F1- Accountant in Business

8/10/2019 F1- Accountant in Business

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F 1

Accountant in

Business



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TABLE OF CONTENTS

Sr. # Name Page #

1 Organization 3

2 Organizational Structure 6

3 Organizational Environment 21

4 Organizational Culture 31

5 Stakeholders in Organization 37

6 Management 40

7 Leadership 44

8 Motivation 54

9 Groups and Teams 61



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10 Recruitment and Selection 73

11 Communication in Business 78

12 Corporate Governance 83

13 Ethics in Organization 86

14 Organizational Social Responsibility 90



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Chapter#1 Organization

“Organization is social arrangement for controlled performance of collective goals with identifiable boundary “

Whatis organization?

Organization is gathering of people but different from other social gatherings because it is formalized up to certainextent. It has collective goals to achieve for which members of organization put their efforts in same direction and parameters are set to check out achievement of these goals, and prominently it has boundary which separatesorganization from environment.



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System Approach for organization

According to this approach, organization act as system, in which input is feed and processing is made and thenoutput in obtained. Organization take inputs from environment and then process it and converts them in outputswhich are marketed again in environment

System can be of 2 types

Closed system : not influenced by environment, all inputs and output is internally managed Open system :interact with environment, take input from environment, process it and convert them into

output to get distributed in environment

How Organization differs

Organization differs on basis of their

Nature: providing product e.g Pepsi or services e.g internet companies Purpose :whether to earn profit or not(nonprofit entities like clubs) Ownership :private entity(owned by individuals) or public(owned by government) Funding: depending on type of funding e.g listed companies are financed by share issue, charities are

financed by donations

Types of organization

Different types of organizations exist, given below are the important ones :

Business Organizations: Their main purpose is to make profits. They appear as sole trader , partnershipand limited companies forms



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Public sector Organizations: these are owned by government, purpose is to render public services e.ghealth and education departments in state

Not for profit: profit making is not their purpose, they fulfill aims for which they are formed e.g charities,clubs

Co-operatives: these are organization comprising members which contribute actively in activities of entity

to get mutual social, cultural benefits.



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Chapter#2 Organizational Structure

Structure of organization is arrangement of jobs within organization. It defines how jobs are grouped andcoordinated in entity. Authorities and responsibilities of individuals working at different levels of organizations aredefined according to structure of entity. In simple words organizational structure gives basic understanding howorganization operates, its resources, filed of operations and specializations.

Following are the main organizational structures:

Entrepreneurial Structure

This type of Structure is suitable for small organizations where tasks are simple. Organization is owned by single person. Workers simply act on orders of boss. Consider operation of small medical store, with owner and 2 workers performing their duties on direct orders of owner. This type of entity enjoys benefits of absence of communicationlayers because direct orders are given by owners to workers so communication is much quick as compare to otherstructures. Dis advantages include the limitations of entrepreneurial structure only for small businesses.

Features of entrepreneurial structure:

Simple processes Small number of employees No formal company structure



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Functional Structure

Functional structure applies to larger entities with multiple departments.

When organization grow , level of its activities expand and now only owner cannot take whole responsibilityrather level of responsibility is divided into many responsible persons mostly managers. There is need of some baseto divide duties in that.

In functional structure organization is divided into different departments on basis of functions e.g salesdepartments will include sale persons whose function is only to made sales similarly other departments are also formed on similar functions basis.

Advantages

pooling of expertise helps in recruitment and management

Dis Advantages

Communication problems may occur between different departments



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Divisional Structure

When continue to grow and expand to different countries. Such entity is technically named as “ multinationalorganization”. Due to company growth in multiple countries it uses divisional structure to handle operations. Forexample Pepsi operates in all almost all regions of world, so to manage expanded operations it may base itsstructural on continents or regions with certain countries in each region. Decisions will be made at each region todeal with instantly changing market requirements. When we say decisions it mean that production, sales,

marketing all will these will be locally decided at each region and with local resources of each region.

Divisional structure is also known as “geographical structure”.



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Advantages

Local decision making is suitable to rapidly changing environment Independence to regional managers giving them confidence

Dis advantages

Loss of economies of scale Inconsistency in standards

Product Structure

Entities dealing with variety of products may divide its operations on products basis helping to specialize product

related issues.

Case Study

Johnson n Johnson (J&J) owns250 companies in 60 countries of the world. It divides its operations in basis of itsmajor products segments. Divided into 3 major product segments, the first product is “ Consumer segment ” dealing

with baby care, skin care, oral care, wound care and women’s health care products. Second product segment is”



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Medical Devices & Diagnostics “including instruments used by medical profe ssionals for diagnose and prevention ofdiseases. Third product segment is “ Janssen Pharmaceutical ” dealing with important medical needs of time. This

product structure has helped J&J to expand its business from US to 60 countries in world.

Matrix Structure

This structure is more complex, individual is answerable to both project and functional managers. This structureensures completion of certain function (e.g. production) within time limit, so ensures timely completion of tasks atsame time maintaining quality.

Works operates two ways in matrix structure. Functional managers retain decision making powers of theirdepartments .On the other hand project managers are given overall responsibility to completion of projects andthey play the leading role in matrix structure

Advantages

timely completion of tasks output focused flexibility in structure

Dis Advantages



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Dual Authority creates conflict High costs Stressful for employees( answerable to two managers)

FUNCRIONALMANAGERS

PRODUCTION SALES ACCOUNTS R &D MARKETING

PROJECTMANAGERS

PROJECT A

PROJECT B

PROJECT C

Span of Control

It shows the number of employees answerable to manager. For example if a manager has five people under hisauthority to report for their work, span of control if five



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Tall vs Flat Organizations

Concept of tall and flat entities depends on number of levels in management. Tall organization involves more layersof management where as in flat organizations number of layers in comparatively less. Tall organizations includes

narrow span of controls mean more levels of authority with less persons liable to senior at each level.

Tall organizations Flat organizations

Advantages

Narrow spam of control made it easy to handlesmall teams

More number of steps to promote, keepemployees motivated

Disadvantages Small people at each force managers to keep

delegation powers in hand Slow decision making due to large number of

steps Can’t survive in rapidly changing environment

Advantages

Rapid communication Can response to emerging needs More delegation at each level of management

Disadvantages Less number of steps in management, so low

motivation

Centralization vs Decentralization

An important aspect of organization structure is the extent of power ratio between head office and regional office.If head office has retained powers of major decisions, it is known as centralized structure. If powers are delegatedto regional managers to make their own decision based on local requirements, then it is known as de centralizedstructure.



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Chapter#3 Information Technology (IT)Data vs Information

First concept which needs to be understood in area of information technology is data and information. Raw factsand figures constitute DATA. As the data in not arranged in some standard form so it doesn’t give any meaning to

its user. For proper understanding data needs to be arranged in some meaning full form so that it can be useful tousers. Arranged data is called information.

For example raw data of debtors, creditors and others do not help accountant but when it is arranged in form ofincome statement or balance sheet ,it give proper meaning and help accountant in interpretation.

Qualities of Good Information

Qualified of good information can be summarize using mnemonic “ACCURATE”

Accurate- information should be correct in all means so that it can prove beneficial to the user Complete- completion of information should be insured before presentation. Incomplete

information result in wrong decisions Cost benefits- information is only beneficial if benefit associated with it exceeds cost incurred

to obtain it User understanding- information should be presented in way which understandable for user.

For example if users cannot understand technical information, it must be presented using simpleways Relevant- information is only beneficial for the user if it is relevant for the user. For example

information containing medical terminologies is irrelevant for accountant Authority- authority of information adds to its credibility ,so it should be delivered by person

having authority or expertise in that area. For an accounting information will create more impactto students if it was delivered by expert accountant

Timely- timely presentation of information helps in achievement of desired results Ease of use- use the documents easy to use for user .e.g statement of financial position

presented in standard format is more to use for receiver



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Levels of Information

Information is required at each level of organization, but need of information is different at each level. Informationis required at following levels:

Operational Information:

Information need for daily tasks Tasks specific information Short term requirement Used by supervisors to handle tasks at operational level

Tactical information:

Used in resource allocation decisions

Strategic

Tactical

Operational



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both short term and long term used by managers of departments summarized form but less summarized that strategic information

Strategic information:

used by directors to decide strategic direction of organization long term information summarized form information about whole organization

Types of Information Systems

Information systems can be divided into following types:

Transaction Processing Systems (TPS)

TPS is the basic information system used at operational level. It records the daily routine transactions andarrange them in given forms so that it can be used at higher levels. For example sale orders systems,

payroll systems etc

Management Information Systems (MIS)MIS operates at management level. TPS records data on day to day entries basis but daily data is of nouse to managers. Managers are interested in weekly and monthly reports. MIS transform the datareceived from TPS into summarize reports which make it suitable for managers to use. Its important tounderstand that MIS only use data from internal sources

For example if TPS records sale orders or payroll od daily basis, MIS will show monthly figures of saleorders and their comparatives their other months sale orders.



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Decision Support Systems(DSS)

This information system supports business and organizational decision making activities

Like DSS also serve at management level but it enjoys more analytical power then MIS. It presents largeamounts of data in the form of models, charts and other creative forms to help managers in the

presentation and interpretation of data.

DSS uses both internal and external sources to gather data. For example sale, inventory, financial datafrom internal sources external data like interest rates and taxes figures from external sources

MISReoprts

Sale Transactions

Purchase Orders

Inventory Records



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Executive Information Systems

EIS is used at strategic level to aid executives in Decision making for the performance of the company.

Features of EIS information system includes summarize data, friendly presentation of the data, dataanalysis. It helpexecutives to drill down from high levels of summarize information low level detailed data.

Advantages

Timely delivery of summarize information

Better understanding of information Correct decision making Achievement of strategic goals

TPS data

Intenraland

External

Inputs

DSSReports



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Expert Systems (ES)

Expert systems have comprehensive data base of expert knowledge. ES system comprises of knowledge base andinference rules. It records human knowledge and us it to make decision for those who have less expertise

ES is based on the concept of artificial intelligence. Human expertise along with knowledge reasoning patternscreate artificial intelligence use to make expert decisions

HumanExpertise

ReasoningPatterns

ExpertSystem



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Chapter # 3 Organization EnvironmentThe organization’s environment is study of the externals factors influencing the organization. The environment ofthe organization keeps on changing every time. Creation of external forces is a continuous process. Some of theseexternal forces help the organization to achieve strategic goals and some of the forces oppose working oforganization. So the of these external forces necessary for organization in order to keep moving in line with its longterm strategy

Environmental Factors (PEST Model)

Several environmental factors affect organization activities and these are summarized in form of PESTEL. It includes political, economic, social, technological, environmental and legal factors. Let’sanalyze these step by step:

Political and legal: includes political situation of country e.g protests, wars and similar crises and impact

of laws on entity e.g industry specific laws

Economic: includes overall economic changes e.g tax rates , interest rates

Organization

Political

Social

Technological

Economic



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Social and Cultural : includes attitudes and social trends of people of country, especially demographic factors

Technological: includes effects of technology on business e.g wide use of internet has recently affectedmany businesses

Political and Legal Factors

Effect of Political system and government policies on Organization:

Political system is linked with government stability and attitude of political forces .Its image can be seen in policiesof government. It effects organization in many ways.Political stability e.g smooth democratic government attractsinvestors throughout the world resulting health healthy growth of country economy while instability in political

system e.g.strikes, instable governments and future uncertainty badly affects working of business.

Sources of Legal Authority

Different sources of legal authority effects business. These can effects them in form of tax rate and other rateschanges. Following are prominent sources of legal authority:

Supra-national body: these are bodies which have power of oversight over multiple countries e.g in EuropeEU has power to enforce law in countries,IFAC, UNO, World Bank are other examples

National Governments: these have power to enforce new laws or change old laws within geographical

boundaries of particular country Local Governments: these governments normally operate and have powers at districts level and can effect

local businesses

Employment law

Every country has employment laws to protection employees from injustice by employer. Business should haveknowledge of these laws so as to save from penalties and high costs.Following are main aspects of this law:

Minimum wage: some countries have put bar on minimum to safe employees/laborers from low

salaries/wages Working conditions: working conditions are also defined in some premises e.g working

hours,timings,safety rules etc Redundancy: Redundancy is only permitted on sound grounds. Unfair dismissals can be challenged in

courts



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Health and Safety Law

Minimum safety requirements are also defined and it varies from place to place,so understanding of these rules arealso required for business.For example in UK safe environment must be provided to employee for work at whichhe/she is not exposed to unnecessary risk.It is responsibility of company to provide such environment to employeesotherwise can result in huge damage of reputation and costs too.

Data Protection Law

Some countries have data protection laws which protect individuals from misuse or without permission use of data.Following are principles of data security:

Personal data should be obtained with consent of individual by fair means Personal data should be taken for specified reasons Personal data taken should be accurate and not excessive Personal data should be held as long as needed so specified purpose. Personal data should be kept secure Personal data should not be transfer to other countries without data protection rules

Principles of Consumer Protection

European Union (EU) outline following principles of consume protection:

Consumer is free to buy from where he/she want to buy Contract of sale must protect from customer from any possible loss if product does not serve purpose ,

return it if doesn’t work High safety standards must be set for food and consumer goods Before eating any food item look at ingredients Look at list to check any chemicals, preservatives or other harmful ingredients Contracts should be fair to customers, no hidden conditions be there in contract Right to return if customer change their mind Make it easy for customer to compare prices Customers should not be misled Provide protection to customers on holiday Effective solutions to solve cross border problems



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Economic Factors

Macro-economic FactorsStudy of aggregate economy at national or even global level. Its objective is to analyzeinflation, unemployment,budget deficits etc.

Business activity depends upon government policy especially related to interest rates, tax rates, fiscal and monetary policies, import duties etc. Also business activities strongly effect both individuals which means more benefits toindividuals and households.

Impact of Inflation:

Inflation is increase in prices over time. It is measured by CPI, RI

High inflation is damaging for businesses as it causes labor,materials and other costs to rise which increase pricesof goods. This is ‘spiral effect” as increases in good prices again result in demand of high wages and more increasein prices,so it keeps going on.

Impact of Employment:

Both high and low levels of employment are ‘Not suitable’ for business. High level of unemployment effects society

as more peopl e are looking for jobs and they couldn’t get their job in spite of skills.Similarly high level ofemployment is also not suitable as results in shortage of labor in market leading to high wages which later turns ininflation effect.

Impact of stagnation

Stagnation means no increase in national income. It shows underutilization of resources resulting in state ofeconomic stagnation. Investors are not willing to invest in country.Economic growth ceases and living standard of people falls.

Impact of international payment Disequilibrium

Ideally imports of a country are equal to its exports creating sense of equilibrium. If imports of country exceedexports, it would create situation of disequilibrium. It would have harmful effects on economy.Government has todeficit financing to balance payments. Like any other problem disequilibrium has also got solution, it can berectified by depreciating currency so that exports become cheaper and equilibrium is attained again.



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Types of economic policies

Two types of policies are used by government to solve problems in economy.

Fiscal policy

Fiscal policy deals with Government spending, expenditure and taxation. Government covers expenditures throughtaxation income and rest of expenditures are financed through borrowings. In inflation season government spendsless on people; more money is saved, whereas in recession season more amount is spent through savings andborrowings.

Monetary policy

Monetary policy focuses on controlling supply of money in economy. In inflation interest rates are kept high so asdiscourage people to get loans, thus in this way government control supply of money in economy

Microeconomic Factors

D E M A N D

Demand in power to purchase a product with willingness to purchase it. Willingness and ability to pay arenecessary conditions of demand.

Law of demand

Law of demand states that when price of a product increases, its demand decreases in market and viceversa.

Assumptions of Law no change in taste or fashion. Money income of the consumer remains constant Price of other goods remains constant.

Demand schedule and curve:

The demand schedule refers to the various quantities of a good which a consumer would demand atvarious hypothetical prices.



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Price of commodity X

($./Kg)

Quantity Demanded

Qd (kg)

5

4321

10

15

20

25

Negatively sloped demand curve also shows that there is a negative relation between price and quantity

demanded of a good.

Real demand curve:

A real demand curve slopes downward from

left to right and convex to the origin, which

shows that quantity demanded increases

Progressively with the fall in price.

Reasons of negative slope of demand curve:

Income effect; Substitution effect; Entry of new consumers into the market; Diminishing Marginal Utility.



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Extension/ Contraction in Demand CurveRise/Fall in Demand Curve

Extension in demand Shift in demand

The first factor causes on-the-line change while the remaining factors cause Shift in demand curve. The price of a good held constant, when the demand increases it shifts demand curve upwards while thedecrease in demand is shown as inward shift in demand curve.

SUPPLY

Means the quantity of a product which the suppliers produce and brought for sale in the market

The law of supply:

Other factors remain constant, when prices of a product increases its supply also increases and viceversa

Thus the quantity supplied varies directly with price.



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Supply schedule & curve:

Price of commodity X

($/Kg)

Quantity Supplied

Qs (kg/per day)

5

4

3

2

1

40

30

20

10

Rise/Fall in Supply Curve

The price of the good causes changealong supply line, while the other factorsshift in supply curve. When supplyincreases, it shifts to the right and whendecreases it shifts to the left.



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Five Forces Model

Threat of new entrants

New entrants will decrease profit margins. The will create their market share and leave others with low profitmargins. Entrance of new competitors will depend on barriers to the industry. These barriers include fixed cost andcapital requirements. If there are high fixed costs and high capital requirements less entrance will be track towardsthe market

Existing competitors

Competition in the market depends upon the profit margins in the market and the market growth.

If there are higher profit margins in the market this will lead to or high rivalry in the market and viceversa

If the market growth is high , this will keep the competition in the market high and vice versa

Threat of substitute products

If multiplier substitutes of company product exist in the market that is difficult to increaseprices without takingcustomers into confidence. Substitutes of the product can be a direct substitutes and in direct substitutes. DirectSubstitutes provide same replacement as that of the company product while indirect substitute is product from thedifferent industry fulfilling the same needs.

Bargaining power of suppliers

Bargaining power of suppliers within be high when there are many as the number of suppliers in the market and byswitching cost of industry is high

Bargaining power of customers

Product differentiation keeps bargaining power of customers low. Lack of product differentiation will urgecustomer to demand low prices of the product.



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Organization

NewEntrants

ExistingCompetitors

Power ofsuppliers

Power ofcustomers

SubstituteProducts



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Chapter #4 Organizational Culture

Culture

Culture is the shared beliefs of one community which separates it from other communities. It defines one group of people to be separate from all others in world. They share beliefs, norms, values and religion.

Popular characteristics of culture include:

Language Perception Use of space Religion Environment

Language

The one of way of leaning about a person culture is language. By language you can directly allocate him to a part ofglobe from which he may belong.

Perception

Thinking, making decision and coming up to occasion can also separate one community from another.

Use of space

Proxemics: the study of how people use space to communicate.Reveals important cultural differences

Concept of personal space varies across cultures Space is arranged differently in different cultures.

Religion



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– A major element of culture.

– Can be a very visible aspect of culture.

– Often prescribes specific behavioral practices.

– Influences codes of ethics and moral behavior.

– Influences conduct of economic matters.

Values and National culture – Cultures vary in underlying patterns of values and attitudes.

Handy- Types of Culture

In 1978, in his book “GODS OF MANAGEMENT” Charles Handy suggested four types of culture:

Power

Task

Role

Person



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Power culture

Power culture is centralized culture where authority comes from the individual who has authority andcontrol the over organization. This person is normally CEO/ founder of the organization. Handy in hisbook compare power culture with the spider web, the owner of the business holding the powers of thecore of culture like the spider in the web.

Features

decision making is highly centralized limited delegation of power The boss follow the “TELL” rule and expect worker to follow the orders

Role culture

In this culture are individual has to perform his role within rules and regulations. This culture is more likelyto bureaucratic culture, where every person has to follow instructions from the seniors and has to follow it.

Handy compared the role culture with pyramid of boxes .These boxes are persons performing job roles.Each box perform its role and hence pyramid is ideally completed. If a person leaves the organization thebox will be replaced by another person in the pyramid and hence pyramid is again completed.

The role of culture is only suitable for slowly changing businesses or work units of the company. This isbecause each person is trained to perform his role in fixed way and persons are not capable to vary theirrole according to changing environment

Task culture

This structure focus on output of tasks provided. Teams are formed, tasks are given to them and timelyand efficient completion is the basis of the determination of rewards. Teams who perform their taskstimely and accurately are rewarded with high monetary packages

Features

High packages for experts Performance is based on output Initiates creativity in individuals

Person culture





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Hofstede National Culture

Hofstede’s five dimensions of national culture:

Power distance Uncertainty avoidance

Individualism-collectivism Masculinity-femininity Long-term/short-term orientation

Power distance – The willingness of a culture to accept status and power differences among members.

– Respect for hierarchy and rank in organizations.

–

Example of a high power distance culture — Indonesia.

– Example of a low power distance culture — Sweden.

Uncertainty Avoidance – The cultural tendency toward discomfort with risk and ambiguity.

– Preference for structured versus unstructured organizational situations.

– Example of a high uncertainty avoidance culture — France.

– Example of a low uncertainty avoidance culture — Hong Kong

Individualism-collectivism – The cultural tendency to emphasize individual or group interests.

– Preferences for working individually or in groups.

– Example of an individualistic culture — United States.

– Example of a collectivist culture — Mexico.

Masculinity-femininity

– The tendency of a culture to value stereotypical masculine or feminine traits.

– Emphasizes competition/assertiveness versus interpersonal sensitivity/relationships.

– Example of a masculine culture — Japan.

– Example of a feminine culture — Thailand.



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Long-term/short-term orientation – The tendency of a culture to emphasize future-oriented values versus present-oriented values.

– Adoption of long-term or short-term performance horizons.

– Example of a long-term orientation culture — South Korea.

– Example of a short-term orientation culture — United States.

HofstedeNationalCulture

PowerDistance

UncertaintyAvoidance

Masculinity-

femininity

Long-term/Short-

termorientation

Individualism-Collectivism



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Chapter # 5 Stakeholders in Organization

Stakeholders are persons or entities which affected by organization or can affect organization. Stakeholders havetheir interests in the organization so they influence so protect their interests.

Types of Stakeholders

Internal

These are stakeholders inside the organization

Employees Shareholders Directors Managers

Connected

These stakeholders are connected to organization by contracts

Key Suppliers

Key Customers Employees

External

These stakeholders are outside organization People living nearby organization



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Government Local committees Media and Press

Conflict in Stakeholders

As stakeholders intensely affect org. they have some natural conflicts in them e.g shareholders want more profitsbut employees want more salaries, customers want 24/7 services but employee want to work only 5 days a week

So what org will do to resolve conflicts in stakeholders? Here comes the role of management. Effectivemanagement is one which effectively takes all stakeholders on board and then make or most of them satisfied byreasonable measures e.g negotiations

Mandelow ModelMandelow model identified positions of various stakeholders, depending upon their influence of organization. Heanalyzed various positions on interest vs power basis and concluded four types of stakeholders.

Mandelow model presented how to work out conflict in stake holders.

Key players: they have high power and high interest so management have to take them into confidence inmajor decisions

Keep satisfied: they have high power but lower interest so keeping them satisfied will serve the purpose Keep informed: they have low power but high interest so management just keeps them informed Minimal Effort: these are the weak ones with low interest and power.so management spends least time on

them.



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MinimalEffort

KeepInformed

Key

players

Keep

Satisfied



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Chapter # 6 Management

Manager and Their Roles

Managers: – Utilize organization resources at optimum level

– Act as a role model for subordinates.

– Act as a super visor, oversee the work or subordinates.

–

Stick to schedule and strive for maximum, quality output.

– Assume roles such as coordinator, coach, or team leader.

Effective Manager

– An effective manager is one whose organizational unit, group, or team consistently achieves itsgoals while its members remain motivated and align to the organization objectives.

– Key results of effective management:

• Task performance.

• Job satisfaction.

Functions of management:

There are four main functions of management which includes:

Planning• Planning is a step to answer 4 questions. What, When, How and Where.

• In this function of management, Managers set short term goals, and identify actionsneeded to achieve them.

• For example a short term goal for trading company will to increase its sales by 20%.Proper action for such goal achievement will be to increase reach to different areas or







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Conceptual skills.• An ability to see and understand how the system works, and how the parts are

interrelated.

• Used to:

– Identify problems and opportunities.

– Gather and interpret relevant information.

– Make good problem-solving decisions.



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Chapter # 7 Leadership

Difference between Leadership and Management: – Management promotes stability or enables the organization to run smoothly. And it rely on the rules and

policies already and use organizational resources to best possible way to maximize output. They manageresources by the rules and regulation.

– Leadership promotes adaptive or useful changes. They influence subordinates to act when needed. Theyare innovative and think out of box. They lead team to a desire goal and objective achievement.

Forms of leadership:

Formal leadership Informal leadership

Trait Theories

– These theories believe that all leaders share some specific characteristics which make themleaders and the leadership characteristics are associated to family.

– Assume that traits play a key role in:

• Differentiating between leaders and non-leaders.

• Predicting leader or organizational outcomes.



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– Great-person-trait approach.

• Earliest approach in studying leadership.

• Tried to determine the traits that characterized great leaders.

Identifiable Characteristics of Leaders – Energetic.

– Operate on an even keel.

– Seek power as a means of achieving a vision or goal.

– Ambitious.

– High need for achievement.

– Recognize their own strengths and weaknesses.

– Oriented toward self-improvement.

– Integrity.

– Not easily discouraged.

– Deals well with large amounts of information.

– Above-average intelligence.

– Good understanding of their social setting.

– Possess specific knowledge concerning their industry, firm, and job.

Behavioral Theories

– Assume that leader behaviors are crucial for explaining performance and other organizationaloutcomes.

Leadership Grid – Developed by Robert Blake and Jane Mouton.

– Built on dual emphasis of consideration and initiating structure.



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– A 9 x 9 Grid (matrix) reflecting levels of concern for people and concern for task.

• 1 reflects minimum concern.

• 9 reflect maximum concern.

– Five key Grid combinations.

• 1/1 — low concern for production, low concern for people.

• 1/9 — low concern for production, high concern for people.

• 5/5 — moderate concern for production, moderate concern for people.

• 9/1 — high concern for production, low concern for people.

• 9/9 — high concern for production, high concern for people.



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Contingency Theories

Fiedler’ s Leadership Contingency Theory – Initiated the situational contingency approach in the mid-1960s.

– Fiedler’s approach emphasized that group effectiveness depends on an appropriate match

between the leader’s s tyle and situational demands.

Key variables in Fiedler’s contingency model. – Situational control.

• The extent to which a leader can determine what his or her group is going to do as wellas the outcomes of the group’s actions and decisions.

• Is a function of:

– Leader-member relations.

– Task structure.

– Position power.

– Least preferred co- worker (LPC) score reflects a person’s leadership style.

• High-LPC leaders have a relationship-motivated style.

• Low-LPC leaders have a task-motivated style.

Implications of Fiedler’s contingency model. – Task-motivated leaders have more effective groups under conditions of low or high situational

control.

– Relationship-motivated leaders have more effective groups under conditions of moderatesituational control.

Fiedler’s cognit ive resource theory. – Cognitive resources are abilities or competencies.

– A leader’s use of directive or nondirective behavior depends on:

• The leader’s or subordinates group members’ ability or competency.

• Stress.

• Experience.



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• Group support of the leader.

– Directedness is most helpful for performance when the leader is:

• Competent.

• Relaxed.

• Supported.

– Otherwise nondirectedness is preferred.

Evaluation and application of Fiedler’s contingency theory – Controversy regarding what LPC actually measures

– Leaders match training

• Leaders are trained to diagnose the situation to match their LPC scores with situationalcontrol.

• Also shows how situational control variable can be changed to obtain a match.

House’s Path-goal Theory of Leadership – Emphasizes how a leader influe nces subordinates’ perceptions of both work goals and personal

goals and the links, or paths, found between these two sets of goals.

– The theory assumes that a leader’s key function is to adjust his/her behavior to complement

situational contingencies.

– Leader behaviors.

• Directive leadership.

• Supportive leadership.

• Achievement-oriented leadership.

• Participative leadership.

–

Situational contingency variables.

• Subordinate attributes — authoritarianism, internal-external orientation, and ability.

• Work setting attributes — task, formal authority system, and primary work group.



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Path-goal theory predictions regarding directive leadership. – Positive impact on subordinates when task is clear; negative impact when task is ambiguous.

– More directedness is needed when ambiguous tasks are performed by highly authoritarian andclosed-minded subordinates.

Path-goal theory predictions regarding supportive leadership. – Increases satisfaction of subordinates working on highly repetitive, unpleasant, stressful, or

frustrating tasks.

Path-goal theory predictions regarding achievement-oriented leadership. – Encourages subordinates to strive for higher performance standards and to have more confidence

in their ability to meet challenging goals.

– Increases effort-performance expectancies for subordinates working in ambiguous, non-repetitivetasks.

Path-goal theory predictions regarding participative leadership. – Promotes satisfaction on non- repetitive tasks that allow for subordinates’ ego involvement.

– Promotes satisfaction for open-minded or non-authoritarian subordinates working on repetitivetasks.

Evaluation and application of House’s path -goal theory. – Many aspects of the theory have not been adequately tested.

– Lacks substantial current research.

– House has revised and extended path-goal theory into a theory of work unit leadership.

Hersey and Blanchard ’s Situational Leadership Model – Emphasizes the situational contingency of maturity, or “readiness,” of followers.

– Readiness is the extent to which people have the ability and willingness to accomplish a specifictask.

– Leader style and follower readiness.

•

A telling style is best for low readiness.

• A selling style is best for low to moderate readiness.

• A participating style is best for moderate to high readiness.

• A delegating style is best for high readiness.



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Substitutes for leadership. – Sometimes hierarchical leadership makes essentially no difference.

– Substitutes for leadership make a leader’s influence either unnecessary or redundant.

Examples of leadership substitutes. – Individuals’ exper ience, ability, and training.

– Individuals’ professional orientation.

– Highly structured/routine jobs.

– Intrinsically satisfying jobs.

– Cohesive work group.

Examples of leadership neutralizers. – Individual indifference toward organizational rewards.

– Low leader position power.

– Physical separation of leader

Charismatic Approaches to Leadership

– Charismatic leaders, by force of their personal abilities, can have a profound and extraordinary

effect on followers.

– Characteristics of charismatic leaders include:

• High need for power.

• High feelings of self-efficacy.

• Conviction in the moral rightness of their beliefs.

– Charismatic behaviors include:

•

Role modeling.

• Image building.

• Articulating goals.

• Emphasizing high expectations.

• Showing confidence.



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• Arousing follower motives.

Dark side versus bright side of charismatic leadership. – Dark side.

• Emphasizes personalized power.

• Leaders focus on themselves.

– Bright side.

• Emphasizes socialized power

• Leaders empower followers

Conger and Kanungo’s three -stage charismatic leadership model – Stage 1: The leader critically evaluates the status quo.

– Stage 2: The leaders formulate and articulate future goals and a idealized future vision.

– Stage 3: The leader shows how the goals and vision can be achieved.

– If leaders use behaviors such as vision articulation, environmental sensitivity, and unconventionalbehavior, followers will attribute charismatic leadership to them.

Charismatic leadership relative to close-up and at-a-distance leaders. – Both types of leaders are viewed as charismatic but possess quite different traits and behaviors.

Transactional Leadership – Involves leader-follower exchanges necessary for achieving routine performance agreed upon

between leaders and followers.

– Leader-follower exchanges involve:

• Use of contingent rewards.

•

Active management by exception.

• Passive management by exception.

• Abdicating responsibilities and avoiding decisions.

Transformational leadership occurs when leaders: – Broaden and elevate their followers’ interests.



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– Generate awareness and acceptance of the group’s purposes and mission.

– Stir their followers to look beyond their own self-interests to the good of others.

Dimensions of transformational leadership. –

Charisma.• Provides vision and a sense of mission; and instills pride, respect, and trust in followers.

– Inspiration.

• Communicates high expectations, uses symbols to focus efforts; expresses important purposes in simple ways.

– Intellectual stimulation.

• Promotes intelligence, rationality, and careful problem solving.

– Individualized consideration.

• Provides personal attention, treats each employee individually, and coaches and advises.

Transformational leadership is likely to be strongest at the top-management level.

Transformational leadership is found through the organization.

Transformational leadership operates in combination with transactional leadership.

What are the new leadership perspectives, and why are they especially important in high performance organizations?

Leadership in high performance work teams.

– Leaders in self-directing work teams act as coordinators.

– Behaviors in the coordinator role emphasize the development of self-leadership on the part ofteam members.

• Self-leadership acts as a partial substitute for hierarchical leadership.

• While coordinator behaviors encourage follower participation, they are not charismaticbehaviors.

What are the new leadership perspectives, and why are they especially important in high performance organizations?

Some new leadership issues.

– People can be trained in new leadership approaches.

– New leadership is not always good or needed.



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– New leadership should be used in conjunction with traditional leadership.







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ERG Theory

Developed by Clayton Alderfer.

Collapses Maslow’s five categories into three categories: existence needs, relat edness needs, and growth needs. And said that more than one need category may be activated at the same time.

Existence needs

Desire for physiological and material well-being.

Relatedness needs

Desire for satisfying interpersonal relationships.

Growth needs

Desire for continued personal growth and development.

Characteristics:

Addition of frustration/regression hypothesis is a valuable contribution.

Offers a more flexible approach to understanding human needs.

Acquired Needs Theory

Developed by David McClelland.

Three needs — achievement, affiliation, and power — are acquired over time, as a result of experiences.

Managers should learn to identify these needs and then create work environments that are responsive to them.

Need for achievement:

The desire to do something better or more efficiently, to solve problems, or to master complex tasks.

High need for achievement people:

– Prefer individual responsibilities. – Prefer challenging goals. – Prefer performance feedback.

Need for affiliation:

The desire to establish and maintain friendly and warm relations with others.

High need for affiliation people:



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– Are drawn to interpersonal relationships. – Seek opportunities for communication.

Need for power:

The desire to control others, to influence their behavior, or to be responsible for others.

High need for power people:

– Seek influence over others. – Like attention. – Like recognition.

Characteristics:

Identification of the need profiles that are required for success in different types of jobs.

People can be trained to develop the need for achievement, particularly in developing nations.

Two-factor Theory

Developed by Frederick Herzberg.

Also known as motivation-hygiene theory.

Portrays two different factors — hygiene factors and motivator factors — This theory stated that there are someother types of needs, which may not cause motivation but if they are not present it will cause dissatisfaction in

organization.

Hygiene factors – Sources of job dissatisfaction. – Associated with the job context or work setting. – Improving hygiene factors prevent people from being dissatisfied but do not contribute to satisfaction.

Motivator factors – Sources of job satisfaction. – Associated with the job content. –

Building motivator factors into the job enables people to be satisfied. – Absence of motivator factors in the job results in low satisfaction, low motivation, and low performance.

Short Comings: – Account for individual differences. – Link motivation and needs to both satisfaction and performance. – Consider cultural and professional differences. – These failures also apply to other content theories.



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Contemporary Theories

Equity theory

Workplace development by J.Stacy Adams.

People gauge the fairness of their work outcomes in relation to others. This theory believed that a person remainsmotivated if he compares himself with the same level personnel and believe that he is receiving same benefits ashis. And when perceived inequity occurs, people will getdemotivated. In this individual may compare himself to a person within organization, relative, friend or a person working in another organization.

HygieneFactors Motivators



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Felt negative inequity

Individual feels he/she has received relatively less than others in proportion to work inputs.

Felt positive inequity

Individual feels he/she has received relatively more than others in proportion to work inputs.

Equity restoration behaviors. – Change work inputs. – Change the outcomes received. – Leave the situation. – Change the comparison points. – Psychologically distort the comparisons. – Take actions to change the inputs or outputs of the comparison person.

Equity theory implications. – Inequity perceptions are entirely from reward recipient’s perspective, not from reward giver’s perspective. – The equity process must be managed so as to influence the reward recipient’s equity perceptions.

What do the process theories suggest about individual motivation?

Characteristics – Overpayment (felt positive inequity) results in increased quantity or quality of work. – Underpayment (felt negative inequity) results in decreased quantity or quality of work. – Stronger support for underpayment results. – Overpayment and underpayment results are closely tied to individualistic cultures. – Collectivist cultures emphasize equality rather than equity.

Expectancy Theory

Developed by Victor Vroom

A person’s motivation is a multiplicative function of:

– Expectancy. – Instrumentality – Valence.

Expectancy

The probable outcome one person has assigned to the successful completion of task, work or project.

Instrumentality

The probability assigned by the individual that a given level of achieved task performance will lead to various workoutcomes.



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Valence

The value attached by the individual to various work outcomes.

Motivational implications of expectancy theory. – Motivation is sharply reduced when, expectancy, instrumentality or valence approach zero. – Motivation is high when expectancy and instrumentality are high and valence is strongly positive. – Managers should act to maximize expectancies, instrumentalities, and valences that support

organizational objectives.

Characteristics: – Theory has received substantial empirical support. – Multiplier effect is subject to some question. – May be useful to distinguish between extrinsic rewards and intrinsic rewards. – Does not specify which rewards will motivate particular groups of workers, thereby allowing for cross-

cultural differences.

Key Characteristics of motivation within Organization:

Job satisfaction – The degree to which individuals feel positively or negatively about their jobs.

Job satisfaction can be assessed:

– By managerial observation and interpretation. – Through use of job satisfaction questionnaires.

Job enrichment – The motivation can be caused by increasing one person authority and more involvement in decision

making. – In job enrichment an individual is awarded with more authority.

Job enlargement – The motivation can be caused by increasing one person responsibility. i.e. If a person was responsible for

one manufacturing unit, now make him responsible for two units.



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Chapter # 9 Groups and Teams

Groups

A group is a collection of two or more people who work with one another regularly to achieve commongoals.

People working together sharing a short term objective and all share their skills to achieve such objective.

Groups: – Help organizations in achieving short term objectives.

– Increase organization effectiveness and efficiency.

– Pooling of knowledge and experience.

Effective groups achieve high levels of: – Task performance.

• Members attain performance goals regarding quantity, quality, and timeliness of workresults.



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– Member’s satisfaction.

• Members believe that their participation an experiences are positive and meet important personal needs.

– Team viability.

• Members are sufficiently satisfied to continue working together on an ongoing basis.

Synergy – Effective groups offer synergy.

– It makes it possible to achieve 2+2=5.

– With synergy, groups accomplish more than the total of the members’ individual capabilities.

– Synergy is necessary for organizations to compete effectively and achieve long-term high performance.

Situations in which groups are superior to individuals – When there is no clear expert in a particular problem or task.

– When problem solving can be handled by a division of labor and the sharing of information.

– When creativity and innovation are needed.

Types of Groups

Formal groups – Officially designated to serve a specific organizational purpose.

– May be permanent or temporary.

• Permanent work groups are command groups in the vertical organization structure.

•

Temporary work groups are task groups specifically created to solve a problem or perform aa defined task.

– Virtual groups.

• Groups whose members convene and work together electronically via networkedcomputers.

• Activities are facilitated by groupware.



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• Can accomplish the same things as members of face-to-face groups.

• It makes it possible to pool finest people to form a group.

Informal groups –

Emerge without being officially designated by the organization. – Who share some same interest.

– Types of informal groups.

• Friendship groups.

• Interest groups.

Benefits of informal groups. – Can speed up work flow by supplementing formal lines of authority.

– Can satisfy needs that are thwarted or unmet by the formal group.

– Can provide members with social satisfaction, security, and a sense of belonging.

STAGES of Group Formation

A group or team passes through five lifecycle stages:

– Forming.

– Storming.

– Norming.

– Performing.

– Adjourning.

Forming stage – It is a stage where a need for forming a group or team is felt and rumors are heard all over

organization. All people are concerned about who will form part of group, what role may beassigned to him, what will be the objective and possible risks and rewards.

– Members concern’s include:

• Getting to know each other.

• Discovering what is considered acceptable behavior.



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• Determining the group’s real task.

• Defining group rules.

Storming stage –

A period of high emotionality and tension among group members. In this stage all member fights for different roles defined and responsibilities.

– Members con cern’s include:

• Formation of coalitions and cliques.

• Dealing with outside demands.

• Clarifying membership expectations.

• Dealing with obstacles to group goals.

• Understanding members’ interpersonal styles.

Norming stage – The point at which the group really begins to come together as a coordinated unit. This is a stage

where are roles and responsibilities are assigned, all rules are defined and a specific name andobjective is given to the concerned group.

– Members concern’s include:

• Holding the group together.

• Dealing with divergent views and criticisms.

• Dealing with a premature sense of accomplishment.

Performing stage – Marks the emergence of a mature, organized, and well-functioning group.

– Members deal with complex tasks and handle internal disagreements in creative ways.

– Primary challenge is to continue to improve relationships and performance.

Adjourning stage – Particularly important for temporary groups.

– A well-integrated group is:

• Able to disband when its work is finished.

• Willing to work together in the future.



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Group Components

Nature of the task Goals

Rewards Resources Technology Membership diversity Group size

Tasks – Technical demands of a task.

• Routineness, difficulty, and information requirements.

– Tasks that are complex in technical demands require unique solutions and more information processing.

– Social demands of a task.

• Relations, ego involvement, and controversies over ends and means.

– Tasks that are complex in social demands involve difficulties in reaching agreement on goals ormethods for accomplishing them.

Goals, rewards, and resources – Long-term performance accomplishments rely on:

• Appropriate goals.

• Well-designed reward systems.

• Adequate resources.

Technology – Provides the means to get work accomplished.

– The right technology must be available for the task at hand.

– Work-flow technology can affect the way group members interact.

Membership characteristics. – A group must have the right skills and competencies available for task performance and problem

solving.



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• Homogeneous groups may not perform well if they lack the requisite experiences, skills,and competencies.

• Heterogeneous groups may perform well if they effectively utilize a variety ofexperiences, skills, and competencies.

– Diversity-consensus dilemma.

• Increasing diversity among group members makes it harder for group members to worktogether, even though the diversity itself expands the skills and perspectives available for

problem solving.

Group size – As group size increases, performance and member satisfaction increase up to a point.

• Division of work promotes performance and increased satisfaction.

• Communication and coordination problems occur, in turn decreasing performance andsatisfaction.

– Problem-solving groups should have 5 to 7 members.

– Groups with an odd number of members may be more effective for resolving disagreements andreaching a speedy decision.

– Groups with an even number of members may be more effective when careful deliberation,consensus building, or complex problem solving is What are group andintergroup dynamics?

Advantages of group decision making

– More knowledge and expertise is applied to solve the problem.

– A greater number of alternatives are examined.

– The final decision is better understood and accepted by all group members.

– More commitment among all group members to make the final decision work.

– Individuals may feel compelled to conform to the apparent wishes of the group.

– The group’s decision may be dominated by one individual or a small coalition.

– Group decisions usually take longer to make.



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Teams

A team is a small group of people with complementary skills, who work actively together to achieve acommon purpose for which they hold themselves collectively accountable.

Types of teams

– Teams that recommend things.

• Established to study specific problems and recommend solutions to them.

– Teams that run things.

• Have formal responsibility for leading other groups.

– Teams that make or do things.

• Functional groups that perform ongoing tasks.

The nature of teamwork

– Team members actively work together in such a way that all of their respective skills are utilizedto achieve a common purpose.

– Teamwork is the central foundation of any high performance team.

Characteristics of high performance teams: – High performance teams:

• Have strong core values.

• Turn a general sense of purpose into specific performance objectives.



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• Have the right mix of skills.

Diversity and team performance – To create and maintain high performance teams, the elements of group effectiveness must be

addressed and successfully managed.

– Diverse teams:

• Improve problem solving and increase creativity.

• May struggle in the short term.

• Have strong long-term performance potential.

Team building – A sequence of planned activities designed to gather and analyze data on the functioning of a

group and to initiate changes designed to improve teamwork and increase group effectiveness.

How team building works – Five step process.

• Problem or opportunity in team effectiveness.

• Data gathering and analysis.

• Planning for team improvements.

• Actions to improve team functioning.

• Evaluation of results.

Increased emphasis on teams and teamwork – Presents challenges to people accustomed to more traditional ways of working.

– Creates complications due to multiple and shifting memberships.

– Requires team leaders and members to deal positively with group dynamics issues.

– Requires ongoing team building.

Task and maintenance leadership – High performance teams require distributed leadership.

• The team leader and team members share in the responsibility of meeting task needsand maintenance needs.



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Task activities – The various things members do that contribute directly to the performance of important group

tasks.

– Task activities include:

• Initiating discussion.

• Sharing information.

• Asking information of others.

• Clarifying what has been said.

• Summarizing the status of a deliberation.

Maintenance activities

– Support the group’s social and interpersonal relationships.

– Maintenance activities include:

• Encouraging the participation of others.

• Trying to harmonize differences of opinion.

• Praising the contributions of others.

• Agreeing to go along with a popular course of action.

Groups members should avoid the following disruptive behaviors:

– Being overly aggressive toward other members.

– Withdrawing and refusing to cooperate with others.

– Horsing around when there is work to be done.

– Using the group as a forum for self-confession.

– Talking too much about irrelevant matters.

– Trying to compete for attention and recognition.

Roles and role dynamics – A role is a set of expectations associated with a job or position on a team.

– Performance problems occur when roles are unclear or conflictive.

– What can be done to improveteam processes?



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– Role ambiguity — occurs when a person is uncertain about his/her role.

– Role overload — occurs when too much is expected and the person feels overwhelmed with work.

– Role under load — occurs when too little is expected and the person feels underutilized.

– Role conflict — occurs when a person is unable to meet the expectations of others.

Norms: – Represent beliefs about how group or team members are expected to behave.

– Are rules or standards of conduct?

– Clarify role expectations.

– Help members to structure their behavior

– Help members to gain a common sense of direction.

– Help to reinforce group or team culture.

Key norms that can have positive or negative implications.

– Performance norms.

– Organizational and personal pride norms.

– High-achievement norms.

– Support and helpfulness norms.

– Improvement and change norms.

Team cohesiveness – The degree to which members are attached to and motivated to remain a part of the team.

– What can be done to improveteam processes?

Members of highly cohesive groups:

– Value their membership.

– Try to maintain positive relationships with other members.

– Are energetic when working on team activities.

– Are not prone to absenteeism or turnover.

– Are genuinely concerned about team performance.



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– Tend to satisfy a broad range of individual needs.

High team cohesiveness occurs when: – Members are similar in age, attitudes, needs, and backgrounds.

– Group size is small.

– Members respect each other’s competencies.

– Members agree on common goals.

– Members work on interdependent tasks.

– Groups are physically isolated from others.

– Groups experience performance success or crisis.

Types of Teams:

Problem-solving teams – Employee involvements teams include a wide variety of teams whose members meet regularly to

collectively examine important workplace issues.

– Quality circle.

• A special type of employee involvement team.

• Team meets periodically to address problems relating to quality, productivity, or cost.

Cross- functional teams – Consist of members representing different functional departments or work units.

– Used to overcome functional silos problem.

– Used to solve problems with a positive combination of functional expertise and integrativesystems thinking.

Virtual teams – Members meet at least part of the time electronically and with computer support.

– Groupware facilitates virtual meetings and group decision making.

Key advantages of virtual teams. – Brings cost effectiveness and speed to teamwork.

– Brings computer power to information processing and decision making.

Key disadvantage of virtual teams.



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– Direct personal contact among members suffers.

Self-managing Teams

– Small groups are empowered to make the decisions needed to manage themselves on a dailybasis.

– Teams make decisions on:

• Scheduling work.

• Allocating tasks.

• Training in job skills.

• Evaluating performance.

• Selecting new team members.

• Controlling quality of work.

How self-managing teams work – Are permanent and formal elements of the organizational structure.

– Team members assume duties otherwise performed by the manager or first-line supervisor.

– The team should include between 5 and 15 members.

– Members rely on multiskilling.

Benefits of self-managing teams – Productivity and quality improvements.

– Production flexibility.

– Faster response to technological change.

– Reduced absenteeism and turnover.

– Improved work attitudes.

– Improved quality of work life.

Operational difficulties for self-managing teams – Impact on supervisors and others accustomed to a more traditional way of working.

– Self-managing teams are not appropriate for all organizations.



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Chapter # 10Recruitment and Selection



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Human resource (HR) Strategic Planning

– The process of organizing best individuals to attain the Organization objectives and goals.

– A key element is the staffing function, which consists of:

• Recruitment.

• Selection.

• Socialization.

Job analysis – Staffing begins with job analysis.

– Vacancy responsibilities, authority and to whom he will report.

– Identifies the individual qualification, experience and personality required for the position.

– Forms the basis for a job description and job specifications.

Recruitment – It is the actual process from advertisement to hiring or an individual to fill the position vacant

within organization.

Recruitment Approaches – External recruitment.

– Internal recruitment.

Selection – A series of steps from initial applicant screening to final hiring of the new employee.

– Selection process.

• Completing application materials.

• Conducting an interview.

• Completing any necessary tests.

• Doing a background investigation.

• Deciding to hire or not to hire.

Completing application materials. – Gathering information regarding an applicant’s background and ex periences.



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– Typical application materials.

• CV

• Education and experience documents

Conducting an interview. – Typically used though they are subject to perceptual distortions.

– Interviews can provide rough ideas concerning the person’s fit with the job and the o rganization.

Deciding to hire or not to hire. – Draws on information produced in preceding selection steps.

– A job offer is made.

– A physical examination may be required if it is relevant to job performance.

– Negotiation of salary and/or benefits for some jobs.

Training – A set of activities that provides the opportunity to acquire and improve job-related skills.

– Types of training.

• On-the-job training.

• Apprenticeships.

• Job rotation.

• Off-the-job training.

Career planning and development – Focus is on the long term.

– Individuals work with their managers and/or HR experts on career issues.

The training of individuals already working in organization is made to comply with requirement of law, or toestablish a long term relationship, to make an individual compatible with the organization objective and provide

him relevant skills to use his position within organization effectively and efficiently.

Performance appraisal. – A process of systematically evaluating performance and providing feedback upon which

performance adjustments can be made.

– Performance appraisal should be based on job analysis, job description, and job specifications.



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Functions of performance appraisal. – Define the specific job criteria against which performance will be measured.

– Measure past job performance accurately.

– Justify rewards, thereby differentiating between high and low performance.

– Evaluation.

– Feedback and development.

Evaluative decisions. – Concerned with issues regarding:

• Promotions

• Transfers.

• Terminations.

• Salary increases.

– When these issues are decided on the basis of performance, a performance appraisal system isneeded.

Feedback and development decisions. – where they stand in terms of expectations and performance objectives.

– Feedback should involve a detailed discussion of the strengths and weaknesses.

– Feedback can be used as a basis for coaching and training by the manager.

Dimensions and standards of performance appraisal. – Output measures.

• Quantity of work output.

• Quality of work output.

– Activity measures.

• Behavioral measures that are typically obtained from the evaluator’s observation and

rating.

Performance appraisal methods. – Comparative methods.

• Seek to identify a person’s relative standing among those people being rated.



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– Absolute methods.

• Specify precise measurement standards.

– Collectivist-oriented cultures are less likely to use comparative methods and more likely to useabsolute methods.

Types of Rewards – Extrinsic rewards.

• Positively valued work outcomes given by some person or source in the work setting.

– Intrinsic rewards.

• Positively valued work outcomes received directly from task performance.





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Receiver-Decoder:

The person who is intended to receive message is known as receiver and the process absorbing or understandingmessage is known as decoding.

Feedback:

This is the final component of communication, in which the receiver reacts with either the desired response basedon a clear understanding of the symbols or with an undesired response because of miscommunication. Feedbackcan be oral or written. It can also be an action, such as receiving in the mail an item you ordered. Sometimes silenceis used as feedback.

Barriers in Communication

Context

Encoder

Message

Medium

Decoder

Feedback



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Semantic Barrier

i) Assign different meaning to the same word or use different words for the same meaning, orii) Words carry different nuances, shades or flavors to the transmitter & the receiver.

a. Symbols with different meaningb. Badly expressed messagec. Faulty translationd. Specialist language

Emotional Barrier

i) Premature evaluationii) Inattentioniii) Loss by transmission/poor retentioniv) Closed-minded

v) Laziness

Organizational Barrier

i) Organizational policyii) Rules and regulationiii) Status relationshipiv) Complexityv) Organizational Facilities



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Types of Communication in Organization

External Communication:

A type of communication in which knowledge flows from organization to external world. This type of

communication is used to share information, comply with requirement, and make sales. This communication takes place i.e.

Government agencies and department distribution,retailers,individual customer

Internal Communication:

Barriers inCommunication

OrganizationalBarrier

EmotionalBarrier

SemanticBarrier



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A type of communication in which knowledge flows within organization. This type of communication is used toshare information, opinion, feedbacks, or feelings. This communication takes place i.e.

Superior, subordinate, peer, departmental.



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Chapter # 12 Corporate GovernanceIn big organization where owners are not directly involved in the controlling of the business and this function is performed by the directors appointed by the shareholders.

Here the governance issues start and require corporate code of governance to adopted by the organization in orderto ensure that directors act in the best interest of the shareholders.

In the largest organizations, owners may have such small individual stakes

That:

• They do not care too much what the organization does.

• They are not prepared to challenge the directors over their performance.

• They do not have the power to challenge the directors

The biggest owners are often institutional shareholders – for example, Pension funds, investment companies. Theyare investing money on behalf of others – it is not theirs own money. They tend to be “inactive” by nature,

preferring not to “rock the boat”. Due to globalization the large companies become largest and agency problem

started to worse. The concept of globalization is also important in the context of most recent corporate scandals.

Agency issues

In simple terms, if you want something done properly, the way you want it done …

Do It Yourself!

Agents are people employed to do something for shareholders (shareholders are the “principal”). The ris k is thatthey do it for their own interest… rather than fulfilling their “fiduciary duties” shareholders.

Agency Costs:

If shareholders employ directors to do something for them, additional costs will arise. The agent will expect to be paid for their work that creates agency cost.

The agent may expect additional benefits like: A nice office and company car

Shareholders will have to spend some time and effort monitoring the agent to ensure they are doing what you want… and the less you trust the agent, th e more Checking you will want to do!



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Corporate Governance is a system of laws or guidance aimed at making directors manage companies in the bestinterests of shareholders, and potentially other stakeholders. Its objective is to create effective, entrepreneurial and prudent management, to deliver long term success. It is an attempt to deal with the agency problem with anobjective to maximizing long term performance.

Corporate Governance Codes

Global – the OECD have developed a Code (Organization for Economic Cooperation and Development). The ICGN(International Corporate Governance Network) has used its membership to create its own more detailed guidelinesbuilt around the OECD Code, and designed for use by any country.

National – many countries have developed their own systems, sometimes as laws (e.g. Sarbanes-Oxley in the USA)and sometimes as a Code (e.g. UK Corporate Governance Code (formerly called Combined Code)).

Companies – many companies have tried to develop their own policies on Corporate Governance, some of which go further than the rules or Code their country expects them to follow.

Other – in some countries, a regulatory body will set some rules. Such as something that appears to be “voluntary”

can effectively become law (e.g. in UK all listed companies are required to either follow the UK CorporateGovernance Code, or explain why they have not followed it

Principles Underpinning the Code of Corporate Governance

Fairness

While taking decision equal consideration should be given to all stakeholders. They should be treated equally.

Openness/Transparency

Company should follow the compulsory and voluntary disclosure requirements to ensure that all the necessarymatters are communicated to stakeholders.

Independence

For the purpose of monitoring all the monitoring agents should be independent such as non -executive directors,internal and external auditors.

Probity /honesty

To be honest in all professional and business relationships. Probity is highest level of integrity. Speaking truth afterhaving due investigation.



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Responsibility

Directors should understand and accept their responsibility to shareholders and other stakeholders, and act in theirbest interests … and be willing to accept the consequences if they fail in this responsibility.

Accountability

Directors should be held accountable for the actions they are held responsible however, they cannot delegate theaccountability to others in contrast to responsibility.

Reputation

Reputation includes the reputation of of directors and company as well. Directors should consider the both and tryto avoid any personal damage of reputation as it affects the reputation of the company in indirect way.

Judgment

Directors should consider the all necessary information and understanding in order to make more rational businessdecisions.

Integrity

Integrity means honest dealings, fairness and do not allow any kind of influence.



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Chapter # 13 Ethics in Organization

Ethical Behavior – “Good” and “right” as opposed to “bad” or “wrong” in a particular setting.

– Ways of thinking about ethical behavior.

• Utilitarian view.

• Individualism view.

• Moral rights view.

• Justice view.

Fundamental Principles of Ethics

Objectivity

Objectivity is a state of mind where the only matters considered when making a decision, or forming an opinion, arethose matters relevant to the situation. Personal issues, conflicts, or the influence of others must be ignored, so thatthe final opinion given is fair, impartial, and justified.

Integrity

Someone with integrity inspires trust because they stick to their principles in all situations. What those principlesare will depend on their personal ethical beliefs. In a professional sense, someone with integrity would be expectedto uphold the values of the profession, abide by relevant laws and guidance (but seek to change those laws andguidance where they are not consistent with the principles they believe in), not look the other way when unethical practices are going on, etc.



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Due Care and Competence

Professionals should always carry out their work with professional care, and should only accept work that theybelieve they have the skills and experience to undertake properly.

Professional Behavior

Accountants should not do anything that could do damage to the reputation of the accountancy profession.“Professional” behavior is something that is investigated

Confidentiality

Accountants will gain knowledge of client information that is private. Such Information should not be disclosed toanyone else, unless: The law demands it (e.g. suspicion of money laundering, terrorism). The client allows it. It is in

“the public interest”. The problem with the above is trying to define “the public interest”, a subject that

Ethical Theories

Ethics is:

• Concerned with right and wrong, and how behavior is judged to be good or bad.

• About how we should live our lives and, how we should behave towards other people.

Relativism and Absolutism

Relativism

Refuses the possibility of acquiring objective knowledge of moral principles. It suggests that all moral statementsare essentially subjective and arise from the culture, belief or emotion.

Absolutism

This approach to ethics is built on the principle that objective, universally applicable moral truths exist and can beknown. This is called ethical absolutism







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.

Chapter # 14 OrganizationalSocial Responsibility

Organizational social responsibility –

The obligation of organizations to behave in ethical and moral ways as institutions of the broadersociety.

– Managers should commit organizations to:

• Pursuit of high productivity.



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Environmental Footprints:

Is a measure of the impact that the business activities have on the environment.

Factors to be considered in determining the entity’s environmental footprint

(a) Depletion of natural resources

(b) Noise and aesthetic impacts

(c) Residual air and water emissions

(d) Long-term waste disposal (exacerbated by excessive product packaging)

(e) Change in the local quality of life (through for example, the impact of tourism)

Sustainability

Refers to limiting the use of depleting resources to the extent it can be replenished.

Questions need to be considered when considering sustainability

• Sustainable at what cost

• Sustainable for whom

• Sustainable by whom

• Sustainable for how long

• Sustainable in what way

There are two approaches to sustainability a ccording to their supporter’s views.

Weak Sustainability

Believes that the focus should be on sustaining the human species and the natural environment can be regarded asa resource.

Strong Sustainability

Emphasizes the need for harmony with the natural world; it is important to sustain all species, not just the humanrace. They see a requirement for fundamental change, including a change in how man perceives economic growth(and whether it is pursued at all).



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Global Reporting Initiative (GRI)

GRI is a group of multi stakeholders comprising of experts in different countries working in groups and governancebodies with vision of developing common sustainability reporting framework. The purpose of GRI is to developaccountability, transparency, reporting , and sustainable development.

Full Cost Accounting

Is a system that incorporates all the relevant cost including environmental cost.

Advantages

• Company has full information about environmental footprint.

• This would improve the reputation of the company in that company has significantly overcome theenvironmental footprints.

Disadvantages

This increases the cost of information gathering about different aspects of costing

The requirement to include the subjective externalities such as impact on other parties that is not part of economictransactions

Environmental Management System

Eco Management and Audit Scheme (EMAS)

EMAS is voluntary scheme for environment management that focuses on targets, improvements, inspection, anddisclosure and verification.

EMAS basis or requirements

• An environmental policy

• On site environmental review

• Environmental management system



• Environmental audit every three years

• Results of audit to be used to set objectives and for revising the policy to achieve those objectives

• A public environmental statement validated by accredited environmental verifiers Containing detaileddisclosures about policy, management systems and performance in areas such as pollution, waste, raw materialusage, energy, water and noise

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