INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

Chapter,* 1

Industrial Engineering is concerned with the design, improvement and

installation of integrated vstem of man, materials and machines involved in
production and distribution of products. "

f j

/. 1 Industrial Engineering
1.2

Fields of Industrial Engineering

1.3

Functions of Industrial Engineering

1.4

Origin and Development of Factory System

. ' ' > ' - ' . - : ' . i i ' ' i'l . . . .

1.5

Historical Development of Industrial Engineering

-1-.

t I i,

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/ 6 Pioneers of Scientific Management

Questions

1.1 INDUSTRIAL ENGINEERING

Ind ust ri al engi n eeri n g i s con cern ed wi t h bri n gi ng t o get he r and e ffect i ve uti l iz at i on of vari ous
resour ces or i nput s t o fa ci li t at e efficient production/operation. In ot her words, we m a y sa y
t hat i ndust ri al en gi ne eri n g i s an en gi ne eri ng approa ch to det ai l ed anal ysi s of the use and cost of t he
vari ous resou rc es of an organi z at i on. The m ai n r esourc es ar e peopl e/ m en, m at eri al s, i nform at i on,
equi pm ent and m one y whi ch ar e to be used in ri ght m anne r so t hat the y const i t ut e an int e gr at ed
com bi nat i on t o a chi eve t he product i on obj ect i ves (t o i m prove product i vi t y or profi t s et c.) and
poli ci es of t he orga niz at i on. Effi ci ent produ ct i on/ ope rat i on s yst em s are t hose s yst em s whi ch scor e
hi gh on act ual pe rform an ce st and ards.
It i s im port ant t o not e t hat i ndust ri al engi n ee ri ng i s rel at ed not m er el y wi t h t he s yst em of
equi pm ent , pro cesses and m at eri al s but al so wi t h peopl e who i nt era ct wi t h thi s s yst em . Thus
i ndust ri al en gi n eeri n g t echni ques go be yond t he m echani cal cost f act or. Thes e ar e associ at ed wi t h
organi z at i onal st ruct ur e, adm i nist rat i ve t echni qu es and hum an probl em s; and at t he sam e ti m e
rel at i onshi p bet we en t he e ffi ci en c y and consent of the worki ng group is al so consi de red for bet t er
coordi nat i on.
In si m pl e words, i t is r el at ed wi t h t he i m provem ent of what ev er has been desi gn ed and/ or eval uat ed.
If i t i s hum an work, t he indust ri al en gi ne er woul d t r y t o m ake i t mor e effi ci ent , m ore product i ve, l ess
ti ri n g, and causi n g m i nim um wast a ge of m at e ri al s, t im e and ene rgy thus l east costi n g. If i t is con cern e
d

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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

wi t h handli n g t a <k he woul d t rv to r educe (he am ount of m ovem ent i nvol ved t hrough chan ge i n l oad
M? C and rea rran ge m ent of the l a yout used. If it i s a m anufa ct uri ng t ask i t woul d t r y ei t he r b y
redesi gni n g or bx usi ng di f Terent i nput m at eri al s so t hat bet t er or newe r product i on t c chn.ques
coul d be ut i li z ed and provi de bet t er i nt e gr at i on and How am ong proc essi ng st eps. Thus, it m a y be
concl uded t hat indust ri al enci ne eri n g i s not r el at ed m erel y wi t h t he s yst em of m at e ri al s, m et hods
and equi pm ent but al so wi t h t he m en who i nt er act wi t h t his s ys t em . Th e i m pact of peopl e on t he
operat i n g s yst em i s bot h from wit hi n and out si de. Men who oper at e a m achi ne, who handl e m at eri al
or who pl an t he m et hod/ proc ess a re wi t hi n t he opcrat i na s ys t em . Thus work st ud y ti m e and m ot i on
st ud y, wage i ncent i ve pl ans m om at i on and e rgo n o m i c s are i nt egral pa rt of i ndust ri al en gi ne eri n g.
Si m il a rl y, t he peopl e who are oot si de the oper at i on svst em al so pl a y i m port ant rol e. C onsum ers
outsi de t he product i on s yst em det erm i ne t he dem and of product . Thi s dem and i s dependent on
product desi gn, qual i t y and sal es pri ce et c. Thus indust ri al en gi ne ers are requi r ed t o work fo r
product and process im provem ent .
Anot her im port ant asp ect of indust ri al en gi ne eri n g i s it s gen eral i t y. Ind ust ri al en gi ne eri ng i s not
confi ned onl s t o m anufact u ri ng a ct i vi t i es. It i ncl udes servi c e sect ors l i ke banki n g, t ransport at i on,
wat t e m ana ge m ent , di st ri buti on and heal t h ca re et c. Thus, t he scope of indust ri al en gi ne eri n g i s qui t e
bi g and ce rt ai nl y not const rai ned wit hi n t he bounda r y of indust ri al uni t .

1.1.1 Concept of In dustrial Engineering

ITii s t erm In dust ri al Enci nc cri nc i s com posed oTt w o wo rds whi ch gi ve t he basi c concept of
Ind ust ri al En gi nee ri ng ( I. E.)
Ind ust ri al m eans rel at ed t o i ndust r y, whi ch m eans a proc ess of produ ct i on or a com pl et e proc ess
of convert i n g i nput resour ces i nt o useful product s or servi ces (d ependi n g upon nat ur e of indust r y) .
As 3 s yst em , it m a y be rep resent ed as fol l ows:
Inp ut ___^ C onversi on Tec hni que 'l 'rodu ct i on Useful P roduct
R esources
or P rocessi n g Equi pm ent ----------------> (Out put )
Technol o g y In form al ion Dat a
Engi n eeri n g m a y be de fi ned as:

The profusion in hich a hnuleje uj Sftithemuiical. Physical and social sciences obtained by
experience and practice in utitncil emnumually fur the conversion of materials into useful products
Jur the benefit uj maul in J
Had i i been t he m anufa ct uri ng of a product , t he appli c at i on of pri nci pl es of Ind ust ri al En gi nee ri ng
( IF.) woul d at t em pt t o red esi gn or t o uti l iz e di ffe rent m at eri al s in ord er to use newe r or bet t e r
product i on m et hods and provi de bel t er i nt egrat i on bet ween vari ous pro cessi ng st eps. In se rvi ce
sect or li ke hospi t al s, and t e achi ng In dust ri al En gi ne eri ng l eads to produ ct i vi t y i m provem ent .

1.1.2 Activities of Ind ustrial Engineering

The fi el d of In dust ri al En gi nee ri ng ( IE ) rep resent s an ar ea t hat i s toda y unde rgoi ng rapi d ex pansi on
and di versi fi c at i on. Ever y act i s i t y of an i ndust ri al s yst em i nvol ves an el em ent t hat bri ng
coordi nat i on ot vari ous a ct i vi t i es and wit hout whi ch al l act s woul d be i ne ffe ct i ve and nonproduct i ve. Thi s el em ent of coordi n at i on whi ch i nfl uenc es pl ans and obj ect i ves m a y be t erm ed
m anagem ent . The refo re, m ana gem ent consi st s of get t i n g t he t hi ngs done b y ot hers and a m anager is
one who a chi eves go al s or a c c o mp l i s h e s obj ect i ves bv di rect i n g t he e ffort s of ot hers.
Basi c al l y, the indust ri al m ana ge rs have t o per form fol l owi n g:
_ _________________INDUSTRIAL ENGINEERING AND DEVELOPMENT OF FACTORY SVSTEM________________3J
S

1. Pl anni n g
2. Organi zi n g
3. Directing

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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

4. Cont rol l i ng
5. St affi ng
A pl an is an organi z ed sch em c of doi n g som et hi ng whi ch i s di rect ed t o achi ev e
i ndust ri al obj ect i ves under c ert ai n const rai nt s. An hom ogen eous worki ng
envi ronm ent is devel oped t o bri ng coordi n at i on am on g t he va ri ous el em ent s of pl an
for t he ex ecut i on of organi z ed schem e. S om e act i vi ti es are li st ed bel ow:
K To ai d i n t he dev el opm ent of sound si t e sel ect i on and ph ysi cal l a yout for t he
ex e cut i on of organi z ed work.
2. To anal yse and pl an product i on schedul es and i nvent ori es.
3. Devi s e t echni ques to i m prove product i vit y and m oral of m en at work.
4. To st ud y the equi pm ent repl a cem ent feasi bi l it y.
5. To ai d in t he det erm i nat i on of econom i c l ot si z e and t he work i n pro ccss
requi r em ent s for each phase of oper at i on.
6. To ai d in t he pr epar at i on of det ai l ed speci fi c at i ons for ev er y work and to ev al uat e
t hem .
7. To ai d i n t he devel opm ent of qual it y speci fi cat i ons and quant i t y needed fo r
vari ous i nput s m at eri al s.
;

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8. To di agnose and rect i f y caus es of poor product qual i t y.

9. To ev al uat e t he effect i ven ess of m ark et i ng, di st ri but i on and advert i si ng pol i ci es of
t he organi z at i on
10. To desi gn, devel op and eval uat e t he com pl ex m an-m achi ne s yst em s invol ved
i n product i on process.
11. To ai d i n t he devel opm ent of non-fi nan ci al i nc ent i ves t o m ai nt ai n i nt e rest and
ent husi asm am ong t he vari ous peopl e of t he organi z at i on.
12. To evol ve bet t e r m et hods of produ ct i on b y usi n g ope rat i on res ear ch t echni qu es.
13. To ai d i n an al ysi s and schedul e of bi g proj ect s b y ut i li z i ng C PM and PERT
t echni ques.
14. To ai d i n dev el opm ent and m ai nt enan ce of st andards governi n g adm i ni st r at i ve and
sal es bud get
15. To ai d i n t he devel opm ent of t rai ni ng program m es for t rai ni n g of supervi sors
and work ers t o hel p t hem i n prope r per form an ce of t hei r dut i es.
16. To ai d i n t he est abl i shm ent of effe ct i ve cost cont rol and budget ar y cont rol .

1.1.3 Techniques of Industrial Engineering

Im po rt ant t echni ques whi ch ar e com m onl y used b y indust ri al en gi ne ers are as fol l ows:
1. Si t e sel e ct i on and pl ant desi gn, t echni ques
2. Organi s at i on and pl anni ng t echni ques
3. Met hods en gi ne eri n g t echni qu es
4. S t at ist i cal t echni ques
5. C omm e rci al engi n eeri n g t echni ques
6. Oper at i ons rese arch t echni ques

1.1.3.1 Site Selection and Plant Design Techniques

It i s ver y i m port ant de ci si on t hat t he m anagem ent has t o t ake. Al on gwi t h t he indust ri al pol i c y of St at e
and C ent ral Governm ent , t he si t e sel e ct i on i s dependent upon m an y fa ct ors l i ke avai l abi l i t y and cost
of l and, proxi m i t y t o raw m at e ri al s, consum er, t ransport at i on f aci l it i es, avai l abi l it y of wat er,
el ect ri ci t y and l abour, cl im at i c condi ti ons et c
.cent ur y and cont i nui ng i n ni net eent h and t went i et h c ent ur y has produced m odern l arge scal e
product i on
and busi ness orga niz at i ons.
.
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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

Thus t hi s fa ct or y s yst em is Modern System of product i on whi ch sat i sfi es t he econom i c needs
or
i ndi vi dual s, com m uni t i es and count ri es b y m anuf act uri n g product s/ goods in fact o ri es and whi ch
uti l iz e

men,

m at eri al s, m achi nes and m et hods to m e et t he m arket dem ands.

1.4.4.1 Merits of Factory System

1. Qual i t y of product s has im prov ed
2. Wider product vari et i es ar c m anuf act ured
3. Le a ds t o l esser m at eri al wast a ge
4. R esul t s is m ore effi ci enc y
5. Ut i l iz at i on of l and, l abour and m one y is m ore
6. Uni t cost has de cr eased
7. S i nce t he dem and of product s i s inc reasi n g rapi dl y, it has i m proved em pl o ym ent l evel .
8. It has resul t ed i n cul t ural and soci al devel opm ent of worke rs due to con cent r at i on of m ost of
t he i ndust ri es at a pl ac e.
9. P roduct i on rat e has i ncre ased and t rai ni ng peri od of m an power has be en redu ced.
10. Now t he produ ct i on of subsi di a r y i t em / product s i s possi bl e due t o yi el d of b yp rodu ct s.
11. The am ount of rev enue rec ei ved i n t he form of t ax es and duti es has i ncr eased.
12. It i s hel pful i n t he adv ancem ent of t he count r y as a whol e and in t he dev el opm ent of
i nt e rnat i onal
t rade.

1.4.4.2 Lim itations of Factory System

1. It cr eat es monopol y of work 2 In di vi dual s can avoi d t he responsi bi l i t y of work
3. It c auses l ot of pol l uti on, ove rgrowi n g pa ym e nt of l ow w ages et c.
4. It gi ves ri se t o monopol y whi ch resul t s i n the concent rat i on of we al t h i n few hands i .e. fe w
bi g
i ndust ri al houses
5. It caus es l abour ex pl oi t at i on and m a y cause cl ass w ar
6. In vi e w of com pet i t i on l ot of m one y i s requi r ed for advert i sem ent s et c.
7. S m al l scal e and cot t age indust ri es m a y suffe r due to dev el opm ent of f act or y s yst em .

1.5 HISTORICAL DEVELOPMENT OF INDUSTRIAL ENGINEERINGEFFECTS OF

INDUSTRIAL REVOLUTION AND WORLD WAR-II ON MANUFACTURING
TECHNIQUES AND MANAGEMENT
Ind ust ri al En gi nee ri ng had i t s root s in t he Indust ri al R evol ut i on, i t was t he r esul t of cont i nuous
appl i cat i on of ski l l and i nvent i ons for t he i ncre ase i n produ ct i on. Modern er a of indust ri al
engi n ee ri ng i s assum ed t o have st art ed from indust ri al revol ut i on. The fi rst im pa ct of In dust ri al
R evol ut i on was on B ri ti sh C ot t on Tex t il e In dust r y wh ere t he devel opm ent had been m ade on t he
convent i onal m et hods i n ord er t o i m prove t he product i vit y. In 1732 Mr. R i chard Arkwri ght had
i nvent ed the spi nni ng F ram es whi ch had im prov ed the produ ct i vi t y of the s ys t em and qual it y of t he
product .
In 1769 Mr. J am es Wat t dev el oped st e am engi n e whi ch inst i gat ed m an t o use it as a sourc e of
power. The i nvent i on of st eam powe r had brought a revol ut i on i n i ndust ri es at t hat ti m e. P eopl e
st a rt ed t hi nki n g of ut i li z i ng st eam power fo r runni ng t he m achi nes. Thus st e am pow er brought
revol ut i on i n indust ri es b y wa y of useful repl acem ent of m anpowe r wi t h st eam powe r.
The se cond phase of i nvent i ons whi ch brou ght t hi s revol ut i on are:
Ke y's Fl yi n g Shut t l e (1753) qui ck ened weavi n g.
Hargr ea ves S pi nni ng Jenn y (1707) acc el er at ed spi nni ng proc ess.

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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

w ^ .________ -,v _____

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,, INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

Cartwright' s power loom speeded up weaving.

Dav y's l am p ex haust f an and wi re cabl e al l m ade worki ng in mi nes l ess dangerous. Wat t s
st e am engi n e (1782) whi ch worked on a new pri nci pl e of ti m e rot ar y/ m ot i on usher ed ' a ge of
speed.
"
'
n th
E
Nel son's hot bl ast ( I 828) gre at l y i ncr eas ed the produ ct i on of i ron. D erb y and hi s son
sm el t ed i ron wi t h coal . Hen r y count perf ect ed the puddli n g and rol li n g of i ron.
In the se cond phase of indust ri al revol ut i on whi ch i s st i ll cont i nui n g, convent i onal m ach '
chan ge d i nt o aut om at i c m achi ner y l i ke:

(0 Com pl ex aut om at i c m achi ne t ool s t hat perfo rm one ope rat i on for produci ng a
product \ v h' coul d ea rl i er be produced b y a l ong seri es of sep arat e m achi ne t ool s indi vi dual l y
operat H (u) Aut om at i c fe ed ba ck devi c es t hat wat ch work and act upon t hese observat i ons i n
automati
adj usti n g t he operat i on so t hat it wil l not chan ge from the pres ent spe ci fi cat i ons.
El ect roni c devi ces to r ecord st ore pro cess, sum m ari z e and i nt erp ret i nform at i on.

Ca

" y (in)

St eam power chan ged t o h ydr aul i c and nucl ea r powe r. In aut om at i c nucl e ar power pl ant s I
produced b y at om i c ch ai n rea ct i ons, whi ch produc es st eam that run t urbi nes whi ch i n t urn T "
el ect ri cal power requi red t o run t he m achi nes. C onventi onal offi ce m achi ne r y chan ge d int o e | n
dat a pro cessi n g m achi nes/ equi pm ent , t ype wri t ers and cal cul at i ng m achi nes t o com put ers R C
organi z at i on ch anged t o boa rds and co rporat i ons. Thus i t w as bei ng ext end ed to m an's thi nh
organi z at i on and m ana gem ent pri nci pl es and m et hods. The cl assi c wri t ers of t hat ti m e li ke
Adam S -l 1776) who deal t wi t h t he topi cs of Econom i c S ci ences and Mana ge m ent S ci en ce
hTdef Z ^ thi nki ng of ev en F. W. Tayl or, who was conc erned pri m ari l y wi t h conc ept s of produ c i
v ty
B y Tayl or ini t i ati ons, t he peopl e of t hat t i m e had dev el oped a pref er ence or i nt erest for m ^h
t hi n gs and sc.ent i fi c bent to sol ve t hei r di ffi cul t i es i n sci ent i fi c m anne r P eopl t ed a p ? '

^^ Development

-W- be ^

Som e of t he si gni fi c ant -a chi evem ent s of work donp hv

J
rk d0ne by vanous
as fol l ows:
i ndust ri al en gi n eers can be outl i ned
1. Fr ederi ck A. Hal se y, t he f at her of t he Ha Uev " ..........
vi ews on wa ge pa ym ent Hi s mot i vat i on ; P r e : m , u m P l an of w age pa ym e nt pres ent ed hi s

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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

P 8n W3S t0 im

l abour and m achi nes. Hei Lo Sl TT 'S f

P r 0 V e ^^
" yp ot nesi s

'

of

product i vi t y wi t h wo rk forc e.
of sha ri ng t he bene fi t s of

i m p r o ve d

2. F. W. Tayl o r, probabl y t he most oft en quot ed and ^ re cogni si ng the pot enti al im provem ent s
t o be acl l v HT
^ i n v e s t i a t o r i s c r e d i t e d w i , h j ob/ t ask and desi gni n g t he t ask fo r m ax im um e
f '^ W f k C 0 ' l t e n t ^ el em ent s. The conc ept of Tim e -st ud y appl i ed t o n l n
el i m i nat i ng it s n o n
p r o d u c t i ve
y PP

"ed

to

P 1 Q duct i on operat i ons was i ni t i at ed b y hi m . He

_ Fr ank B. Gi l brct h, t he ot her ni nnt of ih t

W3S v cr

. * .much

of Tayl o r. Tayl or con cent

ed

by

work

and

wri t i ngs
and wi fe ) ext end ed T^or^ Z^^^ ^7 "

Whcreas Gi,bre,h

'

cont ri but i on was i dent i fi cat i on an al yVis aid m e lu

COnct

St ud y. Hi s pri nci pal

f

perfo rm i ng a t ask. Gi l brct h cl a si fi ed T

as The rbl i gs, and was ab e^ TI T" " ^ ^

f o f

Tfans

ort c,c

fundamental

" ^t i on invol ved i n

"

chan gi ng worki n g condi ti on TlTZZ ^ J^ f P c r f o r m i "6 c h The rb.i g under

and unwant ed m ovem ent s
/ Ac WorJ fc cr.

Hands by

^
'nx roauc e t he concept of Effective Utilization of Both

f , C a d C r S h i p 3 n d P a i d m r e a t t e n t i 0 " hum an f act or

for Gant t cha rt s S T? ' f? t r o 1 i n i n d 't ri al operat i ons. Me is m ai nl y rem em ber ed
S ee ci "o? andTral m ' w t h i S f i C ' d i n C ' U d e A n a , ^ i s of Manuf act uri n g C ost . P roper
8
work r e c The
/ T' D c v d P m e n t " 'Inc ent i ve S chem es t o ret va rd e ffi ci ent
worke rs, et c. These are used t o deal wi t h com pl ex act i vit i es l i ke sch edul i ng probl em s
C

ZZ

' He'! Zi^T1't riCd t0 P ^ bC int ,lle bOUOm f the P rinci P ,f cS of administration and management.
Hen
l h 5 r 0 T S J f m a n a g e m e n t a s h e h a d o b s e r v e d ^ fi rst hand as an i ndust ri al i st . Henr y Fa yal had
devel oped P ri nci pl es of Orga ni sat i on on t he basi s of di vi si on of work such as
an aut hori t y and r esponsi bi l i ti es, st abi l i t y of orga ni sat i onal unit y, com m and and t eam spi ri t et c.

6. In 1924 W A S chewho rt devel oped fundam ent al pri nci pl es of st at i sti c al qual i t y cont rol and
encour aged t he use of st at i st i cal t echni ques for sol vi ng i ndust ri al probl em s.
7. In 193 1 L. H. C .. Tipp et devel oped work sam pl i ng t o st ud y work pat t ern.
8. In 1940 P. M. S . Bl ack et , devel oped t he conc ept of opt i mi z at i on cal l ed operat i on R ese arch
Appl i cat i ons for O. R. i n Worl d War-I I.
9. In 1947 G. B. Dantz i g and W. O. Ha ys used l i near program m i n g and ot he r pro gr am m i ng
m et hods tor sol vi n g i ndust ri al probl em s.
10. In 1960 L. Cum m i ngs and L. P ort er i nt roduc ed t he con cept of organi z at i onal behavi our st udv
of m en at work, i nt egrat i on of m an and m achi ne and i nt egrat i on of product i on m anagem ent
funct i ons.
A hi ghl y si gni fi cant e ra i n t he dev el opm ent of i ndust ri al engi nee ri ng began aft e r Worl d War-I I
Man y new act i vi t i es got devel oped and t he appl i cat i on of pri nci pl es and t echni ques we re broad ened
t o a l arge ext ent . In bri ef thes e act i vi t i es wer e:
(a) Devel opm ent of s yst em -anal ysi s and desi gn
(b) Use of m at hem at i cal and st at i st i cal m et hods
(c) Net work pl anni ng t echni ques and t hei r appl i cat i ons

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INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

(d) In dust ri al engi n eeri n g and com put ers

(<e )
Val ue en gi n eeri n g
(J) Hum an fact ors or e rgonom i cs.
sci ^cet S cot ^eltrJre r'T^ ^
em pi ri cal

from
S

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ph,Sticati0n

virll,e

non

quant i t at i ve

of whi ch it can be consi de red a hard sci enc e.


INDUSTRIAL ENGINEERING AND DEVELOPMENT OF
FACTORY SYSTEM 15]

t ool s to anvs e^hU nl h P m e 111 s > t he i ndust ri al en gi ne er of toda y has m an y mor e

sophi sti c at ed t ool s t o anal ys e hi s probl em s and t o desi gn new and im prov ed
s ys t em s INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT
Ui----------- -------------- -----------------------------------------------------------------------:-----------------------------------------------

1.6 PIONEERS OF SCIENTIFIC MANAGEMENT

The fol l owi ng are t he pi oneers of sci ent i fi c m anagem ent :
1. F. W. Tayl or (1856-1915)
2. H. L. Gant t .
3. Herrington Em erson (1853-1931)
4. H. B. Gil br et h (1868- 1924)
5. Man y P ark er Fol l et (1868-1933)
6. Hen ri F a yol (1841- 1925)
7. Geo rge Elt on Ma yo (1880- 1949)

1.6.1 F. W. Taylor (1856-1915)

F. W. Tayl o r was a pi onee r i n propoundi ng sci ent i fi c pri nci pl es of.m ana gem ent as a
r esult of his
r esea rch i n va ri ous ar eas of i ndust ri al a ct i vi t y. He st i m ul at ed i nt er est i n t i m e st ud y of
ope rat i ons. He
has al so cont ri but ed i n t he di rect i on of m anagem ent and t her efor e, cal l ed as " Fat h er
of S ci ent i fi c
Man agem ent ". He chan ge d the phi l osoph y of m ana gem ent as a whol e as he gave t he
sci ent i fi c approa ch t o t he m ana ge m ent .

Definition of Scientific Management

S ci ent i fi c Mana gem ent im pl i es appl i c at i on of sci ent i fi c m et hods and pri nci pl es t o t he
di ffi cul ti es and quest i ons t hat anse duri n g the m anagem ent of a busi ness. In ot he r
words sci ent i fi c m ana ge m ent m eans use of sci ent i fi c t ool s, such as defi ni t i on,
an al ysi s, m easur em ent , ex peri m ent at i on and proof i n de al i ng wi t h t he probl em s of
Man agem ent . Thus sci ent i fi c Mana gem ent m a y be defi ned as t he " Art of knowi ng
ex act l y what is t o be done and t he best wa y of doi n g i t ".
Tayl o r t ri ed t o work out som e s ys t em wh ereb y t he i nt erest s of m anagem ent and
t he wo rkers coul d be sam e. Hi s focus w as on m ax i mi z at i on of work er's produ ct i vi t y.
The vari ous cont ri but i ons m ade b y Tayl or are as fol l ows:

1.6.1.1 Developm ent of Science for each Elem ent of an Individual Work
Anal yse t he work sci ent i fi cal l y thus repl aci n g rul e -of- t hum b m et hod. It was requi r ed
t o fi nd out a what i s t o be done b y a part ,cul ar worke r how he i s to work and what
equi pm ent woul d be nec essar y t o do it Th.s i nform at i on was provi ded t o t he work er
so as to r educe t he wast a ge of m at e ri al and ti m e et c

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and im prove t he qual i t y of out put / work.

1.6.1.2 Division of Labour or Functional Management

Tayl o r i nt roduced the conc ept of funct i onal organi sat i on.
m ana ge m ent ev erv produ ct i on
prt iplTof o , e ' g " b T S - C a C h f t h 6 m W U l d g i V e r d e r S i n h i s f u n c t i o n I
supervtion

"

655601,31

^ ^^

aU S

Unde r

funct i onal

P heres of activities as well as in work

1.6.1.3 Use of Tim e, Motion and Fatigue Study

fnvol ve n s C t y hl T , i e S
t hat which
hl work ! T HT?
Thework nf^ I

Ut

tS tlmC

'

'

thC bCSt W3y of doi

f a t i g U C 3 n d C 0 S t Ta

"S

J ob- The best wa y of doi n g a task is

> " 0 r unde rt ook st udi es on fat i gu e incurred bv at e

t he j ob. He sugge st ed t hat for

i mprovto* production
m t hl d L T P r S " S U l d b e P l a " n e d i n a d v a n c e d work er shoul d use predet e rm i ned
m et hod and gi ven t une for a defi ni t e wo rk.

1.6.1.4 Standardisation of Methods, Machines, Tools and Procedures

S hovel l i ng work and shovel loads reve al ed t he im port an ce of st and ardi sat i on of
m et hods and t asks S t andardi sat i on hel p i n reduci n g, ti m e, l abour and cost of
produ ct i on. The succ ess of sci ent i fi c m anagem ent js'r el at ed wi t h st and ardi sat i on of
s ys t em i.e. t echni qu es of produ ct i on, m achi nes and t ool s ut il i z ed, j 6.1.5 Scientific

Selection and Training of Workers

maintaining product i on effi ci en c y, it is essent i al that t he wo rkers shoul d be
ph ys i cal l y and t echni c al l y sound for t he t ask the y are requi r ed to perfo rm .
For

J a yl or su ggest ed t hat proper c are shoul d be t ak en whil e sel e ct i ng work for ce and
due consi derat i on should be gi ven t o thei r educ at i on apt it ude and work ex peri ence et c.
Thus sci ent i fi c procedu res need t o be devi sed t o sel ect workers best suit ed to
pe rform spe ci fi c t asks and t hen t o t rai n t hem wi t hi n t he indust r y in ord er t o m eet t he
obj ect i ves of t he ent e rpri se.

1.6.1.6 Differential Piece Rate System

Tayl o r advocat ed Di ffe rent i al Pi ec e R at e S yst em of pa ym e nt whi ch provi des an
i ncent i ve for a worke r t o achi ev e hi gh l evel of opti m um out put . It di st i ngui shes the
m ore e ffi ci ent work ers from t he l ess effi ci ent worke rs and m ot i vat es to produc e
m ore.

1.6.1.7 Econom y and Profit

Scientific m anagem ent

l a ys m ore st ress on the econom i c aspect of product i on.

Maxi m um out put c an be achi ev ed onl y b y opt im um ut il i z ati on of resour ces and
el i m i nat i on of wast a ge i n al l form s i n order t o mi ni mi z e cost . C ost cont rol and
e conom y wi l l resul t in hi gher wa ges for workers.

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INDUSTRIAL ENGINEERING AND DEVELOPMENT OF
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1.6.1.8 Cooperation between Labour and Managem ent

Ment al revol ut i on is the m ost i m port ant feat ur e of sci ent i fi c m anagem ent as it woul d
c reat e a con ge ni al and favour abl e at m ospher e/ envi ronm ent l e adi ng t o harm on y and
coop erat i on. The obj ect i ve of m ax i m um prosperi t y of em pl o ye es and em pl o yers c an
be a chi eved onl y i f t her e is perf ect m ut ual coope rat i on bet ween t he m ana gem ent and
t he wo rk for ce.

Criticism to Scientific Management

(/ ) It fai l s t o appre ci at e t he soci al cont ex t of work ers and hi gh er
r equi rem ent s of worke rs. (/ / ) Mana ge rs feel i t unwar rant ed i nt e rfe ren ce i n
m ana ge ri al pre rogat i ves, (/ /i f ) Tayl or 's conc ept t hat uni ons ar e real l y not
ne eded was resi st ed b y worke rs. (iv) F ai l s t o r eco gni z e the su ggest i ons
and ide as of work for ce.

1.6.2 Henry L. Gantt

Gant t i s re cogni sed as one of t He gr eat cont ri but ors of t he sci ent i fi c m ana gem ent er a.
H. L. Gant t was a cl ose associ at e of Tayl or and worked wi t h hi m . He em phasi z ed t he
i m port anc e of l e adershi p and pai d m ore att ent i on t o t he hum an f act or invol ved in
produ ct i on pl anni ng and cont rol i n busi ness operat i ons. He i s m ai nl y rem em ber ed for
hi s cont ri but i ons as m ent i oned bel ow:
( ) Gant t devel oped a dai l y " Ba l anc e S heet Chart " i.e. product i on cont rol ch art s
known a^ Gant t chart s or Ba r chart s. These a re used t o de al wi t h com pl ex
a ct i vi t i es. In thes e chart s t he job or the a ct i vi t i es bei ng pe rform ed are
r epres ent ed on ve rt i cal ax i s whe re as t he t im e el aps ed is shown on hori z ont al
axi s. Thi s prov ed to be revol ut i onar y i n t he ar ea of product i on pl anni n g and
cont rol . Gant t chart s gr aphi cal l y present ed t he proc ess of work, b y showi ng
t he m achi ne oper at i on, quant i t i es com pl et ed, m an hour per form an ce,
del i veri es and t he work i n a rre ars t o f aci l i t at e da y to da y pl anni ng of t he
work.
( ) He t ri ed t o el i mi nat e t he hardshi ps of Tayl or 's di ffer ent i al pi ec e-r at e s ys t em
and brou ght out hi s "t ask and bonus pl an". Di ffe rent i al pi e ce- rat e s ys t em was
an i ncent i ve pl an wher eb y t he worker w as pai d on the basi s of hi s dai l y
out put , Gant t 's t ask and bonus pl an w as so st ruct ured t hat t he worke r was
pai d a gu ar ant eed dai l y wage whet her or not he com pl et ed t he st andard work.
But i f he com pl et ed four hours worki ng i n thr ee hours or l ess, he was pai d
for four hours.

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' 1 INDUSTRIAL ENGINEERING &

OPERATIONS MANAGEMENT
__________________________________________________________________________
__________________________________________________________________________

16
Thus t he workers rec ei ved bonus as a resul t of the i nt rodu ct i on of t hi s s ys t em .
(c) Gant t pl e aded fo r a pol i c y of pre achi n g and t eachi n g of worke rs and t hus
st ressed t he need of t rai ni n g of workers fo r im provi n g thei r produ ct i vi t y.
Ft was be cause of hi m t hat m anagem ent duri ng hi s peri od consi dered
t rai ni n g as one of t he responsi bil i t i es of t he m an agem ent .
(d) He t hou ght of ext endi n g the pri nci pl es of sci ent i fi c m ana gem ent t o the sol ut i on
of the problems
j

of an i ndust ri al soci et y as a whol e. It app eal ed for ha rm oni ous rel at i onshi p
bet w een em pl o yee s
and em pl o ye rs and di scoura ge d t he use of power i n a arbi t r ar y fashi on. He
consi der ed t hat non fi nanci al rew ards and good ph ysi cal envi ronm ent
we re essent i al for achi evi n g hi gher product i vi t y
(e) Gant t em ph asiz ed t he im port an ce of t he concept of servi c e over profi t . He
dev el oped t he con cept of i ndust ri al r esponsi bil i t y.
We t hus observe t hat Gant t 's cont ri but i ons were m ore i n t he nat ur e of
r efi nem ent s rat he r than fundamental con cept s and have been m ore useful t han
t hat of Tayl or t o t he dev el opm ent of sci ent i fi c management

1.6.3

H. Emerson Philosophy of Efficiency (1856-1915)

He con ce rned him sel f wi t h the m ana ge m ent of the ent e rpri se as a t ot al i t y and not
onl y with shop m ana gem ent as w as done b y F. W. Tayl or. He popul a ri sed
sci ent i fi c m anagem ent and interpreted the con cept s of st and ard t i m e, st andard
cost and prevent age wast es of al l ki nds. In 1912 he advocated 12 pri nci pl es of
i m provi ng t he effi ci en c y whi ch are ( I) Id eas (2 ) Com m on S ense (3) Competent
Counsel (4) Di sci pl i ne (5) F ai r deal (6) Ad equat e rel i abl e, im m edi at e and
pe rm anent re cord (7) dispatching (8) S t andards and sch edul es (9) St anda rdiz ed
worki n g condi ti ons (10) St and ardi z ed Operations (11) St anda rd worki n g
i nst ruct i ons and (12) R ewa rd for effi ci enc y.
Ac cordi n g t o hi m , e ffi ci en c y and henc e product i vit y does not exi st i n ex t rem e
e ffort but i n elimination of undesi rabl e effo rt and pr event i n g wast es of al l
ki nds, t he el i m i nati on of wom en and chi l d l abour i n com pet i t i ve em pl o ym e nt ;
Effi ci enc y of a s yst em m eans t hat t he ri ght work is done i n ri ght m ann er b y ri ght
m en at ri ght pl a ce and i n ri ght t i m e.

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INDUSTRIAL ENGINEERING AND DEVELOPMENT OF
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He advoc at ed t he " Li ne and st aff organi z at i on" i nst e ad of fun ct i onal

for em anshi p. As t o re wards for e ffi ci enc y, he su ggest ed t he di fferent rat es
of effi ci en c y besi des a gu arant e ed mi ni m um wa ge He was m ai nl y con cern ed
wi t h i m provi ng the effi ci enc y of t he wo rkers. That i s wh y he is oft en cal l ed
t he " hi gh pri est of effi ci enc y" .

1.6.4

Frank B. Gilbreth (1868-1924) and Lillian M. Gilbreth

F rank Gil br et h and hi s wi fe Li l l i an Gi l bret h w ere cont em pora r y of Tayl or, but
t he y worked indep endent l y on t i m e and m ot i on st ud y. The y m ade m em or abl e
cont ri but i on t o im prov em ent or worki n g m et hods and t hus to di scove r one best
wa y of a ccom pl i shi ng a t ask, wit h m arked e ffi ci en c y and l east ex pert i z at i on He
dev el oped a uni que t echni qu e of l ast work. Fast e r speed work howev er, di d not
r efe r t o hurr yi n* wi t h t he work but econom i si ng the ti m e sequenc e b y el i m i nat i ng
unne cessa r y/ m ov em ent s and ex haust i ng mot i ons and m et hods of a ccom pl i shi ng a
t ask. Whe re as Li l l i an con ce rned hers el f wit h t he hum an aspe ct of m an agem ent .
The y consi der ed t hat t he root c ause of worke r's di ssat i sfact i on was t he l ack of
m ana ge m ent i nt erest in t hem . The y st ressed that m anagem ent shoul d underst and
t hei r requi r em ent s and personal i t y. He and hi s wi f e Li l l i an M. Gi l bret h
m ai nt ai ned that t he hum an aspect must be consi dered as a m aj or ar ea of
consi de rat i on and st ud y i n t he fi el d of m anagem ent . Ac cordi n g t o L. M. Gi l bret h,
t he phi l osoph y of m ot i on st ud y sa ys, "M an i s consi dered as t he c ent re of act i vi t y
and as expr essi ng him sel f in m ot i ons, added b y tool s and m a chi nes usi ng
m at eri al s as m edi um of ex pressi on".
I us tor orderl y organi z at i on of com pl ex i ndust ri al act i vi t i es f o l l o w i n g
sequ ences o f o p e r a t i o n s shoul d be fol l owed:
(a) Id ent i fi cat i on of t he probl em and it s obj ect i ves
(b) De fi ni ng t he probl em obj ect i ves

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(,c) Collection of relevant data on the

problem (cf) Interpretation and analysis of
data (e) Consideration of available
alternatives
(J) Formulation of tentative conclusions about jacking the problem
(g) Initiating or starting selected action on the basis of conclusions
and veryfying the results (/,) Reviewing and evaluating the results
and incorporating any corrective action if essential and needed.
(/ ) F ram i n g rul es t o serve as gui de t o pl anni ng and ex ecut i on. Som e im port ant
cont ri but i ons of Gi l bret h are:

1.6.4.1. Developm ent of Motion Study

He de fi ned m ot i on st ud y, " as t he sci enc e of el i m i nat i ng wast age i n al l form s
r esult i n g from unnecess ar y, il l di re ct ed and i neffi ci ent m ot i on". Accordi n g t o
Gi l bret h t he purpose of mot i on st ud y was t o i m prove work m et hods so as to discov er
or devel op one best wa y of ac com pli shi n g a t ask.
He i dent i fi ed sevent een (17 ) on t he j ob m oti ons and cal l ed t hem THER B L1 GS
(Th erbl i gs ) is Gi l bret h spelt back words wi t h t he t ransposi ti on of one l et t e r. He
m ai nt ai ned that a t herbl i g anal ysi s coul d be appl i ed t o an y j ob. Fu rt her, he
dev el oped t he s ys t em t o an y j ob. Furt her, he dev el oped t he s yst em of "Fl o w P rocess
C hart " whi ch m akes t he st ud y of vari ous proc esses of act i vit y easi e r. H e al so
dev el oped m i crom ot i on st ud y and S IM O cha rt s.

1.6.4.2 Developm ent of Chronocyclographs

He used m i croch rom et er of spe ed cl ock and t ook phot ogr aphs b y ci ne cam e ras of t he
work ers and t he cl ock. Thus t hre e observat i ons wer e t aken i .e. wh at m ovem ent s
oc curr ed, how m uch ti m e t he y took and what was t he di rect i on of movem ent s. Thi s
pro cess was t erm ed as C hronoc yc l o gr aph.

1.6.4.3 Study of Fatigue

Gi l bret h ca rri ed out st udi es on fat i gue and i t s el i m i nat i on. The y con cl uded t hat
f at i gue coul d be consi der abl y reduc ed b y al l owi n g rest peri ods, spaci ng the work and
l i ght eni n g the l oad.

1.6.5 Mary Parker Follet (1868-1933)

Mar y P arker Fol l et was a phil osophe r and pol i t i cal sci ent i st , ga ve " Lo w of the
si t uat i on" i n 1919 and m ade im port ant cont ri but i ons i n t he fi el d of funct i onal
aut hori t y, l eade rshi p, coordi nat i on, cont rol and conc ept t o t he nat ure of m ana gem ent
and of hum an rel at i onshi p wi t hi n i ndust ri al groups. S he anal ys ed t he nat ure of
cons ent on whi ch and dem ocrat i c group i s bas ed throu gh an ex ami nat i on of
P s yc hol ogi cal f act ors underl yi ng i t .
Ac cordi n g t o 'her, t hi s cons ent was not st at i c but was a cont i nuous phenom enon.
S he al so prov ed that confl i ct can be const ru ct i ve and coul d be harn essed t o t he
servi ce of t he group. Th e most f rui t ful wa y of r esol vi ng confl i ct ac cordi n g t o Fol l et

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INDUSTRIAL ENGINEERING AND DEVELOPMENT OF
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was not throu gh dom i nat i on and com prom i se on t he pl ea t hat dom i nat i on gi ves t he
f eel i ng of l oss and surr ende r t o bot h the si des. She was i n favou r of i nt egrat i on
whe reb y t he part i es t hem sel ves ex am i ned t oget her t he new wa ys of a chi evi ng thei r
con fl i cti n g desi r es si nce, thi s gi v es a mor e st abl e sol ut i on to probl em of confl i ct s.
Ac cordi n g t o her, di ffer ent si t uat i ons requi re di ffe rent t ype s of l eadershi p
m eani n g the reb y that l eaders ar e product s of t hei r t im es and t he l ead ershi p fe at ures
a re a funct i on of t he part i cul ar or speci fi c si t uati on. The succ ess of a l eade r does not
m er el y depend on t he t rai ni n g he possess es but on the speci fi c sit uat i on at a ti m e i n
whi ch he ut il i z es hi s l eadershi p.
S he was of the opi ni on t hat for achi evi n g good resul t s va ri ous l im bs of the
orga niz i n g bod y shoul d be w el l coordi nat ed and cl osel y a ct to get he r so t hat the y
work as a si n gl e ent i t y.
S he al so advo cat ed for i nt egrat i on of i nt e rest s of invest ors, consum ers and
work ers. Mar y pa rker Fol l et pl ead ed for t he appl i c at i on of sci ent i fi t m et hod's t o't h e
sol uti on of personnel probl em s.

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Mnm*.

MANAGEMENT

1.6.6

[I 18

INDUSTRIAL

ENGINEERING

ft

OPERATIONS

Henri Fnyol (1841-1925)

A Fren ch i ndust ri al i st duri n g hi s l ong and suc cessful ca rri er as an i ndust ri al m ana ge r
Mr Fa to prob e i nt o the bot t om of t he pri nci pl es of adm i ni st r at i on and m ana gem ent
F aval ani l pro cess of m anagem ent as he had observed it fi rst hand, li e sai d t hat
m ana ge ri al act i vit i es i t t h l ' ) e l evel s arc mor e si gni fi cant t han ot her act i vi t i es, l i e
was t he fi rst to st at e pri nci pl es of m ana U P P C r funct i ons of h m anager. Man y of t he
t al ent s whi ch are re cogni sed t oda y as pri nci pl es of m B C m e n t a , u l wer e ori gi nal l y
spe ci fi ed b y F a yol . I li s concl usi on w as t hat al l i ndust ri al a ct i vit i es coul d h. a i ?
e m e n < i n fol l owi ng si x group;
' bc
Sl,
bdi vi ded
1. Technical Activities: Technical activities involve, technical know how production m, r

and adapt at i on et c.
uuucuon

- m anufact u re

2. Com m er ci al Act i vi t i es: Bu yi n g, sell i n g and ex chan ge .

3. Fi nanci al Act i vi ti es: These a ct i vi t i es i nvol ve sea rch for and opt i m um use of
c api t al .
4. Account i n g Act i vi t i es: S t ock t aki ng bal an ce sheet s, and cost she et s t o
det e rm i ne fi n posi ti on ol t he ent e rpri se.
" nanci al
5. S ecuri t y: It i s rel at ed wi t h prot ect i on of asset s and m an powe r.
6. Mana ge ri al or Adm i nist rat i ve Act i vi t i es: Means to fol l ow m ana ge m ent
fun ct i ons l i ke nhnn, organi z i ng, com m andi ng, coordi nat i on and cont rol li n g (of
al l t he abov e a ct i vi t i es).
Al l the abov e m ent i oned act i vi t i es are essent i al for t he succ essful ope rat i on of t he
ent e rpri se i
non of thes e can be i gnor ed. Though Fa yol re cogniz ed t he im port an ce of fi rst fi ve
abov e activ e s bur
t he m ai n obj e ct i ve ol hi s st ud y and anal ysi s has been m ana gem ent i .e. to ensur e the
pe
rform an ce o the work w el l .
K
vm wnc eot

1.6.7

George Elton Mayo (180-1949)

El t on Ma yo, an Aust ral i an b y bi rt h and t rai ned i n P s yc hol og y is ge ne ral l y reco gni z ed
as the "F at he r o f
Hum an R el at i ons Approa ch" . Ma yo 's m ai n cont ri but i on t o m an agem ent t hought was
hi s em phas.s on

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hum an and soci al fa ct ors i n i ndust ri al rel at i onshi ps. He l ed the t eam whi ch condu ct ed
t he H awt hrone
i nvest i gat i on at Al a rvard i n the Uni t ed S t at es wi t h the col l abor at i on of t he West ern
El ect ri c C om pan y
bet w een 1927 to 1936 and fi nanci al support of t he R ock F el l er Found at i on. Ma yo and
hi s associ at es
st udi es rev eal ed t hat an orga niz at i on i s not onl y a form al a rran ge m ent of m en and
fun ct i on but al so a
soci al s yst em whi ch c an be operat ed suc cessful l y b y ut i l iz i ng t he pri nci pl es of
ps ychol o g y and ot her behavi our sci ences.
Ma yo was of t he opi ni on t hat c ause of i ncre ase i n product i vi t y of t he work ers i s
not a s i n gl e fact o r of ch angi n g wo rki ng pe ri od and condi t i ons but a com bi nat i on of
sev eral ot he r fa ct ors such as:
(/ ) Les s rest ri ct i ve t echni ques of supervi si on
(/ / ) P rovi di n g aut onom y t o work ers
( I/ O P erm it t i ng t he form at i on of sm al l coh esi ve sub groups of worke rs
(/ v) C re at i ng condi ti ons whi ch encour age and support t he growt h and devel opm ent
of thes e groups
(v) C ooper at i on bet ween worke rs and m anagem ent

(v0 Opport uni t y t o be hea rd

(v#0 P art i ci pat i on in de ci si on m aki ng et c.
Ma yo was t he fi rst person t o advoc at e fo r t he unde rst andi ng of work ers
di ffi cul ti es i n vi ew of growt h of sci enc e and t echnol og y. He desi r ed the m ana gem ent
t o underst and t he probl em s of work for ce and m ake effort s t o red ress t hem . H e and
hi s associ at es poi nt ed out:

t*
___________________PRODUCTION, PRODUCTIVITY AND BUSINESS ORGANIZATION___________
35]
5. Li m i t at i ons and rest ri ct i ons put fort h b y t he Govt . (i .e. gr ant of l oans,
for ei gn ex change and such ot he r t hi ngs.
Busi n ess m a y be defi n ed as " an ent e rpri se/ uni t/ pl ant enga ge d in t he product i on
and di st ri but i on of goods for sal e i n t he m arket or rend eri n g servi ces fo r a pri ce"

2.17 TYPES OF BUSINESS ORGANISATIONS OR TYPES OF OWNERSHIP

Vari ous t ype s of busi ness orga niz at i ons ar e as fal l ows:
1. P ri vat e S ect or

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( ) In di vi dual owne rshi p or S ol e P ropri et orshi p

( ) P art nershi p
( c) J oi nt st ock com pani es
( cf) Coope rat i ve se ct or ent e rpri ses.
2. Publ i c S ect or Ent erpri ses (St at e Owne rshi p & Cont rol )
( a) Govt . D epart m ent
(i b) P ubli c C orporat i ons (or st at ut or y corpor at i ons) . (c) S t at ut or y Boa rd or
C omm i ssi on
3. Join t S ec tor
(a) P ri vat e ent rep ren eurs
(b) P ri vat e Lt d. C o.
(c) Publ i c Lt d. C o.

2.17.1 Private Sector Enterprises

2.17.1.1 Individual Ownership or Sole Proprietorship
Thi s i s the sim pl est and ol dest fo rm of busi ness ent erp ri se.
In t hi s t ype of organi z at i on t he i ndi vi dual ent rep reneu r suppl i es t he ent i re
c api t al , em pl o ys l abour and m achi nes. The ent i re aut hori t y and responsi bi li t y i n
t he m at t er of deci si on m aki n g and worki ng bel ongs t o hi m and al l profi t and
l osses are of hi s own. Thi s t yp e of ent e rpri se can be st art ed b y an y one havi n g
i ni ti at i ve, sel l i ng apt i t ude and li t tl e c api t al t o ent er i nt o busi ness. It i s owned
m ana ge d and cont rol l ed b y onl y si ngl e m an hen ce i t i s al so known as In di vi dual
Own ershi p. In such organi z at i on owner him sel f is r esponsi bl e for al l the
l i abi li t i es. Hen ce credi t or can col l ect t he m one y even f rom hi s personal prop ert y.

Applications
Thi s form of ownershi p i s m ost sati sf act or y in t he foll owi n g c ases:
(i
1. For sm al l sc al e busi ness requi ri n g sm al l am ount of capi t al whi ch c an be
e asi l y ar ran ge d b y one m an, e.g. sm al l scal e i n d u s t r y , com m erci al shop,
r et ai l t rade or prof essi onal servi c es.
2. Wher e ri sk i nvol ved i s not too he av y.
3. W here one m an m an agem ent i s possi bl e.
4. Wher e l ocal m arket i s avai l abl e.

Advantages
1. S im pl e and Eas y t o Man age: Thi s t yp e of ownershi p i s si m pl e i n nat ur e and
e as y t o m ana ge.
2. Le a st Le gal R est ri ct i ons: It does not requi r e m uch l egal form al i t i es or
com pl i cat ed proc edures t o st art the busi ness.

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3. Qui ck De ci si ons and P rom pt Act i ons: Si nce t he whol e busi ness i s
cont rol l ed b y one m an, t her efo re, he can t ake de ci si ons qui ckl y and
i m pl em ent t hem i n ri ght t i pi e.
4. Qual i t y P roduct i on: P ersonal at t ent i on and supervi si on of t he owne r l eads to
qual i t y product i on.

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36

___________________________INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT

5. B et t er La bour R el at i onshi p: In vi ew of sm al l busi ness and cl ose cont a ct

bet w een owne r a wo rkers good em pl o ye e- em pl o ye r r el at i onshi ps are
m ai nt ai ned.
6. P ersonal At t ent i on t o C ust om er C om pl ai nt s: It
at t ent i on to cust or and thei r r equi rem ent s
sat i sfa ct i on re ga rdi n g t hei r com pl ai nts a b o u t T
sm al l .
7. S m al l C api t al : Tal ent ed m en of a sm al l m eans
c api t al i s r e q u i r

is possi bl e t o pa y personal
and t o gi v e t hem ent i re
product as the busi ness is
can st art busi ness as sm al l

8. It i s eas y t o m ai nt ai n busi ness se cret s as it i s one m an show.

Lim itations
Thi s t ype of organi z at i on has t he fol l owi n g l im i t at i ons:
1. Am ount of c api t al t hat is r equi red for i nvest m ent i s sm al l , t her efor e, m odern
f act or y
c an
st art ed
wit h
t hi s
s yst em
of
organi z at i on.
'
be

2. Work suffe rs si nce t he owne r cannot be m ast e r of all t echni ques l i ke

m ana ge m ent en gi ne eri n g pro cesses.
' s an,1
3. Own er cannot t ake ri sk to st art bi g busi ness due t o unl i mi t ed l i abi li t i es.

2.17.1.2 Partnership Organization

S om e dra wbacks of pri vat e com pani es a re rem oved in t hi s t ype of orga niz at i on t o a
considerable

;i r: h i P i S t h e r e J a t i 0 n S h i p b e t w e e n t h e P e o P l e i n t e r e s t e d da rt i ng a busi ness and t he y com b, t oget h e.

t o i ncre ase the. r resou rc es i .e. capi t al , l abour, abi l i t y and ski ll . The succ ess o f o a r I
rn

ssrr
r
the mbers
* ^~
ng cooperation

adjustment

$$
P art n I t
^^ S h U , d W O r k h a r d t o e a r n
and gre at er
profi t
P art ne rshi p bus,ness i s owned b y t wo or m ore (upt o 20) who shar e t he powe rs
r esponsi b i it i . profi t s a ccordi n g t o an a gr eem ent re ach ed am ong t hem

r esponsi bi l i ti es a
A person m a y possess ex cept i onal busi ness abi l it y ex peri en ce and t al ent but no
c ani r.l h hav e a fi nanci al part ner. S im i l arl y a fi nanci er m a y requi re a m ana ge ri al

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ex pert a [ , ' ' " " ex pert and al l of t hem m a y fo rm a part n ershi p ent e rpri se.
" 3 techn'Cal

Types of Partners
' pX 3 '

Par

'" e , S : A "

P ar,ne rS Wh 0 a re ,h e p a rt ne rs hi

known as genen,
2

oAfCpo,tcieasr,ner!:

'

A C i Ve

PamerS

'

*h0Se

Wh

,akC

aC,iVC

in

th

'

and f r m u ,a,i

and the y get t hei r sha re in t he pro fi t of t he fi rm

aS
A K

. .

........ r
,e

" " r ^ r ? ? ', "

eir repmed name for ,he

ulu

m e il l II I.

^^ ^

Z !,

a C , I Ve p a

"

in the lnana

gem ent . Nomi nal part ne rs

n,r
S , P ar2 Z'Vt T 7 y ,

af,er aSCer,aim

t he busi ness.
app ea r.
nowhe re thei r nam e,
4

SSf **nr " , o s e

whose ase is bciow 1 8

"=

lhe

or

P
P

"

par

'

,he

secr et l y

but

a *

Advantages
1

n? uch f Tel 1r r l l i rl n e r S HT ^ e a S ' e r 3 5 C m p a i e d t o i o i , 1 t s t 0 <* com pani es. It does not

i n vo l v e m uch l egal form al i t i es and he av y ex pendi t ure of r egi st r at i on and
st am p dut y.
Thi s t ype of organi z at i on enj o ys m ore fre edom and i s not subj e ct t o st ri ct Govt ,
ch ecks
2. The am ount of capi t al coll e ct ed i s m ore due t o l arge num ber of owners
t han t hat i n cas e of sol e t rade organi z at i on.
3. In t hi s t ype of organi z at i on peopl e possessi n g di ffer ent abi li t i es and
ski ll s m a y com e t oget h er Thus mone y and knowl ed ge bot h ar c
com bi ned to e arn profi t .
4. A probl em is ex am i ned from mor e t han one poi nt of vi ew t here fore, t he
de ci si ons t ak en a r e l i ke l y t o be sounder than i n one m an busi ness.
5. The worki ng of t he ent erpri se can be e asil y kept secr et and con fi dent i al .

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in
e
ia
te
a
n
d

Lim itations
1. Due t o unl im i t ed li abi l i t y, ri sk i nvol ved i s m ore. Thi s f ri ght ens a wa y
m one yl end ers.
2. Aft er t he deat h or r et i rem ent of a part ner, t he part ne rshi p m a y com e t o
an end.
3.

It can rai s e much l ess capi t al as com pared t o joi nt st ock com pan y.
The refo re, i t i s unsui t abl e for m odern i ndust ri es r equi ri ng hu ge c api t al
and a l arge num ber of m ana ge ri al abi l i ti es.

4. A part ne r m a y wit hdr aw f rom t he fi rm and est abl ish hi s own ent e rpri se
wi t h t he knowl ed ge of t he secr et of t he busi ness.
5.

Al l t he part ners a re j oi nt l y and sever al l y l i abl e for t he act s of the

pa rt ner, who is i ncharge of m anagem ent . Thus mi st ake of one part n er
m a y cause a bi g l oss to al l t he pa rt ners.

6. The profi t s ar e shar ed b y t he pa rt ners. So t her e i s no i ncent i ve for hard

work. Som et i m es, i t encour ages l avish ex pendi t ure.

Form ation of Partnership

P art ne rshi p can be form ed ei t her verbal l y or b y wri t t en a gr eem ent but t o avoi d
t he possi bi li t y of confl i ct at l at er st a ge , i t is desi r abl e t o ent e r i nt o wri tt en
a gr eem ent . The w ri tt en agre em ent i s cal l ed "P art ne rshi p De ed". The
pa rt nershi p deed cont ai ns t he t erm s and condi t i ons rel at i ng t o pa rt nershi p and
t he r egul at i ons gov erni n g i t s int ern al m ana gem ent . The part nershi p deed
shoul d have t he fol l owi ng det ai l s:
1. Nam e of t he fi rm
2. Nat u re of t he busi ness
3. Dat e of st art i n g pa rt nershi p
4. Durat i on of part nershi p
5. Mone y cont ri but ed b y e ach part ner
6. Al l ot m ent of m ana ge ri al fun ct i ons am on g the part ne rs
7. S har e of pro fi t and l osses
8. S al ar y i f an y al l owed t o m ana gi ng pa rt ners
9. R at e of i nt e rest on c api t al invest m ent , i f an y
10. The am ount whi ch can be wi t hdra wn b y e ach part ner
11. The basi s for i ncl usi on of an y new part ne r.
12. Ac count s of t he fi rm and aut hori t y for si gni ng ch eques, bi ll s of
ex chan ge et c.
13. The ai m of part ne rshi p as wel l as t he m anner i n whi ch i t can be
di ssol ved.
14. Lo ans and advan ces pl us i nt er est on them b y part ne rs, i f an y.

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2.1 7.1.3 Joint Stock Company

Wit h t he ch ange in t he scal e of product i on from sm al l scal e t o l arge scal e and
wi t h the wi deni n g of the m ark et from l oc al t o nati onal and i nt ernat i onal , t he
i ndi vi dual ownershi p and part ne rshi p fi rm wi t h thei r li m i t ed fi nanci al
r esourc es, li m it ed m ana ge ri al skil l and unl i m it ed l i abi li t y fai l ed t o m eet t he
r equi rem ent s ofj oi nt st ock com pani es. The y have l i mi t ed li abi l i t y.
In thi s t ype , c api t al i s cont ri but ed b y a l arge num be r of pe rsons i n t he form of
shar es of di ffer ent val ues. The c api t al is r ai sed b y sel l i n g shar es of di ffer ent
val ues. P ersons who purchas e t he sha re a re

...................

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INDUSWIAL ENG INEERING OPERATIONS MANAGEMENT

Known ns share hol ders and the m anagi ng bod y i s cal l ed "Ho ard of Di re ct ors" i s
el c ct cd b y thes e shar > hol ders. The boa rd of di re ct ori s responsi bl e for pol i c y
m i l ki n g, t aki n g i m port ant fi nanci al and t echni c al deci si ons for effi ci ent worki n g of
t he ent erpri se.
In thi s form of organi z at i on li abi l i t y of t he sha re hol der is li m i t ed t o the ext ent
of the amount ,,r shares hel d b y hi m and l i e i s fre e from the responsi bi li t y of
debt s and cl ai m s on t he com p an y bc yo n i t he val ue of shares. P eopl e of al l sect i ons
a re encou ra ged t o cont ri but e for t he com p an y bccan - t hi s ben efi t . Th ese shares a rc
t rans fer abl e.
L

Types of Joint Stock Com panies

The re are t wo t ypes of j oi nt st ock com pani es:
1. P ri vat e Li m i t ed C om pan y
2. P ubli c Li m i t ed C om pan y
1. P ri vat e Li m i t ed C om pan y: Thi s t ype of com pan y can be form ed b y t wo or
m ore m em ber TI m axi m um num be r of m em be rshi p i s li m it ed to 50 ( ex cl udi n g
t he em pl o yee s). The co rnel re gi st e red under In di an Com pan y's Ac, 1956. In
t hi s the t ransf er of shares is l i mi t ed to m onl y and gen eral publ i c cannot be
i nvi t ed l o purchas e shar es. Norm al l y, t he m em bers of
company arc friends and relatives.
llLh 1

In t hi s s yst em ' pe rsons who want to m ak e use of li m it ed li abi l i t y and at the

sam e ti m e ke en t h ^ , h C P r i V a l C U d - C m p a n y M S l f t h e m i d d l c i ndust ri est Zt
The P ri vat e Lt d. com pan y need not ci r cul at e t he Bal an ce She et , P rofi t and I
oss Account m r ,
sl ld i,oid i,s
7
T m i b - y p'- Ss:
st at cm e, et c. ) i n t he m eet i n g. The gov ernm ent does no. i nt e rfe re in t he wo rki ng of,he
con Z'
2. P ubli c Li m i t ed C om pan y: As indi c at ed b y i t s nam e, t he m cm be rshi n ofnuhl i r
l ! .,i
i s open t o gene ral publ i c. Th e m i ni m um num ber r equi red to forn such on n w
T "'" ": t her e no upper l i mi t . Such com pani es c an advert i se, t o offer i t s sh e
t o g S o ,, i c V" com pani es are subj ect t o gre at e r cont rol aud supervi si on b y
t he Govern* Th^co i n essent i al t o prot e ct t he i nt erest of the sha re hol ders
and m em bers of publ i c Sh res r - ! wi t hout an y pri or app roval . The affai rs
of com pan y a re m ana ge d b y an el e ct ed bodv c d l Boa rd of Di rect ors. The
num ber of m em bers of Bo ard of Di rect o rs i s li m it ed t o seve^
Li qui dat i on: If t he l i abi l it y be com es m uch mor e t han asset s and

when e X s P r s or
pavni e u

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run ,hc company At ,his ,ime ,he

'

I 90
Li qui dat i on m a y be vol unt ar y or com pul sor y or unde r t he supe rvi si on of t he C ourt If t he
z'idTiiV" , e n , h e a s s e t s r t h e b ' - s o i d .
Is di Zl d am on g t S r^ " * "" ~
am al gam at i on i s a com bi ni ng l o get he r of t wo busi ness.
I, usuall y resul t , i n Tonom l l s e "c . ^ f

eConomics

"f arge sc al es, adm i ni st r at e and

nurk enne

Will

wMch c o u M b V s e , 1 ^ a FT" a m 4 l " m , i 0 w M I " v e som e exi st i ng asset s and l uhi l hu,
ex cond L '" " 7 , t U a W n t ( ! " f a i ' s l h e
I IK
b
: : '
f n c c c pt ebl e to t he proposed part n er.
Gen er al l y, som ea
.m en.
be m ade l o one or bot h t he bal an ce sheet s t o adj ust the obj ect i ons rai sed b y .he ot her
parr

Finance G e n e r a t i o n for J o i n t Stock Companies

S l hl u 1 ^ ro, cx pnnsi o,,. repl acem enl . al t er at i on and t o keep t he busi ness runni ng I*
t equned c api t al ,s suppl i ed b y ,d,vi dual s, soci et i es and asso ci at i ons. Funds can
al so be arr angeJ
from banks and fi nanci al co rporat i ons et c. i n t he form of I oans. Fol l owi n g are t he
ot her sources whi ch c an provi de mone y for the ent erpri s e.
1. Is sue of S hares: A part of the capi t al r equi red m a y be col l e ct ed i n t he form of
shar es.
2. Issu e of Debent ur es: When com pan y desi r es t o rai se t he requi red fi nan ce
t hrou gh l oans i nst ead of shar es t hen deb ent ures a re issued. These are
adv ant ageous becaus e deb ent ure hol de r cannot cl ai m ownershi p and t he y ar e
pai d i nt er est onl y. Deb ent ures m a y be i ssued fo r m eet i n g i nit i al r equi rem ent s
or for dev el opm ent purposes.
3. B ank Lo ans.
4. St at e l oans from Ind ust ri al D evel opm ent
C orpor at i on or from In dust ri al Corpor at i ons.

Corpo rat i on,

S t at e

Fi nan ce

Advantages
J oi nt st ock com pan y has t he fol l owi ng advant a ge s over ot her fo rm s of busi ness
orga niz at i ons:
1. The shar e hol ders bear no ri sk as t he li abi l i t y is li m it ed, m ore and m ore
peopl e ar e encou ra ge d t o i nvest capi t al .
2. An aver age person c an cont ri but e c api t al wi t hout m uch hesit at i on be cause of
l arge num ber of i nvest ors ri sk of loss i s di vi ded.
3. The work i s di vi ded am ong di fferent groups of persons henc e bet t er work c an
be done.

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4. Adm i ni st rat i on c an be run bet t er as j oi nt st ock com pan y can bear t he hi gh

sal a ri es of good m anagi n g agent s.
5. Joint st ock com pani es a re not a ffect ed b y t he r et i rem ent of an y of the shar e
hol ders.
6. It possesses gre at pot ent i al i ti es for ex pansi on.

Lim itations
1. La c k of personal i nt er est on the part of sal ari ed m anagers l eads t o
i neffi ci en c y and was
2. Wit h t he i nt i m at e knowl edge of fi nan ci al posi t i on pf t he com pan y t here i s
suffi ci ent scope for m em be rs of m an agem ent fo r t hei r pe rsonal profi t s.
B ec ause the y can sel l and purch ase sha res a cco rdi ngl y.
3. It r equi res a l arge num ber of l egal form al it i es t o be obse rved.
4. It i s di ffi cul t t o preserv e se cret s in t he j oi nt st ock com pani es.

2.1 7.1.4 Cooperative Sector Enterprises

C ooper at i on is a form of orga ni z ati on, wh erei n persons, i rr espect i ve of cast e, cr eed
and rel i gi on, vol unt ari l y associ at e to get he r as hum an bei n gs on t he basi s of equ al it y
t o ful fi l t hei r com m on econom i c i nt e rest s,
In t e rnat i onal La bou r Orga ni sat i on ( ILO) defi n ed i t as an associ at i on of persons,
usual l y of li m it ed m eans who have vol unt ari l y j oi nt ed t oget her t o a chi eve a com m on
e conom i c end t hrou gh the form at i on of a dem ocr at i cal l y cont rol l ed busi ness
orga ni sat i on, m aki n g equi t abl e cont ri buti ons t o t he capi t a requi r ed and acc ept i ng a
f ai r shar e of ri sks and bene fi ts of t he undert aki n g.
Mr. N. B arow defi ned coope rat i ve soci et y as " a Vol unt a r y Orga ni z ati on of
pe rsons wi t h unrest ri ct ed m em bershi p and col l e ct i vel y owned funds, consi sti n g of
wa ge ea rners and sm al l produc ers, uni t ed on a dem ocr at i c basi s for t he est abl i shm ent
of ent erpri ses under joi nt m ana gem ent for the purpose of im provi n g t hei r house hol d
or busi ness econom y".

Characteristics of Cooperative Organisation

1. Vol unt ar y organi z at i ons
2. Open m em be rshi p
3. C omm on i nt er est of m em bers
| 40 _______________________INDUSTRIAL ENGINEERING & OPERATIONS MANAGEMENT_______________

l i conom i c nnd Dem oc rat i c m anagem ent

5. P.ol i i i s not i m nonanl bur u i s t o serve m em bers
6. S epa rat e l egi sl at i ve enti t y: R e gi st rat i on need ed
7. Di sposal ol surpl us or profi t am ong m em bers in ac cordan ce wi t h thei r shar e
c api t al
8. Obj e ct i ve i s m ut ual hel p and servi c e m ot i ve.

Types of Cooperative Societies

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The vari ous t yp es of cooper at i ve soci et i es i n o u r c o u n t r y a r e ; I. P roduc er's

C ooper at i ve S o c i e t y 2 C onsum er's C ooper at i ve S o c i c t y
3. Housi n g C ooper at i ve S oci ct y
4. C redi t C ooper at i ve S oci et y
5. C ooper at i ve F arm i ng Soci et y
H,,i,VC,S0CiC'y: S
wi sh , h

is lhc r

" ' "ope rat i ve i n whi ch work ers

15
t hei r own m anager s The J fi l T , 5 ' f
squi red. The y e | e c ;
pr event s t he woH c^ Im 'be "T^ i S
" ^f" 3 ' 5 ' 8 ? ' C , l u l
ULm
"
e ex pl oi t ed and t each es t hem how t o work in
t eam spi ri t
i
d
d
W
s
X
;
:
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S
X
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r
p r n t di rect l y
8
at r easonabl e pri c es S eco
f' i
T" 8 t h e m c m b e r s a " d "on
m em ber

' ^SS S li

Odat i ont o i l s m em bers

coop erat i ve 'pu rchas es
\[n t ^ IZ'TT " '" P^ " ^..........................................................................
a yme n
m em ber on i nst al m ent s whi ch is ve r y1 onve, "em
' b

Cha rsed from

soc e. y ,s t o save the m em bers f rom t he ex pl oi t at i on of money l ende rs

c annot afford sci ent i nc t echni cs of far,Ig and m ech^^e^X - Advantage of

Cooperative Organizations
1

satThere

shou,d

2 An y person i rr espect i ve of c ast e, cr eed, sex can becom e t he m em ber

: tt S XS f^; "

m0ney iS S

<* " advert i sem ent s and pnbl i cit y et c pr<Tv i de honora r y

sei "vkes for

6 MhH^ r S i t S , e m p l 7 e e s fi nabl e w ages and bet t er servi ce condi ti ons

6. Mi ddl em an s prof,, ,s el im i nat ed si nc e t he pur chase i s di r ect l y from produce r
e m o c r a t N , o r m a i i y o , , c P^^U..,.,.

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or a h torn "S *

en

" , y ' T " e '' e f r e '

eXiS,e

"Ce

iS

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9. It ben efi t s ge ne ral publ i c.

10. It prom ot es a sense of coope rat i ons am ong i t s m em be rs.
11. The l i abi li t y of an y m em ber i s l im i t ed t o hi s cont ri but i on i n capi t al .
Fo r an y debt t o the orga niz at i on, m em bers do not bear pe rsonal
l i abi li t y.

Lim itations of Cooperative Organizations

1. It s c apaci t y to r ai se c api t al is l i mi t ed as it s m em ber m ost l y com e from
worki n g cl ass and m i ddl e cl ass. There for e, i t is sui t abl e for sm all and
m edi um siz ed busi ness.
2. In vi ew of li m i t ed fi nanci al resour ces, servi ces of hi ghl y qual i fi ed persons
c annot be ut i li z ed.
3. Most l y i neffi ci ent m ana ge m ent and som et i m es
m ana ge m ent i s i nex peri en ced and cor rupt .

it

is

found

t hat

4. The ex ecut i ve com m i t t ee and t he em pl o ye es favour t hei r fri ends and

r el at i ves at t he cost of ot hers.
5. It requi r es bet t er and st ri ct supervi si on.
6. The re i s undue govt , i nt erf er ence. D espi t e l a ck of support from Govt ,
e ach cooper at i ve soci et i es shoul d be r egi st ered wi t h Govt , seem s
unj ust i fi ed.
7. Man y t i m es coope rat i ves a re ex pl oi t ed b y the poli t i ci ans fo r t hei r sel fi sh gai ns.

2.17.2 Public Sector Enterprises (State Ownership & Control)

F ast er and pl anned econom i c dev el opm ent cannot be achi ev ed b y pri vat e
se ct or al one. St at e ownershi p serv ed as m eans t o rem ove m onopol i st i c
t enden ci es, a wa y t o e ffect effi ci enc y and t o t ake those fi el ds wher e t here i s
l ack of wi l li n gness or capi t al t o st art t he busi ness. P art i ci pat i on al so becom e
essent i al whe re st at e cont rol and se cre c y i s t o be m ai nt ai ned e. g. product i on
of defen ce equi pm ent . Governm ent has al so t aken st eps to set up i m port ant
i ndust ri es whi ch are vi t al t o the nat i on such as Iro n and S t eel Ind ust ri es,
Ai r cra ft , Hi ndust ran Ma chi ne Tool s and Fert i l iz e r P l ants et c. The effi ci enc y
of st at e undert aki n gs i s fa r bel ow the pri vat e ent erpri ses, inspi t e of the fact
t hat the fo rm er get raw m at eri al , m achi n er y and m one y fre el y; st i ll , t he
produ ct i on of goods and profi t s a re l ow i n t he P ubli c Undert aki ngs, R easons
for t hese dr awba cks in st at e undert aki n gs is favou ri ti sm di shonest y,
i neffi ci en c y, incom p et enc y and non- deservi n g pe rsons on hi gh er post
gen eral l y dom i nat e. Form s of Publ i c S ect or Ent e rpri ses a re as fol l ows
1. Gove rnm ent Dep art m ent al Ent e rpri ses/ Orga niz at i ons
2. P ubli c Corpo rat i ons
3. Governm ent Com pani es

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2.17.2.1 Governm ent Departmental Organizations

Thes e organi z at i ons ar e organi z ed li ke an y ot her Govt , depart m ent s. These
a re ei t her m ana ge d and run b y t he offi ci al s of t he gove rnm ent under t he
ch arge of t he secr et ar y of Mi ni st r y conce rned. The ex am pl es ar e R ai l wa ys ,
De fen ce In dust ri es, P ost s and Tel egra ph, Shi p bui l di ng and st eel i ndust r y et c.
In cert ai n organi z at i ons co-ope rat i on of sev eral mi ni st ri es i s requi red
The refo re, a com m it t e e of r epres ent at i ves from conce rned m i ni st ri es i s
const i t ut ed so t hat coop erat i on, consul t at i on and qui ck deci si ons m av be
t aken. Bhak ra Cont rol Bo ard and Al l In di a Handl oom Bo ard a re ex am pl es of
orga niz at i ons m ana ge d b y i nt erd epart m ent al com mi t t ees.

Characteristics of Governm ent Departm ental Organizations

(/ ) Fi nanc ed out of gove rnm ent bud get . 00 R evenu e go t o pubi c
ex cheque r (/ / / ) Al l rul es and r egul at i ons of Governm ent ar e appl i cabl e (*v)
Unde r di re ct cont rol of conce rned mi ni st r y (v) Em pl o yee s ar e t re at ed as
Gove rnm ent serv ant s

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Merits
L The e conom i cal , soci al and pol i ti c al obj e ct i ves of t he Governm ent a re
a chi eved due t o gov ernm ent cont rol .
2. S uch orga niz at i ons ore suit abl e for publ i c ut i l it y se rvi ces and def enc e
i ndust ri es.
3. C om pl et e sec rec y i s pos si bl e li ke i n ordi nan ce fact ori es due t o governm ent
cont rol .
4. C onsum er's i nt erest s arc properl y safe gu arded
5. Gove rnm ent c an afford to w ai t lon g for an ent e rpri se to yi el d profi t . Bi g
orga niz at i ons li ke i ron and st e el works, he av y cl cct ri cal s and defen ce
proj e ct s can be st art ed.

Lim itations
L B ecaus e of red t api sm (i .e. bure aucr at i c cont rol ) qui ck de ci si ons ar e not
possi bl e
2. Maj or m odi fi cat i on and innovat i ons are di ffi cul t t o i ncorpo rat e as
Gove rnm ent offi ci al s nre fp (o wo rk ac cordi n g t o ce rt ai n rul es and
r egul at i ons.
3. Offi ce rs ar c di scour aged from t aki ng qui ck deci si ons be cause of red t api sm .
4. La c k ol i ni t i at i ve bec ausc prom oti ons ar e on seni ori t y basi s rat h er t han m eri t
bas ed.

2.1 7.2.2 Public Corporations

A publ i c orpor at i on is a bod y cre at ed b y a l aw of P arl i am ent wi t h it s powe rs, dut i es
and li abi l i ti ,- dct m cd m wri t t en l aw. Thou gh t ot al capi t al i s provi ded b y the
Gove rnm ent t he y have separate ' nd enj o y i ndepend enc e i n m att e rs rel at ed t o
appoi nt m ent , prom ot i ons et c. Thes e corpo rat i ons h no pi ofi t mot i ve and work fo r t he
sak e of soci al wel fa re.

Merits
1. Thes e ar e supposed to be bet t er m ana ge d. Th ese a re ex pect ed t o provi de
bet t er wo rki n, c o n d i t i o n s t o work ers and cheap er and bet t er produ ct s t o
consum e rs
na . t . o n s
2. Due t o absenc e of red t api sm and bure aucr at i c cont rol , qui ck deci si ons are
possi bl e
by GoVcZerrn> C 3 n U S e f U n d S g r e a t r f r e e d m " t H e 3 b S e n C e f a i ' d i t a n d ': i n B
4. More fl ex i bi li t y as com par ed t o depart m ent al organi sat i ons
5
' If h profrm ot i ve S U i t a b I e ^ m 3 n a g i n 8 P U b M C U t U i t i e S 3 1 r e a S n a b l e C S t t 0 P e 0 ? l e i n
6. In vi e w of t he m anagem ent i n t he hands of expe ri enc ed and capabl e di rect o r,
t hese are m ana ged
m ore effi ci ent l y t han t hat of Gov ernm ent dep art m ent s.

Dem erits
1 spe c? al act . f 0 r m f
of the

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35

chan

2e

in its

const i t uti on wi ll requi r e am endm ent

2 Inde rontiirf tljCfh C 0 r P : a t i 0 n S n l y n p a p e r s - I n r e a , i t y M i " ^t ers, Gov ernm ent offi ce rs and
P oli t i ci ans i nt erf er e i n t he worki n g of such corpo rat i ons
3. t i s sui t abl e onl y for t he m an agem ent of ver y bi g ent e rpri ses
5 P ub M c 'co r on rat ' 3 ' ' egiS,ati n ^ ^ f rmati n is elaborate and time consuming.
i nt e t ed Tn .Tr
T P l y ^ t h e y a r e n 0 t t 0 f a c e com pet i t i on, so t hese are
not
i nt erest ed i n adopt i ng new t echni qu es and m aki n g i m provem ent s i n t hei r
worki n g.

2.1 7.2.3 Governm ent Com panies

A ^TernteTtrco "" ^ T" '^ t h e f o r m f a J o i * S < o c k C om pan y unde r C om pani es Ac. t han 5P / of
t h^7 y > a C C r d , " e , n d i a n
Act
1956,
is
an y
com pan y i n whi ch not l ess
CaP
l a Li nl tt1
' , S h e l d b y S l a , e a ' U l C e n t r a l Governm ent . Thi s form of organization
is
b
popul ari t y ,n r ec ent ti m es. It i s cr eat ed b y an ex ecut i ve and not a l e gi sl at i ve
de ci si on and i s

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m ana ge d b y el ect ed board of di re ct ors whi ch m a y i ncl ude pri vat e i ndi vi dual s Thes e
a re a ccount abl e for it s worki n g t o t he con cern ed m i ni st r y and i t s annual repo rt i s
r equi red t o be pl ac ed ever y ye a r on t he t abl e of t he P arl i am ent or S t at e Le g. sl at i ve
al on gwi t h com m ent s of t he conce rned dep art m ent In i t s da y t o d a y worki n g i t i s fr ee
from Governm ent , int er fer enc e, howev er, Bur eau of Publ i c Ent erp ri ses c an i ssue
gui danc e and di r ect i ons.

Merits
1. It i s eas y t o form
2. Gove rnm ent com pan y di rect ors ar e fr ee to t ake deci si ons and a re not bound b y
c ert ai n ri gi d rul es and re gul at i ons
3. The y t r y t o sat i sf y t hei r cust om ers bec ause ot herwi se t he y m i ght l oose to t hei r
com pet i t ors. Limitations
1. Mi suse of ex cessi ve fre edom cannot be rul ed out
2. Ac count abi l i t y is i nadequ at e.
3. S i nce t he di r ect ors are appoi nt ed b y governm ent , so t he y spend m ore ti m e in
pl easi n g thei r poli t i cal m ast ers whi ch l eads t o ine ffi ci ent m anagem ent .

2.17.3 The Joint Sector Management

It i s a gr eed fact that t oda y i n gove rnm ent orga niz at i ons whet he r i t is publ i c l i mi t ed
com pan y or st at e ent e rpri se, m ana gem ent i s a bi g heada che. Thi s is consi der ed one of
t he m ai n c auses of t oda y's unrest , pri c e ri se, st ri kes and l ockout s et c. To over com e
t hi s gre at t roubl e, r ecent l y i n pol i ti c al and gove rnm ent al ci rcl es consi de rabl e st ress
i s bei ng gi v en t o t he fut ur e growt h of indust r y in j oi nt sect or.

Concept of Joint Sector

J oi nt sect or m eans part i ci pat i on b y the gov ernm ent and pri vat e i ndust r y i n t he shar e
c api t al and t he gen eral m anagem ent of t he i ndust ri al unit t o be set up. It s aim i s t o
a chi eve t he t ask of soci al j usti c e throu gh e ffi ci ent use of resour ces. The governm ent
fi nan ces and pri vat e ent erpri ses m ai nt ai ns the effi ci ent worki n g of t he i ndust r y.

Contribution
In regar d t o t he i ndi vi dual vent ur es al r ead y funct i oni ng under joi nt sect or pri nci pl e
t he part i ci pat i on has not ge ne ral l y been on an equ al foot i n g and gov ernm ent i s seni or
pa rt ner. The share capi t al i s usual l y i n the rat i o of 51: 49 and in al l c ases t he
gove rnm ent hol d 51% of t he sha res.

Participation
In thi s set up C hai rm an i s a gove rnm ent nom i nee but Man agi n g Di rect o r i s nom i nat ed
b y col l abor at i ng pri vat e i ndust r y., In t he board of di r ect ors t he Governm ent has l arge
r epres ent at i on. The vi ew of Gove rnm ent is m ore li kel y t o pr evai l on m at t ers of
i m port anc e due to it s l arge shar e hol di n g and repr esent at i on. The servi c e condi ti ons
and the sal ari es of bot h offi c ers and worke rs i n t hese a re hi ghe r t han t hose enj o yed
b y t hei r count erp art s i n t he publi c sect or ent erpri s es.

Advantages

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1. It prom ot es soci al obj ect i ves

2. Hel p ful i n mobi l iz at i on of resou rc es
3. Cont rol s t he busi ness m al pra ct i ces
4. Act s as ant i dot es t o monopol y and conc ent rat i on of e conom i c powe r
5. Acc el er at es i ndust ri al gr owt h
6. It m akes nat i onal i sat i on unnecess ar y

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