BBPP1103 Principles of Management - Vapr20

BBPP1103
Principles of Management
Copyright © Open University Malaysia (OUM)

BBPP1103
PRINCIPLES OF
MANAGEMENT
Shahrol Aman Ahmad
Azhari Ramli
Nasri Nalimi
Azelin Aziz
Assoc Prof Dr Santhi Raghavan

Project Directors: Prof Dr Widad Othman
Prof Dr Shamsul Nahar Abdullah
Open University Malaysia
Module Writers: Shahrol Aman Ahmad

Azhari Ramli
Nasri Nalimi
Azelin Aziz
Universiti Utara Malaysia
Assoc Prof Dr Santhi Raghavan

Moderator: Prof Dr Wardah Mohamad

Reviewers: Nik Azlina Nik Yaacob

Prof Dr Wardah Mohamad
Enhancer: Dr Asokan Vasudevan
Developed by: Centre for Instructional Design and Technology

First Edition, May 2008

Second Edition, December 2013 (rs)
Third Edition, April 2020 (MREP)
Copyright © Open University Malaysia (OUM), April 2020, BBPP1103
All rights reserved. No part of this work may be reproduced in any form or by any means without
the written permission of the President, Open University Malaysia (OUM).

Table of Contents
Course Guide xi–xvi
Topic 1 What is Management? 1

1.1 Definition of Management 2
1.2 Who are Managers? 3
1.2.1 Functions of Management 3
1.2.2 Roles of a Manager 5
1.2.3 Skills of a Manager 7
1.3 Types of Managers 9
1.4 Evolution of Management Theory 10
1.4.1 Classical Perspective 11
1.4.2 Human Perspective 16
1.4.3 Quantitative Management Perspective 18
1.4.4 Contemporary Perspective 19
Summary 22
Key Terms 24
References 24
Topic 2 Planning 25
2.1 Definitions of Planning 26
2.2 How to Plan Effectively? 27
2.2.1 Determining Objectives 27
2.2.2 Building Individual Commitment 29
2.2.3 Preparing an Action Plan 29
2.2.4 Monitoring the Progress 30
2.2.5 Maintaining Flexibility 30
2.3 Types of Planning 31
2.3.1 Planning Based on Format 31
2.3.2 Planning Based on Organisational Hierarchy 32
2.3.3 Planning Based on Frequency of Use 33
2.4 Advantages and Disadvantages of Planning 35
2.4.1 Advantages of Planning 36
2.4.2 Disadvantages of Planning 37
Summary 39
Key Terms 40
References 40

iv  TABLE OF CONTENTS
Topic 3 Decision-making 42
3.1 Decision-making Environment 43
3.1.1 Decision-making in Certain Conditions 44
3.1.2 Decision-making in Uncertain Conditions 44
3.1.3 Decision-making in Risky Conditions 45
3.2 Rational Decision-making Process 46
3.3 Limitations in Rational Decision-making 49
3.3.1 Common Mistakes in Decision-making 50
3.3.2 Bounded Rationality 50
3.3.3 Risky Environment 51
3.4 How to Improve Decision-making 52
3.4.1 Using Specific Rules and Tests 52
3.4.2 Using Groups 55
3.5 Group Decision-making Methods 56
3.5.1 Brainstorming 56
3.5.2 Nominal Group Technique 58
3.5.3 Delphi Technique 58
3.5.4 Advantages of Group Decision-making 59
3.5.5 Disadvantages of Group Decision-making 60
Summary 63
Key Terms 64
References 64
Topic 4 Organisation Design 65

4.1 Factors that Influence Organisational Structure 66
4.1.1 Organisational Strategy 66
4.1.2 Size of the Organisation 67
4.1.3 Technology 67
4.1.4 Environment 68
4.2 Designing Organisational Structures 68
4.2.1 Functional Departmentalisation 69
4.2.2 Product Departmentalisation 70
4.2.3 Customer Departmentalisation 71
4.2.4 Geographic Departmentalisation 71
4.2.5 Matrix Departmentalisation 72
4.3 Authority 73
4.3.1 Chain of Command 73
4.3.2 Line and Staff Authority 74
4.3.3 Line and Staff Functions 75
4.3.4 Span of Control 75
4.4 Centralisation and Decentralisation 76

TABLE OF CONTENTS  v
4.5 Work Design 78

4.5.1 Work Specialisation 78
4.5.2 Job Rotation, Enlargement and Enrichment 79
4.6 Organisation Process Design 80
4.6.1 Emerging New Organisational Designs 81
Summary 86
Key Terms 87
Topic 5 Human Resource Management (HRM) 88

5.1 Determining the Needs of Human Resources 89
5.1.1 Job Analysis 91
5.1.2 Forecasting 92
5.2 Recruitment/Hiring 94
5.2.1 Internal Recruitment 94
5.2.2 External Recruitment 95
5.3 Selection of Qualified Employees 96
5.3.1 Application Forms and Resume 97
5.3.2 References and Background Checking 97
5.3.3 Selection Tests 98
5.3.4 Interviews 99
5.4 Development of Qualified Employees 101
5.4.1 Orientation 101
5.4.2 Training 102
5.5 Performance Evaluation 105
5.5.1 Who Should Evaluate? 107
5.5.2 Methods for Performance Evaluation 108
5.6 Retaining Qualified Employees 109
5.7 Employee Separation 111
5.7.1 Employee Termination 112
5.7.2 Downsizing 113
5.7.3 Retirement 114
5.7.4 Employee Turnover 114
Summary 117
Key Terms 119
Reference 119

vi  TABLE OF CONTENTS
Topic 6 Communication in Organisations 120

6.1 Definition of Communication 121
6.2 Types of Communication 123
6.2.1 Formal Communication 124
6.2.2 Informal Communication 128
6.2.3 Non-verbal Communication 128
6.3 Increasing Communication Effectiveness 129
6.3.1 Communication Barriers 130
6.3.2 Measures for Overcoming Communication Barriers 131
Summary 134
Key Terms 135
References 136
Topic 7 Motivation 137

7.1 The Classical Model and Scientific Management
7.1.1 Approaches to Motivation 139
7.2 Needs-based Approach 141
7.2.1 MaslowÊs Hierarchy of Needs 141
7.2.2 HerzbergÊs Two-factor Model 143
7.2.3 Acquired Needs Theory 145
7.3 Process-based Approach 146
7.3.1 Expectancy Theory 147
7.3.2 Equity Theory 148
7.3.3 Goal-setting Model 149
7.3.4 Reinforcement Model 150
Summary 154
Key Terms 155
References 156
Topic 8 Leadership 157

8.1 Leadership Approaches 158
8.1.1 Leader-centred Approach 158
8.1.2 Follower-centred Approach 163
8.1.3 Interactive Approach 164
8.2 Strategic Leadership 170
8.2.1 Visionary Leadership 171
8.2.2 Charismatic Leadership 171
8.2.3 Transactional Leadership 171
8.2.4 Transformational Leadership 172
Summary 174
Key Terms 175
References 175

TABLE OF CONTENTS  vii
Topic 9 Motivation 176

9.1 Definition of Control 177
9.1.1 Quality Assurance 177
9.1.2 Preparation to Face Future Changes 178
9.2 Steps in the Control Process 178
9.2.1 Establishing Standards 179
9.2.2 Measuring Performance 179
9.2.3 Making Comparisons 180
9.2.4 Taking Corrective Actions 180
9.3 Dynamic Process 181
9.4 Basic Methods of Control 181
9.4.1 Pre-control 182
9.4.2 Concurrent Control 182
9.4.3 Feedback Control 182
9.5 Forms of Control 183
9.5.1 Bureaucratic Control 183
9.5.2 Objective Control 184
9.5.3 Normative Control 184
9.5.4 Concertive Control 185
9.5.5 Self-control 185
9.6 Factors That Need to be Controlled 186
9.6.1 Finance 186
9.6.2 Human Resources 186
9.6.3 Internal Operations 187
9.6.4 Customers 187
Summary 189
Key Terms 190
References 191
Topic 10 Managing Teams 192

10.1 Differences between Group and Team 193
10.2 Advantages of Teams 194
10.3 Disadvantages of Teams 196
10.4 When is a Team Needed? 197
10.5 Types of Teams 199
10.6 Characteristics of Teams 201
10.6.1 Team Norms 202
10.6.2 Team Unity 202
10.6.3 Team Conflict 203
10.6.4 Phases of Team Development 203
10.7 Towards Building a High-performance Team 206

viii  TABLE OF CONTENTS
Summary 210
Key Terms 212
Reference 212
Topic 11 Innovation and Change 213

11.1 Why is Innovation Important? 214
11.1.1 Technology Cycle 214
11.2 Managing Innovation 216
11.2.1 Managing Innovation Resources 216
11.3 Organisational Change 218
11.3.1 Forces of Change 219
11.4 Managing Change 221
11.4.1 Aspects that Can Be Changed by Change Agents 223
11.5 Barriers to Change 226
11.5.1 Individual Barriers 226
11.5.2 Organisational Barriers 227
11.6 Overcoming the Barriers to Change 228
11.7 Ways to Manage Change 230
Summary 233
Key Terms 235
References 235
Answers 236

COURSE GUIDE

COURSE GUIDE  xi
COURSE GUIDE DESCRIPTION

You must read this Course Guide carefully from the beginning to the end. It tells
you briefly, what the course is about and how you can work your way through
the course material. It also suggests the amount of time you are likely to spend in
order to complete the course successfully. Please keep on referring to the Course
Guide as you go through the course material. It will help you to clarify important
study components or points that you might miss or overlook.
INTRODUCTION
BBPP1103 Principles of Management is one of the courses offered at Open
University Malaysia (OUM). This course is worth 3 credit hours and should be
covered over 15 weeks.
COURSE AUDIENCE
This is a compulsory basic course for undergraduate learners at Open University
Malaysia.
As an open and distance learner, you should be able to learn independently and
optimise the learning modes and environment available to you. Before you begin
this course, please ensure that you have the right course materials, understand
the course requirements, as well as know how the course is conducted.
STUDY SCHEDULE
It is a standard OUM practice that learners accumulate 40 study hours for every
credit hour. As such, for a two-credit hour course, you are expected to spend
80 study hours. Table 1 gives an estimation of how the 80 study hours could be
accumulated.

xii  COURSE GUIDE
Table 1: Estimation of Time Accumulation of Study Hours
Study
Study Activities
Hours
Briefly go through the course content and participate in initial discussions 3
Study the module 60
Attend 3 tutorial sessions 10
Online participation 12
Revision 15
Assignment(s) and examination(s) 20
TOTAL STUDY HOURS ACCUMULATED 120
COURSE LEARNING OUTCOMES

By the end of this course, you should be able to:
1. Elaborate the basic concepts, functions and basic skills in management;
2. Describe the management of an organisation including employees and
physical resources;
3. Explain the changes in management and the current management practice
in todayÊs business world; and
4. Apply the principles of management to the workplace.
COURSE SYNOPSIS
This course is divided into 11 topics. The synopsis for each topic can be listed as
follows:
Topic 1 gives an overview on management and the roles that must be played by
the manager. The management skills required at different levels of management
will also be introduced. You will be exposed to the evolution of management
thoughts that explains the thinking contributed by the main management
thinkers over the years.
Topic 2 discusses planning as one of the most important functions in

management. The processes involved in effective planning, types of planning as
well as the advantages and disadvantages of planning are discussed.

COURSE GUIDE  xiii
Topic 3 explains decision-making; the process of identifying problems,

generating alternative solutions, selecting and implementing the best solutions
available. This topic also discusses the situations of decision-making (certain
conditions, uncertain conditions and risky conditions) and the steps involved in
rational decision-making. The types of limitations in the process of decision-
making, which are bounded rationality, common mistakes and risky
environment, will also be discussed. Finally, this topic also elaborates the two
methods to improve the quality of decisions to be made using specific rules and
tests. Group decision-making is also being discussed.
Topic 4 discusses the design of an organisation. Several factors that influence the
structure of an organisation such as strategies, size, environment and technology
will be discussed. The types of organisations such as departmentalisation based
on functions, products, customers, geographical location and matrix will also be
explained. This is followed by management of organisations which involves
authority, chain of command, span of control, delegation, centralisation and
decentralisation. This topic will also introduce you to work design that involves
work specialisation, job rotation, job enrichment and job enlargement. Finally,
this topic will also explain the mechanistic and organic organisational designs
and several other types of new structures.
Topic 5 focuses on human resource management. This topic discusses human

resource planning, recruitment techniques and selection of employees. Also
discussed is the importance of training, performance evaluation, remuneration
and termination of employees.
Topic 6 covers communication, where the basic elements in a communication

process are described. The formal communication systems that are frequently
used, such as the vertical, horizontal and diagonal communication are also
presented. In addition, informal communication and non-verbal communication
will also be covered. This topic also discusses the methods to enhance
communication by identifying the barriers to communication including the steps
to overcome them.
Topic 7 discusses motivation. The two types of motivation models that will be
discussed are the needs-based and process-based models. These include
Maslow's hierarchy of needs model, HerzbergÊs two-factor theory, McClellandÊs
needs achievement model, expectancy model, equity theory, goal-setting theory
and reinforcement theory.

xiv  COURSE GUIDE
Topic 8 elaborates on leadership. This topic will discuss leadership based on

three approaches which are the leader-centred approach, follower-centred
approach and interactive approach. The leader-centred approach focuses on the
characteristics of the leaderÊs personality, behaviour of the leader and the style of
leadership. Under the behavioural approach, the researches by Ohio State
University, Michigan University and the management grid, will be discussed.
The follower-centred approach focuses on the variables of replacement and
neutralisation of leadership. In the interactive approach, the situation leadership
model, Fiedler contingency model, and the path-goal and the continuum of
leadership behaviour will also be covered. At the end of this topic, strategic
leadership will be presented.
Topic 9 covers control. This topic discusses the steps in the control process. Also
discussed are the three types of control methods and five forms of control.
Finally, this topic discusses the factors that must be controlled by organisations
such as finance, human resource, quality and also customer.
Topic 10 focuses on teams. This topic starts with the differences found between
teams and groups, the advantages and disadvantages of teams and when teams
are used. Also discussed are the types of teams that exist in an environment.
Several features of teams and issues that can influence the performance level of
teams will also be discussed.
Topic 11 discusses the importance of innovation and ways to manage innovation.

In addition, this topic will also discuss the forces of changes in organisations. The
factors that can cause changes to organisations, ways to manage change,
resistance to change and tactics to overcome resistance to change, will also be
explained.
TEXT ARRANGEMENT GUIDE

Before you go through this module, it is important that you note the text
arrangement. Understanding the text arrangement will help you to organise your
study of this course in a more objective and effective way. Generally, the text
arrangement for each topic is as follows:
Learning Outcomes: This section refers to what you should achieve after you
have completely covered a topic. As you go through each topic, you should
frequently refer to these learning outcomes. By doing this, you can continuously
gauge your understanding of the topic.

COURSE GUIDE  xv
Self-Check: This component of the module is inserted at strategic locations

throughout the module. It may be inserted after one subtopic or a few subtopics.
It usually comes in the form of a question. When you come across this
component, try to reflect on what you have already learnt thus far. By attempting
to answer the question, you should be able to gauge how well you have
understood the subtopic(s). Most of the time, the answers to the questions can be
found directly from the module itself.
Activity: Like Self-Check, the Activity component is also placed at various

locations or junctures throughout the module. This component may require you to
solve questions, explore short case studies, or conduct an observation or research.
It may even require you to evaluate a given scenario. When you come across an
Activity, you should try to reflect on what you have gathered from the module and
apply it to real situations. You should, at the same time, engage yourself in higher
order thinking where you might be required to analyse, synthesise and evaluate
instead of only having to recall and define.
Summary: You will find this component at the end of each topic. This component
helps you to recap the whole topic. By going through the summary, you should
be able to gauge your knowledge retention level. Should you find points in the
summary that you do not fully understand, it would be a good idea for you to
revisit the details in the module.
Key Terms: This component can be found at the end of each topic. You should go
through this component to remind yourself of important terms or jargon used
throughout the module. Should you find terms here that you are not able to
explain, you should look for the terms in the module.
References: The References section is where a list of relevant and useful

textbooks, journals, articles, electronic contents or sources can be found. The list
can appear in a few locations such as in the Course Guide (at the References
section), at the end of every topic or at the back of the module. You are
encouraged to read or refer to the suggested sources to obtain the additional
information needed and to enhance your overall understanding of the course.
PRIOR KNOWLEDGE
There is no prerequisite requirement for learners prior taking this subject.
ASSESSMENT METHOD
Please refer to myINSPIRE.

xvi  COURSE GUIDE
REFERENCES
Bateman, T. S., & Snell, S. A. (2008). Management: Building competitive
advantage (8th ed.). Boston, MA: Irwin-McGraw Hill.
Jones, G. R., & George, J. M. (2007). Contemporary management (5th ed.). Boston,
MA: Irwin-McGraw Hill.
Rue, L. W., & Byars, L. L. (2004). Management: Skills and application (11th ed.).
Boston, MA: Irwin-McGraw Hill.
TAN SRI DR ABDULLAH SANUSI (TSDAS)

DIGITAL LIBRARY
The TSDAS Digital Library has a wide range of print and online resources for the
use of its learners. This comprehensive digital library, which is accessible
through the OUM portal, provides access to more than 30 online databases
comprising e-journals, e-theses, e-books and more. Examples of databases
available are EBSCOhost, ProQuest, SpringerLink, Books24×7, InfoSci Books,
Emerald Management Plus and Ebrary Electronic Books. As an OUM learner,
you are encouraged to make full use of the resources available through this
library.

Topic  What is
1 Management?
LEARNING OUTCOMES
By the end of this topic, you should be able to:
1. Describe the meaning of management and manager;
2. Identify the functions of management, the roles and skills of a
manager;
3. Differentiate types of managers; and
4. Discuss the evolution of management theory.
 INTRODUCTION
Before we study in-depth the aspects of management, let us first understand what
management is.
Let us look at the difference between professionals and managers. Doctors,

accountants, engineers, architects and lawyers are good examples of the former.
As an example, a doctor treats patients using his ability and expertise. He does not
direct another person to perform his job functions on his behalf.
A nurse acts as the doctorÊs assistant. She does not have the same qualifications
and abilities as the doctor. So, she can only assist him in examining patients. In
short, the doctor cannot assign his job to the nurse or any other assistant. The same
applies to other professionals.

2  TOPIC 1 WHAT IS MANAGEMENT?
Professionals are very different from managers. The latter, in a nutshell, direct
people to perform tasks efficiently and effectively. Management means ensuring
that a job is carried out well until completion. This means a manager does not
necessarily need to know how to perform a specific job but needs to act as a
coordinator to ensure that certain tasks are carried out smoothly.
For example, the manager of a shoe factory does not necessarily have to know the
details of shoemaking but he needs to ensure that all resources allocated to him,
including human resources, i.e. the employees under him, function satisfactorily
and that the objectives set by the organisation are achieved. Furthermore, the
manager needs to make sure that the objectives are achieved efficiently and
effectively.
Therefore, this topic will introduce you to the meaning of management and
manager, the functions of management, the roles and skills of a manager, types of
managers and the evolution of management theory. Happy reading!
1.1 DEFINITION OF MANAGEMENT

First and foremost, what does management mean?
Management is the process of overseeing and coordinating resources

efficiently and effectively in line with the goals of an organisation.
What is effectiveness? Effectiveness is the attainment of goals which enables the

realisation of the objectives of an organisation or to put it briefly, „doing the right
thing‰.
On the other hand, what is efficiency? Efficiency is performing a job using

minimum effort, cost and wastage or simply, „doing things right.‰ The end result
of an efficient and effective management is the success of an organisation.
A person can either be described as efficient but not effective or effective but not
efficient in managing a specific task. Both elements are not interdependent. Let us
say a factory worker found a shortcut to do a task with lower cost but by doing so,
he deviated from the ethical objectives of the organisation. For example, he
disposes production waste by dumping it into the nearby river. However, one of
the organisationÊs ethical objectives is to maintain harmony in the community. So,
the factory worker, through his action, deviated from the objective although he
was efficient. In short, he was efficient but not effective.

TOPIC 1 WHAT IS MANAGEMENT?  3
In contrast, an employee is considered effective but not efficient if he uses an old

method to resolve a management issue even if it could have been resolved
efficiently without deviating from the objectives of the organisation. For example,
in delivering information, the employee chose to send a letter via post instead of
e-mail. Although it did not affect or is in conflict with the organisationÊs objectives,
the employee had wasted a part of the resources allocated to him.
Both efficiency and effectiveness cannot be excluded from the definition of

management as these are essential elements in defining management.
SELF-CHECK 1.1
In your words, explain what is management.
1.2 WHO ARE MANAGERS?

Did you know that there are three ways to understand managers? They are:
(a) A classic way of analysing the task of management is by examining
management from the point of the functions performed by managers;
(b) The second approach is to observe the roles of managers; and
(c) The third is to analyse the skills required by managers.
Now, what is a manager?
A manager is an individual who is directly responsible for ensuring that tasks

are performed by people or employees in an organisation.
Next, we will look at the functions of management.
1.2.1 Functions of Management

Management is the process of overseeing and coordinating resources efficiently
and effectively in line with the goals of an organisation. In short, management
refers to the process of delegating tasks to employees to be performed successfully.

Thus, the manager is involved in various basic activities. These activities are
usually grouped as management functions. These functions are illustrated in
Figure 1.1.
Figure 1.1: The main functions of management

Source: Lewis, Goodman & Fandt (2001)
Let us look at Table 1.1 which describes more on each management function.
Table 1.1: Management Functions
Function Description
Planning It defines the objectives to be achieved for a given period and what needs
to be done to achieve the objectives. All management levels in an
organisation need to be involved in planning. Managers need to develop
objectives in line with the overall strategies of the organisation.
Organising Determines what tasks are to be done; who will implement and
coordinate them; how the tasks are to be grouped; who reports to whom;
and where decisions are to be made. The manager needs to logically and
effectively organise the information, resources and workflow of the
organisation so that he is able to react positively to changes in the
business environment.
Leading This involves motivating subordinates, selecting the most effective
communication channels, resolving conflicts and directing as well as
guiding the actions of others with the intention of achieving all
objectives. The effective leader of today has to be visionary in foreseeing
the future, sharing the vision and encouraging employees in realising the
vision.
Controlling It measures performance in all pre-determined objectives, determines
reasons for deviation and takes appropriate actions, where necessary.
Controlling is an important function in the management process as it
provides ways to ensure that the organisation moves towards achieving
its objectives.

The management process at all levels of an organisation involves planning,

organising, leading and controlling resources in an organisation. A manager does
not necessarily have to know how to perform a specific job as he only acts as a
coordinator to ensure the smooth running of operations.
For example, the manager of a clothes manufacturing factory does not necessarily
have to know in detail the techniques of making clothes. However, he needs to
ensure that each resource under his control, such as capital, factory and
manpower, functions properly and that the objectives outlined by the organisation
are met.
Nevertheless, all the functions highlighted earlier are merely for classification
purposes in management studies. In reality, management functions usually
overlap. Moreover, the functions in management are interdependent. For example,
a well-structured organisation will find it impossible to advance if there is no
thorough planning. The same applies to an organisation led by an efficient director
but with poor control systems. Thus, all functions are equally important in an
organisation.
EXERCISE 1.1
Explain each of the management functions discussed earlier.
1.2.2 Roles of a Manager

As stated earlier, there are many ways to identify a manager. A manager can be
identified not only through the functions he performs but through other ways as
well. A professor of management, Prof Henry Mintzberg, carried out a detailed
analysis of managers by walking around and observing what managers did at
work (Lewis et al., 2001). He observed that managers not only planned, organised,
led and controlled but also played other important roles as described in Table 1.2.

Table 1.2: Roles of a Manager
Role Description
Figurehead A manager must carry out ceremonial duties. For example, the vice-
chancellor of a university must be involved in the launching of
programmes conducted at the university. The head of a department is
responsible for entertaining his clients.
Leader A manager indirectly functions as a leader. Each manager must
function as a leader in motivating and encouraging his subordinates.
The manager steers members of his unit to continuously work
effectively to achieve the goals of the unit and organisation besides
resolving problems and issues.
Liaison officer A manager conveys relevant information to individuals outside his
unit or to other relevant parties outside his organisation. The manager
will allocate time for interacting with people outside his organisation.
Thus, a manager acts as a channel for communication between his
department and those within as well as those outside his organisation.
For example, a human resource manager may liaise with the finance
manager to check on funds allocated for the recruitment of new
employees by the organisation before embarking on a recruitment
drive.
Spokesperson The manager of an organisation usually acts as its spokesperson. For
example, a supervisor will usually ensure that the operations manager
is furnished with the latest information on the running of his
production plant. Similarly, the general manager of a factory will lobby
local authorities for a new tender.
Negotiator No organisation is without problems. A manager is compelled to find
a solution for each of its problems regardless of complexities. The
manager needs to spend a lot of time in discussions as he plays the role
of a negotiator. For example, a manager will negotiate with the trade
union representative to reach an amicable agreement on salaries.
Initiator Two management experts, Sumantra Ghoshal and Christopher Bartlett
(Dessler, 2001), highlighted an additional role of a manager as the
initiator of corporate actions and transformations. Moreover, an
excellent manager is one who cultivates three processes that steer his
employees towards achieving initiatives for change. These processes
are as follows:
(i) Entrepreneurship Process

The manager will try to improve his unitÊs performance and
when he gets a good idea, he will launch a programme to realise
the idea.

Researches carried out in Japan, the United States and Europe

showed that a successful manager is one who puts in a lot of time
and effort in steering his employees towards thinking like an
entrepreneur. To meet this objective, the manager needs to
empower, support and provide incentives for employees to attain
self-direction.
(ii) Capability Development Process

In a technology-centred world, conglomerates need to fully
utilise their advantage as a large establishment not only in
matters of economies of scale but also in the aspects of enhancing
the knowledge and abilities of its employees.
A manager who succeeds will focus on creating a conducive
environment that encourages employees to shoulder additional
responsibilities. He will also focus on preparing the necessary
training and guidance to build their self-confidence. The
successful manager will give employees room for making
mistakes without the fear of being penalised while undergoing
training and encourage them to learn from their mistakes.
(iii) Reformation Process

A successful manager will identify situations that might pose
challenges to the strategies of the organisation and assumptions
made. In other words, the manager is capable of cultivating a
querying disposition such as why something is done in a certain
way and whether there are alternative ways of doing it.
Source: Lewis et al. (2001)
ACTIVITY 1.1
Which one is the most crucial role of a manager? What kind of roles
should a successful manager play? Discuss these questions in the
myINSPIRE forum.
1.2.3 Skills of a Manager

When an organisation shortlists employees for the position of a manager, it will
usually select individuals with technical, interpersonal and conceptual skills.
Therefore, the third approach to understanding the tasks of managers is to analyse
the skills required to carry out the tasks.

Figure 1.2 shows three types of essential skills required at each level of
management.
Figure 1.2: Skills required at different levels of management
The arrow pointing upwards shows the type of skills that are increasingly needed
by top-level management. Meanwhile, the arrow pointing downwards shows the
type of skills that are increasingly needed by lower-level management or line
managers. These skills are further explained in Table 1.3.
Table 1.3: Three Skills of a Manager
Skill Description
Conceptual Conceptual skill refers to the ability to view the organisation as a whole,
and the impact the different sections have on the organisation as a whole
and on each other. It also involves observing how an organisation
adapts to or is affected by external environmental factors such as
society, economic pressure, customers and competition. An efficient
manager should be able to identify, understand and solve various
problems and critical perspectives. The need for conceptual skills
becomes increasingly crucial when a manager climbs higher in the
management hierarchy.
Interpersonal Interpersonal skill is the ability to work well with other people.
Managers with good interpersonal skills work more effectively in a
group, encouraging other employees to provide their ideas and
comments as well as being receptive to the needs and views of others.
The manager will also, indirectly, become a good listener and speaker.
In fact, interpersonal skills are crucial, regardless of the level of
management.

However, a lower-level manager will be more occupied in solving

technical problems while a manager at the middle and higher levels will
be mainly occupied with dealing directly with others.
Technical Technical skill is the ability to apply procedures, techniques and
specialised knowledge required for a certain task. For a shoe factory
supervisor, for instance, the technical skills required will include the
skills involved in making the shoe from the raw material until the final
product is ready. In another example, a housing developerÊs technical
skills will include ways to complete the development of a housing
estate.
Technical skills are crucial for lower-level managers as they supervise

employees in the manufacturing or service sectors. The manager needs to
have technical knowledge and skills to train new employees and assist
them in solving work-related problems. Skills and technical knowledge
are required to solve operational problems that cannot be handled by
employees. Nevertheless, the higher the position of a manager in a
hierarchy, the fewer the technical skills are required.
SELF-CHECK 1.2
1. What are the roles required of a manager?
2. What are the skills needed by a manager?
1.3 TYPES OF MANAGERS

Most organisations have a few types of managers. In a university, for example,
there are the vice-chancellor, deputy vice-chancellors, deans, deputy deans, heads
of departments and heads of courses. The same goes for other employees such as
human resource manager, treasurer, head of security and so on.
Corporate sectors, on the other hand, have presidents, vice- presidents, operations
managers, sales managers, finance managers, supervisors and so on.
All of the above-mentioned are managers as they plan, organise, lead and control
employees and tasks in an organisation with the aim of achieving its organisational
goals. There are many ways of categorising managers. For example, we can
differentiate managers based on level, position and organisational function. These
types of manager are explained in Table 1.4.

Table 1.4: Three Types of Managers
Type Description
Top-level They are the highest-level managers in a firm. They are commonly
managers known as executives. Titles given include president, chief
executive officer (CEO), vice-president or chief financial officer.
Middle-level They are under the top-level managers and are usually designated
managers as managers.
Lower-level They are the lowest in the management ladder. They are usually
managers or line called supervisors. They include production supervisors who
managers oversee the work of employees in a factory.
All these levels have many similarities. Managers at all levels plan, organise, lead
and control employees and tasks in an organisation. Managers also spend time
with their employees through conversations and monitoring; provide influence
and motivation; and attend face-to-face conferences and committee meetings.
Nonetheless, there are two main differences among the three management levels.
Firstly, top-level and middle-level managers have managers as employees under
them. In brief, they manage other managers, unlike line managers.
Managers at different levels utilise their time differently. Top-level managers

spend most of their time planning and setting goals. Middle-level managers define
goals in specific projects for lower-level managers to implement. On the other
hand, lower-level management or line managers focus on giving directions and
controlling their subordinates at work daily to ensure the success of a project.
SELF-CHECK 1.3
Based on what you have learned, identify the differences among the
three levels of management and tabulate your answer.
1.4 EVOLUTION OF MANAGEMENT THEORY

Lastly, let us look at the evolution of management theory. From the start of the
19th century until the 20th century, managers and scholars formed a theoretical
framework to explain what they believed to be good practices of management.
Their efforts led to four different classes of perspectives on management – classical,
human, quantitative and contemporary. Each perspective is based on different
assumptions towards the objectives of the organisation and human behaviour.

Figure 1.3 will help you understand the chronological sequence of the
perspectives.
Figure 1.3: The evolution of management theory
You might wonder why it is important and necessary to study the historical
development or evolution of management thought. Studying history enables us to
learn from past mistakes to avoid making them again in the future. History also
allows us to study past successes that can be emulated accordingly in the future.
Most importantly, we must understand the reasons behind such occurrences in
order to improve in the future. These four perspectives are further explained in the
next subtopics.
1.4.1 Classical Perspective

This perspective existed in the 19th and early 20th centuries. It focused on the
rational and scientific approaches to the study of management and on finding
ways to mould an organisation to become more efficient. There are three sub-
classes in this perspective, which are:
(a) Scientific Management

This approach existed at a time when productivity was deemed critical by
businessmen. Businesses were growing rapidly but businessmen were facing
a critical shortage of workers. Hence, management was continuously finding
ways to improve the performance of its employees. The focus on improving
employeesÊ efficiency is known as the scientific management approach. A
number of researchers contributed towards the findings of scientific
management. Among them were Frederick Winslow Taylor, Frank and
Lilian Gilbreth, and Henry Gantt (see Figure 1.4).

Figure 1.4: Among the scientific management philosophers
Frederick Taylor (1856–1915), a mechanical engineer, was of the opinion that

problems arose mainly due to poor management practices and, to a lesser
degree, problems with employees. He stressed that management itself
needed to transform and that the transformation method could only be
established through scientific research. He suggested that decisions based on
„rules of thumb‰ be substituted with established procedures, after analysing
each situation. TaylorÊs theory, which stated that the productivity of the
labour force could be improved through scientifically-based management
practices, earned him the title „father of scientific management‰. To improve
the work performance of employees, Taylor conducted a research known as
„time and motions study‰.
From the research findings, Taylor identified five principles of management

that could boost production efficiency. The five principles are as follows:
(i) Using the scientific approach to determine best practices and not
relying on rules of thumb;
(ii) Selecting suitable employees to perform a particular task. Suitability
here refers to both mental and physical aspects;
(iii) Training and developing an employee so that he is able to perform a
given task according to established procedures;
(iv) Giving monetary incentives to ensure that employees perform a task
accordingly; and
(v) Reassigning all responsibilities pertaining to planning and organising
to the manager.

Taylor was not alone in this research. Henry Gantt (1861–1919), a friend of
Taylor, focused on the control system in the scheduling of production. His
famous invention, the Gantt chart is still used today in planning the schedule
of a project and has also been adapted in computerised scheduling
applications.
The husband and wife team of Frank (1868–1924) and Lillian Gilbreth
(1878–1972) strived to further expand the scientific management approach.
Lillian was a pioneer in the field of industrial psychology and contributed
greatly to human resource management. She believed that if scientific
management was widely utilised, the abilities of each employee would grow
considerably.
(b) Bureaucratic Management

Bureaucratic management is an approach to management that is based on
guidelines, hierarchy and clear division of labour as well as rules and
procedures. Max Weber (1864–1920), a German social theorist (see
Figure 1.5), introduced many bureaucratic concepts.
Figure 1.5: Max Weber
Among the components of bureaucracy introduced are:

(i) Authority and clearly defined responsibilities;
(ii) Positions in an organisation that are structured according to hierarchy;
(iii) Promotions based on qualifications;
(iv) Records of all administrative actions and decisions to ensure continuity
of organisational rules;
(v) Separation of ownership and management; and
(vi) Guidelines implemented for all employees without bias.

The bureaucratic approach strives to increase efficiency and ensure

continuity of all operations in the organisation. This approach differs from
scientific management, which only focuses on the employee as an individual.
Nevertheless, this principle, used to improve efficiency, may also cause

inefficiency. Rigid guidelines create red tape and slow down the decision-
making process, resulting in the inability to change swiftly to adapt to the
needs of the environment and, at times, create conflicts in performing a task
professionally.
(c) Administrative Management

The administrative management approach focuses on the organisation as a
whole. Among the contributors to this approach were Henri Fayol, Mary
Parker Follett and Chester I Barnard (see Figure 1.6).
Figure 1.6: Among the administrative management philosophers
Henri Fayol (1841–1925), a Frenchman, is considered the pioneer of

administrative theory as he introduced the organisational principles and
administrative functions. His most relevant contribution was presenting the
definition and roles of an administrator. Fayol defined administration and
management as planning, organising, directing, coordinating and
controlling. He identified 14 principles of management as explained in
Table 1.5.

Table 1.5: Fourteen Principles of Management
Principle Description
Division of labour This is a concept on specialisation of work based on the
assumptions that:
• No one can do all the work;
• Each job requires different skills; and
• Repetition of work will increase efficiency.
Authority The right to give directions and power to be complied with.
Here, authority at the office has to be differentiated from
personal authority.
Discipline Based on respect and conformity.
Unity of command An employee should receive instructions from one
superior only.
Unity of direction One superior and one direction for a particular activity
with the same objective.
Subordination of Personal interest should not exceed or precede over
individual interests common interest.
to the general
interests
Remuneration Salary payment is based on various factors.
Centralisation The centralisation of work depends on the situation and
formal communications channel.
Scalar chain This is about the line of authority and its formal
communication channel.
Order Resources are allocated in the right place at the right time.
Where possible, people related to a specific kind of work
should be assigned to the same location.
Equity All employees should be treated as equally as possible.
Stability of tenure Management should make retaining of productive
employees a priority.
Initiative Management should encourage worker initiative in
new/additional activity.
Esprit de corps A term, borrowed from the French language, that means
loyalty and devotion in uniting the members of a group. It
emphasises on harmony and unity in an organisation.

Mary Parker Follett (1868–1933) was trained in the field of philosophy and
political science. Her approach focused on the involvement of employees and
sharing of information among managers. She stressed the importance of
common goals among subordinates to reduce personal conflicts. FollettÊs
ideas were contrary to the ideas in scientific management but conformed with
modern management. Her approach focused on the individual and not
engineering techniques. Follett stressed on issues relevant to the 1990s such as
mankind, ethics, authority and leadership to inspire employees to excel in
their jobs. Her main concepts included delegation of authority, leading
employees and not commanding them as well as allowing employees to act
according to the situations.
Chester I Barnard (1886–1961) introduced the informal organisation concept.

An informal organisation exists in a formal organisation. He believed that
organisations were not mere machineries and that informal relations could be
a powerful tool and an asset to an organisation if properly managed. He also
introduced the acceptance theory of authority, which stated that employees
have options in complying with the directives of the management. Managers
should treat their employees well as the acceptance of authority by employees
is critical in ensuring the success of an organisation.
Overall, the classic perspective towards management is very important and

has given organisations a basic skill to increase productivity and garner
effective support from employees.
1.4.2 Human Perspective

Mary Parker Follett and Chester I Barnard were also the main founders of the
human approach in management which emphasises the importance of
understanding human behaviour, employeesÊ needs, the attitude of employees in
a working environment besides social interaction and group processes. The
categories of the human approach are human relations movement, human
resource approach and social science approach. These categories are further
explained in Table 1.6.

Table 1.6: Three Categories of Human Approach
Category Description
Human relations This approach is based on the premise that effective control
movement comes from individual employees rather than strict control
by authorities. This approach originated from research that
was conducted at the Western Electric CompanyÊs
Hawthorne Works in Chicago between the years 1927 and
1932. The research was overseen by Elton Mayo and Fritz
Roethlisberger, two psychologists from Harvard
University. The research originally intended to study the
relationship between physical conditions and production.
Light irradiation temperature and other factors related to
the working environment were selected as physical
conditions. The original conclusion obtained by the
researchers contradicted the results they anticipated.
Three series of experiments were conducted and the results

of all the experiments contradicted what were expected. In
the first experiment, lighting radiation served as a physical
situation. It assumed that levels of brightness would
facilitate higher output for the employees. From this, it was
found that when the lighting radiation was brightened or
dimmed, the production output would continue to
increase. This meant that there were other factors that
might have caused the increase in productivity. It was the
same for the second and third experiments where other
physical situations were chosen; the results could not
clearly explain the causes for increase in production.
In conclusion, the Hawthorne research shows that the

productivity of employees increases because they had
received special treatment from management. The human
relationship was connected to the increase in output.
Group pressure will also affect a personÊs behaviour.
Group quality is very effective in determining the output
of an employee and monetary compensation is less
effective as compared to group quality, sentiments and
guarantee. As an overall conclusion, the Hawthorne
research generated an era of awareness that humans are
complex and they are an influential input to determining
the performance of an organisation.

Human resource The human resource approach stresses that employees

approach productivity will increase when the employeesÊ
satisfaction of basic requirements are met. This movement
is likened to a dairy farm where satisfied cows produce
more milk. From the management point of view, satisfied
employees will increase their work output. This approach
combines the work structure with the motivation theories.
Among the main proponents of this approach were

Abraham Maslow and Douglas McGregor (we will discuss
this further in Topic 7 on motivation).
Social science approach The social science approach developed the theories of
human behaviour based on the scientific and learning
methods. It was derived from the fields of sociology,
psychology, anthropology, economy and other disciplines
to understand the behaviour of employees and interactions
in an organisation.
This approach can be seen in most companies. The

economic and sociology sectors have significantly
influenced how managers probe further into an
organisationÊs strategy and structure. Psychology has
influenced the management approach through motivation,
communication, leadership and personnel management.
1.4.3 Quantitative Management Perspective

This approach began in the era of World War Two, where quantitative techniques
were used in the handling of ships and bombs by the British army. The three main
concepts of this approach are the management of science, management of
operations and management of information systems. These three concepts are
further explained in Table 1.7.

Table 1.7: Three Main Concepts of Quantitative Management
Concept Description
Management of This approach was put forward to resolve the problems that arose
science due to World War Two. A group of mathematicians, physicists and
scientists was formed to resolve military issues. As these were
recurring issues that involved the transfer of equipment and
humans quickly and efficiently, these techniques were applied by
large-scale firms.
Management of This approach refers to the management sectors that focus on the
operations production of physical products or services. The members of
operations management use quantitative techniques to resolve
manufacturing issues. Among the methods usually used are
forecasting, inventory modelling, linear and non-linear
programming, and theories of rotation, scheduling, simulation and
break-even analysis.
Management of This approach is a new sub-sector in the quantitative management
information approach. Systems are designed to provide relevant information to
systems managers at the appropriate time and cost. With the creation of
high-speed digital computers, it opens up the potential for
management to utilise this as a tool. These computer systems
compile information to assist in managementÊs decision-making
process.
1.4.4 Contemporary Perspective

Management is naturally complex and dynamic. The elements of each approach
which have been discussed are still being used now. The humanity approach is the
most evident approach but there have been some changes to this approach. The
two main theories under this perspective are the systems theory and contingency
approach.
(a) Systems Theory

A system comprises closely-related sections that function in general to
achieve the same objective. A system functions to transform input found
from the external environment to output. There are five components of a
system as explained in Table 1.8.

Table 1.8: Five Components of a System
Component Description
Input Equipment, people, finance or information source that are used
to produce products or services.
Transformation The use of production technology to transform input to output.
process
Output Comprises products and services of an organisation.
Feedback Decisions that will influence the selection of input used in the
next process cycle.
Environment Includes social, political and economic influences.
Ideas of systems that influence the mindset of management comprise of the

following (see Table 1.9).
Table 1.9: Five Ideas of a System
Idea Description
Open system A system that interacts with the external environment to
survive.
Closed system A system that does not interact with the external environment
to survive and often fails.
Entropy The tendency for a system to become obsolete.
Synergy Individuals, groups and organisations can achieve more if they
cooperate instead of working alone.
Sub-system Sections of a system that are interdependent.
(b) Contingency Approach

The classical management approach is perceived as a universal observation.
The management concept is perceived as universal when the management
practice is the same in all situations.
In business studies however, an alternative observation arose.
A person learns management by experiencing the problems of case

studies. The contingency approach combines the universal and case
observations. Under this approach, a managerÊs action depends on the
main contingencies in an organisational situation.

EXERCISE 1.2
True (T) or False (F) Statements
1. A new wave manager will not perform classical management

functions. ____
2. Conceptual skill is the most important skill for managers in the

lower levels. ____
3. A manager who has made a number of mistakes is excluded from

the momentum movement path to the higher level management
because he is not sensitive to others. ____
4. For most managers, the knowledge, skills and abilities that brought
early success in their careers do not necessarily help them in
becoming successful managers. ____
5. Scientific management focuses on the productivity of an employee.

____
Multiple Choice Questions
1. Which function in management involves monitoring improvements

and taking corrective actions whenever needed?
A. Planning
B. Organisation
C. Leadership
D. Control
2. What is the difference between a traditional manager and a current

manager?
A. Total experience gained by the manager
B. The way the manager implements traditional management
functions
C. Total number of traditional management functions
implemented
D. Only traditional managers will implement traditional
management functions

3. What is the new element in the current management functions that

does not clarify the functions of traditional management?
A. Realisation of work
B. Facing competition
C. Managing individuals, projects and processes
D. Leading
4. Which of the following is NOT a step involved in the realisation of work?

A. Determining the objectives that need to be achieved
B. Planning how to achieve the objectives specified
C. Collecting and managing the required information to make the
best decision
D. Evaluate the competition levels in the market
5. Whose responsibility is it to set objectives that are consistent with an

organisationÊs objectives as well as plan and implement the
objectives?
A. Top-level management
B. Middle-level management
C. Lower-level/line management
D. Team leader
• Management is the art of directing other people in performing work by

emphasising the aspects of effectiveness and efficiency in implementation.
• Effectiveness is achieving the objectives that enable the realisation of an

organisationÊs objective or doing the job the right way.
• Efficiency is implementing the work by using minimum ability, cost and

wastage or doing things right.
• A manager is an individual who is directly responsible for ensuring that tasks

are performed by employees in an organisation.

• There are four main functions of management namely planning, organising,

leading and controlling.
• The manager plays several roles in an organisation. The roles include

figurehead, leader, liaison officer, spokesperson, negotiator and idea initiator.
• Management skills are crucial to ensure the success of a manager. These consist
of conceptual, interpersonal and technical skills.
• Managers are divided into three types namely top-level manager, middle-level
manager and lower-level/line managers.
• There are four different classes of perspectives on management – classical,

human, quantitative and contemporary. Each perspective is based on different
assumptions towards the objectives of the organisation and human behaviour.
• Classical perspective can be divided into scientific management, bureaucratic

management and administrative management.
• Among the pioneers of classical perspective are Frederick Winslow Taylor,

Frank and Lilian Gilbreth, and Henry Gantt.
• Mary Parker Follett and Chester I Barnard are the main founders of the human
perspective in management which emphasises the importance of
understanding human behaviour, employeesÊ needs, the attitude of employees
in a working environment besides social interaction and group processes.
• The categories of the human perspective are human relations movement,

human resource approach and social science approach.
• Quantitative management approach began in the era of World War Two,

where quantitative techniques were used in the handling of ships and bombs
by the British army. The three main concepts of this approach are the
management of science, management of operations and management of
information systems.
• There are two main theories under contemporary approach namely the
systems and contingency theories.

Administrative management Liaison officer

Bureaucratic management Management
Classical perspective Management of information systems
Conceptual skills Management of operations
Contemporary approach Management of science
Contingency approach Manager
Controlling Middle-level managers
Effectiveness Negotiator
Efficiency Organising
Figurehead Planning
Human perspective Quantitative management approach
Human relations movement Scientific management
Human resource approach Social science approach
Initiator Spokesperson
Interpersonal skills Systems theory
Leader Technical skills
Lower-level or line managers Top-level managers
Leading
Dessler, G. (2001). Management: Leading people and organizations in the

21st century. Upper Saddle River, NJ: Prentice Hall International.
Lewis, P. S., Goodman, S. H., & Fandt, P. M. (2001). Management: Challenges in

the 21st century. Cincinnati, OH: South-Western College Publishing.

Topic  Planning
2
LEARNING OUTCOMES
1. Describe the meaning of planning;
2. Identify the five main processes involved in effective planning;
3. Explain the three types of planning; and
4. Compare the advantages and disadvantages of planning.
 INTRODUCTION
Planning is a management function, besides organising, controlling and leading.
Thus, to enable an organisation to function effectively, good planning is crucial.
According to C. W. Roney (Certo, 2000), generally, planning is done for two

purposes. Firstly, it is done as a form of protection for an organisation. This means
that when planning is done, a manager can forecast the effects from each of the
suggestions or alternative actions that will be carried out. In this situation, the
manager will choose the alternative action that provides the best results to the
organisation and protect it from any decision that is not profitable.
Secondly, planning is done to increase the affirmative levels of an organisation.

For example, when an organisation opens a new branch, it is not a coincidence but
the result of detailed planning. With proper planning, managers will be able to
ensure what needs to be done, how to carry out the actions, why it has to be done,
when to do it, where to do it, who should implement it and so on. Without good
planning, an organisation will not be able to expand.

26  TOPIC 2 PLANNING
From these early discussions, we can conclude how important planning is in order
to achieve success in an organisation. Therefore in the next subtopics, we will learn
in detail the definitions of planning, how to make effective plans, types of planning
as well as the advantages and disadvantages of planning. Happy reading!
2.1 DEFINITIONS OF PLANNING

Before discussing further on organisational planning, it is appropriate to first
analyse the definition. Let us look at Table 2.1 which gives you a few definitions
of planning that have been proposed by Western management intellectuals.
Table 2.1: Definitions of Planning
Source Definition
Lewis, Goodman & Planning means determining the objectives that are desired to be
Fandt (2001) achieved and deciding on the actions that are needed to be taken
in order to achieve the objectives.
Certo (2000) Planning is a proposal of actions that need to be made by an
organisation to achieve its objectives.
Rue & Byars (2004) Planning is a process to determine the objectives that an
organisation desires to achieve in the future, including the actions
that need to be taken in order to achieve them.
Robbins (1996) Planning involves the definition of objectives, the formation of
strategies and action plans to coordinate the organisationsÊ
activities.
Bartol & Martin Planning refers to the process of determining an organisationÊs
(1994) objectives and making decisions on the best way to achieve them.
From the definitions highlighted, planning involves the activities of identifying the
objectives that need to be achieved, including determining the strategies that need
to be adopted in order to achieve the objectives set.
In summary, planning emphasises the end result, including the means to

implement the task. With planning, managers would be able to determine how to
distribute the available resources efficiently in order to achieve the organisationÊs
objectives.

TOPIC 2 PLANNING  27
ACTIVITY 2.1
Based on what has been discussed, provide a definition of planning
according to your understanding. Compare your answer with your
coursemates in the myINSPIRE forum.
2.2 HOW TO PLAN EFFECTIVELY?

Effective planning involves five main processes (Williams, 2013):
(a) Determining the objectives that need to be achieved;
(b) Building individual commitment towards achieving the objectives;
(c) Forming action plans;
(d) Monitoring progress; and
(e) Maintaining flexibility.
These processes are not only meant to establish planning but also to ensure that
the planning is implemented correctly and effectively.
2.2.1 Determining Objectives

As stated earlier, the first step in planning is to determine the objectives to achieve.
A good objective should have the SMART features ă specific, measurable,
attainable, realistic and timely ă as illustrated in Figure 2.1.
Figure 2.1: Five features to achieve good objectives

Let us look at Table 2.2 which explains more on these features.
Table 2.2: Five Features to Achieve Good Objectives
Feature Description
Specific objective The objective must be stated specifically. Suppose an
organisation intends to increase its production this year.
Then, it must state clearly how much of an increase it
wants to achieve, such as, 10 or 20 per cent or more.
Measurable objective A good objective is an objective that can be measured
quantitatively. This measurement is important to
determine whether the objective can be achieved or not.
Based on the example just now, the increase in
production can be measured by calculating the products
produced. If after calculations, it was found that there
was an additional 10 per cent increase compared to what
was assumed previously, the objective that was planned
earlier, that is, the increase of 10 per cent has been
achieved.
Attainable objective A good objective is an objective that is not impossible to
achieve. An attainable objective will motivate employees,
while an unattainable objective will lead to low morale.
Realistic objective A realistic objective is reasonable. Suppose the production
capacity of Company A had reached the maximum level.
The management then decided to set the objective of
increasing production by another 30 per cent. This
objective is unrealistic as it cannot be achieved since the
production capacity has already reached the maximum
level. Therefore, it is important for the manager of an
organisation to evaluate the capabilities of the organisation
before making any plans.
Timely objective A good objective usually outlines the time period for its
achievement, for instance, one year or three years. With
this time period, all the resources can be combined and
focused towards achieving the objective.

2.2.2 Building Individual Commitment

Even though objectives have been set, there is no guarantee that all the individuals
in the organisation will be driven to achieve them. Hence, after determining the
objectives, the next step that needs to be taken is to instil a sense of commitment in
each of the organisationÊs individuals towards achieving the objectives. There are
four methods that can be used to establish commitment by the members of an
organisation. Let us refer to Table 2.3 for the methods of establishing commitment.
Table 2.3: Methods of Establishing Commitment
Method Description
Determination of Usually when a decision has been made through cooperation
objectives by between members, it will create a sense of ownership towards the
cooperating with all decision made. When the members feel that the decision was
members of the made based on their agreement, it will create a sense of
organisation commitment to ensure the success of its implementation. This
method is the best approach and is commonly used in
organisations to increase the commitment of employees.
Reasonable The objective set has to be reasonable so that employees will be
objectives motivated to perform their task until the planned objective is
achieved. Objectives that are unrealistic with high targets are
difficult to achieve, while objectives that are too low will bore the
employees.
Announcement of Generally, when an objective is publicly known, we will be
objectives to embarrassed if we fail to achieve it. Hence, we will work harder
members in the to ensure the planned objective is achieved.
organisation
Getting support To facilitate work operations, it will be good to have upper
from upper management support. This support can be in the form of money,
management opinion, advice and others. With this support, all dealings will be
easier and indirectly motivate us to achieve the objectives.
2.2.3 Preparing an Action Plan

Action plans will be prepared after identifying the commitment that will be
provided by members of the organisation towards achieving the objectives that
have been set. This action plan will explain the steps to be taken to implement the
task, the individuals involved, resources and time needed to achieve the objectives.

2.2.4 Monitoring the Progress

The fourth step in planning is to monitor progress. It aims to identify whether the
plans are working well or not. Two methods to monitor progress are explained in
Table 2.4.
Table 2.4: Two Methods to Monitor Progress
Method Description
Determining long- Long-term objectives are actual objectives that need to be
term and short-term achieved while short-term objectives are formed for the purpose
objectives of motivating an organisationÊs members and employees
temporarily while working towards the attainment of the long-
term objectives.
For example, the long-term objective of Organisation A is to

generate a net profit of RM10,000 in the year 2010. The short-
term objective that has been determined is to increase the net
profit in the account every month in the year 2010. If the net
profit increases every month, it will motivate employees to
continue generating more profit until it reaches the targeted
RM10,000 by December 2010.
Obtaining Frequent performance feedback enables employees and the
performance manager to monitor their progress levels. Should there be any
feedback from deviation from the objective or original strategy, then
participating parties adaptation efforts, setting direction and work strategies will be
immediately done. Feedback also ensures that the manager
does not deviate from the original objectives and identifies the
mistakes made so that corrective actions are undertaken.
2.2.5 Maintaining Flexibility

Good planning is planning that has flexibility or elasticity. At times, the action plan
and certain objectives cannot be implemented as planned. Sometimes, objectives
are found to be difficult to achieve and action must be taken to modify the
planning. Changes made might be from the aspect of work strategy, scope of
objectives to be achieved or the resources involved. Such flexibility in planning is
important because if there are any problems related to the planning process, then
it will not affect the overall planning made and maybe only a portion needs to be
improvised. Thus, good planning should include features of flexibility so that it
can be modified when necessary.

SELF-CHECK 2.1
1. Why is effective planning in an organisation important?
2. Explain briefly the processes involved in planning.
2.3 TYPES OF PLANNING

Although planning is defined as the process of determining the objective and
identifying the methods to achieve the objectives, planning can consist of several
types. It exists in several forms and sizes as well as has its own meanings. Dessler
(2001) categorised planning into three main dimensions:
(a) Planning based on format;
(b) Organisation hierarchy; and
(c) Frequency of use.
Figure 2.2 summarises the types of planning based on these dimensions.
Figure 2.2: Types of planning
These three methods are further explained in the next subtopics.
2.3.1 Planning Based on Format

Planning differs from the aspect of format, that is, the way it is presented. If
planning is written in the form of statements that state what needs to be achieved
and how it is achievable, it is called descriptive planning. One example is the
planning of an individualÊs career.
There is also planning that is stated in the form of financial statements. This type
of planning is called budgeting as this plan is stated quantitatively by using
financial terms.
Meanwhile, graphic planning refers to planning that explains what needs to be

achieved and how to achieve it in the form of charts. An example of graphic
planning is the Gantt chart. This chart illustrates the time period required in order
to implement several activities in the form of a bar chart.
2.3.2 Planning Based on Organisational Hierarchy

Apart from formats, planning is also different from the aspect of time frame. Some
planning is for long term, while others are for short term. Planning is done by
management based on the hierarchy of the organisation.
As mentioned in the previous topic, there are three levels of management in an

organisation:
(a) Top-level management;
(b) Middle-level management; and
(c) Lower-level management.
An organisationÊs objectives have to be determined at each level of the organisation.

This type of planning is known as top-to-bottom planning and comprises strategic
planning/plans, tactical plans and operation plans. Let us refer to Table 2.5 for
further details.
Table 2.5 Planning Based on Organisational Hierarchy
Organisation
Planning Explanation
Hierarchy
Top-level Strategic This is the overall planning of the organisation that
management plan explains the organisationÊs general direction and how
it will position itself in the market compared to its
competitors (positioning). Strategic planning usually
encompasses a long period of time and is made for a
period of two to five years in the future. The top
management will be responsible to establish this plan.

Middle-level Tactical This plan is prepared and implemented by the middle

management plan management level. It explains how an organisation
will distribute and use the resources, funds (monetary)
as well as the individuals in the organisation in order
to achieve the objectives that have been determined.
This tactical planning usually involves a moderate time
period and is made between six months and two years.
Lower-level Operational This is the daily planning which is prepared and
management plan implemented by the lower-level management who are
also known as the line managers. Normally, this
planning will explain the production and distribution
of products for a period of 30 days to six months.
Even though each management level does its own planning, the planning will only
be effective when the objectives and actions made at the lower level supports and
is in accordance with the objectives and actions determined by the top and middle
levels of management.
2.3.3 Planning Based on Frequency of Use

Apart from format and organisational hierarchy, planning is also different from
the aspect of frequency of use. Some planning is only used once whereas some are
used repeatedly.
Planning that is only used once is known as one-time usage planning. It is

specifically prepared to fulfil specific purposes, such as the opening of a new
branch. Even though the organisation may open more than one branch, each plan
made will only be applicable to that specific branch only. This is because each
branch will definitely have different resources whether in terms of money,
manpower, customersÊ distribution, size of the branch area and so on.
Therefore, the plan for the opening of a new branch in Gombak, for instance,
cannot be used for the opening of another new branch in Alor Setar. Other
examples of this type of planning will be the budget prepared for a specific time
frame.
Planning that is repeatedly used is known as standing plans. This plan is used to
manage situations that frequently arise in an organisation such as employeesÊ
disciplinary problems. There are three types of standing plans as explained in
Table 2.6.

Table 2.6: Three Types of Standing Plans
Type Description
Policy Policy is the general guidelines or principles to manage a situation.
Procedure Procedure refers to the actions or processes that must be taken if a certain
situation arises. It is more specific compared to policy.
Regulations Regulations are the specific guidelines when taking an action. Regulations
are normally more specific compared to procedures.
The following example will facilitate the understanding of standing plans.
Syarikat Suria Sdn Bhd had set a policy that its employees are responsible for
ensuring that every product sold to customers is in good condition. For any
damaged product sold, customers can claim compensation from the company.
However, before compensation is paid, there are several procedures that must
be complied with. First, to record the damage in the inventory system and
second, to obtain prior approval from the departmental manager for the
payment of compensation. However, the regulations state that any report on
the damage must be made within a period of 30 days from the date of purchase.
Observe that all the activities involved, which are the activity of selling the product
to customers, compensation claims from customers as well as the payment of
compensation by the business, are repeated activities in a business; hence, policies,
procedures and regulations had been fixed as guidelines to manage all these
activities.
Therefore, each time any of these activities occur, the same policy, procedures and
regulations will be applied. In summary, the same planning (that is, the policy,
procedures and regulations) can be used repeatedly to manage repeated activities.
EXERCISE 2.1
What is the difference between one-time usage planning and fixed
planning?

ACTIVITY 2.2
In the myINSPIRE forum, discuss the following questions:
(a) Reflect on the fates of some well-known companies in Malaysia that

had to liquidate or sell their shares to other companies due to their
failure to maintain their position in the commercial world. Could
this be because of their failure to practise initial planning?
(b) In your opinion, what are the implications to the organisation if the
objectives determined by management are inaccurate and
irrational?
2.4 ADVANTAGES AND DISADVANTAGES OF

PLANNING
Before we end this topic, let us identify the advantages and disadvantages of
planning. Even though planning provides certain advantages, it also has its
disadvantages. By understanding these, a manager will be able to assess the
quality of the planning implemented. Let us look at Table 2.7 which summarises
the advantages and disadvantages of planning.
Table 2.7: Advantages and Disadvantages of Planning
Advantages Disadvantages
 Generates intensive efforts towards  Restricts changes that occur in the
an organisationÊs objectives. organisation.
 Creates continuous efforts among  Planning does not take into
managers in the organisation consideration the uncertainties of
hierarchy. future assumptions.
 Explains the direction of the  Separates between the planner and
organisation to the managers and implementer.
employees.
 Assists managers in establishing
work strategies.
 Creates positive impacts on
individuals and organisations.
These advantages and disadvantages are further explained in the next subtopics.

2.4.1 Advantages of Planning

Table 2.8 explains more on the advantages of planning.
Table 2.8: Advantages of Planning
Advantage Description
Generate intensive Employees will be more hardworking if there is planning,
efforts that is, through well-defined objectives and work strategies.
Work performance can be further improved as they are aware
of the direction in which they need to move.
Continuous effort Planning involves a specific period. Managers who engage in
planning know that the objectives can only be achieved when
the time comes. Hence, intensive efforts will continue until
the planned objectives are successfully achieved and the
managers and the employees will work more enthusiastically
throughout the period of achieving the objectives.
Unity of direction With planning, employees will know the objectives which
need to be achieved including strategies that must be
followed. Indirectly, all members of the organisation have
direction and will move towards that same direction or
objective.
Establishing work When a senior manager sets an objective to be achieved,
strategy automatically, the managers at the middle and lower levels
will question the ways to achieve that targeted objective. In
order to achieve it, managers will establish strategies which
will serve as guidelines in determining the activities that need
to be implemented.
Positive impact on Planning has been proven to be effective for organisations
individuals and and individuals. Generally, organisations that engage in
organisation planning will obtain more profits and expand much faster
compared to organisations that do not engage in planning. It
also applies to individuals, whether manager or employee.
Normally, the work performance is much better if they have
objectives and strategies when doing their work.

2.4.2 Disadvantages of Planning

Nevertheless, planning has its disadvantages as well. Table 2.9 describes the
disadvantages of planning in detail.
Table 2.9: Disadvantages of Planning
Disadvantage Description
Restricting Usually, planning is made for a specific time period. When changes
changes and take place in an environment, then the existing plans need to be
adaptation updated again. These changes to the environment can occur from
the aspect of change of taste among consumers, technology
changes, legislation and others. Nevertheless, individuals or
organisations are sometimes too committed to achieving the
objectives that have been planned before this until they do not
realise that the strategies made are no longer suitable and must be
revised. The failure to realise this need for change will cause
implementation failure in the present plans.
Uncertainty Planning is usually based on the assumptions of future occurrences.
towards For example, if a manager presumes that the demand of a certain
assumptions product will increase in the future, then plans are made to increase
the production of that product in order to meet the demand. In
order to accomplish a plan, assumption on future issues must be
accurate. A lot of uncertain elements will exist when forecasting for
the future. If the forecast made is wrong, then the planning made
based on that assumption will fail in the end.
Separation Generally, planning is done by top-level managers while its
between implementation is carried out by the employees at the lower levels.
planner and This segregation can sometimes cause the plans made to be
implementer incompatible with the capabilities of the employees. This happens
when the person who planned is not directly involved in the
operations division. As such, he or she does not know in detail the
capability levels and constraints faced at the operation level,
resulting in unsuccessful planning.
ACTIVITY 2.3
Based on what you have learned, discuss in the myINSPIRE forum the
importance of effective planning and its implications towards your
company if the planning failed to achieve the organisationÊs objectives.

EXERCISE 2.2
Essay Question
Explain the disadvantages of planning.
1. Which management process determines the objective that needs to

be achieved as well as the methods to achieve it?
A. Formulation of strategy
B. Tactical implementation
C. Planning
D. Administration
2. What is the first step in effective planning?

A. Maintain flexibility in planning
B. Form an action plan
C. Determine objectives
D. Build commitment towards achieving the objective
3. Which type of standing plan provides specific guidelines for taking

a particular action?
A. Rules
B. Policy
C. Procedure
D. Regulations
4. „Ahmad, please make sure that you explain to your staff the steps
for setting up the new work process, the budget given and the
people involved,‰ said Encik Ali.
What step in the planning process is Encik Ali referring to?

A. Determine objectives
B. Build individual commitment
C. Prepare an action plan
D. Monitor progress

5. Who is responsible for the forming of tactical plans?

A. Top-level managers
B. Middle-level managers
C. Lower-level managers
D. All the managers above
1. Planning is made based on assumptions in the future. ____
2. One of the disadvantages of planning is the restriction of changes

and adaptation in an organisation. ____
3. Operation planning is made to determine how an organisation can

utilise the resources, budget and individuals in order to achieve a
specific objective. ____
4. Standing plan is planning that is specifically made for a certain

purpose. ____
 Planning involves the activities of identifying the objectives that need to be

achieved, including determining the strategies that need to be adopted in order
to achieve the objectives set. In summary, planning emphasises the end result,
including the means to implement the task.
 There are five steps or processes to form effective planning:
– Determine the objectives that need to be achieved;
– Establish individual commitments towards achieving the said objectives;
– Form action plans;
– Monitor the progress of planning; and
– Maintain the flexibility of the planning that has been done.

 There are three main types of planning namely planning based on format,
organisation hierarchy and frequency of use.
 Among the advantages of planning are generating intensive efforts,

continuous effort, unity of direction and establishing work strategy.
 The disadvantages of planning are restricting changes and adaptation,

uncertainty towards assumptions and separating between planner and
implementer.
Advantages Organisational hierarchy

Attainable Planning
Disadvantages Realistic
Format Specific
Frequency of use Strategic plan
Measurable Tactical plan
Operational plan Timely
Bartol, K. M., & Martin, D. C. (1994). Management. Malvern, PA: American

Institute for Chartered Property Casualty Underwriters, Incorporate.
Certo, S. C. (2000). Modern management: Diversity, quality, ethics & the global
environment. Upper Saddle River, NJ: Prentice Hall.
Dessler, G. (2001). Management: Leading people and organizations in the 21st

century. Upper Saddle River, NJ: Prentice Hall International.


Robbins, S. P. (1996). Organizational behavior: Concepts, controversies,

applications (7th ed.). Englewood Cliffs, NJ: Prentice Hall International.
Williams, C. (2013). Management (7th ed.). Mason, OH: South-Western Cengage

Learning.

Topic  Decision-
3 making
LEARNING OUTCOMES
1. Identify the types of environments for decision-making;
2. Recognise the processes involved in making rational decisions;
3. Identify the limitations in making rational decisions;
4. Describe the methods for improving decision-making;
5. Explain the methods for group decision-making; and
6. Identify the advantages and disadvantages of group decision-
making
 INTRODUCTION
Did you know that one of the important duties of a manager is decision-making.
What is decision-making?
Decision-making is defined as a process to identify problems, generate

alternative solutions, select the best solutions available and implement them.
In other words, it is a process of selecting a solution from a few available

alternatives.

TOPIC 3 DECISION-MAKING  43
When discussing decision-making, another important concept that needs to be

taken into consideration is the making of rational decisions.
Rational decision-making refers to making decisions based on facts, opinions

and reasonable reasons.
Generally, decisions that are made based on facts and opinions are the best
decisions. Nevertheless, not all decision makers can make decisions that are
rational. This is due to the limitations that exist in the environment or within the
decision maker.
Take note that the words „decision maker‰ and „manager‰ will be used
interchangeably in this topic. This is because in the context of an organisation, a
manager is the person responsible for making decisions. Therefore, whether the
term „manager‰ or „decision maker‰ is used, it refers to the same individual – the
person making the decision. Let us learn more on decision-making in the next
subtopics. Happy reading!
3.1 DECISION-MAKING ENVIRONMENT

A good decision is not only influenced by the experience, efficiency and skills of
the decision maker but also the adequacy and validity of the information obtained
that are related to the business environment (Abu Mansor et al., 1999). The
information mentioned herein refers to the information that can help us in making
a forecast on situations that will occur in the future.
For example, is it possible for us to forecast accurately the actions of competitors

in the future or what is the interest rate for next year, or what are the changes in
legislations that may happen in the future and so forth? If we could obtain
sufficient information, it will be easier for us to forecast situations that might occur
in the future. Thereafter, the process of decision-making will be easy and accurate.
Generally, there are three information situations in the process of decision-making,

whether:
(a) Information is completely obtained;
(b) Information is incompletely obtained; or
(c) There is no information at all.

44  TOPIC 3 DECISION-MAKING
This will create three decision-making environments or situations as shown in

Figure 3.1.
Figure 3.1: Three decision-making environments
Let us discuss these decision-making environments further in the next subtopics.
3.1.1 Decision-making in Certain Conditions

The decision maker obtains complete information in order to facilitate his decision-
making. He is able to predict with certainty what situations will occur in the future.
By knowing what will occur in the future, the results generated by each of the
alternative decisions will be able to be ascertained or known with certainty. The
alternatives that give the best results will be selected and then implemented.
An example of decision-making in certain conditions is the following situation:
Suppose you were offered two alternative investments – Investment A and

Investment B. Investment A gives a return of five per cent in two years whereas
Investment B gives a return of six per cent also in two years. You have sufficient
information related to these investments. You know the types of investment,
period of investment and the rate of return. From this complete information,
you are able to know the return in revenue from each investment made. A
rational decision maker will definitely choose the alternative investment that
gives the highest returns, which is Investment B.
3.1.2 Decision-making in Uncertain Conditions

In this situation, the decision maker does not have any information that would
help in his decision-making. Therefore, he is uncertain of the future and also
cannot predict the results of each alternative decision made. Consequently, the
decision maker has to use his experience and discretion to reach a decision.
When making decisions in uncertain conditions, the decision maker needs to have
a high propensity towards risks. What is risk propensity?
Risk propensity refers to the tendency of a person to take or avoid risk.
Individuals who have a high propensity towards risks dare to take risks in any
decision made. Since there is no information available to facilitate the decision-
making process, it is important for the decision-maker who operates in such
situations to have higher propensity towards risk.
Let us look at the following example which illustrates decision-making in an

uncertain condition:
Company ABC has been conducting its rattan furniture business for a long time
in the area of Bandar Banjau. Now, Company ABC has decided to introduce a
new product into its market, that is, decorative items made from ceramic. As
these ceramic decorations are new to the people of Bandar Banjau and there
have been no previous traders selling them, Company ABC cannot forecast the
response of consumers towards this product. This is because there is no
previous data that can be used as a guide. Will the residents of Bandar Banjau
be interested in ceramic products? Since the reaction of consumers is not
predictable, the result of each alternative decision made is also unpredictable.
In this case, the alternative decisions that can be taken into consideration will be
from the aspect of setting the selling price. Will the ceramic decorations be sold at
a price of RM10, RM7 or RM5? Since there is no information available to be used
as a guideline, then normally, the decision made will depend on the discretion of
the decision maker.
3.1.3 Decision-making in Risky Conditions

Most managers or decision makers have actually operated in these conditions.
They have information but it is incomplete. Therefore, they will not know for sure
the situations that will occur in the future. Minimal information will only give
some insight in predicting what will occur. Whether the situation will really
happen or otherwise cannot be completely ascertained. Usually, the situations can
only be assumed to occur based on the information obtained and the percentage
of probability that the situations will occur.

For example, from the monthly sales statement, it is noticed that total sales had
increased each month. Therefore, you are able to assume that the company will
obtain a net profit this year after making losses last year. Without obtaining other
information such as operational cost, change of taste in consumers and loan
interest, you can only assume that the company will obtain a profit based on the
sales trend for the past few months. Then, you state that the probability that the
company will obtain profits is 60 per cent and the probability that the company
will make losses is 40 per cent. With this, you make a decision to increase
investment. Here, you made a decision in a risky condition, that is, it is not known
whether the company will really be making a profit or otherwise.
SELF-CHECK 3.1
1. Explain the determining factors in decision-making.
2. What are the steps that you think are required of a manager in
decision-making?
EXERCISE 3.1
Explain the three different decision-making environments that are faced
by managers.
ACTIVITY 3.1
If you are a manager, what will be the factors that enable you to make a
risky decision? Discuss your answer with your coursemates in the
myINSPIRE forum.
3.2 RATIONAL DECISION-MAKING PROCESS

Although decision-making seems simple, the decision made must be rational. As
stated before, the decision has to be based on facts, opinions and reasonable
reasons. Systematic evaluations have to be conducted in the overall decision-
making process. In summary, making a rational decision can be defined as a
systematic process of defining problems, evaluating decision alternatives and
selecting the best alternative decisions available.

Williams (2013) stated that there are six steps or processes that need to be followed
to make rational decisions. These steps are shown in Figure 3.2.
Figure 3.2: Six rational decision-making processes

Source: Williams (2013)
Now, let us discuss each process further (see Table 3.1).
Table 3.1: Six Rational Decision-making Processes
Process Description
Defining problems The first step in rational decision-making is to identify the
problem. At this stage, a manager needs to identify the problems
faced, the source of the problems and how to resolve them.
For example, your office is facing delayed work problems. When

analysed, it is found that the problems originate from the
shortage of computers in the office. Therefore, the management
agrees to purchase more computers for office use.
Identifying decision After identifying the problems, the next step in rational decision-
criteria making is to establish the decision criteria. The decision criteria
refer to the standards or features that will be considered when
making a decision.
Referring to the previous example, since the management had

decided to purchase new computers, then what are the criteria
that will be taken into consideration when selecting new
computers? Price, quality, compatibility and warranty are the
decision criteria.

Allocating weight After identifying the criteria that need to be considered when
to each criterion making a decision, the next step will be to allocate weight to each
of the criteria. One method that is normally used for this purpose
is to make relative comparisons. In this method, each criterion
will be compared directly with others. This is to identify which
is the most important criterion, the second important criterion
and thereafter the less important criterion for the decision
maker. Thus, decision criteria are arranged according to
priorities. The priorities of an individual might be different from
those of another individual.
Based on the example given earlier, you might place the quality
factor as the most important, followed by the compatibility
factor, pricing factor and lastly, the warranty factor.
Generating Once you have identified and allocated weights to the criteria,
alternative the next step is to develop as many alternative solutions as
solutions possible. The more alternatives generated, the better is the
process.
Based on the examples above, in order to purchase a new

computer, the alternatives that can be taken into consideration
will be Acer, HP, iMac and others.
Evaluating At this level, every alternative will be compared with each
alternatives decision criterion. This is to determine the extent of the
alternatives to fulfil the decision criteria that had been set.
Usually, this level takes the longest time as there is a lot of
information that must be collected first before comparisons can
be made. It also involves a huge sum of money.
This means that all the alternative solutions, Acer, HP, iMac, will
be evaluated from the aspects of quality, compatibility, pricing
and warranty (decision criteria). The more decision criteria that
are fulfilled by an alternative, the better the alternative will be.
Selecting the The last step in the process of making rational decisions is to
optimal decision select the best alternative solution available. The best alternative
is the alternative that fulfils all the decision criteria according to
the importance that has been arranged. However, if there are no
alternatives that can fulfil all the decision criteria according to
the arrangement set, then the alternatives that fulfil the most
criteria will be selected.

3.3 LIMITATIONS IN RATIONAL DECISION-

MAKING
Generally, decision-making will become better if the manager or decision maker
follows thoroughly all the steps that have been discussed earlier. Nevertheless,
sometimes there are obstacles that confuse the decision maker.
For example, lack of information. This problem can cause difficulties in defining the
problem. Financial factors can also become another obstacle in rational decision-
making.
Supposing the finance is limited; hence, maybe not all the alternative solutions can
be considered. Besides that, time limitation is another factor in making the optimal
decision. This will restrict the alternative solutions available. All these limitations
cause complications to the manager in making the best or optimal decision.
Based on Williams (2013), generally, the limitation process of decision-making can

be divided into three categories:
(a) Common mistakes;
(b) Bounded rationality; and
(c) Risky environment.
Figure 3.3 illustrates more on these three limitations.
Figure 3.3: Limitations in rational decision-making

SELF-CHECK 3.2
What are the obstacles that may complicate decision-making?
3.3.1 Common Mistakes in Decision-making

Managers cannot make rational decisions as they are sometimes influenced by
intuition and biases. Most management decisions are influenced by intuition, that
is, the managersÊ instinct. This usually happens with an experienced manager. This
situation may occur because the issue that needs to be resolved is similar to a
previous situation that had happened. Managers who depend on intuition have a
tendency to neglect information from the data available. As a result, the decisions
made are not based on facts and reasons.
Sometimes, managers also make biased decisions. This happens when a manager
assumes that an issue that will happen in the future is similar to a previous incident
he had experienced.
For example, Company ABC Sdn Bhd had recruited Ali, a graduate from Jaya
University as their employee. However, Ali failed to perform. The companyÊs
management decided not to recruit any more graduates from Jaya University. The
decision was one-sided or biased. Managers should not assume that all graduates
from Jaya University are like Ali, as he does not represent all graduates from that
university.
3.3.2 Bounded Rationality

Bounded rationality means that a manager tries to adopt a rational approach in
decision-making but is hindered by certain limitations such as limited resources,
lack of information and the capacity to analyse limited decisions.

There are four problems that obstruct managers from rational decision-making as
Table 3.2: Four Problems that Obstruct Managers from Rational Decision-making
Problem Description
Limited resources Resources consist of time, money, equipment and manpower.
Resources that are limited can influence decision-making. For
example, assuming that previously the organisation had planned
to set up several new branches, but its income had decreased due
to an economic downturn. As a result, the plan to set up new
branches was postponed. Observe that due to the limited
financial resources, what was done is not the same with what had
been originally planned.
Excessive additional Advancement in technology has caused information dumping to
information happen. Some information can be easily obtained but at the same
time can cause problems to the manager. This is because the
manager is unable to handle all the information that is available.
As a result, only certain information is considered. Thus,
decisions made may not be the best as not all information is taken
into consideration.
Memory problems Memory problems can cause difficulties for the manager. Even
though information is usually recorded, sometimes information
is overlooked or unrecorded.
In order to make rational decisions, all required information need

to be obtained. To compile all this required information might
involve time and high costs. Maybe not all the information can be
compiled. Therefore, an optimal decision cannot be made.
Expertise problems Expertise problems cause the decision maker to encounter
problems in arranging, understanding and summarising the
information available. This is because no individual is an expert
in every sector. Although the information can be analysed by
computer, the decision maker will still require specific skills to
understand the results that have been obtained. As a result of this
lack of expertise, the evaluation made may not be the best.
3.3.3 Risky Environment

As stated earlier, some managers might make decisions in a risky environment.
This means that the manager has information to assist in his decision-making even
though the information obtained is not complete. As a result, the decision made
can either be successful or otherwise.

EXERCISE 3.2
What are the limitations in rational decision-making? Describe the
limitations.
3.4 HOW TO IMPROVE DECISION-MAKING

How do we improve our decision-making skill? The quality of a decision can be
improved by applying the following methods:
(a) Using specific rules and tests in the process of decision-making; and
(b) Making decisions as a group.
These two methods are further explained in the next subtopics.
3.4.1 Using Specific Rules and Tests

As stated just now, decision-making can be improved by using specific rules and
tests.
(a) Rules of Decision-making

What is decision rule?
Decision rule refers to a set of criteria that needs to be completed to

enable an alternative solution to be accepted.

There are two types of rules in decision-making as explained in Table 3.3.
Table 3.3: Two Types of Rules in Decision-making
Type Description
Rules of priority According to this rule, all decision criteria will be arranged
according to its priorities. Each alternative solution will be
assessed based on the criteria one by one. A good
alternative must fulfil the most important criteria followed
by the second and subsequent criteria. The best alternative
will be the one that fulfils the most criteria highlighted.
For example, Ahmad plans to rent a shop lot to conduct

his business. The criteria that have been considered and
arranged according to priority are as follows:
(a) Located in the town area;
(b) Large area;
(c) Rental not exceeding RM500 per month; and
(d) Has electricity and water utilities.
Assume that there are four alternative shops that can be

considered – A, B, C and D. After the evaluation, it was
found that Alternative A fulfils the criteria of (i) and (iv),
Alternative B fulfils the criteria of (i) and (ii), Alternative C
fulfils criteria (i), (iii) and (iv) and Alternative D fulfils
criteria (ii) and (iii). Although Alternative C fulfils three of
the four criteria mentioned, Alternative B is the best option
as it fulfils the two highest criteria.
Do remember that the best alternative does not necessarily

fulfil the most important criteria but the alternative that
fulfils the highest criteria or priorities according to its
arrangement.
Rules of minimum Sometimes, managers must make decisions such as „yes‰
condition or „no‰ and „accept‰ or „reject‰. In this situation, the
decision maker needs to set a minimum condition that
must be fulfilled by each of the alternative solutions in
order to enable it to be accepted. Any alternative that
cannot fulfil even one condition would be rejected.

For example, before a sponsor accepts or rejects the

applications of students for scholarships, he will probably
set some minimum conditions such as:
(a) Management courses;
(b) Education for first degree; and
(c) Yearly family income not exceeding RM18,000.
The studentÊs application must pass all these conditions for

it to be approved.
(b) Various Variable Tests

Both the decision-making methods above can only make a separate
evaluation on each of the alternatives. However, there are situations that
require the decision maker to assess the effects of the implementation of
various alternatives at the same time. Sometimes, this combination provides
optimal result.
Evaluation is made through the implementation of several variable tests. It

is quite complicated and requires the decision maker to learn the methods in
designing experiments including ways to compile and analyse the statistical
data that will be generated.
The following example shows the use of various variable tests in decision-
making (see Table 3.4).
Table 3.4: Various Variable Tests for Recreational Park
Alternative Strategy
Profit
Test Two-in-one Tickets Free Food Coupon Free Parking (RM)
(A1) (A2) (A3)
1. 1,500
2. × × 1,000
3. × × 3,800
4. × × 2,500

The management of a recreational park is drafting a strategy to increase the

number of visitors to its park every Monday, which is the day that has the
lowest number of visitors every week. Among the alternative strategies that
have been planned are:
(a) (A1) Two-in-one tickets whereby one visitor ticket can admit another
visitor for free;
(b) (A2) Free food coupon for each visitor; and
(c) (A3) Free parking for visitors.
Hence, every Monday, experiments are conducted to study the results. In the
first week, there were no changes and the income for that week was RM1,500.
In the second week when strategies A1 and A2 were initiated, the income for
that week was RM1,000. In the third week, when strategies A2 and A3 were
introduced, it generated an income of RM3,800. In the fourth week, when
strategies A1 and A3 were combined, the income generated was RM2,500.
The experiments clearly showed that strategies A2 and A3 (free food coupons
and two-in-one tickets) were the best combination of solution.
3.4.2 Using Groups

Most current organisations use groups to make decisions. For example, a
university academic committee is established to evaluate the effectiveness of a
programme or a group of employees are assigned to determine a new product
which will be introduced to consumers. This happens because group decision-
making has more advantages compared to individual decision-making.
ACTIVITY 3.2
1. Based on your experience, state the methods to improve a decision that
you have made. Discuss your answer with your coursemates in the
myINSPIRE forum.
2. In your opinion, is a collective decision better than an individual

decision? Why? Compare your answer with your coursemates in the
myINSPIRE forum.

EXERCISE 3.3
Explain how decision-making can be further improved.
3.5 GROUP DECISION-MAKING METHODS

Generally, there are three main methods that a group uses to generate results, as
illustrated in Figure 3.4.
Figure 3.4: Three methods of making group decisions
These methods are further explained in the next subtopics.
3.5.1 Brainstorming
What is brainstorming?
Brainstorming is a technique that encourages the generation of ideas as much

as possible without any criticism.
It is a group decision-making process in which negative feedback on any

alternative presented is forbidden until all alternatives have been studied
(Certo, 2000). What is the purpose of brainstorming? The purpose of
brainstorming is to extract ideas from each group member openly. A group
brainstorming activity will usually be effective when the group consists of five to
seven individuals.
In summary, all group members will propose their own ideas according to their
turn. In the early stage, all ideas, whether good or bad, suitable or not suitable, are
accepted without being evaluated. By doing so, it will motivate all members in the

group to generate more ideas. This process will continue until no more ideas are
proposed. After all the ideas have been collected, evaluation will be made by
discussing the advantages and disadvantages of the ideas given. Then, the best
idea will be accepted. Figure 3.5 summarises the processes involved in
brainstorming.
Figure 3.5: The brainstorming process
This method is good for generating ideas. However, it also has some weaknesses.
For example, it restricts the production of ideas. As members in the group voice
their ideas by taking turns, sometimes, an idea that had arisen might be lost while
a member waits to speak. At times, group members may feel that their ideas are
not good enough and feel shy about expressing them to the group. These
disadvantages restrict the actual function of brainstorming.
How do we overcome these problems? In order to overcome them, currently,

brainstorming by computers is used. In this method, group members do not have
to wait for their turn to state their opinions. They can directly type into the
computer and therefore, the loss of ideas does not happen. At the same time, the
group members will still remain anonymous. Therefore, the members will not be
shy or uncomfortable when evaluation of their ideas is done.
SELF-CHECK 3.3
1. In your own words, explain brainstorming.
2. Briefly explain the processes involved in brainstorming.

3.5.2 Nominal Group Technique

What is nominal group technique?
Nominal group technique is a method of decision-making whereby group

members propose and evaluate their ideas individually before sharing them
with the other group members.
There are four steps involved in this technique as explained in Table 3.5.
Table 3.5: Four Steps in Nominal Group Technique
Step Description
Step 1 Each group member records his individual ideas on the decision or
problem discussed.
Step 2 Each member will read out his ideas to everyone in the group for sharing.
These ideas are usually written on the blackboard/whiteboard for review
and reference by all group members.
Step 3 A discussion is held to evaluate the advantages and disadvantages of
each idea.
Step 4 Members secretly vote on a piece of paper. The idea that receives the
highest number of votes is accepted and implemented.
3.5.3 Delphi Technique

Next is the Delphi technique. What does it stand for?
The Delphi technique is a decision-making method where a panel that

comprises several experts will answer questions and work together until a
solution is reached for a specific issue.
This technique does not require the panel members to meet face to face. They
might interact by mail, e-mail and others.

The steps involved in this technique are:

(a) Experts in related departments are identified and selected as panel members.
(b) Problems are composed in the form of a questionnaire comprising open-
ended questions.
(c) The questionnaire is given to the panel members with the request for them
to propose solutions.
(d) Each expert completes the questionnaire and returns it to the manager.
(e) All the answers are summarised and bound together in the form of a report.
It is returned to all panel members together with a more specific and detailed
questionnaire form that has been reviewed.
(f) Panel members read the report to find out the opinions and proposals of the
other members relating to the problem. They also complete the second
questionnaire.
(g) This process is repeated until a unanimous decision is achieved by the
members on the best solution.
EXERCISE 3.4
State the advantages of brainstorming electronically as compared to face
to face.
3.5.4 Advantages of Group Decision-making

Group decision-making offers several advantages compared to individual
decision-making. Basically, these groups are formed to focus the experience and
skills possessed by specific groups of individuals on a specific problem or
situation.
This means that the group offers more knowledge and skills compared to
individuals. With this additional information, the group is able to handle the
problem better and the source of the actual problem can also be known. At the
same time, more alternative solutions can be generated.
The backgrounds of these members are varied. For instance, there are members
from the marketing department, operations department, training division and
others that enable this problem to be viewed from various perspectives.

Involvement in the group usually provides satisfaction to all the members. They
feel satisfied that the decisions made were proposed by them. Hence, they will
accept the decisions that have been made and are committed to accomplishing its
implementation.
3.5.5 Disadvantages of Group Decision-making

Although group decision-making offers many advantages, it also has certain
disadvantages. The most obvious disadvantage is that it takes a long time. This
includes time for the appropriate meeting to gather all the group members, time
used for discussions, time wasted due to resolving a problem or conflict that may
arise within the group and others.
In addition, the discussion may also be controlled by certain individuals. This will
limit the involvement of other members in the discussion and therefore affect the
quality of the decision made. Sometimes, a group objective is disregarded by the
group if the objective is perceived as a personal objective.
Groupthink is another frequent problem that occurs when working in a group.

Groupthink refers to a situation where panel members try not to propose ideas
that are different from other group members due to numerous reasons, such as
friendship, to avoid conflict, afraid of being boycotted and others. In the end, the
discussion cannot be made rationally and it affects decision-making.
All these are part of the advantages and disadvantages of group decision-making.
The manager needs to know the advantages and disadvantages before he can
determine whether to use the group or individual decision-making approach.
Table 3.6 summarises all the earlier explanations.
Table 3.6: The Advantages and Disadvantages of Group Decision-making
Advantages Disadvantages
• Sharing of experience and skills • Time consuming.
among group members. • Discussion might be controlled by
• More information, data and facts can certain individuals.
be compiled. • Have to compromise.
• Problems can be seen from various • High costs involved if it involves
perspectives. many group members.
• Increases acceptance of and • Pressure to agree with group
commitment to the decision made. decision.
• Groupthink.

SELF-CHECK 3.4
1. State the advantages and disadvantages of group decision-making.
2. List other factors that contribute to the advantages and

disadvantages of group decision-making.
EXERCISE 3.5
1. Which of the following is NOT a part of rational decision-

making?
A. Intuition process
B. Definition of problems
C. Evaluating alternatives
D. Selecting optimal solutions
2. What is the first step in making a rational decision?

A. Identify the decision criteria
B. Allocate weights to the criteria
C. Defining problems
D. Generating alternatives
3. What is the most effective method for generating as many ideas

as possible?
A. Individual analysis
B. Delphi technique
C. Face-to-face brainstorming
D. Electronic brainstorming

4. „This refers to a situation whereby group members try not to propose

ideas which are different from other group members.‰
What does the above refer to?

A. Delphi technique
B. Brainstorming
C. Groupthink
D. Nominal group technique
5. Which is not a decision-making situation?

A. Certain conditions
B. Uncertain conditions
C. Partial risk conditions
D. Risky conditions
1. There are two types of decision-making environments, namely certain

conditions and uncertain conditions. ____
2. Decision criteria are features or elements that will be taken into

consideration when making a decision. ____
3. The first step in the process of rational decision-making is to develop

alternatives as many as possible. ____
4. Groupthink is one of the advantages of group decision-making. ____
5. Brainstorming, nominal group technique and Delphi technique are

methods of group decision-making. ____

• Decision-making is defined as a process to identify problems, generate

alternative solutions, select the best solutions available and implement them.
• Decision-making is made in three types of environment namely certain

conditions, uncertain conditions and risky conditions.
• There are six processes of rational decision-making namely defining the

problems, identifying the decision criteria, allocating weights to each criterion,
generating alternative solutions, evaluating each alternative and selecting the
optimal decision.
• Rational decision-making has specific limitations such as common mistakes,

bounded rationality and making decision in a risky environment.
• In spite of that, decision-making can still be improved by several methods.
• First, making decisions using specific rules and tests such as the rules of
priorities, rules of minimum condition and conducting various variable tests,
and second, making group decisions.
• There are several methods of group decision-making such as brainstorming,

nominal group technique and the Delphi technique.
• Although group decision-making has a lot of advantages, it also has specific

disadvantages.
• Some of the advantages are more information, data and facts can be compiled,
problems can be seen from various perspectives as well as increases acceptance
of and commitment to the decision made.
• Some of the disadvantages are having to compromise, high costs involved if

many group members meet, pressure to agree with group decision as well as
groupthink.

Advantages Groupthink
Allocating weight to each criterion Identifying decision criteria
Brainstorming Limited resources
Certainty Memory problems
Defining problems Nominal group technique
Delphi technique Risky
Disadvantages Rules and test
Evaluating alternatives Rules of minimum condition
Excessive additional information Rules of priority
Expertise problems Selecting the optimal decision
Generating alternative solutions Uncertainty
Group decision-making Variable tests
Abu Mansor, A., Ahmad, F., Din, M., Hanissah A. R., & Mohd Noor, N. A. (1999).
Pengantara Pengurusan. Sintok: Universiti Utara Malaysia.
Certo, S. C. (2000). Modern management: Diversity, quality, ethics & the global
environment. Upper Saddle River, NJ: Prentice Hall.

Learning.

Topic  Organisation
4 Design
LEARNING OUTCOMES
1. Identify the factors that influence organisational structure;
2. Differentiate the five types of organisational structure;
3. Describe the concept of authority in organisations;
4. Contrast the concepts of centralisation and decentralisation;
5. Evaluate the different types of work design; and
6. Discuss the organisation process design.
 INTRODUCTION
When we discuss organisation design, we cannot avoid discussing organisational
structure. What is organisational structure?
Organisational structure refers to the development of an organisationÊs

functions that are grouped and coordinated formally.
Organisational structure is the work arrangement at a section or department that

directs the behaviour of individuals and groups towards the achievement of an
organisationÊs objectives. This is a system that connects the duties, workflow and
communication channels between individuals and the various work groups in an

66  TOPIC 4 ORGANISATION DESIGN
organisation. The purpose is to simplify the use of each resource and individual
collectively as a management system for the achievement of the objectives that
have been set.
An organisational structure is usually displayed in graphical form which is called

an organisational chart. Traditionally, the organisational chart is illustrated in the
form of a pyramid chart with personnel at the top of the pyramid having higher
authority and responsibilities compared to personnel who are placed at the lower
levels of the pyramid.
This topic will introduce you to the factors that influence organisational structure,
the five types of organisational structure, the concept of authority in organisations,
the concepts of centralisation and decentralisation, the different types of work
design and the organisation process design. Let us continue with the lesson.
4.1 FACTORS THAT INFLUENCE

ORGANISATIONAL STRUCTURE
There are four factors that influence the structure of an organisation:
(a) Organisational strategies;
(b) Size of the organisation;
(c) Technology; and
(d) Environmental.
We will discuss each of these factors one by one in the next subtopics.
4.1.1 Organisational Strategy

The main thing that an organisation usually pays attention to when it comes to
achieving its objectives is how the organisation has been structured. Structures that
are accurate do not guarantee success but will increase the probability of achieving
success. This means that the organisational structure can assist the management
team in achieving the objectives set. Since the objectives are the reason the
organisational strategy is enacted, both the objectives and strategies have to be
interrelated. Specifically, organisational structures have to be drafted according to
the strategies that have been enacted by the organisation.

TOPIC 4 ORGANISATION DESIGN  67
In other words, changes in the organisational strategies will lead to changes in the
organisational structure. Meanwhile, changes in the organisational structure will
help to facilitate and support the changes made in the organisational strategy.
Even though research has stated the importance of the organisational structure to
be drafted according to the strategies that have been decided, it is clearly seen here
that strategy is not the main factor that needs to be considered. The process to
match the structure with the strategy is something complex and must be made
through an in-depth understanding of the history of the current structure and
other factors such as the size of the organisation, environment and technology.
4.1.2 Size of the Organisation

There are many methods to measure the size of an organisation. Measurements
that are often used are the quantum of sales and quantum of manpower. Size can
influence the structure of an organisation.
Organisations that are smaller in size have a tendency for lesser work
specialisation, less standardisation and more centralisation of decision-making.
On the other hand, organisations that are larger in size have a tendency towards
work specialisation, standardisation and decentralisation of decision-making. This
means that larger organisations emphasise more on work specialisation,
departmentalisation, expansion of charts and rules compared to organisations that
are smaller in size.
4.1.3 Technology
What does technology refer to?
Technology refers to how an organisation changes its inputs to become

outputs.
Each organisation will have at least one technology that changes its financial,
manpower and physical resources into products or services. The routine level is
an aspect that differentiates technology – whether the technology is a routine
activity or non-routine activity. Activities that are non-routine are something that
are specific like the production operations of particular services to meet the needs
of consumers such as those provided by tailors, chefs and barbers.

What is the relationship between structure and technology? The routine tasks
normally have a tendency towards departmentalisation structures that are much
bigger. Hence, routine activities create structures that are more centralised,
whereas non-routine activities depend largely on the expertise of an individual,
such as a barber; this creates a more decentralised structure.
If the operation is based on technology that is routine, where the production of

products and services are produced in bulk such as a garment factory that operates
in a more formal way, then more departmentalisation, work specialisation and
compliance towards rules and regulations will be made. Businesses that operate
on non-routine technologies such as barbers do not need a lot of
departmentalisation, work specialisation and strict compliance to rules, as
required by bigger organisations like a factory.
4.1.4 Environment
Every organisation will face external influences that affect the survival of an
organisation, known as environmental influences or factors that are specific or
general. Why does the environment have an impact on the structure of an
organisation? This is because changes in the environment cannot be determined.
Some organisations will face static environments, whereas some will face
environments that are dynamic. Static environment provides less concern on
uncertainties compared to a dynamic environment. As the uncertainties in the
environment can threaten the effectiveness of organisations, management will try
its best to reduce the threats. One of the ways of reducing uncertainties in the
environment is by making changes to the organisational structure.
EXERCISE 4.1
List the factors that influence organisational structures.
4.2 DESIGNING ORGANISATIONAL

STRUCTURES
Organisational structure is established based on the types of departmentalisation.
What does it mean?

Departmentalisation refers to the division of work and employees of different

organisational units that are responsible for carrying out the duties given.
Each individual in these different units will work and all the work output will be
aimed towards the objectives that have been determined. There are five types of
departmentalisation as shown in Figure 4.1.
Figure 4.1: Five types of departmentalisation
These five types of departmentalisation are further explained in the next subtopics.
4.2.1 Functional Departmentalisation

Functional departmentalisation coordinates work and employees through
different units and each unit is responsible for a specific business function or
expertise area. For example, departmentalisations according to functions or areas
that are common are accounts, sales, marketing, production, operations and
human resource department. Departmentalisation based on functions is used
widely by organisations. Figure 4.2 illustrates an example of functional
departmentalisation.
Figure 4.2: Example of functional departmentalisation
This type of departmentalisation has several advantages. First, it allows work to

be carried out by individuals who are qualified and skilled in the areas concerned.
The second advantage is that it reduces cost by reducing work duplication and use

of resources in the organisation. Thirdly, each individual in the same department

will acquire the same work experiences or training, communication and
coordination, thereby reducing problems for management.
However, this type of departmentalisation also has several disadvantages, such as

difficulty in coordinating between departments. Functional departments can cause
delays in decision-making and produce managers and employees who are
restricted in experience and expertise.
4.2.2 Product Departmentalisation

This departmentalisation is based on products and employees work in different
units, each with the responsibility of producing a product or service. In other
words, each department represents one type of organisational output.
Let us look at Figure 4.3 which shows you an example of product

Figure 4.3: Example of product departmentalisation
An organisation that practises this type of departmentalisation output has several

advantages. One of the main advantages is to allow managers and employees to
expand their experience and expertise that are related to the overall activity of the
product or service produced. Apart from that, the product department structure
allows management to evaluate the work performance of each work unit.
How about the disadvantages? Product departmentalisation may also have some
disadvantages. Managers may focus on their product to the exclusion of the rest
of the organisation. Administration costs may also increase due to each product
having its own functional-area experts.

4.2.3 Customer Departmentalisation

This type of departmentalisation coordinates work and employees in different
units that are responsible for specific types of consumers only. The advantage of
this consumer-based department is that the organisation will focus all its efforts
on fulfilling the needs of consumers.
Therefore, an organisation will establish different units in order to provide services

to specific consumers and also allow the organisation to specialise and adapt its
products and services to fulfil the requirements and resolve consumersÊ problems.
Some of the disadvantages of departmentalisation are the existence of duplication

of work and use of resources and the difficulty to coordinate between departments
that provide services to different types of consumers. Customer
departmentalisation causes employees to overemphasise effort to fulfil customer
needs until it affects the organisationÊs business performance. Let us look at
Figure 4.4 for a better understanding of consumer departmentalisation.
Figure 4.4: Example of consumer departmentalisation
4.2.4 Geographic Departmentalisation

Geographic departmentalisation coordinates the work and employees of different
units that are responsible for conducting business activities in certain geographical
locations.
What are the advantages of a geographically-based department? The advantages

of it are the abilities of the organisation to react with speed and efficiency to the
requirements of specific markets within the scope of responsibilities of a
department. This advantage is more important when the products and services
that are produced are marketed to different countries. Besides that, it also helps to
reduce costs by positioning the organisational resources nearer to the targeted
consumers.

However, it creates duplication of work and the wasteful use of the organisationÊs
resources. Besides this, difficulties will arise in coordinating between departments
as the departments are in geographical areas that are located far from each other.
Figure 4.5 illustrates an example of a geographic departmentalisation.
Figure 4.5: Example of geographic departmentalisation
4.2.5 Matrix Departmentalisation

This is a type of structure that combines two or more types of departmentalisation
at the same time. There are several factors that differentiate matrix
departmentalisation from the other types of structures, that is, the employees
report to two different supervisors or managers. Apart from that, it also leads to
cross interactive functions that cannot be done in the other types of
departmentalisation. The advantage of the matrix department is that it allows the
organisation to manage large scale and complex projects or activities efficiently.
The disadvantage of this matrix structure however, is that it requires a higher level
of coordination to manage the complexity involved in order to conduct big projects
or projects that have many phases to be completed. This situation often causes the
matrix department to focus on the conflict of authority and confusion among
employees who have to report to more than one supervisor or manager at a time.
Besides that, the matrix department also requires higher-level management skills
compared to other types of departmentalisation.
EXERCISE 4.2
Explain the concept of functional and geographic departmentalisation

and state one advantage and one disadvantage for these types of

ACTIVITY 4.1
Share the type of departmentalisation practised by your organisation in
the myINSPIRE forum.
4.3 AUTHORITY
Authority is a part of the organisational structure. What does it mean?
Authority means the right to give directives, take actions and make decisions
related to activities to achieve the organisationÊs objectives.
Authority refers to the right that is given in a management position. Authority is

normally channelled from top to bottom, that is, to the lower management levels.
Authority is placed on a position by disregarding the personal factors of the
position holder. This right exists based on the formal position in an organisation.
When someone leaves that formal position, the authority remains with the
position. Let us look at the different types of authority in the next subtopics.
4.3.1 Chain of Command

First type of authority is chain of command. Let us look at Figure 4.6 that illustrates
the chain of command.
Figure 4.6: Chain of command

As you can see in Figure 4.6, there are lines that connect the rectangles on the top
section with the rectangles that are at the lower sections. These lines are known as
the chain of command. The chain of command explains who reports to whom in
the said organisation. Individuals in the top rectangles have authority over those
in the lower rectangles, according to the lines that connect them. Individuals at the
top have the right to give directives, take actions and make decisions on the work
of individuals located below them. Individuals at the lower levels must report all
aspects of their work to the people at the level above them according to the chain
of command.
In order for the lower levels to avoid confusion and conflict of authority due to the
need to report to more than one manager, unity of command is needed in an
organisation. Unity of command is the management principle that states that
employees only report to one manager at a time. In other words, only one manager
is given the authority to become the leader at any one time or for any activity in an
organisation.
4.3.2 Line and Staff Authority

The next authority dimension differentiates between line authority and staff
authority. The differences between line authority and staff authority are explained
in Table 4.1.
Table 4.1: Differences between Line Authority and Staff Authority
Line Authority Staff Authority

Line authority has the right to make Staff authority involves the right to
decisions and give directives to provide advice and assistance to parties
employees that are placed under its chain that have line authority and other
of command. The director, who has line employees even though they are not under
authority, has the right to give directives the chain of command. Always remember
to the managers under him. Generally, that staff authority is only to provide
line authority is related to matters advice and assistance and not directives
involving the organisationÊs management like line authority. Staff authority enables
system especially in all aspects related to certain parties to assist in increasing the
work and conduct that is linked to efforts effectiveness of the line authority to
to achieve the objectives which had been implement the duties that are under their
determined. Line authority helps those responsibility.
who accept it to work and ensure the
efficiency of the activities under their
responsibility.

The line authority and staff authority must work together to maintain the
efficiency and effectiveness of an organisation. To ensure that both work
productively, the management must ensure that both these authority groups
understand the mission of the organisation, have specific objectives and believe
that their partnership helps the organisation to achieve its objectives.
4.3.3 Line and Staff Functions

The term „line and staff‰ is used to explain the various functions in an
organisation. Line function is an activity that directly contributes to the production
and selling of an organisationÊs products and services to consumers. For example,
the activities that are conducted by the production and marketing departments are
known as line functions.
Staff function is an activity that contributes indirectly to the production and selling
of an organisationÊs products and services including its supporting activities.
Specifically, staff functions in an organisation are the activities that are conducted
by the accounts, human resources and legal departments. For example, the
manager of the marketing department may ask for advice from the legal
department to ensure that the words used in certain advertisements meet legal
requirements.
4.3.4 Span of Control

What does span of control refer to?
Span of control refers to the number of employees who report directly to a

manager or supervisor.
Members of the classical management theory such as Henri Fayol believed that
organisational structures were vertical and comprised several levels of
management that had a restricted span of control. This restricted span of control
allows the organisation to increase its efforts to monitor its employees. The
restricted span of control means that the number of employees placed under the
supervision of a manager is small, thus ensuring stringent supervision.
Nevertheless, organisations that have long organisational structures and restricted

span of control will incur higher costs especially in terms of employeesÊ salaries.
The high cost is caused by the vertical organisation structure as it requires multiple
levels of management.
Besides that, the multiple levels of management can cause delays in decision-
making and the staff/managers have the tendency to refer their problems to upper
management. Creativity among employees will be limited due to stringent
controls and lack of freedom given by management.
Currently, most organisations practise a broad span of control as it reduces costs,

expedites the decision-making process, increases creativity and flexibility, narrows
the gap towards consumers and empowers the employees. At the same time, the
organisation strives to ensure that this broad span of control does not jeopardise
the organisation by providing training to all employees so that they have a better
understanding of their job requirements and get the assistance of colleagues to
resolve issues that arise.
SELF-CHECK 4.1
Based on your understanding, explain the term „span of control‰.
EXERCISE 4.3
Briefly explain the following:
(a) The meaning of chain of command.
(b) The differences between line authority and line function.
(c) The meaning of span of control.
4.4 CENTRALISATION AND

DECENTRALISATION
Now, let us move on to centralisation and decentralisation in an organisation.
Firstly, what does centralisation mean?
Centralisation is a situation where almost all control is centralised, especially

the control for decision-making to one party, which is the top level people in
an organisation.

Organisations that practise this method give authority to the managers to make
decisions even though it is a trivial matter. How about decentralisation?
Decentralisation is a situation where a certain amount of authority is handed

down to subordinates or employees at the lower levels of an organisation.
Organisations that practise decentralisation have more delegated authority at all

levels.
How far an organisation needs to centralise or decentralise control depends on the

situations faced by the organisation. As explained, organisations that are large will
gain more advantages by practising decentralisation. When the size of an
organisation expands, the management will have to deal with expansion and
increase in responsibilities and all kinds of duties that must be implemented.
Delegation is an effective step that can help a manager to manage the increase in
workload.
In other issues, higher-level management may be of the opinion that the

organisation has become too big and has a high level of delegation. One of the
signs that an organisation has become too big is the increase in labour costs that
are higher than other costs in the organisation. Hence, increasing centralisation in
certain activities can help to reduce the need for manpower, which will also reduce
the cost of labour to a much acceptable level.
If organisations are facing a situation where the consumers of its products and
services are located at different places, then decentralisation should be practised.
Decentralisation is able to place the resources of management closer to consumers
and by doing so, the organisation will be able to react quickly to changes in
consumersÊ tastes.
If the organisation requires quick decision-making in order to overcome all the

problems faced, decentralisation will be the best option. Decentralisation can
reduce red tape and allows employees at the lower levels to make decisions faster
when faced with a problem.
If creativity is required in the organisation, then decentralisation is also the best

option. Decentralisation provides delegation of authority that will give the
employees freedom in finding the best possible option to create or resolve an issue.
Besides that, the freedom given encourages creativity and innovation in working
techniques or products.

4.5 WORK DESIGN

Work design specifies the activities that are done by employees or a group of
employees. It determines how and where the work has to be executed as well as
by whom. Besides that, work design also includes the tools and equipment that
will be used when carrying out the work activities.
What is the objective of work design? The objective of work design is to achieve
productivity. The success of work design takes efficiency into consideration when
carrying out the activities. In other words, work design can ensure a healthy and
safe working environment for the employees in the short and long term.
4.5.1 Work Specialisation

What does work specialisation mean?
Work specialisation refers to the act of assigning the contents of smaller

sections from the overall work or process to individuals.
For example, the overall process of preparing a burger consists of small activities
such as frying the meat, preparing the vegetables, preparing the bun and packing
it. In this case, work specialisation is possible as the steps are easy to learn and
there are less diversified activities and high repetitive activities. An employee who
is responsible for doing the packaging will be handling a simple activity which is,
easy to learn. Work diversification is low (only need to pack) and highly repetitive
(packing).
One of the disadvantages of work specialisation is that in cases where the task is
simple, the person performing the task will be easily bored. It causes low levels of
job satisfaction and high absenteeism rates and thereafter can cause the
organisation to have a high turnover.
The main reason for work specialisation is that it is more economical. When a work
activity is specialised, for example the task of packing burgers, it takes a shorter
time to learn and become skilful. If there is an employee who resigned or become
absent, the organisation will only face a small drop in the productivity rate when
replacing the employee who had resigned or is absent with a new employee. Apart
from that, when the work design is simple, the wage or salary offered is also low.
Work that is simple does not require a high salary to attract employees.

4.5.2 Job Rotation, Enlargement and Enrichment

Due to the efficiency of work specialisation, organisations find it hard to eradicate
its implementation. Hence, redesigning work is essential in order to maintain the
advantages of work specialisation. There are three methods to overcome the
disadvantages of work specialisations as explained in Table 4.2.
Table 4.2: Three Methods to Overcome the Disadvantages of Work Specialisation
Method Description
Job rotation This is practised to overcome the disadvantages of work specialisation
by transferring employees from one type of specialisation to another
periodically. For example, employees who are responsible for packing
burgers are transferred to the activity of frying meat. The purpose of
job rotation is to provide employees with a variety of activities and
opportunities to utilise different skills. Job rotation allows the
organisation to continue practising work specialisation. Apart from
that, diversification of activities can reduce boredom in employees and
give more job satisfaction.
Job This is another method to overcome the disadvantages of work
enlargement specialisation. Job enlargement adds the number of tasks in an activity.
For example, before this, the employee only needed to handle burger
packaging but when the scope of work was widened, the employee no
longer only performed packing activities but also performed other
activities such as putting in the sauce and labelling the burgers. While
many employees say that they are stressed due to job enlargement,
some others feel that job enlargement gives them opportunities to
develop other skills.
Job This involves an increase in the number of tasks in the activities and
enrichment gives the employees authority and control in making decisions related
to their work. Psychologists including Frederick Herzberg stated that
as employees only handle a few tasks, they are quickly bored. Simple
and easy activities are not what they are looking for. Other
psychologists such as Herzberg, Maslow and Alderfer believe that
what is required by employees from their work activities is work
achievement that comes as a result of doing a job successfully and the
recognition of success that comes with the use of the skills and
potential that they have. Job enrichment tries to manage dissatisfaction
issues by adding depth to the work.

The job enrichment proposed by Herzberg is based on the two

motivational factors approach. Job enrichment refers to building the
motivators in work activities to make them more interesting and
challenging. This can be done by giving employees a little freedom and
allowing them to plan and inspect on their own, which is usually done
by their supervisors or superiors. Employees may individually be
given the responsibility of determining their own work progress levels
and also to rectify their own mistakes. When the work becomes more
challenging and employee responsibilities increase, then the
motivation and interest will also increase.
EXERCISE 4.4
Based on your understanding, briefly explain the following:
(a) Job enlargement.
(b) Job enrichment.
(c) Job rotation.
4.6 ORGANISATION PROCESS DESIGN

There are two types of organisation designs namely mechanistic organisation and
organic organisation. What do these two means?
A mechanistic organisation is an organisation categorised by work

specialisation and responsibility, fixed roles and chain of command that are
rigid caused by centralised control and vertical communication.
This type of organisation is most suitable for businesses that are stable and
unchanging. Next is organic organisation.
An organic organisation is an organisation categorised with a wide definition

of work and responsibilities, changing roles and decentralisation, and
horizontal communication.

Unlike mechanistic organisation, the organic organisation is most suitable for

businesses that are dynamic and always changing. The key criterion that
differentiates these two approaches is that the mechanistic organisation focuses on
organisational structure, while organic organisation focuses more on the
organisation processes which are the collections of activities in the organisation
that change its inputs into outputs that are valuable to customers.
4.6.1 Emerging New Organisational Designs

Since the early 1980s, organisational management had already begun thinking of
a few new organisational designs. The purpose was to develop options for a new
design in order for the organisation to compete more competitively. There are four
new organisational designs namely team structure, modular organisation, virtual
organisation and borderless organisation (see Table 4.3).
Table 4.3: Four New Organisational Designs
Design Description
Team structure The use of teams has become more popular in coordinating work
activities. The main criteria in team structures are the disintegration of
departments and the decentralisation of decision-making to the level
of work teams. For organisations that are small in size, the overall
organisation is perceived as a team. Meanwhile, organisations that are
bigger have a team structure complementing what we call as
bureaucracy. This allows the organisation to achieve efficient
standardisation that is practised by bureaucracy apart from obtaining
flexibility that comes with the team structure. The use of teams such
as stand-alone teams and cross-functional teams will increase
productivity and efficiency in the organisation.
Modular Each organisation has its advantages and uniqueness in producing
organisation products or services to its own customers. These advantages and
uniqueness are contained in the core business activity which the
organisation is able to perform well, fast and cheap compared to other
organisations.
A modular organisation outsources business activities to other

organisations, suppliers, experts or consultants. The meaning of
modular is used as business activities can be bought from other
organisations for the purpose of adding activities and can be dropped
when they are no longer required.

Modular organisations have several advantages. For example, the

payment of outsourced activity such as labour, experts or production
capabilities occur only when the transactions are required. This will
cause the cost borne to be lower if all the activities are managed on its
own. Secondly, the outsourced activity is able to focus on its own tasks
thus ensuring better performance.
Nonetheless, in order to maintain these advantages, there are a few

pre-conditions that must be fulfilled first. The most important
condition is that the modular organisation requires close cooperation
with the organisations that do the outsourced business activity.
However, modular organisations also have their disadvantages too.

The most critical weakness of a modular organisation is the loss of
control when business activity is outsourced to other organisations.
Apart from that, the organisation might also reduce its competitive
advantage unintentionally in two ways. Firstly, the change in
technology and competition can cause the situation where
the outsourced activities identified earlier as a side activity becomes a
competition. Secondly, the organisation that accepts the outsourced
activity could become a competitor one day.
Virtual A virtual organisation is an organisation that has become a part of the
organisation business network. Virtual organisations exist in a network that shares
expertise, costs, capabilities, markets and customers collectively to
resolve customersÊ problems or producing certain products and
services.
For example, the shoe manufacturer company, Puma is a type of

virtual organisation. Puma is responsible for the strategy and
marketing of products in Germany. One small networking firm in Asia
also handles the purchase and distribution of raw materials that will
be used to produce Puma sports shoes. Different organisations in
China, Taiwan and Indonesia are responsible for producing the Puma
shoes. Organisation networks that are different, handle the network of
sales and distribution of products that operate in Africa, Asia,
Australia, Europe, North America and South America. Overall,
80 different organisations from around the world are involved in the
making and selling of Puma sports shoes.
Unlike modular organisations which can be seen as stable and have

long relationship with organisations that deal with it, virtual
organisations have relationships that are shorter and temporary with
the organisations that are in its network. Thus, the virtual organisation
composition often changes. The combination of organisations that
becomes its partners in the network depends on the expertise required
to resolve any problems or producing of specific products and services
to consumers.

This virtual organisation has its own advantages. One of the

advantages of a virtual organisation is that it allows organisations
participating in the network to share all costs involved. As the
members of the network can swiftly combine the efforts in fulfilling
the needs of consumer, they will react swiftly and flexibly. Apart from
that, since the members are doing their best, theoretically the virtual
organisation would be able to produce the best products and services
in all aspects.
The disadvantages faced by modular organisations are also faced by

virtual organisations. When a business activity is outsourced, it will
become difficult to control especially from the aspect of quality of
work produced by the network partner.
On the other hand, the most evident disadvantage of a virtual

organisation is that the implementation of virtual organisation
requires high level of management expertise so that the organisation
networks that are involved will work better together especially if there
is a tendency for the relationship time frame to be short due to the
activity conducted or the relationships is based on projects.
Borderless A borderless organisation is an organisation that tries to eliminate the
organisation chain of command and to replace departmentalisation with team
authority. This means the organisation is trying to eradicate borders
whether vertically or horizontally in an organisation.
This situation does not mean that the manager at the lower levels and
employees are no longer responsible to the top management but what
is meant here is the emphasis on speed, fast reaction and flexibility.
This type of organisation also removes borders that separate the
internal environment in an organisation with its external environment.
One of the advantages of a borderless organisation is that this

organisation will be able to utilise its knowledge, expertise and
capabilities of employees in a better way. In this matter, resolving of
problems is no longer the responsibility of only individuals that are
involved in the said problems.
For example, the problems in the marketing department that is

supposed to be resolved by individuals in the marketing division can
also be resolved by experts in that matter either from within or outside
the organisation. The next advantage would be the close rapport
between all internal divisions in the organisation with the external
components. This close rapport is formed due to the disintegration of
the borders that separates both the environments.

However, borderless organisations also have disadvantages. For a

start, the manager and employees always assume that the transition of
an organisation to a borderless structure threatens their job security.
The most obvious disadvantage is that there is no clear-cut way to
achieve an organisational structure.
SELF-CHECK 4.2
1. To what extent do you agree with the use of teams in carrying out
work?
2. Explain the term „borderless organisations‰.
EXERCISE 4.5
Essay Question
Explain the difference between mechanistic organisation and organic
organisation.
1. Which factor does not influence the structure of an organisation?

A. Technology
B. Organisational strategy
C. Type of products and services produced
D. Organisation size
2. What type of departmentalisation coordinates the work and

employees in different units based on product and services?
A. Product
B. Functional
C. Geographic
D. Virtual

3. The additional number of tasks in a work activity that is carried out

by employees is known as
A. Job rotation
B. Job enlargement
C. Job enrichment
D. Job specialisation
4. What is TRUE regarding consumer departmentalisation?

A. Creates duplication of work
B. Establishes departmentalisation based on functions
C. Increases distribution cost of resources
D. Coordination between departments is easier
5. „This type of organisation outsources its business activities to other

organisations, supplier, experts or consultants.‰
What type of organisational structure does the above refer to?
A. Modular
B. Virtual
C. Borderless
D. Matrix
1. Large organisations have organisational structures that have a

tendency specialise jobs towards specialising and reducing
standardisation and centralisation. ____
2. Matrix departmentalisation is a type of structure that consists of

two or more types of departmentalisation. ____
3. Chain of command explains the flow of authority in an

organisation. ____
4. Henri Fayol believed that organisational structures that are vertical

will have a span of control that is restricted. ____
5. An employee is transferred from one work area to another work

area. This situation is called job enrichment. ____
• There are four factors that influence the structure of an organisation. These are
organisational strategies, size, technology and environmental factors.
• Organisational structure is established based on the types of

departmentalisation, either functional, product, matrix, geographic and
customer.
• Departmentalisation means the division of work and employees to different

organisational units that are responsible for resolving the duties given.
• Authority is a part of organisational structure. Authority means the right to

give directives, take actions and make decisions related to activities to achieve
the organisationÊs objectives. It can be in terms of chain of command, line and
staff authority, line and staff functions and span of control.
• Centralisation is a situation where almost all forms of control are centralised,

especially the control for decision-making to one party, which is the top-level
management in an organisation.
• Decentralisation is a situation where a certain amount of authority is handed

down to subordinates or employees at the lower levels of an organisation.
• Work design specifies the activities that are done by employees or a group of
employees. It determines how and where the work has to be done as well as
by whom.
• Work specialisation refers to the act of assigning the contents of smaller

sections from the overall work or process to individuals. The main reason for
work specialisation is that it is more economical.
• There are three methods to overcome the disadvantages of work

specialisations namely job rotation, job enlargement and job enrichment.
• There are two types of organisation design namely mechanistic organisation

and organic organisation.
• There are four new organisational designs: team structure, modular

organisation, virtual organisation and borderless organisation.

Authority Matrix departmentalisation

Borderless organisation Mechanistic organisation
Centralisation Modular organisation
Chain of command Organic organisation
Customer departmentalisation Organisational strategy
Decentralisation Product departmentalisation
Environment Size of the organisation
Functional departmentalisation Span of control
Geographic departmentalisation Team structure
Job enlargement Technology
Job enrichment Virtual organisation
Job rotation Work design
Line and staff authority Work specialisation
Line and staff functions

Topic  Human
5 Resource
Management
(HRM)
LEARNING OUTCOMES
1. Determine the needs of human resources and recruitment;
2. Identify the methods for capturing the interests of qualified
candidates;
3. Describe the methods for developing qualified employees;
4. Discuss performance evaluation;
5. Explain the methods for maintaining qualified employees in the
organisation; and
6. Discuss employee separation.
 INTRODUCTION
Every organisation needs people to plan and implement all its activities to achieve
the goals that have been set. Therefore, employees are one of the most important
assets needed by an organisation. If an organisation uses high technology,
sophisticated tools and equipment, and has strong financial resources but lacks
skilful, knowledgeable and capable human resources, it will still not succeed in
any field ventured.

TOPIC 5 HUMAN RESOURCE MANAGEMENT (HRM)  89
Many organisations have started to use human resources as one of the tools to
match their competitors. This method is frequently implemented by organisations
that offer products based on services to their customers. In this condition, only
human resources can provide satisfaction to the customers.
Thus, human resource in organisations must be managed properly. A properly

managed human resource will not only be a competitve advantage but also helps the
organisation to achieve its goals efficiently and effectively. What is HRM?
Human resource management (HRM) is a process of obtaining, developing and

maintaining a sufficient number of qualified employees in order to achieve goals
that have been set.
Let us learn more on HRM as we go through the needs of human resources and
recruitment, the methods for capturing the interests of qualified candidates, the
methods for developing qualified employees, performance evaluation, the
methods for maintaining qualified employees as well as employee separation.
Happy reading!
5.1 DETERMINING THE NEEDS OF HUMAN

RESOURCES
Before we go further, let us find out the meaning of an organisation.
An organisation is a system where human resource acts as one of the functions

in moving the system.
HRM needs to have a relationship which is in line with the organisationÊs strategies.
Therefore, human resource needs to be managed properly in order to implement the
organisationÊs strategies and this is considered as the process of HRM.
An efficient and effective HRM must undergo processes such as:

(a) Determining the needs of human resources in organisations;
(b) Obtaining qualified candidates;
(c) Developing employees; and
(d) Maintaining qualified employees.
90  TOPIC 5 HUMAN RESOURCE MANAGEMENT (HRM)
Determining an organisationÊs human resource needs is very important. Let us

look at Table 5.1 which shows you that the processes of obtaining (recruitment and
selection), developing (orientation, training and performance evaluation) and
maintaining or separating employees (granting of rewards and separation) are
interdependent with one another.
Table 5.1: Four Processes of Human Resource Management (HRM)
Process Task
Determining the needs of • Human resource planning
human resources
Attracting qualified candidates • Recruitment/hiring
• Selection
Development of qualified • Orientation
employees • Training
• Performance appraisal
Maintaining qualified • Financial rewards and job benefits
employees • Employee separation
These functions cannot be managed properly without good planning. Hence,

human resource planning is required.
In addition, HRM is a process of using the goals and strategies of organisations to

forecast the needs of human resources in recruiting, developing and maintaining
a qualified workforce. An organisation that has poor or no human resource
planning will face a surplus in the workforce and be forced to find a way to reduce
it or it will face a shortage of workforce which will lead to an increase in overtime
costs and inability to fulfil the demand for the companyÊs products or services.
Planning human resources begins with considering the mission, strategies and
objectives of an organisation. As stated before, human resource planning is
interdependent and needs to be viewed as a part of the strategic planning of the
organisation. Fundamentally, human resource planning consists of two main
components namely job analysis and forecasting. These two components are
further explained in the next subtopics.
EXERCISE 5.1
1. Explain the term „human resource management or HRM‰.
2. State the processes involved in HRM.

5.1.1 Job Analysis

A particular job area exists in an organisation as a result of the formation of goals
that need to be achieved. Job output or the combination of job outputs lead to the
achievement of goals.
Thus, how do we ensure the success of a particular job? It is simple; by performing

a job analysis in order to find out about the job requirements and selecting a
workforce that is capable and qualified to perform the particular job. What is job
analysis?
Job analysis is a detailed process regarding the related tasks of a particular job
and the quality of human resources needed to perform the job.
Job analysis seeks to gather four types of information which are (William, 2013):
(a) Job activities, such as what activities employees carry out and how, when
and why they do them.
(b) Tools and equipment used to perform the job.
(c) The context of job in which it is implemented such as situation, workplace
environment or scheduling.
(d) The needs of personnel in performing the job, meaning the knowledge, skills
and capabilities required for the particular job.
Information regarding job analysis can be obtained by:

(a) Asking employees to make a list of the tasks that need to be performed for a
particular job and the importance of each task;
(b) Getting the employees or supervisors to fill in questionnaire forms;
(c) Observations of jobs;
(d) Interviews; or
(e) Filming the tasks being carried out by the workers when they are performing
the job.

The results of the job analysis will form the job description and job specification.
These two are further explained in Table 5.2.
Table 5.2: Two Types of Job Analysis Results
Type Description
Job description It is a written statement that clearly explains the job, duties,
responsibilities, activities and performance results required from the
job-holder.
Job specification It is a written statement stating the qualifications required from the
job holder. Qualifications here include level of academic
achievements, work experience, skills and abilities that need to be
fulfilled by the future job-holder.
Since the job analysis describes in detail the description and specifications
required, each organisation needs to provide job analysis prior to any recruitment.
It will also be used during recruitment and selection in order to match the
qualifications of the applicants to the job requirements. Job analysis also helps
managers to prepare training programmes and acts as a comparative resource in
determining wages.
SELF-CHECK 5.1
What is job analysis? What are the information gathered from job analysis?
EXERCISE 5.2
Give a brief description of job analysis.
5.1.2 Forecasting
What is forecasting?
Forecasting is a process of predicting the total number and types of employees

with the knowledge, skills and abilities needed by an organisation in the future.

There are two types of forecasting namely internal and external. These two types
of forecasting are further explained in Table 5.3.
Table 5.3: Two Types of Forecasting
Type Description
Internal forecasting It pertains to the internal factors of the organisation which
influence the level of demand and supply of human resources in
the organisation. Factors such as the organisationÊs financial
performance, productivity level, mission and change in
technology, retrenchment, promotion, retirement and mortality
are some examples of internal forecasting.
External forecasting It pertains to the external factors of the organisation that affect
the level of demand and supply of its workforce in the future.
The factors include supply of labour in a particular area,
economics (unemployment rate), labour unions and
demographics of the labour force (in the aspect of age),
migration, competition levels and growth in a particular
business or market.
In order to forecast the demand and supply of human resources in an organisation,

a manager can use three methods of forecasting which are the most frequently
used. These methods are:
(a) Best estimates;
(b) Management input; and
(c) Statistical ratios (historical ratios).
These methods can predict how many types of skills and abilities of employees are
needed by the organisation in the future.
EXERCISE 5.3
State two types of forecasting of total number and types of employees.

5.2 RECRUITMENT/HIRING
What is recruitment?
Recruitment is the process of developing a group of candidates who are

interested and qualified for a position offered by an organisation.
This effort is considered as a process because it involves steps such as searching

and capturing the interest of qualified candidates to apply for the position offered.
Recruitment can be carried out using two methods namely internal recruitment
and external recruitment. These two are further explained in the next subtopics.
5.2.1 Internal Recruitment

Firstly, what is internal recruitment?
Internal recruitment is the effort of developing a group of candidates who are

interested and qualified for a position offered from the existing employees in the
organisation.
Internal recruitment also means promoting or moving existing employees into a

vacant position. Many organisations prefer this method because it is able to boost
the commitment, morale and motivation of the employees. It is also able to reduce
the time and costs of employee development since the employee has already
understood the culture and procedures of the organisation. This will increase the
probability of the employee performing successfully in the position.
This method of internal recruitment differs from one organisation to another. Some
organisations practise closed recruitment systems where the manager will only
select a particular candidate or employee who is qualified to apply for the position.
This method is often used for promotion. The decision is made informally and in
a subjective condition and depends more on support from the employeeÊs leader.
This closed system is very much preferred especially by small companies since it
is able to reduce time, energy and costs in filling a vacant position in the
organisation.

However, there are organisations that practise internal recruitment by setting up

an open recruitment system whereby the vacant position is announced to all the
employees in that organisation. Job posting is another method where the vacant
position is advertised to all employees in the organisation. Information regarding
the position such as qualifications and requirements needed, salary, working
hours and others will be notified. This information will be circulated by displaying
it on the companyÊs bulletin board, circulation letters, intranet system or any other
communication channels which could be accessed by employees of the company.
Employees who feel that they are qualified and fulfil the requirements of the
particular position are able to submit their applications. This method helps the
organisation to discover hidden talents, allows employees to be more responsible
towards their career development and solves the problem of maintaining talented
employees who are already bored with the position they are currently holding and
considering the possibility of leaving the company.
5.2.2 External Recruitment

Now, let us move on to external recruitment. What does it mean?
External recruitment is a process of developing candidates from outside the

organisation who are interested and qualified for the position offered.
The methods for external recruitment include:

(a) Job advertising (newspapers, magazines, letters, radio stations and
television);
(b) Employee referral (asking employees whether there are any suitable
candidates);
(c) Walk-in (candidates themselves come to apply);
(d) Outside the organisation (universities, technical and vocational schools,
colleges and learning centres), government and private employment
agencies; and
(e) Career seminars and websites.
There are many ways to recruit externally but which one should be used? Studies
show that employee referrals, walk-in, newspaper advertising and government
employment agencies are frequently used to recruit candidates for positions such
as clerical and production operators or more popularly known as blue-collar

employees. For professional/technical levels or executives, newspaper

advertisements, private employment agencies and recruitment from learning
centres and universities are more frequently used. For recruiting candidates to
higher positions such as managers, organisations depend more on employee
referrals, advertising in magazines and newspapers as well as private employment
agencies.
SELF-CHECK 5.2
What are the elements that an employer should focus on when
recruiting a new employee?
ACTIVITY 5.1
In some organisations in Malaysia, the employers, managers or recruiters
are more inclined towards hiring their own friends to fill job vacancies
even if there are many other qualified candidates. What is your opinion
on this? Discuss this issue with your coursemates in the myINSPIRE
forum.
EXERCISE 5.4
List two methods of recruitment that can be implemented by
organisations.
5.3 SELECTION OF QUALIFIED EMPLOYEES

When an organisation carries out the process of attracting the interest of
candidates to apply for the positions offered and later developing a group of
candidates, the process of gathering information for evaluation and then selecting
the best candidate for that particular position must then be performed. This
process is referred to as the process of selection. This process is very important
since hiring the wrong candidate will have an adverse impact on the organisation.
In order to reduce this uncertainty, human resource experts have suggested four
methods of selection. These methods are shown in Figure 5.1.

Figure 5.1: Four methods of selection of qualified employees
These methods are further explained in the next subtopics.
5.3.1 Application Forms and Resume

The first selection method is the application form and resume. Both contain the
same information about the candidate such as personal information, academic
background, working experience and so forth.
Usually, application forms act as a tool for obtaining information about the
candidate which is prepared by the organisation itself. Meanwhile, a resume is
prepared by the candidate himself following his own format.
Many organisations prefer the use of application forms since the form prepared
only relates to the information required. The information obtained will be
incorporated into the human resource information system which will be used as
the material for selection evaluation.
5.3.2 References and Background Checking

Most organisations require applicants to prepare their job references such as
former employer or colleagues, teacher or lecturers who can be contacted in order
to find out and obtain more information regarding the candidate. What is the
purpose of background checking? The purpose of checking the candidateÊs
background is to obtain validity and accuracy of the information provided by the
candidate as stated in the application form or resume. This act of checking enables
the organisation to double check any particular information, negative matters or
job-related background information which is not stated by the applicant.

This checking is usually conducted with learning centres, former employers, court
records, police records and government agencies and other resources through
telephone calls, letters or self-investigations.
5.3.3 Selection Tests

Why are some employees able to perform their job well while others are not? Job
performance of a particular candidate can only be acknowledged after he has
started working.
However, selection tests help organisations in making the right decision on the
most qualified person to be hired. These selection tests measure either directly or
indirectly whether a particular candidate is able to perform the job well. Let us
look at Table 5.4 which shows you the four types of selection tests used by
organisations.
Table 5.4: Selection Tests
Type of Test Description

Specific ability test This test measures the abilities needed to perform a particular job.
It is also referred to as aptitude test. This type of test is usually
used for job areas such as mechanical, clerical, sales and physical
work.
Cognitive ability The purpose of this test is to measure perceptual speed, verbal
test comprehension, numerical aptitude, general reasoning and spatial
aptitude. This test is able to indicate how fast and how well a
candidate could understand words, numbers, logic and spatial
dimensions. An ability test can forecast the job performance of
some job areas only, but cognitive ability test can forecast the job
performance for all job areas.
A candidate who performs well in his cognitive or ability test is

usually efficient in learning something new, able to process
complex information and able to solve problems and make
decisions well.
Biographical data Biographical data or better known as biodata is an extensive study
on the personal background and experiences in the life of a
particular candidate. The basis of this study is the past behaviour
(personal background and life experiences) which is the best
forecast for future behaviour.
Personality test This is a test that measures the personality of the candidate
towards the job. This test shows the candidates personality
dimensions.

The series of tests conducted in assessment centres include:

(a) In-basket training;
(b) Role playing;
(c) Small group presentation; and
(d) Leaderless group discussion.
What is in-basket training? In-basket training is a written test where candidates

are given matters related to the task of a manager such as memos, telephone
messages, organisation policy and other forms of communication. Candidates only
have limited time to read, prioritise items and decide on the means of dealing with
each of the items. An experienced manager will evaluate and make comments and
then provide suggestions.
Leaderless group discussion is a discussion in a group comprising six candidates

and they are given two hours to solve problems but none of the members is elected
to lead the group. Trained observers will monitor and make comments for each
candidate based on how far the candidate is able to discuss, listen, lead and deal
with others.
5.3.4 Interviews
Each of us who applies for any particular position will not be able to avoid being
interviewed. If we had attended five interviews at different organisations, it means
we have already faced five different types of interview conditions. What is an
interview?
An interview is a method where company representatives will ask the

candidate a series of questions related to the job to determine whether he is
qualified for the job or not.
There are a few types of interviews which are frequently used by organisations
namely unstructured, structured and semi-structured (a combination of
unstructured and structured interview). The unstructured and structured
interviews are further explained in Table 5.5.

Table 5.5: Two Types of Interview
Type Description
Unstructured interview It is an interview where the company representatives ask any
questions to the candidate. In this type of interview, a
candidate will face a different set of questions from other
candidates.
Structured interview It is an interview where the interviewer will ask a standard
set of questions which had been earlier prepared and
drafted. Each candidate will face the same questions like any
other candidate. There are four types of questions that are
frequently asked during this type of interview:
(i) Situation-based Questions

Questions that require the candidate to provide
answers on what he will do when faced with a
particular situation (For example: What will you do
if⁄)
(ii) Background-related Questions

Question that inquires about the candidateÊs work
experience, academic qualifications and other
qualifications.
(iii) Behaviour-related Questions

Questions on the candidateÊs former jobs.
(iv) Job-related Questions

Questions which require the candidate to demonstrate
his job knowledge (For example, a question for a medical
doctor: „A particular medicine has been administered to
a patient and he shows negative feedback. How do you
deal with the situation?‰)
EXERCISE 5.5
State the two main processes involved in the selection of qualified
candidates.

ACTIVITY 5.2
Before attending an interview, a candidate might prepare himself with
answers to potential questions. He would already have ready answers
before going into the interview room. In this scenario, what is your
opinion regarding the effectiveness of interviews for employers? Discuss
this matter in the myINSPIRE forum.
5.4 DEVELOPMENT OF QUALIFIED

EMPLOYEES
Through the process of selection, organisations will be able to obtain suitable
candidates to fill the positions offered. The next step that needs to be considered
by managers is to introduce the new staff to the organisation and his or her new
job. Training must be provided to strengthen existing skills, knowledge and
abilities of the employees with the job needs in the organisation.
Then, performance evaluation needs to be carried out in order to evaluate the

effectiveness of the training and performance of the employee. What have been
discussed earlier are the aspects that need to be considered by the management in
developing qualified employees in their respective organisations.
5.4.1 Orientation
What is orientation?
Orientation is the process of introducing new employees to the programmes,

policies and culture of the organisation.
Orientation helps them to learn about the organisation and get used to the new
environment. Sometimes, orientation only focuses on simple matters such as
working hours, parking priority and salary payment schedules. Employees may
only undergo orientation by watching films, reading handbooks and being
introduced to their colleagues.

Orientation is conducted by teaching employees about the corporate culture and

providing guidelines to succeed with the organisation. For some organisations,
orientation is also incorporated into the training programmes. This is to ensure
that new employees have the basic knowledge and skills needed to perform the
job assigned.
5.4.2 Training
Now, let us move on to training. What does it mean?
Training means providing opportunity for employees to develop working

skills, experience and knowledge they need in order to perform their job or
upgrading their job performance.
Training is not only needed by new employees but also by employees who have
been working long with the organisation. Besides that, training is also not only
needed by lower-level employees but also by middle and higher-level
managements.
(a) Determining the Needs for Training

Organisations should not hastily conduct training programmes for their
employees. If this happens, it can cause the organisations to bear high costs
due to the ineffectiveness of a particular training programme. This is because
at that point of time, training may no longer be needed. To avoid this,
organisations must determine the needs for training. This is a process of
identifying and giving priority to the learning needs of the employees. Needs
for training can be carried out by identifying performance ineffectiveness,
listening to complaints from customers, making observations on employees
and managers, or assessing the skills and knowledge of employees.
Furthermore, evaluation of training needs is an important tool in

determining who should or should not be attending the training
programmes conducted. The selection of candidates for training must be
based on information related to a particular job area.
After training needs have been determined, training objectives must be

developed to fulfil the needs. Many training programmes are conducted
without objectives. Effective objectives must state what will happen to the
organisation, department or employees when training has been completed.

The expected results must be stated in writing. Training objectives can be

categorised as shown in Table 5.6.
Table 5.6: Training Objectives
Objective Main Question

Objective guidelines • What are the principles, facts or concepts that will be
learned in the training?
• Who will be taught?
• When will the teaching begin?
Departmental and • What is the impact towards the organisation and
organisational department when work absenteeism, turnover, cost
objectives reduction and productivity increase takes place?
Individual growth • What are the effects of training on the behaviour and
and performance attitude of employees?
objectives
• What are the effects on the personnel development of
the particular employee?
When training objectives have been stated clearly and effectively, training
programmes can be implemented successfully and will be able to give results
as expected. A training programme that achieves objectives will increase the
level of productivity, overcome inefficiency and help employees in the future
especially in career development.
(b) Training Methods

Several training methods can be used to fulfil training needs and objectives.
Let us look at Table 5.7 which explains several training methods that are
frequently used.
Table 5.7: Several Training Methods that are Frequently Used
Method Description
On-the-job training This type of training is usually given by senior
employees or supervisors. Trainees will be shown how
to perform a job and be allowed to perform it under the
supervision of the supervisor. One of the forms of on-
the-job training is job rotation (sometimes referred to
as cross training). In job rotation, employees will learn
several different tasks in a particular unit or
department and perform the tasks in a particular
period of time.

One of the advantages of job rotation is that it allows

flexibility in a particular unit or department. When an
employee is absent from work, his job can be done by
another employee. One of the advantages of on-the-job
training is that it does not need any specific facility.
Besides that, new employees are able to perform

productive jobs during the learning process. One of the
disadvantages of this method of training is that the
pressure at the workplace can cause the training to be
dangerous or easily forgotten.
Apprentice training This is a training programme system that requires an
apprentice to work for a certain period before he is
allowed to perform a job or specialisation in a
particular area. Trainees are given instructions and
acquire experience during work or outside work, in
every practical and theoretical aspect needed for a job.
Usually, a trainee will be placed under the supervision
of a mentor who has wide experience and has been
long involved in that particular job area. The mentor
will give all the guidance and share his experiences
with the trainee, which hopefully will be able to help
the trainee progress towards a successful career path.
Off-the-job training Unlike on-the-job training, off-the-job training is done
outside of the location of the job area. The location of
training might be in a classroom with the same facilities
or in other different locations. This form of training
allows the demonstrator to focus on a particular
education subject without any interference and in a
controlled environment.
However, the downside of this form of training is that

it is unable to depict the real conditions of the
workplace to the trainees.
Vestibule training The same procedure and tools used in the real working
condition is performed in a particular area known as
vestibule. Trainees are taught how to perform a job and
use the relevant equipment by an experienced
employee. This will help the trainees to learn about the
job areas in a comfortable condition without any
pressure from production scheduling.

The main advantage of this method is that trainers can

emphasise on theories and use the necessary techniques
compared to the outputs and trainees will learn how the
real job is performed.
However, this method can be very costly and employees

still need to get used to the real working environment.
Vestibule training has been used to train word processing
operators, bank tellers, clerks and those in other related
jobs.
ACTIVITY 5.3
In order to strengthen the skills of an employee, the Malaysian Ministry
of Human Resources introduced a scheme known as „Suspend and
Training Scheme‰ for graduates and suspended workers. In your point
of view, how far is this scheme able to help in determining the training
needs and training methods needed by a particular organisation? Discuss
this matter with your coursemates in the myINSPIRE forum.
SELF-CHECK 5.3
List the advantages and disadvantages of on-the-job training, apprentice
training, off-the-job training and vestibule training in a table.
EXERCISE 5.6
List the training methods that can be used by an organisation.
5.5 PERFORMANCE EVALUATION

After training is given to employees, they are released to perform the jobs assigned
to them, equipped with all the knowledge and guidance given. The next step is to
carry out performance evaluation. This is a process of evaluating job performance
and preparing feedback based on that evaluation. Performance evaluation
contributes towards two purposes:
(a) Firstly, the purpose of the evaluation is to help inform employees about their
performance level in comparison to the standard; and

(b) Secondly, performance evaluation can help in personnel development and

preparation for future training programmes.
Performance evaluation focuses on previous performance and measures it in

comparison to the standards fixed. The methods of performance evaluation must
fulfil the criteria of relevance and validity. In order to make it valid, the method used
must be consistent in giving results regardless of the time or who the evaluator is.
What is actually being evaluated? This might be a question which frequently plays
inside the mind of a manager. Basically, evaluation is conducted on three sets of
criteria namely job output, behaviour and attitude. Let us look at Table 5.8 which
clarifies the three sets of evaluation criteria.
Table 5.8: Sets of Criteria for Evaluation
Set of
Description
Criteria
Individual If a job emphasises more on the calculation of job output compared to
job output the job purpose, the evaluation needs to be conducted on the individual
job output. By using job output, a production manager needs to evaluate
on criteria such as quantity produced, defaults made and cost per unit
of product. This is similar to evaluating the performance of a
salesperson, which is evaluating the overall total sales made based on
the total number of units and ringgit, and the total number of new
customers generated.
Behaviour In most cases, it is difficult to specifically identify the output produced by
an employee especially when a job is a part of a group or department task.
Evaluation for a group or department can be conducted easily but
evaluation of individual contribution is difficult. By using the example
above, the behaviour of a production manager that can be used for the
purpose of performance evaluation are the accuracy and frequency of
report submission or the leadership style shown by him.
Meanwhile, the performance evaluation of a salesperson may be related

to the average number of calls or meetings with customers in a day or the
total number of sick leaves taken for each year.
Attitude This is considered a weak set of criteria but this type of evaluation is still
practised in some organisations. It is said to be weak because the
evaluation of attitudes excludes from the evaluation the real job
performance. Attitudes such as having good manners, exhibiting
confidence, able to be independent or cooperative, trying to look busy
or having a broad experience, are subjects that might be directly or
indirectly proportional with the level of real job performance.

5.5.1 Who Should Evaluate?

Performance evaluation of an employee can be done by certain personnel in the
organisation as explained in Table 5.9.
Table 5.9: Personnel that Conduct Evaluation
Who Description
Supervisors Many organisations practise this method. An employee is evaluated by
the person who supervises him. For example, an operator is evaluated
by his supervisor; an executive is evaluated by a senior executive or
manager; and, a general manager is evaluated by the board of directors
of the company.
Colleagues Evaluation by colleagues is considered a reliable approach. This is
because colleagues are close to the employee being evaluated and his
daily job performance. Daily meetings and conversations provide
comprehensive views regarding the job performance of the employee
being evaluated.
Evaluation by colleagues could augment the effectiveness of evaluation

made by supervisors. However, evaluation by colleagues may also be
bias.
Subordinates The fourth party that can become the performance evaluator are
subordinates. Subordinates can provide important and detailed
information regarding the behaviour of their superiors due to a close
relationship. The problem is that subordinates may be afraid to provide
accurate evaluation due to the power held by their superiors and fear of
retaliation.
360 degrees The final approach is the 360 degrees evaluation. It provides feedback
evaluation on performance from all parties related to the job of the employee being
evaluated which covers general workers, customers, colleagues and
managers.
SELF-CHECK 5.4
In evaluating the performance of a particular employee of an

organisation, it is very important that the evaluation given is clear,
accurate and fair because the performance evaluation will become the
guidance and determinant for an employee. In your opinion, who is the
most appropriate person to conduct a performance evaluation of an
employee?

5.5.2 Methods for Performance Evaluation

The previous discussion focused on who should conduct the performance
evaluation of an employee. Now, what are the methods that can be implemented
in making evaluations? Let us find out the answer in Table 5.10.
Table 5.10: Methods for Performance Evaluation
Method Description
Essay writing This is the simplest method in conducting performance evaluation.
This method requires the employee being evaluated to explain about
the strengths, weaknesses, earlier performances, potential and
suggestions in increasing performance. This essay writing does not
require complex forms or extensive exercises to be completed. But
the results will usually portray the ability of the writer. A good or
bad performance is determined by the writing skill and level of true
performance of the evaluated employee.
Critical This is a form of evaluation that observes the behaviour that acts as
incidents the key in differentiating between a good or poor work performance.
The evaluator will write to explain what has been done by the
employee and whether his job is effective. Evaluation here is not only
directed at behaviour but also involves the personality of the
employee. Statements regarding these critical incidents can depict
the behaviour required and identify what needs to be improved.
Measurement of One of the ways to increase performance through evaluation is by
objective measuring objective performance. This is a simple and countable
performance performance measurement. Objective performances that are
frequently used are outputs, scraps, wastes, sales, customer
complaints or level of default.
Employee Under this method, the evaluators rank employees according to such
comparisons factors as performance and value to the organisation. Only the
employee can occupy a particular ranking.
ACTIVITY 5.4
You have been exposed to the methods of evaluation that are normally
used by performance evaluators. In your opinion, how fair and effective
are these methods to the employee being evaluated? In your view, what
other methods are suitable for evaluating the performance of an
employee? Discuss this matter with your coursemates in the myINSPIRE
forum.

EXERCISE 5.7
State who should be the performance evaluator for an employee in your
organisation.
5.6 RETAINING QUALIFIED EMPLOYEES

An employee works with an organisation to fulfil his personal objective, that is, to
earn money for his livelihood. An organisation can retain a talented employee if it
offers rewards that fit the job and needs of the employeeÊs personal objectives.
What is employee reward?
Employee reward refers to the payment granted to the employee as an

exchange for the job that is carried out. This reward may be financial or non-
financial.
Generally, there are four types of decisions of reward granting as shown in

Figure 5.2.
Figure 5.2: Four types of employee rewards
The decision of payment level is a decision of making payment to employees

whether at a level below, above or at par with the payment of salary in the labour
market.
An organisation uses job evaluation to determine the payment structure. Job

evaluation determines the value or sum that must be paid for each job by
determining the market value for the knowledge, skills and needs required to
perform that particular job. After the job evaluation has been carried out, the

organisation will usually make payments at the same rate as determined by the
market. There are some organisations that pay above the rate determined by the
market. This is to attract the employeesÊ interest and retain them in the
organisation. A salary which is higher than the level determined by the market
will attract the interest of more qualified candidates, increase the level of job
acceptance, reduce recruitment time and increase the level of employee retention.
The decision of variable payment is a decision that focuses on how far the payment
of salary differs from the job performance of an individual employee and
organisation. The purpose of relating payment with organisation performance is to
increase motivation, effort and job performance of employees. Piecework, sales
commissions, profit-sharing and employee share ownership plans are the options
available in variable payment.
Piecework payment plan is the payment for something that can be counted. For
example, an employee will be paid a standard rate for each item produced and
payment will increase if production is increased (for example, RM0.35 per unit for
the first 100 products, and if production exceeds 100 units the worker will be paid
at the rate of RM0.45 per unit).
Meanwhile, sales commission is the payment a salesperson receives. It is a

percentage of the value of the goods he sold. The more sales he makes, the more
commission he will receive. For example, a car salesperson receives a sales
commission of RM500 for each car that he sells. Hence, the more cars he sells, the
more commission he makes.
Since piecework and sales commission are based on individual performance, this
can reduce the motivation of employees to work in a team. Therefore, some
organisations introduce group incentives to attract the interest of employees to
work in a group or team. Profit sharing is the payment taken from a part of the
organisationÊs profit. This payment is divided among the employees and is usually
above the level of reward that they normally receive. The more profits the
organisation make, the more rewards the employees will receive.
Employee share ownership plan grants employees with companyÊs shares in

addition to the rewards that they usually receive. Meanwhile, share option
provides the opportunity for employees to buy company shares at a fixed price
tier where the price is usually lower than the market value. For example, a
company offers its employees the price of RM5 per share, while the market price
is RM10 per share.

Payment structure is a decision related to internal payment distribution. This

refers to how far individual employees in an organisation receive different levels
of salary. Individuals at the top level will receive a higher pay compared to those
at lower levels. For example, a director enjoys a higher payment structure than the
assistant director and a much higher structure than his subordinate officers.
Rewards granted are not only in monetary form but also in the non-monetary
form, known as employment benefits. These are called such because only
individuals working at a particular position or organisation will enjoy the benefits.
Employment benefit is the granting of rewards that cover anything other than the
salary. Many organisations offer various forms of benefit choices to employees
such as retirement and pension plans, paid leave, sick leave, health insurance, life
insurance, health treatment, discounts on products and services of the company
and many more.
EXERCISE 5.8
Based on your understanding, state the differences between financial
rewards and employment benefits.
5.7 EMPLOYEE SEPARATION

Lastly, let us look at employee separation. At one point, an organisation has to be
separated from its employees voluntarily or by force. What is employee separation?
Employee separation means the loss of an employee by an organisation either

voluntarily or involuntarily.
This separation is caused by various reasons. Involuntary separation arises when an

organisation decides to discontinue the service of an employee or retrench an
employee. On the other hand, voluntary separation means that the employee
decides to retire or leave the organisation.
Since this separation affects recruitment, selection, training and granting of rewards,
the organisation must be able to forecast the number of employees who will be lost
due to termination, downsizing, retirement and turnover when making human
resource planning.

5.7.1 Employee Termination

Terminating employees may be considered as a simple act but think about the
feelings of the employee being terminated. It is definitely hard to describe the
feelings of that employee. Therefore, the manager must do a few things to
minimise problems related to employee termination.
Firstly, in most situations, termination or dismissal cannot be the first choice. The
employee must be given a chance to change his behaviour when a problem arises.
The employee should receive a series of specific warnings on the matters of what
and how serious is the problem that he caused. After warnings have been given,
the problematic employee must be given time to make changes or correct his
mistakes. If the problem continues, he needs to be given consultation on employee
performance, what needs to be done to increase it and the results that will arise if
the problem continues (for example, show-cause letter, warning letter, suspension
without payment or termination).
Secondly, the employee should be terminated based on sensible and rational

reasons. The termination of an employee without sensible reasons can result in the
employee taking legal action, with a claim of wrongful discharge. This would
require the employer to state the job-related reasons for discontinuing the services
of the employee. The decision of termination needs to be done on job-related
factors such as disobeying or violating the companyÊs law or consistently showing
poor performance in the job.
Thirdly, the organisation needs to focus on the reaction of other employees when
one of them is terminated. This is because the issue of termination can affect the
performance and motivation of existing employees because it may raise anxiety
towards the security of their job as well.
SELF-CHECK 5.5
A disciplinary action was taken against an employee due to an act of
breach of trust. In your view, if he promised to change his behaviour and
expressed regret over his actions, should he be given a second chance?
What is the most suitable and necessary action to take in order to ensure
that he will not repeat the mistake?

5.7.2 Downsizing
What is downsizing?
Downsizing is the act of organised repealing of positions and jobs in the

organisation.
Whether it is caused by the reduction of cost, decline in market shares or being too
aggressive in employing workers and growth, it is an event that happens
constantly in any organisation regardless of any economic condition.
Is downsizing effective? Theoretically, downsizing should bring an increase in

productivity and better performance profit and increase organisational flexibility.
A 15-year research on downsizing found that a company implementing 10 per cent
downsizing of its labour use is only able to produce a 1.5 per cent reduction of its
cost and 4.7 per cent increase in share value for three years compared to
34.3 per cent in the situation where downsizing is not implemented.
Not only that, profitability and productivity levels generally are not increased
through downsizing. This clearly shows that downsizing is not the best strategy to
implement. Instead, effective human resource planning is the best act. Downsizing
needs to be taken as the final step.
However, if the organisation finds that the financial condition and strategies
implemented are not effective and downsizing is necessary for the survival of the
organisation, it must train its managers to explain the needs of downsizing to the
employees. The most important is that the top-level management must explain in
detail why downsizing is needed and choose a suitable time to inform the
employees. The news of downsizing should be delivered to the employees by the
management of the company, instead of being informed from the media such as
television and newspapers.
Besides that, the organisation must truly assist the affected employees by helping
them to find other jobs or providing centres for counselling services. These centres
serve to provide counselling to reduce the anxiety of the downsized employees
and lift their morale. Counselling centres could also help to retain a positive image
of the organisation from the societyÊs point of view due to the strategy of
downsizing implemented. These measures will help the employees to maintain
their level of job productivity up until their final days with the organisation.

5.7.3 Retirement
Retirement of an employee takes place when his retirement period arrives but
there are times when early retirement of employees can help the organisation. In
the effort to reduce the workforce in an organisation, the implementation of early
retirement incentive programmes might help. These programmes offer financial
benefits for employees in order to persuade them to retire early. Not only does this
effort reduce the workforce but it also reduces cost by repealing a particular
position after the retirement of the employee, reduces cost by substituting a highly
paid retired employee with a lesser-paid new employee or by providing
opportunities to existing employees in the organisation.
What is the main problem related to this programme? The main problem related
to this programme is in forecasting who and how many employees are ready to
accept this programme. The organisation may lose talented employees and face a
large number of employees who want to retire early.
5.7.4 Employee Turnover

Employee turnover takes place when an employee voluntarily ends his service
with an organisation. Generally, an organisation tries to retain a low turnover rate
in order to reduce the processes of recruiting, employing, training and replacement
cost. However, not all turnovers harm the organisation.
For example, a functional turnover happens in the condition where an

underperforming employee chooses to resign voluntarily. This enables the
organisation to replace the employee with a new and a more competent employee.
On the other hand, dysfunctional turnover takes place when a high-performance

employee chooses to leave voluntarily. This condition adversely affects the
organisation and it will lose a talented employee.
Thus, employee turnover needs to be analysed carefully in order to determine who

really chooses to leave the organisation:
(a) An employee with poor performance; or
(b) An employee with a good performance.

If many high-performance employees leave a company, the managers must find

out the reasons and take measures to reduce it. Methods such as salary increment
and offering benefits that might encourage or increase the working condition for
these skilled employees could help. One of the best ways to influence functional
turnover and dysfunctional turnover is by linking salary payment with the level
of performance demonstrated.
EXERCISE 5.9
Essay Question
1. List four ways of employee separation frequently faced by

employees and organisations.
2. Describe the four basis of reward granting decision.
1. „This is a written statement regarding the qualifications required

for holding a particular position.‰

A. Job description
B. Job specification
C. Record system
D. Job analysis
2. What type of interview asks standard questions to all candidates,

usually questions regarding backgrounds, attitude and situation,
and job-related matters?
A. Standard interview
B. Structured interview
C. Situation interview
D. Semi-structured interview

3. EXERCISE
What is the5.9
process of introducing the organisation to new employees
regarding organisational programmes, policies and culture?
A. Orientation
B. Vestibule training
C. Performance evaluation
D. Apprentice training programme
4. „This is a kind of payment where the salesperson receives percentage

from the price value of the goods sold.‰

A. Piecework
B. Share options
C. Sales commission
D. Profit sharing
5. What is the act of organised repealing of positions and jobs in the

organisation?
A. Retirement
B. Employee turnover
C. Termination
D. Downsizing
1. Organisation strategies must be planned based on the condition of

human resource in the organisation. ___
2. Human resource management is a process of attracting the interest of

qualified candidates and maintaining or retaining qualified
employees. ___
3. Job analysis is a study process regarding the duties related to a

particular job and the human qualities needed in performing the job.
___

4. Forecasts toward factors such as economy, competition level

technology, residentÊs demographic that influences the level of
demand and supply of organisationÊs workforce in the future are
considered as the internal forecasting of organisation. ___
5. Recruitment can be performed in two ways: internal recruitment

and external recruitment. ___
• Human resource is the most valuable asset for an organisation. Therefore, it

must be managed properly.
• Excellent human resource management (HRM) can assist in the

implementation of organisational strategies at a high level of efficiency and
effectiveness.
• HRM is a process that comprises four main components:
– Determining the needs of human resource and the organisation;
– Attracting the interest of qualified candidates;
– Developing qualified employees; and
– Retaining qualified employees.
• These processes must be implemented with proper planning to ensure that

they make a significant contribution and fulfil the goals and objectives of the
organisation.
• Human resource planning consists of two main components namely job

analysis and forecasting.
• The process of developing a group of candidates who are interested and

qualified for a position offered by an organisation is referred to as recruitment.
• Recruitment can be carried out using two methods namely internal

recruitment and external recruitment.

• Selection of qualified employees can be done through four methods namely

application forms and resume, references and background checking, selection
tests and interviews.
• Development of qualified employees can be done through orientation and

training.
• Performance evaluation is a process of evaluating job performance and

preparing feedback based on that evaluation. The criteria for evaluation are
individualÊs job output, behaviour and attitude.
• An organisation can retain a talented employee if it offers rewards that fit the
job and needs of the employeeÊs personal objectives.
• Employee reward refers to the payment granted to the employee as an

exchange for the job that is carried out. This reward may be financial or non-
financial. Generally, there are four types of decisions of reward granting
namely payment level, variable payment, payment structure and employee
benefits.
• Employee separation means the loss of an employee by an organisation either

voluntarily or involuntarily.
• Involuntary separation arises when an organisation decides to discontinue the

service of an employee or retrench an employee.
• Voluntary separation means that the employee decides to leave or retire.
• Employees will be lost due to termination, downsizing, retirement or turnover.

Application forms and resume Job specification

Apprentice training Orientation
Downsizing Performance evaluation
External forecasting Piecework payment plan
External recruitment Processes
Human resource management References and background checking
(HRM)
Retirement
Internal forecasting
Reward granting
Internal recruitment
Selection tests
Interviews
Termination
Job analysis
Training
Job description
Turnover

Learning.

Topic  Communication
6 in Organisations
LEARNING OUTCOMES
1. Explain the importance of good communication in an organisation;
2. Differentiate between formal communication and informal
communication;
3. Clarify the forms of communication; and
4. Evaluate the steps for overcoming barriers to communication.
 INTRODUCTION
Why does a manager communicate? According to Lewis et al. (2001), there are
many reasons why a manager communicates. Managers motivate, inform, control
and fulfil social needs. Communication is used to influence employees to achieve
organisational goals. Communicating information provides facts and data to be
used in making decisions towards achieving the objectives that have been set. It is
used to coordinate employees and tasks.
Managers also communicate in order to fulfil social needs through interaction that
does not involve work. For example, an employee is not only required to talk on
matters related to his job but also on issues related to sports, weather,
entertainment, politics and others. Even though this communication will not have
direct effect on his work performance in the organisation, it can influence the way
the employee feels about his workplace and his relationship with other employees.

TOPIC 6 COMMUNICATION IN ORGANISATIONS  121
According to Rue and Byars (2004), a study found that 50 to 90 per cent of the
managerÊs time is used on communication. Unfortunately, according to another
study, almost 70 per cent of business communications failed to achieve the
objectives desired. According to another study, lower level managers spend
57 per cent of their time communicating, while for middle managers it is
63 per cent, and for upper managers it is 78 per cent.
Let us learn more on communication in this topic as we go through the importance

of good communication, formal communication and informal communication,
forms of communication as well as steps to overcome barriers to communication.
Happy reading.
EXERCISE 6.1
Explain the main reasons why a manager communicates.
6.1 DEFINITION OF COMMUNICATION

What is communication? Generally, communication is a dynamic and complicated
process which involves many factors that affect its effectiveness. Dynamic process
means that the process of communication is not in a static or fixed condition.
Meanwhile, complicated process means that even though it is a simple interaction

involving two people, it involves numerous variables such as the individual,
environment, experience of both parties, and work conditions that determine the
efficiency and effectiveness of the process. Based on these descriptions, we can
define communication as follows:
Communication is the process of transferring information and knowledge

from one individual or party to another person or party using meaningful
symbols. It is a method of exchanging and sharing of ideas, attitudes, values,
opinions and information.
The process of communication begins with a sender who wishes to deliver a

particular message and this process is complete when the receiver of the message
provides feedback on whether the message received is understood or not.
Figure 6.1 depicts the elements in the process of communication.

122  TOPIC 6 COMMUNICATION IN ORGANISATIONS
Figure 6.1: Process of communication

Sources: Jones, George & Hill (2000)
As stated earlier, communication is a process where the exchange of information

takes place between two or more people. The elements of the communication
process are explained further in Table 6.1.
Table 6.1: Eight Elements in the Communication Process
Process Description
Information Also known as the message source, the sender is a person who has a
sender piece of information and wishes to deliver it to other parties.
Encode Encoding takes place when the sender translates the information to be
delivered into a series of symbols that can be identified and understood
by the receiver.
Message The message comprises symbols in the form of verbal, written or sign
language that symbolises the information to be delivered by the sender
to the receiver.
Channel Channel is the method of delivery from one person to another. The
channel must suit the message to be delivered to ensure that the
communication process occurs smoothly, effectively and efficiently.
Decoding Decoding is the process where the receiver translates the message
received into a form that can be understood and brings meaning to the
receiver.
Receiver The receiver is the individual or party who receives the message delivered
by the sender. The message formed is based on the background of the
receiver.
Feedback It refers to the reaction of the receiver towards the message received
from the sender. It is a process of returning the message to the sender
that depicts the level of understanding of the receiver towards the
particular message. Providing feedback is the best way of showing that
a particular message has been received and whether the message has
been understood or otherwise.

Disruption or Any factor that disrupts, confuses and restricts the delivery of message
noise is considered as disruption or noise. Interference may be internal or
external. Internal factors are related to the individual himself, such as a
receiver who does not pay attention to the message delivered.
Meanwhile, external factors are environmental and physical factors that
cause the message delivered not to be perfectly understood by the
receiver.
Sources: Jones, George & Hill (2000)
ACTIVITY 6.1
Have you ever encountered a situation of misunderstanding between your
subordinate and yourself, or between your manager and yourself? What
was your action? Share your answer with your coursemates in the
myINSPIRE forum.
EXERCISE 6.2
Define communication and the elements involved in communication.
6.2 TYPES OF COMMUNICATION

In an organisation, communication is very important in order to ensure that the
message to be delivered reaches the receiver. Did you know that there are three
types of communication used in organisations? Let us look at Figure 6.2 which
shows you the three main types of communication.

Figure 6.2: Types of communication
The types of communication mentioned in Figure 6.2 are further explained in the
next subtopics.
6.2.1 Formal Communication

What is formal communication?
Formal communication is a message or information delivered through the

hierarchy network or job responsibility as defined by an organisation.
There are three formal communication systems that are frequently used:
(a) Vertical Communication

Vertical communication refers to two types of communication namely
downward and upward flow of information. These two are further explained
in Table 6.2.

Table 6.2: Two Types of Vertical Communication
Type Description
Downward According to Rue and Byars (2004), it is a part of the
communication communication system that exists in an organisation. This
channel of communication is frequently used by managers to
deliver messages to subordinates or customers. Downward
vertical communication begins from upper management and
travels down along the levels of management to middle
management, lower/line management and employees.
The purpose of downward vertical communication is to

inform or instruct other management and employees
regarding policies or organisational goals that have been set
by upper management. Other purposes of communication
include to give advice; information, instruction and
evaluation of subordinates; and provide information on the
goals and policies of the organisation to the members of the
organisation.
Problems in downward communication arise when it is

misused, for example, when managers do not provide
opportunities for subordinates to give feedback or do not
provide complete information needed by subordinates to
perform their work effectively. This might result in the
subordinates being confused, less understood and fail to
perform in their jobs. This condition happens because most
downward communication is one way and does not
encourage feedback from subordinates using the
information.
The choice of channel used in this system is important.

Written communication is usually difficult to change. It is a
form of official record, but it does not allow immediate
feedback.
Meanwhile, verbal communication does not provide a

record and can be easily refined but it allows immediate
feedback.

Upward Upward vertical communication contains messages or

communication information from the lower level of the hierarchy or
subordinates to the upper management level. It is used by
employees to deliver suggestions, opinions or feedback to
upper management. This can be done through meetings,
discussions, surveys and others.
The main function of this type of communication is to

provide information to upper management regarding what
is happening at the lower level. Ideally, organisation
structures must allow for both downward and upward
forms of communication. Communication is supposed to
flow two ways through the formal structure of the
organisation. Unfortunately, upward communication does
not flow as smoothly as downward communication.
According to Rue and Bryars (2004), the following are some
of the barriers to upward communication:
(a) Management fails to react when subordinates deliver

information. This failure will cause frustration and
prevent future communication.
(b) Manager does not like to hear negative information or

problems. When employees feel that their manager has
this attitude, they will probably avoid giving him
information.
(c) The attitude of a manager plays a critical role in

upward communication. If a manager is concerned and
listens well, upward communication can be improved.
(b) Horizontal Communication

What does horizontal communication mean?
Horizontal communication refers to the flow of message among members

working in the same level of hierarchy in a particular organisation.
This type of communication takes place between colleagues or among

managers. This type of communication forms relationships and is necessary to
achieve coordination among friends at the same level. For example, the sales
manager discusses with the human resource manager the number of part-time
employees needed for next month.

Basically, upward and downward communications take place through the

chain of command of the organisation. Horizontal communication is
important for coordination among departments and to ensure the perfect
functioning of downward communication, which covers instructions from
upper management; and upward communication, which consists of feedback
from the subordinates to upper management.
Horizontal communication usually follows a workflow pattern in a

particular organisation, which takes place among colleagues, managers and
departments.
What is the aim of horizontal communication? The main aim of horizontal

communication is to provide a direct channel in coordination and be a means
to solve problems in the organisation.
How about the benefit of horizontal communication? The benefit of

horizontal communication is that it allows the members of an organisation
to develop relationships with their colleagues from the same level. This will
further develop work satisfaction and cooperation.
(c) Diagonal Communication

What does diagonal communication refer to?
Diagonal communication refers to the flow of message between two

parties from different hierarchies or departments in a particular
organisation.
This type of communication does not follow protocol and is frequently used
in informal organisations. For example, a human resource manager discusses
with a clerk from the accounts department regarding incomplete information
in employee records.
SELF-CHECK 6.1
What is meant by formal communication? State the different types of
formal communication channels in an organisation.

6.2.2 Informal Communication

According to Rue and Byars (2004), there are many informal paths of
communication in an organisation. Most of this communication happens outside
the chain of command. These informal communication channels are known as the
grapevine. What is a grapevine?
A grapevine is an informal network of information among employees.
The grapevine in organisations does not emphasise power and rank. In terms of
communication direction, the grapevine may connect members of the organisation
in any direction, either vertically, horizontally or diagonally.
Even though the grapevine can be regarded as rumours, they are also useful to
management. Through the grapevine, management is able to deliver information
and receive feedback faster without incurring a high cost. Based on the feedback,
management can evaluate whether to carry out further investigation on the matter
at hand.
6.2.3 Non-verbal Communication

What is non-verbal communication?
Non-verbal communication is a type of communication that does not use

words, either verbal or written.
Non-verbal communication is an important addition to verbal communication and

sometimes it can even alter the meaning of verbal communication. Non-verbal
communication is the best method to communicate emotions. When combined
with verbal communication, it becomes a powerful tool for a manager to
disseminate information to the employees. Non-verbal communication consists of
two types of communication as explained in Table 6.3.

Table 6.3: Two Types of Non-verbal Communication
Type Description
Kinesics Kinesics is a type of non-verbal communication that does not use
words, instead it applies body language and facial expressions. A
person is able to understand the message delivered by watching the
body language or the expressions shown. For instance, a person will
move his head left to right when he does not understand a certain
matter. However, not everyone can understand this type of language.
Hence, the use of body language often raises problems between the
sender and the receiver.
Paralanguage According to Rue and Byars (2004), forms of non-verbal
communication involve tone, pitch, intonation level, volume and
speech patterns such as silence or halts in a personÊs voice which can
also be considered as a form of communication. For example, in the
US, a person can raise his or her eyebrows to indicate disagreement,
attraction or as a sign of giving attention. On the other hand, in Japan,
raised eyebrows are considered as an obscene sign.
SELF-CHECK 6.2
Explain what is an informal communication.
6.3 INCREASING COMMUNICATION

EFFECTIVENESS
How do we increase the communication effectiveness? The first step in forming
effective communication is to identify and overcome barriers in the
communication process. This is because these barriers will interfere with the
message to be delivered to the receiver.

6.3.1 Communication Barriers

There are five barriers in communication as depicted in Figure 6.3.
Figure 6.3: Five barriers to communication
These five barriers to communication are further explained in Table 6.4.
Table 6.4: Five Barriers to Communication
Type Description
Selective This is the tendency to listen and receive objects and information
perception which are consistent with our values, beliefs and desires, but
disregard or reject information that is inconsistent with them.
Perception is a process whereby an individual receives, arranges,
interprets and stores information obtained from his or her
environment. This is followed by the process of perception filtering.
Filtering of perception involves difference in personality, psychology
or basic experience that influences other people to disregard or not
give attention to certain stimuli. Individuals are also inclined to fill in
the blanks of the missing information by assuming what he does not
know is consistent with what he already knows.
Disruption Disruption is any factor that interrupts, confuses or restricts
communication. For example, a person talking on the telephone in a
noisy environment will face difficulty in understanding what the
sender is saying. This disruption might result in the wrong
perception towards the message being delivered.

Emotions Emotional reactions such as anger, love, jealousy and fear will
influence a person in understanding the message being sent to him.
Emotions are subjective reactions when a person communicates. The
emotion and sentiment of the sender influences the message
encoding and the receiver may or may not realise the emotional
condition of the sender at the particular time. The emotions of the
sender and the receiver will influence the message decoding and
reaction of the receiver.
Communication The skill to communicate differs from one individual to another.
skills These differences are caused by culture, education, training and the
personality of the particular person. For example, Americans tend to
be more talkative as compared to the Japanese.
Japanese people prefer to wait, listen and discuss a matter in detail

before making any decisions. The effectiveness of communication
also depends on the time a message is delivered. For instance, if a
manager decides to give out an instruction or message during the
festive season or in the evening when employees are about to leave
the workplace or thinking of taking a long vacation, the effectiveness
of communication will definitely be less.
Suspicion The reliability of a particular message will affect the effectiveness of
message acceptance. For example, in a discussion between employees
and management, employees are frequently suspicious about the
claims of the managers. In this situation, the perception towards the
nature or honesty of the sender is important. The education and
experience of a person on the subject of communication will also
affect the process of communication. Another important factor is the
closeness of the receiver to the sender. A good relationship between
the two parties will promote a better and more effective
communication between one another compared to individuals who
are always in conflict.
6.3.2 Measures for Overcoming Communication

Barriers
There are seven measures or steps that can be taken by managers and employees to
overcome the barriers to communication. These measures are shown in Figure 6.4.

Figure 6.4: Seven measures in overcoming communication barriers
Now, let us look at Table 6.5 which explains these measures in detail.
Table 6.5: Seven Measures in Overcoming Communication Barriers
Measure Description
Controlling the There are times when a manager receives too much information
flow of information that may not be relevant or important to him. Therefore, the
manager must create a system that is able to identify and give
priority only to the important messages that require his
immediate attention.
Encouraging The manager and related parties need to take measures to
feedback determine whether the message had been understood accurately.
From the feedback received, the sender is able to find out whether
the message delivered had reached its target.
Language used Since language can become a barrier to communication, a
manager needs to properly choose the right words and language
that can be easily understood by the subordinates. For example,
the use of technical language is only suitable for experts in a
particular area.
Active listening A manager assumes that part of the responsibility to
communicate successfully is by giving non-punishing feedback
or asking employees for feedback. This means that the manager
is clearly listening to what is being told. Subordinates must also
be good listeners and receivers of information. They need to listen
actively, reduce interference and develop better communication
skills through role-playing and group presentation training.
Controlling Like everybody else, a manager needs to control his negative
negative emotions emotions when communicating because negative emotions can
alter or affect the contents of a particular message.

Using non-verbal Managers need to use non-verbal signs to emphasise important

signs parts in a particular message in order to portray their feelings.
Using the The grapevine is a communication channel that is difficult to be
grapevine as a removed from any organisation. Therefore, managers must be
communication able to use this channel to deliver information promptly, examine
channel reactions before making the final decision and get feedback.
ACTIVITY 6.2
After identifying the seven measures in overcoming communication
barriers, in your point of view, how far is the effectiveness of these
measures in practice? Justify your answer. Discuss this matter in the
myINSPIRE forum.
EXERCISE 6.3
TRUE (T) or FALSE (F) Statements
1. Each basic function of management requires effective

communication skills. ___
2. Communication depends on the ability to deliver messages and

not receive messages. __
3. Paralanguage consists of body language and facial expressions. __
4. Communication systems of organisations can move downwards,

upwards and horizontally. __
5. The grapevine can become a source of information for managers.

__
1. What is the flow of information received by the receiver from the

message sender referred to?
A. Decoding
B. Feedback
C. Perception
D. Grapevine

2. Which of the following is a form of non-verbal communication?

A. Paralanguage
B. Perception
C. Horizontal communication
D. Vertical communication
3. Which of the following is NOT considered a barrier to

communication?
A. Selected perception
B. Disruption
C. Emotion
D. Grapevine
• Communication is an act of sending or disseminating information.

Communication is a dynamic and complex process which involves many
factors.
• There are eight elements involved in the process of communication namely the
sender, encoding, message, channel, decoding, receiver, feedback and
disruption or noise.
• Generally, communication can be divided into three types namely formal,

informal and non-verbal communication.
• There are three formal communication systems which are frequently used in
organisations namely vertical communication, horizontal communication and
diagonal communication.
• The informal communication channel in an organisation is also known as the

grapevine.
• Non-verbal communication consists of kinesics and paralanguage.

• There are many barriers which may interfere with the formation of effective
communication. Among them are selective perceptions, disruption, emotions,
communication skills and suspicion.
• There are seven measures that can be implemented in order to overcome the
barriers of communication which are controlling the flow of information,
encouraging feedback, language used, listening actively, controlling negative
emotions, using non-verbal signs and using the grapevine as a communication
channel.
Channel Informal communication

Communication Information sender
Communication skills Kinesics
Decoding Measures
Diagonal communication Message
Disruption/noise Non-verbal communication
Emotions Paralanguage
Encode Receiver
Feedback Selective perceptions
Formal communication Suspicion
Horizontal communication Vertical communication

Jones, G. R., George, J. M., & Hill, C. W. L. (2000). Contemporary management

(2nd ed.). Boston, MA: Irwin-McGraw Hill.


Topic  Motivation
7
LEARNING OUTCOMES
1. Describe the basic approaches to motivation;
2. Explain the needs-based approach to motivation; and
3. Discuss the process-based approach to motivation.
 INTRODUCTION
Have you ever heard the „carrot and stick‰ metaphor? What does it represent? It
represents a combination of reward and punishment to induce a desired behaviour
(see Figure 7.1).
Figure 7.1: Stick and carrot metaphor refers to reward and punishment as two forms of
motivation to move

138  TOPIC 7 MOTIVATION
What is motivation? According to Williams (2013), motivation consists of powers

that are able to move, direct and enable a person to be diligent in their effort to
achieve goals. For example, an employee might be driven to work hard in order to
produce as many outputs as possible, while other employees are only motivated
to perform just enough of the work required.
Managers must understand the factors that form these differences. Managers are
usually confused in differentiating between motivation and performance. In
industrial psychology, normal work performance is represented by the following
equation:
Work performance = Motivation × Ability × Situational constraints
Since work performance is a function of motivation, ability and situational

constraints, work performance will decline if any one of the components is weak.
Needs are physical and psychological requirements that have to be fulfilled in

order to ensure oneÊs existence and well-being. When needs are not fulfilled, a
person will experience internal tension but as soon as the need is fulfilled, the
person will gain satisfaction and feel motivated. Soon, the need fulfilled can no
longer motivate the individual and when this condition occurs, the individual will
shift to other needs that have yet to be fulfilled. Hopefully, by learning the models
and theories of motivation, your organisation will not resort to something like
Figure 7.2. Happy reading!
Figure 7.2: An extreme form of carrot and stick method in an organisation

TOPIC 7 MOTIVATION  139
SELF-CHECK 7.1
After reading the Introduction just now, do you still remember the
contribution by Frederick Taylor explained in Topic 1? What were his
contributions towards management?
7.1 THE CLASSICAL MODEL AND SCIENTIFIC

MANAGEMENT
According to Rue and Bryars (2004), in his classical motivation model, employees
can be motivated by money. Frederick Taylor in his book, The Principle of
Scientific Management (1911), suggested an approach for companies and
employees in obtaining benefits based on his views on the workplace. He proposed
that employees be paid a higher salary to encourage them to produce more
outputs, which supports the opinion that employees can be motivated by money.
Meanwhile for companies, they need to analyse the job and find the best ways to
produce goods at lower costs, achieve a high level of profit and pay employees
promptly in order to motivate them.
The approach by Frederick Taylor is known as scientific management. His ideas

were widely accepted among managers in the early 20th century. For example,
many factories in the US hired experts to conduct studies on time and movement.
The techniques of industrial engineering are used in every work section in
determining how it can be performed effectively.
7.1.1 Approaches to Motivation

According to Lewis et al. (2001), motivation can be studied using several
approaches. Models of motivation can be categorised into two types as explained
in Table 7.1.
Table 7.1: Two Types of Motivation Models
Type Description
Needs-based model This motivation model emphasises the specific needs of humans
or internal factors that give power to direct or stop an action.
The needs-based approach explains motivation as a
phenomenon that takes place internally. There are three
important models in this approach: hierarchy of needs model,
two-factor model and acquired needs theory.

Process-based model This motivation model focuses on the understanding of

thinking or the cognitive process that exist in the mind of an
individual and actions that affect the behaviour of an
individual.
Douglas McGregor (1906–1964) introduced Theory X and Theory Y about

employees. Theory X comprises negative attitudes, while Theory Y consists of
positive attitudes.
Theory X states that people:

(a) Dislike working and prefer to receive directives;
(b) Must be forced to work; and
(c) Prefer to avoid responsibilities and have low ambitions.
Prioritise requirements for security rather than other requirements, that is Theory
X is of the opinion that people define work only as a necessity to live and will avoid
work whenever possible.
However, Theory Y states that people:
(a) Prefer to work;
(b) Will achieve the objectives that are assigned/entrusted;
(c) Will accept and seek responsibilities; and
(d) Have the intellectual ability that can be used to achieve organisational
objectives.
According to Theory Y, people will be satisfied with their jobs if the working
environment is conducive and they could implement their responsibilities well.
Although most companies use/apply Theory Y in their management, Theory X is

still being used in the management of some companies.
EXERCISE 7.1
How do needs-based models differ from process-based models?

7.2 NEEDS-BASED APPROACH

As stated in Table 7.1, the needs-based approach consists of the hierarchy of needs
model, two-factor model and acquired needs theory. These three are further
explained in the next subtopics.
7.2.1 Maslow’s Hierarchy of Needs

According to Lewis et al. (2001), MaslowÊs hierarchy of needs model is the most
famous model for motivation. According to the hierarchy of needs, an individual
has five basic needs, namely:
(a) Physiological;
(b) Safety;
(c) Social;
(d) Esteem; and
(e) Self-actualisation.
Figure 7.3 shows the five needs according to the hierarchy.
Figure 7.3: MaslowÊs hierarchy of needs

Source: Certo (2000)

Physiological and safety needs are the lower-level needs that can be fulfilled
externally, while social needs, esteem needs and self-actualisation needs are the
upper-level needs that can be met internally. MaslowÊs model identified that
individuals have different needs which can be motivated by different matters or
activities. Let us look at Table 7.2 for a description of each of these needs.
Table 7.2: Description on MaslowÊs Hierarchy of Needs
Need Hierarchy
Physiological This need exists at the lowest level of the hierarchy. Examples of
this need are the need for food, water, air and sleep. Organisations
can help individuals to fulfil this need by preparing sufficient
income to obtain food, shelter and a comfortable working
environment. People will focus on fulfilling these needs before
meeting the needs in the higher level.
Safety This need is related closely to acquiring a safe physical and
emotional environment. Examples of this need are employment
network, health insurance and retirement plans used to fulfil the
safety needs of employees.
Social After physiological and safety needs have been fulfilled, social
needs will become the main source of motivation to people. This
need includes the desire towards friendship, love and the sense of
belonging. An example of social need is when an employee
establishes friendship in the workplace and feels a part of the
organisation.
Esteem The needs at this level include the needs for status and recognition.
These needs can be fulfilled through achievement of success.
Esteem needs are fulfilled when one is given recognition and
respect by other people. For example, organisations can help in
fulfilling this need through promotion or providing a spacious
workstation to the employee. People in need of recognition want
themselves to be accepted based on their abilities and want to be
known as being capable and efficient.
Self-actualisation This need is at the highest level of the hierarchy. This need means
that people value high achievement based on their self-potential by
using capability and interest to the maximum level in order to
perform work in the environment. As an example, a challenging
task can assist in satisfying a person towards the achievement of
self-actualisation needs.

According to Maslow, when a particular need has been fulfilled, it will no longer
motivate the behaviour of employees. For example, when an employee has gained
confirmation in his workplace, then a new retirement plan may become less
important to him compared to the opportunity of having new friends and joining
the informal group in the organisation. It is the same when the lower-level needs
are not fulfilled, most people will pay attention to those particular needs first.
For example, an employee who is trying to fulfil the need for self-recognition by
being promoted to an important position in a particular department; will change
his mind if he suddenly finds out that the department and the position he is
holding may be eliminated. He may then be motivated to find a more secure job
elsewhere, instead of pursuing for a promotion in the same company.
Unfortunately, this model can only provide basic guidelines to managers. Many of
the studies that came later found that hierarchy level differs between individuals in
different cultural environments.
SELF-CHECK 7.2
Briefly explain MaslowÊs hierarchy of needs model.
7.2.2 Herzberg’s Two-factor Model

According to Rue and Bryars (2004), the study done by Frederick Herzberg,
Bernard Mausner and Barbara Snyderman produced an approach towards
motivation that is accepted widely in the area of management. This approach is
known by several names such as:
(a) Motivation and care approach;
(b) Two-factor model; or
(c) Motivation and hygiene approach.

This model relates job satisfaction with productivity for a group of accountants
and engineers. This study found that factors toward job satisfaction are separated
from the factors that lead to dissatisfaction of jobs. Figure 7.4 shows the two-factor
model.
Figure 7.4: HerzbergÊs two-factor model

The factors of this model are further explained in Table 7.3.
Table 7.3: HerzbergÊs Two-factor Model
Factor Description
Motivation Motivation factors are factors related to the work performed. These
factors are related to positive feelings and attitude towards the
particular work. Motivation factors include the work itself,
achievements, inner growth and responsibility.
Hygiene These factors refer to the context of work or the environment where
the work is being carried out. The factors include supervision,
workplace conditions, individual relationship, salary, safety as
well as the companyÊs administration and policies. These factors
are closely related to the negative feelings towards a particular job
but nevertheless they do not contribute towards motivation.
Instead, these factors prevent motivation from occurring.

For example, employees will feel dissatisfied if they believe that

their workplace is not safe; but if the condition of the workplace is
improved, employees may not necessarily become satisfied. If
employees are not given any recognition, feelings of dissatisfaction
may not exist. At the same time although they may not feel satisfied
but when recognition is given, employees will feel more satisfied.
This theory suggests that managers should use two approaches in

order to increase motivation:
(a) They must ensure hygiene factors such as conducive work

environment are clearly stated in the company policies and
can be accepted by the employees. This practice will reduce
dissatisfaction of employees; and
(b) Managers must use motivational factors such as recognition

and additional responsibilities as tools to increase employees
satisfaction and motivation.
In conclusion, this approach shows that motivation comes from the individual
himself. Attention towards hygiene factors will help individuals to reduce
excessive dissatisfaction. Both factors of motivation and hygiene need to exist
together to promote motivation. The result of this study found that this two-factor
model is effective in a professional workplace environment but is less effective in
a clerical or manufacturing environment.
EXERCISE 7.2
Describe the hygiene factors and motivational factors in the two-factor
model.
7.2.3 Acquired Needs Theory

According to Rue and Bryars (2004), this motivation model focuses on the three
needs that are important or related to the working environment, namely:
(a) Achievement;
(b) Affiliation; and
(c) Power.
This model was developed by David McClelland. The use of the word „needs‰ in
this model differs from the needs as laid out in the hierarchy of needs approach.

In this model, needs are assumed as something that can be learnt, while Maslow
viewed needs as inherited. Let us look at Table 7.4 which explains more on
achievement, affiliation and power.
Table 7.4: Need for Achievement, Affiliation and Power
Need Description
Achievement It is the desire to perform much better and more efficiently than
before. The level of achievement motivation in a person depends on
factors such as childhood, personal experiences and education and
the type of organisation joined.
Power This refers to the desire to control, influence or be responsible over
other people.
Affiliation This relates to the desire to maintain close and personal relationships.
This need can involve personal authority or institutional authority.
Meanwhile, the need for social acceptance is the desire for creating
relationships with other people.
According to McClelland, most people have already achieved certain levels of

these needs and that they vary from one individual to another (Rue & Bryars,
2004). In this model, when the strength towards these needs has been developed,
it will be able to motivate the behaviour of individual in situations that will allow
them to fulfil highly demanding needs.
7.3 PROCESS-BASED APPROACH

Now, let us move on to the process-based approach. Employee motivation is a
complex matter. Managers need to have a complete perspective regarding
methods that can be implemented to face the particular situation. They need to
understand the reasons why people have different needs and goals, why
individuals need change and how employees change in order to satisfy their needs
through various methods. The need for understanding these aspects of motivation
is crucial since organisations face various management issues that are caused by
changes in the global environment. Several models that can be used to understand
the complex motivation process are:
(a) Expectancy model;
(b) Equity theory;
(c) Goal-setting model; and
(d) Reinforcement model.

These models or theories are further explained in the next subtopics.
7.3.1 Expectancy Theory

According to Rue and Bryars (2004), this model was developed by Victor H.
Vroom. The expectancy theory was based on the idea that employee believes in
the association between effort, performance and outcome or result are the
consequence of the value and performance that they have fixed on the result.
Expectancy plays the role of determining their level of motivation. This theory
assumes that the motivation level of employees depends on three basic beliefs
which are expectancy, instrumentality and valence. Let us look at Figure 7.5 which
shows you the association between expectancy, instrumentality and valence.
Figure 7.5: Association between expectancy, instrumentality and valence

Source: Jones, George & Hill (2000)
These three beliefs are further explained in Table 7.5.
Table 7.5: Three Basic Beliefs of Expectancy Theory
Belief Description
Valence EmployeesÊ belief regarding the value of outcome or simply how far
the particular reward or outcome is attractive or desired.
Expectancy EmployeesÊ belief that their effort will incline towards the level of
performance desired or the assumption of the association between
effort and performance.
Instrumentality EmployeesÊ belief that the achievement of the performance level
desired will lead to the outcome desired or the assumption of the
association between performance and rewards.

This model suggests that in order to become a highly motivated person, the three
factors or beliefs must also be high. If any one of the factors declines, the overall
motivation will also drop. Managers are able to use this model to motivate
employees through systematic gathering of information regarding what employees
want out of their job by creating a clear and simple association between rewards
and individual performance, and also granting power or authority for the
employee to make decisions. The measures mentioned will increase the expectancy
of employees that hardwork and effort will bring about excellent performance.
7.3.2 Equity Theory

According to Rue and Bryars (2004), this theory was proposed by J. Stacey Adams.
This motivation model was based on the idea that people want to be treated
equally in their relationship with other people.
Inequality exists when an employee regards that his inputs or contributions in the
form of time, effort, education, experience, skill, knowledge and all the efforts
given to the work together with the outcomes or rewards given by the organisation
in the form of salary, benefits, recognitions and others are less compared to the
contribution towards work and the rewards received by other people. Figure 7.6
illustrates the situation of comparison and its association with perception.
Figure 7.6: Comparative situations and their association with perception

Source: Bateman & Snell (1999)
For example, a graduate who has just completed his studies received a job offer to
work with a company with a starting pay of RM24,000 per annum, in addition to
having a company car and sharing an office room with another employee. If he
finds out that there is a new employee reporting for duty given the same salary
and remuneration he received, he will feel that the treatment given is equal. But if
the opposite happens, that is, if the new employee reporting for duty is given a
salary of RM30,000 per annum, a bigger company car and an office room all to
himself, the particular employee will feel that inequality has taken place. For an
individual who experiences equal treatment, the ratio of comparison may not
necessarily be the same relatively.
Based on the previous example, the employee who initially feels that there is
inequality when the new employee receives a better remuneration will be able to
change that feeling when he finds out that the new employee has in fact a longer
working experience and better qualifications than himself; hence he deserves the
bigger remuneration and benefits.
This theory also states that the existence of inequality can result in pressure
equivalent to the level of inequality felt by the employee. This pressure will
motivate a person to achieve equality or reduce inequality.
How do we reduce inequality? There are several actions that can be taken to reduce
inequality such as:
(a) Reducing input or contribution if it is much higher compared to the input
and outcome received by other people;
(b) Increasing input if input is much lower compared to others; or
(c) Demanding compensation such as a pay rise or deciding to resign from the
job.
EXERCISE 7.3
Explain the main differences between expectancy theory and equity
theory.
7.3.3 Goal-setting Model

What is a goal-setting model?
A goal-setting model is a motivation model that acts by enhancing the

efficiency and effectiveness of individuals, groups, departments or
organisation by focusing specifically on the outcomes expected.

Goal is the target, objective or decision that a person tries to achieve. This model
states that people will be motivated up to a certain level when they are given a
specific goal, which is challenging and they will obtain feedback regarding their
development towards achieving the particular goal.
The basic components for a goal-setting model are that the goals:
(a) Must be specific, challenging and acceptable;
(b) Have performance feedback; and
(c) Are given at the correct time.
As a motivation tool, goal-setting can help employees in three ways:

(a) As a guideline and driver of behaviour to support the goals of the
organisation;
(b) Provide challenges and standards that can be used to make evaluations; and
(c) For stating something important and preparing the framework for planning.
An important aspect of this model is the involvement of employees in goal-setting.

When the employees themselves determine the goals they want to achieve, it will
be easier for them to accept the goal and become more committed to it. If
employees are not involved or participation is only minimal in setting the goal,
they normally will not be that interested in achieving the goal.
7.3.4 Reinforcement Model

According to Rue and Bryars (2004), the growth of the motivation reinforcement
model was pioneered by B. F. Skinner. There are two assumptions for this theory
which are that the:
(a) Behaviour of humans is determined by the environment; and
(b) Behaviour of humans is associated with related laws that can be expected and
altered.
The basic idea that forms the core of this theory is the assumption that the outcomes
or consequences of a personÊs behaviour at present will affect his behaviour in the
future. The behaviour that results in positive outcomes will be repeated but the
behaviour that results in negative outcomes normally will not be repeated. The
outcomes or consequences of the behaviour of an individual are referred to as
reinforcements.

Basically, there are four types of reinforcement, namely:

(a) Positive reinforcement;
(b) Negative reinforcement or avoidance;
(c) Punishment; and
(d) Elimination.
Figure 7.7 illustrates how behaviour can affect outcomes.
Figure 7.7: Consequences due to behavioural actions

These four reinforcements are further explained in Table 7.6.
Table 7.6: Four Types of Reinforcement
Type Description
Positive Positive reinforcement is the contribution of positive outcome or
reinforcement consequence based on the desired behaviour. For example,
organisations that pay cash bonus to salespeople who exceed the sales
quota will encourage them to work more diligently in the future.
Negative Negative reinforcement means giving an opportunity to a person in
reinforcement order to avoid negative outcome or consequence through a desired
behaviour. Negative and positive reinforcements can both be used to
increase the frequency of the desired behaviour. For example, making
tax payment before the month of May will prevent a person from
being fined.
Elimination Elimination involves the absence of positive outcome or effect, or
drawing back the positive outcome that used to give effect from the
desired behaviour.

Punishment Punishment is the negative effect that is a result from the occurrence
of an undesired behaviour. As an example, an employee who is
always late for work can be suspended or have his pay detained. Both
forms of elimination reinforcement and punishment can be used to
reduce the frequency of the undesired behaviour. There are many
studies conducted that show that rewards can increase the level of
satisfaction and motivation compared to punishment.
Lastly, let us look at Figure 7.8 which illustrates a summary of the reinforcement
theory that was discussed just now.
Figure 7.8: The summary of reinforcement theory

Source: Rue & Byars (2004)
ACTIVITY 7.1
What is your motivation towards your career and family? Which models
or theories relate to your motivation? Discuss these questions in the
myINSPIRE forum.

EXERCISE 7.4
Essay Question
As a manager, you have decided to reduce the undesired behaviour of a
particular employee. What are the types of reinforcements that are
suitable to be used and why?

1. The scientific management approach assumes that money is the
main inducer to motivation. ___
2. The experience of an employee is an example of outcome or result
in the equity model. ___
3. In the two-factor model, hygiene factors need to exist for true
motivation to take place, but motivation factors do not need to exist
for true motivation to happen. ___
4. Valence in the expectancy model refers to employeesÊ belief
regarding the value of outcomes or consequences. ___
5. The key to a successful positive reinforcement is that rewards must
be the result of performance. ___
1. „This model assumes that people are motivated towards lower

level needs that have yet to be fulfilled.‰
What model of motivation is referred to above?

A. Goals
B. Reinforcement
C. Hierarchy of needs
D. Two-factor
2. Which motivation model states that needs are assumed as being

learnt rather than being inherited?
A. Two-factor theory
B. Maslow hierarchy
C. Achievement of needs model
D. Expectancy model

3. Which is not a component of the expectancy model?

A. Valence
B. Instrumentality
C. Forecasting
D. Expectancy
4. What is the negative effect that is a result of an undesired behaviour

under the behaviour reinforcement model?
A. Elimination
B. Positive reinforcement
C. Negative reinforcement
D. Punishment
5. According to the view of the two-factor model researcher, what factor

can prevent motivation from occurring but does not actually produce
motivation?
A. Hygiene factors
B. Motivation factors
C. Equity factors
D. Expectancy factors
• Motivation consists of powers that are able to move, direct and enable a person
to be diligent in his or her effort to achieve goals.
• Motivation can be studied using several approaches. The models of motivation

can be categorised into two types of model namely needs-based model and
process-based model.
• Needs-based approach explains motivation that exists and takes place

internally or explains what truly motivates people. The three approaches
discussed in this topic are MaslowÊs hierarchy of needs, two-factor model and
acquired needs theory.

• According to MaslowÊs hierarchy of needs, an individual has five basic needs

namely physiological, safety, social, esteem and self-actualisation needs.
• Two-factor, or motivation and hygiene approach relates job satisfaction with

productivity for a group of accountants and engineers. Both factors of
motivation and hygiene need to exist together to promote motivation.
• Acquired needs theory focuses on the three needs that are important or related
to the working environment, namely, achievement, affiliation and power.
• Meanwhile, process-based approach explains the cognitive process that affects

human behaviour. The four theories or models discussed are expectancy
theory, equity theory, goal-setting model and reinforcement model.
• The expectancy theory was based on the idea that employee believes in the
association between effort, performance and outcome are the consequence of
the value and performance that they have fixed on the result.
• Equity theory was based on the idea that people want to be treated equally in
their relationship with other people.
• A goal-setting model is a motivation model that acts by enhancing the

efficiency and effectiveness of individuals, groups, departments or
organisation by focusing specifically on the outcomes expected.
• The motivation reinforcement model states that the behaviour of humans is

determined by the environment and is associated with related laws that can be
expected and altered.
Acquired needs theory Motivation

Equity theory Needs-based model
Expectancy theory Process-based model
Goal-setting model Reinforcement model
MaslowÊs hierarchy of needs Two-factor model

Bateman, T. S., & Snell, S. A. (1999). Management: Building competitive advantage

(4th ed.). Boston, MA: Irwin-Mc-Graw Hill.
Certo, S. C. (2000). Modern management (8th ed.). Upper Saddle River,

NJ: Prentice Hall.


Boston. MA: Irwin-McGraw Hill.

Learning.

Topic  Leadership
8
LEARNING OUTCOMES
1. Define leadership;
2. State the differences between a manager and a leader;
3. Compare the three leader-centred approaches; and
4. Discuss four types of strategic leadership.
 INTRODUCTION
Now, let us move on to leadership. What is leadership?
Leadership is a process of influencing other people to achieve group or

organisation goals.
Leaders are different from managers. According to Williams (2013), the main
differences are that a leader emphasises on the quality of work so that the
treatment given is fair, has a long-run focus, is more inclined towards changes,
gives inspiration and is able to motivate other people in overcoming their
problems.
Meanwhile, a manager emphasises more on performing a job in the correct way,

has a short-run focus, maintains the status quo and acts to solve other peopleÊs
problems. Let us look at Figure 8.1 which illustrates the differences between a
manager and a leader.

158  TOPIC 8 LEADERSHIP
Figure 8.1: Differences between a manager and a leader

Next, we will look at two approaches in leadership which are leadership

approaches and strategic leadership. Let us continue with the lesson.
8.1 LEADERSHIP APPROACHES

Approaches to leadership can be divided into three categories namely:
(a) Leader-centred approach;
(b) Follower-centred approach; and
(c) Interactive approach.
These approaches are further explained in the next subtopics.
8.1.1 Leader-centred Approach

This approach focuses on the personality features of a leader, the behaviour of a
leader and leadership style.
(a) Personality Features of a Leader

According to Lewis et al. (2001), the personality features of a leader are
among the earliest approach in the study of leadership. Early studies on
leadership theory tried to identify the specific personality features related to
an excellent leader. The focus on personality is based on the assumption that
some leaders have certain:
(i) Physical features (height, weight and self-appearance);

TOPIC 8 LEADERSHIP  159
(ii) Personality aspects (self-appreciation, economic stability, knowledge,

initiative and diligence); and
(iii) Abilities (creativity, articulate, patience and sympathy).
For example, physical form, intelligence and the skill of public speaking at
one time were considered the personality features of a good leader.
Moreover, there are beliefs that taller people are better leaders than shorter
ones. This type of personality approach, however, was proven to be a weak
determinant of leadership potential.
Generally, there are several personality features that show the difference
between a leader and a follower. However, the variation is insignificant.
Studies related to personality features generally are not very successful. The
main reason is that the personality features of a particular leader are not
necessarily similar to those of other leaders. In fact, personality features alone
are not enough to create a successful leadership.
(b) Focus Towards Leadership Behaviour

This approach to leadership behaviour is conducted through studies on what
had been done by an effective leader and not based on the features possessed
by the particular leader. There are many studies on leadership behaviour
such as those conducted in the Ohio State University and Michigan
University as well as the study of leadership behaviour using the managerial
grid. These studies are further explained in Table 8.1.
Table 8.1: Studies on Leadership Behaviour
Study Description
Ohio State According to Rue & Byars (2004), several series of studies on
University leadership were conducted by this university to obtain a summary
regarding the most important and effective behaviour to become
successful leaders. They wanted to obtain information related to
successful leaders regardless of the organisation involved. These
studies found that two consistent and important behaviours of
leaders are consideration behaviour and structural behaviour.
Consideration behaviour refers to the behaviour of leaders that

show feelings of consideration towards members of the group or
subordinates and fulfilling their needs. Meanwhile, structural
behaviour refers to the behaviour of leaders in forming the work
procedures of subordinates and guiding them towards goal
achievement.

This study found that leaders with a high level of consideration are
more inclined to have satisfied subordinates compared to leaders
with a low level of consideration. For example, the appointment
and termination of employees are at the lowest level, while work
satisfaction is at the highest level under the supervision of a leader
with a high level of consideration behaviour. Leaders who are
assumed to have a high level of structural behaviour but are low in
terms of consideration will face a high frequency of complaints and
resignation among employees.
The correlation between consideration behaviour and the

effectiveness of a leader depends on the group led. A high
achievement for consideration behaviour correlates positively with
the effectiveness of a leader such as managers and office staff in a
large industrial firm, while a high achievement for consideration
behaviour correlates negatively with the effectiveness of leaders
such as production engineers.
There is no consistent association or relationship between

structural behaviour and the effectiveness of a leader, but the
relationship is dependent on the group led. Let us look at
Figure 8.2 which illustrates the relationships between
consideration behaviour with structural behaviour.
Figure 8.2: Association between consideration behaviour

and structural behaviour

Michigan According to Rue and Byars (2004), the purpose of the study
University conducted by The Institute of Social Studies, Michigan University,
led by Rensis Likert, was to identify the basic principles that
contribute towards productivity and satisfaction of the members of
a group. The study found that consideration behaviour (work-
oriented) and structural behaviour (task-oriented) are exclusive and
separated behaviours. Both these behaviours are on the same
continuum but at opposite ends.
The conclusion from this study was that leaders who are inclined
towards the feeling of consideration must reduce their structural
behaviour and vice versa. In the meantime, for leaders who are
inclined towards work, they need to reduce their consideration
behaviour. The result of the Michigan UniversityÊs study also
found that consideration behaviour or employee-oriented
behaviour has a close association with successful leadership.
Managerial According to Rue and Byars (2004), Robert Blake and Jane Mouton
grid by produced a method for classifying the styles of leader management
Blake and referred to as the managerial grid or also known as the leadership
Mouton grid. This managerial grid uses a two-dimensional framework in
providing the status to leaders based on consideration towards
people with consideration towards production in forming the five
different styles of leadership. Both behaviours are on the scale of
1 to 9, with 1 representing the lowest and 9 representing the
highest, as depicted in Figure 8.3.
Figure 8.3: Managerial grid


Blake and Mouton suggested that the position of leadership at the

matrix 9,9 is the best. They named this style of leadership as team
management. Leaders at the matrix 9,1 show the style of
authoritarian management that of workers following orders when
they have high consideration on production and low consideration
on people.
Leaders who are at the matrix 1,9 are leaders who are very
concerned in creating a happy and friendly working condition but
do not give important focus towards production or performance.
This is known as the leadership style of country club management.
The weakest leadership style based on this grid is the impoverished
leadership style that is at matrix 1,1. The leaders at this position do
not care about the employees and production but instead, he only
performs his work at a minimal level.
Finally, the leadership style that is in the middle at the matrix 5,5 is
a leader who shows moderate consideration towards the
employees and production.
(c) Leadership Styles

After the three studies that focused on the personality features of leaders,
researchers shifted their focus by conducting studies related to the behaviour
of leaders or leadership styles. Leadership style refers to the behaviour
exhibited by a leader when dealing with subordinates and this leadership
style can be differentiated in terms of decision-making.
There are three types of leadership styles, namely, autocratic, laissez-faire

and democratic. Generally, autocratic leaders make more decisions for the
group as compared to other types of leadership styles. Meanwhile, laissez-
faire leaders allow the members of the group to make all the decisions. A
democratic leader, on the other hand, guides and encourages the group to
make decisions.
Normally, most leaders do not follow just one type of leadership style. These
three styles of leadership will provide different feedback when it comes to
problems relating to human relationships.
EXERCISE 8.1
The results of the study by Michigan University are almost similar to
those of the study by Ohio State University. State the similarities.

ACTIVITY 8.1
1. You are one of the interviewers for the position of marketing
manager. Candidate A is articulate, well-built, tall and has the
qualifications required by your company. Meanwhile, Candidate B is
articulate and confident but is also short and bald. He has
qualifications which exceed your companyÊs requirements. What are
the weaknesses of Candidate B that limit your choice in selecting him
to become a marketing manager? Discuss your views with your
coursemates in the myINSPIRE forum.
2. To obtain a clearer picture on what is meant by the managerial grid

by Blake and Mouton, go to the following website:
http://www.nwlink.com/~donclark/leader/matrix.html
Look for the word „questionnaire,‰ click on it and choose the article
and read the instructions.
3. You have already learnt about the results of the studies conducted by
the two universities and the managerial grid by Blake and Mouton.
Based on your understanding of these three studies, identify the
differences and similarities, if there are any, in the three studies and
give your answers in the form of a table. Post your answer in the
myINSPIRE forum for comparison.
8.1.2 Follower-centred Approach

According to Lewis et al. (2001), self-leadership is a paradigm for creating leaders of
organisations who are ready to lead themselves. Even though leadership is
important, the successor variables to leadership and leadership neutralisation create
a situation where leadership is no longer needed or the presence of leadership will
not bring significant effect on job performance.
The leader successors are variables such as individuals, tasks and organisation
features that can cause leaders to become redundant or in other words, those
variables are able to exceed the abilities of leaders in affecting satisfaction and
performance of subordinates.
Meanwhile, leadership neutralisations are variables such as employees, tasks and

organisation features that intervene with the work actions of a leader or create a
difficult situation for the leader to influence the performance of the followers.

8.1.3 Interactive Approach

In order to study the effectiveness of leadership in a particular organisation,
another method used is by looking at the way a particular leader interacts with his
followers, either directly or indirectly. There are four models used in interactive
approach as shown in Figure 8.4.
Figure 8.4: Four models of interactive approach
These models are further explained as follows:
(a) Situational Leadership Model

According to Rue and Bryars (2004), this model is also known as leadership
life-cycle model. It was introduced by Paul Hersey and Kenneth Blanchard.
This model is based on the assumption that leadership styles should portray
the maturity level of subordinates. This model studies the interaction
between behaviour, leadership, situation or condition and competency of
followers.
Competency here is defined as the ability of subordinates and their

commitment towards completing specific tasks. There are two types of
behaviour in this model, namely, the task behaviour and relationship
behaviour.
In this model, when the level of maturity of followers increases, task

behaviour must be reduced, while relationship behaviour must be increased
and later, gradually reduced.
Subordinate maturity portrays their ability in performing tasks on their own,

accepting responsibilities and their level of motivation to succeed. This
model suggests that when maturity level of followers changes from
immature to matured, the behaviour of leaders must also change from high-
task behaviour to low-relationship behaviour, that is, the first quadrant, to
the high-task behaviour to high-relationship behaviour, until the fourth
quadrant that is low-task behaviour to low-relationship behaviour.

This model then combines the task behaviour and relationship behaviour to
create four different leadership styles:
(i) Telling or directing style;
(ii) Selling or coaching style;
(iii) Participating or supporting style; and
(iv) Delegating style.
These styles are used based on the different level of maturity of employees.
According to Williams (2013), maturity of followers consists of task maturity
and psychological maturity.
The telling or directing style of leadership is suitable for employees having

the lowest level of maturity. For a higher level of maturity, leaders only have
to give encouragement to the employees in completing their tasks. The
suitable leadership style for this situation is the style of selling or coaching.
For employees who are more matured, involvement in making decisions
together and two-way communication, then the participating or supporting
style of leadership is considered the most suitable.
Meanwhile, the delegating style of leadership is suitable for employees

having the highest level of maturity. Figure 8.5 illustrates the situational
leadership model.

Figure 8.5: Situational leadership model
(b) FiedlerÊs Contingency Theory

According to Williams (2013), this theory is one of the earliest studies using
the contingency approach. It was introduced by Fred Fiedler. He studied the
favourableness between the leaderÊs personality features with situational
conditions. Fiedler suggested two personality features, namely task
motivation and relations motivation. Fiedler viewed situational leadership
on a continuum of favourableness and unfavourableness based on the
following three main dimensions:
(i) Leader-subordinate Relations
Refer to the degree to which the leader feels accepted by the followers.
(ii) Task Structure
It is the degree to which the goals and other factors are outlined clearly.
(iii) Position Power
It is the extent to which the leader has control over the rewards and
punishments that his followers receive.

Let us look at how these dimensions are interpreted in Figure 8.6.
Figure 8.6: FiedlerÊs contingency theory

This theory is based on several assumptions:

(i) Leaders will become effective when their task group moves
successfully;
(ii) Leaders are not capable of changing their leadership styles;
(iii) Leadership style must be suited to the correct situation; and
(iv) Favourable situations will help leaders to influence the members of the
group.
This model used a survey known as least preferred co-worker (LPC) scale to
measure leadership styles. According to the LPC scale, there are two types of
styles that are basic to the leader. Employees giving views of positive LPC
were found to have a relation-oriented leadership style. Meanwhile,
employees with negative LPC were found to be having task-oriented
leadership style.
A favourable situation occurs when leaders are able to influence their

followers and this is determined by leader-member relations, task structure
and position power.
Generally, leaders with relations orientation and a high LPC mark are
considered as better leaders in intermediate favourable situations. However,
leaders who are task oriented with low LPC marks are better leaders in very
highly favourable situations or in unfavourable situations.

In conclusion, since this theory assumed that leaders are not able to alter their
leadership styles, therefore organisations must measure and accurately match
leaders to situations or change the situational factors to suit the leaders.
(c) Path-goal Theory

According to Williams (2013), this theory was introduced by Martin Evans
and Robert House. This theory stated that a leader is able to increase the
satisfaction and performance of his subordinates by explaining and setting
up the path towards behavioural goals by increasing the number and forms
of rewards towards the achievement of goals. Figure 8.7 illustrates the
framework for path-goal.
Figure 8.7: Path-goal theory

Subordinates will accept the behaviour of a leader when it becomes the

source of current and future satisfaction. The behaviour of a leader influences
the motivation of subordinates since satisfaction towards the needs of
subordinates is closely associated with performance success, guidance
preparation, support and rewards required to achieve an effective
performance.
You will find that in this theory, there are four types of behaviour for a leader.
These four types of behaviour will be discussed in Table 8.2.
Table 8.2: Types of Behaviour of a Leader
Behaviour Description
Directive Leadership behaviour with the leader allowing employees to
behaviour recognise clearly what is expected of them, clarifying the
guidelines to perform their tasks, work schedule, setting up
achievement standards, and making them abide by the
standards of rules and regulations.
Supportive Leadership behaviour that allows employees to be close to the
behaviour leader. The leader exhibits feelings of concern, care for the
employeesÊ welfare and treats them fairly and equally, forming
a happy and friendly environment.

Participative Leadership behaviour where the leader holds discussions with

behaviour the employees in order to obtain views and inputs before
making decisions.
Achievement Leadership behaviour where the leader sets challenging goals
behaviour and high standards on the employees. Here, the leader also
shows confidence that the employees are competent and
responsible.
In conclusion, this theory assumes that a leader is able to change and suit his
style of leadership according to the subordinates led, or even the work
environment of the subordinates.
(d) Continuum of Leadership Behaviour

According to Rue and Byars (2004), Robert Tannenbaum and Warren
Schmidt believed that different situations required different leadership
styles. They considered three important forces that are related to finding the
most effective leadership styles:
(i) Forces within the leader;
(ii) Forces within the subordinates; and
(iii) Forces within the situation.
Let us look at Figure 8.8 which shows you the continuum of leadership
behaviour.
Figure 8.8: Continuum of leadership behaviour

Source: Tannenbaum & Schmidt (1958) as cited in Rue & Byars (2004)

In the continuum produced as shown in Figure 8.8, the leadership behaviour

on the left refers to a leader having high control and only giving slight
freedom to his subordinates. Leadership behaviour in the middle of the
continuum depicts a change in leadership style from autocratic style to
democratic style. Finally, the leadership behaviour on the right shows that
the leaderÊs control is scarce with the subordinates having more freedom in
making decisions.
ACTIVITY 8.2
1. Based on your understanding of the previous discussion, draw a
figure that represents the situational leadership model according to
what you have just learned. Share your answer in the myINSPIRE
for comparison.
2. For further information on FiedlerÊs contingency theory, visit:

http://courses.washington.edu/inde495/lecf.htm
After you have read this article, try to obtain important notes which
can be used as your references when answering the essay questions
later.
EXERCISE 8.2
Explain what is meant by a favourable situation in FiedlerÊs contingency
theory.
8.2 STRATEGIC LEADERSHIP

Lastly, let us look at strategic leadership. What is strategic leadership? According
to Williams (2013), strategic leadership refers to the:
(a) Competency of a leader in making predictions:
(b) Retaining flexibility;
(c) Thinking strategically;
(d) Having visionary ideas; and
(e) Cooperating with others in forming a positive future for the organisation.

In addition, strategic leadership refers to the way leaders are able to change the
attitude of employees in order to achieve the goals that have been set. Strategic
leadership involves:
(a) Visionary leadership;
(b) Charismatic leadership;
(c) Transactional leadership; and
(d) Transformational leadership.
These four types of strategic leadership are further explained in the next subtopics.
8.2.1 Visionary Leadership

What is visionary leadership? Visionary leadership is a leadership style that is
able to create a positive image for the future of the organisation by motivating
employees and is able to depict the direction of the organisation based on the
planning and goals that have been set.
8.2.2 Charismatic Leadership

What does charismatic leadership mean? Charismatic leadership refers to the
features of leaders in creating a strong relationship between themselves and
subordinates. A charismatic leader is a leader having high levels of reference force.
Half of the force comes from his need to influence others. This type of leader has a
high level of self-confidence, is dominant and believes in the truth in everything
that he does. He is capable of convincing followers that he is right. He is also able
to channel his visions to be shared together with his subordinates.
8.2.3 Transactional Leadership

Next is transactional leadership. Transactional leaders will determine what should
be done by employees to achieve their own objectives and the objectives of the
organisation. They also classify and help employees to be confident so that they
are able to achieve the objectives on their own through certain efforts. This type of
leadership is based on the process of exchange, where subordinates are given
rewards for good achievements and punished for unsatisfactory achievements.

8.2.4 Transformational Leadership

Finally, let us look at transformational leadership. Transformational leaders are
capable of enlightening and accepting suggestions and visions of the group and
are able to encourage employees to look beyond their own needs and own interest
for the well-being of the group. Transformational leaders will motivate their
employees to perform more than expected by initiating feelings of importance and
value of the task in each individual. This can be done by creating interest in
employees to perform for the sake of the group and the organisation besides
fulfilling their own needs of self-achievement. In your opinion, who are the leaders
of the world that portray visionary leadership, charismatic leadership,
transactional leadership and transformational leadership? Can you name some of
them according to these four types?
SELF-CHECK 8.1
Explain the leadership characteristics that need to be exhibited by a
manager.
EXERCISE 8.3
Essay Question
In what way does a transactional leader differ from a transformational
leader?
1. Leaders emphasise more for a task to be performed efficiently. ___
2. The study conducted by the Ohio State University and Michigan

University are slightly similar based on the task dimension and
relation dimension. ___
3. The path-goal model assumes that leadership style is stable and

cannot be altered. ___
4. FiedlerÊs contingency model states that leadership style is stable

and fixed. ___
5. Transactional leadership is based on the process of exchange. ___

1. Which leadership model states that an effective leader possesses a set

of specific characteristics?
A. Contingency
B. Behavioural
C. Personality
D. Goal
2. What is the best combination for leadership style according to Blake

and Mouton?
A. Moderate consideration towards human and productions
B. High consideration towards human
C. High consideration towards production
D. High consideration towards human and production
3. According to Fiedler, when do leaders become effective?

A. Have high consideration towards human and productions
B. Explain LPC in a positive form
C. Find that a situation is favourable
D. Obtain a leadership style that suits the situation
4. Which leadership style suits an employee who is confident, committed

and capable of receiving responsibilities?
A. Directing
B. Selling
C. Participating
D. Delegating
5. Leadership neutralisation is one of the variables related to which style

of leadership?
A. Contingency
B. Self
C. Visionary
D. Behavioural

• Leadership is a process of influencing other people to achieve group or

organisation goals.
• Leaders are different from managers. The main differences are that leaders
emphasise more on performing tasks effectively, while managers emphasise
more on performing tasks efficiently or correctly.
• Approaches to leadership can be divided into three categories namely the

leader-centred approach, follower-centred approach and interactive approach.
• Leader-centred approach focuses on the personality features of leaders, leader

behaviour and leadership styles.
• The main results from the studies on personality features of a leader found that
successful leaders usually have certain personal features that are better when
compared to followers.
• On leadership behaviour, some important studies discussed are the studies

conducted by the Ohio State University, Michigan University and managerial
grid by Blake and Mouton.
• Leadership style refers to the behaviour exhibited by a leader when dealing with
subordinates and this leadership style can be differentiated in terms of decision-
making. There are three types of leadership styles, namely, autocratic, laissez-
faire and democratic.
• The follower-centred approach or also known as self-leadership is a paradigm

that is based on the presence of leaders in organisations who are ready to lead
their own selves.
• Meanwhile, interactive approach is related to the studies between leader

behaviour with the situation and favourableness of the followers.
• There are four main models in interactive approach namely leadership

situational model, path-goal model, FiedlerÊs contingency model and the
continuum of leadership behaviour model.
• Strategic leadership refers to the competency of a leader in making predictions,

retaining flexibility, thinking strategically, having visionary ideas and
co-operating with others in forming a positive future for the organisation.

• Strategic leadership involves visionary leadership, charismatic leadership,

transactional leadership and transformational leadership.
Charismatic leadership Managerial grid

Contingency model Path-goal model
Follower-centred approach Situational model
Interactive approach Strategic leadership
Leader Transactional leadership
Leader behaviour model Transformational leadership
Leader-centred approach Visionary leadership
Leadership
Bateman, T. S., & Snell, S. A. (1999). Management: Building competitive advantage

(4th ed.). Boston, MA: Irwin-Mc-Graw Hill.
Certo, S. C. (2000). Modern management (8th ed.). Upper Saddle River, NJ:
Prentice Hall.



Learning.

Topic  Controlling
9
LEARNING OUTCOMES
1. Define control and its main purposes;
2. Examine the steps involved in the control process;
3. Describe dynamic process;
4. Explain the three basic methods of control and the five forms of
control; and
5. Discuss the four factors that need to be controlled.
 INTRODUCTION
Controlling is one of the four main functions in management. It is important to
managers in order to ensure all the planning, organising and leading run as
smoothly as desired. If managers are able to ensure that each plan made and every
task given to the employees are carried out perfectly, and the results expected are
as what had been planned, then control is not required.
Unfortunately, managers are not able to ensure that the plans will run smoothly
without the occurrence of any problem since most planning is done by humans
and humans vary in terms of abilities, motivation and performance. Hence, in a
rapidly changing business environment, not only the expected results must be
controlled, planning must also be monitored and controlled.

TOPIC 9 CONTROLLING  177
Therefore, let us find out more on controlling as we go through its definition, main
purposes, the steps, dynamic process, the basic methods, the forms as well as the
factors that need to be controlled. Happy reading!
9.1 DEFINITION OF CONTROL

Firstly, what does control mean?
Control is the process of ensuring that organisational activities are running

according to plan.
(Rue & Byars, 2004)
This process can be carried out by comparing the actual performance with the
standard that has been established and taking corrective actions in order to rectify
any distortion that does not comply with the standard.
As for management control, it is a systematic effort to fix or establish the standard

of performance through planning objectives, designing information feedback
systems, comparing the actual performance with the fixed standard, determining
whether there are any disadvantages or weaknesses and taking suitable actions to
ensure all resources within the organisation can be used in the most effective and
efficient way in achieving the objective of the organisation.
What is the main purpose of control? The main purpose of control in management
is to prepare managers to face future or existing problems before they become
critical. In general, an organisation with a good control mechanism will have a
competitive advantage compared to organisations without a good control system.
Why is control important to organisations? Let us find out the answer in the
following subtopics.
9.1.1 Quality Assurance

The smooth running of a particular process can be monitored and problems can be
avoided by having control. Control is able to stimulate the organisation to monitor
and improve the quality of products and services offered. Through the activities
related to the control process, members of the organisation will always be driven
to act according to the plans that have been established.

178  TOPIC 9 CONTROLLING
9.1.2 Preparation to Face Future Changes

Change cannot be avoided. Changes in environmental factors such as markets,
competitors, technology and legislation make the control process important for
managers in responding towards opportunities and threats. Thus, control helps
the organisation to suit its products to the needs and wants of consumers in the
market.
SELF-CHECK 9.1
Explain what is control within a particular organisation.
9.2 STEPS IN THE CONTROL PROCESS

According to Rue and Byars (2004), a control process has four basic needs:
(a) Fixing of standards to be used in measuring the level of growth;
(b) Monitoring the actual performance;
(c) Comparing performance to the standards, that is, the comparison of the
organisationÊs actual performance with the planned performance; and
(d) Taking corrective actions in rectifying any setbacks and weaknesses that
occurred in achieving the performance that has already been set.
Let us look at Figure 9.1 which illustrates the four steps involved in the process of
control.
Figure 9.1: Control process

These steps are further explained in the next subtopics.

9.2.1 Establishing Standards

Standard is the base for comparison to measure the level of performance of a
company in order to find out whether the company is compliant to the set
standard. Standard is the point of reference in making comparisons to another
value. What is standard?
Standard can be defined as what is required out of a particular job or an

individual.
In management control, standards are usually derived from the objectives.

Standards should be easy to be measured and interpreted. A specific objective that
can be measured makes it more suitable to be used as a standard. If this standard
is not clearly and specifically stated, it may be wrongly interpreted and will then
raise various difficulties that can affect the goals of the organisation.
In general, there are three types of standards as explained in Table 9.1.
Table 9.1: Three Types of Standards
Type Description
Physical standard Such as quantity of products and services, number of customers
and quality of products and services.
Financial standard It is stated in the form of money, and this includes labour cost,
sales cost, material cost, sales revenue, profit margin and others.
Time standard It includes the performance rate of a particular task or the time
period required to complete a particular task.
9.2.2 Measuring Performance

Performance measurement is a type of control. Actual results need to be monitored
to ensure that the output produced is according to the specific standard. What is
the main purpose of performance monitoring? The main purpose of performance
monitoring is to gather data and detect deviation as well as problem areas.
Measurement is meaningless if it is not compared to the standard.

9.2.3 Making Comparisons

The next step is performing the comparison of standards.
Comparison of standard is a process where comparison is made between the

actual performance with the standard set.
This step is important because it allows any deviation or distortion to be detected

and corrective actions can be taken in order to achieve the goals that have been set.
9.2.4 Taking Corrective Actions

It is often found that managers establish standards and monitor decisions but fail
to take suitable actions. The first and second steps in control will be meaningless
if corrective actions are not taken. Before taking any steps in correcting, detailed
analysis must be carried out in order to find out the factors that caused the
particular deviation. What is corrective action?
Corrective action is a process of identifying the distorted performance,

analysing the distortion and developing and implementing programmes in
order to rectify it.
This corrective action may involve change in one or more operational activities of
the organisation such as modification, repairing of machines, preparation of
certain courses and others, or it might also involve a change in the fixed standard.
SELF-CHECK 9.2
You must have heard about standards used in measuring the level of
performance of a particular company. What do you understand about
this term „standards‰ and do you know how a particular standard is
formed?

EXERCISE 9.1
What is meant by controlling as a process?
9.3 DYNAMIC PROCESS

According to Williams (2013), the running of a control process is a continuous act.
This process cannot be done only once in order to gain the achievement expected.
It is a dynamic process and it begins with looking at the actual performance and
measuring the achievement level of that particular performance.
Managers will then compare the performance achieved with the performance that
has been fixed. If there happens to be any difference, it must be analysed in order
to identify the cause of the variance and this is followed by the correcting act. This
process must be done repeatedly and must be given full attention by the manager
in order to achieve the performance goals set.
9.4 BASIC METHODS OF CONTROL

According to Williams (2013), a control process consists of three basic methods
which are identified as pre-control, concurrent control and feedback control (see
Figure 9.2).
Figure 9.2: Three basic methods of control

Source: Jones, George & Hill (200) as cited in Williams (2013)
Let us discuss the three basic methods of control further in the next subtopics.

9.4.1 Pre-control
This type of control is also known as preventive control or feed-forward control.
This involves the use of information, including information from the latest results.
This information is needed to forecast what will happen in the future so that
preventive measures can be taken. It is implemented to prevent the occurrence of
deviation between what had really happened with what is expected to happen.
Prevention is carried out through detailed analysis on the input before it is
accepted into the process of organisation transformation. Input is ensured to
comply with the quality standards established so that the results obtained are as
expected.
One example of the use of this control is when a manager ensures that the sample
of raw material that is going to be used complies with the standard established by
the organisation or based on certain specifications to avoid damage towards the
product in the future.
9.4.2 Concurrent Control

Concurrent control is carried out during the process of transformation. When this
control is carried out, restoration actions, corrective actions or modifications are
done after the distortion has been detected. For a production-oriented
organisation, this controlling action is taken while input is being processed; in the
meantime, for service-oriented organisations, it is taken while service is being
provided.
Through this method of control, organisations will monitor their operations and
simultaneously take the necessary corrective actions before the transformation
process is completed. This will help to reduce mistakes in the outputs being
produced. Examples of this method of control are mid-term examinations, control
of accounts, control of inventories and others.
9.4.3 Feedback Control

Feedback control involves gathering information related to the weaknesses of
controlling measures after an incident takes place. This type of control is
implemented after the transformation process has been completed with the
purpose of finding out whether the whole activity ran properly with results as
expected.

This control is also able to determine whether the plan that is going to be carried
out has the continuity with the previous programme. It is also able to evaluate the
effectiveness and efficiency of the involved parties in performing the activities of
the organisation.
An example of this method of control is the use of low-quality raw materials that
resulted in the production of low-quality products. The act of changing the raw
materials used is one of the examples of feedback control.
9.5 FORMS OF CONTROL

According to Williams (2013), there are five forms of control that can be used by
managers in implementing the process of control (see Figure 9.3).
Figure 9.3: Five forms of control that can be used by managers in organisations
Let us further our discussion on these forms of control in the next subtopics.
9.5.1 Bureaucratic Control

This method uses hierarchy authority to influence employees. Rewards are given
to employees who obey, and punishment is meted out to employees who do not
obey the policies, regulations and procedure of the organisation.

9.5.2 Objective Control

This method uses the measurement of observation towards the behaviour of
employees or output produced to evaluate work performance. Managers are more
focused on the observation or measurement towards the behaviour of employees
or outputs rather than the policies or rules. Objective control consists of two forms
of control namely behaviour control and output control (see Table 9.2).
Table 9.2: Two Types of Objective Contol
Type Definition
Behaviour control It is the rule of behaviour and actions that controls the behaviour
of employees in their tasks.
Output control It is the form of control that controls the output of employees by
granting them rewards and incentives.
Important features in the implementation of output control are reliability, fairness

and accuracy, convincing employees and managers to achieve the expected results;
while rewards and incentives depend on the performance standard that has been
established.
9.5.3 Normative Control

What is normative control?
Normative control is a method that arranges the behaviour of employees and

results through norms and beliefs shared together among all the members
within the organisation.
There are two main substances in this type of control which are:
(a) Sensitivity towards selection of employees based on their attitude and
norms; and
(b) Obtaining inspiration based on experience and observation of employees.

9.5.4 Concertive Control

What is concertive control?
Concertive control is a method that uses the norms and behaviour discussed,
formed and agreed by the workgroup.
This form of control plays a role in an autonomous workgroup. An autonomous

workgroup is a workgroup that operates without the presence of a manager and
is fully responsible for the control of process, task group, output and behaviour.
Autonomous workgroups gradually grow through two stages of concertive
control:
(a) Members work and learn from each other, supervising the work of each
member and developing norms and beliefs that guide and control them; and
(b) The appearance and acceptance of objectives as a guide and control of
behaviour.
9.5.5 Self-control
It is a system where managers and employees:
(a) Control their own behaviour by establishing their own goals;
(b) Monitor their own progress and their own achievements of goals; and
(c) Reward themselves when goals have been achieved.
EXERCISE 9.2
State the three basic methods in a control process and the five forms of
control that can be implemented within an organisation.
ACTIVITY 9.1
Discuss in the myINSIRE forum the types of control implemented in
your orgsanisation.

9.6 FACTORS THAT NEED TO BE CONTROLLED

Lastly, let us look at the factors that need to be controlled. Determining the matters
to be controlled is as important as making decisions on whether to control or in
what method should control be done. There are several factors that need to be
controlled by a manager in order for the organisation to be able to achieve the goals
expected. These factors are explained in the next subtopics.
9.6.1 Finance
One of the important areas that need to be controlled is finance. There are times
when the financial performance does not meet the expected standard. If this
condition remains undetected and relevant actions are not taken, the existence of
the company might be in jeopardy. Financial perspective is generally related to
activities such as sales, purchases and others.
Financial statements are important sources of financial information for an

organisation. A balance sheet shows how strong the financial position, assets,
liabilities and the position of the equity holder for a certain financial period. A
profit-loss statement or income statement shows the summary of the operational
activities and the relationship between expenditure and revenue for a particular
financial year.
According to Williams (2013), there is a new approach in the financial perspective

known as economic value added. Economic value added is the total profit of a
company which exceeds the capital cost in a particular year. From this perspective,
a manager must impose control so that the total profit of a company always
exceeds the capital cost for the company to continuously gain economic value
added.
9.6.2 Human Resources

The control towards human resources is vital for organisations. If an organisation
is unable to control its human resources properly such as constantly losing its
expert workforce, this will jeopardise the performance and achievement of the
company. Organisations need to have planning that is able to motivate the
employees. For example, organisations need to be concerned about the problems
faced by the employees by creating harmonious discussions between the
management and the employeeÊs union.

9.6.3 Internal Operations

Internal operations of organisations are usually measured through quality.
Operations control is very important for every organisation especially for
manufacturing firms. This is because efficiency and effectiveness of operations
control will determine the level of production and organisational performance as
fixed by the standard. The quality value of products and services produced based
on the standard will be able to strengthen the perception of the customers towards
the quality of goods that they had purchased.
For example, the control of product quality is able to reduce waste and product
defects, and this will further save cost. Inventory control is also effective in
reducing the costs of investment related to inventory.
9.6.4 Customers
According to Williams (2013), in order to measure the performance of customers,
an organisation needs to impose control on customers who leave the organisation
and not based on the survey of customer satisfaction. Here, the manager will make
evaluation by measuring the percentage rate of customers who left the
organisation. By controlling customers from leaving the organisation, a company
will be able to increase profits. For example, the rule of thumb is the cost in
obtaining a new customer is five times more compared to the cost of retaining an
existing customer.
SELF-CHECK 9.3
In managing an organisation, a manager is responsible for ensuring the
smooth running of the management process. He has to ensure that
detailed control is carried out. What do you think are the factors that
need to be controlled by a manager in his organisation?

EXERCISE 9.3
Essay Question
Why does the financial perspective need to be controlled?
1. Control is the process of finding out what is happening compared

to the standards established. ___
2. Decision on control does not affect decision on future planning. ___
3. Organisations practising bureaucratic control are very difficult to

change. ___
4. Future control is also known as prevention control. ___
5. Economic value added is the total profit of a company which

exceeds its capital cost in a year. ___
1. What are most methods of control based on?

A. Future control
B. Feedback control
C. Concurrent control
D. Dynamic control
2. What type of control is a method that uses norms and behaviour

that have been discussed, formed and agreed by the workgroup?
A. Concertive
B. Bureaucratic
C. Normative
D. Self

3. Which type of control is implemented during the occurrence of the

transformation process?
A. Concurrent
B. Prevention
C. Objective
D. Feedback
4. Which is not a basic need of the control process?

A. Establish standard
B. Comparing actual performance with standard
C. Controlling objectives
D. Taking corrective actions if necessary
5. What perspective is usually used to measure operational

performance in an organisation?
A. Finance
B. Quality
C. Human resource
D. Customers
• Control is the process of ensuring that organisational activities are running

according to plan.
• The main purpose of management control is to prepare managers to face

existing or future problems before it becomes critical.
• Control is important for organisation for its quality assurance and future
changes.
• There are four steps in the control process namely establishing standards,
measuring performance, making comparisons and taking corrective actions.

• Control is a dynamic process because it is a continuous process.
• Three basic methods of control are:
– Pre-control which is also known as prevention control;
– Concurrent control or present control; and
– Feedback control.
• There are five forms of control that can be used by managers in implementing
the control process: bureaucratic, objective, normative, concertive and self.
• In order to ensure that the organisation can achieve its goals, several important
factors must be controlled. These factors are finance, human resources, internal
operations and customers.
Behaviour control Human resources

Bureaucratic control Internal operations
Controlling Making comparisons
Concertive control Measuring performance
Concurrent control Normative control
Corrective action Objective control
Customers Output control
Dynamic process Pre-control
Establishing standards Prevention control
Feedback control Quality assurance
Finance Self-control
Future changes Taking corrective actions




Learning.

Topic  Managing
10 Teams
LEARNING OUTCOMES
1. Differentiate between group and team;
2. Identify the advantages and disadvantages of teams;
3. Determine the best time to form teams;
4. Distinguish the types of teams available in the current environment;
5. Describe the characteristics of teams; and
6. Discuss the factors involved in building high-performance teams.
 INTRODUCTION
For the past 20 years, organisations such as Volvo and Toyota have introduced the
concept of teams in their production tasks processes. This condition is considered
as something new since there were no other organisations that were willing to do
so before. However, this scenario has changed. Nowadays, organisations that do
not implement the concept of teamwork are considered outdated.
The technique of teams is implemented nowadays because there is evidence

showing that teams are more efficient in performing tasks compared to individuals
when dealing with tasks that require a variety of skills, considerations and
experiences. Many organisations have altered their structures in order to develop
teams to utilise the talents of the employees optimally.

TOPIC 10 MANAGING TEAMS  193
Besides that, some management have discovered that a team is more flexible and
responsive towards changes in the environment compared to traditional
structures. A team can be instantly formed, moved and disbanded whenever
needed. Therefore, this topic is dedicated to team and will provide understanding
and clarify matters related to teams. Let us continue with the lesson.
10.1 DIFFERENCES BETWEEN GROUP AND

TEAM
Generally, teams and groups are not the same entities. So, what are their
differences? Let us find out the differences between teams and groups.
A group is defined as two or more individuals who interact and are

independent of each other towards achieving a certain objective.
When we have a group, a workgroup can be performed. What does it stand for?
A workgroup is generally a group that shares information and makes

decisions in order to assist the members to perform their jobs well in the
relevant field.
Workgroups do not need to or do not have the opportunity to be involved in task

collection which involves merging and integrating efforts. Performance will be
assessed based on individual contribution to the group. In other words, the
performance of the group is the total contribution of each member of the group.
Now, let us move on to team. What does it stand for?
A team is an interdependent and complementary entity in all aspects among

the members, with a partnership commitment towards achieving the same
goals.

194  TOPIC 10 MANAGING TEAMS
Moreover, teamwork generates positive synergy through coordination efforts.

Thus, a team is an entity that exceeds a group. Performance is not based on
individual contribution but instead it depends on the performance of the entire
team. The definition given clarifies that the success of a team depends on the
interdependent relationships and collective effort of the team members. Therefore,
team members have mutual influence and significant impact on each other when
working together.
SELF-CHECK 10.1
In an organisation, a particular task is carried out in a group or a team. In
your opinion, what is the difference between a team and a group?
ACTIVITY 10.1
State the differences between groups and teams in the form of a table.
Compare your answer with your coursemates in the myINSPIRE forum.
EXERCISE 10.1
Describe briefly the differences between teamwork and groupwork.
10.2 ADVANTAGES OF TEAMS

Organisations these days are inclined towards the concept of teams since teams
are able to:
(a) Enhance customersÊ satisfaction;
(b) Increase the quality of products and services;
(c) Provide the speed and efficiency in product development;
(d) Enhance job satisfaction of employees or workers; and
(e) Make quality decisions.
One of the ways teams help to enhance customersÊ satisfaction towards

organisations is by forming a team that is specially trained to fulfil certain needs
of the customers. Through this method, customers are directly connected to the
team in order to fulfil their needs. Organisations also form problem-solving teams,

and teams that involve employees who conduct research in order to boost
customersÊ satisfaction and prepare suggestions for enhancement. This type of
teams usually holds weekly or monthly meetings.
Teams also assist organisations to improve the quality of products and services.
Unlike organisations with traditional structures where the management is fully
responsible towards decisions and performances, teams take direct responsibility
regarding the quality of products and services produced.
One thing that makes the concept of teams popular these days is the need for speed
and efficiency in designing and producing products. In the present business
environment, prompt changes in customersÊ preferences demand that an
organisation works both quickly and efficiently. In traditional organisational
structures, product development and production will usually take a long time.
Since teams have members with various functions, speed and efficiency in
designing and producing products are achieved.
The implementation of teams can also increase the levels of job satisfaction. It gives
employees the opportunity to enhance their skills. This is done by cross training.
Cross training is an exercise that trains team members to perform all or most of the
work done by other workers. This exercise allows teams to function under normal
conditions with no interruptions even with the absence or resignation of a team
member. The advantage for the employees is that they are able to broaden their
skills and become more competent and confident in performing their jobs.
Team members always enjoy job satisfaction due to leadership responsibility

which cannot be gained from traditional organisations. Teams are allowed to
determine their working manner, scheduling, maintenance, equipment, leave
schedule, quality control and others. This freedom is very meaningful to the
workers. Besides that, due to the rotation of leadership responsibility among team
members, each member has the opportunity to develop their leadership skills.
Teams share various advantages especially in the aspect of decision-making.

Problems can be viewed from various perspectives since a team consists of
individuals having different knowledge, skills, abilities and experience. Diversity
from various angles will increase the probability of the team in solving the real
problem. Increase in knowledge and information makes it easier for the teams to
generate various choices of solutions that can lead to quality solutions. Since each
member is involved in the process of decision-making, they are considered as
being more committed to achieving the solution to a particular problem. In many
cases, a team is able to perform better compared to an individual worker.

10.3 DISADVANTAGES OF TEAMS

Now, let us look at the disadvantages of teams. The implementation of teams
brings numerous benefits to an organisation, but the organisation also has to face
a few disadvantages of having teams. Some of the disadvantages are:
(a) High turnover rate at the initial stages;
(b) Social loafing; and
(c) The behaviour of self-restriction.
These disadvantages are further explained in Table 10.1.
Table 10.1: Disadvantages of Teams
Disadvantage Description
High turnover Turnover rate is high especially at the initial stage of a team
rate formation. A team is not necessarily accepted by everyone. Inability
to adapt to other members and the internal environment of a team
are the main factors for high turnover rates at the initial stage of
team formation. Besides that, inability to take responsibility,
inability to contribute effort and lack of experience are some other
factors that contribute to this disadvantage.
Social loafing This happens when employees fail to contribute towards job
sharing. In other words, social loafing means that a person becomes
a sleeping partner in the team. Social loafing usually takes place in
a large team where it is difficult to identify and monitor the efforts
contributed by each member of the team. In other words, members
that practice social loafing will try hard to hide their activities and
this condition causes the phenomenon of social loafing difficult to
be detected.
Self-restrictive The condition that leads to the behaviour of self-restriction is when
behaviour there are team members who do not have their own opinions or
views and do not engage in discussions. All these can diminish the
performance levels of the team. This matter is seen to be similar to
the condition of social loafing but actually it is not. Social loafers try
to ensure that other members do not know about their activities,
but those with self-restrictive behaviour will openly tell others that
they are not contributing to the team.

EXERCISE 10.2
List the advantages and the disadvantages of teams.
10.4 WHEN IS A TEAM NEEDED?

How important are teams in organisations? Why canÊt a task be carried out by an
individual? Let us find out the answer in this subtopic as it discusses the time and
conditions when a team must be used in order to maximise its benefits (see
Table 10.2).
Table 10.2: Time and Conditions When a Team Must Be Used in Order to
Maximise Its Benefits
When Description
The objective or Many organisations implement the concept of teams because it
meaning of usage is is popular or due to the assumption that a team is able to solve
clear all kinds of problems.
However, a team will only succeed when team members know

the reason why the team is formed and what they are required
to do.
Tasks that cannot be This means that a team is needed when a task is complex,
carried out needing diversity of perspectives or requiring repetitive
individually but interaction with other people in order to complete it.
through the merging Nevertheless, if a task is simple and does not require diversity
of these individuals of perspectives or repetitive interaction with other people, a
team is not required.
Rewards can be Team rewards depend on the team performance rather than
provided for individual performance. This is the key to providing rewards
teamwork or team for the team behaviour or effort. If the level of reward is not in
performance line with the level of performance, the team will not be able to
function as required. If a particular task is more inclined
towards individual work rather than teamwork, the following
problems will arise. Fast workers will give pressure to slow
workers in order to increase the speed of production. Since
payment is determined by team performance, fast workers will
find that their payment declines compared to before while slow
workers will find that their payment increases. This condition
can result in the reduction of overall productivity.

There are many Resources needed by teams include training, time, place and
resources readily collaboration methods, equipment and consistent information
available and feedback regarding teamwork processes and work
performance. Failure in obtaining these resources, such as lack
of training to support the transition from individual work to
teamwork, and insufficient time to learn the methods of
operating machines will result in the failure of team
implementation. The most perceptible problem is the difficulty
faced by management in helping or transferring resources to a
team that causes the team not to be able to function as required.
It has a clear authority This means the team is given the freedom to determine the
in managing and working method, making the work schedule, training and
modifying the maintenance, or ways to solve customersÊ problems. A team
working method with clear authority will be able to manage and perform the
task better compared to teams having no authority.
Let us look at Table 10.3 which summarises when do we need to use a team or not.
Table 10.3: When Teams Can or Cannot be Used
Use Teams When ⁄ Do Not Use Teams When ⁄

The objectives and reasons of its The objectives and reasons of its
formation are clear. formation are not clear.
Work cannot be carried out Work can be carried out individually.
individually.
Rewards can be given based on Rewards are only given based on
teamwork. individual effort and performance.
There are plenty of resources available. Resources needed are not available.
Team has the power to manage and The management is still monitoring and
alter the working methods carried out. influencing the working methods being
carried out.
EXERCISE 10.3
Based on your understanding, describe the condition where the use of a
team is unnecessary.

10.5 TYPES OF TEAMS

Now, let us move on to the types of teams. Did you know that an organisation can
choose the type of team to be formed? What should be kept in mind is the reason
why the team needs to be formed. The type of team must be suitable for the reason
and the types of task that need to be carried out. Figure 10.1 illustrates the seven
types of teams which exist in our environment today.
Figure 10.1: Seven types of teams in a particular organisation
These seven types of teams are further explained in Table 10.4.
Table 10.4: Seven Types of Teams in an Organisation
Type Description
Employee This is a team that provides advice and suggestions to
involvement team management relating to certain matters. Meetings among
members of the team are held during working hours and are done
periodically. Issues such as safety at the workplace, customer
relations or quality of product are often raised by this team. This
team can only give advice and suggestions but does not have the
power to make decisions. Membership in this team is voluntary
but selection is from the circle of experts. The idea of forming this
type of team is that the person closest to a particular problem or
the real working situation is the best person to give advice and
suggestions. These advice and suggestions are given to
management and it is up to management to make its decisions.

Semi-autonomous This team has the authority to make decisions and solve problems
team relating to the main tasks of product and services production is
known as a semi-autonomous team. This team receives
information regarding budgets, work quality, performance and
also information regarding products produced by competitors.
Team members are trained in various skills and tasks. This team
has the power to make decisions just like a supervisor or a
manager, but the authority received is not complete. The
management still plays a role but lesser compared to the
traditional workgroup.
Self-managed A self-managed team differs from a semi-autonomous team. A
team self-managed team is a team that manages and controls the overall
main tasks in the production of products and services. This team
can do anything related to production without having to refer to
or wait for instructions from management. This includes matters
in managing and controlling the allocation of materials, product
making, providing services, ensuring the accuracy of delivery and
others.
Self-designed This is a team that possesses the characteristics of a self-managed
team team but also controls the design of the team, work activities and
team memberships. This type of team is involved in operational
matters related to the team which exceeds the self-managed team.
This team has the power to determine the work schedule, leave,
how and when a task should be performed, besides determining
the membership in the team by conducting interviews and other
activities.
Cross-functional This team consists of employees from different fields or functions
team in the organisation. Since team members have different functions,
knowledge and experiences, a cross-functional team is able to
identify the real problems and see them through various
perspectives as well as are able to generate more ideas and
alternatives. This type of team can be used in any organisation and
can be formed whether part-time, temporarily or permanently.
Virtual team A virtual team has members in different geographical areas or
organisations and uses telecommunications and information
technology (IT) to carry out activities of the organisation. Meetings
among team members are not conducted face to face but instead
the team uses a combination of communication and IT. This type
of team is still new and can become a reality with the development
of communication technology such as e-mail, the Internet, video
conferencing and more. Since members do not meet in physical
locations, entry of suppliers, customers and influential groups can
be carried out.

The advantage of this team is that it is a flexible team. Team

members can work with one another without having to meet face
to face, without considering the time limit or organisation. The
weakness of this team is that team members have to learn how to
voice out new approaches since physical meetings in this group no
longer exists.
Project team Project team is a team formed to carry out a task or project in a
particular time period. This type of team is usually used for the
purpose of developing new products, upgrading existing products,
developing new information systems or in building new offices
and factories. A project team is usually led by a project manager
who has full responsibility for planning, managing membership
and team management.
A project team is made up of members from different functions

and also involves members from suppliers and customers. The
advantage of this team is that it is able to eliminate communication
barriers among functional areas since its membership consists of
members having different functional areas. Besides that, this team
is flexible where it can be disbanded or moved to a new project
after the completion of a particular project.
EXERCISE 10.4
State the type of team based on the characteristic given:
(a) A team having the authority to determine the memberships in the
team.
(b) A team where its members are in different geographical areas or
organisations.
10.6 CHARACTERISTICS OF TEAMS

The understanding of characteristics of teams is crucial to ensure the success of a
particular team formation in an organisation. What are the characteristics of
teams? The four characteristics you need to know are team norms, team unity,
team conflict and phases of team development. These characteristics are further
explained in the next subtopics.

10.6.1 Team Norms

What are team norms?
Team norms are informal rules or standards which are agreed upon in order
to control the behaviour of team members.
Team norms have a strong influence on work behaviour. An effective work team
develops norms that are related to work quality and accuracy, presence, safety and
sincerity in giving opinions or ideas. Besides that, it is able to develop commitment
towards teamwork, trust in management and job satisfaction.
Usually, team norms are related to positive decisions, but team norms can also
bring negative influences towards the team. Teams having negative norms can
influence the team members to become more inclined towards behaving
negatively.
10.6.2 Team Unity

What does team unity refer to?
Team unity refers to how far the team members are attracted to becoming
members of the team and motivated to stay permanently in the team.
Team unity is able to sustain and reduce the turnover rate of team membership.
When teams possess high unity levels, each member is more motivated to
contribute to the team and expect guarantees from other team members. This will
accelerate the achievement of high performance.
In order to develop unity in teams:

(a) Organisations must ensure the involvement of each member in the team
activities or meetings;
(b) The organisation must create opportunities so that team members can
cooperate with each other by modifying work schedules or workplace
layouts; and
(c) Get the team members to be involved in off-work activities.

SELF-CHECK 10.2
To ensure the smooth running of tasks and prolonged level of motivation
in a team, the team members must unite and cooperate with each other.
In your opinion, how can unity be developed in a team?
10.6.3 Team Conflict

Conflicts and misunderstandings do exist in any teams. What causes conflicts to
arise? Among the cause of conflicts are:
(a) Fighting over limited resources;
(b) Arguments regarding certain issues; and
(c) Discrepancy in opinions.
Usually, conflict is viewed as a negative matter. The key here is that, rather than trying
to avoid conflicts in a team, try to ensure that a team faces a suitable conflict instead.
10.6.4 Phases of Team Development

Development and growth of a team will undergo four phases. The phases consist of
forming, storming, norming and performing as depicted in Figure 10.2.
Figure 10.2: Seven phases of team development


However, not all teams who undergo these four phases are able to produce high
levels of performance. If a team is not perfectly managed, the team will quickly face
a downturn and go through the phases of de-norming, de-storming and de-forming.
Let us refer to Table 10.5 which explains the seven phases of team development.
Table 10.5: Seven Phases of Team Development
Phase Description
Forming It is the first phase in the development process of a particular team. This
is the beginning of the first meeting among team members, forming the
first perception and trying to discover the feelings and conditions if they
continue to become members of the team. This phase also forms several
team norms where team members start searching for behaviours that will
be accepted or rejected by the team.
Therefore, the team leader must provide time frames for team members
to get to know each other as well as set up the basic rules and team
structure.
Storming It is the second development phase that is characterised by conflicts and
disagreement where team members have different opinions regarding
with, what and how a task should be carried out.
This situation takes place when team members start working together,
resulting in a clash of personalities and work styles. Besides that, as team
members, they have to sacrifice a lot of their own personal needs. In this
phase, team members will start voicing their opinions and needs besides
trying to build up positions or roles they desire in the team. Moreover,
team members will start to show an attitude of uneasiness towards what
needs to be done by the team and how it should be done. Team
performance at this level is low and there are some who are totally
ineffective. At this point, the role of the team leader is very much needed
in order to generate the teamÊs focus towards the goals and performance
levels. Team members need to be more patient and more tolerant
towards each other too.
Norming It is the third phase in the development of a team. Each member will start
to resolve any conflict or misunderstanding as one of their roles as a
member of the team. Positive norms will begin to bloom, and team
members should know what is expected from each member of the team.
Misunderstandings start to be resolved, team spirits start to build up and
unity becomes stronger. At this level, members will start to accept the
goals of the team, move together as a unit and start to show increase in
performance and work together effectively. There are certain conditions
where teams will face repetition of the storming and norming phase until
they truly find the suitable norms and start to shift to the next phase.

Performing It is the final phase in the team development process. During this phase,
performance will start to increase since the team becomes more matured
and fully functional. At this stage, members must be fully committed and
start thinking as a member of the team. Members become loyal to one
another and start to feel responsible towards the success and failure of
the team. At this phase, members already feel the joy of being part of the
team.
After a certain time, if a team is not perfectly managed, performance will start to decline,
and the team will go through the downturn phases of de-norming, de-storming and de-
forming.
De-norming It is the repetition of the norming phase, team performance starts to
decline in terms of time, size, scope, goal and membership. For example,
when there are new members joining the team, existing members will
become defensive when matters regarding the methods of performing
certain tasks are questioned by the new members. Expression of ideas
and opinions are no longer open. This is further added by the condition
of new members actively or passively rejecting the roles and behaviour
of the team which was formed earlier.
De-storming It is a condition where the team comfort starts to decline. Team unity
becomes weaker when team members refuse to follow the team norms
and do not participate in team activities. Feelings of anger will rise when
the team falls into conflict and the team starts to move into the final stage
known as de-forming.
De-forming In this phase, members of the team will position themselves in order to
control the fragmentation of the team. Thus, factions start to form in the
team. Members will avoid meeting each other and the team leader. Team
performance decreases at a maximum level when members no longer
think about team performance.
If a team is managed as properly as possible, the decline in team development will

not arise. A manager needs to identify the influences that can lead to the downturn
of the team. He can take the initial steps to prevent negative influences from
continuing to threaten the team.
EXERCISE 10.5
State the phases involved in team development.

SELF-CHECK 10.3
We have already identified the phases of formation and the downturn of
a team. Based on your understanding of what you have learned so far,
what are the factors that influence the level of performance in teamwork?
10.7 TOWARDS BUILDING A HIGH-

PERFORMANCE TEAM
Lastly, let us look at the issues that influence the performance of teamwork. There
are seven issues related to teams that you need to know in detail (see Figure 10.3).
Figure 10.3: Seven issues that influence the performance levels of teamwork
These issues can influence the level of performance of teamwork. They are further

Table 10.6: Seven Issues that Influence the Performance Levels of Teamwork
Issue Description
Team size The best team is the one made up of a small number of members.
When the number of members exceeds 10 or 12, it is difficult to
perform tasks successfully. This is because the team will face
interaction problems on issues related to the job. A large number of
members might also fail to develop the necessary unity, commitment
and accountability needed to achieve a high level of performance.
Hence, in forming a team, the manager needs to ensure that the
number of team members does not exceed 12 people.
Capability of In order to perform a task efficiently, a team needs three types of
team members different skills:
(a) Technical skills related to the job;
(b) Skills in solving problems and making decisions that can be
identified from the actual problem by generating alternatives,
evaluating each alternative and choosing the best alternative;
and
(c) Good listening skills, ability to solve conflicts and other
interpersonal skills.
No team can achieve its actual potential without developing these

three skills.
Role models A team possesses different needs and team members must be chosen
and based on their personalities and priorities. A high-performance team
diversification is a team that is able to match its team members to suitable roles.
Matching members with suitable positions based on what they have
provides opportunity for the members to contribute their best to the
teamÊs overall performance.
Therefore, teams need a diversity of skills and this can be achieved by

diversifying members of the team without the existence of any form
of discrimination.
Commitment A successful team provides direction, momentum and commitment
towards the to its members. The same purpose will result in members knowing
same purpose their roles, direction and guidance in contributing efforts towards the
purpose agreed upon together.
Specific goals A successful team is able to change its purpose into specific goals
which can be measured and achieved. These specific goals provide
clear communication space and assist the team in maintaining their
focus.

Performance Traditionally, performance evaluation and granting of rewards are

evaluation and only dedicated to individuals but when a team is formed, the system
reward of performance evaluation and reward scheme needs to be modified.
systems Suitable performance evaluation systems and reward schemes which
are based on teamwork rather than individuals will generate effort
and commitment among the members of the team.
Absolute A successful team is a team that has absolute beliefs among its
beliefs members. This means the team members believe in the integrity,
characters and the capability of the other members. These developed
beliefs will assist members to perform their work better. This is
because each member believes that the other members have the
capability and ability in solving the assigned tasks.
Therefore, the result from this combination of beliefs and contribution

will assist in the success of the team.
EXERCISE 10.6
Essay Questions
1. Briefly explain why the number of members in a team should be

kept small.
2. Explain the meaning of teamwork and give your comments on

why this concept is becoming more popular these days.
1. Which process refers to the training of team members on how to

perform all or most of the tasks performed by other members?
A. Cross training
B. Job enlargement
C. Horizontal training
D. Job enrichment

2. Which is TRUE regarding the characteristics of a high-quality team?

A. Having members with technical skills related to the job
B. Having a large number of members
C. Having members who can afford to be independent to perform
the job individually
D. Having members who become social loafers
3. Which of the following is NOT applicable to teams?

A. A team with a large number of members will not be able to
show good performance
B. The strategies of organisations must be drafted according to the
conditions of the teams
C. Teams are needed when the goals are clear
4. A team will become weak if there are members who restrict

themselves from participating in team activities. What is TRUE about
teams?
A. A team is the same entity as a group
B. Teams cannot be used when resources are limited
C. Semi-autonomous teams possess more power compared to self-
managed teams
D. Project team is the type of team that is the most difficult to be
disbanded
5. In which phase of team development does high turnover rates occur?

A. Forming
B. Storming
C. Norming
D. Performing

TrueEXERCISE 10.6
(T) or False (F) Statements
1. Teams can help organisation in increasing the quality of products

and services produced by the organisation. ___
2. Team members with the behaviour of self-restriction will try to

ensure that no other members of the team know about their
activities, but this does not occur for a social loafer. ___
3. A team that can only give advice and suggestions but does not have
the power in making decisions is referred to as an employee
involvement team. ___
4. Team unity is considered as informal in the aspect of the agreed

upon rule or standard that regulates the behaviour of team
members. ___
5. A large-sized team made up of between 15 to 20 people is

considered as a good team because it is able to generate diversity in
contributing views and opinions. ___
• A group is defined as two or more individuals who interact and are

independent of each other towards achieving a certain objective.
• A team is an entity that is able to provide synergy to the development of

organisations.
• A team has its own advantages and disadvantages. If a team is formed at the
right time, the advantages gained might exceed the disadvantages.
• Some of the advantages of a team are enhancing customersÊ satisfaction,

increasing the quality of products and services and increasing the levels of job
satisfaction.
• Meanwhile, the disadvantages of a team are high turnover rate, social loafing
and self-restrictive behaviour.

• A team is needed when the objectives and reasons of its formation are clear,
work cannot be carried out individually, rewards can be given based on
teamwork, there are plenty of resources available and the team has the power
to manage and change the working methods carried out.
• Meanwhile, do not use team when the objectives and reasons of its formation
are unclear, work can be carried out individually, rewards are only given based
on individual effort and performance, resources needed are not available and
the management is still monitoring and influencing the working methods
being carried out.
• There are seven types of teams namely employee involvement team, semi-
autonomous team, self-managed team, self-designed team, cross-functional
team, virtual team and project team.
• There are four characteristics of teams namely team norms, team unity, team
conflict and phases of team development.
• There are seven phases of team development namely forming, storming,

norming, performing, de-norming, de-storming and de-forming.
• The seven issues that influence the performance levels of teamwork are team
size, capability of team members, role models and diversification, commitment
towards the same purpose, specific goals, performance evaluation and reward
systems and absolute beliefs.

Absolute beliefs Reward system

Advantages Role model
Commitment Self-designed team
Cross-functional team Self-managed team
De-forming Semi-autonomous team
De-norming Social loafing
De-storming Specific goals
Disadvantages Storming
Diversification Team
Employee involvement team Team conflict
Forming Team norms
MemberÊs capability Team size
Norming Team unity
Performance evaluation Teamwork
Performing Virtual team
Project team

Learning.

Topic  Innovation
11 and Change
LEARNING OUTCOMES
1. Describe the importance of innovation in organisations and the ways
to manage innovation effectively;
2. Identify the forces of change in organisational change;
3. Explain how to manage change and the four aspects that can be
transformed by change agents;
4. Identify the two types of barriers to change;
5. Explain the six tactics to overcome change barriers; and
6. Discuss the three ways to manage change.
 INTRODUCTION
Now, we have come to the end of this module. This final topic focuses on
innovation and change. It begins by discussing the issues related to organisational
innovation. What does organisational innovation mean?
Organisational innovation means success in the implementation of creative

ideas in the organisation.

214  TOPIC 11 INNOVATION AND CHANGE
Where do ideas come from? Creative ideas come from creativity, that is, the
creation of ideas that are useful for the organisation. Innovation can bring about
many advantages and benefits to the organisation, but the main benefit is that it is
able to create and retain the competition advantage of the organisation.
The second part of this topic explains the change in organisations. What is
organisational change?
Organisational change means the modification or alteration of organisations

from one structure, quality or condition into another form from time to time.
Organisations need to change due to several reasons; the most important is a

change of environment. Thus, the last part of this topic explains the environmental
factors that affect organisations, change management, barriers to change, how to
overcome the barriers and ways to manage change. Happy reading!
11.1 WHY IS INNOVATION IMPORTANT?

There are several matters that we need to understand when discussing innovation.
The following subtopics explain matters related to innovation and from there, we
will be able to know why innovation is crucial for organisations these days.
11.1.1 Technology Cycle

What is technology?
Technology refers to knowledge, tools and equipment as well as the

techniques and methods used to change inputs into outputs.
(Williams, 2013)

TOPIC 11 INNOVATION AND CHANGE  215
Let us look at Figure 11.1 which shows you the technology life cycle.
Figure 11.1: Technology life cycle

Based on Figure 11.1, we can see that technology cycle begins with the founding
of a certain new technology and ends when the technology achieves certain limits,
becomes outdated and is replaced with new technology that is more sophisticated.
The S-pattern innovation curve is a curve that represents the life cycle of
technology.
At the early stage of the existence of technology (denoted by point A), there is still
a lot more to be learned from the technology in order to develop it and this results
in a slightly slow progress. From point A to point B, there is a slight curve which
indicates increase in effort (in the form of finance, research and development) that
only provides a slight increase in the performance of the technology.
When this technology matures (indicated by point B), researchers have identified
the methods to obtain better performance from that particular technology. The
curve from point B to point C indicates that the injection of effort in a small
quantity is already enough to increase the performance of the technology to a
stimulating level. Point C shows that additional effort in developing the
technology will only result in a slight increase in performance. More importantly,
point C denotes that the technology has reached its optimum level. This means
that additional efforts will no longer bring any benefits or increase the
performance of that particular technology.
After the technology has achieved its maximum limit, that is, at the end of the
S-curve, increase in performance usually comes from new or the latest technology.
The second S-curve is the curve that represents the new technology replacing the
old technology.

ACTIVITY 11.1
With the rapid development in information technology nowadays, how
far does innovation play an important role in an organisation? Discuss
this matter with your coursemates in the myINSPIRE forum.
EXERCISE 11.1
List the phases involved in the life cycle of technology.
11.2 MANAGING INNOVATION

Innovation must be managed properly for organisations to enjoy its benefits. If not
properly managed, it will not bring any benefit and may even have a negative
effect to the organisation. The next subtopic explains the methods implemented to
manage innovation in organisations.
11.2.1 Managing Innovation Resources

As stated before, innovation begins with creativity. Therefore, an organisation
needs to establish a creative work environment in order to generate creativity.
What is a creative work environment?
A creative work environment means a workplace culture where the

employees believe that new ideas are evaluated, appreciated and encouraged.
What are the factors that encourage creativity in the workplace? There are five
factors that encourage creativity in the workplace (Williams, 2013):
(a) Challenging work;
(b) Encouragement from the organisation;
(c) Encouragement from supervisors;
(d) Encouragement from the workgroups; and
(e) Freedom.

Work will become challenging when it requires hardwork, focus and attention as
well as when it is viewed as important by other people in the organisation.
Challenging work will encourage creativity since it is able to create a rewarding
experience to the executor. When accepting challenging work, an employee will
try to figure out the methods or ideas that can assist in performing the particular
job. The success in performing the challenging job will give satisfaction to the
employee.
A creative work environment requires three types of encouragement as shown in

Figure 11.2.
Figure 11.2: Three factors that encourages creativity in the workplace
These three factors are further explained in Table 11.1.
Table 11.1: Three Factors that Encourages Creativity in the Workplace
Factor Description
Encouragement Encouragement from the organisation is present when the
from the management encourages risk-taking and new ideas, supporting
organisation and making good evaluation towards particular ideas, grant
rewards and recognition towards creativity and encourages the
sharing of new ideas among the different departments within the
organisation.
Encouragement Encouragement from supervisors or managers is a form of
from supervisors encouragement given by those who are in the chain of command of
an employee. This type of motivation is given by the managers in
order to provide clear goals to encourage open interaction with
subordinates and actively show support towards the development
of new ideas.

Encouragement Meanwhile, encouragement from the workgroups exists when

from the members of the group have diverse experience, education and
workgroups background, and when there is openness in the contribution and
sharing of ideas. Openness or freedom here means giving a slight
amount of empowerment or authority to each member towards his
work activities. The power given can provide space for the
employee to be able to make decisions. The process of decision-
making will in turn produce useful ideas that are able to assist the
employee to perform his work successfully.
However, control must also be given to avoid any occurrence of

unwanted issues, for example, the employee takes the opportunity
to do something negative as a result of the authority given.
SELF-CHECK 11.1
Why must innovation that result from staff ideas be managed and
administered?
EXERCISE 11.2
Based on your understanding, briefly describe the following:
(a) Innovation;
(b) Technology; and
(c) Creative work environment.
11.3 ORGANISATIONAL CHANGE

Did you know that organisations normally face two types of environments? These
environment can either be stable or dynamic. It is almost difficult nowadays to
find a business environment that is completely stable. In all likelihood,
organisations nowadays will face a dynamic environment where the
environmental factors, either specific or general, will change rapidly. If an
organisation is not capable of handling environmental changes, it has a poor
chance of maintaining its position in its area of business.

Therefore, the organisation must always monitor and view the effect of each of the
changes. Any change may bring either opportunity or threat to the organisation. It
is because of the effects of environmental change that the organisation needs to
make changes. What is meant by organisational change?
Organisational change is the need for an organisation to change from one

condition to another, to take the opportunity or avoid a threat caused by
environmental changes in order to retain the survival of the organisation.
11.3.1 Forces of Change

As you already know, organisations nowadays face environments that are
dynamic and continually changing. What are the forces that demand an
organisation to change? One of the forces is the change in the conditions of the
workforce. The conditions of workforce nowadays require the organisation to be
open to diverse cultures in the environment. This is because in the current
environment there is diversity in the workplace, either an obvious diversity or a
less apparent form of differences.
Therefore, the policies of human resource and its practices must be changed in
order to attract interest and retain a diverse workforce besides trying to avoid any
legal action.
Technology is viewed as one of the forces that can change the work methods and
the organisation itself. For example, the use of computers as one of the tools to
monitor and control employees enables the managerÊs span-of-control to become
wider and the structure of organisation to become more open. The sophistication
of information technology (IT) has caused organisations to be more sensitive to
changes. Consequently, some organisations now can develop, produce and
distribute products faster than before.
Starting from the early 1970s, due to the rise of the world petroleum price, the
world economy has continuously affected organisations. The most obvious
example is when the economic downturn took place in Malaysia somewhere
around the middle of 1997. The value of the ringgit fell, leading to the collapse of
the stock exchange and to the downfall of several of the countryÊs most significant
industries. It is the effect of this fall in ringgit value that also caused Malaysia to
lose its competitive edge in the international market and later forced the
government to peg the ringgit to the US dollar.

Besides that, the loan interest rates that had gradually increased forced many
organisations to retrench their employees and worse, some of them were forced to
close their businesses. From the examples above, it is clear that the economy is also
one of the factors why an organisation needs to change.
Competition also results in change especially in the aspect of quantity and quality.
As a result of global trading, competition not only comes from within the country
but also involves overseas organisations. Competition not only involves
organisations in the same industry but also those in other industries. Due to
this competition, organisations must ensure their survival from the threat of
competition.
Successful organisations are those that are able to adapt to the current flow of
competition. They are the organisations that are fast and capable of developing
new products and services and selling them in the market.
Therefore, organisations need to adapt to changes in social trends. Changes in

social trends could change the preferences and wants of customers. This change
will definitely alter the level of demand towards products and services of the
organisation.
Not only that, the products and services that were once in high demand will
become obsolete due to this change. Therefore, the organisation needs to make
changes in order to adapt to the current social trends.
Last but not least, the countryÊs internal and global political conditions can affect
organisations as well. If there is any change of government in a country, it will also
cause change in terms of the business rules and regulations of that particular
country. Let us look at Table 11.2 which summarises these forces of change and
their effects towards organisational change.
Table 11.2: Forces of Change and Their Effects
Force of Change Examples

Workforce conditions • Increase in the number of professionals
• Increase in cost of workforce
Technology • Use of computer and automation
• Total quality management or TQM programmes
Economy • Increase in interest rates
• Drop in local currency value

Competition • Global competition

• Mergers and acquisitions
Social trend chart • Increase in educated groups of people
• Change in preferences
Politics • Downfall of communist countries
• Change to new government
ACTIVITY 11.2
From your point of view, what are the ways to make changes in the
morale and attitude of staff in their areas of employment? Discuss this
matter in the myINSPIRE forum.
EXERCISE 11.3
Other than the examples given in Table 11.2, give one example of effects
for each of the forces of change.
11.4 MANAGING CHANGE

Now, let us move on how to manage change. But first, let us learn on how to
initiate change. What does initiating change mean?
Initiating change refers to carrying out something using new ways and
methods compared to before.
Making drastic changes in an organisation without any proper planning can spell
disaster for that particular organisation. Therefore, an organisation must make
planned changes. What are planned changes?
Planned changes mean changing activities that are necessary and required
and these changes have to be goal oriented.

According to Robbins (1996), there are two goals for changes, which are:
(a) To increase the capability of the organisation in order to be able to accept
challenges and changes in the environment; and
(b) To change the behaviour of individuals within the organisation.
If an organisation wishes to stay in the business, it must be able to respond quickly

to the changes in the environment. When competitors produce new products and
services, the government starts to implement new rules, the supply of resources
becomes scarce and any other changes that take place, organisations must be able
to adapt to these conditions. Generating innovation, granting power to employees
and introducing teamwork are among the examples of planned changes activities
that are directed as a response towards the changes in the environment.
Since the success of an organisation depends on the efficiency and effectiveness of

employees, planned changes are also concerned with changing the behaviour of
individuals or groups within an organisation. In implementing changes within the
organisation, there are two types of changes:
(a) Change of first order; and
(b) Change of second order.
First order change is a linear change, slow in nature and implemented in stages.
This change is made without any apparent change in the basic structure of the
organisation. It is also conducted that way if there is no strong pressure from the
environment. Besides that, if the particular organisation has a strong culture,
changes must be implemented slowly and in stages.
The second order change is a change that is radical in nature, multidimensional

and multilevel. This type of change needs high levels of leadership in order to
realise the changes. It takes place when there is intense pressure from the
environment that disrupts the survival of the organisation. This demands the
organisation to make drastic changes.
We have already discussed what is meant by planned changes, its objectives and
the types of changes that can occur in an organisation. Now, the question rises on
who will be responsible for managing the activities of change in organisations. The
answer is the change agents. Who are change agents?

Change agents are anyone, either managers, non-managers, employees or

external negotiators.
In the effort to make a significant change in the organisation, the management is

more inclined to use external negotiators who have more knowledge regarding
theories and methods of changes.
SELF-CHECK 11.2
What is your opinion on the differences between changes that are

planned and changes that are carried out without proper planning?
ACTIVITY 11.3
Do you agree that second order change requires a leader who is

charismatic and has a clear vision in order to ensure the continuity of the
organisation? Justify your answer in the myINSPIRE forum.
EXERCISE 11.4
Briefly explain the two types of changes in organisations.
11.4.1 Aspects that Can be Changed by Change Agents

What are the aspects in organisations that can be changed by the change agents?
There are four aspects in organisations that can be changed by the change agents
as shown in Figure 11.3.

Figure 11.3: Four aspects that can be changed by the change agents
These four aspects are further explained in Table 11.3.
Table 11.3: Four Aspects That Can Be Changed by Change Agents
Aspect Description
Change of Structure for an organisation is not something that is absolute.
structure Structure must be changed to adapt to the conditions in the
environment. Thus, change agents might need to change the structure
of the organisation if necessary.
The structures of organisation explain the methods of work

divisions, combined and coordinated. Change agents can change
one or more of the important elements in designing the
organisation. For example, widening the span of control and
combining the responsibilities of departments. Rules and
procedures can be implemented to increase standards, or the level
of decentralisation can be increased to accelerate the process of
decision-making.
Change agents can introduce significant modification in the true

design of organisations. This can include the change of form from a
simple structure to a team-based structure or in other words,
changing the form of departmentalisation. Change agents can also
take into consideration the redesigning of work and work
schedules. Another example of modification is the reward system
for employees. Motivation can be increased by making
improvements in the employeesÊ rewards system. For example, by
introducing the system of bonus based on performance and profit-
sharing between organisation and employees.

Change of Technology is another aspect in the organisation that can be

technology changed or modified by change agents. Nowadays, changes in the
technological environment involves introduction to tools, or
methods that can either be new automation or computerisation.
Competitive factors or innovation in industry requires the change
agents to introduce the new tools, equipment and operation
methods.
In order to maintain the survival of the organisation, the

introduction of new technology will be able to assist the
organisation in accelerating product development and
distribution to customers. It can also help build the competitive
advantage of the organisation. The use of this technology also can
ensure the ability and effectiveness of the organisation in the
industry.
Change of Physical layout comprises space and arrangement of tools,
physical layout equipment and other things in the workplace. This physical layout
can influence the work productivity, efficiency and effectiveness
of employees. For example, removing walls or partitions or
creating an open workspace area in the workplace will facilitate
communication among employees. For instance, the management
can also change the quantity or types of lighting, level of heat and
cold, level of sound, cleanliness of the workplace and the interior
design dimensions such as furniture, decorations and colour.
Change of The final aspect that can be changed by change agents is the
employees employees. Change agents can assist individuals or groups within
an organisation to work more efficiently. This involves changing
the attitude and behaviour of the members of the organisation
through communication, making decisions and solving problems.
ACTIVITY 11.4
Discuss the following questions in the myINSPIRE forum:
(a) „Change in the structure of an organisation can increase the morale
of the staff.‰ Do you agree with this statement? Justify your answer.
(b) The change of a particular technology in an organisation will give
rise to substantial risk. What are the factors that must be considered
to minimise this risk?
(c) Do you agree if a series of developmental training are conducted
for the employees in order to help them gain new skills and
exposure towards new technologies?

EXERCISE 11.5
List the organisational aspects that can be changed by change agents.
11.5 BARRIERS TO CHANGE

When change is needed, of course the ones that are involved will be the
organisation and its members. Based on past experiences, if a change happens, we
will not be able to avoid facing barriers. In this case, an organisation will encounter
obstacles of change from two parties:
(a) Individual employees; and
(b) The organisation itself.
The sources of obstructions from both the parties are further explained in the next
subtopics.
11.5.1 Individual Barriers

The source of change barrier for individuals comes from basic human
characteristics itself, such as perception, personality and needs. The following are
several reasons why an individual opposes change.
One of the reasons is due to human habits. What is habit?
Habit is a behaviour performed by an individual periodically.
The inability of individuals to carry out the behaviour known as habit (for instance,
not being able to have coffee before reporting for duty) will result in the individual
feeling uneasy or anxious. Individuals feel that if changes are to be made, then they
will no longer be able to satisfy their habits.
Besides that, individuals feel anxious towards change due to their feeling of fear
towards the guarantee and security of their employment. For example, if an
organisation introduces the use of robotic equipment in the production line,
individuals will develop the fear of losing their jobs.

Economics is also one of the factors that cause individuals to oppose change.
Individuals have the assumption that change will affect their income.
In addition, changes in work activities or developing a new work routine can raise
the feelings of fear in the individuals. Individuals become worried that they are no
longer able to perform the work following the new standards set, particularly if
remuneration is made based on productivity.
Besides that, the anxiety towards something that is unknown causes individuals
to oppose changes. They do not know whether they can perform under the new
approach. This causes the individuals to think only of the negative aspects.
Other than that, the reason that contributes towards change barriers is the selective
nature in processing information. Individuals only want to hear and process
information that they desire or information that are equal to their assumptions.
Therefore, when this condition rises, individuals are usually inclined to have
negative thoughts.
11.5.2 Organisational Barriers

There are several sources that are identified as being organisational barriers.
Organisations usually have built-in mechanisms that are able to provide stability.
When an organisation faces the need for change, the organisation fears that the
stability felt all this while will be severely affected. This condition is referred to as
structure inertia.
Group inertia is also one of the sources of organisational barriers. It is inertia in the
form of a group that creates barriers towards change. For example, individuals
have already agreed to accept the changes that will be made but the employee
union does not want any change, which then causes individuals to be forced to
oppose the change and this is referred to as group inertia.
Restriction of change focus can happen too. This refers to the condition where an
organisation makes changes on a certain sub-system only. An organisation is
formed from the combination of interdependent sub-systems. Therefore,
modification cannot be made towards one sub-system without involving the other
sub-systems. Thus, if changes are made towards one sub-system only, the changes
may neither be acceptable nor successful.

Furthermore, organisational change may be a threat to the expertise of certain

groups. These groups are worried that if change takes place, their expertise may
no longer be needed, and this will further jeopardise the security of their
employment.
Besides that, changes are also viewed as a threat towards the authority of some
groups. For example, the introduction of involvement in decision-making and the
formation of self-managed teamwork are the types of changes that can threaten
the authority of managers.
Other than that, changes are also assumed to become a threat towards the existing
allocation of resources. Some groups in the organisation that have control over the
resources usually view change as a threat to their position. These groups fear that
change will result in scarcity or permanent loss of resources that have been enjoyed
by them all this while.
SELF-CHECK 11.3
List the differences between individual barriers and organisational
barriers.
ACTIVITY 11.5
A change frequently has good and bad implications to an organisation.
In your opinion, what is the most difficult barrier to be changed? Share
your opinion with your coursemates in the myINSPIRE forum.
11.6 OVERCOMING THE BARRIERS TO

CHANGE
How do we overcome the barriers to change? There are six tactics that can be
implemented by change agents to overcome change barriers. These tactics are
further explained in Table 11.4.

Table 11.4: Six Tactics That Can Be Implemented by Change Agents to

Overcome Change Barriers
Tactic Description
Communication Barriers can be reduced through communication with employees in
and learning order to help them see the logical aspect of a particular change. This
tactic is based on the assumption that the source of barrier is caused
by obtaining the wrong information, misinterpreting information or
through a bad communication condition. This tactic is used to
provide clarification and accurate information regarding the changes
which can help in reducing barriers to communication.
Communication can be implemented through face-to-face
discussions, memos, group presentation or reports.
Involvement This tactic assumes that it is difficult for a person to oppose change if
he himself is also involved in the effort and activities of
transformation. With this involvement, the involved parties will
contribute their expertise and involvement, and this will reduce
communication barriers. Not only that, commitment can also be
obtained, and this will enable an increase in the quality of change.
Facilities and Change agents can offer forms of facilities and support to reduce
support barriers. When employees have a high level of anxiety, counselling
services and therapy, new skills training or paid leaves are forms of
facilities and support that can be given to employees.
Negotiation Change agents can also deal with change barriers by making valuable
exchange in order to reduce communication barriers. For example, if
the barriers come from some individuals having power, reward
packages can be used as negotiation substance.
Besides that, this reward packages and offers will be able to fulfil the
needs of the individuals. Negotiation tactics are most suitable when
change barriers are caused by powerful individuals in the
organisation.
Manipulation Manipulation refers to the effort of changing the standpoint of a
and co-optation person. Altering or changing facts to make them interesting,
restricting bad information and creating rumours are some of the
ways to obtain employeesÊ agreement.
Meanwhile, co-optation is the combination of manipulation and

involvement. The act of co-optation will try to „buy‰ group leaders
who cause barriers by providing these leaders important roles in
making change decisions. Advices from these leaders are required,
not to find the best solution but as confirmation. By ‰buying‰ these
leaders and successfully changing their standpoint, indirectly it will
also change the perception and standpoint of their followers.

Force This is the final tactic that can be implemented by change agents. This
is an application that uses threat towards the person who is a barrier.
For example, threat to be moved to another department, losing the
chance for a promotion, and a poor performance evaluation are
among the threats imposed if the person does not want to abide by
the changes that will be made.
SELF-CHECK 11.4
Imagine you are the general manager of an advertising company. What
are the factors needed to overcome barriers towards change in your
organsaition?
EXERCISE 11.6
State the differences between negotiation, co-optation and force.
11.7 WAYS TO MANAGE CHANGE

Lastly, let us identify ways to manage change. Change to be made by a particular
organisation must be managed as properly as possible in order to avoid the
occurrence of any negative consequences especially from groups that obstruct
change. Change can be managed using several ways as explained in Table 11.5.
Table 11.5: Three Ways to Manage Change
Way Meaning
Liquidation Refers to getting individuals who are affected by the changes to
believe the need for these changes.
Change Refers to the processes used towards employees and managers in
intervention order to change their behaviour and work practices.
Freezing Refers to supporting and strengthening the changes that were
successfully carried out in order for it to continue.

Now, let us look at Table 11.6 which explains several suggestions that can be used
by managers when there are groups who form barriers towards change by using
the suggestions by Kurt Lewin.
Table 11.6: Things That Need to Be Done When Employees Form Barriers
Towards Change
Method Suggestion
Liquidation • Sharing thoughts with employees on why change is needed.
• Exhibits sympathy towards the difficulties faced by the managers
and employees due to the change.
• Communication regarding the changes in a context that is simple,
clear, widely verbal or written.
Change • Explaining the benefits that can be gained from changes.
intervention
• Identifying respected individuals in the organisation to manage the
efforts of changes.
• Allowing individuals to accept the suitable effect from the changes,
for example while the employees are busy carrying out their work.
• If possible, ensure that no employees are being terminated to reduce
fear towards change.
• Offer training to ensure employees are confident and capable in
performing the needs of the new task.
Freezing • Upper management needs to give support by providing consistent
messages and resources.
• Let everyone know about where and when changes had taken place
successfully.
• Offer counselling or other services that can assist the employees in
overcoming the pressure due to the change.
ACTIVITY 11.6
What is the importance in managing a particular change to be carried out
by a particular organisation? Discuss this question with your coursemates
in the myINSPIRE forum.

EXERCISE 11.7
Essay Question
Give a brief description on the change management theory proposed by
Kurt Lewin.
1. Which of the following is NOT a method suggested for managing

change barriers?
A. Education and communication
B. Participation
C. Test
D. Negotiation
2. Which stage in the S-pattern innovation curve indicates that slight

effort will produce obvious progress in the technology
performance?
A. Initial stage of cycle
B. Intermediate stage of cycle
C. Final stage of cycle
D. Initial and final stage of cycle
3. Which tactic for overcoming barriers to change uses threat towards

the employee posing the barrier?
A. Negotiation
B. Manipulation
C. Co-optation
D. Force

4. What does the method of „buying‰ group leaders who cause barriers
towards change referred to?
A. Negotiation
B. Force
C. Co-optation
D. Involvement
5. „Change that is radical in nature, multidimensional and multilevel‰

refers to which order of change?
A. Fourth
B. Third
C. Second
D. First
• Organisational innovation means success in the implementation of creative

ideas in the organisation.
• Creative ideas come from creativity, that is, the creation of ideas that are useful
for the organisation.
• Innovation can bring about many advantages and benefits to the organisation,
but the main benefit is that it is able to create and retain the competitive
advantage of the organisation.
• Innovation relies heavily on technology cycle. Technology cycle begins with

the founding of a certain new technology and ends when the technology
achieves certain limits, becomes obsolete and is replaced with new technology
that is more sophisticated.
• Innovation must be managed properly for organisations to enjoy its benefits.

Innovation begins with creativity. Therefore, an organisation needs to establish
a creative work environment in order to generate creativity.

• There are three factors that encourage creativity in the workplace namely
encouragement from the organisation, encouragement from supervisors and
encouragement from the workgroups.
• Organisational change is the need for an organisation to change from one

condition to another, to take the opportunity or avoid a threat caused by
environmental changes in order to retain the survival of the organisation.
• The forces of change are workforce conditions, technology, economy,

competition, social trend chart and politics.
• In order to manage change, we need to initiate change and make planned

changes. There are two types of changes namely change of first order and
change of second order.
• Change agents are the people who will be responsible for managing the
activities of change in organisations and they can be anyone.
• There are four aspects that can be changed by change agents namely structure,
technology, employees and physical layout.
• There are two types of barriers to change namely individual barriers and
organisational barriers.
• There are six tactics that can be used by the change agents to overcome change
barriers. These tactics are communication and learning, involvement, facilities
and support, negotiation, manipulation and co-optation as well as force.
• There are three ways to manage change namely liquidation, change

intervention and freezing.

Change Freezing
Change agents Individual barriers
Change intervention Initiating change
Change of employees Innovation
Change of physical layout Involvement
Change of structure Liquidation
Change of technology Manipulation and co-optation
Communication and learning Negotiation
Creativity Organisational barriers
Encouragement Organisational change
Facilities and support Planned change
First order change Technology change
Force Second order change
Forces of change
Robbins, S. P. (1996). Organizational behavior: Concepts, controversies,

applications (7th ed.). Englewood Cliffs, NJ: Prentice Hall International.

Learning.

236  ANSWERS
Answers
TOPIC 1: WHAT IS MANAGEMENT?
Exercise 1.1
Planning is to set and determine the objectives that need to be achieved in the
future and what should be done in order to achieve those objectives.
Organising is delegating activities and assigning the suitable authority to carry out
the said activities.
Leading is an art in directing and channelling human conduct with the aim to
achieve all objectives that have been determined.
Controlling is carried out through performance evaluation of all the objectives set
in order to determine the reasons for deviation and take appropriate action
whenever necessary.
Exercise 1.2
1. F
2. F
3. T
4. T
5. T

1. D
2. B
3. A
4. C
5 B

ANSWERS  237
TOPIC 2: PLANNING
Exercise 2.1
One-time usage planning is a planning made to fulfil one particular purpose only.
Fixed planning is a planning made for managing events that occur repeatedly in
an organisation.
Exercise 2.2
The disadvantages of making plans are:
(a) It restricts changes and adaptations in an organisation.
(b) An incorrect prediction of the future will result in the planning done to be
incorrect or unsuitable.
(c) The separation between the planner and the executor causes the planning
made to be ineffective.

1. C
2. C
3. D
4. C
5. B

1. T
2. T
3. F
4. F

238  ANSWERS
TOPIC 3: DECISION-MAKING
Exercise 3.1
Certain condition – Where the decision maker has complete information in
assisting him to make decisions. With this complete information, the decision
maker will be able to know for certain the results that will be generated by each
decision alternative, and later choosing the alternative that will bring the most
optimum result.
Uncertain condition – A condition where the decision maker does not have any
information to assist him to make decisions. Thus, the decisions made depend
most on the experience and consideration of the decision maker.
Risky condition – Under this condition, the decision maker has the information
needed to make decisions, but the information is incomplete and insufficient.
Therefore, the results generated from each decision alternative are not able to be
predicted for certain.
Exercise 3.2
Bounded rationality occurs when decision-making is bounded by certain problems
such as limited resources, excess information, memory problem and expertise
problem of the decision maker.
The general mistakes in decision-making are making biased decisions or making

decisions purely based on intuition alone without taking into consideration the
available facts.
Decision-making in a risky environment will also limit rational decision-making.

This is because incomplete information can result in not making the best decision.
Exercise 3.3
Decision-making can be improved through these methods in the process of
making decisions:
(a) Implementing the rules of decision-making, namely, the rule of priority and
rule of minimum condition;
(b) Conducting the test of variables; and
(c) Making decision in groups.
ANSWERS  239
Exercise 3.4
There are two advantages of electronic brainstorming compared to face-to-face
brainstorming:
(a) Group members can state their respective ideas at any time without having
to wait for their turn to give out the opinions.
(b) Group member can avoid the feeling of shame or low self-esteem if the
suggestions are rejected since the identity of the contributor is not featured
on the computer screen.
Exercise 3.5
1. A
2. C
3. D
4. C
5. C

1. F
2. T
3. F
4. F
5. T

240  ANSWERS
TOPIC 4: ORGANISATION DESIGN

Exercise 4.1
The factors that can influence the structure of an organisation are:
(a) Organisational strategy;
(b) Organisation size;
(c) Technology; and
(d) Environment.
Exercise 4.2
(a) Functional Departmentalisation
The type of departmentalisation where all jobs and employees are divided
into separate units that are responsible towards a particular function of
business or area of expertise.
Advantage
Functional departmentalisation is able to avoid multiplication of work and
resource usage in organisation.
Disadvantage
Functional departmentalisation can delay the process of decision-making
and produce managers and employees with limited experience and
expertise.
(b) Geographic Departmentalisation

The type of departmentalisation that coordinates the job and employee into
separate units responsible for conducting business activities in certain
geographical area.
Advantage
The advantage of geographic-based department is that it can help the
organisation to act faster and more efficiently towards demand from certain
markets within the responsibility of the particular department.
Disadvantage
The disadvantage of this type of departmentalisation is that it can cause
multiplication of work and resource usage in organisation.

ANSWERS  241
Exercise 4.3
(a) Chain of Command
Chain of command explains who needs to report to whom, that is,
individuals who are at the top level are more powerful compared to the
individuals at the lower level. Chain of directives also shows the flow of
directive path or authority in organisation.
(b) Difference between Line Authority and Line Function

Line authority is related to the rights of making decision and giving
directives to employees who are in the chain of directives of a particular
manager. Meanwhile, line function means the activities that directly
contribute in the aspect of invention and sales of an organisationÊs products
and services to the customers.
(c) Span of Control

Span of control gives details on the number of employees placed under the
supervision of a manager.
Exercise 4.4
(a) Job Enlargement
Job enlargement means addition of activities or tasks into a particular area of
work.
(b) Job Enrichment

Job enrichment means increasing the depth of job; not only there is an
addition in the number of tasks in a particular area but employees are also
given the authority and control to make decisions on their job.
(c) Job Rotation

Job rotation means employees are shifted from one area of job specification
to another area of job specification either periodically or non-periodically.
Exercise 4.5
Mechanistic organisations are organisations that have a high level of job
specification, high level of formality, a rigid chain of directives, practice
centralisation of control and vertical or upwards communication. Meanwhile,
organic organisations are organisations that have a chain of directives that are not
rigid, a low formality level, a low level of job specification, practice
decentralisation of control and horizontal communication.

242  ANSWERS

1. C
2. A
3. B
4. A
5. A

1. F
2. T
3. T
4. T
5. F
TOPIC 5: HUMAN RESOURCE MANAGEMENT

(HRM)
Exercise 5.1
1. Human resource management (HRM) is a process of obtaining, developing
and retaining qualified employees sufficiently towards achieving goals that
have been set.
2. The stages involved in the HRM process are as follows:

(a) Determining the needs of human resource;
(b) Attracting the interest of qualified candidates;
(c) Development of qualified employees; and
(d) Retaining qualified employees.

ANSWERS  243
Exercise 5.2
Job analysis is a process of detailed study regarding tasks related to a particular
work area and human qualities needed in performing the particular job. The result
of the study will form the job description and job specification. Job description is a
written statement that clearly explains the job, duties, responsibilities, activities
and performance result required from the job-holder.
Meanwhile, job specification is a written statement regarding qualifications such

as level of academic achievement, work experiences and other skills required from
the job-holder.
Exercise 5.3
The two types of forecasting of the total number and types of employee are
external forecasting of organisation and internal forecasting of organisation.
Exercise 5.4
The two methods of recruitment that can be implemented are internal recruitment
and external recruitment.
Exercise 5.5
In the process of selecting qualified candidates, organisations must perform two
main processes, namely the process of gathering information to be evaluated and
the process of selecting the best candidate for the position offered.
Exercise 5.6
The training methods that can be implemented by an organisation are as follows:
(a) On-the-job training;
(b) Vestibule training;
(c) Apprentice training; and
(d) Off-the-job training.

244  ANSWERS
Exercise 5.7
The following are the individuals or groups having potential in becoming the job
performance evaluator for an employee:
(a) Supervisors/managers;
(b) Colleagues;
(c) Subordinates; and
(d) Other parties who are related to the particular employee such as customers,
suppliers and others.
Exercise 5.8
Financial rewards are rewards in terms of money such as pay of wage,
commission, bonus, share ownership and dividend payment given to employees
in return for their contribution of energy and effort towards the organisation.
Meanwhile, employeesÊ benefits are non-financial rewards given to the employees

such as medical facilities, travelling, life insurance, discounts on products and
services of the company, paid leave and sick leave.
Exercise 5.9
1. The four ways of employee separation that are usually faced by employees
and organisations are:
(a) Employee termination;
(b) Organisation downsizing;
(c) Retirement; and
(d) Employee turnover.
2. There are four basis to the decision of reward granting namely levelled
payment, variable payment, payment structure and employment benefits.
The decision of levelled payment means determining the decision in making
payment to employee at the higher or lower level or at the same level with
the wage payment tier in the labour market. Variable payment is the
payment decision made in variable from one individual to another based on
the individual performance and the organisation.

ANSWERS  245
Meanwhile, payment structure refers to how far the employees in the

organisation receive different levels of payment. Employment benefits cover
rewards other than the direct salary given to the employees.

1. B
2. B
3. A
4. C
5. D

1. F
2. F
3. T
4. F
5. T
TOPIC 6: COMMUNICATION IN ORGANISATIONS

Exercise 6.1
Among the reasons are to motivate, inform, control and fulfil social needs.
Communication in the form of motivation has the purpose of influencing the
behaviour of the members of an organisation. Communication also has the role of
a control function. Communication will coordinate and unite work and tasks.
Managers need to communicate to fulfil social needs. Communication has a role
in fulfilling social needs through interactions that are not related to work and
emotions.

246  ANSWERS
Exercise 6.2
Communication is an act of sending or spreading information. Communication is
a dynamic and complex process that involves many factors. There are eight
elements involved in the communication process which are sender, encoding,
message, channel, decoding, receiver, feedback and disruption/noise.
Exercise 6.3
1. F
2. T
3. T
4. F
5. T

1. B
2. A
3. D
4. B
5. D
TOPIC 7: MOTIVATION
Exercise 7.1
Needs-based model is a motivation model that emphasises on the specific needs
of human and internal factors that give the power to direct and stop actions.
Needs-based model explains motivation as a phenomenon that takes place
internally.
Meanwhile, process-based model is a motivation model that focuses on the

understanding of thinking or cognitive process in the mind of individuals and
affect behaviour.

ANSWERS  247
Exercise 7.2
Motivational factors are factors related to the work being carried out and they are
related to the positive feeling towards the work. Motivational factors consist of the
work itself, achievement, career growth and responsibilities.
Hygiene factors refer to the context of work and the environment where the work
is being carried out. These factors are supervision, workplace condition, individual
relationship, salary, safety and administration and policies of the company.
Exercise 7.3
The purpose of expectancy theory is to predict and describe the relations between
task and effort. It suggests that work motivation is determined by perception and
beliefs of individuals towards the relationship between effort and performance
and beliefs towards result expectation related to the different levels of
performance.
Meanwhile, the equity theory focuses on the feelings of individual regarding

equality in the treatment given compared to other people. This theory suggests
that individuals will try to reduce the inequalities felt if they exist.
Exercise 7.4
The two types of reinforcements that can be used are elimination and punishment.
Elimination involves the absence of positive outcome or effect, or drawing back
the positive outcome that affects the desired behaviour. Punishment is the giving
of negative effect as the result of the occurrence of undesired matters. As an
example, an employee who is always late for work can be suspended or have his
pay held back by the company. Both forms of elimination reinforcement and
punishment can be used to reduce the frequency of undesired behaviour.
However, many studies conducted had shown that rewards can increase the level
of satisfaction and motivation compared to punishment.

1. T
2. F
3. F

248  ANSWERS
4. T
5. T

1. C
2. C
3. D
4. D
5. A
TOPIC 8: LEADERSHIP
Exercise 8.1
From both studies, the results achieved are quite similar. Both have given two
main dimensions which are task dimension and relation dimension.
Exercise 8.2
Favourable situations occur when leaders are able to influence their followers and
this is determined by leader-subordinate relations, task structures and position
power. Generally, a leader with relations orientation and a high LPC grade are
considered better leaders in intermediate favourable situations. On the other hand,
leaders that are task-oriented with low LPC grade are better leaders in very highly
favourable situations or in unfavourable situations.
Exercise 8.3
Transformational leaders will motivate their employees to perform more than
what have been expected by initiating the feelings of importance and value of the
task in each individual. This can be done by creating interest in employees to
perform every matter for the sake of the interest of the group and the organisation,
besides fulfilling their own needs of self-achievement.
Meanwhile, transactional leadership is based on the process of exchange, where

subordinates are given rewards for good achievement and punished for
unsatisfactory achievement.

ANSWERS  249

1. F
2. T
3. F
4. T
5. T

1. C
2. D
3. D
4. D
5. B
TOPIC 9: CONTROLLING
Exercise 9.1
Control is a process to ensure that organisational activities are running according
to the plan. This process can be carried out by comparing the actual performance
with the standard that had been established and taking corrective actions in order
to rectify any distortion that does not comply with the set standard.
Exercise 9.2
Control process consists of three basic methods namely pre-control, which is also
known as prevention control, concurrent or present control, and feedback control.
There are five forms of control that can be used by managers in implementing
control process, namely bureaucratic control, objective control, normative control,
concertive control and self-control.

250  ANSWERS
Exercise 9.3
One of the important areas that need to be controlled is the area of finance. There
are times when financial performance does not meet the standard or is not as
expected. If this condition remains undetected and relevant actions are not taken,
the survival of the company might be in jeopardy.

1. T
2. F
3. T
4. T
5. T

1. B
2. A
3. A
4. C
5. B
TOPIC 10: MANAGING TEAMS

Exercise 10.1
Teamwork is the task performed through a coordinated effort among team
members where team members contribute towards the implementation of the
same objective.
Meanwhile, groupwork is a task performed without coordinated effort.

ANSWERS  251
Exercise 10.2
Team strengths are the ability to increase customer satisfaction, quality of products
and services of the organisation, and job satisfaction.
Meanwhile, team weaknesses are a high level of turnover during the initial stage
of team formation, social loitering and self-restrictive behaviour.
Exercise 10.3
Teams do not need to be formed when the job performed does not involve
combination or coordinated effort among the employees; rewards towards
performance are only based on individual effort and performance; and resources
needed are unavailable.
Exercise 10.4
(a) Self-designed team
(b) Virtual team
Exercise 10.5
The development phases:
(a) Forming;
(b) Storming;
(c) Norming;
(d) Performing;
(e) De-norming;
(f) De-storming; and
(g) De-forming.

252  ANSWERS
Exercise 10.6
1. A small number of team members are necessary in order to avoid the
situations of social loitering and behaviour of self-restriction. Besides that, a
small number of team members will strengthen the interaction among the
members and speed up the process of decision-making.
2. Teamwork consists of a small number of team members with skills that are
complementary to each other, being responsible and had agreed in achieving
the same goals. Teamwork is becoming more popular because it can help the
organisation to react fast and properly towards a certain problem and
challenge, and increase the performance of the organisation compared to the
traditional approach.

1. A
2. A
3. A
4. B
5. B

1. T
2. F
3. T
4. F
5. F
TOPIC 11: INNOVATION AND CHANGE

Exercise 11.1
The life cycle of technology will undergo the phases of birth, increase in
development and maturity before it is substituted by a new technology.

ANSWERS  253
Exercise 11.2
(a) Innovation refers to good ideas that begin with creativity.
(b) Technology is the knowledge, tools, equipment and techniques and
methods used to change input into output.
(c) Creative work environment means workplace culture where employees
believe that new ideas are valued, appreciated and encouraged.
Exercise 11.3
Try to think of the examples and discuss them with your or tutor and coursemates.
Exercise 11.4
There are two types of change in organisations: first order change that is linear in
nature, slow and happens in stages; and second order change that is radical in
nature, multidimensional and multilevel.
Exercise 11.5
Aspects that can be changed by the change agents are:
(a) Organisation structure;
(b) Technology in organisations;
(c) Physical layout in organisation; and
(d) Employees within the organisation.
Exercise 11.6
Negotiation is an approach that fulfils the wants of those who are causing barriers
by granting those rewards in exchange for the cooperation given.
Meanwhile, co-optation is the approach of „buying‰ the leader of group who is a

barrier towards change so that this leader will influence his followers to change
their minds and then cooperating towards the change.
As for force, it is an approach using threat to instil fear to the parties causing
barriers, in order for them to cooperate.

254  ANSWERS
Exercise 11.7
Kurt Lewin proposed a theory related to the management of organisation change.
This theory involves the process of liquidation, change intervention and freezing.
Liquidation refers to getting individuals who are affected by the changes to believe
in the need for the changes. This process tries to liquidate the culture or other
matters that can bring obstruction towards changes. Change intervention means
the processes used towards employees and managers in order to change their
behaviour and work practices (that had been liquidated). Meanwhile, freezing
refers to supporting and strengthening the change that was successfully carried
out in order for it to be prolonged.

1. C
2. B
3. D
4. C
5. C

MODULE FEEDBACK
MAKLUM BALAS MODUL
If you have any comment or feedback, you are welcome to:
1. E-mail your comment or feedback to modulefeedback@oum.edu.my
OR
2. Fill in the Print Module online evaluation form available on myINSPIRE.
Thank you.
Centre for Instructional Design and Technology

(Pusat Reka Bentuk Pengajaran dan Teknologi )
Tel No.: 03-78012140
Fax No.: 03-78875911 / 03-78875966


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Copyright © Open University Malaysia (OUM)

Copyright © Open University Malaysia (OUM)

Module Writers: Shahrol Aman Ahmad

Assoc Prof Dr Santhi Raghavan

Moderator: Prof Dr Wardah Mohamad

Reviewers: Nik Azlina Nik Yaacob

Enhancer: Dr Asokan Vasudevan

Developed by: Centre for Instructional Design and Technology

First Edition, May 2008

Copyright © Open University Malaysia (OUM)

Topic 1 What is Management? 1

Copyright © Open University Malaysia (OUM)

Topic 4 Organisation Design 65

Copyright © Open University Malaysia (OUM)

4.5 Work Design 78

Topic 5 Human Resource Management (HRM) 88

Copyright © Open University Malaysia (OUM)

Topic 6 Communication in Organisations 120

Topic 7 Motivation 137

Topic 8 Leadership 157

Copyright © Open University Malaysia (OUM)

Topic 9 Motivation 176

Topic 10 Managing Teams 192

Copyright © Open University Malaysia (OUM)

Topic 11 Innovation and Change 213

Copyright © Open University Malaysia (OUM)

Copyright © Open University Malaysia (OUM)

COURSE GUIDE DESCRIPTION

Copyright © Open University Malaysia (OUM)

Table 1: Estimation of Time Accumulation of Study Hours

COURSE LEARNING OUTCOMES

Topic 2 discusses planning as one of the most important functions in

Copyright © Open University Malaysia (OUM)

Topic 3 explains decision-making; the process of identifying problems,

Topic 5 focuses on human resource management. This topic discusses human

Topic 6 covers communication, where the basic elements in a communication

Copyright © Open University Malaysia (OUM)

Topic 8 elaborates on leadership. This topic will discuss leadership based on

Topic 11 discusses the importance of innovation and ways to manage innovation.

TEXT ARRANGEMENT GUIDE

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Self-Check: This component of the module is inserted at strategic locations

Activity: Like Self-Check, the Activity component is also placed at various

References: The References section is where a list of relevant and useful

Copyright © Open University Malaysia (OUM)

TAN SRI DR ABDULLAH SANUSI (TSDAS)

Copyright © Open University Malaysia (OUM)

Let us look at the difference between professionals and managers. Doctors,

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1.1 DEFINITION OF MANAGEMENT

Management is the process of overseeing and coordinating resources

What is effectiveness? Effectiveness is the attainment of goals which enables the

On the other hand, what is efficiency? Efficiency is performing a job using

Copyright © Open University Malaysia (OUM)

In contrast, an employee is considered effective but not efficient if he uses an old

Both efficiency and effectiveness cannot be excluded from the definition of

In your words, explain what is management.

1.2 WHO ARE MANAGERS?

Now, what is a manager?

A manager is an individual who is directly responsible for ensuring that tasks

Next, we will look at the functions of management.

1.2.1 Functions of Management