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Wednesday, January 16, 2008

CASE STUDY

Mr. Ravinder Rao is a B.E. in Computer Science from the Regional Engineering College, Surathkal and is working as a Project Manager in Mangala Tech., a leading software company in India. Mr. Rao was an all-rounder, who did exceedingly well in his studies as well as other extracurricular activities. Though he secured admission for MBA at Manipal Institute of Management, due to financial constraints he discontinued his studies and joined Mangala Tech. He proved to be good in his job and within a short period of 5 years rose to the position of Project Manager.

Gradually Mr. Rao began to feel dissatisfied with the work environment in general and his own work in particular. He wanted to get an MBA degree and as his desire remained unfulfilled, he was feeling quite restless. His friends appreciated his feelings and suggested that he should meet his boss Mr. S. S. Pai and discuss the matter with him. Mr. Rao then approached Mr. Pai and asked him to sanction study leave for two years. Mr. Pai was not helpful and discouraged Mr. Rao by saying that for a talented person like Mr. Rao, a MBA degree would make no difference and moreover, the company had no such policies of granting study leave. After about a month Mr. Ravindra Rao put in his resignation.

Read and analyze the above case, on the basis of your individual analysis answer the following questions:

1. Critically analyze the attitude and action of Mr. Ravinder Rao.

Ans: Basically Mr Ravinder Rao was an all-rounder, who did exceedingly well in his studies as well as other extracurricular activities. With in a short period of 5 years by his good job and hard work he rose to the position of Project Manager.

But when we are to discuss about his attitude , first and the foremost thing what we see his unsteady mind. Because, even though he was studying well, he discontinued his studies showing his financial crisis. But after joining in an organization, he decided to resign his job and again go for studies.

A man rather a human being should first set goals in his life and then should work hard to achieve his goal. When a goal is fixed then only we can plan our life accordingly and take necessary actions to proceed step by step to achieve these goals. But Mr.Rao seems have got no specific goals.

When he was studying, he wanted to go for job to rid over his financial crises. But when he was an employment, gradually he lost his interest even though it is mainly because of dissatisfied working environment.

If he is proceeding towards some goal, then he will not resign his job in order to continue his studies. He can as well selected or carried out studies by continuing his employment itself by doing as a part time course .

Therefore, after analyzing the attitude and action, Mr. Rao seems to be an unsteady minded human being.

2. If you were Mr. S. S. Pai what advice would you give Mr.Rao and why ?

Ans: If I was Mr. S S. Pai , I would have advised him to proceed his studies and go for MBA degree . Because, he is very good in his studies also apart from doing good job. So an Organization should also give due care on the career development of his employees.

I would have never at least discouraged Mr. Rao by saying that for a talented person like Mr. Rao, a MBA degree would make no difference.

Rather, I would have explained him the company policy of not granting any study leave but could have helped by way of giving some education advance which can be deducted from his monthly installments over the period of certain years. This is mainly to reduce his financial burden as it is one of the constraints for him to discontinue his studies.

I would have also suggested him not to go for resignation as he will totally be handicapped if he desires to go for full time degree course. I would have suggested him to take MBA degree course as a part time course, so that he works to earn money and studies to acquire more knowledge and obtain qualification.



Enumerate the sources of Power in Organizations

The concept of human societies and human organizations entails the concept of power in a wide range of interpretations. Power is seen as the ability to influence, an ability to affect, an ability to mobilize, a capacity to exert influence, the ability to employ sanctions and so on. There is a range of definitions that the meaning of power, influence control, domination, and authority are not sharply cut off from one another. (Pheby, 2004)

Power in organisations is classically represented by Weber (1947) and is directly concerned with hierarchy or structure and legitimacy. At times of change however, illegitimate power is recognised as of considerable significance. ‘Insiders are not always obedient’ Minzberg (1983).

One of the major theories of power, exchange theory, has as its central assertion in the exchange theory as it appears in economics and has been the notion of the market that is called catallaxy. A catallaxy is a market order without planned ends, characterized by the ‘spontaneous order’ which emerges when individuals pursue their own ends within a framework set by law and tradition. (Hayek, 1982) In a broader organisational context, emphasis on the interpersonal relationships between manager and subordinates or leader and followers can offer an insight into the complicity of power and organisation. The figure shows the sources of power in an organisation and the effects of the Exchange Theory.

Reward Power is an individual’s ability to influence others’ behaviour by rewarding their desirable behaviour. Coercive Power is an individual’s ability to influence others’ behaviour by means of punishment for undesirable behaviour. Legitimate Power most frequently refers to the manager’s ability to influence subordinates’ behaviour because of the manager’s position in the organisation hierarchy. Expert Power is an individual’s ability to influence others’ behaviour because of skills, talents or specialised knowledge possessed by the individual. Referent Power is an individual’s ability to influence others’ behaviour as a result of being liked or admired.

The hierarchical relationship between manager and subordinate is not the only dimension of power in an organisation. Power can exist from situations created from the design of the organisation, the type of departmental structure, the opportunity to influence, access to powerful individuals and critical resources. In general, structural and situational sources of power are created by the division of labour and departmentalisation, which naturally result in unequal access to information, resources, decision-making, and other individuals and groups. Knowledge as power means that individuals, groups or departments that possess knowledge crucial to attaining or meeting the organisational goals have power. Resources as power suggest that groups or departments or individuals who can provide critical or difficult to obtain resources acquire power in the organisation. Decision making as power means that individuals or groups acquire power to the extend that they can affect some part of the decision making process. Networks as power imply that various affiliations and coalitions, both inside and outside the organisation, represent sources of power.

It may be argued that users of technology gain power themselves due to a lack of technological training amongst more senior members of the organisation but it is in the information, not the technology that power lies. The use of technological know-how to misrepresent or manipulate data will inevitably be exposed and the use of standard software packages and ‘open systems’ reduces the chance to possess unique knowledge.

Elaborate on different types of Groups

Groups can be either formal or informal.

1. Formal Groups:

A designated work group defined by the organization’s structure. A formal group is set up by the organization to carry out work in support of the organization’s goals. In formal groups, the behaviours that one should engage in are stipulated by – and directed toward – organizational goals. Examples include a book-keeping department, an executive committee, and a product development team. Formal groups may be command groups or task groups.

  • Command Group: A command group consists of a manager and the employees who report to him or her. Thus, it is defined in terms of the organization’s hierarchy. Membership in the group arises from each employee’s position on the organizational chart.
  • Task Group: A task group is made up of employees who work together to complete a particular task or project. A task group’s boundaries are not limited to its immediate hierarchical superior. It can cross command relationships. An employee’s membership in the group arises from the responsibilities delegated to the employee – that is, the employee’s responsibility to carry out particular activities. Task group may be temporary with an established life span, or they may be open ended.

  • Committee: A group of people officially delegated to perform a function, such as investigation, considering, reporting, or acting on a matter. Committee, one or more persons appointed or elected to consider report on, or take action on a particular matter. It investigates analyses and debates the problem and makes recommendation. Committee usually has their own Committee member comprising of advisory authority, secretary and others. Recommendation is sent to the authority that is responsible for implementing them.

2. Informal Groups:

An organization’s informal groups are the groups that evolve to meet social of affiliation needs by bringing people together based on shared interests or friendship. Thus, informal groups are alliances that are neither formally structured nor organizationally determined. These groups are natural formations in the work environment that appear in response to the need for social contact. Many factors explain why people are attracted to one another every day, they are likely to form friendships. That likelihood is even greater when people also share similar attitudes, personalities, or economic status.

  • Friendship Groups: Groups often developed because the individual members have one or more common characteristics. We call these formations “Friendship groups”. Social alliances, which frequently extend outside the work situation, can be based on similar age, same political view, attended the same college, etc.

  • Interest Groups: people who may or may not be aligned into common command or task groups may affiliate to attain a specific objective with which each is concerned. This is an interest group.

  • Reference Groups: Sometimes, people use a group as a basis for comparison in making decisions or forming opinions. When a group is used in this way. It is a reference group. Employees have reference group inside or outside the organization where they work. For most people, the family is the most important reference groups. Other important reference groups typically include co-workers, friends, and members of the person’s religious organization. The employee need not admire a group for it to serve as a reference group. Some reference groups serve as a negative reference; the employee tries to be unlike members of these groups.

3. Stages of Group Development: In interpreting behaviour of a particular group, it is important to recognize not only a broad pattern of development but also the unique characteristics of the particular group and the circumstances that contribute to (or detract from) its development. The way in which a particular group develops, depends in part on such variables as the frequency with which group members interact and personal characteristics of group members. However, it is generally believed that groups pass through a standard sequence of five stages.

Define Motivation. Describe Hertzberg’s Two-factor theory of Motivation.

Hertzberg’s theory explains the motivational factors and the hygiene factors which affect directly and indirectly to workers performance. According to this theory the motivational factors were identified as responsibility, achievement, and the work itself. When these factors are present, they lead to superior performance and provide job satisfaction the workers.

In this case the workers are affected by the both factors. The motivational measure or the appreciation methods followed by the company was not satisfactory to the workers, as even the inexperienced workers stared to enjoy all the benefits which should have been facilitated to the trained/experienced workers. Experienced workers feel that their experience and knowledge were not accepted or appreciated by the management and their performance was always evaluated with the new untrained workers. This created a negative mind set and their productivity affected adversely thus the firm is facing the critical situation. The management should implement good reward or appreciation plans based on better performance to motivate the workers and this will result in better productivity as well.

Hygiene Factors:

Hygiene factors represent the need to avoid pain in the environment. They are not an intrinsic part of a job, but they are related to the condition under which job is performed. They are associated with negative feelings. They must be viewed as preventive measures that remove sources of dissatisfaction from environment.

Motivators:

Motivators are associated with positive feelings of employee about the job. They make people satisfied with their job. Motivators are necessary to keep job satisfaction and job performance high. On the other hand, if they are not present they do not prove highly satisfying. Motivational Factors or satisfiers are directly related to job content itself, the individual performance of it, its responsibilities and the growth and recognition obtained from it. Motivators are intrinsic to the job.

Define Perception. Interpret the various barriers to Perception

perceiving and interpreting what others do is burdensome. As a result, individuals develop techniques for making the task more manageable. These techniques are not foolproof. Several factors lead us to form inaccurate impressions of others. These barriers to perception are inaccurate impressions of others. These barriers to perception are:

Selective Perception: we receive a vast amount of information. Therefore, it is impossible for us to assimilate everything we see – only certain stimuli can be taken note of. That is why; the boss may reprimand some employees for doing something that – when done by another employee – goes unnoticed. Since we can have observed everything going on about us, we engage in selective perception.

Selective perception is also out tendency to choose information that supports our viewpoints; individuals often ignore information that makes them feel uncomfortable.

Selective perception allow us to “Speed –read” others, but not without the risk of drawing an inaccurate picture. Because we see what we want to see, we can draw unwarranted conclusions from an ambiguous situation. Our perception tends to be influenced more by an individual’s attitudes, interests, and background than by the stimulus itself.

1. Stereotype:

A stereotype is a generalization about a group of people. When we judge someone on the basis of our perception of the group to which he or she belongs, we are using the shortcut called stereotyping. Stereotypes reduce information about other people to a workable level, and they are efficient for compiling and using information. It is a means of simplifying a complex world and it permits us to maintain consistency. It is less difficult to deal with an unmanageable number of stimuli if we use stereotypes. Stereotypes can be accurate, and when they are accurate, they can be useful perceptual guidelines. However, most of the time, stereotypes are inaccurate.

2. Halo Effect:

The halo error in perception is very similar to stereotyping. In stereotyping the person is perceived according to a single category whereas under the halo effect the person is perceived on the basis of one trait.

3. First-impression error:

Individuals place a good deal of importance on first impressions. First impressions are lasting impressions. We tend to remember what we perceive firs about a person, and sometimes we are quite reluctant to change out initial impressions. First-impression error means the tendency to form lasting opinions about an individual based on initial perceptions. Primacy effects can be particularly dangerous in interviews, given that we form first impressions quickly and that these impressions may be the basis for long-term employment relationships.

4. Projection:

It is easy to judge others if we assume they are similar to us. This tendency to attribute one’s characteristics to other people is called projection. Projection can distort perceptions made about others. People who engage in projection tend to perceive others according to what they are like, rather than according to what the person being observed is really like. When managers engage in projection, they compromise their ability to respond to individual differences. They tend to see people as more homogeneous than they really are.

5. Self-Fulfilling prophecies:

Self-fulfilling prophecies are situations in which our expectations about people affect our interaction with them in such a way that our expectations are fulfilled. Self-fulfilling prophecy is also known as the Pygmalion effect, named after a sculptor in Greek mythology who carved a statue of a girl that came to life when he prayed for this boon and it was granted.

The Pygmalion effect has been observed in work organizations as well. A manager’s expectations of an individual affect both the manager’s behaviour toward the individual and the individual’s response. For example, suppose a manager has an initial impression of an employee as having the potential to move up within the organization. Chances are that the manager will spend a great deal of time coaching and counseling the employee, providing challenging assignments and grooming the individual for success.

. Explain the motivational problem in this case by relating it to Herzberg's theory.

Herzberg developed a theory of motivation on the premise that human nature has two separate elements - The motivators and maintenance factors. According to this theory of motivation the items that determine job content are considered motivation factors e.g. Achievement, recognition, responsibility, advancement and the work itself. The elements that influence the job context are the hygiene or maintenance factors e.g. company policy, salary, interpersonal relations, working conditions etc. They must be adequate and if they are absent or inadequate, they will create dissatisfaction.

Hygiene Factors:

Hygiene factors represent the need to avoid pain in the environment. They are not an intrinsic part of a job, but they are related to the condition under which job is performed. They are associated with negative feelings. They must be viewed as preventive measures that remove sources of dissatisfaction from environment.

Motivators:

Motivators are associated with positive feelings of employee about the job. They make people satisfied with their job. Motivators are necessary to keep job satisfaction and job performance high. On the other hand, if they are not present they do not prove highly satisfying. Motivational Factors or satisfiers are directly related to job content itself, the individual performance of it, its responsibilities and the growth and recognition obtained from it. Motivators are intrinsic to the job.

2. Analyze the problem in depth and find out a solution to the problem.

Ans: There is a need of a sound system of motivation to make the workers put forth their best efforts. A sound system of motivation should have the following essential features.

1. It should satisfy the needs and objective of both organization and employees.

2. Motivational system should change with the changes in the situation.

3. Jobs should be designed in such a way as to provide challenges and variety.

4. Managers should recruit the active co-operation of subordinates in improving the organization's output. Subordinates should be made to realize that they are stakeholders in the organization.

5. The motivation system should satisfy the different needs of employees. It should be directly related to the efforts of the employee.

6. The motivational system should be simple so that they simply understood the system.

3. If you were the HR Manager how would you motivate the employees so they work better?

Ans: Several factors influence human behavior. There are numerous drives and needs which can act as good motivators moving people to work and getting things done through them as per the plan. People respond to physiological needs, social needs and egoistic needs. Human needs and desire are the doorways through which the manager channelizes his motivation efforts. There are three types of motivational programmers to improve a person’s behavior towards his job. These are

  • Pay incentive plans
  • Job enrichment and
  • Management by objective

There are four important factors governing employee response to the measures of motivation.

1. The intensity or urge of the Drive.

    1. Past Experience - can he rely upon the promise given by the boss.
    2. Amount of Reward - The quantity and quality of the reward can influence the amount of extra effort put forth by employee.

Time Relationship of Response to Reward - Long range promises are less effective than immediate fulfillment.

Define personality. Elucidate trait theory

Different psychologists defined the term personality in different ways. We can define personality as a relatively stable set of characteristics that influence an individual’s behavior. In other words, personality can be defined as the sum total of ways in which an individual react and interact with others.

Trait Theory:

Over the time, researches have developed a number of personality theories and no theory is complete itself. We can conventionally group these theories in to five heads:- Intrapsychic theory, Type theories , trait theories, self theory.

According to trait theory, all individuals have some traits, which help to develop their personality. We can summarize these traits in to five heads.

Openness to experience:

These types of people are imaginative, creative and conventional. They are open to experiment new ideas, and adventurous things.

Conscientiousness:

These type of traits a have a tendency to show self discipline, aim for achievement, and planned behavior rather than spontaneous behavior. Conscientiousness concerns the way in which we control regulate and impulse our controls. There are several advantages for this type of behavior as they positively regarded by others as intelligent and reliable.

Extraversion:

Extraversion includes Energy, urgency and tendency to seek stimulation and the company of others. Extraverts enjoy being with people, they are full of energy, and often experience positive emotions. They tend to be enthusiastic and action oriented individuals.

Introverts tend to be quiet, low-key and less dependent on social world. Their lack of social involvement should not be interpreted as shyness or depression.

Agreeableness:

This includes a tendency to be compassionate and cooperative rather than suspicious and antagonistic towards others. This type of individuals prefers to getting along with others, they are friendly, generous, helpful and willing to compromise their interest with others. These types of people generally have an optimistic view of human nature.

Draw back of agreeableness nature is that, it is not useful in a situation that requires tough or absolute objective decisions.

Neuroticism:

This is a tendency to experience unpleasant emotions easily such as anger, anxiety etc. We can call this as depression or emotional instability. These types of individuals are emotionally reactive. They get easily upset with the emotional events that would not affect most people and their reactions tend to be more intense than others. These negative reactions tend to be persisting for long period of time; as a result they would be in a bad mood often.

This negative emotional reaction diminishes their ability to think clearly, make decisions and cope with stress situations.

Case Study

Ashish shah is the Managing Director of Sai Furnitures a medium sized house hold furniture manufacturing firm in Manipal. He holds a Bachelors Degree in engineering and a Masters Degree in management. He has been managing the company from its inception in 1982. For more than two decades, the company is doing reasonable well.

Of late, Mr. Shah has noticed that the workers are not working to their full potential. It is a well-known fact that they filled their days with unnecessary and unproductive activities and worked only for the sake of wages. About a year back, the situation has become quite alarming as the organisation began to crumble under the weight of uneconomical effort. The situation demanded prompt remedial measure to check the detrimental trend that was noticed in the last year. Mr. Shah knew very well that the only way to progress and prosper is to motivate workers to peak performance through various incentive plans.

Mr. Shah summoned the HR Manager and enquired – What is the problem with the workers? We pay the highest in the industry. Our working conditions are excellent. Our fringe benefits are the best in the industry. Still the workers are not motivated. Find out what the workers really want? Unless productivity increases we are doomed. The HR Manager made a detailed investigation and comes out with the following reply – The wages, fringe benefits and working conditions are not enough. Other things are equally important. I have found out from the workers that work and efficiency go unnoticed and unrewarded in the company. The promotions and benefit plans are tied to the length of service. Even unproductive workers enjoy all the benefits in the organisation, which in fact, according to the workers, should go only to those who work hard. As a result more and more workers are joining the bandwagon of non-performers. This has become quite alarming as workers refuse to perform.

Define Attitude. Explain the Cognitive Dissonance theory

Leon festinger was the founder of dissonance theory. According to this theory, people want their beliefs to be consistent with one another and want their behavior to be consistent with their beliefs. When people become aware of inconsistency among their beliefs or between their attitude and their behavior they experience cognitive dissonance.

This theory argues that any form of inconsistency is uncomfortable and that individual will attempt to reduce the dissonance and hence will experience the discomfort. To avoid this they will look for a stable state where there is a minimum of dissonance.

To determine the level of dissonance one should first evaluate the importance of elements creating the dissonance. These elements can be classified in to three heads.

Cognitive focuses on an unobservable change in mental knowledge. Cognitive learning is learning achieved by thinking about the perceived relation ship between events and individual goals and expectations. Cognition refers to individual’s goals and expectations. Cognition refers to individual’s ideas, thoughts, knowledge, interpretation and understanding about the individuals and environment.

Assumptions of Cognitive theories

1. Some learning process may be unique to human beings.

2. Cognitive processes are the focus of study.

3. Objective, systemic observations of people, behaviour should b e the focus of scientific inquiry; however, inferences about unobservable mental processes can often be drawn from such behaviour.

4. Individuals are actively involved in the learning process.

5. Learning involves the formation of mental associations that are not necessarily reflected in overt behaviour changes.

6. Knowledge is organized.

7. Learning is a process of relating new information to previously learned information.

Compare Classical Conditioning theory versus Operant Conditioning theory

Classical Conditioning Theory:

Classical conditioning is one of the simplest forms of learning, yet it has a powerful effect on our attitudes, likes and dislikes, and emotional responses. We have all learned to respond in specific ways to a variety of words and symbols. Our lives are profoundly influenced by associations we learn through classical conditioning. Ivan Pavlov’s research on the conditioned reflex in dogs revealed much of what we know about the principles of classical conditioning.

Classical conditioning of Pavlov: Ivan Pavlov (1949 – 1936) organized and directed research in physiology at the institute of experimental medicine in St. Petersburg, Russia from 1891 until his death in 1936. His book “Conditioned Reflexes” is one of the classic works in psychology.

Classical conditioning is modifying behavior so that a conditions stimulus is paired with an unconditioned stimulus and elicits an unconditioned behavior. Ivan Pavlov, a Russian psychologist developed classical conditioning theory based on his experiments to teach a dog to salivate in response to the ringing of a bell. When Pavlov presented meat to the dog, he noticed a great deal of salivation. But, when merely bell was rung, no salivation was noticed in the dog. What Pavlov did next was to link the meat and the ringing of the bell. He did this several times. Afterwards, he merely rang the bell without presenting the meat. Now, the dog began to salivate as soon as the bell rang. After a while, the dog would salivate merely at the sound of the bell, even if no meat were presented. In effect, the dog had learned to respond, i.e., to salivate at the sound of bell, since it was conditioned to link the sound of the bell with the offering of meat.

Classical conditioning introduces a simple cause-and-effect relationship between one stimulus and response. It also makes the response reflective or involuntary after the stimulus-response relationship has been established. This leaves no ground for making choices, which factor differentiates human beings from dogs. Under certain situations, classical conditioning does explain human behaviour. For examples, if a student is always reprimanded by his principles office, he may become nervous whenever asked to come to the principal’s office because of this association.

Operant Conditioning theory:

Operant Conditioning theory argues that Behaviour is a function of its consequences. People learn to behave to get something they want or avoid something they don’t want. Operant behaviors mean voluntary or learned behaviour in contrast to reflexive or unlearned behaviour. The tendency to repeat such behaviour is influenced by the reinforcement or lack of reinforcement brought about by the consequences of the behaviour. Reinforcement therefore strengthens behaviour and increases the likelihood that it will be repeated.

What Pavlov did for classical conditioning, the Harvard psychologist B. F. Skinner did for operant conditioning.

Operant conditioning induces a voluntary change in behavior and learning occurs as a “Consequence” of such change. It is also known as reinforcement theory and it suggests that behaviour is a function of its consequences. It is b based upon the premise that behaviour of job performance is not a function of inner thought, feeling, emotions or perceptions but is keyed to the nature of the outcome of such behaviour. The consequences of a given behaviour would determine whether the same behaviour is likely to occur in future or not. Based upon this direct relationship between the consequences and behaviour the management can study and identify this relationship and try to modify and control behaviour. Thus, the behaviour can be controlled by manipulating its consequences. This relationship is built around two principles;

  • The behaviour that results in positive rewards tends to be repeated and behaviour with negative consequences tends not to be repeated.
  • Based upon such consequences, the behaviour can be predicted and controlled.


Elaborate the functions of Management

Management comprises directing and controlling a group of one or more people or entities for the purpose of coordinating and harmonizing them towards accomplishing a goal. Management often encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources. Management can also refer to the person or people who perform the act(s) of management.

Management functions:

1.1 Different levels of management

Top-level management

  • Top-level managers require an extensive knowledge of management roles and skills.
  • They have to be very aware of external factors such as markets.
  • Their decisions are generally of a long-term nature.
  • They are responsible for strategic decisions.
  • They have to chalk out the plan and see that plan may be effective in future.

Middle management

  • Mid-level managers have a specialised understanding of certain managerial tasks.
  • They are responsible for and carrying out the decisions made by top-level management.
  • They are responsible for tactical decisions.

Lower management

  • This level of management ensures that the decisions and plans taken by the other two are carried out.
  • Lower-level managers' decisions are generally short-term ones.

1.2 Formation of the business policy:

  • The mission of the business is its most obvious purpose -- which may be, for example, to make soap.
  • The objective of the business refers to the ends or activity at which a certain task is aimed.
  • The business's policy is a guide that stipulates rules, regulations and objectives, and may be used in the managers' decision-making. It must be flexible and easily interpreted and understood by all employees.
  • The business's strategy refers to the plan of action that it is going to take, as well as the resources that it will be using, to achieve its mission and objectives. It is a guideline to managers, stipulating how they ought to use best the factors of production to the business's advantage. Initially, it could help the managers decide on what type of business they want to form.

How to implement policies and strategies

  • All policies and strategies must be discussed with all managerial personnel and staff.
  • Managers must understand where and how they can implement their policies and strategies.
  • A plan of action must be devised for each department.
  • Policies and strategies must be reviewed regularly.
  • Contingency plans must be devised in case the environment changes.
  • Assessments of progress ought to be carried out regularly by top-level managers.
  • A good environment is required within the business.

The development of policies and strategies

  • The missions, objectives, strengths and weaknesses of each department must be analysed to determine their roles in achieving the business's mission.
  • The forecasting method develops a reliable picture of the business's future environment.
  • A planning unit must be created to ensure that all plans are consistent and that policies and strategies are aimed at achieving the same mission and objectives.
  • Contingency plans must be developed, just in case.

All policies must be discussed with all managerial personnel and staff that is required in the execution of any departmental policy.

Where policies and strategies fit into the planning process

  • They give mid- and lower-level managers a good idea of the future plans for each department.
  • A framework is created whereby plans and decisions are made.
  • Management is may cause good affect to people who are good in planning and making their business move fast.

Mid- and lower-level management may add their own plans to the business's strategic ones.

1.3 Basic elements of management:

Management operates through various functions, often classified as planning, organizing, leading/motivating and controlling.

  • Planning: deciding what needs to happen in the future (today, next week, next month, next year, over the next five years, etc.) and generating plans for action.
  • Organizing: making optimum use of the resources required to enable the successful carrying out of plans.
  • Leading/Motivating: exhibiting skills in these areas for getting others to play an effective part in achieving plans.
  • Controlling: monitoring -- checking progress against plans, which may need modification based on feedback.

Thursday, January 10, 2008

What is meant by’ disclaimer of onerous property’ and how the same is exercised

Under Section 10 of the Companies Act, 1956, the court having jurisdiction to wind up a company is the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situated, except to the extent to whih jurisdiction has been conferred on any District Court/ (s) subordinate to the High Court. However, winding up of a company with a paid up share capital of Rs. 1lakh or more must take place in the High Court.

Meaning of Registered Office for Purposes of Section 10

Registered office for the purposes of deciding jurisdiction of the winding up court shall mean the place which has longest been the registered office of the company during six months immediately preceding the presentation of the petition for winding up.

It may be noted that even if there is an agreement that dispute shall be resolved before any specific court, winding up petition can only be filed before the court where registered office of the company is situated [G.T.e. Industries Ltd. Vs. Parasrampuria Trading & Finance (P.) Ltd. (1997) 19 SCL 536 (All)].

Again, in Haryana Telecom Ltd. Vs. Serlite Industries Ltd, the Supreme Court held that, the High Court should decide a petition for winding up a company under the Companies Act and not under the Arbitration and Counciliation Act even if there was an arbitration agreement between the parties [Business Standerd 17 July 1999].

Tuesday, January 8, 2008

Time specified in the Companies Act

If this is the case, it cannot be said that Mr. ‘X’ as a director of ‘B Company Ltd.’ obtains from ‘B Company Ltd.’ anything more than what he is entitled as an ordinary director of ‘B Company Ltd.
Under these circumstances, it cannot be said that Mr. ‘X’ holds a place or office of profit under ‘B Company Ltd. Hence, the prohibition contained in sub-section (1) of Section 314 does not apply to the instant case.
Discuss the validity of the arguments of the Director in the following cases:
In the General Meeting of X Ltd., held on 2.5.2000, Mr. A was appointed as a Director.
On that day, he was not holding any equity shares in X Ltd. As per the Articles of
Association of X Ltd. the share qualification is the holding of 500 equity shares. On
(. 15.6.2000 Mr. A applied for 1,000 equity shares in X Ltd. and the shares were allotted
on 10.7.2000. Mr. A claims that he was holding the qualification shares within the time
specified in the Companies Act. As per Section 270 of the Companies Act, 1956, where Articles of Association prescribe for share qualification, the same must be obtained by each director within two months after his appointment. Section 283 (1) (a) provides that the office of a director shall fall vacant if he fails to obtain qualification shares within the time specified in sub-section (1) of Section 270.
In the given case, Mr. A was appointed as a director on 2.5.2000 but he was allotted the requisite qualification shares on 10.7.2000, i.e., after the lapse of two months prescribed under Section 270 (1). Thus, the office of Mr. A shall be deemed to have fallen vacant.
There was no limit on the borrowing for the business in the memorandum of the company. But pursuant to a decision in the general meeting, the directors could
not borrow beyond the limit of the issued capital of the company without the sanction of the general meeting. The directors borrowed money beyond their powers for the business of the company. The company failed to pay back the same and argued that since the money was borrowed by directors exceeding their authority, the company has no legal liability. Examine and comment with supporting case law.

Applicable to a subsidiary company

‘x’ is a whole-time director in ‘A Company Ltd.’
A Company Ltd.’ recently floated a wholly-owned subsidiary company called ‘B Company Ltd.’ for one of its diversification projects. Mr. ‘X’ has been appointed as an ordinary director on the Board I’)f the subsidiary company. There is a proposal to pay sitting fees to him as per the
guidelines applicable to a subsidiary company. Can Mr. ‘X’ who is a whole time director of ‘A Company Ltd.’ accept sitting fees from ‘B Company Ltd.’ which is its su\)sidiary company in view of the provisions of Section 314 of the Companies Act, 1956, which says that a director of the holding company cannot hold office pr place of profit under the subsidiary company?
It may be noted that under sub-section
(1) of Section 314 prohibition is against a director of the holding company holding an office or place of profit under the
subsidiary company. Only if the office held by the director of the holding company is an office or place of profit within the meaning of sub-section
(3) of Section 314, the prohibition contained in sub-section (1) of Section 314 would apply.
Let us now traverse the definition of ‘office or place of profit’ of Section 314. In case office or place of profit is held by a director, he would be deemed to be holding an office or place of profit under the company only if he obtains from the company anything by way of remuneration over and above to which he is entitled as such director.
In the instant case, Mr. ‘X’ is an ordinary director of ‘B Company Ltd.’ and is entitled to sitting fees under the Articles of Association of ‘B Company Ltd.’ and such sitting fees presumbly is in accordance with Rule lOB of the Companies (Central Government’s) General Rules and Forms, 1956.

The Managing Director of the company

MIs. Excellent Industries Ltd. is a Multi-product Company with a paid up capital of Rs. 4 crores. A contract for the purchase of Textile Machineries and balancing Equipments valued at Rs. One crore was placed before the Board for approval. The Managing Director of the company is interested in this contract because his son-in-law in a partner of the firm selling the machineries and the equipment to the company. Explain briefly the procedure to be followed by the company to enter into the said
contract. Since the Managing Director of Mis. Excellent Industries Ltd. is interested in the contract for the purpose of textile machineries etc., the same should be approved by the Board of Directors at its meeting. It cannot be approved through resolution passed by circulation [Section 297). The company should also obtain the approval of Central Government since its paid up capital is more that Rs. 1 crore. For this purpose the following steps are to be taken:
(i) Hold a Board meeting and place the terms of the contract for consideration.
The Managing Director should disclose nature of his interest as required
under Section 299.
(ii) The Managing Director should neither take part in the discussion nor vote in respect of the said contract. His presence will also be not counted for the purpose of quorum (Section 300 and 303 of the Companies Act).
(iii) The consent of the Board must be accorded by way of a resolution passed at
the meeting of the_Board.
(iv) The particulars of the contract must be entered in the register maintained
under Section 301 which should be made available for inspection.
(v) An application to the Central Government should be made in Form 24A by enclosing (a) certified copy of the Board resolution approving the contract; (b) certified copy of the agreement containing the particulars of the contract; and (c) Bank Draft/Challan evidencing the payment of prescribed fee.
Mr. V, a chartered accountant, is a Director in PQR Limited. The Company
proposes to appoint/engage the firm V & Co. in which Mr. V is a partner in one or more of the following capacities:
j Consultants on regular retainer basis.
(H)Authorized representatives to appear before tribunals.
Discuss whether the provisions of Section 314 of the Companies Act are attracted
in the above situations.
Apparently the prohibition under sub-sections (1) and (lB) of Section 314 of the Companies Act, 1956 is not applicable to remuneration/compensation given to directors or their associates for the services of a professional nature rendered by them to the company in their professional capacity such as advocate, chartered accountant, solicitor, etc. However, prohibition will apply to them if they bind themselves on
regular retainership basis. Thereore, (i). a kctoI Q1aere c.:ountas appoient
by the company on a regulab1tE-J!lersp £!sas advlse!:t.c2ulta!lt, .mter.nal aud;tor,
etc., shall be hit by the restrictive provisions q,f sub-sectiop.s (l) aDd (lB) of Sc.Hon 3l4.
(ii) Based on the above analogy as contained above, the bare engagement of a Charactered Accountant in a particular case and the payment to him of his professional fees in that case would not attract the provisions of sub-sections (1) and (1 B) of Section 314 of the Companies Act. Engaging a person in his professional capacity for performing a particular function, say, for attending to a particular case or for undertaking a particular assignment of consultancy, or rendering advice on a specific matter, would not by itself constitute appointment to an office or place of profit in or under the company. ,But, if the terms of engagement of attend to a’Irtlie tax casesor act as adviser in all connected matters, whethr gQ.erally
or in ap—articular city or town, then even thoug,

Department of Company Affairs

Thus, the company, Madhurima Ltd., is required to obtain Central Government’s apval, from the Department of Company Affairs, Government of India for the
appointment of Mr. Sharat as its managing Directo
Examine whether the following transactions can be considered as a loan to a Director requiring approval of the Central Government under Section 295 of the Companies Act:
(i)An advance payment of salary of Rs. 10,000 to an employee who is the wife
of the Managing Director.
(ii)A Public Company secures residential accommodation for the use of its
Managing Director by entering into a lease arrangement under which the
company has to deposit a certain amount with the landlord to secure compliance with the terms of the Lease.Agreement.
(iii) A Public Company purchases a flat which is subsequently sold to a Director at the prevailing market price, out of which the Director pays 50 percent immediately and contracts to pay the balance in 10 equal annual instalments.
fC.A.
(i) This transaction does not per se amount to a loan so as to violate Section 295 of Companies Act, 1956. The burden of proving otherwise lies with the prosecution. Thus, in the absence of any evidence that there has been circumvention of the Section
by disguising the loan to the wife of a director, who is an employee, as salary advance
the Court refused to accept the case of prosecution - M.R. Electronic Components Ltd..vV. Assistant Registrar of Companies (1987) 61 Compo Cas. 8 (Mad.).
(ii) The deposit of money by the company with the landlord to secure residential accommodation for its managing director can in no way be considered a loan to a director under Section 295. It is no concern of the managing director on what terms the company secures premises for residential accommodation for him.
(iii) In a petition in Dr. Fredie Ardeshir Mehta v. Union of India seeking quashing of a prosecution launched tmder Section 295, the Bombay High Court came to the conclusion that a company selling one of its flat to one of its directors on receiving half price in cash and agreeing to accept the balance in instalments does not amount to giving of a loan to the director. It is a credit sale. It cannot even be described as an indirect loan.
The Bombay High Court observed that the Section 295 refers to an indirect loan to a director, what it means is that the company shall not give a loan to a director through the agency of one or more intennediaries. The word ‘indirectly’ in the Section cannot be read as converting what is not a loan into a loan. Thus, there was no contravention of Section 295 (1)
Papa Group of companies known for their business repute have been advocating for payment of donations to political parties as one of the methods of funding elections. The group has recently floated a company by name MIs. Papa Computers Ltd. and in the very first year of its working made a net profit of Rs. 6 crores. Examine with reference to the provisions of the Companies Act, whether the said company can make political donations and what is the maximum limit up to which a
company can make political donations. According to Section 293 A of the Companies Act, 1956, no Government Company and no other company which has been in existence for less than three financial years shall contribute any amount directly or indirectly to any political party or for any political purpose to any person. Thus, in the present case, Mis. Papa Computers Ltd. cannot make any political donation because the company has not been in existence for a period of three years.

The shareholders of the company

The paid-up share capital and free reserves of XYZ Co. Limited, a public company, is Rs. 100 crores as on 1st April, 1998. The shareholders of the company at their general meeting held on 4th April, 1998, by a resolution authorised the Board of Directors of the company to borrow money “exceeding the paid-up share capital and free reserves of the company, to the extent required by the Board of Directors”. The Board of Directors as a result borrowed money to an extent of Rs. 130 crores, including Rs. 20 crores as short-term loan and Rs. 25 crores as a temporary loan for financing the construction of a building of the company.
Referring to the provisions of the Companies Act, 1956 examine the validity of the
following:
(i) The Board is exercising the powers for borrowing money to an extent of Rs.
130 crores?
(ii) What would be your answer in case the company’s paid-up share capital and free reserves increased to Rs. 150 crores and the Board of Directors borrow money to an extent of Rs. 140 crores which neither include any short-term loan nor temporary loan for financing of the construction of a building of the
company?
Ylns. The problem as asked in the question is based on the provisions of the Companies Act, 1956, as contained in Section 293(1)(d) and the Explanations I and II to that Section. The Section provides that a public company, or a private company which is a subsidiary of a public company shall not, except with the consent of such public company or subsidiary in general meeting, borrow moneys after the commencement of the Companies Act, 1956, where the money to be borrowed together with the moneys already borrowed by the company (apart from temporary loans obtained
The company desires to know from you, whether they can appoint Mr. Sharat, as the “Managing Director”, to comply with Section 269 of the Companies Act, 1956. You are requested to give a reasoned answer, duly supported by analysis of the legal
provisions applicable to the issue in question.
Section 269 of the Companies Act, provides that every company with a paid up capital of more than Rs. 5 crores shall have a “managing director” and approval of Central Government is required to appot a managing director, if the terms and conditions of appointment do not meet the requirements laid down in Schedule XIII of the Act.
It is from the facts recited in the question, that Mr. Sharat, the incumbent for the office of “managing director” is not a person resident in India. However, it is to be seen whether this is a disqualification, in terms of Schedule XIII of the Act.
Part I -: (e) of Schedule XIII, envisages that the appointee shall be eligible
only if he inter-alia, is “resident in India”, )
which includes a person who has been’staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment asa managerial person and who has come to stay in India
(i) for taking up employment in India, or
(ii) for carrying on a business or vocation in India.
From the facts given, it is clear that Mr. Sharat does not fulfil the requirements of the above Explanation in Schedule XIII and therefore is not qualified for appointrrient,
without permission of the Central Government. .

Registrar of Companies

Thus, based on the above provisions, it can be concluded that the members contention in this case shall not be tenable, as under (a) above, J is not required to file his consent to act as director with the Registrar of Companies. J has, therefore, not violated any of the provisions of the Act.
The answer in the second case would also be the same as it is covered under © above. Hence J is not required to file his consent to act as director on his re-appointment with the Registrar of Companies.
After serious disagreement and difference of opinion among the shareholders of the company in the last annual general meeting, some of the directors took the steps as noted below. Discuss the validity and effect of the following:
(i) Mr. John, the managing director sends his notice of resignation.
(ii) Mr. Paul, an ordinary director verbally resigns and not in writing.
(iii) Mr. David, another ordinary director, had sent his resignation, but withdrew it
before the Soard meeting was held for accepting his resignation.
(i) Mr. John, the managing director cannot resign merely by giving a notice. In his case a formal acceptance of resignation by the company is essential so as to make it complete and effective. This is because he occupies two positions or possesses two capacities, viz., one that of a director, and the other that of manager or officer of the company in the sense of a whole time employee.
An employee cannot give up office at his pleasure simply by giving notice. The notice or the letter of resignation is required to be approved or accepted by the company and the officer concerned has to be relieved of his duties and responsibilities attached to the office which he has resigned from. (Achutha Pal (v) Registrar of Companies (1956) 36 Camp.
(ii) A director can resign from his office in the manner laid down in the Articles of the company. Where Articles do not contain any provision in this regard, a director may still resign at any time by giving a reasonable notice to the company. In Latchford premier Cinema vs. Ennion it was held that a verbal notice accepted at a meeting is sufficient, even if the articles provide for resignation in writing.
Thus,rrbal resignation cannot be held valid unless accepted at a meeting of the
Board/Shareholders.
Even written notice of resignation to be valid must be addressed to the company
t to any third party.
( iii) Once a director has given a notice of resignation, he cannot withdraw it except w the consent of the company properly considered by the directors. It makes no difference that the withdrawal is sought before the Board’s meeting. However, where articles provide that a director may resign only if the Board consents, the resignation shall not be effective until the Board’s consent is given and the resignation may be
withdrawn in the meantime.
With reference to the provisions of the Companies Act, 1956, examine the validity of the following:
(a) Appointment of Mr. Salak, a minor, as a Director of MRN (Pvt.) Ltd.
(b) Mr. Smart was appointed as the Managing Director of a public limited company
for a period of 5 years effective from 1.4.1993. It is noticed that he performed certain acts on behalf of the company in which he was appointed after the expiry of his term. Some of the aggrieved parties have questioned the validity
(a) Section 274 deals with disqualification of directors. Section 274(2) permits a private company to provide that a person shall be disqualified for appointment as a director On any groun ls in addition to those specified in sub-section(l). In the case of a minor, though there is nO provision in the Act expressely disqualifying him, as he is not competent to contract, he cannot file either with the company or with the Registrar any valid consent to act as director as required by Section 264. But Section 264 applies .only to public companies and private companies which are their subsidiaries; there is nothing prohibiting a director of other private companies in the absence of any contrary provision in the Articles. Therefore, Mr. Balak may be appointed as a director of MRN (Pvt.) Limited.
(b) Section 290 validates only the acts of a person acting as a director if it was subsequently discovered that his appointment was invalid by reason of any defect or disqualification or was terminated by virtue of any provision contained in the Act or in the Articles. It does not extend to validating the acts of a perspn acting as managing director (M. D.) except as regards his acts, if any, as a director. Further it was held in Varkey Souriar v. Keraleeya Banking Co. Ltd. (1957) 27 CC 591 that where an M. D. ceased to hold office any subsequent act of his would not be valid as it was not an irregular exercise of power, but exercise of power by a person who has nO authority at all.