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IGNOU Solved Question Papers: ECO - 03 (June' 2011) | IGNOU B.Com Solved Question Paper


IGNOU B.Com Solved Question Paper

Term-End Examination (June, 2011)



Time: 2 hours (Maximum Marks: 50)

Weightage: 70%

Note: Attempt any five questions.

All questions carry equal marks.

1. (a) Discuss the human relations approach the study of management.  5+5

Ans: Human Relations Approach: There are two thoughts of management – Classical and neo classical. The classical school did not give importance to the human aspects of the workers. Therefore, they did not achieve a high level of production efficiency and co-operation between the management and workers. The failure of the classical approach led to the human relations movement. The human relations experts tried to integrate (combine) Psychology and Sociology with Management. According to them, organisation is a social system of interpersonal and inter group relationships. They gave importance to the management of people. They felt that management can get the work done from the workers by satisfying their social and psychological needs. The basic principles of human relations approach is that human beings are not interested only in financial gains. They also need recognition and appreciation. Workers are also human beings. So they must be treated like human beings and not like machines. Managers should try to understand the feelings and emotions of the workers.

(b) Do you think that management principles are universally valid? Give arguments.

Ans: Taylor’s techniques are developed through scientific approach and not by rule of thumb.  Any principle developed scientifically is universally applicable because these are not affected by personal feelings or biasness of managers. The techniques which facilitate the universal applicability of Taylor’s principles are:

a)      Time study

b)      Motion study

c)      Method study 

d)      Fatigue study

               But, some techniques of scientific management are not universally applicable under some situations. These are:

a)      Functional Foremanship: This technique is not applicable in the organization following the principle of unity of command.

b)      Differential Piece Wage system: This technique is also not applicable in the organization following the principle of equity.

2. (a) What are the characteristics of an organisation ?  5+5

Ans: Nature or characteristics of organisation

From the study of the various definitions given by different management experts we get the following information about the characteristics or nature of organization:

1)      Division of Labour: Every organisation is characterized by the division of work.  The total efforts of the group are divided into different functions and each function is assigned the function for which he is observed to be suited best.

2)      Co-ordination: As different persona are assigned different functions and all these functions aim at achieving organisational goals, hence necessary relationships are established between them so as to co-ordinate all the activities of all the people of the organisation.

3)      Objectives: Organisations exist to achieve objectives. Without objectives organisations cannot exist for a long period.

4)      Authority and Responsibility structure: In an organisation the positions are so ranked that each of them is subordinate to the one above it and is superior to the one below it.  Each position is delegated necessary authority and responsibility so as to enable it functions effectively.

5)      Communication: Every organisation has its own channels or methods of communication.  Effective communication is vital for success of management.

6)      Organisation is a Machine of Management: Organisation is considered to be a machine of management because the efficiency of all the functions depends on an effective organisation. In the absence of organisation no function can be performed in a planned manner.

7)      Organisation is a Universal Process: Organisation is needed both in business and non business organisations. Not only this, organisation will be needed where two or mom than two people work jointly. Therefore, organisation has the quality of universality.

8)      Organisation is a Dynamic Process: Organisation is related to people and the knowledge and experience of the people undergo a change. The impact of this change affects the various functions of the organisations.

(b) Discuss the importance of organisation.

Ans: Importance of Organising

Organising is the fundamental activity of management.  It is necessary for management to mobilize men machinery money and materials or resources for achieving organisational objectives.  Organising provides basis for other functions of management, hence scientifically designed organisation helps manager to function efficiently and effectively.  The importance of organisation may be explained as follows –

a)      Efficiency of Management: A Good organisation helps in making optimum use of available resources for achieving organisational objectives, increasing efficiency of management.

b)      Facilities Administration: A properly designed and balanced organisation facilitates both management and operation of the enterprise.

c)      Facilitates growth and diversification: On account of sound organisational structure growth and diversification can be successfully achieved for improving competitive strength of the organisation.

d)      Facilitates Technological progress: Sound organisational structure is useful for coping with technological changes which have become inevitable under modern conditions.

e)      Encourages healthy human relations: Scientific and balanced organisational structure when manned by right type of people tends to motivate people through job satisfaction that promotes healthy human relations in the organisation.  It helps maintaining morale at a higher level.

f)       Stimulates initiative and creativity: Sound organisation stimulates creative thinking and initiative by providing opportunities to experiment with new ideas for developing new ways of doing things.

g)      Reduction in work load of top management: Sound organisation stimulates creative thinking and initiative by providing opportunities to experiment with new ideas for developing new ways of doing things.

h)      Smooth direction: In sound organisation right men are placed at right place hence direction tends to become smooth and effective.

i)        Easy communication: Every organisation has its own channels or methods of communication.  Effective communication helps in effective management..

j)        Integration of individual efforts to achieve organisational goals: The functions, duties and responsibilities of the different departments are clearly defined which helps in achieving organisational goals.

k)      Effective control over employees: Each subordinate should have only one superior. There should not be dual subordination. It helps in effective control over the employees.

3. Distinguish between formal and informal organisation. Describe the functions of an informal organisation.  5+5

Ans: Meaning of formal organisation: 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 organisation: Man is a social animal and wants social interaction.  Formal organizations are joined by people to satisfy their needs but these organizations cannot satisfy all the needs of people because of their nature.  Hence informal organization emerges in all the formal organizations.

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.

Functions of Informal Organizations:

1)         Informal group gives social satisfaction to the employees.

2)         It promotes sense of belongingness.

3)         It provides safety valve for emotional problems of the employees

4)         It provides social control.

5)         It helps developing communication channels in the organization

6)         It provides help on the job to the employees during illness, accidents etc.

7)         It serves as a check on authority of a manager.

8)         It  provides fertile ground for future leaders

9)         it supports in achieving organizational goals

10)     It reduces supervision.

11)     It may help manager to overcome their natural limitations of ability.

4. What is directing? Describe the principles of directing.    3+7

Ans: Direction may be defined as the function of management which is related with instructing, guiding and inspiring human factor in the organization to achieve organization objective. The direction is not merely issuing orders and instructions by a superior to his subordinates, but is includes the process of guiding and inspiring them. The analysis of definition reveals that direction function consists of three elements – Motivation, Leadership and Communication.

In the words of Koontz and O’Donnell, ”Directing is a complex function that includes all those activities which are designed to encourage subordinates to work effectively and efficiently.”

Principles of Directing are given below:

a)      Maximum Individual contribution: According to this principle, directing must help every individual employee to contribute his Best towards the achievement of organizational goal.

b)      Harmony of objectives: Directing must ensure that the individual goals of employees and that of organization do not conflict with each other. Directing must aim at bringing harmony among them.

c)      Unity of direction: There should be one head and one plan for a group of activities having the same objective to have effective direction.

d)      Unity of Command: According to this principle an employee should receive orders from one boss only to avoid confusion. If there are more bosses it can create problem amongst superiors.

e)      Effective leadership: A manager must possess the qualities of a good leader. He must guide his subordinates not only on work problems but also on their personal problems.

f)       Effective communication:  To have effective direction, it is very essential to have an effective communication system which provides for free flow of ideas, information, suggestions, complaints and grievances.

g)      Follow through: Managers must continuously review whether the instructions are being understood and followed by the employees or not.

5. (a) Describe the barriers to effective delegation. 5+5

Ans: Barriers in delegation of authority

a)      Reluctance to delegate: - In many cases managers will not be interested to delegate to authority. They will not be willing to give authority to subordinates. They will not make any plan to delegate authority.

b)      Fear of subordinates: - Managers in many cases fear from subordinates because they think that when there is delegated authority their performance will be superior to the performance of manager and subordinate may pose challenge to the manager.

c)      Lack of trust: - Managers may lack confident or trust on subordinates. They do not think or believe that after delegating authority, subordinates will do better or their performance will improve.

d)      Incompetence of subordinates: - Subordinates must be competent enough for effective delegation of authority. Subordinate must be willing and competent to accept delegated authority. In many organizations due to the incompetency of subordinates delegation of authority is affected.

e)      Lack of control: - When employees are delegated authority, they will be free to work. They will work autonomously; managers cannot exercise effective control over them. Delegation is affected.

(b) Discuss the measures to be taken for effective delegation.

Ans: Principles of Effective Delegation of Authority or How barriers can be removed or Elements of delegation:

a)      Knowledge of Objectives: Before delegating authority, the subordinates should be made to understand their duties and responsibilities. In addition, knowledge of objectives and policies of the enterprise should be provided to them.

b)      Parity of Authority and Responsibility: This principle of delegation suggests that when authority is delegated, it should be commensurate with the responsibility of the subordinate.

c)      Unity of Command: This principle of delegation suggests that everyone should have only one boss. A subordinate should get orders and instructions from one superior and should be made accountable to one superior only.

d)      The Scalar Principle: The scalar principle of delegation maintains that there should be clear and direct lines of authority in the Organisation, running from the top to the bottom. The subordinate should know who delegates authority to him and to whom he should contact for matters beyond his authority.

e)      Clarity of Delegation: The principle of clarity of delegation suggests that while delegating authority to subordinates, they should be made to understand the limits of authority so that they know the area of their operation and the extent of freedom of action available to them. Such clarity guides subordinates while performing their jobs.

6. Explain various techniques of management development programmes.   10

Ans: Methods of training for managers/methods of managerial development/executive development:

A) On the job method: On the job method refers to training given to personnel inside the company. There are different methods of on the job training.

1. Job rotation: This method enables the company to train managerial personnel in departmental work. They are taught everything about the department. Starting from the lowest level job in the department to the highest level job. This helps when the person takes over as a manager and is required to check whether his juniors are doing the job properly or not. Every minute detail is studied.

2. Planned progression: In this method juniors are assigned a certain job of their senior in addition to their own job. The method allows the employee to slowly learn the job of his senior so that when he is promoted to his senior job it becomes very easy for him to adjust to the new situation. It also provides a chance to learn higher level jobs.

3. Coaching and counseling: Coaching refers to actually teaching a job to a junior. The senior person who is the coach actually teaches his junior regarding how the work must be handled and how decisions must be taken, the different techniques that can be used on the job, how to handle pressure. There is active participation from the senior.

Counseling refers to advising the junior employee as and when he faces problems. The counselor superior plays an advisory role and does not actively teach employees.

4. Under study: In this method of training a junior is deputed to work under a senior. He takes orders from the senior, observes the senior, attends meetings with him, learns about decision making and handling of day to day problems. The method is used when the senior is on the verge of retirement and the job will be taken over by the junior.

5. Junior board: In this method a group of junior level managers are identified and they work together in a group called junior board. They function just like the board of directors. They identify certain problem, they have to study the problem and provide suggestions. This method improves team work and decision making ability. It gives an idea about the intensity of problem faced by the company. Only promising and capable junior level managers are selected for this method.

B) Off the job training method: Off the job training refers to method of training given outside the company. The different methods adopted here are:

1. Classroom method: The classroom method is used when a group of managers have to be trained in theoretical aspects. The training involves using lectures, audio visuals, case study, role play method, group discussions etc. The method is interactive and provides very good results.

2. Simulation: Simulation involves creating atmosphere which is very similar to the original work environment. The method helps to train manager handling stress, taking immediate decisions, handling pressure on the jobs etc. An actual feel of the real job environment is given here.

3. Business games: This method involves providing a market situation to the trainee manager and asking him to provide solutions. If there are many people to be trained they can be divided into groups and each group becomes a separate team and play against each other.

4. Committee: A committee refers to a group of people who are officially appointed to look into a problem and provide solution. Trainee managers are put in the committee to identify how they study a problem and what they learn from it.

5. Conference: Conferences are conducted by various companies to have elaborate discussions on specific topics. The company which organizes the conference invites trainee manager and calls for experts in different fields to give presentation or lecture. The trainee manager can ask their doubts to these experts and understand how problems can be solved on the job.

6. Readings: This method involves encouraging the trainee manager to increase his reading related to his subject and then ask him to make a presentation on what he has learned. Information can be collected by trainee manager from books, magazines and internet etc.

7. In basket training: In this method the training is given to the manager to handle files coming in and to finish his work and take decisions within a specified time limit. The trainee manager is taught how to prioritize his work, the activities which are important for his job and how to take decisions within limited time limit.

7. What is leadership? Explain the qualities of an effective leader.    3+7

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.

Qualities of a Good Leader

1.      Patience: Patience is the capacity to face difficult situations, hardships or inconvenience without making a single complaint. A good leader must show patience while waiting for expected results, facing difficult situations and taking important decisions. He must avoid taking hasty decisions and actions.

2.      Good Personality: A good personality is a combination of physical, mental and social qualities. Good personality helps a leader to influence his followers. Attractive physique and good manners add an advantage to the leader's personality.

3.      Self-confidence: A good leader must have self confidence. This quality is necessary for facing challenging situations and for solving problems easily and effectively.

4.      Human Skills: A good leader must have essential social and human skills. That is, he must understand people. This quality is necessary for dealing with different types of persons and social groups.

5.      Judgment skills: A good leader should be able to examine problems in right perspective. His judgment and decision making abilities should be superior to others. He should be able to form opinions and judge based on facts and not be prejudiced

6.      Communication skills: A good leader should be able to communicate the goals and procedures of the organisation clearly, precisely and effectively to the subordinates. Only then will it be possible for him to convince, persuade and stimulate subordinates to action.

7.      Listening skills: People tend to avoid a leader who does not listen. Hence a good leader in one who can listen to other peoples problems. He should be able to create a culture whereby people can be frank with him and give him information and also give him feedback about himself, which can help him to improve himself.

8.      Inspiring skills: A good leader should be able to inspire people to deal with the “why” question. He should not just command and control but be able to lead the people and get them involved to work together as a team.

9.      Administrative Skills: A good leader must have an administrative ability. This means, he must be able to get the work done through his followers. He must know how to plan, organize and control the work of his followers.

10.  Discipline: A good leader must be a disciplined person. This means he must have respect for the rule and regulations of the organisation. This is because his followers will follow his example.

11.  Initiative: A good leader must always take an initiative. This means he should do the right thing at the right time without being told by others. He must be able to construct and implement his own plan.

12.  Intelligence: A good leader must be smart and intelligent. That is, he should have a good educational background and sound technical knowledge. He should be more intelligent than his followers. If not, his followers will not respect him. This will have a bad effect on his performance.

13.  Innovative:  A good leader must have an art of innovation. That is, he must have a good imagination and visualization skills. He must develop new ideas and tactics to solve problems. He must combine the new ideas with the old ideas.

8. What is supervision? Discuss the qualities of a good supervisor.           3+7

Ans: The word supervision is the combination of two words i.e., super+vision where super means over and above and vision means seeing. Thus, supervision means overseeing the subordinates at work. supervision refers to the direct and immediate guidance and control of subordinates in performance of their task.

Qualities of a Good Supervisor

a)      Good Personality and self confidence: A good personality is a combination of physical, mental and social qualities. Good personality helps a supervisor to influence his subordinates. Also  he must have self confidence which is necessary for facing challenging situations and for solving problems easily and effectively.

b)      Human Skills: A good supervisor must have essential social and human skills. That is, he must understand his subordinates. This quality is necessary for dealing with different types of employees working in an organisation.

c)      Judgment skills: A good supervisor should be able to examine problems in right perspective. His judgment and decision making abilities should be superior to others. He should be able to form opinions and judge based on facts and not be prejudiced

d)      Communication and technical skills: A good supervisor should be able to communicate the goals and procedures of the organisation clearly, precisely and effectively to the subordinates. He must also be familiar with the technology used within the organisation.

e)      Listening skills: Employees just have a supervisor who does not listen. Hence a good supervisor in one who can listen to his subordinates’ problems. He should be able to create a culture whereby subordinates can be frank with him and give him information and also give him feedback about himself, which can help him to improve himself.

f)       Inspiring skills: A good supervisor should be able to inspire his subordinates. He should not just command and control but be able to inspire his subordinates and get them involved to work together as a team.

g)      Administrative Skills and ability to develop organisation: A good supervisor must have an administrative ability. This means, he must be able to get the work done through his subordinates. He must know how to plan, organize and control the work of his subordinates. He must also be able to develop an effective organisation that meets current needs.

h)      Discipline: A good supervisor must be a disciplined person. This means he must have respect for the rule and regulations of the organisation. This is because his subordinates will follow his example.

9. Write notes on the following: 5+5

(a) Line organisation

Ans: LINE ORGANISATION: Line organisation or military organsiation 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:

1)      The line organisation forms a vertical line relationship from the top to the bottom of the organisation.

2)      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.

3)      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.

4)      There is no provision for staff officers (i.e., experts or specialists) to offer advice to the line officers under this system.

(b) Budgetary control

Ans: Concept of Budgetary Control

Budgetary control is the process of determining various budgeted figures for the enterprise for the future period and them comparing the budgeted figures with the actual performance for calculating variances, if any.

According to Brown and Howard, “Budgetary control is a system of controlling costs which includes the preparation of budgets, coordinating the departments and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve maximum profitability.”

Objectives of Budgetary Control: The main objectives of budgetary control are as follows:

a)      To ensure planning for future by setting up various budgets, the requirements and expected performance of the enterprise are anticipated.

b)      To co-ordinate the activities of different departments.

c)      To operate various cost centres and departments with efficiency and economy.

d)      Elimination of wastes and increase in profitability.

e)      To anticipate capital expenditure for future.

f)       To centralize the control system.

g)      Correction of deviations from the established standards.

h)      Fixation of responsibility of various individuals in the organization.

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