Trading procedure on a stock exchange

Prior to introduction of computer based online trading, trading used to be done in the trading hall of a stock exchange. This system was full of shortcomings,hence replaced by online trading. The ususal online trading procedure is as follows:

1. Contacting a broker: any investor, willing to invest in stock exchange is required to get itself registered with a broker and complete the required formalities. Depending upon the type of trading practice, the broker may provide him the trading facility, e.g. a combination of direct online service, through branch and phone calls.

2. Placing an order: after the type of facility is decided, an investor may place, buy or sell order as the case may be. An order may be placed in two forms, at market rate or desired rate. In case of market rate order is executed immediately. In case of desired rate, transation will be executed only when the desired rate comes.

3. Execution of order: When buy/sell orders are fed into a computer either by an investor or by a broker, the list of executed orders are prepared. The broler informs the investor by call or by mail and prepares a contract.

4. Settlement: all the transactions taking place in a day are settled by the stock exchange on the appointed day. Net results of all the transactions done by a broker are settled which shows how much money each broker will receive or deposit. The broker in turn settles his accounts with his individual investors.

The above settlement is relevent to cash segment of a stock exchange. Besides cash segment, NSEI and BSE have derivative segments in which securities do not exchange hands but only difference in prices of the securities is settled. This is called forward trading.

Important terms related to stock exchange

1. Dematerialisation: these days . securities like equity shares are not allotted in paper form. When records like ownershipof stocks is kept in electronic form instead of physical form(i.e. share certificates) it is known as dematerialisation of securities. It helps in overcoming the problem of theft, forgery, delays, misplaced certificates and unnecessary paper work.

2. Demutulisation: The purpose of demutulisation is to protect the interests of the investors and to reduce the chances of brokers using the exchange for their personel gains. It is the process that separates the trading rights of members or brokers in a stock exchange from its ownership and control.

Staffing Process

Staffing Process

1. Manpower planning: The first step in the process of staffing is concerned with determining the number and type of individuals required for the organisation.

Manpower planning necessitates work load as well as work force analysis. Work load analysis means assessing the number 0f employees required for performance whereas work force means finding the number and type available. Such an exercise would also reveal if the organization is understaffed, overstaffed or normally staffed.

2. Recruitment: This involves attracting and stimulating qualified candidates to apply for the job. This refers to the identification of the different sources of manpower availability (internal or external) and making efforts to secure applications for various job positions.

3. Selection: It is the process of choosing the best candidate to fill in the job positions. It is said to be the negative process as more no. of candidates are rejected at each stage than the no. of candidates selected.

4. Placement and Induction: placement involves pitting the selected candidates at the right job after considering his ability and aptitude.

After placing the candidates on their jobs, induction begins. It includes introducing or orienting the employees to the organisaton and to their fellow employees. They are also informed about their working hours, tea breaks, leave rules, medical and transport facilities etc.

5. Training: it refers to the process of education the selected employees so as to increase their skill of handling the job efficiently. Various methods of training are used to enhance their skills.

6. Performance appraisal: it is a systematic way of measuring the performance of employees so that their training and promotion etc. can be decided.

7. Career planning and promotion: Employees these days have a lot of aspirations about their career. The orgnisations must plan clear cut promotional policies so that employees are motivated. Employees who show better performance consistently should be promoted to higher positions.

8. Compensation: It is the remuneration paid to employees in cash and in kind in exchange of the services. wages are fixed according to their level, nature of work, degree of risk involved etc. workers should be suitably rewarded to sustain and attract competent personnel.

Features of principles of management

Priciples of Management

Features

1. Evolutionary: Management principles are not developed overnight or they are not based on personal feeling of an individual. Proper observation and experimentation is done before making any concept a principle.

2. General Guidelines: Management pricniples are general guidelines to action and decision making. They are not readymade solutions to problems. Their applicability differ according to the nature, size and requirement of the organisation.

3. Influence human behaviour: principles of management are meant for regulating human behaviour and getting higher performance from individuals. However, due to complexity of human behaviour, its applicability is limited.

4. Universal: principles of management are applied to all types of organisaions irrespective of their nature and size and in all situations. E.g. priniple of unity of command is applied to all types of organisations.

5. Flexible: Principles can be applied differently in under different conditions. Some changes can be made in their application according to the requirement of the company. They can be easily modified by the managers who are using them. E.g. degree of centralisation and decentralisaton vary in different organisations according to their nature and size.

6. Contingent: This means thet management principles are dependent on the situations prevailing in the organisation. E.g. principle of team spirit is very important for organisarions where work is carried out by group of people whereas it of no use for the companies where work is performed by individuals and not by group.

7. Based on cause and effect relationship: Principles tell us clearly that if a particular principle is applied in a situation, what would be its effect. E.g. principle of division of labour leads to specialisation and increase in efficiency. Here division of labour is the cause and efficiency is the effect.

Chapter – 2

Principles of Management

Objective Questions

1. 1. Give any point of difference between management and scientific principles.

2. 2. Give any difference between management principles and values

3. 3. Give any point of difference between management principles and techniques.

4. 4. Give any two features of management principles.

5. 5. Are principles of management static?

6. 6. List any two principles of ‘scientific management’ formulated by Taylor for managing any organisation scientifically?

7. 7. How are management principles derived?

8. 8. Why is that management principles are universal?

9. 9. Which principle of management insists in orderly arrangement of men and material?

10. 10. An organisation is following the principle of scalar chain and principle of equity. What are the positive effects of these principles?

Conceptual Questions

1) Describe the meaning of “Replacement of thumb of rule with science”?

2) How do the techniques of time study and motion study help in improving the efficiency level?

3) Which principle of management is violated in the following situations :

• a) When a worker receives order from more than one boss.
• b) When an employee is given responsibility to achieve target production of 500 units with no authority to access over raw materials.
• c) When worker is wasting time for search of tool box in the organisation.
• d) When manager grants one month medical leave to a supervisor with pay and only one week medical leave to account.

4) Why does the principle of unity of command not hold good in an organisation using the technique of functional foremanship?

5) Taylor’s techniques of management are universally applicable. Do you agree? Give four reasons to support your answer

6) The production manager of Bharat Ltd. Instructs a salesman to go slow in selling the products whereas the marketing manager is insisting on fast selling to achieve the target. Which principle is being violated in this case? State any one consequences of violating this principle.

Very Short Answer Questions

1) What do you understand by principles of management?

2) What does scientific management mean?

3) State any two characteristics of principles of management.

4) What do you mean by universality of management principles?

5) What is meant by flexibility of management principles?

6) ‘Management principles are evolutionary’. Explain.

7) Distinguish between principle of unity of command and unity of direction on the basis of

• a) Meaning
• b) Aim

8) What are the aims of time and motion study?

9) ‘Fayol’s principles of equity and order can be applied in actual work situation.’ Do you agree?

10) How do the principle of scalar chain helps in solving the problems faster?

11) What is meant by work study?

12) What do you mean by simplification of work?

13) What is the basic difference between unity of command and foremanship?

14) State any three principles of Taylor.

15) Describe the principle of cooperation between the workers and the management.

16) Explain the principle of remuneration

17) Explain in brief the principle of Esprit De Corps

18) Give suitable examples for the principle of division of labour.

19) Why Henry Fayol is considered as the father of management?

Short answer questions

1. 1. How do the principles of scalar chain and unity of command help in solving the problems faster?
2. 2. Briefly explain the principles of scientific management
3. 3. Explain five techniques which facilitate the application of scientific principles.
4. 4. Explain with suitable example the technique of differential rate system
5. 5. Write a note on functional foremanship
6. 6. How do the techniques of scientific management improve the productivity of workers?
7. 7. Explain the nature of management principles
8. 8. Bring out the importance of management principles
9. 9. Explain the method study and technique of simplification as developed by Taylor
10. 10. Explain the principle of discipline and principle of subordination of individual interest to general interest

Long answer questions

1. 1. Develop a differential piece rate plan for a shirt manufacturing company.

2. 2. Taylor’s principle of scientific management and Fayol’s principles of management are mutually complementary. Do you agree with this view? Give any five reasons.

3. 3. It has been observed that the ‘prevailing situation’ in an organisation is due to violation of principle of order. What might have been the prevailing situation?

4. 4. Taylor’s techniques are universally applicable. Do you agree?

5. 5. An employee is asked to produce 100 units in one week’s time but he is not allowed to take out the raw materials from the store. At the end of the week the employee could not complete his target because of insufficient supply of raw material. Can we blame the employee? Which principle is associated with this condition? Explain it.

6. 6. Explain any five techniques of “scientific management”

7. 7. If any organisation does not provide for the right place for human and physical resources in an organisation then which principle is violated? What are the consequences of it?

8. 8. Mohan, a manager expects his sub-ordinates to adapt to the new environment and working conditions without giving them time to settle down. Which principles of management are being overlooked and why?1.

9. 9. Mohan a manager expects his subordinates to work for the happiness and pleasure of being in the organisation. Which principle is being related to this?

10. a manager does not distribute the work a=among his subordinates wither according to the capability or proportionately. Which principle of management is overlo

Differencie between policy and strategy

Difference between rules and methods

difference between rules and procedures

Difference between policies and rules

difference between policy and procedures

difference between policies and objectives

Marking scheme for class XII Board exams (2010-2011)
Chapter1. Nature and significance of management 7 marks
Chapter2. Principles of Management 7 marks
Chapter3. Business Environment 5 marks
Chapter4. Planning 7 marks
Chapter5. Organising 8 marks
Chapter6. Staffing 10 marks
Chapter7. Directing 10 marks
Chapter8. Controlling 6 marks
Chapter9. Business Finance 12 marks
Chapter10. Financial markets 8 marks
Chapter11. Marketing Management 14 marks
Chapter12. Consumer Protection 6 marks

Staffing

Staffing

An organisation can achieve its objectives only when it has right people in the right positions. Staffing is that part of the process of management which is concerned with obtaining, utilizing and maintaining a satisfactory and satisfied work force.
Staffing has been described as the managerial function of filling and keeping filled the positions in the organisation structure.

Importance of staffing
Since the right people have to be chosen while selecting a person, the human element is very important. Staffing provides the human element or instinct while selecting. The attitude, aptitude, commitment, loyalty are important qualities perceived by the enterprise.
Human resource is the foundation of any business. The right people can help you take your business to the top; the wrong people can break your business. Hence staffing is the most fundamental and critical to organizational performance.
The staffing function has assumed greater importance these days because of
· Rapid advancement of technology
· Increasing size of organisation and
· Complicated behavior of human beings

No organisation can be successful unless it has the right kind of people at different job positions.
Staffing ensures the following benefits to the organizations:
1. It helps in finding and placing competent personnel at various jobs.
2. It ensures higher performance by placing right person at the right job.
3. By appointing efficient staff, it ensures continuous survival and growth of the organisation.
4. It ensures optimum utilization of human resource. Through manpower planning and job analysis we can find out the number and type of employees required. So there are no chances of overmanning and shortage of personnel.
5. Objective assessments and fair rewards improve job satisfaction and morale of employees. Such efficient staff helps to win over the competitors..

Importance of decentralisation

Importance of decentralisation
1. Develops initiative among subordinates: When the lower level managers are given freedom to take their own decisions they learn to depend on their own judgment. They keep facing challenges and take initiative to develop solutions for them. It also helps in identifying those executives who have the necessary potential to become dynamic leaders.
2. Develops managerial talent for the future: When the work is passed on to the employees it gives them opportunity to use their talents and increases their experience of handling work independently. This gives them a chance to prove their abilities and prepares qualified manpower who can be promoted to the vacant positions. It also helps to identify those who may not be successful in assuming greater responsibility.
3. Quick decision making: Through decentralisation, the decision making power is entrusted to all the managers. This leads to faster decision making because employees near the point of action need not take approval from the higher level and can take their own decisions. So the process is much faster.
4. Relief to top management: in the process of decentralisation, top level managers are not overburdened with the responsibility and authority as they systematically pass the authority and responsibility at different levels and they become free to concentrate on more important issues.
5. Facilitates growth: Decentralisation means greater freedom to lower levels as well as divisions and departments. This develops a sense of competition among them where each one tries to do better than the other. Thus their productivity levels increase and they generate greater returns for the organization.
6.Better control:

Decentralization

Decentralization
Decentralization means delegation of authority at every level. It is the even and systematic distribution of decision making authority to the lowest level of management. Under decentralization every employee working at different levels gets some share in the authority. Decentralization is a policy matter and managers plan in advance whether to go for centralized or decentralized policy.

Relation between delegation and decentralization
Decentralisation is the extension of delegation. In delegation, we multiply the authority by two whereas in decentralization, the authority is multiplied by many because systematic delegation taking place at every level will result in evenly distribution of authority and responsibility at every level and result in decentralistion. If delegation is restricted to certain levels only then there will be no complete decentralization also.

For example if the director gives the responsibility to production head to complete the target of 50,000 units per annum, and authorize him to hire the required workers, decide their salaries and working conditions.
The production head further shares his authority and responsibility with production manager to achieve the target and select the workers.
The production manager in turn shares with the supervisor to select the workers.
This sharing of authority and responsibility between the director, production head, production manager and the supervisor will result in systematic distribution of authority at every level automatically. Thus we say that delegation leads to decentralization.


Relation between centralization and decentralisation

An organization is centralized when decision making authority is retained by higher management whereas it is decnetralised when the authority is delegated.
Complete centralization means concentration of all decision making authority at the top level in the management hierarchy. On the other hand complete decentralisation implies the delegation of all decision making authority to the lower level of the hierarchy. Both these situations are unrealistic. An organization can never be completely centralized or decentralized. As it grows in size and competency, there is a tendency to move towards decentralisation. This is because in large organizations, those employees who are closely involved with the operations tend to have more knowledge about them than the top management. Hence there is a need for a balance between these co-existing forces.

Importance of delegation

Importance of delegation
1. Effective management: By delegation, managers pass their routine work to their subordinates. So they get more time to concentrate on more important matters. This will help them to excel in new areas and be more efficient and effective.
2. Employee development: In the process of management, the work is passed on to the employees. This gives them opportunity to use their talents and increases their experience. It makes them better leaders and decision makers. Thus delegation helps in preparing better future managers.
3. Motivation of employees: When a superior passes on the responsibility to his subordinate, it is not merely sharing work but also sharing trust. This develops a feeling of belongingness and commitment for the subordinate. It improves his confidence and he feels encouraged to improve his performance.
4. Facilitation of growth: While passing on a responsibility and authority managers have to take care of the qualification and capability of the employee. This division of work and specialization provides a ready work force to take the leading position in a new venture and thus help in the expansion of the enterprise.
5. Basis of management hierarchy: Delegation establishes authority responsibility relationships between employees. The degree and flow of authority determines who is to report to whom. It also decides the power enjoyed by each job position in the organization.
6. Better coordination: Authority, responsibility and accountability help to define the powers, duties and answerability related to various job positions in an organization. This helps to avoid overlapping and duplication of efforts and thus helps in maintaining coordination amongst departments and functions of management.Importance of delegation

Delegation

Delegation
Delegation is defined as ‘a process of entrusting responsibility and authority to the subordinates and creating accountability on those who are entrusted with the authority and responsibility.’
Delegation means downward transfer of authority from a superior to subordinate. It is required for efficient functioning of the organization as well as enables the manager to use his time on high priority work. It helps the subordinate to satisfy his needs.
However it is not the process of abdication. The manager shall still be responsible for the performance of the job assigned to him. Moreover, the authority delegated to a person can be taken back and redelegated to another person. Thus, irrespective of the authority delegated, the manager will still be accountable to his senior.


Elements of Delegation
1.Responsibility: It means the obligation of the subordinate to properly perform the work assigned to him. The process of delegation begins when the manager passes on some of his responsibilities to his subordinates which mean that responsibility can be delegated.
However, when an employee is given the responsibility of some job, he must also be given the requisite authority to carry out his job.
2.Authority: It means power to take decision. It also refers to the right of an individual to command his subordinates within the scope of his position.
When the managers are passing their responsibilities to the subordinates, they also pass some authority matching the responsibility. However they should not pass all their authority to their subordinate.
3.Accountability: It implies answerability of the subordinate for accomplishment or non accomplishment of job assigned. Once, the authority has been delegated and responsibility accepted, one cannot deny accountability. Accountability can only be shared with the subordinate, it cannot be delegated and it flows upwards.
It indicated that the manager must ensure proper discharge of duties by his subordinates. The subordinate is expected to explain the consequences of his actions and omissions.

Thus it can be stated that while the authority can be delegated, responsibility is assumed and accountability is imposed.

Delegation is not the process of abdication
This means that accountability is absolute. It can never be passed or delegated. Even after creating accountability on subordinates, the superiors also remain answerable. For example, if the sales manager is assigned a target of selling 1000 units in one month, and he divided this target among 5 salesmen under him. At the end of the month, if only 80 units could be sold, he can not escape his accountability. Though he had passed this target to his subordinates, still he cannot get rid of his accountability. He should have checked the performance from time to time to make sure that the work is going on in the right direction and taken timely action.

Formal and Informal organization

Formal and Informal organization

Formal Organisation

When the managers are carrying on the organizing process then as a result, an organizational structure is created to achieve systematic working and efficient utilization of resources. This type of structure is known as formal organizational structure.
This structure clearly spells out the job, authority, and responsibility assigned to each individual, the superior subordinate relationship and their designations.
The features of such a structure are:
1. This structure is created deliberately created by the process of organizing.
2. The purpose of the structure is to achieve organizational goals.
3. It gives more emphasis to work than to interpersonal relationships among employees.
4. Each individual is assigned a specific job and a fixed authority. Various job positions and their interrelationships are clearly defined. This clarifies who is to report to whom.
5. It results into the creation of a scalar chain. Efforts if different departments are coordinated, interlinked and integrated.

Advantages
1. It helps in effective accomplishment of goals by clearly defining the job role of each employee.
2. It is easy to fix responsibility as mutual relationships are clearly defined.
3. There is no overlapping or duplication of work as work is systematically divided among various departments and individuals.
4. Unity of command is maintained through an established scalar chain.
5. It provides stability to the organization since the behavior of members can be fairly predicted.

Limitations
1. Because of scalar chain, communication is generally slow, leading to delay in action.
2. It does not give importance to the social and psychological needs of the employees. This may lead to demotivation.
3. It places more emphasis on structure and work, and so it ignores human relations, creativity and talent.

Informal structure
In the formal structure, individuals are assigned certain job positions. While working on these job positions, the individuals interact with each other and develop some social and friendly relations in the organization. This network of social and friendly groups forms another structure in the organization which is called the informal structure.
Informal structure gets created automatically and spontaneously for getting psychological satisfaction. However, the existence of such organization depends upon the existence of formal structure. So, if there is no formal structure, there will be no job positions, there will be no people working on these job positions, and there will be no informal structure.
Features of informal structure are:
1. It gets created automatically without any deliberate efforts by the management.
2. The existence depends upon formal organization. It originates from within formal organization as a result of personal interactions among employees.
3. It does not follow any fixed path of authority or communication. So there is no specific direction of flow of information.
4. There are no officially laid down norms of behavior. There is no definite structure. The source of information cannot be known

Advantages
1. Informal communication does not follow scalar chain and so there can be faster spread of communication.
2. It helps to fulfill the social needs of members and gives them a sense of belongingness and motivation.
3. It helps the top level manager to know the real feedback of employees. This information can be made use of to fulfill organizational objectives.

Disadvantages
1. It may sometimes work against the interests of formal organization and spread rumors.
2. Sometimes the informal structure may oppose the policies and changes of management, and then it becomes very difficult to implement them in organization.
3. It may force the members to follow group norms. This may be harmful to the interest of the organization.

Types of organizational structure -Divisional structure

Types of organizational structure

B. Divisional Structure
An organization which is very large in size and is producing more than one product, they need to evolve a design to cope with the complexity. The activities related to one product are grouped under one division. The organizational structure consists of separate divisions, each such division has its own manager. Within each division, functions like production, marketing, finance etc. are performed.
In other words, each division tends to adopt a functional structure. However, functions may vary across divisions in accordance to their product line.

Advantages
1. Development of personnel: All activities related to one type of product are grouped under one department only. This helps in development of varied skills in the head and prepares him for a higher post.
2. Accountability: In this type of structure, the performance of each department can be easily assessed. It also helps in fixation of responsibility for poor performance so that appropriate remedial action can be taken.
3. Fast decision making: Each division functions independently and so decisions are much faster. This also promotes flexibility and initiative.
4. Expansion and growth: New departments can be easily added without disturbing the existing departments.

Disadvantages
1. There may be a conflict among different divisions on allocation of resources. A particular division may seek to maximize profits at the cost of others.
2. Each department requires all the resources to work as an independent unit. This increases cost as there may be duplication of activities across products.
3. The divisional heads focus only on their product. They may fail to identify themselves as a part of the common organization and develop divisional conflicts, ignoring organizational interests.

Suitability
Divisional structure is suitable where:
· The number of products is more than one.
· Different manufacturing technologies and marketing methods are used.
· The size of the concern is very large or is growing.

Types of organizational structure

A. Functional Structure
When the activities or jobs are grouped keeping in mind the functions to be performed then it is called functional structure. These functions are organized in to separate departments. For example, in a manufacturing concern division of work into key functions will include production, purchase, marketing, and personnel.












Advantages
1. Specialisation: Activities are grouped according to functions to be performed. Similar tasks are placed under one department. This leads to efficiency and specialization.
2. Easy supervision: Since the tasks to be done in one department are of similar nature, it becomes easy for the supervisor to guide and supervise the employees performing the jobs.
3. Easy coordination: Similarity of tasks being performed help in promoting control and coordination within the departments
4. Increases managerial efficiency: Managers in each department are performing the jobs again and again. This makes them specialized and increases their efficiency.
5. Effective training: Training of employees become easy as focus is only on a limited range of skills.
6. Decreased cost: Minimum duplication of efforts and economies of scale results in lower cost.

Disadvantages
1. The departments become specialized in their own way and fail to see the prospects of the whole organization. Thus it becomes difficult to achieve organizational goals.
2. The departmental heads start thinking their departments to be functional empires. This leads to conflicts among various departments.
3. When the departments become large it becomes difficult to coordinate.
4. Even when the organizational goals are not achieved it becomes difficult to fix responsibility as all the departments are interrelated.
5. Employees and managers are trained for only one function i.e. the department to which they belong. This develops inflexibility in them as they have difficulty in appreciating others point of view.

Suitability
Functional structure is suitable where:
1. The size of the business unit is large.
2. Specialization is required.
3. Decentralization of authority is needed.
4. Only one product is sold.

Organising Structure

Organising Structure

Organising structure is the outcome of organizing process. Whenever an organization grows in size and complexity, an adequate structure is needed. Structure clearly defines the job positions, authority, and responsibilities of different employees.

An organizational structure is defined as ‘Network of job positions, responsibilities and authority at different levels’.

Peter Drucker clearly says, ‘An organizational structure is an indispensable means; and the wrong structure will seriously impair business performance and even destroy it.’

Benefits of a good structure

1. It allows correlation and coordination among human, physical resources and enables the business to achieve its goals.
2. It ensures a smooth flow of communication and better control over the operations.
3. It provides the framework within which an organization functions while coordinating the responsibilities of individuals and departments.

The span of management, to a large extent gives shape to organizational structure. It refers to the number of subordinates that can be effectively managed by a superior. This determines the levels of management in the structure. The span of control depends upon:

· Capacity and intelligence level of managers.

· The trust of managers in their employees.

· The employees’ intelligence level.

· Nature of job.(routine or specialized)