Centralization and De-Centralization Concepts CENTRALIZATION: The term “centralization” has several meanings: Centralization of Performance: Say, if the operations of a company is restricted to a single geographical location, it characterizes centralization of performance. Departmental Centralization: Specialized activities are carried out by a single department, say, maintenance of a whole plant, staff recruitment by HR department etc., Centralization as an aspect of management: This implies restricted delegation and exclusivity of decision-making by the top management. According to Allen, “Centralization is the systematic and consistent reservation of authority at central point in an organization.” According to Weihrich and Koontz, “Centralization (as an aspect of management) is the tendency to restrict delegation of decision-making. What are the special circumstances that force the managers to reserve authority and centralize decision making powers? 1.       To facilitate personal leadership 2.       To provide for integration 3.       To handle emergencies 4.       To utilize resources effectively and instantaneously. DECENTRALISATION: It is the tendency to disperse decision making authority in a structured and organized manner. It can be viewed as a philosophy rather than a principle where-in “discretion” plays a major role in deciding which decisions to push down into the organization structure and which to hold near the top. Capital expenditure, Investment analysis and major policy decisions have to be dealt with, by the top management. It is the systematic effort to delegate to the lowest levels of authority except that which can be exercised at central points. TYPES OF DECENTRALIZATION: Three approaches to the concept are: 1.       PROFIT CENTRES 2.       COST EXPENSE CENTRES 3.       INVESTMENT CENTRES Profit Centre: Here the organization is split into divisions on a “product basis” and is given full authority to handle its own scheduled operations, right from placing orders to negotiating the sale of its finished products. Cost Expense Centre: Whenever it is easy to determine the cost of operations, cost centres are established. Cost centres run on “budgets” which acts as a control tool to run the units within the specified budgetary limits. Investment Centre: Useful in the case of big multi-product enterprises where product performance is measured by decentralizing the investment aspect. Each strategic business unit is responsible for the acquisition, use and disposition of fixed resources. Advantages of Decentralization: Managers and executives are relieved form excessive work pressure Even low level employees are involved in decision making thus bringing the decision making process closer to the scene of action. It facilitates product-diversification Creates an opportunity for learning Ensures effective control When a big organization is divided into relatively smaller units, it becomes flexible and also effects close control. Disadvantages of Decentralization:  ·         Conflict arises between people belonging to different levels of the organization ·         Rising cost ·         Lack of co-ordination between production and marketing departments ·         No defined leadership Contingency Factors in Decentralizing: 1.       Organizational goals 2.       Organizational size 3.       Geographical dispersion 4.       Technical complexity of tasks 5.       Time frame of discussions and decisions 6.       Subordinates’ take on issues 7.       Planning and control procedures 8.       Environmental factors 9.       Knowledge and experience of managers Effective Decentralization can be accomplished by ·         Establishing appropriate centralization ·         Developing efficient managers ·         Proper provision for communication and co-ordination ·         Establishing adequate controls Top management must be willing to delegate authority towards decision making; Middle management must be willing to accept responsibility that is being delegated. Only then effective decentralization is...

The Spirit of Entrepreneurship In the modern competitive business environment, not all graduates of various disciplines like engineering, management and the like can aspire for white collar jobs. The recent global recession has made the prospective job seekers think twice about working in foreign countries. Self employment has become the order of the day. Being your own boss is truly inspiring and motivating at least in theory. When it comes to reality, we need to know exactly what does it take to become an entrepreneur by starting a small business or taking over the business run by your predecessors. Why we need more entrepreneurs? Various avenues have been opened up thanks to communication and transportation that has brought the world under a single huge umbrella. Also small industries face minimum risk as the investments are marginal and they have the liberty to try a number of innovations like combination of new products new materials new methods of production new markets new sources of materials and even New forms of organization. Being a competitor in an open market, minimum profit and constant revenue inflow are assured and also they can enjoy the benefit of minimum fluctuation in the product price as it is determined by the market and not by individuals. Want to know 10 Daily Habits of Most Successful Entrepreneurs? Scope of entrepreneurial activity: Either you can be a subsidiary to large scale business or you can engage yourself in supply of repair services with small engineering establishments or you can go for small cottage industry businesses like cutlery, furniture, jewelry, fruit canning, soap making etc., Being fairly labor intensive, you can provide economic solution by creating employment and income opportunities in urban and rural areas with relatively low cost of capital investment. Business process outsourcing has been in recent times the magic happening in countries like India, China etc., where the foreign investors take advantage of cheap labor, time and efficient communication skills of the population. Knowledge process outsourcing has also become popular and it stands as a testimony of the rising power of Asian countries over the west. “Small is beautiful” and you can make it big in the small scale business industry if you are Innovative and productive Provide personalized services to the customers Identify and target the right markets This ensures “WINNING THE GAME OF BUSINESS“. An economy grows only when it has large number of enterprises accelerating the economic growth prospects of that particular country. The export policies of all nations have become more flexible owing to globalization, liberalization and...

Definitions of Human Resource Management:  1. “A series of integrated decisions that govern employer-employee relations. Their quality contributes to the ability of organisations and employees to achieve their objectives.” (Milkovich & Boudreau, 1997). 2. “Concerned with the people dimension to management. Since every organisation comprises people, acquiring their services, developing their skills, motivating them to higher levels of performance and ensuring that they continue at the same level of commitment to the organisation are essential to achieving organisational goal. This is true, regardless of the type of organisation: viz. government, business, education, health, recreation, or social action.” (Decenzo & Robbins, 1989). 3.”The planning, organising directing and controlling of the procurement, development, compensation, integration, and maintenance of human resource to the end those individual, organisational, and social objectives are accomplished.” (Flippo, 1984). 4. “The organisation function that focuses on the effective management, direction, and utilisation of people; both the people who manage produce and market and sell the products and services of an organisation and those who support organisational activities. It deals with the human element in the organisation, people as individuals and groups, their recruitment, selection, assignment, motivation, empowerment, compensation, utilisation, services, training, development, promotion, termination and retirement.”(Tracey,1994 ) Knowledge Workers Human resource management is therefore understood as the all significant art and science of managing people in an organisation. Increasing research output in behavioral sciences, new trends in managing ‘knowledge workers’ and advances in training methodology and practices have led to substantial expansion of the scope of human resource management function in recent years. HRM is not just an arena of personnel administration anymore but rather a central and pervasive general management function involving specialised staff as assistants to main line managers. Managing employee relationships is the role of the Human Resource department Human Resource Management is a process of valuing and developing people at work, this includes: Recruitment and selection Employee communication and engagement (participation) to increase employee retention Training and development  Leadership WHAT IS YOUR GREATEST WEAKNESS Labour turnover & staff retention Labour turnover refers to the proportion of a workforce that leave during a period of time (usually one year) Labour turnover =  number of staff leaving during the period x 100 average number of staff Staff retention refers to the ability of a firm to keep its workers. The disadvantages of having a large proportion of staff leaving each year include: The cost of recruiting replacement workers The cost of training the new workers  Loss of productivity whilst replacements are found  Loss of experienced workers  Negative impact on reputation WHAT IS YOUR GREATEST STRENGTH Methods to control turnover: 1. Financial methods of motivation Bonuses Profit share Fringe benefits 2. Non financial methods of motivation Employee engagement and empowerment Training and development Promotion opportunities 3. Improved Human Resource Management procedures  Four Fundamental Principles of HRM: Human Resource is the organisation’s most important asset; Personnel policies should be directed towards achievement of ENTERPRISE goals and strategic plans; Corporate culture exerts a major influence on achievement of excellence and must therefore be    strengthened with consideration of employee welfare. Whilst integration of corporate resources is an important aim of HRM, it must also be recognised that all organisations are ‘pluralist societies’ in which people have differing interests and concerns, which they defend and at the same time function collectively as a cohesive group. →Evolution of...

Factors of External Environment of Business What do you mean by Business Environment: The sum total of all things external to firms and industries that affect the functioning of the organization is called Business Environment. Elements of Business Environment 1.       ECONOMIC 2.       SOCIAL 3.       CULTURAL 4.       POLITICAL 5.       LEGAL 6.       TECHNOLOGICAL 7.       DEMOGRAPHIC 8.       GEOGRAPHICAL 9.       ECOLOGICAL 1. Economic Environment This refers to all economic factors that influence and affects the very survival of an organization. Can be classified into ·         Economic factors affecting demand ·         Competitive forces Economic factors affecting demand The existence of an organization depends on the demand for its products or services. The customers’ ability to buy and willingness to pay determine the demand factor. The buying power is determined again by ·         Employment ·         Income taxes ·         Saving and ·         Prices The money acquired by an individual through employment is utilized for paying taxes which is the first priority and then comes saving or spending. In developing countries like India, much importance is attached to the habit of saving in the form of insurance policies or mutual fund deposits or investment on immovable assets. This makes the economy strong and stable even during times of recession, whereas we witness the economy of some developed countries entirely shaken when there is an economic depression. Sub Prime Lending Sub prime lending may prove to be disastrous for a growing or grown nation when the money is lent by the banks to third parties without proper securities or collaterals. While the initiative is intended to increase the growth rate or GDP, the end result may not live up to the expectations when the money is parted to individuals or firms with poor financial credentials. Disposable Income Disposable income also decreases when the tax rate increases and his/her ability to buy is reduced. Equally important is the willingness to by because the fact that an individual has the ability does not mean that he or she will buy. Willingness is affected by the preferences for products and the expectation about future factors like the price fluctuation, increase in one’s own income, general economic trend and so on. Competitive forces Firms have to first survive in order to succeed in the market. To accomplish this they exert competitive force on each other through one or the other following methods. ·         Price cutting ·         Promotion-advertising, personal selling ·         Design, feature and packing ·         Number and type of customer services offered give a cutting edge to firms competing in the race. 2. Social and Cultural Environment The social environment depends upon the ·         The class structure ·         Mobility ·         Nature of the social organization and ·         Development of social institutions People always have the unending desire to move from one occupational category to another and this is the main reason for high job turn over in IT industries for various reasons like pay, promotions, job satisfaction etc., This is the same reason which can be attributed to the failure of many good projects that go underway due to lack of continuation of the same initiative with which it was started. The above said process is more prevalent in urban societies than rural where scope of mobility is much the less among farmers, artisans and those engaged in traditional crafts and cottage industries. 3. Political Environment A smart manager has to be on tenter hooks to gauge the trends in political scenario that directly or indirectly affect the functioning of the firm. The political weather is highly unpredictable and may be classified into ·         Long-term changes ·         Quick changes ·         Cyclical changes ·         Regional changes Now-a-days we see that the economic depression in...

Significance of Privatization Privatization that has gathered momentum since around the 1980’s has become the hallmark of the new wave of economic reforms sweeping across the world. It refers to the transfer of ownership or management of an enterprise from the hands of the public sector to private sector. It also means the withdrawal of the state from an industry or sector, partially or fully. Privatization marks a change from dogmatism to pragmatism and amounts to a reversal of policy. It is evident that the economic growth rate has multiplied ever since privatization has come into existence. What is Privatization? 1. The transfer of ownership of property or businesses from a government to a privately owned entity. 2. The transition from a publicly traded and owned company to a company which is privately owned and no longer trades publicly on a stock exchange. Performance of Public Sector: The performance of state owned enterprises in many countries have, by and large been far from satisfactory. This may be attributed to the prevalence of bureaucracy and red tapism in most of the public sector administration. They have often put large burdens on public budgets and external debt. Economic inefficiencies in the production activities with high costs of production, inability to innovate and costly delays in delivery of the goods produced are some of the shortcomings of the public sector. There is also ineffectiveness in the provision of goods and services such as failure to meet intended objectives, diversion of benefits to elite groups, and political interference in the management of enterprises. The relationship between the management and the labor unions is strained owing to the expansion of bureaucracy. Why Privatization? These problems have led many governments to undertake programmes of public sector reform. One Such reform is privatization of publicly managed activities to discard the inefficiencies and improve the economic growth rate. For privatization to succeed: Privatization cannot be sustained unless the political leadership is committed to and unless it reflects a shift in the preferences of the public arising out of dissatisfaction with the performance of other alternatives. Now-a-days, private sector enterprises have started dominating even core industries like petroleum, power and communication under the leadership of visionaries who may be the heads of the states or owners of such private organizations. Public services to be provided by the private sector must be specific or have a measurable outcome. Consumers should be able to link the benefits they receive from a service to the costs they pay for it. Since they will then shop more wisely for different services. Privately provided services should be less susceptible to fraud than government services if they are to be effective. Equity is an important consideration. Privatizing the state owned enterprises reduces corruption and the benefit goes to the society. The process encourages entrepreneurship and leads to intense development of capital market. Governments usually want to sell the least profitable enterprises, those that the private sector is not willing to buy at a price acceptable to the Government. The Government may even fear that if it gives a free rein to the private sector management, its power might be at stakes. All said and done most of the governments view privatization as an important strategy of economic...