monitor the plan carefully to ensure that the premises are holding true in the present condition or not. If not, adjustments are made in the plan.
(b)Discuss the various steps involved in the decision-making process.                                  11
Ans: Decision Making - Introduction
Decision-making is an essential aspect of modern management. It is a primary function of management. A manager's major job is sound/rational decision-making. He takes hundreds of decisions consciously and subconsciously. Decision-making is the key part of manager's activities. Decisions are important as they determine both managerial and organisational actions. A decision may be defined as "a course of action which is consciously chosen from among a set of alternatives to achieve a desired result." It represents a well-balanced judgment and a commitment to action.
Definitions of Decision-making
The Oxford Dictionary defines the term decision-making as "the action of carrying out or carrying into effect".
According to Trewatha & Newport, "Decision-making involves the selection of a course of action from among two or more possible alternatives in order to arrive at a solution for a given problem".
Steps Involved In Decision Making Process
Decision-making involves a number of steps which need to be taken in a logical manner. This is treated as a rational or scientific 'decision-making process' which is lengthy and time consuming. Such lengthy process needs to be followed in order to take rational/scientific/result oriented decisions. Drucker recommended the scientific method of decision-making which, according to him, involves the following six steps:
1.       Identifying the Problem: Identification of the real problem before a business enterprise is the first step in the process of decision-making. It is rightly said that a problem well-defined is a problem half-solved. Information relevant to the problem should be gathered so that critical analysis of the problem is possible. This is how the problem can be diagnosed. Clear distinction should be made between the problem and the symptoms which may cloud the real issue.
2.       Analyzing the Problem: After defining the problem, the next step in the decision-making process is to analyze the problem in depth. This is necessary to classify the problem in order to know who must take the decision and who must be informed about the decision taken. Here, the following four factors should be kept in mind:
a)      Futurity of the decision,
b)      The scope of its impact,
c)       Number of qualitative considerations involved, and
d)      Uniqueness of the decision.
3.       Collecting Relevant Data: After defining the problem and analyzing its nature, the next step is to obtain the relevant information/ data about it. There is information flood in the business world due to new developments in the field of information technology. All available information should be utilised fully for analysis of the problem.
4.       Developing Alternative Solutions: After the problem has been defined, diagnosed on the basis of relevant information, the manager has to determine available alternative courses of action that could be used to solve the problem at hand. Only realistic alternatives should be considered. It is equally important to take into account time and cost constraints and psychological barriers that will restrict that number of alternatives.
5.       Selecting the Best Solution: After preparing alternative solutions, the next step in the decision-making process is to select an alternative that seems to be most rational for solving the problem. The alternative thus selected must be communicated to those who are likely to be affected by it. Acceptance of the decision by group members is always desirable and useful for its effective implementation.
6.       Converting Decision into Action: After the selection of the best decision, the next step is to convert the selected decision into an effective action. Without such action, the decision will remain merely a declaration of good intentions. Here, the manager has to convert 'his decision into 'their decision' through his leadership.
7.       Ensuring Feedback: Feedback is the last step in the decision-making process. It is like checking the effectiveness of follow-up measures. Feedback is possible in the form of organised information, reports and personal observations. Feed back is necessary to decide whether the decision already taken should be continued or be modified in the light of changed conditions.
Every step in the decision-making process is important and needs proper consideration by managers. This facilitates accurate decision-making.

5.       (a) What do you understand by formal and informal organisation? Distinguish between the two.   5+6=11
Ans: MEANING OF FORMAL ORAGANISATION: The formal organization refers to the structure of jobs and positions with clearly defined functions and relationships as prescribed by the top management. This type of organization is built by the management to realize objectives of an enterprise and is bound by rules, systems and procedures. Everybody is assigned a certain responsibility for the performance of the given task and given the required amount of authority for carrying it out.
In the words of Chester Barnard, "An organisation is formal when the activities of two or more persons are consciously co-ordinated towards a common objective".
MEANING OF INFORMAL ORAGANISATION: Man is a social being and wants social interaction.  Formal organisations are jointed by people to satisfy their needs but these organisations cannot satisfy all the needs of people because of their nature.  Hence informal organisation emerges in all the formal organisations.
Informal organisation is natural or spontaneous network of personal and social relationships between individuals formed on the basis of personal attitudes values emotions, friendships prejudices, interest’s likes and dislikes, regional affinity, common work place etc.  Informal organisation is all pervasive and is found at all levels of management.  It consists of small informal groups with their own behavioral patterns, status systems, beliefs and goals.
According to Davis informal organisations is” that network of personal and social relations which is not established or required by formal organisation.  It is a shadow organisation”.
Difference between formal and Informal organisation:

It is official, so it has prescribed structure of roles and relationships.  It is planned and deliberately created by management
It is in unofficial or natural having no specific structure.  It arises spontaneously without official sanction by management
It is based on delegation of authority & may grow to very big size.  It is mechanistic and brings order in the organisations.
It arises through social interactions between employees.  It usually remains small is size.  It is humanistic and gives satisfaction to employees.
It is deliberately created impersonal with emphasis on authority, functions, status differentials and down ward communications
It is personal with emphasis on people and their intricate relationships, informal rankings and multidimensional communications. 
It is hierarchical and pyramid shaped.
It has no definite shape, and no division of work.  It is structural less and ill defined.  It is psychosocial system.
Its tasks, goals and values are economic oriented towards efficiency, productivity profitability and growth.
Its tasks, goals and values are socio- psychological centering on individual and group satisfaction affiliation co-friendship esteem etc.
6. Charts and Manuals
It can be shown in the form of charts and manuals of the organisation.
It finds no place on organisation charts and manuals.
7. Role and Relationships
It has written roles and procedures, authority and responsibility are clearly defined.  There are well defined roles and relationships.
It has unwritten conventions and norms there are no written rules or procedures.
8. Authority
Formal authority is institutional, it attaches to a position and a person exercises it by virtue of his position. Formal authority flows downwards as it is delegated. 
Informal authority attaches to a person and it flows upwards or horizontally as it has to be earned there is informal leader and has strong influence.
9. Behaviour
It has prescribed system of behaviour .Rewards and punishments are given on the basis of desired behaviour rewards can be both monetary and non monetary.
It is unwritten norms of behaviour, enforced through mutual consent rewards include social esteem, satisfaction group leadership while punishments are censure isolation, boycott etc.
It is rational and created to meet organisational goals.  It is stable, permanent and predictable.
It arises to satisfy man’s quest for social satisfaction It is relatively fickle and unpredictable.
Group membership is rigidly defined, every employee belongs to one workgroup only.
One person can be member of several informal groups of his choice.  He may be a leader in one group and a follower in the other.

(b)What do you mean by departmentation? Briefly discuss the different methods of departmentation.              5+6=11
Ans: Departmentation - Introduction
The process of dividing activities into units and subunits is referred to as departmentation. The term departmentation is used in a generic sense n is not only confined to the creation of such units as are called departments, but it includes divisions, sections and jobs also.
Dividing up work calls or identification of total activities and classification of such activities into units and subunits. There are three bases for primary grouping of activities at the second level of the organisation just below the top level. Units at the second level are commonly called departments when business functions are adopted as the pattern of grouping activities. Such units go by the name of divisions when either products manufactured or territories are adopted as the means of classifying activities.
There are, however, two approaches to departmentation- top down and bottom-up approaches. In the top-down approach, activities are divided step by step downward form the chief executive's job to the operating jobs. In the bottom-up approach, the division of activities is carried on in a reverse order. Starting form operating jobs, there arise sections form combining some correlated jobs, departments from combining some sections and finally the chief executive position form putting departments together. While the top-down approach gives emphasis on co-ordination and managerial action, the bottom-up approach gives emphasis on co-ordination and managerial action, the bottom-up approach focuses attention on employee performance. Although the top-down approach is easy for understanding the departmentation process, both the approaches are utilized in actual practice
Bases or Methods of departmentation
Departmentation provides motivation by developing feeling of autonomy to the extent possible. There are several bases of departmentation. The more commonly used bases are function, produt, territory, process, customer, time etc. Some of these bases are internal-operation – oriented like function, process, time while others like product, territory and customer are output-oriented.
a)      Functional Departmentation: The grouping of common or homogeneous activities to form an organisation unit is known as functional departmentation. Functional departmentation is the most widely used basis for organising activities and is present almost in every large organisation at some level.
Functional departmentation is most commonly used because it offers certain advantages which include advantages of specialization, ensuring performance of activities necessary for the achievement of organisational objectives, elimination of un-necessary activities, easier control over functions, easier way for pinpointing training need of the managers and maintaining the relative importance of functions in the organisation.
b)      Product wise departmentation: Product departmentation involves the grouping together of all activities necessary to manufacture a product or product line. Product departmentation is preferred for product expansion and diversification when manufacturing and marketing characteristics of each product are of primary concern. Product departmentation offers several advantages places attention to product lines, reduces problems of coordination for different products, provides opportunities for further diversification and expansion of organisation and provides product specialization necessary for managers specially when each product is different from other.
c)       Territory – wise Departmentation: Territorial or geographical departmentation is specially useful to large-sized organisations having activities which are physically  or geographically spread such as banking, insurance, transportation etc., Territorial departmentation provides certain efficiency in operation. Local factors such as customers, culture, styles, preferences etc., always affect organisational functioning.
d)      Production processes – wise departmentation: In  process departmentation, processes involved in production or various types of equipments used are taken as basis for departmentation. When the production activities involve the use of several distinctive processes, these can be used as the base for grouping of activities. Such activities may be textiles, oil production etc., The process are set in such a way that a series of operations is feasible making operations economic. It provides advantages of specialization required at each level of total processes, maintenance of plant can be done in better way, and manpower can be utilized effectively.
e)      Customer – wise departmentation: Customer based departmentation is  basically market – oriented in which departments are created around the markets served or around marketing channels. The basic idea of this departmentation is to provide services to clearly identified groups of customers. Each group of customers has different purchase behavior, payment schedule, demand pattern etc., Therefore they can be attracted to the organisation’s business by satisfying them by providing services, payment schedule demand pattern etc.

6.       (a) What is motivation? Write about its importance.                                5+6=11
(b) “Leadership is a dynamic and continious process.” Discuss.                    11
7.       (a) Explain the effective requirements of an effective control system.                                    11
(b) Discuss the importance of ‘budget and budgetary control’ as a technique of managerial control.                         11