Briefly describe the various theories of leadership.

Leadership is the process of influencing the behavior of others towards the attainment of desired goal or purpose in given circumstances. Leadership is a tool to get the desired work done through employees or subordinates. Leadership is majorly explained on the basis of influence relationships and motivational considerations. One method of solving the problem of motivation is the effort to provide inspiring and effective leadership to the employees. The success of a manager is largely decided by the fact as to how much effective he is as a leader. Leadership is the ability to make people act the way the manager or leader wants. It is the process of influencing others to become what they are capable of becoming in the view of the leader. Leadership, in essence is carrying the people with the leader by their consent.

Theories of Leadership
Leadership styles focus on the behavior pattern exhibited by a leader during supervision of the subordinates. On the other hand, who will emerge an effective leader? Or how effective a leadership style will be? such questions are answered by leadership theories. Simply stated, theories focus on various approaches to successful leadership. The theories of leadership may be classified into three categories, Trait theories, Behavioral theories and situational theories. Theories of leadership are provided in two categories: Traditional and modern. Traditional theories are: 1. Trail theory 2. Exchange theory 3. Contingency theory 4. Path goal theory. Modern theories are: 1. CHARISMATIC theory 2. TRANSFORMATIONAL theory 3. SOCIAL COGNITIVE theory

TRADITIONAL THEORIES
TRAIT THEORIES OF LEADERSHIP:
Trait theories identify traits or characteristics that help in leadership. Leaders were more intelligent than the average of the group being led, but, interestingly, the leader is not the most intelligent of the group. Emotion quotient (EQ) characteristics such as empathy, graciousness, optimism, and being able to read the nonverbal cues in social situation are associated with effective leaders. The leader should be able to assess himself as an able person (Self efficacy). From trait theory, this approach moved towards skills theory. From the trait theories, a list of skills categorized as technical, conceptual and human skills needed for effective management or leadership are specified. Yukl further identified that skills such as creativity, organizing ability, persuasiveness, diplomacy and tactfulness, knowledge of the task, and the ability to speak well contribute to leader success. Competencies are another version of trait theory. In the language of competencies, the following competencies were identified as having a relation to leadership effectiveness. 1. Drive, or the inner motivation to pursue goals (achievement motivation). 2. Leadership motivation - the use of socialized power to influence others to succeed. 3. Integrity, the idea includes truthfulness and the will to translate words into deeds. 4. Self-confidence exhibited through impression management 5. Leading others to feel confident. 6. Intelligence ability to process information, analyzes alternatives, and discovers opportunities. 7. Knowledge of the business ideas relevant to the business are initiated. 8. Emotional Intelligence: self-monitoring personality, ability to adapt to circumstances as needed.

EXCHANGE AND GROUP THEORIES OF LEADERSHIP:

According to this group of theories, a leader provides more benefits/rewards than burdens/costs for followers.

In a group, members make contributions at a cost to themselves and receive benefits at a cost to the group or other members. Interaction continues because members find the social exchange mutually rewarding. (If every member of the group has to get more reward than his personal cost, the group must have synergy. The individual contributions result in bigger output due to the synergy) In this group of theories, some analyzed the relationship between leader and the followers as one consisting of dyads, leader and each follower. One idea that emerged from this thinking is that leader behavior changes with subordinate behavior. When subordinates are not performing very well, leaders tend to emphasize the task and initiate structure to improve the performance. With subordinates who are doing a good job, consideration to people becomes the dominant behavior. Some scholars in this group, emphasize the role of subordinates and this means subordinates have to be trained to be good followers so that group comes out successful. Followers have to support the leader and make leader look good. Another aspect of leadership brought out by this line of theory is that subordinates who are committed and who expend a lot of effort for the unit are rewarded with more of the leaders potential resources than those who do not display these behaviors. Thus over a time the leader develops an in-group and an out-group of subordinates and these two groups are treated in different ways. The in-group reports fewer difficulties in their relationship with the leader and the out-group people have more complaints and grievances. In this line of thought is also the idea, perceived similarity between the leader and the subordinate leads to higher quality leader-subordinate relationship. In another dimension of this theory, it is stated that leaders try to change the self concept of the subordinate to improve the performance of the subordinate. At the same time subordinates also shape leaders self concept or self schema through their responses.

CONTINGENCY THEORY OF LEADERSHIP:

Fred Fiedler, presented a rigorous version of contingency theory wherein situation plays a part in leadership process. Fiedler described the favorableness of a situation using three dimensions. 1. The leader-member relationship cordial or opposing 2. The degree of task structure at hand structured or unstructured 3. Leaders position power Formal authority of the leader Fiedler found that when situation is very favorable or unfavorable, authoritarian leadership style delivered better results. When the situation is moderately favorable or unfavorable, human oriented or democratic leadership delivered better results. As in majority of the case, the situation will be in the middle ground, democratic leadership style is the more popular and appropriate style. Fiedler also came out with cognitive resource theory (CRT) of leadership. According to CRT 1. More intelligent leaders develop better plans, decisions, and action strategies than less intelligent leaders. 2. Intelligence contributes more strongly to group performance if the leader is directive and the group members are motivated and supportive of the leader. 3. Interpersonal stress distracts the leader from the task and the leaders intelligence will contribute more highly if the leader has relatively stress-free relationship with superiors and subordinates.

PATH-GOAL LEADERSHIP THEORY:

According to this theory leaders have to understand the goals of the followers and prescribe a path that promises the fulfillment of goals to the followers. The theory asserts that leader behavior will be acceptable to followers to the extent that the followers see such behavior as either an immediate source of satisfaction or as instrumental to future satisfaction. Leadership behavior will be motivational and increase the effort of the followers to the extent that (1) it makes satisfaction of follower needs contingent on effective performance of the tasks planned by the leader and (2) it complements the environment of subordinates by providing the coaching, guidance, support, and rewards which are necessary for effective performance and which may otherwise be lacking in subordinates or in their environment. Leaders can exhibit the following types of behavior as they feel appropriate to a situation. Same person can exhibit all the behaviors as appropriate. 1. Directive leadership: Leader decides the path and directs the followers. 2. Supportive leadership: Leaders friendly. 3. Participative leadership: Leader asks for and uses suggestions of followers.

4. Achievement oriented leadership: Leader sets challenging goals and shows confidence that followers will attain those challenging goals. The activities of leader can be explained in the following steps. 1. Recognizing and arousing followers needs for outcomes over which the leader has some control. 2. Increasing the personal payoffs to followers for task accomplishment. This could mean providing payoffs which the follower desires. 3. Making the path to those payoffs (goals - *path-goal theory) easier to travel by coaching and direction. 4. Helping followers clarify their expectations. 5. Reducing frustrating barriers. 6. Increasing opportunities for personal satisfaction contingent on effective performance. Path goal theory focuses on two aspects, goals of the subordinates and the path that is to be traveled for achieving those goals. Leader has to contribute to both of them or either of them at any point in time to be the leader.

MODERN THEORIES
CHARISMATIC LEADERSHIP THEORIES:
Robert House suggested that charismatic leaders are characterized by self confidence and confidence in subordinates, high expectations for subordinates, ideological vision, and the use of personal examples. Followers identify with leader and his mission, exhibit extreme loyalty to and confidence in the leader, emulate leaders v alues and behavior, and derive self esteem from their relationship with the leader. The leaders foster attitudinal, behavioral and emotional changes in their followers. Charismatic leaders produce performance in followers beyond expectations.

TRANSFORMATIONAL LEADERSHIP THEORY

Transactional leadership involves an exchange relationship and can be interpreted as guiding followers to produce according to their values, beliefs. Transformational leaders shift the values, beliefs and even needs of their followers. Transformation leaders help their organization and followers deliver an output that is far better or higher than than the historical trend based estimated output. Transformational leaders have the following characteristics 1. They identify themselves as change agents. 2. They are courageous. 3. They believe in people. 4. They are value driven 5. They are life long learners. 6. They have the ability to deal with complexity, ambiguity and uncertainty. 7. They are visionaries (have grand plans).

SOCIAL COGNITIVE APPROACH TO LEADERSHIP

The cognitive approach emphasizes understanding. A leader has to understand himself, his needs, and his behavior and also has to understand the environment that includes followers, their needs and behaviors. Leadership is coming out with plans and actions that are acceptable to followers and achieve the objectives of the group. The steps in this approach can be described as: 1. The leader identifies the environmental variables that control his behavior. 2. The leader spares his time to work with the subordinate to discover the personalized set of environmental contingencies that regulate the subordinates behavior. 3. The leader and subordinate jointly attempt to discover ways in which they can manage their individual behavior to produce more mutually reinforcing and organizationally productive outcomes.

4. The leader enhances the efficacy of subordinates through setting up successful experiences (coaching), modeling, positive feedback, and persuasion, and psychological and physiological arousal. The increased efficacy leads to performance improvement. The success of the subordinates can in turn lead to leadership efficacy through the increased confidence in leader as well as appropriate subordinate behavior to reward his leader.

CONCLUSIONS THAT EMERGE FROM SYNTHESIS OF THEORIES

Leadership theories are not mutually exclusive. Each theory to an extent supplements or complements other theories. Leaders are better individuals in various traits compared to average followers. Leaders have to provide value to followers. Their effectiveness does not depend only on their traits and performance. The behavior of followers is also an important variable in determining the outcome of the organization. Hence group responsibility needs to be stressed to attain the outcomes or objectives of the group rather the role of leader alone. Leaders have to be coaches and they have to take interest in developing their subordinates' capabilities.

Compare and contrast Herzbergs Theory of Motivation and McGregors Theory X and Th eory Y.

McGregor's X-Y theory

According to McGregor, there are the following two types of managers: Theory X managers - These managers believe that most of the people are self-centered, are only motivated by their physiological and safety needs, and are indifferent to the needs of the organization they work for. They (usually the team) lack ambition and have very little creativity and problem-solving capacity. As a result, they dislike their work and will try to avoid it. They will also avoid taking responsibility and initiative. There is one word to describe Theory X managers: distrust. They distrust their employees. These managers, therefore, tend to be authoritarian. Theory Y managers - As opposed to Theory X managers, Theory Y managers trust their employees. They believe that most of the people are high performers in a proper work environment. This is because most of the people are creative and committed to meeting the needs of the organization they work for. Theory Y managers also believe that most people like to take responsibility and initiative and are self-disciplined. Finally, they also believe that most people are motivated by all levels of needs in the Maslow's hierarchy of needs. These managers tend to provide more freedom and opportunity for career growth.

Herzberg's motivation-hygiene theory

This theory classifies the factors needed to motivate people into two categories: hygiene factors and motivating factors. Hygiene factors are necessary for motivation but not sufficient; they do not bring satisfaction, but they prevent dissatisfaction. Some examples are compensation; company policies; level of supervision or ownership of the assigned work; relationship with superiors, subordinates, and peers; and working conditions. Motivating factors are factors that bring (or increase) job satisfaction. Some examples are challenging work assignment, opportunity for career advancement and accomplishments, opportunity for growth, sense of responsibility, and recognition.

Write a brief note on MBO? The Concept of Management by Objectives (MBO) The concept of MBO is closely connected with the concept of planning. The process of planning implies the existence of objectives and is used as a tool/technique for achieving the objectives. Modern managements are rightly described as 'Management by Objectives' (MBO). This MBO concept was popularized by Peter Drucker. It suggests that objectives should not be imposed on subordinates but should be decided collectively by a concerned with the management. This gives popular support to them and the achievement of such objectives becomes easy and quick. Management by Objectives (MBO) is the most widely accepted philosophy of management today. It is a demanding and rewarding style of management. It concentrates attention on the accomplishment of objectives through participation of all concerned persons, i.e., through team spirit. MBO is based on the assumption that people perform better when they know what is expected of them and can relate their personal goals to organizational objectives. Superior subordinate participation, joint goal setting and support and encouragement from superior to subordinates are the basic features of MBO. It is a result-oriented philosophy and offers many advantages such as employee motivation, high morale, effective and purposeful leadership and clear objectives before all concerned per-sons. MBO is a participative and democratic style of management. Here, ample a scope is given to subordinates and is given higher status and positive/participative role. In short, MBO is both a philosophy and approach to management. MBO concept is different from MBC (Management by Control) and is also superior in many respects. According to the classical theory of management, top management is concerned with objectives setting, directing and coordinating the efforts of middle level managers and lower level staff. However, achievement of organizational objectives is possible not by giving orders and instructions but by securing cooperation and participation of all persons. For this, they should be associated with the management process. This is possible in the case of MBO and hence MBO is different from MBC and also superior to MBC. MBO is an approach (to planning) that helps to overcome these barriers. MBO involves the establishment of goals by managers and their subordinates acting together, specifying responsibilities and assigning authority for achieving the goals and finally constant monitoring of performance. The genesis of MBO is attributed to Peter Drucker who has explained it in his book 'The Practice of Management'. Definitions Of Management By Objectives MBO:According to George Odiome, MBO is "a process whereby superior and subordinate managers of an Organisation jointly define its common goals, define each individual's major areas of responsibility in terms Of results expected of him and use these measures as guides for operating the unit and assessing the contribution of each of its members." According to John Humble, MBO is "a dynamic system which seeks to integrate the company's needs to clarify and achieve its profits and growth goals with the manager's need to contribute and develop himself. It is a demanding and rewarding style of managing a business." Features Of Management By Objectives MBO :Superior-subordinate participation: MBO requires the superior and the subordinate to recognize that the development of objectives is a joint project/activity. They must be jointly agree and write out their duties and areas of responsibility in their respective jobs. Joint goal-setting: MBO emphasizes joint goal-setting that are tangible, verifiable and measurable. The subordinate in consultation with his superior sets his own short-term goals. However, it is examined both by the superior and the subordinate that goals are realistic and attainable. In brief, the goals are to be decided jointly through the participation of all. Joint decision on methodology: MBO focuses special attention on what must be accomplished (goals) rather than how it is to be accomplished (methods). The superior and the subordinate mutually devise methodology to be followed in the attainment of objectives. They also mutually set standards and establish norms for evaluating performance. Makes way to attain maximum result: MBO is a systematic and rational technique that allows management to attain maximum results from available resources by focussing on attainable goals. It permits lot of freedom to subordinate to make creative decisions on his own. This motivates subordinates and ensures good performance from them.

Support from superior: When the subordinate makes efforts to achieve his goals, superior's helping hand is always available. The superior acts as a coach and provides his valuable advice and guidance to the subordinate. This is how MBO facilitates effective communication between superior and subordinates for achieving the objectives/targets set.

Steps In Management By Objectives Planning :Goal setting: The first phase in the MBO process is to define the organizational objectives. These are determined by the top management and usually in consultation with other managers. Once these goals are established, they should be made known to all the members. In setting objectives, it is necessary to identify "Key-Result Areas' (KRA). Manager-Subordinate involvement: After the organizational goals are defined, the subordinates work with the managers to determine their individual goals. In this way, everyone gets involved in the goal setting. Matching goals and resources: Management must ensure that the subordinates are provided with necessary tools and materials to achieve these goals. Allocation of resources should also be done in consultation with the subordinates. Implementation of plan: After objectives are established and resources are allocated, the subordinates can implement the plan. If any guidance or clarification is required, they can contact their superiors. Review and appraisal of performance: This step involves periodic review of progress between manager and the subordinates. Such reviews would determine if the progress is satisfactory or the subordinate is facing some problems. Performance appraisal at these reviews should be conducted, based on fair and measurable standards.

Advantages of Management By Objectives MBO : Develops result-oriented philosophy: MBO is a result-oriented philosophy. It does not favor management by crisis. Managers are expected to develop specific individual and group goals, develop appropriate action plans, properly allocate resources and establish control standards. It provides opportunities and motivation to staff to develop and make positive contribution in achieving the goals of an Organisation. Formulation of dearer goals: Goal-setting is typically an annual feature. MBO produces goals that identify desired/expected results. Goals are made verifiable and measurable which encourage high level of performance. They highlight problem areas and are limited in number. The meeting is of minds between the superior and the subordinates. Participation encourages commitment. This facilitates rapid progress of an Organisation. In brief, formulation of realistic objectives is me benefit of M[BO. Facilitates objective appraisal: NIBO provides a basis for evaluating a person's performance since goals are jointly set by superior and subordinates. The individual is given adequate freedom to appraise his own activities. Individuals are trained to exercise discipline and self control. Management by self-control replaces management by domination in the MBO process. Appraisal becomes more objective and impartial. Raises employee morale: Participative decision-making and two-way communication encourage the subordinate to communicate freely and honestly. Participation, clearer goals and improved communication will go a long way in improving morale of employees. Facilitates effective planning: MBO programmes sharpen the planning process in an Organisation. It compels managers to think of planning by results. Developing action plans, providing resources for goal attainment and discussing and removing obstacles demand careful planning. In brief, MBO provides better management and better results. Acts as motivational force: MBO gives an individual or group, opportunity to use imagination and creativity to accomplish the mission. Managers devote time for planning results. Both appraiser and appraise are committed to the same objective. Since MBO aims at providing clear targets and their order of priority, employees are motivated. Facilitates effective control: Continuous monitoring is an essential feature of MBO. This is useful for achieving better results. Actual performance can be measured against the standards laid down for measurement of performance and deviations are corrected in time. A clear set of verifiable goals provides an outstanding guarantee for exercising better control. Facilitates personal leadership: MBO helps individual manager to develop personal leadership and skills useful for efficient management of activities of a business unit. Such a manager enjoys better chances to climb promotional ladder than a non-MBO type.

Limitations of Management By Objectives MBO : Time-consuming: MBO is time-consuming process. Objectives, at all levels of the Organisation, are set carefully after considering pros and cons which consumes lot of time. The superiors are required to hold frequent

meetings in order to acquaint subordinates with the new system. The formal, periodic progress and final review sessions also consume time. Reward-punishment approach: MBO is pressure-oriented programme. It is based on reward-punishment psychology. It tries to indiscriminately force improvement on all employees. At times, it may penalize the people whose performance remains below the goal. This puts mental pressure on staff. Reward is provided only for superior performance. Increases paper-work: MBO programmes introduce ocean of paper-work such as training manuals, newsletters, instruction booklets, questionnaires, performance data and report into the Organisation. Managers need information feedback, in order to know what is exactly going on in the Organisation. The employees are expected to fill in a number of forms thus increasing paper-work. In the words of Howell, "MBO effectiveness is inversely related to the number of MBO forms. Creates organizational problems: MBO is far from a panacea for all organizational problems. Often MBO creates more problems than it can solve. An incident of tug-of-war is not uncommon. The subordinates try to set the lowest possible targets and superior the highest. When objectives cannot be restricted in number, it leads to obscure priorities and creates a sense of fear among subordinates. Added to this, the programme is used as a 'whip' to control employee performance. Develops conflicting objectives: Sometimes, an individual's goal may come in conflict with those of another e.g., marketing manager's goal for high sales turnover may find no support from the production manager's goal for production with least cost. Under such circumstances, individuals follow paths that are best in their own interest but which are detrimental to the company. Problem of co-ordination: Considerable difficulties may be encountered while coordinating objectives of the Organisation with those of the individual and the department. Managers may face problems of measuring objectives when the objectives are not clear and realistic. Lacks durability: The first few go-around of MBO are motivating. Later it tends to become old hat. The marginal benefits often decrease with each cycle. Moreover, the programme is deceptively simple. New opportunities are lost because individuals adhere too rigidly to established goals. Problems related to goal-setting: MBO can function successfully provided measurable objectives are jointly set and it is agreed upon by all. Problems arise when: (a) verifiable goals are difficult to set (b) goals are inflexible and rigid (c) goals tend to take precedence over the people who use it (d) greater emphasis on quantifiable and easily measurable results instead of important results and (e) over-emphasis on short-term goals at the cost of longterm goals. Lack of appreciation: Lack of appreciation of MBO is observed at different levels of the Organisation. This may be due to the failure of the top management to communicate the philosophy of MBO to entire staff and all departments. Similarly, managers may not delegate adequately to their subordinates or managers may not motivate their subordinates properly. This creates new difficulties in the execution of MBO programme.

Essential Conditions for Successful Execution / Implementation of MBO : Support from all: In order that MBO succeeds, it should get support and co-operation from the management. MBO must be tailored to the executive's style of managing. No MBO programme can succeed unless it is fully accepted by the managers. The subordinates should also clearly understand that MBO is the policy of the Organisation and they have to offer cooperation to make it successful. It should be a programme of all and not a programme imposed on them. Acceptance of MBO programme by managers: In order to make MBO programme successful, it is fundamentally important that the managers themselves must mentally accept it as a good or promising programme. Such acceptances will bring about deep involvement of managers. If manages are forced to accept NIBO programme, their involvement will remain superfluous at every stage. The employees will be at the receiving-end. They would mostly accept the lines of action initiated by the managers. Training of managers: Before the introduction of MBO programme, the managers should be given adequate training in MBO philosophy. They must be in a position to integrate the technique with the basic philosophy of the company. It is but important to arrange practice sessions where performance objectives are evaluated and deviations are checked. The managers and subordinates are taught to set realistic goals, because they are going to be held responsible for the results. Organizational commitment: MBO should not be used as a decorative piece. It should be based on active support, involvement and commitment of managers. MBO presents a challenging task to managers. They must shift their capabilities from planning for work to planning for accomplishment of specific goals. Koontz rightly observes, "An effective programme of managing by objective must be woven into an entire pattern and style of managing. It cannot work as a separate technique standing alone."

Allocation of adequate time and resources: A well-conceived MBO programme requires three to five years of operation before it provides fruitful results. Managers and subordinates should be so oriented that they do not look forward to MBO for instant solutions. Proper time and resources should be allocated and persons are properly trained in the philosophy of MBO. Provision of uninterrupted information feedback: Superiors and subordinates should have regular information available to them as to how well subordinate's goal performance is progressing. Over and above, regular performance appraisal sessions, counseling and encouragement to subordinates should be given. Superiors who compliment and encourage subordinates with pay rise and promotions provide enough motivation for peak performance.

Discuss departmentation by product.

The purpose of product departmentation is that every product is handled by separate management team and the problems faced in the development of a product are carried out by single group of employees working in that unit. The disadvantage is that the product managers need to coordinate each other for the resource sharing which becomes a difficult process because of lesser communication between the product divisions. Sometimes, products of the same company start competing with each other which results in snatching one's division profit from other division leaving behind net profit for the company zero. However this kind of structure works best in the big organizations which have lots of products in their product portfolio. Companies may have multiple products. Like Maruti is producing Alto, Zen, Swift. Large companies are often organized according to the product. All common activities required to produce and market a product are grouped together. Major disadvantages are duplication of resources. Each product requires most of the same functional areas such as finance, marketing, production etc. For example, Samsung manufactures Phones, T.V., Tablet etc. For each product, they have same functional department like marketing, production etc. Thus, it is duplication of functions. Product Departmentalization has become important for large complex organization. Advantages : Allows specialization in particular products and services. Managers can become experts in their industry. Closer to customers. Places attention and effort on product line. Places responsibility for profits at the division level. Improves coordination of functional activities. Furnishes measurable training ground for general managers. Permits growth and diversity of products and services. Limitations : Duplication of functions. Limited view of organizational goals Requires more persons with general manager abilities. Tends to make maintenance of economical central services difficult.
Under product departmentation, departments are formed on the basis of a particular product, product line, or service. Each of these departments can operate fairly autonomously. A key advantage is better coordination and fewer barriers to communication among the functional specialists who work on a particular product line. They also have more potential for responding to customers in a timely way. A disadvantage is that product-oriented departments might actually work at cross purposes.

What are the steps in the planning process? Steps in Planning:

Being aware of opportunities: In light of: The market Competition What customers want Our strengths Our weaknesses

Setting objectives or goals Where we want to be and what we want to accomplish and when. (Primary Goal)

Considering planning premises In what environment internal or external will our plans operate?

Choosing an alternative Selecting the course of action we will pursue

Comparing alternatives in light of goals sought Which alternative will give us the best chance of meeting our goals at the lowest cost and highest profit?

Identifying alternatives What are the most promising alternatives in accomplishing our objectives?

Formulating supporting plans Such as plans to: Buy equipment Buy materials Hire and train workers Develop a new product

Quantifying plans by making budgets Develop such budgets as: Volume and price of sales Operating expenses necessary for plans Expenditures for capital equipment

BEING AWARE OF OPPORTUNITIES An awareness of opportunities in the external environment as well as within the organization is the real starting point for planning. All managers should take a preliminary look at possible future opportunities and see them clearly and completely, know where their company stands in light its strengths and weaknesses, understand what problems it has to solve and why, and know what it can expect to gain. Setting realistic objectives depends on this awareness. Planning requires realistic diagnosis of the opportunity situation. Although it precedes actual planning and is therefore not strictly a part of the planning process, ESTABLISHING OBJECTIVES The second step in planning is to establish objectives for the entire enterprise and then for each subordinate work unit. This is to be done for the long term as well as for the short range. Objectives specify the expected results and indicate the end points of what is to be done, when the primary emphasis is to be placed, and what is to be accomplished by the network of strategies, policies, procedures, rules, budgets, and programs. Enterprise objectives give direction to the major plans, which, by reflecting these objectives, define the objective of every major department. Major departmental objectives in turn control the objectives of subordinate departments, and so on down the line. In other words, objectives form a hierarchy. The objectives of lesser departments will be more accurate if subdivision manger understands the overall enterprise objectives and the derivative goals. Managers should also have the opportunity to contribute ideas for setting their own goals and those of the enterprise.

DEVELOPING PREMISES (Assumptions about the environment in wch the plan is tO be carried out.)

The next logical step in planning is to establish, circulate, and obtain agreement to utilize critical planning premises such as forecasts, applicable basic policies, and existing company plans. Premises are assumptions about the environment in which the plan is to be carried out. It is important for all the managers involved in planning to agree on the premises. In fact, the major principle of planning premises is: the more thoroughly individuals charged with planning understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be. Forecasting is important in premising: What kinds of markets will there be? What volume of sales? What prices? What products? What technical developments? What cost? What wage rates? What tax rates and policies? What new plants? What policies ith respect to dividends? What political or social environment? How will expansion e financed? What are the long-term trends? Determining Alternative Courses The fourth step in planning is to search for and examine alternative courses of action. especially those not immediately apparent. There is seldom a plan for which reasonable alternatives do not exist, and quite often an alternative that is not obvious proves to he the best. The more common problem is not finding alternatives but reducing the number of alternatives so that the most promising may be analyzed. Even with mathematical techniques and the computer, there is a limit to the number of alternatives that can he thoroughly examined. The planner must usually make a preliminary examination to discover the most fruitful possibilities. Evaluating Alternative Courses After seeking out alternative courses and examining their strong and weak points, the next step to evaluate the alternatives by weighing them in light of premises and goals. One course may appear to be the most profitable hut may require a large cash outlay and have a slow playback another may look less profitable but may involve less risk; still another may better suit the companys long-range objectives. There are so many alternative courses in most situations and so many variables and limitations to be considered that evaluation can be exceedingly difficult. Because of these complexities. Selecting A Course: This is the point at which the plan is adopted the real point of decision making. Occasionally, an analysis and evaluation of alternative courses will disclose that two or more are advisable, and the manager may decide to follow several courses rather than the one best course. Formulating Derivative Plans When a decision is made, planning is seldom complete, and a seventh step is indicated. Derivative plans are almost invariably required to support the basic plan. Quantifying Plans by Budgeting After decisions are made and plans are set, the final step in giving them meaning, as was indicated in the discussion on types of plans, is to quantify them by converting them into budgets. The overall budget of an enterprise represents the sum total of income and expenses, with resultant profit or surplus, and the budgets of major balance sheet items such as cash and capital expenditures. Each department or program of a business or some other enterprise can have its own budgets, usually of expenses and capital expenditures, which tie into the overall budget. If done well, budgets become a means of adding the various plans and set important standard against which planned progress can be measured.