Principles of Business Management Solved Paper - May' 2014 Semester Exam

2014 (May) – Semester Exam
1.       Fill in the blanks with appropriate word or words :                                    1*8
(a)     Functional foremanship was introduced by F.W. Taylor.
(b)   ‘Father of human relation movement’ was Elton Mayo
(c)    The motivation theory of Abraham Maslow is known as Maslow’s Hierarchy of Needs.
(d)   ‘PODSCoRB’ was introduce by Luther Gulick .
(e)   Peter Drucker is known as father of MBO technique.
(f)     Return on investment (ROI)= (Net Income / Total Investment) X 100
(g)    The minimum duration of long term planning is 5 years.
(h)   Time study is a part of work study.

2.       Write short notes on any four:                                           4*4=16
(a)    Planning premises
(b)   Departmentation
(c)    Autocratic leadership
(d)   Concept of decision making
(e)   Bases of departmentation

Ans: (a) Planning Premises: Managerial plans are based on certain assumptions which are called planning premises. They constitute the ground on which plans will stand. Meaningful premises facilitate consistency and coordination of plans. The premises may be of:
a. Non-controllable premises such as economic conditions, political situations, tastes, preferences of people etc.
b. Semi-controllable premises such as firms market shares, union management relations etc.
c. Controllable premises such as policies of the organisation, procedures, rules etc.
Effective Premising :
a.       To effectuate the planning premises following guidelines may be adopted.
b.      Selection of the premises that bear materially on program.
c.       Development of alternative premises for contingency planning.
d.      Verification of the consistency of premises
e.      Communication of the premises.
(b) Departmentation: 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
(c) Autocratic or Authoritarian Style leader: An autocratic also known as authoritarian style of leadership implies wielding absolute power. Under this style, the leader expects complete obedience from his subordinates and all decision-making power is centralized in the leader. No suggestions or initiative from subordinates is entertained. The leader forces the subordinates to obey him without questioning. An autocratic leader is, in fact, no leader. He is merely the formal head of the organisation and is generally disliked by the subordinates who feel comfortable to depend completely on the leader.
a)      Reduced stress due to increased control
b)      A more productive group ‘while the leader is watching’
c)       Improved logistics of operations
d)      Faster decision making
a)      Short-termistic approach to management.
b)      Manager perceived as having poor leadership skills
c)       Increased workload for the manager
d)      People dislike being ordered around
e)      Teams become dependent upon their leader
(d) Decision Making: 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.
It is rightly said that the first important function of management is to take decisions on problems and situations. Decision-making pervades all managerial actions. It is a continuous process. Decision-making is an indispensable component of the management process itself.
The effectiveness of management depends on the quality of decision-making. In this sense, management is rightly described as decision-making process. According to R. C. Davis, "management is a decision-making process." Decision-making is an intellectual process which involves selection of one course of action out of many alternatives. Decision-making will be followed by second function of management called planning. The other elements which follow planning are many such as organising, directing, coordinating, controlling and motivating.
(e) 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.
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.
3.       What are the objectives of management? Discuss the scope of management.                                           5+7=12
Ans: Management - Introduction
Management is the coordination of all resources through the process of planning, organising, directing, staffing and controlling in order to attain stated objectives effectively and efficiently.  Effectively means doing the right task, completing activities and achieving goals and efficiently means to attain objectives with least amount of resources at a minimum cost. This process starts at the top and continues in more or less degree at every level of the organisation.
According to Harold Koontz, “Management is an art of getting things done through others and with formally organised groups."
According to F.W. Taylor, “Management is an art of knowing what do you want to do and then seeing that is is done in the best and cheapest way.”
According to Henry Fayol, “To manage is to forecast, to plan, to organize, to command to co-ordinate and control.
George R. Terry, “Management is a distinct process consisting of planning, organising, actuating and controlling performance t determine and accomplish the objectives by the use of people and resources,”
Thus management may be defined as a process including various activities like planning, organising , directing, controlling  co-ordination etc in order to make optimum use of men machinery, materials and money by way of preparing plans, policies and purposes, for achieving organisational goals under healthy internal environment.
According to Drucker, management is the dynamic life giving element in every organisation. In its absence, an organisation is merely a collection of men, machines, money and material. The objectives of management are:
a)      Optimum Use of Resources: Management ensures optimum utilization of resources by attempting to avoid wastage of all kinds. It helps in putting the resources to the best advantage.
b)      Effective leadership and Motivation: In the absence of management, the working of an enterprise will become random and haphazard in nature. Management creates teamwork and motivates employees to work harder and better by providing guidance, counseling and effective leadership.
c)       Establish Sound Industrial Relations: Management minimizes industrial disputes and contributes to sound industrial relations in an undertaking. Industrial peace is an essential requirement for increasing productivity.
d)      Achievement of Goals: Objectives can be achieved only when the human and non human resources are combined in a proper way. Managers plan carefully, organize the resources properly, hire competent people, and provide necessary guidance. Thus management is goal oriented.
e)      Reduces Costs - It gets maximum results through minimum input by proper planning and by using minimum input & getting maximum output. Management uses physical, human and financial resources in such a manner which results in best combination. This helps in cost reduction.
f)       Establishes Equilibrium - It enables the organisation to survive in changing environment. It keeps in touch with the changing environment. With the change is external environment, the initial co-ordination of organisation must be changed. So it adapts organisation to changing demand of market / changing needs of societies. It is responsible for growth and survival of organisation.
g)      Essentials for Prosperity of Society - Efficient management leads to better economical production which helps in turn to increase the welfare of people. Good management makes a difficult task easier by avoiding wastage of scarce resource. It improves standard of living.
Scope or Branches of Management:
Management is an all pervasive function since it is required in all types of organized endeavour. Thus, its scope is very large. The following activities are covered under the scope of management:
a)      Planning,
b)      Organisation
c)       Staffing.
d)      Directing,
e)      Coordinating, and
f)       Controlling.
The operational aspects of business management, called the branches of management, are as follows:
1)      Production Management
2)      Marketing Management
3)      Financial Management.
4)      Personnel Management and
5)      Office Management.
1) Production Management: Production means creation of utilities. This creation of utilities takes place when raw materials are converted into finished products. Production management, then, is that branch of management ‘which by scientific planning and regulation sets into motion that part of enterprise to which has been entrusted the task of actual translation of raw material into finished product.’
Plant location and layout, production policy, type of production, plant facilities, material handling, production planning and control, repair and maintenance, research and development, simplification and standardization, quality control and value analysis, etc., are the main problems involved in production management.
2) Marketing Management: Marketing is a sum total of physical activities which are involved in the transfer of goods and services and which provide for their physical distribution. Marketing management refers to the planning, organising, directing and controlling the activities of the persons working in the market division of a business enterprise with the aim of achieving the organisation objectives.
It can be regarded as a process of identifying and assessing the consumer needs with a view to first converting them into products or services and then involving the same to the final consumer or user so as to satisfy their wants with a stress on profitability that ensures the optimum use of the resources available to the enterprise. Market analysis, marketing policy, brand name, pricing, channels of distribution, sales promotion, sale-mix, after sales service, market research, etc. are the problems of marketing management.
3) Financial Management: Finance is viewed as one of the most important factors in every enterprise. Financial management is concerned with the managerial activities pertaining to the procurement and utilization of funds or finance for business purposes. The main functions of financial management include:
(i) Estimation of capital requirements;
(ii) Ensuring a fair return to investors;
(iii) Determining the suitable sources of funds;
(iv) Laying down the optimum and suitable capital
Structure for the enterprise:
(i) Co-coordinating the operations of various departments;
(ii) Preparation, analysis and interpretation of financial statements;
(iii) Laying down a proper dividend policy; and
(iv) Negotiating for outside financing.
4) Personnel Management: Personnel Management is that phase of management which deals with the effective control and use of manpower. Effective management of human resources is one of the most crucial factors 9oassociated with the success of an enterprise. Personnel management is concerned with managerial and operative functions. Managerial functions of personnel management include:
(i) Personnel planning;
(ii) Organising by setting up the structure of relationship among jobs, personnel and physical factors to contribute towards organisation goals;
(iii) Directing the employees; and
(iv) Controlling.
The operating functions of personnel management are:
(i) Procurement of right kind and number of persons;
(ii) Training and development of employees;
(iii) Determination of adequate and equitable compensation of employees;
(iv) Integration of the interests of the personnel with that of the enterprise; and
(v) Providing good working conditions and welfare services to the employees.
5) Office Management: The concept of management when applied to office is called ‘office management’. Office management is the technique of planning, coordinating and controlling office activities with a view to achieve common business objectives. One of the functions of management is to organize the office work in such a way that it helps the management in attaining its goals. It works as a service department for other departments.
The success of a business depends upon the efficiency of its administration. The efficiency of the administration depends upon the information supplied to it by the office. The volume of paper work in office has increased manifold in these days due to industrial revolution, population explosion, increased interference by government and complexities of taxation and other laws.
‘Fayol is considered as father of modern management theory.’ Discuss the statement.                                                12
Ans: Henri Fayol (1841-1925): was a Frenchman with considerable executive experience who focused his research on the things that managers do. He wrote during the same period Taylor did. Taylor was a scientist and he was managing director of a large French coal-mining firm. He was the first to envisage a functional process approach to the practice of management. His was a functional approach because it defined the functions that must be performed by managers. It was also a process approach because he conceptualized the managerial job in a series of stages such as planning, organizing and controlling. According to Fayol, all managerial tasks could be classified into one of the following six groups:
• Technical (related to production);
• Commercial (buying, selling and exchange);
• Financial (search for capital and its optimum use);
• Security (protection for property and person);
• Accounting (recording and taking stock of costs, profits, and liabilities, keeping balance sheets, and compiling statistics);
• Managerial (planning, organizing, commanding, coordinating and control);
He pointed out that these activities exist in every organization. He focused his work on the administrative or managerial activities and developed the following definition:
• Planning meant developing a course of action that would help the organization achieve its objectives.
• Organizing meant mobilizing the employees and other resources of the organization in accordance with the plan.
• Commanding meant directing the employees and getting the job done.
• Coordinating meant achieving harmony among the various activities.
• Controlling meant monitoring performance to ensure that the plan is properly followed.
Henry Fayol's 14 Principles of Management:
The principles of management are given below:
1)      Division of work: Division of work or specialization alone can give maximum productivity and efficiency. Both technical and managerial activities can be performed in the best manner only through division of labour and specialization.
2)      Authority and Responsibility: The right to give order is called authority. The obligation to accomplish is called responsibility. Authority and Responsibility are the two sides of the management coin. They exist together. They are complementary and mutually interdependent.
3)      Discipline: The objectives, rules and regulations, the policies and procedures must be honoured by each member of an organisation. There must be clear and fair agreement on the rules and objectives, on the policies and procedures. There must be penalties (punishment) for non-obedience or indiscipline. No organisation can work smoothly without discipline – preferably voluntary discipline.
4)      Unity of Command: In order to avoid any possible confusion and conflict, each member of an organisation must received orders and instructions only from one superior (boss).
5)      Unity of Direction: All members of an organisation must work together to accomplish common objectives.
6)      Emphasis on Subordination of Personal Interest to General or Common Interest: This is also called principle of co-operation. Each shall work for all and all for each. General or common interest must be supreme in any joint enterprise.
7)      Remuneration: Fair pay with non-financial rewards can act as the best incentive or motivator for good performance. Exploitation of employees in any manner must be eliminated.
8)      Centralization: There must be a good balance between centralization and decentralization of authority and power. Extreme centralization and decentralization must be avoided.
9)      Scalar Chain: The unity of command brings about a chain or hierarchy of command linking all members of the organisation from the top to the bottom. Scalar denotes steps.
10)   Order: Fayol suggested that there is a place for everything. Order or system alone can create a sound organisation and efficient management.
11)   Equity: An organisation consists of a group of people involved in joint effort. Hence, equity (i.e., justice) must be there. Without equity, we cannot have sustained and adequate joint collaboration.
12)   Stability of Tenure: A person needs time to adjust himself with the new work and demonstrate efficiency in due course. Hence, employees and managers must have job security. Security of income and employment is a pre-requisite of sound organisation and management.
13)   Esprit of Co-operation: Esprit de corps is the foundation of a sound organisation. Union is strength. But unity demands co-operation. Pride, loyalty and sense of belonging are responsible for good performance.
14)   Initiative: Creative thinking and capacity to take initiative can give us sound managerial planning and execution of predetermined plans.

4.       What are the fundamental requirements of planning? Discuss the advantages of planning.                               5+6=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.
Principles of Planning
A number of fundamental principles have been devised over the year for guiding managers undertaking planning. Some of these principles are discussed as under,
1)      Principle of contribution to objective: All types of plans are prepared to achieve the objectives of the organisation. Both major and derivative plans are prepared to contribute to the objectives of the enterprise. Planning is used as a means to reach the goals.
2)      Principles of primacy of Planning: This principle states that planning is the first or primary function of every manager; He has to plan first and then proceed to carry out other functions. Other managerial functions are organized to reach the objectives se in planning.
3)      Principle of Planning Premises: In order to make planning effective, some premises or presumptions have to be made on the basis of which planning has to be undertaken. Plans are, generally not properly structures. The reason being that planning premises are not properly developed. This principle lays emphasis on properly analyzing the situation which is going to occur in future.
4)      Principle of Alternatives: Planning process involves developing of many alternatives and then selecting one which will help in achieving desired business goals. In the absence of various alternatives proper planning will be difficult.
5)      Principle of Timing: Plans can contribute effectively to the attainment of business goals if they are property timed. Planning premises and policies are useless without proper timing.
6)      Principle of Flexibility: This principle suggests flexibility in plans if some contingencies arise. The plans should be adjusted to incorporate new situations. The dangers of flexibility should be kept in mind. The changes may upset the earlier commitments. So the cost of changes should be compared to the benefits of flexibility.
7)      Principle of Commitment: There should be a time frame for meeting the commitments made. This will ensure the achieving of targets in time.
8)      Principle of Competitive Strategies: While formulating own. Plans a manager should keep in mind the plans of competitors. The plans should be framed by thinking of what the. Competitors will do in similar situations.
Importance and Advantages of Planning
Planning is of vital importance in the managerial process. No enterprise can achieve its objectives without systematic planning. “Planning is the heart of management” The following points highlight the importance of planning function of management:
a)      Planning provides directions: By stating i n advance how work is to be done, planning provide direction for action. If goals are well defined, employees are aware of what the organisation has to do and what they must do to achieve those goals. Departments and individuals in the organisation are able to work in coordination. Planning keeps the organisation on the right path.  If there was no planning, employees would be working in different directions and the organisation would not be able to achieve its goals efficiently.
b)      Planning reduces the risks of uncertainty: Business enterprises operate in an uncertain environment and face several types of risks. Planning enables these enterprises to predict future events and prepare to face the unexpected events. With the help of planning, managers can identify potential dangers and take steps to overcome them. Thus, planning helps risk and uncertainty.
c)       Planning facilitates decision-making: Decision-making involves searching for various alternative courses of action, evaluating them and selecting the best course of action. Under planning, targets are laid down. With the help of these targets, managers can better evaluate alternative courses of action and select the best alternative. Plans lay down in advance what is to be done and how it is to be done. Therefore, decisions can be taken with greater confidence.
d)      Planning reduces overlapping and wasteful activities: Since planning ensures clarity in thought and action, work is carried on smoothly without interruptions. There is no confusion and misunderstanding. Useless and redundant activities are minimized or eliminated. It is easier to detect inefficiencies and take corrective measures to deal with them.
e)      Planning promotes innovative ideas: Planning is thinking in advance and, therefore, there is scope of finding better ideas and better methods and procedures to reach the objectives/goals of the enterprise. This forces managers to think differently about the future of the organisations from the present. Thus, planning makes the managers innovative and creative.
f)       Planning establishes standards for controlling: Planning provides the goals or standards against which the actual performance can be measured and evaluated. A comparison of actual performance with the standards helps to identify the deviations and to take corrective action. Planning makes control meaningful and effective. ‘Control is blind without planning.” Thus, planning provides the basis of control.

What is budget ? Discuss about various types of budget.                                              2+9=11
Ans: Meaning of Budget
A budget is the monetary or/and quantitative expansion of business plans and policies to be pursued in the future period of time. The term budgeting is used for preparing budgets and other procedures for planning, co-ordination and control of business enterprise. So a budget is a pre-determined statement of management policy during a given period which provides a standard for comparison with the results actually achieved.
Significance of Budget: Budgets act as a tool in the hands of management. They help in improving the efficiency of the business. The following are some of the advantages of budgeting:
a)      Improves Efficiency: Budgeting helps in improving efficiency in the organization. Every person gets a target for achievement.
b)      Co-ordination: The working of different departments and sectors is properly co-ordinated with the help of budgeting.
c)       Economy: The planning of expenditure will be systematic and there will be an economy in spending.
d)      Consciousness among Employees: Budgeting creates consciousness among employees. By fixing targets for the employees they are made conscious of their responsibility.
e)      Time Bound: The budgets are prepared for specific periods and the performance is judged at the end of these periods. The results of employees working can be known after a specified time.
Classification of Budgets: The budgets are usually classified according to their nature. The following are the types of budgets which are commonly used:
(i) Long Term Budget: Budgets which are prepared for periods longer than a year are called LongTerm Budgets. Such Budgets are helpful in business forecasting and forward planning. E.g: Capital Expenditure Budget and R&D Budget.
(ii) Short Term Budget: Budgets which are prepared for periods less than a year are known as ShortTerm Budgets. Such Budgets are prepared in cases where a specific action has to be immediately taken to bring any variation under control. E.g: Cash Budget.
(i) Basic Budget: A Budget, which remains unaltered over a long period of time, is called Basic Budget.
(ii) Current Budget: A Budget, which is established for use over a short period of time and is related to the current conditions, is called Current Budget.
(i) Fixed Budget: It is a Budget designed to remain unchanged irrespective of the level of activity actually attained. It operates on one level of activity and less than one set of conditions. It assumes that there will be no change in the prevailing conditions, which is unrealistic.
(ii) Flexible Budget: It is a Budget, which by recognizing the difference between fixed, semi variable and variable costs is designed to change in relation to level of activity attained. It consists of various budgets for different levels of activity.
(i) Functional Budget: Budgets, which relate to the individual functions in an organization, are known as Functional Budgets, e.g. purchase Budget, Sales Budget, Production Budget, plant Utilization Budget and Cash Budget.
(ii) Master Budget: It is a consolidated summary of the various functional budgets. It serves as the basis upon which budgeted Profit & Loss Account and forecasted Balance Sheet are built up.

5.       What is span of management? Discuss the factors which are influential in determining the span of management.                                                 3+8=11
In the words of Spriegal, "Span of control means the number of people reporting directly to an authority. The principle of span of control implies that no single executive should have more people looking to him for guidance and leadership than he can reasonably be expected to serve. The span of supervision is also known as span of control, span of management, span of responsibility, span of authority and span of direction.
Factors influencing the span of Management
                There are number of factors that influence or determine the span of Management in a particular organisation, the most important of these are as follows:
1)      The capacity and ability of the executive: The characteristics and abilities such as leadership, administrative capabilities; ability to communicate, to judge, to listen, to guide and inspire, physical vigour, etc. differ from person to person. A person having better abilities can manage effectively a large number of subordinates as compared to the one who has lesser capabilities.
2)      Competence and training of subordinates: Subordinates who are skilled, efficient, knowledgeable, trained and competent require less supervision, and therefore, the supervisor may have a wider span in such cases as compared to inexperienced and untrained subordinates who requires greater supervision.
3)      Nature of Work: Nature and importance of work to be supervised is another factor that influences the span of supervision. The work involving routine, repetitive, unskilled and standardized operations will not call much attention and time on the part of the supervisor.
4)      Time available for supervision: The capacity of a person to supervise and control a large number of persons is also limited on account of time available at his disposal to supervise them. The span of control would be generally narrow at the higher level of management because top manager have to spend their major time on planning, organising, directing and controlling and the time available at their disposal for supervision will be less.
5)      Degree of Decentralization and Extent of Delegation: If a manager clearly delegates authority to undertake a well-defined task, a well trained subordinate can do it with a minimum of supervisor's time and attention.
6)      Effectiveness of communication system: Faulty communication puts a heavy burden on manager's time and reduces the span of control.
7)      Quality of Planning: Effective planning helps to reduce frequent calls on the superior for explanation, instructions and guidance and thereby saves in time available at the disposal of the superior enabling him to have a wider span.
8)      Degree of Physical Dispersion: If all persons to be supervised are located at the same place and within the direct supervision of the manager, he can supervise relatively more people as compared to the one who has to supervise people located at different places.
9)      Assistance of Experts: the span of supervision may be wide where the services of experts are available to the subordinate on various aspects of work. In case such services are not provided in the organisation, the supervisor has to spend a lot of time in providing assistance to the workers himself and a such the span of control would be narrow.
What is military organisation? What are its limitations? How it can be made successful?                             2+5+4=11
Ans: Line organisation or Military organisation is a direct type of internal organisation. It is the oldest and the simplest form of integral organisation. Line organisation is a type of internal organisation in which there are direct vertical authority relationships (i.e., superior-subordinate relationships), connecting the positions at each level with those above and those below in the hierarchy. In other word, it is a form of organisation in which the relationships between the various levels of management form a hierarchy of authority or chain of command.
Features of Line Organisation
The chief features of line organisation are:
a)      The line organisation forms a vertical line relationship from the top to the bottom of the organisation.
b)      There is authority relationship or superior-subordinate relationship in the line organisation. Each position in the organisation structure has authority over its subordinate, and is accountable to his superior.
c)       Under this system, authority flows from the top of the structure to its bottom level step by step through downward delegation of authority, while responsibility flows upward from the bottom of the structure to the top step by step.
d)      There is no provision for staff officers (i.e., experts or specialists) to offer advice to the line officers under this system.
Disadvantages of Line Organisation:
Line organisation is not free from defects. It suffers from several drawbacks. The main drawbacks are:
1.        Under this system, as only one executive manages all the activities in his department, there is no scope for specialization.
2.       As only one executive is required to manage all the activities in his department, he is over-burdened, As a result, he may not be able to direct and control the efforts of his subordinates, properly.
3.       As all the decisions relating to a department are taken by only one executive, there is unitary administration. Consequently, the successful functioning of the department depends on the abilities of the departmental head.
4.       Under this system, only one executive controls all the activities of department and gets undue importance. The importance of the other people in the department is not recognised. As a result, there may be lack of co-operation and team-spirit.
5.       Since only one executive controls all the activities in his department, there is much scope for nepotism and favouritism.
6.       Under this system, the subordinates should follow the orders of their superior without expressing their opinion on the orders. That means, there" is limited communication.
7.       Under this system, the lower level managers lose their initiatives and interest, as they have to merely carry out the orders and instructions of their superiors.
8.       When there are too many levels of management, the process of communication may become difficult under this system.
9.       There is the danger that the line authorities may become autocratic or dictatorial.
10.   Line organisation is rigid and inflexible.

A Line organisation can be successful only when the following conditions are satisfied
1. Hierarchical arrangement of giving commands: There should be a hierarchical arrangement of giving commands. The subordinates should get commands only through their immediate superiors. The links in the chain of command should not be skipped. This type of organization helps in co-ordination and control.
2. Presence of Unity of Command: There should be a single line of command. One person should get orders from one supervisor only.
3. Independent subordinates: All persons at the same level of authority should be independent of one another.
4. Proper supervision: The number of subordinates should be such that they are properly supervised.
5. Flexibility: There should be flexibility in organisation regarding the chain in giving command.
6. No too many levels of management: There should be no too many levels of management because the process of communication can be difficult.

6.       Discuss in detail about the various techniques of increasing motivation.                                      11
Ans: Introduction: Motivation
The word motivation is derived from ‘motive', which means an active form of a desire, craving or need that must be satisfied. Motivation is the key to organisational effectiveness. The manager in general has to get the work done through others. These 'others' are human resources who need to be motivated to attain organisational objectives.
According to George R. Terry, "Motivation is the desire within an individual that stimulates him or her to action."
According to Berelson and Steiner “A motive is an inner state that energizes activates, or moves and directs or channels behavior goals".
Techniques of Motivation
Every management tries to spacing certain motivational techniques which can be employed for improving performance of its employees. Motivational techniques may be classified into two categories i.e. financial and non-financial. Both the categories of motivators are discussed as under:
A.      Financial Motivators: Financial motivators may be in the form of more wages and salaries, bonuses, profit-sharing, leave with pay, medical reimbursements, company paid insurance of any of the other things that may be given to employees for performance. The economists and most managers consider money and financial incentives as important motivators. Some of the financial incentives are given below:
a)      Profit sharing: It has been accepted that the profit earned by the firm is also due to the effort put by the workers. So they have a full right to receive a share in it. It is an effective incentive which satisfies the workers.
b)      Co-partnership: Under this system, employees share the capital as well as the profits. It motivates them as they share the profits too.
c)       Suggestion system: Valuable suggestions are accepted and the most valuable ones are also rewarded with cash money.
d)      Retirement benefits: Every employee wants his future to be secured. The firm provides retirement benefits, pension, provident fund, gratuity etc.
e)      Perks: various perks such as housing, car allowance foreign trips etc can be given to the managers to boost up his morale.
B.      Non-financial Motivators: These motivators are in the nature of better status, recognition, participation, job security etc. Some of those motivators are discussed here:
1)      Recognition: Every person wants his work to be recognizes by his superiors. When he knows that his performance is known to his boss then he will try to improve it more and more.
2)      Participation: Participation has been considered a good technique for motivation. It implies physical and mental involvement of people in decision-making process.
3)      Statue: It refers to a social statue of a person and it satisfies egoistic needs. A management may create some statue symbols in the organization.
4)      Competition: In some organizations competitions is used as a motivator. Various persons are given certain objectives and everybody tries to achieve them ahead of others.
5)      Job Enrichment: Job enrichment has been recognized as an important motivator by various researches. The job is made more important and challenging for the workers, may be given wide latitude in deciding about their work methods.
What are the importance of leadership in an organisation?   Discuss the various style of leadership.     3+8=11
Ans: Introduction to Leadership
Leadership is the ability to build up confidence and deal among people and to create an urge in them to be led. To be a successful leader, a manager must possess the qualities of foresight, drive, initiative, self-confidence and personal integrity. Different situations may demand different types of leadership.
Leadership means influencing the behaviour of the people at work towards realizing the specified goals. It is the ability to use non-coercive (no force) influence on the motivation, activities and goals (MAG) of others in order to achieve the objectives of the organisation.
Koontz and 0' Donnel “Leadership is the ability of a manager to induce subordinates to work with confidence and zeal”.
George R Terry “Leadership is the activity of influencing people to strive willingly for group objectives”.
Significance of Leadership
The importance of leadership are as follows:
1.       It improves motivation and morale: Through dynamic leadership managers can improve motivation and morale of their subordinates. A good leader influences the behaviour of an individual in such a manner that he voluntarily works towards the achievement of enterprise goals.
2.       It acts as a motive power to group efforts: Leadership serves as a motive power to group efforts. It leads the group to a higher level of performance through its persistent efforts and impact. On human relations.
3.       It acts as an aid of authority: The use of authority alone cannot always bring the desired results. Leadership acts as an aid to authority by influencing, inspiring, and initiating action.
4.       It is needed at all levels of management: Leadership plays a pivotal role at all levels of management because in the absence of effective leadership no management can achieve the desired results.
5.       It rectifies the imperfectness of the formal organizational relationships: No organizational structure can provide all types of relationships and people with common interest may work beyond the confines of formal relationships. Such informal relationships are more effective in controlling and regulating the behaviour of the subordinates. Effective leadership uses these informal relationships to accomplish the enterprise goals.
6.       It provides the basis of co-operations: Effective leadership increases the understanding between the subordinates and the management and promotes co-operation among them.
Leadership Styles or Types of Leaders
1)      Autocratic or Authoritarian Style leader: An autocratic also known as authoritarian style of leadership implies wielding absolute power. Under this style, the leader expects complete obedience from his subordinates and all decision-making power is centralized in the leader. No suggestions or initiative from subordinates is entertained. The leader forces the subordinates to obey him without questioning. An autocratic leader is, in fact, no leader. He is merely the formal head of the organisation and is generally disliked by the subordinates who feel comfortable to depend completely on the leader.
a)      Reduced stress due to increased control
b)      A more productive group ‘while the leader is watching’
c)       Improved logistics of operations
d)      Faster decision making
a)      Short-termistic approach to management.
b)      Manager perceived as having poor leadership skills
c)       Increased workload for the manager
d)      People dislike being ordered around
e)      Teams become dependent upon their leader
2)      Laissez-faire or Free-rein Style Leader: Under this type of leadership, maximum freedom is allowed to subordinates. They are given free hand in deciding their own policies and methods and to make independent decisions. The leader provides help only when required by his subordinates otherwise he does not interfere in their work. The style of leadership creates self-confidence in the workers and provides them an opportunity to develop their talents. But it may not work under all situations with all the workers, may bring problems of indiscipline. Such leadership can be employed with success where workers are competent, sincere and self-disciplined.
a)      No work for the leader
b)      Frustration may force others into leadership roles
c)       Allows the visionary worker the opportunity to do what they want, free from interference
d)      Empowers the group
a)         It makes employees feel insecure at the unavailability of a manager.
b)         The manager cannot provide regular feedback to let employees know how well they are doing.
c)          Managers are unable to thank employees for their good work.
d)         The manager doesn’t understand his or her responsibilities and is hoping the employees can cover for him or her.
3)      Democratic or Participative Style leader: The democratic or participative style of leadership implies compromise between the two extremes of autocratic and laissez-fair style of leadership. Under this style, the supervisor acts according to the mutual consent and the decisions reached after consulting the subordinates. Subordinates are encouraged to make suggestions and take initiative. It provides necessary motivation to the workers by ensuring their participation and acceptance of work methods. Mutual trust and confidence is also created resulting in job satisfaction and improved morale of workers. It reduces the number of complaints, employee's grievances, industrial unrest and strikes. But this style of leadership may sometimes cause delay in decisions and lead to indiscipline in workers.
a)      Positive work environment
b)      Successful initiatives
c)       Creative thinking
d)      Reduction of friction and office politics
e)      Reduced employee turnover
a)      Takes long time to take decisions
b)      Danger of pseudo participation
c)       Like the other styles, the democratic style is not always appropriate. It is most successful
d)      when used with highly skilled or experienced employees or when implementing operational changes or resolving individual or group problems.
4)      Paternalistic Style leader: This style of leadership is based upon sentiments and emotions of people. A paternalistic leader is like a father to these subordinates. He looks after the subordinates like a father looks after his family. He helps guides and protects all of his subordinates but under him no one grows. The subordinates become dependent upon the leader.

7.       What are the features of a good control system? Discuss the barriers of control.                                      11
Ans:  Essentials of an Effective control system:
The following are the essentials or basic requirements of an effectively control system:
1)      Suitable: The control system must be suitable for the kind of activity intended to serve. Apart from differences in the systems of control in different business, they also vary from department to department and from one level in the organisation to the other. The manager must be sure that he is using the technique appropriate for control of the specific activity involved.
2)      Understandable: The system must be understandable, i.e., the control information supplied should be capable of being understood by those who use it. A control system that a manager cannot understand is bound to remain ineffective. The control information supplied should be such as will be used by the managers concerned. It is, therefore, the duty of the manager concerned to make sure that the control information supplied to him is of a nature that will serve his purpose.
3)      Economical: The system must be economical in operation, i.e., the cost of a control system should not exceed the possible savings from its use. The extent of control necessary should be decided by the standard of accuracy or quality required. A very high degree or standard of accuracy or quality may not really be-necessary.
4)      Flexible: The system of control must be flexible, i.e. workable even if the plans have to be changed. In case the control systems can work only on the basis of one specific plan, it becomes useless if the plan breaks down and another has to be substituted. A good control system would be sufficiently flexible to permit the changes so necessitated.
5)      Expeditious: Nothing can be done to correct deviations, which have already occurred. It is, therefore, important that the control system should report deviations from plans expeditious. The objective of the control system should be to correct deviations in the immediate future.
6)      Forward Looking: The control system must be forward looking, as the manager cannot control the past. In fact, the control system should be so designed so as to anticipate possible deviations, or problems. Thus deviations can be forecast so that corrections can be incorporated even before the problem occurs.
7)      Organisational Conformity: Since people carry on activities, and events must be controlled through people, it is necessary that the control data and system must conform to the organisational pattern. The control data must be so prepared that it is possible to fix responsibility for the deviations within the areas of accountability.
8)      Indicative of Exceptions at Critical Points: The management principle of exception should be used to show up not only deviations but the critical areas must also be fixed for most effective control.
9)      Objectivity: As far as possible the measurements used must have objectivity, particularly while appraising a subordinate's performance, the subjective element cannot be entirely removed.
10)   Suggestive Of Corrective Action: Finally, an adequate control system should not only detect failures must also disclose where they are occurring, who is responsible for them and what should be done to correct them. Overall summary information can cover up certain fault areas.
Barriers in Effective Controlling
(i) Difficulty in setting quantitative standards: Control system loses some of its effectiveness when standards cannot be defined in quantitative terms. Employee morale, job satisfaction and human behaviors are such areas where this problem might arise.
(ii) Little control on external factors: Generally an enterprise cannot control external factors such as government policies, technological changes, competition etc.
(iii) Resistance from employees: Control is often resisted by employees. They see it as restriction on their freedom.
(iv) Costly affairs: Control is a costly affair as it involves a lot of expenditure, time and efforts.
Explain the modern techniques of control which are generally used by management.                                                                   11
Ans: Techniques of Control or Methods of Establishing Control
A number of techniques or tools are used for the purpose of managerial control. Some of the techniques are used for the control of the overall performance of the organisation, and some are used for controlling specific areas or aspects like costs, sales, etc. The various techniques of control can be classified into categories, viz.,
(1) Traditional or Conventional techniques and
(2) Modern or Contemporary techniques.
Modern Techniques
a.      Financial Statement Analysis: Financial statements are a means of managerial control. They can be used by the management for measuring and controlling the profitability, liquidity and the financial position of the business. By comparing the financial statement of the current year with those of the previous years and also by comparing the financial statement of their concern with those of other concerns engaged in the same industry.
b.      Return on Investment Control: Profits are the measure of overall efficiency of business. Profit earned in relation to the capital employed in a business is an important control device. ROI is used to measure the overall efficiency of a concern. It reveals how well the resources of a concern are used, higher the return better are the results.
c.       Management Information System (MIS): Management Information System (MIS) is an approach of providing timely, adequate and accurate information to the right person in the organisation which helps in taking right decisions.
d.      Management Audit: Management audit is an investigation by an independent organisation to find out whether the management is carried out most effectively or not. In case there are drawbacks at any level then recommendations should be given to improve managerial efficiency.
e.       Zero-Base Budgeting (ZBB): In the words of Peter A Pyher, “Zero-base budgeting is a planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch and shifts the burden of proof to each manager to justify why he should spend money at all. The approach requires that all activities be analysed in ‘decision packages’ which are evaluated by systematic analysis and ranked in order of importance”. From his definition, it is clear that Zero-base budgeting is a technique of preparing the budget in which the previous year is not taken as the base, and every year is taken as a new year for preparing the current year’s budget.
f.        Human Resources Accounting: The American Accounting Association has defined human resources accounting as “the process of identifying and measuring data about human resources and communicating this information to interested parties”.
g. Responsibility Accounting: Responsibility Accounting is defined as “a system designed to accumulate and report costs by individual levels of responsibility. Each supervisory area is charged only with the cost for which it is responsible and over which it has control.”