1 Identify and discuss various roles of a Manager with a neat diagram.

Roles of a Manager

(a) Interpersonal roles: Involve a manager working within their team or organization.

(1) Figurehead: Representing the organization in a symbolic and ceremonial way.

The responsibilities of a figurehead include
 Representing the organization: Acts as the public face of the company, representing it at
events and meetings, and giving speeches or presentations.
 Motivating employees.
 Complying with legal and social obligations.
 Participating in community outreach.

(2) Leader: A manager’s leader role is to oversee and manage the performance of their staff.
 Setting goals.
 Motivating staff.
 Monitoring progress.
 Delegating tasks.
 Role Modelling.
 Reviewing decision-making.

(3) Liaison: Manager as a liaison: Make contacts with people outside their area of
responsibility, both inside their organization and outside in the world at large.
 Involves networking;
 Linking people with resources.
(b) Informational Roles: Informational roles involve gathering and sharing information.
(1) Monitor: Manager as a monitor
 Seek out information related to your organization and industry, looking for
relevant changes in the environment.
 Also monitor your team in terms of both their productivity and their well-being.
 Identifies problems and opportunities for growth.
(2) Disseminator: Manager as a Disseminator
 Role of disseminator involves sharing information with others, including
employees, other managers and stakeholders.
 The information can be shared in verbal or written form, and can be passed
on directly or indirectly.
  The manager passes some of his privileged information directly to his
key subordinates who would otherwise have no access to it.
(3) Spokesman: Manager as a spokesman
 As a spokesman, the manager communicates the information/goals of
organization to his staff, and progress of work to his superiors.
 He also conveys information such as goals or policies to external
stakeholders.
 If you work within a large organization, you may need to serve as the
spokesperson of your team and represent it during internal meetings or
events.

(c) Decisional roles: involve making decisions.

(1) Entrepreneur: In this role, manager proactively looks out for innovation to
improve his organization. Managerial responsibilities in entrepreneurship include
leadership, decision-making, organization, communication, negotiation,
monitoring.
(2) Disturbance Handler: In this role, manager must seek solutions for various
unanticipated problems like a strike may loom large, a major customer may go
bankrupt, a supplier may renege on his contract, and so on.
(3) Resource allocator: Distribute resources in a way that maximizes the efficiency
and resourcefulness of an organization. Needs to identify project requirements and
assign resources within the company’s timeline and budget.
(4) Negotiator: Managers participate in negotiations trying to reach their goal.
Negotiating with external parties, internal parties, other departments or team
members.

2 Identify and describe various functions of Management with a neat diagram.

Management process is an operational process, and its functions are sub-processes

in a circular continuous movement.

Management process has six functions.

1. Planning
2. Organising
3. Directing
4. Controlling
5. Innovating and
6. Representing
 Planning – The function that determines in advance what should be done. It is looking ahead and
preparing for the future. It is a process of deciding the business objectives and charting out the
methods of attaining those objectives.

Organizing – Provide everything useful for its functioning: personnel, raw materials, tools,
capital.
Two sections
 Human organization: Carry out the plans successfully. Includes identifying and grouping
work, defining, and delegating responsibility and authority and establishing relationships.
It also includes staffing.
 Material organization: the process of planning and controlling material flows. It includes
planning and procuring materials, supplier evaluation and selection, purchasing,
expenditure, shipping, receipt processes for materials, warehousing and materials
distribution.
Directing – leading, directing, motivating, actuating so on: The manager explains to his people
what they have to do and helps them to do it to the best of their ability.
Three sub-functions
Communication
Leadership
Motivation – Two broad categories – financial and non-financial

Controlling – Performance occurs in conformity with the plans adopted, the instructions issued
and principles established.
Three elements
1. Establishing standards of performance
2. Measuring current performance and comparing it against the established standards
3. Taking action to correct any performance that does not meet those standards.

Innovating – Growing better required than growing bigger. Thus, innovation is an important
function of a manager. Innovation means creating new ideas which may improve a product,
process or practice.

Representing – Manager must represent his organization before various outside groups.
Stake-holders – government officials, labor union, financial institutions, suppliers, customers.
Manager must win the support of stake holders by effectively managing the social impact of his
organization.

Select and describe various steps involved in Planning.

3
STEPS IN PLANNING

(1) Establishing goals/objectives: The first step in planning process is to determine the enterprise
objectives. These are set by upper-level managers after number of objectives has been carefully
considered.The objective set depends on the number of factors like mission of the organization,
abilities of the organization environment of the organization, etc. Defining the objectives of every
department is a very essential one; then only clear-cut direction is available to the individual
departments.

(2) Establishing planning premises: Planning premises are planning assumptions— the
expected environmental factors, information relating to the future such as general economic
conditions, population trends, competitive behavior, Capital and material availability etc.
The planning premises can be classified as below:

a. Internal and External premises: Premises may exist within or outside the enterprise.
Internal premises exist inside the enterprise. The external premises exists outside the
enterprise.
b. Tangible and Intangible premises:
Tangible premises are those which can be quantified.
Eg: Population growth, industry demand, capital and resources invested etc,.
Intangible premises are those which being qualitative in character cannot be measured.
Eg: Political stabilities, sociological factors, attitudes and behavior of the owners etc,.
c. Controllable and non-controllable premises: Some of the planning premises are
controllable and others are non-controllable. Some examples of non-controllable factors are
strikes, wars, natural calamity, legislation etc,. Controllable factors are those which can be
controlled and cannot upset calculation of the organisation regarding plan. The controllable
factors are availability of resources, skill of managers and labor etc.,

(3) Deciding the planning period: Once the long-term objectives and planning premises are
decided, the next task is to decide the period of the plan. Some plans are made for a year and in
others it will be decades. In each case there is some logic in selecting a particular time range for
planning.

(4) Finding alternative courses of action: A particular objective can be achieved through various
actions. For example: An organization’s objective is to grow further which can be achieved in
several ways like expanding in the same field of business or product line, diversifying in other
areas, joining hands with other organization and so on, on which alternatives are identified. With
each category there may be several alternatives.

(5) Evaluating and selecting a course of action: Evaluate the alternatives in the light of the
premises and goals and to select the best course or courses of action. This is done with the help of
quantitative techniques and operations research.

(6) Developing derivative/supportive plans: Once the plan is selected, various plans are derived
so that it supports the main plan. The derivative may be planning for buying equipments, buying
raw material etc. These derivative plans are formulated out of the main plan and therefore, they
support.

(7) Establishing and deploying action plans: Turn the derivative plans into action. Action plan
identifies particular activities necessary and specifies who, what, when and how of each action
item. A draft version of the action plan should be communicated to inform those directly affected
and gain their cooperation.

(8) Measuring and controlling the progress: Monitoring its progress. Managers need to check
the progress of their plans so that remedial action can be taken to make plan work or change
the plan if it is unrealistic. Hence process of controlling is a part of any plan.

i. Give reasons why planning is important.

Without planning, business decisions would become random, adhoc choices.
Five concrete reasons to know why planning is important are as follows
a. To minimize risk and uncertainty.
b. Leads to success.
c. Focusses attention on the organization’s goals.
d. To facilitate control.
 e. Trains Executives.
Make use of a neat diagram to explain the hierarchy of Organizational plans.
4

Vision: At the top of hierarchy is Vision. Vision gives the direction that a business/organization
should pursue in future. Vision describes aspirations, beliefs and values and shapes organization’s
strategy. Vision is an ongoing process and gets reshaped as the organization proceeds. A vision
should be brief, focused, clear and inspirational to an organization’s employees. Vision should be
linked to customers needs and convey a general strategy for achieving the mission.

Mission: Mission establishes the context within which daily operating decisions are made and sets
limits on available strategic operations. It’s an organization’s specialization in some area – service,
product or client. Describes the organization’s scope of business (products and services,, types of
markets, technologies used to provide these products and services, important customer needs or the
expertise that sets the firm apart from others, etc.). Mission also guides the development of
strategies, ruling out a segment that would simple be unprofitable, given organization’s
capabilities.

Objectives: Objectives are goals or aims that the management wishes the organization to achieve.
(Specific Targets). These are end points towards which all business activities like organizing,
staffing, directing and controlling are directed. An organization’s objectives take into account all
stakes and specify a common viewpoint acceptable to all the stakeholders.

Strategies: Strategy is a plan that provides an optimal match between the firm and the environment.
In a competitive situation, it is not enough to build plans logically from goals unless the plans take
into account the environmental opportunities and threats and the organizational strengths and
weaknesses. This is commonly referred to SWOT analysis (strength, weakness, opportunities and
threats). Two important activities involved in strategy formulation are environment appraisal and
corporate appraisal.

Operational plans: These plans act as means of implementing the organization’s strategy. They
provide the details of how strategy will be accomplished.
 Two types: Standing plans and single use plans.
Standing Plans: Designed for situations to justify standard approach. There are four types of
standing plans: Policies, Procedures, Methods and Rules.
Single-use Plans: Developed for single use to achieve a specified end; when that end is achieved,
the plan is dissolved. The major types of these plans are Programmes and Budgets.
 i. Give limitations of Planning.

 Planning is an expensive and time-consuming process.

 Planning sometimes restricts the organization to the most rational and risk-free
opportunities.
 The scope of planning is said to be limited.
 Establishment of advance plans tend to make administration flexible.
 There is the difficulty of formulating accurate premises.
 Planning may sometimes face people’s resistance to it.

5 i. Describe Managerial skills with a suitable diagram.

Robert Katz identifies three types of skills that are essential for a successful management process:
 Conceptual Skills.
 Human or Interpersonal management Skills.
 Technical Skills.

The above diagram shows the managerial skills which are required by managers working at
different levels of management. The top-level managers require more conceptual skills and less
technical skills. The lower-level managers require more technical skills and fewer conceptual
skills. Human relations skills are required equally by all three levels of management. All managers
require above three managerial skills. However, the degree (amount) of these skills required varies
(changes) from levels of management and from an organization to organization.

Conceptual Skills: Conceptual skills enable a manager to use their knowledge or ability for more
abstract thinking (analysis and diagnosis of the different states). As such, they would be in a
position to predict the future of a business or department as a whole. Conceptual skills are vital for
top managers, less critical for mid-level managers and not required for first-level managers. As we
go from the bottom of the managerial hierarchy to the top, the importance of these skills will rise.

 Conceptual skill is the ability to visualize (see) the organization as a whole.

 It includes Analytical, Creative and Initiative skills.
 Ability to think in abstract.
 Assess the environment.
 Analyse the working forces in a situation.
 Good Decision-making.

Human or interpersonal managerial skills: Human or interpersonal management skills facilitate

a manager’s knowledge and ability to work with people. One of the most critical management tasks
 is working with people. Without people, the existence of management and managers becomes
redundant. These skills enable managers to become leaders and motivate employees for better
accomplishments. Additionally, they help them to make more effective use of human potential in
the company. Simply said, they are essential skills for all hierarchical levels in the company.

• Human relations skills are also called Interpersonal skills.

• It is an ability to work with people.
• Conflict Resolution
• Active Listening
• Non verbal communication
• Verbal communication
• It also helps the managers to lead, motivate and develop team spirit.
• All managers have to interact and work with people.

Technical Skills: As the name itself indicates, these skills give the manager knowledge and ability
to use different techniques to achieve what they want to achieve. Technical skills are not related
only to machines, production tools or other equipment, but they are also skills that will be required
to increase sales, design different types of products and services, market the products and services,
etc. Technical skills are most important for first-level managers. When it comes to the top
managers, these skills are not something with a high significance level. Therefore, as we go through
a hierarchy from the bottom to higher levels, technical skills lose their importance.

Technical skill is knowledge and ability in a specialized area of business.

• Person’s knowledge and proficiency in any type of process or technique.
• The low-level managers require more technical skills. This is because they are in
charge of the actual operations.

6 Describe Management as Art, Science and Profession.

Management as Art:
The world of management is truly creative and full of theoretical aspects, easily applicable to real-
world situations.
• Management is an art because it abides by the three basic features of an art.
1. It has theoretical concepts and basic principles.
2. It is based on creativity and practice.
3. Personalised application.

A manager takes care of all the management processes within an organization with the help of
knowledge gained from the study and practice of theoretical concepts and basic principles of
management.
• Efficient management practices, initiatives, innovates on these practices.
• Creativity of a specific manager plays a key role in the application of such principles
in a unique way.
• The style of application of the knowledge by a manager can be completely different
from others. This means a specific manager has his own style of management.
Management as Science:
Management is very systematic and concrete and so we consider management as a science.
The basic features of science are
1. Systematised Body of Knowledge.
2. Principles based on Experimentation.
 3. Universal Validity.

• Management is a systematic subject. It has various theories which are developing with time and
also related to subjects like mathematics, economics etc.
• Various principles and concepts of management are a result of constant experimentation and
observation. Interestingly management deals with human beings and human behaviour and not
completely predictable. Thus, there exists uncertainty.

Management as a Profession:
Management consists of well defined and a systematic body of knowledge similar to other
professions. There are various features that management and profession have in common.
1. Well-defined Body of Knowledge.
2. Restricted Entry.
3. Professional.
4. Ethical Code of Conduct,
5. Service Motive.
• Management consists of well-defined and systematic knowledge, that is imparted
to people aiming to be a manager. This knowledge is developed over time and is
ever changing and increasing. Taught at various institutes, colleges and can also be
acquired through books and journals.
• Management as profession do not have restricted entry. Any person can be called a
manager in an organization regardless of their educational qualifications. But the
possession of educational knowledge from reputed management colleges is an
important aspect and desired quality.
• There is no single association that controls and defines the code of conduct for all
managers. AIMA-Federation – All India Management Association national apex
body of the management profession in India, that regulates the activities of their
manager members. The management section of an organization has well-defined
motives. These vary from organizations to organizations like profit maximization,
service, quality. These motives are dynamic and change fast in favour of service.

7 i. Identify and briefly explain various steps involved in Rational Decision making.

STEPS IN RATIONAL DECISION MAKING

(1) Recognizing the problem: A problem is said to exist;

• When there is deviation from past experience.

• When there is deviation from the plan.
• When competitors outperform.
• When other people bring problems to the manager.
 (2) Deciding priorities among problems: On examination the manager finds out that some of his
problems can be solved best not by him but by his subordinates. All such problems should be
passed on to the subordinates. Some problems may need to be referred upward because they affect
other departments or require information available only at a higher level. Some problems may be
deferred because it may not be the best time to act.

(3) Diagnosing the problem: Every problem should be correctly diagnosed. Symptoms of the
problem that are observed by the manager may sometimes mislead him. A manager should follow
systems approach where he must analyze and thoroughly study all the sub-parts of his organization
which are connected with the sub-part in which the problem seems to be located.

(4) Developing alternative solutions or courses of action: After having diagnosed the problem,
the next step is to develop alternative solutions. If there is only one way of solving a problem, then
no question of decision arises. While developing various alternatives; a manager should always
keep in mind their feasibility. He should have clear recognition of all the limiting factors which
can make the accomplishment of an alternative difficult or impossible. By being creative and
innovative the manager can generate different solutions.
Eg: Non-availability of cash or credit, late delivery of equipment, etc.

(5) Measuring and comparing the consequences of alternative solutions: Once appropriate
alternative solutions have been developed next step is to measure and compare the consequences.
This involves comparison of the quality and acceptability of various solutions. The quality of a
decision must be determined considering both tangible and intangible consequences. As in
diagnosing the problem, here also a manager should follow the systems approach. In situations
where enough information is not available about the quality or acceptability of a solution, it is
advisable to experiment with it on a small scale. This is called pilot-testing.

(6) Converting the decision into effective action: Translate decision into action
Action: A decision is not complete until someone has been assigned responsibility to carry it out.
This requires communication of decisions to the employees. Decision must be communicated in
clear and unambiguous terms. All necessary efforts should be made to secure employees'
acceptance in decision and needs to be informed. Failure to inform everyone who needs to know
of the decision can lead to unfortunate results.

(7) Follow-up: The action should be continuously followed up. The action should be continuously
followed up to ensure whether the decision is achieving its desired purpose and whether the
forecasts and assumptions upon which the decisions were based are still valid. Changing conditions
necessitate new decisions and the process begins again, so that he can modify or alter his decision.

ii. List the types of Decisions

1. Programmed and non-programmed decisions.
2. Major and minor decisions.
3. Routine and strategic decisions.
4. Individual and group decisions.
5. Simple and complex decisions.

8 i. Define Organization and various structures of organization.

Allen defines, organization as the process of identifying and grouping of the work to be performed,
defining and delegating responsibility and authority and establishing relationships for the purpose
of enabling people to work most effectively together in accomplishing their objectives.
All the organizations involve significant amount of conscious planning, coordination or deliberate
structuring.

Span of control, span of supervision, span of authority or span of responsibility: It refers to the
number of people a manager directly manages or it indicates the number of subordinates who report
directly to a manager. It refers to the number of people a manager directly manages or it indicates
the number of subordinates who report directly to a manager.

Span of management is of two types

1. Wider span of management

• Wider span of management leads to “flat” organization.
• Subordinates are more independent.
• Fewer layers in the hierarchy of management.
• The nature of work is repetitive.
• Less direct communication between subordinates and managers.

2. Narrow span of management

Narrow span of management result in “tall” organization structure.
 The manager can supervise each of his subordinates individually.
 Effective communication between the subordinates and their manager.
 Narrow spans lead to many levels in the organization and thus required a larger
number of managers.
9 ii. Identify and explain various principles of organization.

PRINCIPLES OF ORGANISATION

(1)Objectives: The objectives of the enterprise influence the organization structure and hence the
objectives have to be clearly defined. Every part of the organization and organization as a whole
should be geared to the basic objective determined by the enterprise.

(2)Specialization: Effective organization must promote specialization. The activities of the

enterprise should be divided according to functions and assigned to persons according to their
specialization.

(3)Span of control: A manager can directly supervise only a limited number of executives. Hence,
it is necessary to have a proper number of subordinates answerable to a manager.

(4)Exception: This principle requires that organization structure should be so designed that
managers are required to go through the exceptional matters only. All the routine decisions should
be taken by subordinates, where as problems involving unusual matters and policy decision should
be referred to higher levels.

(5) Scalar principle: This is also known as chain of command. There must be clear lines of
authority running from the top to the bottom. Authority is the right to decide, direct and coordinate.
Every subordinate must know who his superior is and to whom policy matters beyond his own
authority must be referred for decision.

(6) Unity of command: Each subordinate should have only one supervisor whose command he has to obey.
Dual subordination must be avoided, for it causes uneasiness, disorder, and indiscipline and undermine of
authority.

(7) Delegation: Proper authority should be delegated at the lower levels of the organization also. The
authority delegated must be equal to responsibility i.e., the manager should have enough authority to
accomplish the task assigned to him.

(8) Responsibility: A superior should be held responsible for the acts of his subordinates. No superior
should be allowed to avoid responsibility by delegating authority to his subordinates.

(9) Authority: The authority is the tool by which a manager is able to accomplish the desired objective.
Hence, the authority of each manager must be clearly defined. The authority and responsibility must be co-
extensive in the organization.

(10) Efficiency: The organization should be able to attain the mission and objectives at the minimum cost.

(11) Simplicity: The organization structure should be as simple as possible with minimum number of levels.
A large number of levels of organization means difficulty of effective communication and coordination.

(12) Flexibility: The organization should be flexible, should be adaptable to changing circumstances. It
should permit expansion and replacement without dislocation and disruption of the basic design. A sound
organization must avoid complicated procedures, red-tape and excessive complication of control so that it
may adapt itself easily and economically to business and technical changes.
(13) Balance: There should be reasonable balance in the size of various departments, between centralization
and decentralization. There must be balance in the formal structure as regards to factors having conflicting
claims.
 (14) Unity of direction: There must be one objective and one plan for a group of activities having the same
objective. Unity of direction facilitates unification and coordination of activities at various levels.

(15) Personal abilities: As organization is a formal group of people there is need for proper selection,
placement and training. Organization structure must ensure optimum use of human resources.

(16) Acceptability: The structure of the organization should be acceptable to people who constitute it.
10 Describe and differentiate Management and Administration

 Administration - Laying down policies and objectives

Administration is a top level function which centers around determination of plans, policies and
objectives of business enterprise.
 Management - Getting work done by others
Management is a lower level function concerned with execution and direction of policies and
operation.
 Types
Administrative management – Top level/upper level management
Operative management – Lower level management
4B i. Organize and explain the steps involved in the Selection process.
Application blank: Filling of the “application blank” by the candidate is the first step in the process of
selection. In this form, the applicant gives relevant personal data such as his qualification, specialisation,
experience, firms in which he has worked, etc. The application blanks are carefully scrutinised by the
company with reference to the specifications prescribed for the jobs to decide the applicants who are to be
called for interview.

Initial interview of the candidate: Those who are selected for interview on the basis of particulars
furnished in the application blank are called for initial interview by the company. This interview is the most
important means of evaluating the poise or appearance of the candidate. It is also used for establishing a
friendly relationship between the candidate and the company and for obtaining additional information or
clarification on the information already on the application blank. The interview must be properly planned
and the interviewers, consisting of specialists in different fields, must make the applicants feel at ease,
discount personal prejudices and note their opinion about the applicants interviewed.

Employment tests: For further assessment of candidate’s nature and abilities, some tests are used in the
selection procedure. Psychologists and other experts have developed certain tests as follows
i. Aptitude test: This test measures the applicant’s capacity to learn the skill required for a job.
It helps in finding out whether a candidate is suitable for a clerical or a mechanical job. His test
helps in assessing before training as to how well the candidate will perform on a job after he is
given the necessary training.
ii. Interest test: This is used to find out the type of work in which the candidate has an interest.
For example, whether a candidate has a liking for a sales job requiring contact with other people
can be assessed by means of this test. An interest test only indicates the interest of a candidate
for a particular job. It does not reveal his ability to do it. Interest tests are generally used for
vocational counselling. Usually, well-prepared questionnaires are used in interest tests.
iii. Intelligence test: This test is used to find out the candidate’s intelligence. By using this test,
the candidate’s mental alertness, reasoning ability, power of understanding, etc. are judged.
Some examples of intelligence tests are: reading and summarizing a paragraph in the allotted
time, writing 10 to 15 words that begin with the same letter in one minute, adding up of some
figures in the allotted time and so on.
 ii. Explain the types of Committees with examples.

Some of the administrative tasks cannot be performed by a single person alone. Such situation may
call for two or more person to perform such tasks. This calls for a committee organisation. “A
committee is a group of persons performing a group task with the object of solving certain problems
for their decision and/or implementation”. Committees help in taking corrective decision,
coordinating the affairs of different departments and meeting communication requirements in the
organization. Set up where new kinds of work and/or unfamiliar problems seem to involve.
Eg: World Heritage Committee, Examination committee, cultural committee.

Classification of Committees
 a. Based on Authority

1)Advisory committee: This committee studies the various aspects of a problem and suggests
courses of action to the management thus reducing its burden. An advisory committee does not
have power to act.
For eg: works committees, sales committees, finance committees.

2)Executive committee: Responsible for overseeing board policies and ensuring good governance
practices. A committee which guards the company policies and procedures. They often educate
and give an insight to the management about the goals of the organisation whenever there is
confusion.

b. Based on Permanance

1) Standing committee: Formed to deal with recurrent organisational problems. Members of

these committees are mostly chosen because of their position or title instead of individual
qualifications and skills.
2) Adhoc task forces: They have a short duration. They are dissolved after the task is over, or
problem is solves. The members are chosen for their skills and experience.
5A Describe and differentiate Maslow’s need hierarchy and Hertzberg’s two factor theory.

Maslow’s need hierarchy

 OR
 Describe the Behavioral approach of Leadership.
5B
Behavioral approach researchers have studied leadership from three points of view
 Motivation

 Authority

2.

3.
 Supervision

ii.Mention the steps in Control Process.

Social responsibilities of Business towards different groups

 Every businessman is at the centre of a network of relationships which consist of those

between him at one end and his workers, employees, consumers, shareholders, other
businesses, community and the government on the other end.
 Towards consumer and the community
 Production of affordable and better-quality goods and services by developing new skills,
innovations and techniques.
 By locating factories and markets at proper places and rationalizing the use of capital and
labour.
 Deciding priorities of production in the country’s interest and conserving natural resources.
 Providing for social audit.
 Honouring contracts and following honest trade policies.
 Making real consumer needs as the criterion for selecting the messages to be given by the
product advertisements.
  Ensuring hygienic disposal of smoke and waste and voluntarily assisting in making the
town environment aesthetically satisfying.
 Achieving better public relations by giving to the community, true, adequate and easily
intelligible information about its working.
 Supporting education, slum clearance and similar other programmes.

 Towards Employees and Workers

 A fair wage/salary to the workers.
 Proper selection, training and promotion of employees without discrimination.
 Social security measures such as Employee Insurance Act, Payment of Gratuiity act,
Pension and good quality of work life.
 Good human relations such as maintaining industrial peace, educating workers to produce
their own leadership and participative management.
 Increase in productivity and efficiency by recognition of merit, by providing opportunities
for creative talent and incentives.
 A businessman should devote his knowledge and ability not only making his worker’s life
more affluent but make it more satisfying and rewarding.

 Towards Shareholders and other Businesses

 Promoting good governance through internal accountability and transparency, the practice
of being open and honest with employees, customers and other stakeholders about a
company’s operations, values and processes.
 Fairness in relations with competitors.
 Competition with rival businessmen should always be fair and healthy, based on the rules
of ethics and fair play rather than on rules of warfare.

 Towards the State

 Shunning active participation in and direct identification with any political party.
 To bring about harmony between the limited enterprise interest and the wider social interest
of the country.
 To prevent oppression or exploitation of the weaker partners in business, such as
employees, minority shareholders, etc.
 To enforce distributive justice, especially to weaker sections of the community.
 To implement rural uplift and secure balanced development of the country.

Social Audit
 A social audit is a systematic study and evaluation of the organization’s social performance
as distinguished from its economic performance.
 It is a way of measuring, understanding, reporting and ultimately improving an
organization’s social and ethical performance.

Social audit is a powerful tool for social accountability, with the scrutiny of the actions of officials
and management sometimes leading to the discovery of administrative and financial irregularities
and corruption

Benefits of Social Audit

 It supplies data for comparison with the organisation’s social policies and standards.
 It develops a sense of social awareness among all employees. (In the process of preparing
reports and responding to evaluations, employees become more aware of the social
implications of their actions).
3. It provides data for comparing the effectiveness of different types of programmes.
 4. It provides data about the cost of social programmes, so that the management can relate this
data to budgets, available resources, company objectives, etc.
5. It provides information for effective response to external groups which make demands on
the organisation.

Limitations of Social Audit

 A social audit is a process audit rather than an audit of results. This means that a social audit
determines only what an organization is doing in social areas and not the amount of social
good that results from these activities.
 They are difficult to measure.
 Their classification under “good” or “bad” is not universally accepted. In other words, the
same social result may be classed as “good” according to one opinion, and as “bad”
according to another.
 Most of them occur outside the organization, making it difficult for the organization to
secure data from these outside sources.
 Even though social results cannot be proved, an audit of what is being done is still
considered desirable, because it shows the amount of effort that a business is making in
area deemed beneficial to society.

How social audits are conducted?

Social audits can be made either by internal experts, outside consultants, or a combination
of the two.

 The internal auditor has the advantage of familiarity with the business, but his judgements
may be influenced by company loyalties.

 An outside consultant has the advantage of an outsider’s view, but he lacks familiarity
with organisational activities, so he may overlook significant data.

 In any case, if audit information is to be released to the public, the outside auditor has
more credibility.

Corporate governance

 The term “corporate governance” is used to denote the extent to which companies run in
an open and honest manner in the best interest of all stake-holders.
 The key elements of good corporate governance are transparency and accountability projected
through a code which incorporates a system of check and balances between all key players, viz.,
board of directors, auditors and stake holders.

Benefits of good corporate governance

 It creates overall market confidence and long-term trust in the company.

 It leads to an increase in company’s share prices.
 It ensures the integrity of company’s financial reports.
 It maximises corporate security by acting as a whistle blower.
 It limits the liability of top management by carefully articulating the decision-making
process.
 It improves strategic thinking at the top by inducting independent directors who bring a
wealth of experience and a host of new ideas.
  The economic competence of a company can be improved through corporate governance.
 Corporate governance also ensures that corporations consider the interests of a wide
range of constituencies and also of the communities within which they function.
 If the execution of good governance fails, heavy losses can result in terms of cost other
than regulatory problems.
 Many organizations that do not give due importance to corporate governance end up
paying a large risk premium while contending for scarce capital in the public markets.
 The confidence of both foreign and domestic investors is maintained and upheld due to
the trustworthiness that comes from good measures of corporate governance.

Business ethics

 Business ethics is the application of moral principles to business problems.

 An action may be legally right but ethically wrong.
 Sexual harassment, discrimination in pay and promotion and the right to privacy are some
other issues relevant to the study of ethics.
 The credibility of a business depends on its high business ethics and integrity.
 The four important factors that affect whether any decision made is ethical or unethical
 Government Legislation: Compliance with regulations and industry standards helps
businesses operate legally and maintain ethical standards.
 Business codes: Business codes influence ethics by providing a formal, written framework
of values, principles, and standards for employee behavior, ensuring consistency in
decision-making and upholding the company's reputation.
 Pressure groups: Pressure groups can encourage companies to support their cause or address
an issue. For example, an animal rights group might pressure a clothing company to stop
using animal products.
 Personal values of the manager himself.
 New approaches trying to make managers inspiring decision-makers, with a sense of
morality.