The Data Institute Acquisition Manual

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Volume 12

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Corporate Development
Product Management
Overseas Development
Product Distribution & Service
Advertising + P.R.
New Technology Primers
Physical Process & Orders
Competition Analysis
Product Perceptions
Customer Perceptions
Data Grids
World MDB
Research MDB
Product MDB
Corporate MDB
Reference MDB



Administration & Customer Handling

One of the primary mistakes made by companies is the lack of thought and investment put into the administration and processing of orders and the handling of customers. The significance of a stable and repeat customer base is pertinent for the Company.

Repeat sales are extremely cost-effective and yet companies fail to properly train and supervise all the staff which interface with the customer. This section analyses the efficacy of the repeat sales and business at the Company and their relative performance with their competitors.

Design of operating procedures and systems which control and guide company staff is discussed in this part of the Acquisition Manual.

Every contact between the Customer and the Company is surveyed in order to identify problems needing to be solved as well as opportunities likely to be exploited.

Reductions in the costs and expenses of administration and customer processing at the Company, as demonstrated in this section, can lead to almost immediate contributions to profitability and productivity.



Administration & Customer Handling:





Every manager within the industry, from the chief executive to the front-line supervisor, can profit from the body of background management knowledge so far developed within each company. The top man can increase his company's chances of success. For the middle manager, management know-how will make the job easier, and will very likely increase his chances of promotion.

Greater management understanding of the company's administration and customer handling will:


Lead to better performance by enabling the manager to increase the output and quality of the work group.


Help the manager better understand the objectives and functions of the company as a whole and the thinking of his superiors. As a result he will be more able to "talk the language" of higher managers, and gain a better hearing for his recommendations and suggestions.


Promote a better understanding of the way in which the manager's group fits in with other groups, make him a more effective team worker, and one whom other managers will respect and like to work with.

Management is not an exact science like physics or chemistry. Although many things have been discovered about this, it is essential that the manager use judgment, based on good sense and experience. This is not a bad thing. For if he could manage by merely following a set of rules, the administration job would be far less interesting than it is.

But what, exactly, is administration? Are there certain functions that all managers perform regardless of whether they're company directors, managers of departments, or supervisors of sections of departments?

If we watch managers at work, we might conclude that their jobs differ so widely in content and scope that no generalizations about administration are possible.

One reason for this is that many managers, even top managers, do work that is not administration at all. A simple example is the sales manager who actually sells and perhaps has a set of customers of his own, in addition to managing the salesforce. Again, the supervisor of a research group may actually perform some of the research himself. Then there's the "working foreman" or headman who works right along with the group he is supervising. In these cases the managers are actually spending only part of their time on administration itself.

A second reason why it may be difficult to identify the functions common to all managers is that the scope of their activities differs so widely. In some cases the way in which a manager carries out his functions affects an entire company; in other cases only a small part of it.

Yet if we look closely at managers at work, we can see that fundamentally they are all performing, or should be performing, the same functions during the time they are actually managing rather than doing work similar to that done by those under them.




1. Planning

The basic administration function is planning, which begins with setting objectives and includes specifying the steps needed to reach them. At the top, of course, the objectives are those of the whole business, but top managers must set administration objectives for each segment of the company.

Naturally, the fundamental objective of any business is to make a profit and to increase it; but it is necessary to be much more specific. Each company must decide just how, in view of the resources and talents available, it can best carve out its own profit-making niche in the market

For example, some companies plan to attract customers by selling high-quality products at premium prices for a selected group of customers. Others aim to serve a clientele that's primarily drawn to low prices. Either may be a good aim, depending on the company's context, but motives of this kind must be reexamined often because circumstances change and one's target market may be shrinking.

Objectives and plans are both long-range and short-range. Short-range plans cover the next three years. The former are quite definite, and the latter are tentative except in cases where definite commitments must be made long in advance.

Objectives embody definite rates of profit, which are based on what is considered feasible in the light of forecasts of the state of the market, the position of the industry, and the company's position as compared to those of its competitors.

Increasingly, also, companies are taking an even more fundamental view of objectives by asking themselves: What business are we really in? In other words… what do our customers pay us for?

Companies hope to increase their profits each year; hence their plans will include means for doing so. For example, they may strive to increase their market share by more sales effort, the adoption of new products, or improved product performance.

Revenues and costs must be matched against the plans to ensure a sober prospect that events will work out as expected. A sales forecast is crucial here in that revenues come from sales, which will be forecast in light of economic climate, industry sales, and one's present or expected market share.

The planning process will often reveal that if the company continues its past practices, there is likely to be a gap between goals and results.

In that event the planners must develop a strategy for filling in the gap through new products, new methods of selling, new markets, or cost reductions. Often, line managers are asked to contribute to the setting of objectives and the formulation of plans. Regional managers may forecast the sales in their areas each year and suggest plans for increasing them. Yet, every manager must set objectives and plan how to reach them.

The manager far down the line may believe that his objectives come down from above and that he cannot change them; and this is true when objectives are formally stated to him by higher authority, in his job description or other directives.

Yet just as a company must ask itself what its customers really want from it, so the subordinate manager must ask what the company really wants from him, what he is actually being paid for, how many subordinate managers actually do this?

2. Organization

Organization includes dividing the work into tasks that can be handled by one person, and supply means of coordination. The principal functions that must be carried out if the plans are to become reality must be described and arrangements must be made to prevent the work of two people from overlapping and to ensure that various units are not working at cross-purposes.

The broad outlines of the organization are generally established at the top, but each line manager must organize his own group in such a way that there is no duplication or wasted effort. In addition he must ensure coordination within his own group and endeavor to coordinate his efforts with those of other groups.

This last aspect is becoming particularly important as companies become more complex. The formal arrangements set up by top management (committees, coordinating groups, and special coordinators), are often inadequate for the policing of every small transaction that may affect another department or group. Hence it is up to the manager of each to make some effort to coordinate the work of his section or department with that of others.

The manager should take pains to learn what is known as the "informal organization" within his own department or group, and in groups whose work is related to his own. The informal organization (which really consists of a network of friendships, alliances, communication channels, and spheres of influence), not provided for in the formal organization charts. It is sometimes bad for the company in that it may result in a tacit agreement among a group of workers to hold down output. But it also may be good in that it could provide a type of horizontal coordination not supplied by the formal organization. The manager must be able to recognize the manifestations of the informal organization and know how to encourage the good results it creates and deter the bad ones.

3. Staffing

Once the functions to be performed have been decided, it is necessary to fill the positions with the most qualified people available. This is a continuing task since some people will be leaving, retiring, getting promoted, et cetera. The purpose, of course, is to have round pegs in round holes as this would solve many of the manager's headaches. Alas this is difficult to do, chiefly when there is a dearth of certain skills or when competitors are paying more. Then the manager may have to take people who seem to him the best of a poor group of candidates.

If so, he must supplement the abilities of his people by training, and this means that he must never become too preoccupied to observe their performance and to judge where they are deficient. Too often training courses are prescribed for whole groups when only some need them, while others would profit from entirely different types of training.

4. Direction

Direction is one of the most important parts of the manager's job, that is, telling people what to do and seeing that they do it to the best of their ability. Since the manager must work through other people, he may stand or fall by his ability to get them to produce the needed results.

Because of its importance, some define administration itself as "the direction of people". But this is only a half-truth. It is essential for the manager to lead his staff well, but it is equally vital to lead them towards the right goals by the right route. If the manager has not planned well, he may have a happy, hardworking group that is efficiently proceeding towards the wrong objective. If he has not organized well, they may be working efficiently on their own tasks, but a good part of their effort may be counteracted by the efforts of others. If he has not staffed or trained well, they may be incapable of producing the results that his company is seeking.

5. Control

Control often suggests the idea of command or direction, and whilst this is one of its dictionary meanings, as applied to administration, however, it means checking on progress to determine whether plans are being fulfilled. If performance is falling short of what is necessary to fulfill the goals, the manager must take steps to correct the difficulties.

Many of the controls available to administration are financial in nature. A simple example is the budget, which is also a tool of the planner, for a budget is a plan to spend certain monies to accomplish certain ends. If actual expenditures over-run the budget, it is an indication that performance is deviating from plans; perhaps justifiably. Similarly, an under-run may indicate that managers have been able to attain fine performances and produce results for less money; or it may mean that some of the things that should have been done have not been done, again, justifiably or not. If the budget is broken down finely enough, it is relatively easy for a superior, or the manager who is responsible for the budget, to determine what has happened and if some special action is needed.

Not all controls are financial. To quote a few, controls are needed for quality, for production, for ensuring that deadlines will be met, for sales (like a budget, the ‘sales quota’ is both a plan and a control). It is even possible to develop controls for such things as training; for example, one might compare the performance of a group that had been given a certain type of training with that of an untrained group doing the same type of work. In that way, one could judge whether the training course is worthwhile, or whether it needs modification, or if should be discarded.

6. Innovation

Many theories on administration confine discussion of the administration job to the phases listed. Previously it was felt that the manager's job was mainly to ensure that things went along evenly, without intramural fights or disruptions. Years ago, Fortune magazine, surveyed 150 personnel men and 150 company CEOs asking whether they believed business most needed adaptable administrators, "concerned primarily with human relations and making the firm a smooth working team", or men with new ideas and strong personal convictions "not shy about making unorthodox decisions that will unsettle tested procedures, and his colleagues". 50% of the CEOs and 70% personnel men voted for the administrator as opposed to the innovator.

But the viewpoint has changed in many firms as competition has become keener, including that from abroad. One Wall Street Journal survey found a decided swing in favor of the innovator.

In the late eighteenth century and almost to the end of the nineteenth century, British managers were the greatest innovators in the world. They got in on the ground floor of the Industrial Revolution, and by their willingness to try to promote new inventions and new ways of doing things made their country the most prosperous in the world. But many think that they clung too long to the original ways of doing things, to the industries in which they led, production of coal and iron and steel products, all now dead industries. Alas, today less that 15% of British business is concerned with manufacturing and one is reminded of G. K. Galbraith’s comments on Margaret Thatcher’s Monetarists: To paraphrase, ‘no society can survive on just selling things to each other; people must make things and there must be some wealth creation through tangible means’.

No country and no company can expect to stay on top, or near the top, if it continues doing things in the same old way simply because that way has brought success in the past, and innovation is not a job for the research department alone. Innovations must be developed by every manager who wants to be worthy of the name. A new product or an entirely new production process or piece of equipment is more dramatic than the introduction of a new procedure or a new form of financial control, but the latter may often be of more benefit to a company. Innovation however does not consist of imaginative ways of creating fictitious paper profits, or incomprehensible management accounts, or fraudulent accounting, as practiced at Enron and the administration of many other shoddy companies.

Innovation may consist of replacing one way of doing things with another, or it may simply mean discarding old procedures that are no longer needed. But whatever form it takes, the drive towards innovation must be continuous. For a company cannot stay in the same place; it must move forward or go back. This is also true of a department.

7. Representation

In addition to all these functions, the manager must represent his company to the outside world. This has always been a part of the administration job, although most administrators do not list it as one of the major administration functions. There are many managers who still regard it as a peripheral activity, or believe that they can delegate it to a public relations or public affairs department.

Actually, the manager cannot escape the job of representation; and today, he must represent his company to more groups than ever before. These groups include the financial community, the general public, the local community, labor unions, industry associations, and innumerable governmental bodies.

Not all managers have contacts with all these groups, but they usually have contacts with some, although on different levels.

8. Communication

Communication is shown encircling all the administration functions, since none of them can be performed without it. Plans or innovations cannot be carried out until they are explained to those who will be implementing them. The organization structure is designed to set up "channels of communication", through which information is passed downward and upward. Organization is sometimes described as "a system of communication". In staffing, the manager must explain the job, the skills needed, and the benefits provided to candidates. The training phase of staffing is almost entirely a matter of communication. Direction and representation, too, are exercised largely through communications, and control systems are truly systems of communication.

9. Learning for Results

There were good managers, of course, long before anyone ever studied administration. But not everyone can be a genius, and the demand for good managers far exceeds the supply of geniuses. Moreover, many of the genius managers of the past in business, government, the military, and other fields, were deficient in one or more of the administration skills and were probably less successful than they might have been had they not proceeded by trial and error.

Until recently, not a great deal was known about the administration systems and controls. Lately a great deal of research, experimentation, and thought has been devoted to the subject. In addition, the computer (and the ability to data mine the company’s databases) has given rise to entirely new possibilities. In short, there are a large number of findings that will help any manager, whatever his native ability, to become more competent.

One of the fruits of the study of administration has been the breakdown of the administration job into the several functions. In itself, of course, this does not tell the manager much about how he can handle his job, but it has the great advantage of making it easier for him to grasp the basics of his job and to control it in a systematic way.

Fortunately, there is much more that the manager can learn in addition to the techniques of his own job and his own industry. The field of administration has drawn on sociology, psychology, economics, and other disciplines, and it is in these areas that the manager can learn from study as well as from experience and trial and error. He still needs plenty of intelligence, common sense, and business judgment (and even the inspired hunch may still have a place), but a knowledge of what others have learned about the various aspects of administration will help him use his native abilities more effectively. It may even help him determine whether his hunches are inspirations or exercises in wishful thinking.

Target Company
Base Reference

Planning Performance

Organizational Ability

Direction & Delegation

Control & Communication


Performance Grid Definitions



The human aspect of the manager's job begins with staffing; selecting people for the various jobs to be done. Of course, he will try to get the person best fitted for each job, but often the fit cannot be exact; and for this reason, proper training and direction can do much to improve its exactness.



What techniques are available to improve the hiring process?

Well, there is the interview, the examination of the past work record, the reference check, and psychological tests; a great variety of them, with more being produced every day. Occasionally, in some jobs, it is possible to give the candidate an actual trial period.

In many cases these methods are used in combination and they can contribute to better selection if used wisely.

It is important that managers understand, and perhaps better than many of them do at present, just what psychological tests can do to help them to better selection, and just what they cannot do. Too many managers take the easy way out by relying too heavily on tests. In fact, one large company abolished psychological testing entirely because subordinate managers often hired people solely on the basis of the test results. That was, of course, simply a way of ducking a decision that every manager should be willing to make.

How does one judge the value of a test?

There are two measures:

       1. validity, and

       2. reliability.

If a test is valid, it measures what it is supposed to measure; and if it is reliable, the same person will make the same score each time he takes it, even after an interval of several years. No test is perfectly valid and reliable, but some do improve the batting average in selection considerably.

Tests are of various kinds:

  • There are intelligence tests, which measure with fair accuracy the extent to which a person is capable of understanding and learning, although they do not tell us to what extent he will apply his intelligence to the job. In some cases people who make high scores even seem singularly lacking in common sense and judgment.

  • There are aptitude tests, such as tests for mechanical aptitude or finger dexterity, which give an indication of the skills a person may find easy to acquire; and there are trade tests that indicate the extent to which a candidate is experienced in a skilled trade.

  • In the case of administration candidates, there are tests like the "in-basket" test, in which participants are given a series of letters and memos, such as a manager might find in his in-basket, and are asked to indicate what action they would take in each case. This is, in effect, a test of judgment.

  • Finally, there are personality tests, which are more controversial since they are much harder to devise than the other types. This is not surprising, because the personality an individual exhibits on the job is likely to be determined in part by the situation in which he finds himself. Although a person cannot fake the answers to the other tests, it is quite possible to guess the "right" answers with many of the personality tests and to adjust his responses accordingly – even where a battery of cross-referencing tests is administered.

Moreover, the way a person uses his intelligence and aptitudes depends in part on his personality as it develops in the job situation. Thus tests cannot be depended upon to do the manager's selection job for him.

The interview is really the crucial part of the selection process, and it is here that the manager can make the greatest contribution to better staffing. Some companies provide interview blanks, which list the questions the interviewer should ask candidates. If this is not the case, it might be as well for the manager to jot down in advance the facts he considers important, albeit some managers find that they have allowed the candidate to interview them rather than vice versa, or perhaps they have talked too much themselves and did not let the poor applicant get a word in.

Probably the best way for the manager to improve his score in staffing, whichever methods he uses, is to determine what the job requires in a realistic way. It would be nice if all jobs could be filled with perfect people, but the real question is not how a candidate stacks up as a human being, not whether one would want him for a bosom friend, but "Does he have what it takes?" Of course, what it takes differs for different jobs. For some jobs the proverbial strong back and weak mind are sufficient. For other positions there are other qualifications, and often the man who possesses them is quite deficient in many of the qualities one admires. Many of the most successful salesmen, for example, are money-hungry to an extraordinary extent, and their ability to sell is really the result of a neurotic drive.

Last but not least, there is the handwriting test, this is a process whereby companies hand over their destiny to a demented soul, called a handwriting expert, who claims to be able to decide on the curl of an 's' or the dot on an 'i' if the candidate is capable of doing a particular job. Clearly any candidate for a job would tend to steer away from a potential employer who used such an absurd theory of selection. For those companies inclined to use this process, it must be said that a cheaper and easier process is to slaughter a chicken and look at its entrails. Not surprisingly there is substantial research that shows that companies engaged in the use of handwriting test, and to a lesser extent, personality profile tests, tend to have a lower profitability and return on investment.



One of the simplest types of training, and a very valid method for training in certain types of tasks, is the old Job Instructor Training developed during World War II when industry was forced to train thousands of inexperienced people, many of whom had never seen the inside of a plant or office.

Role-playing is another technique, useful where the employee is being trained not in performing a specific task but in handling face-to-face contacts. For example, the sales manager may take the part of a prospect and have the salesman rehearse an interview with a customer. Similarly, two supervisors or a supervisor and an instructor may act out a scene, often based on an actual case in which a supervisor must correct an employee. In both instances the role-playing is generally carried out before a group, whose members later offer suggestions for improving the performance. This method of training has the advantage of permitting the salesman or the supervisor to practice face-to-face dealing in a situation in which mistakes carry no penalties in the form of lost sales or disgruntled employees.

Other types of training include group discussions, lectures and special courses at nearby schools or universities; all of which may be used for either managers or employees.

In the case of managers, the company may use job rotation, that is, the manager may spend a few months working in each of several departments to gain a better overall view of the company. Special assignments are another possibility in administration development. So too, is a term as assistant to a member of top management.

Two comparatively new training techniques are now available: programmed learning and sensitivity training. The first is designed primarily to teach skills and the second to improve human relations.

In programmed learning, which may be used either with or without a teaching machine, the learner is presented with a series of "frames", each of which presents a very small bit of information, and he does not go on to the second frame until he has mastered the first as is shown by answering all the questions correctly.

There are two types of programmes: "linear" and "branching". In the linear technique, Frame A presents a piece of information, Frame B reinforces Frame A, and adds something new; Frame C reinforces B, and adds a new piece of information, and so on. In the branching technique, multiple-choice questions are often used, and the student's likely misconceptions are anticipated. Then, if he picked wrong answer "a", he is asked to turn to pages that explain exactly why this is wrong. If he chose wrong answer "b", he is directed to other pages that clear up other kinds of misunderstanding.

The great advantages of the programmed learning technique are, first, that it presents the information so gradually that the student finds it easy to absorb and is encouraged by the progress he makes; and second, that he can learn without an instructor, and proceed at his own pace.

Managers find this technique useful in teaching skills to employees, and may also find it valuable in learning new things themselves.

Sensitivity training or "laboratory education", as it is sometimes called, is a form of human relations training conducted for groups of managers. In effect, although there is a leader, the meetings are unplanned and members are encouraged to speak their minds freely to each other, often in a way that results in hurt feelings. The aim of this type of training is to make managers more sensitive to others and to their own effect on others, and many managers claim that it produces excellent results.

Before prescribing such a seminar for his subordinates, or taking part in one himself, the manager should understand that it is a controversial technique, and some experts believe it does more harm than good.

Target Company
Base Reference

Recruitment Methods

Selection Methods

Initial Training

Specialist Training Programmes

Continuous Training Programmes

Performance Grid Definitions


Assuming the operation has been adequately staffed and the employees have been trained to the point where they are quite capable of doing a good job, the manager's work as an administrator of people is really just the beginning. The fact that his subordinates can do the work well does not mean that they necessarily will. Both the quality and the quantity of their work may fall short of what they potentially could produce. Only if they are motivated to do their best will they turn in the best performance possible for them.

People may, of course, be motivated by fear; fear of losing their jobs or of not getting a merit increase, or simply fear of a bawling out, or yet a nasty look from their boss. But fear is not a very good motivator since it is impossible for the boss to police every action, and the person who is motivated by fear alone will often find many ways of skimping on his work that will not be apparent to the boss. This is true even in times of business recession, when fear of job loss is acute, and much truer in times of prosperity when other jobs are available.

Thus a manager can achieve better results if he can be a leader rather than a driver of his people. He may have to use the fear motive in some cases, but he is likely to be a better manager to the extent that he can avoid doing so.

To determine how the manager can and should lead, one can look at the various factors that have been identified as motivators of people in general and then examine the nature of leadership itself.


In the early 1900s, Frederick Taylor, originator of scientific administration, thought he had the answer: separate planning and doing, to ensure that each job is performed in the best way possible; use motion and time study to determine what the standards should be; and then pay people more for meeting and/or beating the standard. In other words, use money as the motivator. Piecework plans, which also used money as an incentive, had been in existence long before Taylor's time, but Taylor added a new twist. If a man met or surpassed the standard, he was paid the higher rate for all the pieces he produced, not just for those he turned out over and above the standard number.

Taylor's view of motivation was simple: "Now the workman wants just what we want, high wages and the chance for advancement.... Welfare work and all such secondary aids to workmen... should all come along in their proper time, but I wish to emphasize that they should not be allowed to interfere with doing those things which are necessary in order to give workmen what they want most, namely high wages".

Taylor's associate, improved his plan by introducing the daily wage, plus the incentive payments for meeting or surpassing the standard. This did away with one of the bad features of the Taylor incentive system under which rates for those who did not meet the standard were greatly reduced in order to make up for the higher rates paid to the faster workmen.

Taylor confidently expected that his system would produce a "mental revolution" on the part of both administration and labor. Management would make so much more because of the higher production that it would not want to cut the rates. Labor would have a chance to earn so much more that it would find no reason to strike for higher wages. In fact, he felt, there could be no possibility of argument over the wage rates at all since they would be "scientifically" determined.

In experimental situations some remarkable increases in productivity did take place, but the mental revolution in industry was conspicuous by its absence. Labor unions opposed the plan and succeeded in getting the use of the stopwatch for time study banned from government operations. In more than one case a manager who was a prominent supporter of the scientific administration movement introduced the plan and the result was a strike that nearly wrecked his company.

Some thirty years later, Taylor himself admitted that his plan had in no case produced the mental revolution that he had hoped for. Quite naturally, he attributed this to administration's failure to use the plan as he had designed it; as many managements simply cut rates as soon as production rose.

But many administrations today have made strict rules against the cutting of rates, yet they have not sparked a mental revolution to any great degree. Many incentive plans are successful in raising productivity, but even their most ardent supporters do not claim that they tap the full potential of the great mass of workers or that they have produced any particular mental revolution on labor’s part. Not only do they fail to prevent strikes over wage rates; they are, in themselves, a frequent source of grievances.

Money is not the only motivator, the only thing the worker wants from his job. What else then does he want?



The next answer administration got was diametrically opposed to Taylor's. This was the answer provided by Elton Mayo and his associates Fritz Roethlisberger and W.J.Dickson in the famous series of experiments at the Hawthorne Works of the Western Electric company in Chicago.

The company already had a group incentive plan in effect; that is, each employee's earnings were in part dependent on the production of a group. In the experiments a smaller group made up of half-a-dozen girls was used; and hence each worker's earnings depended more on her individual efforts than before. But the girls were allowed to get used to this before the experiments began properly.

Rest periods of various lengths, sometimes accompanied by light meals, were introduced for weeks at a time; and in one case the work week was shortened. With each change in the schedule, productivity went up, which seemed to indicate the value of rest periods. But when all rest periods, shorter hours, and food breaks were abolished, productivity went up still further.

Mayo's explanation of this was that the girls in the test room formed a cohesive group. What the worker wants, he believed, is not more money but a feeling of "belonging" to a stable group whose standards he accepts. People were happier, he felt, before industrialization when family and work relationships were less likely to be disrupted. But since it would be impossible and undesirable to return to the practices of the past, administration should Endeavour to recreate the "feeling of belonging" that existed until technological developments made it necessary for people to adapt themselves to constant changes. He forgot, perhaps, or did not know, that even in the Old Days people did not always produce to the top of their potential. The "idle apprentice" was a well known character before the Industrial Revolution.

"What the employees want" as has been described by researchers, who pointed out specifically how the feeling of belonging may be fostered:


People like to feel important and to feel that they are doing important work.


They are often more interested in the size of their pay packets relative to those of others than in the absolute amounts of pay.


They want to be treated well by their supervisors, to be praised rather than blamed, and not to have to admit their mistakes - at least not publicly.


They like to know whether they are meeting expectations - how well they're doing.


They like to be listened to, consulted about changes that will affect them, or at least warned of changes before they take place.

Well, this sounds quite reasonable. Are these not things we all want, managers as well as employees, just as we want the high pay and the chance for advancement that Taylor spoke of?

Here we have a set of fairly definite guides for the manager that have been made the basis of many of the courses in human relations. But is this the whole story? Perhaps it is, if one examines the implications of the Hawthorne findings keenly. But often, they have been interpreted too narrowly as meaning only that the supervisor should be "nice" to staff and treat them politely, listen to their complaints, and advise them on their personal problems.



Frederick Herzberg, the sociologist, has provided an analysis that may be more helpful. Herzberg characterizes money, a pleasant work place, and pleasantness on the part of the supervisor as "hygiene" factors. That is, just as good medical hygiene removes factors that may be detrimental to health, what he calls the hygiene factors in the job context remove possible causes of dissatisfaction and poor productivity but do not provide positive incentives to work. The real motivators are such things as the sense of achievement, interesting work, and the feeling that the accumulation of achievement will lead to personal growth and recognition.

The supervisor, Herzberg says, will need to use discrimination in recognizing good work and in rewarding it appropriately. He will need to be pleasant, of course. But in addition, he will have to organize and distribute the work so all his staff will be given a chance for successful achievement.

This is very much in line with the Y theory, which is that people are really anxious to do a good job and will do so if only administration will let them take on all the responsibility they are capable of assuming. This theory contrasts with what one calls the X theory, which states that people are naturally passive and lazy and have to be cajoled or compelled to work.

Other studies found that "high productivity" supervisors were employee-centered supervisors, whose groups were supervised less closely by their own superiors. They placed more responsibility on their staff, and thus might be said to offer the chance for achievement and growth that is all important.

Some very cogent observation states that: “Satisfaction is, above all, inadequate as motivation. ...Responsibility, not satisfaction, is the only thing that will serve. To perform, one has to take responsibility for one's own actions and their impact.... one has, in fact, to be dissatisfied to want to do better”.

These later findings do not really contradict the Hawthorne findings; they supplement them and they help to explain them. The girls in the Hawthorne test room, who were under the direction of the researchers rather than the regular supervisors, said they could produce more because there was no "slave driving". Mayo discounted this remark because the usual plant supervisors were pleasant enough in their approach and by no means could they be considered "slave drivers". Yet, in the test room, the girls set their own pace and could slacken off at times and then make up for it later. It may have been this that gave the girls their sense of freedom. Many supervisors make a fetish of a "steady pace".

In addition, many of Roethlisberger's statements of "what the employee wants" do carry some implication that responsibility and achievement are motivators, for example, his emphasis on participation and on praise for good work. Too much of the failure of the "human relations approach" in many firms may rest on the failure to utilize it fully.

Many researchers have called attention to the fact that "participation" as practiced is too often nominal; and either subordinates are asked to voice their opinions only so that they may be persuaded to accept a decision already made, or the participation is restricted to very peripheral activities, such as serving on bond drive committees or making minor suggestions about the company cafeteria.

It is remarkable, in fact, how some managers can persuade themselves that they are practicing consultative supervision and allowing subordinates to participate in their decisions when really they are doing nothing of the kind, and may likely achieve better results if they dropped the pretence.

Many subordinate managers act out similar pretences with rank-and-file employees because they believe the latter are not bright enough to know what has happened. But in this managers deceive themselves. You do not have to be extraordinarily intelligent to recognize deception of this sort, and there are always one or two in the group who can.

Unless the manager is prepared to allow genuine participation, he had better stick to old-fashioned authoritarianism coupled with some attention to the hygiene factors.

This does not mean that the manager must obey the employees or take a vote on every decision; but it does mean that he should not ask for suggestions unless he really believes the employees can contribute something and is prepared to consider their suggestions seriously. If he has already made a decision, he should merely explain it without pretending that he can be convinced to make another.

What about money?, which Taylor considered the all-important motivator? He was quite right in many respects; particularly, since as many behavioral scientists have pointed out, pay is a status symbol in our society and a very tangible award of achievement. But as regards incentive systems, and their failure to produce what Taylor thought they would, some interesting insights developed from studies conducted.

The researcher found that the workers made a distinction between "good money" and "big money". "Good money" enables a man to live on a standard that he considers adequate. "Big money" provides many extras, but to many it is not really worth the extra effort. Others continually seek the "big money".

Thus it is not always possible to say that all people will respond to the same motivators. And this is true of the motivators uncovered by the behavioral scientists as it is of the money motivator.

For example, take participation, or, as it is sometimes called, “consultative supervision”. In general, its contrast “authoritarian supervision”, is very much frowned upon in advanced administration circles today. But sometimes it works better.

It would be fine if a set of rules could be found that would tell the manager how to direct staff and subordinate managers in all cases, but the fact remains that groups and individuals differ and the manager must gauge what is needed and thus act. There are certain things everyone wants, but people want them to different degrees and in different doses.

It is often possible to provide the achievement motive even on very routine jobs, provided the supervisor organizes the work so that each person can see the results of his efforts and gets a feeling of satisfaction in his work.


From the foregoing one may derive some clues to the way in which the manager or supervisor may become an effective leader. Many of the findings of studies of leadership itself are also helpful.

Most people tend to believe in what is known as "charismatic leadership"; that leadership consists of some intangible quality impossible to describe that is immediately recognized by everyone else. It follows from this, of course, that a leader will lead in all situations, regardless of whom the followers are or where he is trying to lead them.

If this theory were valid, the manager who has not been a leader of every group in which he found himself would have to give up in despair. Happily both everyday experience and research on the subject by psychologists contradict this idea. It is almost comparable to the theory that because of his greater intelligence, a man could quell a lion or tiger merely by a direct and fearless glance. If anyone ever put the latter theory to the test, he was probably not on hand to report on the findings of his research.

Attempts have been made to define leadership in terms of traits. Thus it has been said that a leader is fair, intelligent, kindly, and so on; that is, he possesses all the traits generally felt desirable. But everyone has met leaders, in business and elsewhere, who were often less than perfect human beings. Yet this theory is nearer to some of the findings than the charismatic theory, for studies have shown that when a person is esteemed by the group it is more likely to accept him as a leader.

There really are two traits which most leaders do seem to have: intelligence and confidence. Studies have shown that the leader is likely to be more intelligent than his followers, although too great an advantage in this respect may militate against his leadership. The reason confidence is important is easy to see; if he is not sure of where he is going or cannot act as though he were sure, he can scarcely expect others to unreservedly accept his direction.

The best accepted theory of leadership is that it depends on the situation; some people will lead in one situation, others in another. Leadership depends as much on the nature of the followers and on the situation in which they find themselves as it does on the nature of the leader himself. The leader, analysis shows, is the one who can best help the group achieve its objective. One round-up of leadership studies, in fact, came to the conclusion that while leaders were mainly superior to their group in one or more of a wide variety of ways, they had only one thing in common with each other; superior technical skill in the field in which they were engaged.

In another case an executive seminar took up the question of leadership, and instead or reading up on the subject, members set down the characteristics of good leaders they had worked for in the past. The only common characteristic found was that the leaders were people who were really interested in getting a job done, not those who were trying to win a popularity contest.

This theory is encouraging to the manager who lays no great claim to charisma. He can acquire superior knowledge of the field in which he is engaged, and the more his knowledge increases, the more confidence he will have in his own decisions, and thus he will acquire at least one trait that will reinforce his ability to gain assent of his leadership.

If authoritarian leadership is called for, it will be better accepted if the leader knows his job, as there is nothing more disturbing to subordinates than the incompetent autocrat; because of his lack of competence, they cannot respect him, and therefore they feel humiliated by taking his orders. Thus because he cannot be, albeit at least slightly, aware of his own incompetence, he tends to bluster to cover up his own uncertainty and thus acts more unpleasantly towards his employees.

Further, although employees appreciate praise, as was pointed out, praise from someone who really knows good work from bad is far more satisfying than indiscriminate and perhaps even undeserved praise. Praise from a boss who really does not know good work from bad may give the employee some sense of security, but it gives him no real sense of achievement.

If job competence is so important, why have companies become so dissatisfied with it as the sole criterion of promotion? One often hears managers complaining that too much stress has been placed on skill in the selection of supervisors and not enough on "human relations" and "leadership" qualities.

One reason is that "skill" and "knowledge of the job" have been interpreted too narrowly. The mere fact that a person can perform a manual job very well does not mean that he can direct others doing it. If he has true knowledge of the job, he knows how to plan it in the most effective way, what is more important about it and what is less important, and where it fits into the whole job the group is doing. He is interested enough not to rest on his current skill, but is forever trying ways to improve methods.

The skilled man is sometimes so satisfied with his won methods, learned perhaps through a strict apprenticeship, that he is unwilling to change them when better methods are discovered. He becomes what higher managers refer to as a "brittle" supervisor, one who resists all change and is generally a problem to his superiors.

Many people who can do a first-level job cannot supervise others because they try to do the work themselves instead of training and encouraging others to do it. Thus the low-productivity supervisors tended to do more of the work themselves than the high-productivity supervisors, who spent more time advising staff, listening to their ideas, and so on.

These were supervisors of clerical workers, but one might take an example from another field. The star salesman who becomes a sales manager may go out into the field with one of his men, ostensibly to teach him how to sell; but what does he do when they visit a customer? He monopolizes the conversation, and makes the sale. As a result, the salesman gains no rapport with the customer and has no opportunity to learn from his own mistakes.

The proper conduct for the sales manager in this case is to stay largely in the background, and to take part in the conversation only when he can brace the salesman's own presentation. Then after he and his man get outside, he can go over the whole interview, mention any errors, commend the good work, and offer advice that will help the man the next time.

It is partly because of this tendency to grab the ball and run with it that the best salesman may not be the best sales supervisor or sales manager, which is a matter of observed fact.

It may also be because he takes little interest in such things as market surveys, analyses of the potential of various customers, the importance of credit ratings, and so on; all of which are part of the skill of the job needed by the sales manager.

The ability to delegate, which the manager needs as much as knowledge of the job, can also be acquired, which is again encouraging to the man who may not possess any high degree of charisma. It is acquired, of course, by thought and by practice.

Another characteristic of a good leader, is that he sets high standards; standards that are attainable, but not easily so. Such standards, of course, contribute to the sense of achievement, for no one gains any sense of achievement from doing something anyone can do without half trying.

Now the situational theory holds that the person a group accepts as a leader is the one who can help the group achieve its objectives; and in many business and industrial situations, the objective of most members of the group is in line with company objectives to some extent. That is, most people want to do a job they can be proud of, as Y theory indicates. They want a sense of achievement, and they want to grow on the job, get promoted, get such pay raises as may be forthcoming, and so on. The manager who can help them achieve their ambitions, because he knows more than they do and has the time and patience to teach them, has gone a long way towards winning their acceptance of his leadership. Line managers, for example, willingly accept the power of a top manager who is instrumental in company growth because they know their own jobs and incomes are likely to grow with the company.

But occasionally a manager is faced with a subordinate or a group of subordinates who are completely apathetic towards their work or who even seem to get a sense of achievement from being paid for not working. What then?

Of course there are some people that the manager cannot do anything about. Their apathy or recalcitrance may not be their fault, since it may be the result of a lifetime of experience, but the manager cannot hope to correct it. In that case he may have to remove them from the payroll as soon as possible. Or if they will perform useful work of some sort by being driven to it, then he must drive them.

One should not be too inclined to reach a negative conclusion about any given person. Many people do not realize their own capabilities and are afraid to try to exercise them. A little encouragement, a little chance to do things on their own and subsequent success will go a long way to change them.

There are secretaries, for example, who are afraid to try composing letters because they believe that they must be "writers" or at least graduates to do so. Yet with some training they can learn to write letters that are not only acceptable, but very good. Managers who takes the time to provide the needed encouragement and training will subsequently save himself considerable time and effort, for he can simply pass on correspondence to his secretary with a notation "tell him yes", or "tell him no", and be confident that the replies will be properly expressed.

Apathy on the part of an entire group may be based on an incorrect view of the job that has been fostered by previous managers. Many managers, confident that the provision of "hygiene" is all that is necessary, will tell an employee who asks questions beyond the immediate task, "Well, now, let me worry about that. You do not need to bother with it." This is actually the hygienic way of saying, as some supervisors did before "good human relations" received so much emphasis, "You're not paid to think. You're paid to work." It may arouse less resentment, but it is equally productive of apathy.

If the supervisor has a group whose ambition and pride in work has been beaten down in this way, he cannot expect to change things overnight. He must patiently encourage each sign of interest and be willing to take the time to listen and to explain.

Further, unless he is supervising a machine-paced job, such as a part of an automobile assembly line, he will often reorganize the work so that each person has a "whole job" instead of little bits and pieces, the final result of which is so far away that no sense of achievement is possible.




As soon as someone becomes a manager, he must become an organizer, as unless he organizes the work of his subordinates, they will be getting in one another's way and even counteracting one another's efforts; to say nothing of the fact that the way he organizes the work has a great deal to do with the effort his employees put into their jobs.

Organization has been called "a system of communication", and it has been defined as "coordination". It is both, but a more fundamental definition is that "Organization is the form of every human association for the attainment of a common purpose". This definition is more inclusive than the other two, for we need communication mainly to ensure that everyone understands what the purpose is, what his part in achieving it is, and why it is to his advantage to help achieve it to the best of his ability. Coordination, in turn, is necessary to ensure that each person contributes to the common purpose without lost motion.

There are two schools of thought on organization, what is sometimes known as the "classical", "traditional", or administration process school, and the "social science" or behaviorist school. The concepts developed by the former group are based on company experience and logical common sense. Those developed by the latter are drawn from findings of sociologists and psychologists, often arrived at through experimentation with companies and other groups.

Since both sets of theories are to some extent based on experience, it might seem that there is no reason why there should be any quarrel between them. Yet considerable differences sometimes develop in discussions on the subject of organization. The classicists have evolved certain "principles of organization", which they believe offer general guides for the organizer, while some behaviorists claim that these guides are not only useless, but actually detrimental to good organization.

One reason is that the two schools of thought have been asking different questions, and of course, the answers you get depend upon the questions you ask.

In general the classicists have asked:

  • What work must be done if an enterprise is to achieve its objectives?

  • Which activities should be combined into a single job?

  • Which jobs may be coordinated by a single executive?

The behaviorists, on the other hand, have tended to ask:

  • What do people want from the organization?

  • How do they react to one another as they work in groups?

  • How do the various groups interact with one another?

  • How can we organize people so that their jobs will afford them satisfactions other than their pay packets?

Now it is obvious that the answers to the second set of questions have a decided bearing on the answers to the first. An organization of people is not a machine, and just because the parts are fitted together in what seems like a very logical order, it will not necessarily function as it is supposed to. Each individual has his own goals, which may or may not be in line with the purposes of the organization, and these goals (and the ways in which he sets about reaching them) will certainly be influenced by the interactions within the group in which he finds himself and by the interactions of his group and other groups in the organization.

Classicists, however, have never denied the usefulness of psychological and sociological findings. They believe that these can provide valuable insights for the manager, both in determining the style of direction he adopts and in fitting the pieces of his organization together. But they do believe that in developing an organization structure, he must first consider the purpose that is to be achieved. Furthermore most behaviorists do accept the fact that the organization, especially the business organization, must have a purpose, in fact, many of their experiments have been conducted with the consent or at the instance of company administrations who wished to know more about the effect of different types of organization practice on the people within the organization.

Thus there is really no reason for the manager to become a devotee of either one school or the other. He can accept the findings of both where they seem good to him, in the light of his own experience and the situation with which he must cope; and use what will be useful to him.




The classical theories are easier to enumerate because they include several distinct principles, or suggestions, since the classicists do not consider them immutable principles but rather guides to be used as the occasion requires.



The first of these is that there must be an objective (or objectives) for the organization as a whole, and for the holder of each position in it. This is, perhaps, a real principle, in that it holds true in every situation and there is no reason for a formal organization of any kind to exist unless people can accomplish something by working or acting together that they cannot accomplish separately. Even a group organized entirely for social purposes has an objective other than organization itself.


The second principle is that specialization is needed, and here it is the degree of specialization that the manager must concern himself with, for specialization is well established in modern industry, and the complexities today are such that it would be impossible to operate without it.

The theory behind specialization is, of course, that the greater the specialization, the easier it is for a person to become skilled at a job. Also, it is easier to find a person who has the aptitude or skill to perform one specialized task than one who can perform several.

There are, however, limits to the amount of specialization that is technically feasible or economically desirable. If there is room for only one person at the controls of a machine, it is technically impossible to subdivide the operation any further. If splitting up the work would produce a job that cannot keep a person busy more than a couple of hours a day, the result would be a waste of time rather than an economic gain.

This is a situation a manager must watch, for sometimes the specialization that was worthwhile in the past is no longer so today.

Less narrow specialization may also be advisable from the viewpoint of worker morale. A very highly specialized job, for instance one that is confined to making a few motions over and over, often produces apathy and discontentment.



Like objectives, coordination is essential because there can be no true organization without coordination. A characteristic of the large, complex organization is that it is not possible to rely on a common superior to coordinate all aspects of two or more managers' work. For this reason a number of other coordinating devices must be introduced: committees and/or specialized coordinators of various types.

Any manager can, however, do much on his own initiative to further coordination by maintaining communications with others on his level whom his work may affect. Henri Fayol, the French industrialist, who was the originator of many of the classical principles of organization, pointed out that there is no reason why two managers on the same level who report to two different superiors should not communicate with each other directly, provided they keep their superiors informed of any decisions arrived at. He called this form of horizontal communication throwing "gangplanks" between positions.

If the typical organizational channels were followed, any communication from parallel lower levels would have to go all the way up the chain of command and down the other side before it would reach its destination, an obvious waste of many people's time, especially since the chain of command may be very long. The gangplank was his answer, and he believed that every superior should authorize his subordinate managers to deal with others informally in this way, provided they kept him informed of the decisions made.

However, authorizing subordinate managers to throw out gangplanks may be insufficient. Many managers never give a thought to anything but their own departments, and are likely to adopt a policy that makes things a little easier for them even though it causes a whole lot of inconvenience or expense to another department. A manager can make himself a great deal more useful to his company by using gangplanks himself and encouraging his subordinates to do so. Further, he may find that others will eventually be ashamed not to reciprocate, and his own job will become easier in consequence of his communication with them.


The authority principle implies that each man should have only one boss, and the line of authority should run from the company president straight down through the hierarchy to the rank-and-file employee. This principle is observed when the worker reports to a single supervisor, the supervisor to a single manager, the manager to one director, and the director to the CEO. Henri Fayol called this the principle of "unity of command" and it is, in many ways, a common-sense proposition. If a man has more than one boss, he may be subjected to conflicting orders and thus become confused.

The fact that a company uses group administration at the top, as some companies do, need not prevent observance of the principle so far as most of the members of the organization are concerned. Members of the top group can thrash out differences before they transmit orders or instructions down through the channel, which is often known as the "chain of command". By-passing channels by utilizing Fayol’s gangplanks are not a violation of this principle, since the gangplanks are designed for horizontal communication rather than communication up and down the chain of command.

Of course each man has more than one boss in that he is subject to the authority not only of his own immediate superior but of his superior's superior and all the bosses on higher levels. But this need not interfere with true unity of command since the higher bosses are supposed to transmit all their instructions down through the chain, and no one is told what to do by anyone except his immediate superior. Thus the production manager, or even the company president, should not bypass the foreman in issuing orders directly to the worker except in an emergency.



This principle states that responsibility and authority should be commensurate, or as nearly equal as possible. If a man is held responsible for attaining certain objectives, he should be given the authority to do the things necessary to meet the goals; conversely, when he has the authority, he should be willing to accept the responsibility that goes with it.


The principle of delegation is that authority should be delegated as far down the line as possible. The advantages of practicing delegation are that those who are closest to the scene of action may be best able to deal with the problems that arise and time is saved by not sending information up the line and directions down again. Perhaps even more important, pushing responsibility down the line is one way of tapping the initiative of everyone in the organization and of keeping people interested in their jobs.

How far down the line is it feasible to push authority to make a given decision? This depends on three things:


At what point does the person in the job have access to all the information necessary to make the decision?

For example, it is not expected that the production manager would know whether a change in the design of a product would increase sales sufficiently to offset higher production costs, or that the sales manager would know what the total effect of a design change would be on production. Therefore, a company superior must make a decision on this point.


At what point may the job incumbent be expected to have the incentive to decide solely on the basis of what is best for the entire company?
In the case cited above, the sales manager has no incentive to keep production costs down since he is judged on sales volume, while the production manager, who is judged on production costs, has no incentive to make expensive changes simply because they will benefit sales.


Is the incumbent personally capable of using good judgment in the case in question?

The first two criteria are easy to apply, but the last one is difficult indeed. The manager may delegate authority and hold responsible the man to whom he delegates, but the manager himself is still responsible to his own boss for the results of delegated decisions.

This is as it should be, because the manager has the authority to delegate or not to delegate.

Many managers, however, are much too cautious about delegation because they are afraid that their subordinates will make too many mistakes, and they have not devised the controls that make it possible for them to correct errors before they become serious. Thus many managers say that they could operate more effectively if their superiors would delegate more authority to them, and that they personally are overworked because their own subordinates are incapable of assuming responsibility.


The principle of span of control calls attention to the fact that a man can directly supervise only a limited number of people whose work is interrelated. As enunciated by L.A. Graicunas, an administration consultant, this principle holds that supervision of two men entails six relationships:


First, there are the superior's own relations with each of the two men and his relations with each of them when he contacts them both at the same time - or four relationships altogether.


Second, there are the relations between A and B and between B and A. These may actually be two different relationships since A's attitude towards B may not be the same as B's attitude towards A.

Using this method of calculation, the number of relationships becomes enormous as more subordinates are added. With four subordinates the number of relationships becomes 44; with five subordinates it rises to 100.

This has led some administration experts to contend that no executive should supervise more than four to eight subordinates whose work is interrelated. But the real question is whether the superior need be concerned about all these relationships. Should he not really leave something to the men's own initiative? If there is a big fight over a question of policy or procedure, he will naturally have to umpire it and make a decision. But if his subordinates are reasonably adult, he need give the relationships only occasional attention. He does not have to determine exactly how they feel towards each other at each moment. If he does, he is probably a "snoopervisor" rather than a manager.

At any rate, most successful companies transgress the span of control principle, especially at the top, where a CEO or an executive seldom has fewer than eight people reporting to him and may have as many as fifteen or twenty. It is true, however, that it is important to consider the span of control in developing an organization structure, since it naturally cannot be extended indefinitely without loss of coordination. Some companies, however, still prefer to make it difficult for the superior to police things too closely. Thus he is practically forced to delegate more than he otherwise would.


Many authorities hold, and with good reason, that a short chain of command is desirable. This means there should be as few levels of supervision as possible between the chief executive and the rank and file. The greater the number of levels the more the chance that objectives and instructions will be garbled before they reach the point where action must be taken, and the more slowly and less accurately information will move up from the bottom to the top.

The short span of control and the short chain of command where there are many different activities and a great many people to be supervised make it necessary to strike an optimum balance between them. In fact, balance is cited by many classicists as one of the principles of organization; in this respect as well as every other.


The classical principles we have described would be easier to observe were it not for the fact that industry has become so complex that it has been necessary to carry specialization to the point where we have two different types of executives: line and staff, as in the armed forces. Line executives are those who supervise activities that contribute directly to the profits of the company, while staff executives are those who contribute indirectly by providing services or advice to the line organization.

Thus a process manager is a line executive, as is a sales manager. But departments like personnel, accounting, engineering, and process control are staff or auxiliary departments in a company. Their job is to assist the line departments. On the other hand, a copy-typing department in a secretarial-services agency, since it actually produces the service which the agency sells to its customers, is a line department.

The existence of staff departments make it very difficult to keep spans of control short, and it makes it impossible to have a single line of authority running from the chief executive down through the chain of command to the rank and file. This difficulty is partially recognized by the fiction of "functional authority", which is indicated by dotted lines on the organization chart. But "functional authority" is usually a very real authority, and where its possessors are higher in the organization than the line managers, they in fact dilute the latter's authority even though the plans they devise may be transmitted through a line superior.

For example, if a methods department, which is a staff department, reports to the process site manager or the process chief, the first-line supervisor will have less freedom to prescribe the methods to be used. Similarly, if the site is one of many, the manager's own authority may be somewhat diluted by policies or instructions devised by staff men at headquarters.

Neither staff executives nor line executives are entirely happy with this situation. Line executives may complain that the staff interferes with their operations and requires them to spend too much time making reports. Staff executives, on the other hand, may find that the line resists their efforts to help, and that they have continuously to "sell" their ideas to others down the line to get their plans put into effect.

The line-staff difficulty may sometimes be due to higher management neglecting to define jobs carefully. But even if the extent of responsibility and authority attaching to each position has not been made entirely clear, the line and staff administration down the line can do a great deal to ease the situation.

Line managers should remember that staff men can help them with problems that they do not have time to study themselves, and thus make use of staff services to the fullest extent possible. They should keep an open mind about new programmes that the staff suggests, and not condemn them out of hand simply because the staff has suggested them. Nor should they construe staff suggestions as criticisms of the way they have been handling things to date. No one person can be expert in all the specialized skills needed in modern business, and no one is expected to be. In fact, that is why staff men exist.

Staff men, on the other hand, should be content to introduce their projects gradually and should not assume an air of superiority simply because of specialized training. They should be willing to listen to the line's objections and criticisms of their programmes since the objections may be based on very practical experience and thus be well worth taking into account, even to the extent of modifying a programme based on what seems to be very sound theory.

In addition to the specialized staff departments, there are two other types of staff of which the manager should be aware. The first is personal staff (a private secretary for example), and the second is the general staff-man (for example, an assistant-to-somebody). Both are outside any chain of command, and there is no reason why either should come into conflict with the executives. An assistant-to-somebody, it should be noted, is not the same thing as an assistant, who is second-in-command and may have to act for his chief when the latter is absent. The assistant-to-somebody has no authority over anyone, unless he has assistants of his own. He merely handles part of the functions that the chief executive cannot delegate. Generally, his role is that of information gatherer and evaluator.

The position of assistant-to the chief executive is often a highly coveted one since it provides an opportunity to learn general administration skills that few other positions provide. Also, the incumbent has a high degree of "visibility", that is, the man in the best position to further his career cannot be ignorant of his existence or his abilities. Sometimes the position is used as a training ground for a future chief executive.

The position, however, is one in which the incumbent needs to watch with extreme care his relationships with his chief's immediate subordinates since in the course of his information gathering he may be tempted to assume authority he does not possess and arouse resentment that may result in his ousting.

Another type of general staff-man is the chief of staff, who has authority over all the staff functions in the company. Not many companies, however, have created such a position.

The battle of line and staff managers, as in the armed services, is never perfectly resolved. Just as in Agincourt, just as in the invasion of Iraq, the troops (and their line managers) complained that the staff managers had not planned ahead, and had not adequately equipped them for the task. In Enron the line managers ignored the staff managers and this led to disaster. In Marks & Spencer the staff managers ignored the line managers and this has led to a company lost in the wilderness for many years.   



Customer Handling - Relative & Competitive Performance
Operating Procedures & Systems
Order Handling & Input
Order Progress Notification
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Target Company
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Overall Performance

Competitive Rating

Senior Staff Performance

Point-of-Sale Staff Performance

Complaints Handling

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Professionalism of Operating Procedures

Investments in Systems

Corporate Responsibility & Development

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Input Systems & Performance

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Complete Order Delivery

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Cost of After-Sales Services

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Performance Grid Definitions




Now the general classical maxims and the distinction between line and staff provide only general instructions about the actual mechanics of organizing. Have the classicists anything else to offer the industry?

Indeed, they have. Specifically, they offer certain guides to the division of work. For example, it has been pointed out that work may be divided by:

                        1)  The purpose served
                        2)  The process used
                        3)  The persons or thing dealt with
                        4)  The place where the service is rendered

These criteria may be used at any level in the organization, though not necessarily in the order given, to determine how the work should be divided and then subdivided.

Considering the overall objective is to produce tangible products and sell them at a profit. However, this implies two different purposes: processing and selling, which also require two entirely different sets of procedures. In addition, the fact that the objective includes making a profit indicates that there must be records kept. So there is still another primary division by both purpose and process: finance and accounts. Thus one has at least three main divisions: processing, sales, and accounting or finance. In some firms there are two financial departments both reporting to the CEO; the accounting or controller's department and the treasurer's department. This is not illogical, for these two also serve entirely different purposes. The accounting department provides the records for control while the treasurer's department manages investments, stock issuers, and borrowings.

If the company has only a single plant, the head of manufacturing may be the plant manager. But if it has several, it will resort at once to a sub-division by place, that is, there will be one manager in charge of manufacturing in all the plants and several plant managers under him.

Now the plant manager has more than one purpose to consider. He must strive for the right quantity of production and also ensure that what is produced is of the right quality, but these two purposes conflict to some extent since it is easier to produce in quantity if he pays no attention to quality. Hence he will probably want to separate quality control from the administration of production.

Production itself may be divided according to processes, each of which may be placed under a manager. If the plant is large, there may be a general manager over the line supervisors. Related processes or departments near each other will be placed under one man. If the plant produces more than one product, the division may be by product.

Now consider another of the primary purposes of the enterprise: selling. What processes are used here? Fundamentally there are two: Advertising and face-to-face selling through salesmen who visit the customer. The concept is to put the two together under a single marketing manager, and have both the sales manager and the advertising manager report to him.

In sales, also, there is often a division by things dealt with, as when different salesforces are used for different products. This division may even occur further up in the organization scale, so there may be a marketing manager for industrial products and one for consumer products.

The division between industrial and consumer products might also be considered a division by persons dealt with, since industrial products are sold to companies and consumer products to wholesalers or retailers, or sometimes directly to consumers.

Geographical division of the salesforce is typical. If the company sells throughout the country, it will generally have regional sales managers and district sales managers, and each salesman is assigned an exclusive territory in any case.

Again, an accounting department has the general purpose of providing records that will enable administration to maintain control, that is, to determine when deviations from the planned course of action are occurring. But many different processes are used for this purpose; two examples are budgeting and cost accounting, which is the determination of the cost to produce a single unit of the product. Thus further subdivisions of the department may be made if it is a large one.

Division by purpose, it may be seen, enables the manager to set definite objectives for each segment of the enterprise. Division by process, or by people or objectives, enables him to bring together the jobs that require the same or related skills. For example, selling industrial products needs technical know-how, but not so selling consumer products.

Geographical division of the work is one way of cutting down the manager's direct span of control, and also of reducing the time wasted in travel, and travel time may be in-house as well as outside. For example, many plants that are spread over acres of ground have adopted what is known as "area maintenance", that is, stationing a maintenance foreman and several craftsmen in each department or at a central point near a group of related departments. This saves travel from the central maintenance shop, which in a large plant may be some distant from many of the departments.


A company generally begins by having what is termed a "functional" organization; with each of the principal functions, either line or staff, reporting to a top manager or a director, who in turn reports to the company CEO. Yet as the company grows, this organization may become increasingly unwieldy as chains of command get longer and longer.

Then a company may resort to what is known as divisionalization, which is a new way of dividing the work according to objectives. A division manager is appointed to take complete charge of both the production and marketing of a single product or group of products, and is judged not on the amount of production or the volume of sales but on the profit his division produces. His position is comparable, then to that of the CEO of a smaller company, except that he is not responsible for raising capital. That is allocated to him from the general company funds.

Occasionally divisionalization is by place, that is, the division manager is given charge of all operations, including both sales and marketing, in a section of the country. This, however, is less common than divisionalization by products.

Divisionalization has several advantages. It brings major decision-making closer to the scene of action and enables the man in charge to concentrate his efforts on a single family of products. In addition, it relieves the burden on top management.

This introduces new problems. One of these may arise because some divisions sell all of their products to other divisions of the same firm. How, then, are the prices to be set? If the division manager is compelled to sell at a low price in the interests of the overall profitability of the firm, it is hardly fair to judge him on the profit and loss account. Alternatively, if he is permitted to charge his captive market whatever he wants to, his profits might be artificial so far as the whole firm is concerned. One might say, of course, that the price should be the "market price", but this may be difficult to deduce because prices may be set by bidding, and outsiders are not likely to waste time preparing bids if they know they cannot get the business anyway.

This problem will affect only certain divisions, and in some companies there may be none that sell only to other divisions of the company. More serious may be the loss of control by top management, which may not know that things are going badly until something very unfortunate occurs. Income statements that look good may conceal a variety of shortcomings. Pressure to show increased profits may lead divisions into such practices as letting plants and equipment run down, adding too many bad debts into accounts receivable, or short cuts of various kinds that may bring the whole firm into disrepute. These practices are likely to show up in the income statement eventually, but perhaps not until a good deal of harm has been done.


Often an organization has outgrown its current organization structure because many new products and new functions have been added as its size increased. So, thorough reorganization may be needed. But a company may reorganize to align the work more logically and lose more than it gains because of the general disruption entailed when old relationships are suddenly broken up and many people become fearful that the reorganization may leave them in a less favorable position than before.

Therefore it is generally recognized that reorganization should be as gradual as possible. If the present organization is not too unwieldy, the method recommended by the classicists is for the manager to chart the "ideal organization", as he would like to see it if he did not have to consider staff at all and then gradually work towards it rather than introduce the changes all at once. For instance, a firm may recognize that since advertising and sales serve the same purpose, they should be coordinated by a single marketing manager. Not if the advertising manager and sales manager now report to the company CEO both would feel that they had been demoted if another layer of supervision were suddenly inserted between them and the top. Thus it may be necessary to wait until some of the executives retire or leave before making the change.


Most firms are organized largely along classical lines, although they do not necessarily observe all the principles exactly, and by and large, they have a chain of command with the work divided into specialties according to one or more of the methods suggested.

Yet as behavioral scientists have examined situations in industry, they have tended to be critical of the traditional approach, sometimes harshly so. Probably the severest critics of the classical wisdom states definitely that organizations conceived along classical lines are not suited to the needs of psychologically healthy people; that the environment created tends to demand that they be "dependent, passive, and use few and unimportant abilities".

This is certainly true of some business organizations structured along classical lines, with specialization carried up to the point which is technologically or economically feasible and where those in charge are so fearful of mistakes that they prescribe every action in detail. But this does not follow from the classical principle of specialization as we have described it.

Some behavioral scientists have advocated what is known as an "organic organization" in which jobs are defined only slightly, if at all, and everyone pitches in and does what he can do best. This sometimes works very well in a small group; but in an organization of any size, it is likely to make coordinated work impossible. Moreover, there are many people who, so far from being stimulated by this freedom, are made insecure by it.


Some managers have a saying, "If you want a good job done, make it somebody's baby"; that is, give him responsibility for success or failure and let him work out his own plan of the best way to go about it, and it should be a job that calls on all his abilities and one in which he can judge his own failure or success as he goes along. That is practically the only way to arouse his interest and get the best from him. Moreover, it can be done without any great violation of classical principles.

The only point in “specializing” a job to the point where it requires only one motion or only a few motions is that it makes it easier to substitute a machine for human labor.

One close observer of industry and an authority on administration has suggested the following guides for the organization of work:


Each job should constitute a distinct stage in the work process. The man or men doing the job should always be able to see a result. It does not have to be a complete part, but is should always be a complete step, and thus it contributes something visible, important and irreversible.


The job should always depend for its speed or rhythm only on the performance of the man or men performing it. It should not be entirely dependent on the speed with which the jobs before it are being done. The workers should be able to do it a little faster at times or a little slower.


Each job should embody some challenge, some element of skill or judgment.


Whenever a job is too big, too complicated, or too strenuous to be performed by an individual, it should be done by a community of individuals working as an organized team rather than by a series of individuals linked together mechanically.

Only when work is organized so that each portion of it is the "baby" of some person or group will it be possible to get real motivation, for only in that case can people get the sense of achievement which is the real motivator towards better performance.

It is only when real judgment must be used that his sense of achievement can be obtained. If the worker's job does not allow him to make decisions that affect results, he prefers a job that is completely mechanical and that he can do without thinking at all. It is the lesser of two evils.

To organize work in such a way that it will provide the real motivators described by Herzberg is a challenge to every manager, whether he is the chairman of a company or the head of a small group. It can be done, and it has been in some companies, but it takes ingenuity, knowledge of processes, and an insight into the capabilities of individual subordinates.


The informal organization is sometimes spoken of as though it were one organization pervading an entire company and existing side by side with the formal organization. But the informal organization is not one organization but several. It consists of a number of circles, whose members are in communication with each other and who thus establish traditions, norms, and status systems of their own. Some of these circles intersect each other and others are entirely separate.

Managers have probably paid most attention to the informal organization as it exists in a rank-and-file group under a first-line supervisor in cases where it curtails output. It was in response to a situation like this that Taylor developed his differential piecework plan by which a man could earn more by producing more. The same phenomenon was noted in one of the Hawthorne studies.

Employees explain this restriction on output, where it occurs, by the fear that if they do too much work they will eventually be laid off. Or if they are on piecework or an incentive system, they fear that the rates will be cut or the standards raised if they show that higher productivity is possible.

Although some social scientists have been reluctant to believe that these are the real reasons, they may in many cases by the simple truth, but there may be other reasons, and some developing out of the way the work is organized.

When it is impossible for a man to see real results from his work and he is expected to keep moving at a "steady pace" throughout the day, performing the same few motions over and over, he may tend to keep that pace as slow as possible so as not to get too tired by the end of the day. On the other hand, if he had some part in planning his work, and could feel responsible for results, he might not work so steadily but might accomplish far more.

At any rate, some cohesive work groups with highly developed informal organizations do attain very high productivity, and this may be due both to the absence of the fears mentioned above and to the way in which the group is organized. Certainly the organization of the work groups at Non-Linear Systems and the responsibility given them had everything to do with the increase in productivity achieved.

The development of "norms" of productivity, either high or low, is only one manifestation of the informal organization. In many cases it facilitates the attainment of company objectives by making possible more horizontal communication, between people on the same level, than the formal organization channels provide. Another result of the informal organization is that it permits people to "make their own jobs" to some extent and to use the abilities they possess to the highest degree.

Again, the informal organization often enables people to do what is necessary to meet specific day-to-day problems that arise by changing procedures or channels of communication to meet the situation. Often these problems are special and temporary, and it would not be worthwhile to change the formal organization to take account of them, but an informal organization enables them to be solved satisfactorily without any disruption of the formal organization.




In his novel, Little Dorrit, Charles Dickens wrote of a certain government department that he called the "Circumlocution Department" and whose members he named "Barnacles".

Literary license? Certainly. But in essentials a good picture of the way some government departments, in Dickens' day and ever since, have viewed their tasks. Can the same thing happen in business? It can and does. Many businessmen are inclined to regard government as inefficient, and business as efficient, and to believe that the type of bureaucracy Dickens satirized in the Circumlocution Department cannot exist in industry. It arises in government, they say, because the government is not subject to competition, whereas business (which must be efficient if it is to survive and compete) would not tolerate such a department for a minute.

Unfortunately, the facts are against them. More than sixty years ago, Harrington Emerson, an early efficiency expert, reported that he had found groups of clerks on some railroads spending their entire time making out reports that no one ever looked at. Apparently at some time in the past, a company president had requested that certain sets of figures were sent to him regularly. Then he had died or retired, and the new president wanted a different set of figures; and perhaps the next president called for a third set. All three reports continued to be made regularly because no one ever told the clerks to stop working on them, even though the fourth president might be getting all the figures he needed from some other source and neither he nor anyone else ever looked at the reports.

That happened more than a half century ago, and maybe things have since changed. Sadly not. Whenever a company institutes a programme of forms control in an effort to cut down the different types of forms, it is likely to find that outmoded reports which no one needs are still being faithfully made out. Management literature is full of examples.

This happens in government and in industry not because the people are naturally inefficient, indeed they may be quite efficient in making out the useless reports, but because in many large-scale organizations the people who do the actual work are removed from the policy-making levels and do not understand the objectives of the whole organization. They have been told what they are to do, and often how they are to do it, but not why they are doing it or what the ultimate purpose is. Thus, like the Circumlocution Department, they come to think that their objective is to get out as many letters and forms as possible, but are totally unconcerned with what the letters or forms are supposed to accomplish.


Management by objectives is a new approach to administration and organization designed to encourage initiative and to prevent the working at cross-purposes, or for no purpose at all, that is likely to occur unless positive efforts are made to communicate the company's objectives down through the entire organization.

Management by objectives shifts the emphasis from cut-and-dried procedures to accomplishing results. It makes it easier to follow the methods of direction and leadership that prove most successful in providing the achievement motive, for it leaves people free to develop better ways of doing things if they find that new methods will produce better or quicker results.

It also makes over-all goals the concern of every manager and helps to break down the narrow departmental view that so many managers take because they know they will be judged entirely on the records of their own department.

Further, it is much easier to evaluate and reward people when the objectives of each job are clear. Many managers do not like to talk over executive appraisals or employee merit ratings with their subordinates because the rating systems in use compel them to evaluate people in terms of traits. It is hard to tell a person that he does not possess enough "tact", "initiative", "character", or "acceptability"; all terms that have been used on appraisal forms. To criticize a man on counts like these amounts to a personal attack of a type that is difficult for anyone to take with good grace.

Moreover, it implies that the man had inherent failings that are so much a part of him that there is not much he can do about them. When he is judged by the results he achieves, by his success in reaching definite objectives, he is encouraged to use the abilities he possesses to the full rather than sulk over the shortcomings the boss has accused him of. It might be added that shortcomings, either of intellect or of personality, are immaterial as far as the job is concerned if they do not interfere with results.

Ideally, administration by objectives should begin at the top with the emphasis on opportunities rather than on problem-solving.

It should start with thought of possible markets, and the answer to the question:

What do customers really pay us for?

Or if it is a new business, the question is:

What do people want that they cannot now get easily, or in the form they want it, or at the time or the place they want it?

One very successful management news service is said to have started with the idea:

"What information do managers need on such things as taxes, government regulations, and so on that they cannot get easily in succinct form?"

Once this was set forth, the firm resolved how it could be supplied.

Many people start businesses with no other objective than "to go into business for myself". Then they pick a field simply because they know something about it (or even one they know nothing about) and proceed to sink their savings or loan capital into the venture. This is one reason why so many new businesses fail during their first fiscal year, and why few remain in business for as long as five years.

It might be stated as an axiom that no business can succeed or continue to exist unless it fills a vacuum of some sort, that is, unless it supplies something people want that would otherwise not be supplied at all, would not be supplied in sufficient quantity, or would not be supplied at the right time and the right place.


If administration by objectives has been adopted on a company wide basis, the subordinate staff may be asked to suggest possible objectives for his department, and to commit himself to producing set results that will contribute to the overall objective. But even if this is not the case, he can make use of this new technique in managing his own job and the people under him.

One might first try this quick test. One can pick out any of the employees and ask him what justifies his being on the payroll. It is more than probable that the employee will reply by stating what he does rather than what he accomplishes: "I get out these reports" or "I operate this machine". In other words he will be "task-oriented" rather than "accomplishment or contribution minded".

Many job descriptions encourage task orientation rather than orientation toward objectives, even on the part of managers.

For example:  The general accountant is responsible for establishing and maintaining the general books of the company and for the preparation of financial and budget statements in accordance with the approved policies and procedures of the company.

The maintenance of general books of account is not an objective. It is a task. The books are not ends in themselves but means to ends. There are many ways in which they can make a positive contribution to profit. To do so they must show not only the historical information necessary for the annual reports to stockholders and for the satisfaction of the tax authorities, but also the data that permits administration to know where it stands at any given moment and to determine whether or not its plans are being carried out as expected. They should provide this information soon enough so that administration can take steps to counteract unfavorable trends as soon as they appear.

Perhaps the general accountant is well-trained in his profession and high enough in the organization to understand what administration needs in this respect and to realize that he is responsible not only for maintaining the books but for suggesting changes in reporting practices when it becomes evident that administration could use more information or information different from what it is now getting.

But even men high up in the organization structure do not always consider objectives. There are organization specialists who are more concerned with the appearance of their charts than they are with the actual working of the organization. Thus they may recommend breaking up a job or the insertion of another layer of supervision, not because the organization is not functioning properly, but because a span of control seems to them unduly long. There are personnel managers who recommend the use of new programmes merely because other firms have them, not because there is any real certainty that they will contribute to company objectives.

One man whose job was writing standard practice instructions produced a set of directions that could mean either of two diametrically opposite things. When this was called to his attention by someone on his own level, he said: "Well, since no one else has noticed it, I think I'll leave it the way it is." It never occurred to him that the only reason why the firm wanted the instructions in writing was to ensure that every one understood them in the same way.

But perhaps the epitome of task orientation was demonstrated by a graduate student in a school of business administration who had had some experience in hospital administration and was planning to make a career in that field. In a term paper, he wrote: "The concept of the patient-centered hospital is all very well, but it should not be allowed to interfere with good administration". Apparently no one, either on the job or in graduate school, had ever said to him: "Why do we have hospitals at all? What are they for? To provide jobs for administrators?"

Some job descriptions do provide objectives for each job, and this is all to the good - but it is not enough. Each superior should talk over the objective of his group with each subordinate and make plain the contribution sought. In doing so he should relate the objective of each job to broad company objectives and show how it contributes to their attainment.

It may be, of course, that his own superior has never taken the trouble to do the same thing with him, but this need not stop him from doing so. He can analyze the matter for himself, decide what his objectives should be, and then take the initiative in discussing the matter with his superior.

One should realize that the real objective of the company is not simply to produce X or Y product for an instant profit. More realistically one can say: "We're in business to create and to retain customers by satisfying their wants competitively and profitably."

This implies a fundamental orientation towards the market rather than a running inward toward the convenient role of getting out production or simply following procedures. Then he should ask himself the following questions:


What ‘wants’ do we really satisfy?

For example, in purchasing the services of an advertising agency, a company is not buying simply copy, artwork, and the placement of it in media. It is hoping to buy increased sales. Agency account executives, who realize this, often use the knowledge to help customers with their complete plans; and if they succeed in producing sizable increases in sales, they may turn a small customer into a big one.


What advantages do we have over our competitors? Quality? Price? Service? Or if we seem to have no special advantages, what advantages could we provide?


What advantages do our competitors have that we do not possess, and is it possible that we could minimize these advantages in some way?


What groups of companies and/or individuals make up our present and potential customers? Are their numbers growing or declining? And if the numbers are declining, are there other groups we might serve if we did things a little differently or if we could reduce our costs enough to put our products in their price range? Or could we perhaps fill their orders a little faster?

The next step is to determine where our departmental contribution most logically fits in. A production man can make a distinct contribution to profitability by improving quality, by obtaining more production from the same machines and the same people, or by reducing the lead time on delivery. If the sales department suggests a change in the product to make it more saleable, he can try to think how it could be accomplished without too great an added cost or disruption in his department rather than spend his energy thinking up reasons why it cannot be done.

The production head of a small but successful chemical company talks on the telephone to the sales manager every working day to be sure he is making what can be sold rather than asking the sales manager to sell what he can make. When the sales manager told him that he had a chance at a big contract if production of a certain product could be tripled within a short time, he immediately called a meeting of his foremen to decide how it could be done.

Together they worked out the way and did the trick without any expensive capital investment, by putting on a second shift and pressing some unused equipment into service.

Sales managers of industrial products frequently score by developing new applications for their products, and those who are marketing consumer products have an opportunity to open up new types of outlets for their company's goods. They can also help by passing on customers' comments about the merchandise. Most sales managers probably think they need an alibi for not selling and to take credit for the sales achieved because of the product's good points.

In everything they do, sales managers should keep in mind the twofold objective of creating and retaining customers. Some sales managers have set up contests that focus attention on only one aspect of this objective; offering prizes for new accounts but making no penalties for losing old ones. As a result their salesmen have neglected good customers while they were chasing after prospects.

Managers of some departments or sections may feel that they are too far removed from the primary functions, processing and selling, to make any real contribution to profits. They think of themselves and their groups as necessary evils rather than as positive contributors, and as a result, others in the organization consider them in the same light.

Staff departments are particularly prone to mourn their inability to show direct and measurable contributions, and often develop more and more programmes of the type that irritates the line simply because they feel they must show they are doing something. If they would remember that they make their contribution by helping the line achieve company objectives, they would no longer find it necessary to be active just for the sake of being active. When a staff department is ready and able to provide help where the help is needed, it need not worry about the fact that its contributions are not measurable. Everyone will be conscious that it is something more than a necessary evil.

Once the department head or section manager has analyzed his contribution to company objectives, he should check with his superior to ensure that his understanding is correct, and that he has placed his objectives in proper order of importance. Where top management itself does not practice administration by objectives, misunderstandings are possible.

After the manager had determined the contribution his group can make to the achievement of overall company objectives, he should next make an inventory of his strengths and weaknesses. Strengths are resources that will help in achieving objectives, such things as money, manpower, materials, machines, and skills; while a weakness is anything that could defeat efforts to achieve objectives unless it is corrected. Strengths and weaknesses together determine departmental capabilities.


Once the manager knows his objectives and his capabilities, he can spell out what he can accomplish under certain conditions. This in turn compels him to consider the opportunities that lie ahead. How can he make a greater contribution to the attainment of overall objectives?

As he analyses the possible opportunities, he can use three simple yardsticks in making decisions about each one:


He decides whether the opportunity is suitable.

That is, will it help him accomplish his purpose?


Then he determines whether it is "feasible" to do it.

Can he realistically expect to do it in view of the resources available?


He decides whether the idea is "acceptable".

Are the returns worth the risk, time, effort?

For example, say the manager is in marketing. He has examined his resources and found them adequate. In the process, however, he determines that his firm is not giving enough attention to its likely future markets. It may be selling, for example, to an industry that is in what the economists call a cyclical decline. In other words it is declining gradually but irreversibly over the long term. In any company, too, there is usually the normal attrition of customers, as the old faithfuls die off, as tastes change, and as some part of the market is weaned away by new products offered by some other firms. Thus he may discover that he loses about 20% of customers annually. This meant that he has to gain that many new ones, just to stay in the same place.

The next step is to write up how one intends to overcome this marketing weakness. Are new products needed? New outlets? New methods of selling? Advertising in new media to reach new groups? When one has done so an objective for one's department has evolved.

Say the manager is in production. Wages rates and material prices are going up, and there is not much he can do about either. Must unit costs inevitably rise proportionately? Not necessarily.

Consider, for example, the following possibilities:


Can production be planned more carefully so that less inventory of raw materials is needed?


Would any rearrangement of the department make it possible to avoid backtracking in handling materials? One way of determining this is to make a flow chart.


Would some adjustment of machines reduce the amount of wastage and rejects and save both labor and materials?


Is there unnecessary paperwork going on in the department? Does one need all the forms? Could some be combined, simplified, or discarded?


Can he save money on utilities? The power bill may depend, in part, on peak usage. Can he reschedule the turning on of machines that draw heavy current on start-up so that the peak usage is kept down? Can he use process heat for some other purpose? There are consultants who make a business of showing companies how to save on utilities, but any of the possibilities they uncover could be identified by the people within the plant if they only gave thought to the matter.

When the manager has a set of agreed projects, he can decide whether he has allocated his resources properly, and agree on timing and priorities.

Where administration by objectives is practiced on a company-wide basis, the overall resources needed for each manager's set of projects become the basis for his departmental budget, and when all the department's budgets are put together, they represent the company's plans for the next operating period. In this way administration by objectives makes possible what is called "responsibility accounting", or "responsibility reporting". Where this type of reporting or control system is used, the supervisor is made responsible only for objectives he has agreed to and only for resources over which he has control.

In working with his own subordinates, the manager will find it a great deal easier to practice administration by objectives if he has organized the work so that each person has a "whole job", one that demands a certain amount of planning and some opportunity to vary the sequence in which the work is done. Then each one should be able to answer the following questions in the affirmative:


Do I know what I am supposed to accomplish and why?


Has my boss agreed to my objectives?


Has he given me with the necessary resources?


Can I shift the scope and tempo of my effort as conditions require?


Can I determine how well I am doing without asking my boss, but am I free to go to him for help whenever I find I cannot solve problems myself or when I'm not sure I'm on the right track?

One researcher has suggested some guide lines that will help make administration by objectives work for any manager. Among these are:


Goals should be realistic. They should be attainable in the light of all the circumstances, and the subordinate should be expected to attain them if his performance is to be considered adequate. Then the manager may set higher goals as marks to shoot for, with the proviso that their attainment will be considered outstanding performance.


When objectives for all positions have been tentatively set, the manager should write them down and cross-check to see that they all blend with one another. Attainment of the objective set for each man on the lowest level should contribute to the attainment of the line supervisor should contribute to the objective to be reached by his superior, so that all objectives contribute to the general objectives of the company. Similarly, short-range objectives should contribute to long-range objectives.


The objectives must seem fair to the man to whom they are given. If possible, he should be asked to participate in setting them, to suggest objectives for his own position. Often people set higher objectives for themselves than their superiors would set for them.


There will in most cases be more than one objective for each job. If there are too many, the man may try to complete a great many of the easier ones, which may be of minor importance, and hope that this will offset his failure to reach major objectives.




Administration has been deluged with books and articles on communication. It has also spent a great deal of money on communication tools: employee publications, newsletters, and meetings of various kinds. Yet communication in industry is as serious a problem as it ever was, and there are good reasons to believe that the situation may get worse.

One reason for the increasing difficulty of communication is the growing size of firms. As ideas and instructions from the top are transmitted through the various levels of administration, misunderstandings are likely to be cumulate as each person makes his own interpretation. The same is true of information moving up from lower ranks to the top.

Moreover, the further a person is from the source of information, the less likely he is to recognize what has been called "the law of situation".

This law may be illustrated by the case of a fire in a paper basket. No one would have to be told to put it out, since obviously it is to everyone's advantage to do so before it spreads. What the insurance people call a "hostile" fire, in contrast to a "friendly" fire, like a fire in a furnace, is everyone's enemy and everyone knows it. Everyone, therefore, obeys the law of the situation and tries to put it out.

But it is far less easy to discern the law of the situation in relation to such things as careless work or wasting time. In the end these things affect company profitability, and hence the company's ability to give jobs and high wages. But, the connection between what is done in one small job and the final balance sheet of the company is tenuous to most people, especially where jobs are highly specialized and staff are task-oriented rather than results-oriented.

The emphasis on communication has arisen in part because the competitive situation, which is so apparent to managers, is often invisible to the rank and file because of their distance from the top and the specialized nature of their jobs. In part, too, it stems from the philosophy of the "soft manage", which has sometimes been carried so far as to fester the idea that the main job of a manager is to make his staff happy by sustaining a close friendship with them in order to give them a "feeling of belonging".

The latter view has led almost to the belief that communication is an end in itself. It is amazing how many liaison activities are pursued because teamwork is considered the thing to do, because others are doing it, because the brochure or handout looks good, or because it can be sold to the boss.

But the only way a company's communication effort can be made effective is to make it precise in terms of needs and objectives.

The main purpose of communication is to alter people, some group, or some thing, or to avoid unfavorable trends. The purpose of communication is to induce action or to secure inaction.


One's "attitudinal bias" or mental set predisposes one to action or inaction in any given situation. Attitudinal bias, in turn, is the result of stored information, social and economic background, beliefs and prejudices, corporate background and experience, and other factors.

Some of the factors that go to make up a person's total attitudinal bias are stable and tenacious, and it is almost impossible to change them entirely. But even these viewpoints may be modified in intensity by new experience or information or contacts. In other cases the attitudinal bias is less deeply rooted and can be totally changed in time.

Since what a person does in a given situation depends on his attitudinal bias, this bias may precipitate him to action when the context in which he finds himself and/or the information he receives impel him towards his predisposition. The extent to which he acts will rely on the severity of the problem, and the amount, type and persistency of the information.

Fortunately, it is not necessary to change a person's attitude completely if its intensity can be reduced below the "critical action level", and it is much easier to reduce intensity than it is to get a person to change his attitude completely.

For example, in some plants minor infractions of work rules are ignored when it is obvious that the "law of the situation" demands that one man lend a hand to another in a different craft if the work is not to be unreasonably delayed. Yet perhaps both men may believe in the necessity of the rules as a means of job security and would resist any attempt to modify them, but because they have a reasonable sense of job security anyway, the intensity of their feelings is less. They are not, thus, aroused to the critical action level, at which they would absolutely refuse to transgress the rules, and perhaps walk out if they were ordered to break them.

Attitudinal biases determine almost every action of any consequence that a person takes, and every position supported in an argument. About the only time any of us has a truly open mind is when we are presented with a case that is entirely new to us, and on which we have no preconceived opinions.

One must, therefore, know a person's attitudinal position on many issues or one cannot predict the action he may take in any situation or amply prepare the circumstances, the content, and the form of the message. One way of determining a person's psychological "set" is to learn to listen, something few people really know how to do because their own attitudinal bias gets in the way, and they hear what they want or expect to hear, and disregard the implications that contrast their previous opinions.

When those at Hawthorne told interviewers that they were able to produce more because they "felt freer", Mayo concluded that the cohesive work group gave them a "sense of belonging", which was really in line with his own ideas; but if he had been able to escape from his own psychological set, he might have thought of other possible reasons: their freedom to vary their pace and the effort that went into interesting them in the experiment, which may have made them to some extent "results-oriented".

Again, sometimes what people actually say is not the full story, and it may be necessary to let them talk at considerable length before learning the true meaning behind their words. The ostensible cause of a complaint, for example, may be quite different from the real cause. But this facet has been so strongly emphasized in recent years that perhaps this type of interpretation has been overdone. In some cases, people mean exactly what they say, and they will be satisfied only with a straightforward, logical answer.


What does the manager himself want to communicate to his subordinates? Through communication he wants to ensure that they are able to do a good job, which means that his instructions must be clear, and he wants to stimulate their will to work and raise their standards so that they will try to do outstanding work rather than merely get by.

Fundamentally, the communication process implies:
   a) A sender
   b) A receiver
   c) A message
   d) A motivating climate

Each of these plays an important role and can make or break the entire process.

First the receiver must have some confidence in the sender. If the sender has not been truthful in the past, no message will get across, in fact, the communication may produce an effect exactly opposite to that intended. Sometimes a sincere manager will be distrusted because his predecessor has dealt insincerely with the staff. Thus it may take time to build up confidence. When people see that their manager gives honest answers to their questions and does not promise more than he can deliver, they will eventually begin to trust him.

The mere fact that receivers consider the sender honest, however, does not always mean that they will be very swayed by his words. The message he delivers (its content and its form) is as vital, and so are the circumstances, which may or may not provide motivation for them to act as he wishes.

To get an idea across, you must first of all talk about something the other person is interested in or relate it to his own personal benefit. Otherwise, he not really listening (or if he does), he will soon forget.

But how can a manager do this when he must often talk about the economic problems facing the firm, which may seem remote to employees in the lower ranks? About the only way to do so is to relate the facts to the individual's inner drives and goals.

Basically, we have economic and non-economic wants. Economic wants include:
                        1. A useful job
                        2. A rising standard of living
                        3. Economic security

Non-economic wants include:
                        1. Personal development
                        2. Social recognition
                        3. Personal freedom

If we relate communication to these basic drives, we will create a favorable listening climate and our communications will be effective.


Some people feel that what a company or a manager does is a more important form of communication than any written or spoken communication, and it is true that everyone communicates by action as well as by words. It is of little use to urge employees to put more effort into their work if the manager himself wastes his time or wastes theirs because he has not planned properly.

Of course there are cases when a manager may seem to be wasting time but is not really doing so, and in that case, he should unobtrusively make clear what he is doing.



1.  Security & Product Protection
2.  Quality Control Procedures
3.  Accounting Practices & Procedures
4.  Order Taking and Processing
5.  Order Delivery or Contract Satisfaction
6.  After-Sales Services & Procedures
7.  Legal Considerations & Conditions of Business


Target Company
Base Reference

Corporate Security Rating

Process Security Rating

Product Security Rating

Product Protection

Process Protection

Performance Grid Definitions

Target Company
Base Reference

Overall Rating

Competitive Rating

Formalized Quality Control Systems

Quality Control Efficiency

Quality Control Development

Performance Grid Definitions

Target Company
Base Reference

Overall Rating

Competitive Rating

Accounting Efficiency

Cash-Flow Handling

Customer Satisfaction with Accounts Procedures

Performance Grid Definitions

Target Company
Base Reference

Overall Rating

Competitive Rating

Order Taking Efficiency

Order Taking Systems Investment

Customer Satisfaction with Order Taking

Performance Grid Definitions

Target Company
Base Reference

Overall Rating

Competitive Rating

Order Delivery Efficiency

Contract Performance Rating

Customer Satisfaction with Contract Performance

Performance Grid Definitions

Target Company
Base Reference

Overall Rating

Competitive Rating

After-Sales Service Efficiency

After-Sales Systems Investment

Customer Satisfaction with After-Sales Procedures

Performance Grid Definitions

Target Company
Base Reference

Overall Rating

Competitive Rating

Levels of Litigation

Fairness of Terms of Business

Customer Satisfaction with Terms of Business

Performance Grid Definitions



 Financial Definitions





The ADMINISTRATION & CUSTOMER HANDLING SCENARIOS BALANCE SHEET FORECASTS section gives a series of Forecasts for the Company and the industry using a number of assumptions relating to the financial decisions available to the management of the Company.

The Balance sheet forecast given shows the effects of financial improvements which any Financial Management is likely to recommend:


  • Base Forecast : Median Market Scenario

  • Personnel & Staff Improvement

  • Administrative & General Expense Objectives

  • Order Taking Improvements

  • Customer / Order Processing Systems Investment

  • Systems Investment

  • Sales Personnel & Staff Improvement

  • Administration Cost Scenarios

  • Profit Impact From Customer Handling Cost Reduction

  • Capital Investments Options: Distribution / Handling

  • Capital Investments Options: Customer Handling Systems

  • Customer Handling Improvements

Managers in the Company will, in both the short-term and the long-term, have vital decisions to make regarding the financial improvements, margins and profitability and these decisions will need to be evaluated in light of the customers, markets, competitors, products, industry and internal factors. The scenarios given isolate a number of the most important factors and provide balance sheet forecasts for each of the scenarios.

The data provides a short and medium term forecast covering the next 6 years for each of Forecast Financial and Operational items. The Financial and Operational Data sections show each of the items listed below in terms of forecast data and covers a period of the next 6 years.



Financial Comparisons: Scenarios


Target Company

Base Reference Industry



MEDIAN  FORECAST : Margins & Ratios


MEDIAN  FORECAST : Margins & Ratios











SYSTEMS Investment: Financials

SYSTEMS Investment: Margins & Ratios



ADMINISTRATION COST Scenarios: Financials

ADMINISTRATION COST Scenarios: Margins & Ratios

Profit Impact from CUSTOMER HANDLING Cost Reduction: Financials

Profit Impact from CUSTOMER HANDLING Costs: Margins & Ratios

Capital Investment Options: DISTRIBUTION / HANDLING: Financials

Capital Investment Options: DISTRIBUTION / HANDLING: Margins & Ratios

Capital Investment Options: CUSTOMER HANDLING SYSTEMS: Financials

Capital Investments: CUSTOMER HANDLING SYSTEMS: Margins & Ratios












SYSTEMS Investment: Financials

SYSTEMS Investment: Margins & Ratios



ADMINISTRATION COST Scenarios: Financials

ADMINISTRATION COST Scenarios: Margins & Ratios

Profit Impact from CUSTOMER HANDLING Cost Reduction: Financials

Profit Impact from CUSTOMER HANDLING Costs: Margins & Ratios

Capital Investment Options: DISTRIBUTION / HANDLING: Financials

Capital Investment Options: DISTRIBUTION / HANDLING: Margins & Ratios

Capital Investment Options: CUSTOMER HANDLING SYSTEMS: Financials

Capital Investments: CUSTOMER HANDLING SYSTEMS: Margins & Ratios




 Financial Definitions



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