Detailed, Step-by-Step NCERT Solutions for 12 Business Studies Chapter 7 Directing Questions and Answers were solved by Expert Teachers as per NCERT (CBSE) Book guidelines covering each topic in chapter to ensure complete preparation.
Directing NCERT Solutions for Class 12 Business Studies Chapter 7
Directing Questions and Answers Class 12 Business Studies Chapter 7
Multiple Choice Questions
Which one of the following is not an element of direction?
The motivation theory which classifies needs in hierarchical order is developed by.
(a) Fred Luthans
(c) Abraham Maslow
(d) F. Drucker
(c) Abraham Maslow.
Which of the following is a financial incentive?
(b) Stock Incentive
(c) Job Security
(d) Employee Participation
(b) Stock Incentive.
Which of the following is not an element of communication process?
Grapevine is ………….
(a) Formal Communication
(b) Barrier of Communication
(c) La tern al Communication
(d) Informal Communication
(d) Informal communication.
Status comes under the following type of barriers
(a) Semantic barrier
(b) Organisational barrier
(c) Non semantic barrier
(d) Psychological barrier
(b) Organisation Barrier.
The software company promoted by Narayana Murthy is …..
‘The highest level need in the need Hierarchy of Abraham Maslow.
(a) Safety Need
(b) Belongingness need
(c) Self actualisation need
(d) Prestige need
(c) Self Actualisation Need.
The process of converting the message into communication symbols is known aS –
(c) Feed Back
The communication network in which all subordinates under a supervisor communicate through supervisor only is
(a) Single chain
(b) Inverted V
(d) Free flow
Short Answer Type Questions
Distinguish between leaders and managers.
Sometimes leadership and management are used as synonymous terms. This is” not true. There are several differences between leadership and management.
1. Relationship : Management implies superior subordinate relationship. This relationship arises within organisational context.- On the other hand, ’leadership can occur anywhere within or without organisation content. For example, inform group have leader but no managers.
In other ‘ words, leadership is possible in both formally organised as well as ” unorganised groups. But management is possible only in formal and organised groups. The followers of a leader are not necessarily his juniors or subordinates. They may be leader’s peers, associates and even seniors.
2. Source of influence : A manager is appointed and he obtains authority from his position.He makes use of his formal authority to influence the behaviour of his subordinatprs. On the contrary, a leader is not always appointed and he drives his power from his followers who accept him their leader. A leader makes use of this power to influence the attitudes and behaviour of his followers.
3. Sanctions : A manager has command over the allocation and distribution of rewards (positive sanctions) e.g. promotion and punishments (negative sanction), e.g. demotion. On the other hand a leader has command over social satisfaction and related task rewards. Organisational sanctions exercised by a manager are geared to the physiological and security needs. But informal sanctions exercised by a leader are geared to social and ego need.
4. Basis of Following : Both managers and leaders have followers. But the people follow them for different reasons. People follow a manager because they are required to follow by their job description supported by a system of rewards and potenties. But a manager may be there even if there are no followers but only subordinates. A manager may continue in office so long as his performance is considered satisfactory. Whereas a leader can survive as long as followers accept him.
5. Accountability : A manager is accountable for his own behaviour as well as for the behaviour of his subordinates. His accountability of performance is clearly defined. But there is no clear-cut accountability relationship in leadership as a leader is accountable for his behaviour in the same way. A manager seeks to achieve organisational goals but a leader is ‘ more concerned with group goals and members satisfaction.
6. Functions : A manager performs all the functions of planning, organising, staffing, directing and controlling. On the other hand, the main job of a leader is to guide, inspite the efforts of his followers. Leadership in .one aspect or demand of directing function. Thus, management is a wider term then management. A manager is more than a leader. Managers are leaders but all leaders are not managers.
A leader does not require a managerial position. There can be leaders who are not appointed as managers of work groups. But by , virtue of their position, managers have to provide leadership to their subordinaties. Leadership of a manager depends on his personal qualities, attitudes of followers towards him and the situation in which they work. Non-managers can also be leaders of work group by influencing the behaviour of workers.
A strong leader can be weak manager just as a strong manager may be a weak leader. A leader need not be a manager but a good – manager must have the qualities of an effective leader. A managercan get worn done from his subordinates, because he has the authority to distribute reused and penalties to subordinates. But the can make full use of their potential only by inducing confidence and zeal among them. For this purpose a manager must posses leadership qualities.
Difference between Leadership and Management
Does not require Managerial position; A leader is not necessarily a manager
|Requires Managerial position.|
|Mainly involves direction||Involves all the five functions|
|Based on acceptance of followers.||Based on authority of position|
|Narrow term||Wider term.|
Question 2 .
Define Motivation .
Meaning of Motivation
The term ‘motivation’ has been derived from the word ‘motiv which means the urge to do or not to do sometings. Motive is ti.at force within an individual which compels him to act or not to act in certain way. Motives help and guide people to action. Motives, reflect need, wants, drive and impulses within people.
Motivation may, therefore, be defined as the process of stimulating or inducing people to take the desired of action. It is the act of inspiring employees to work hard to achieve the desired goals of the organisation. It involves arousing needs and desires in people so as to initiate and direct their behaviour in a purposive manner.
The aim of motivation is to influence the behaviour of subordinates for better performance and achieving the desired results. Some popular definitions of motivation are given below.
“Motivation means a process of stimulating people to accomplish desired goals.” – William Scott
“It refers to the way in which ways, drives, desires, aspirations, stirrings or needs direct, control or explain the behaviour of human beings.” – Daffon E. Mcfarland
“Motivation is an inspirational process which impels the members of the team to pull their weight effectively to give their loyalty to the group, to carry out properly the tasks that they have accepted and generally to play an effective part in the job that the group has under taken.” – E.F.L. Brech
What is informal communication?
Informal Communication : Communication that takes place without following the formal lines of communication is said to be informal communication. Informed system of communication is generally referred to as the ‘grapevine’ because it spreads throughout the organisation with its branches going Out in all directions in utter disregard to the levels of authority.
The informal communication arises out of needs of employees to exchange their views, which cannot be done through formal channels. Workers chit chatting in a canteen about the behaviour of the superior, discussing about rumour that some employees are likely to transferred are some examples of informal communications. The grapevine/ informal communication spreads rapidly and sometimes gets distorted.
It is very difficult to detect the source of such communication. It also leads to generate rumors which are not authentic. People’s behaviours is a fected by rumors and informal discussions and sometimes may hamper work environment. Some times, grapevine channels may be helpful as they carry information rapidly and therefore may be useful to manager at times, informal channels are used by managers to transmit information to know the reactions of his subordinates.
An intelligent manager should make use of positive aspects of informal channels and minimize negative aspects of this channel of communication.
What are semantic barriers of communication?
Barriers to Communication
It is generally observed that managers face several problems due to communication breakdowns or barriers. These barriers may prevent a communication or jitter part of it or carry incorrect meaning due to which misunderstandings may be created. Therefore, it is important for a manager to identify such barriers and take measures to over come them. The barriers to communication in the organizations can be broadly. grouped as semantic barriers, psychological barriers, organizational barriers, and personal barriers. These are briefly discussed below.
Semantic is the branch of linguistics dealing with the meaning of words and sentences. Semantic barriers are concerned with problems and obstructions in the process of encoding and decoding of message into words or impressions. Normally such barriers result on account of use of wrong words, faulty translations, different interpretations etc. These are discussed below
(i) Badly expressed message : Some times intended meaning may not be conveyed by a manager to his subordinates. These badly expressed messages may be an account of inadequate vocabulary usage of wrong words, commission of needed . words etc.
(ii) Symbols with difficult meanings : A work may have several meanings. Receiver has to perceive one such meanings for the word used by communicator. For example consider these three sentences where the work ‘value’ is used
- What is the value of this ring?
- I value of our friendship
- What is the value of learning computer skills?
You will find that the ‘value’ gives different meaning in different v contexts. Wrong perception leads to communication problems.
(iii) Faulty translations : Sometimes the communications originally drafted in one language (e.g. : English) need to be translated to the language understandable to workers (e.g.; Hindi). If translator is not proficient with both the languages, mistakes may creep in causing different meanings to the communication.
(iv) Unclarified assumption : Some communications may have certain assumptions which are subject to different interperetations. For example, a boss may instruct his subordinate, “Take care of our guest”. Boss may mean that subordinate should take care of transport, food, accommodation of the guest until he leaves the place. The subordinate may interpret that guest should be taken to hotel with care. Actually the guest suffers due to these unclarified assumptions.
(v) Technical Jargon : It is usually found that specialists use technical Jargon while explaining to persons who are not specialists in the concerned field. Therefore, they may not understand the actual meaning of many such words.
(vi) Body language and gesture decoding : Every movement of body communicates some meaning. The body movement and gestures of communicator matter so much in conveying the message. If there is no match between what is said and what is expressed in body movements, communications may be wrongly perceived.
Who is a supervisor?
The supervisor occupies an intermediate position between management and operative employees. As the connecting link between management and workers, the supervisor bridges the grap between what the management expects and what the workers want. He acts as the medium of communication between higher level managers and the operatives. The supervisor holds a key position in the organisation.
He turns plans and policies of the organisation into actual result through the efforts of operatives. As the leader of his group or section he is responsible for both the quantity and quality of production. Supervisors are online executives with command authority. They perform all the basic functions of management. Their main task is to secure desired results from rank and file in accordance with predetermined standards of performance.
The quantity and quality of work depends to a large extent on the competence and character of supervisors. They quality of supervision determines not only the efficiency of operations but also the cooperation, team spirit and discipline among the employees. The supervisor is expected to secure efficient performance from employees and at the same time keep them happy and satisfied.
Supervision is needed due to the following reasons
(a) Every worker must clearly understand the nature of work he is expected to do and the manner in which he is to do it. He must be given clear and precise instructions so that he understands his duties properly and his performance can be up to the required level. It is the job of supervisor to provide such orders and instructions to workers.
(b) Every worker should be assigned duties keeping in view his knowledge, skills and experience. Mismatch between what the worker is capable of doing and what he is asked to do will lead to poor performance and frustration among employees. Supervisors ensure proper assignment of tasks to workers.
(c) In the course of doing their work, operative face problems. They need advice and guidance in performing their duties. Supervisors provide counselling and assistance to them.
(d) Workers may lose interest in their jobs and there may be lack of a sense of.direction and purpose among them. Supervisors can remind them about the usefulness of their work and performance expected from them. They can inspire workers to perform with devott on and zeal.
(e) It is necessary to continuously monitor the performance of operatives. Such monitoring provides useful feed back as to in what respects the performance is not upto the desired level and what corrective actions are required. The supervisor monitor performance and discourages indifference and negligence on the part of workers.
What are the elements of directing ?
Elements Of Directing
Directing function of management includes the following elements:
(a) Supervision : It refers to overseeing the work of the subordinates by their superior. It primarily deals with instructing and guiding the employees towards better level of performance.
(b) Leadership : It is an attempt aimed at influencing people directly towards the attainment of some goal. It is the process of influencing people so that they will strive willingly towards the goal.
(c) Motivation : Motivation may be defined as inspiring a person to intensify his willingness to work harder for the achievement of desired objectives.
(d) Communication : Communication is the process through which two or more persons exchange ideas and feelings among themselves. It involves a systematic and continuous process of under-standing. Thus we can say that all the four elements of directing are very important for an organisation and the organisation must adopt and work according to these elements.
Explain the process of motivation?
Process of Motivation
Motivation is the result of interaction between human needs and incentives offered to satisfy them. The main steps in motivation process are given below.
1. Awareness of Need : The process of motivation beings with the awareness of a need. ‘ Feeling of a need creates anxiety or tension in the person.
2. Stimulas for Action : In order to satisfy the need and remove tension, a person takes some action. When a person feels hungry, for example, he takes steps to satisfy his hunger. He works to earn money with which he can buy food. If he gets no work he may beg for food or may even try to steal food.
3. Fulfilment of Need : In case the person is successful in satisfying his need he feels motivated. If the attempt is unsuccessful the need remains unsatisfied. In such a case the person may search for a different action.
4. Discovery of New Need :When one need is satisfied a new need arises and the process is repeated again.
Explain different networks of grapevine communications?
Grapevine Network : Grapevine communication may follow different types of network. Some of those networks are shown below. Figure : Grapevine Communication Networks
In single strand network, each person communicates to the other in sequence. In gossip network, each person communicates with all non selective basis. In probability network, the individual communicates randomly w’ith other individual. In cluster, the individual communicates with only these people whom he trust of these four types of networks, cluster is the most popular in organizations.
Long Answer Type Questions
Explain the principles of Directing?
Principles of Directing
Providing good and effective directing is a challenging task as it involves many complexities. A manager has to deal with people with diverse background, exactation. This implicates the directing process. Certain guiding principles of directing may help in directing process. These principles are briefly explained below
(i) Maximum individual contribution : This principle emphasizes that directing techniques must help every individual in the organization to contribute to his maximum potential for achievement of organizational objectives. It should bringout untappted energies of employees for the efficiency of organization, for example, a good motivation plan with suitable monetary and non-monetary rewards can motivate an employee to contribute his maximum efforts for the organisation as he or she may feel that their efforts will bring them suitable rewards.
(ii) Harmony of objectives : Very often, we find that individual objectives of employees and the organizational objectives understood as conflicting to each other. For example, an employee may expect attractive salary and monetary benefits to fulfil his personnel needs.
The organisation may expect employees to improve productivity to achieve expected profits. But good directing should provide harmony by convincing that employee rewards and work efficiency are complimentary to each other.
(iii) Unity of command : This principle insists that a person in the organization should receive instructions from one superior only. If instruction are received from more than one, it creates confusion, conflict and disorder in the
organization. Adherance to this principle ensures effective direction.
(v) Appropriateness of direction technique : According to this principle, appropriate .motivational and. leadership technique should be used while directing the people based on subordinate needs, capabilities, attitudes and other situational variables. For example, for some people money can act as powerful motivation while for others promotion may act as effective motivator.
(vi) Managerial communication : Effective managerial communication across all the levels in the organization makes direction effective. Directing should convey clear instructions to create total understanding to subordinates. Through proper feedback, the managers should ensure that subordinate understands his instructions clearly.
(vii) Use of informal Organization : A Manager should realize that informal group? or organization exist within every formal organization. He should spot and make use of such organizations for effective directing.
(viii) Leadership : While directing the subordinates, managers should exercise good leadership as it can influence, the subordinates positively without causing dissatisfaction among them.
(ix) Follow through : More giving of an order is not sufficient. Managers should follow . it up by reviewing continuously whether orders are being implemented accordingly or any problems are being encountered. If necessary, suitable modifications should be make in the directions.
Explain the qualities of a good leader? Do the qualities alone ensure leadership success?
Qualities of A Good Leader
In order to be effective in securing the willing cooperation of the follows a leader must possess several qualities.
These qualities may be described as follow :
1. Sound Physic : A good leader must have good health and physical fitness. He requires tremendous stamina and vigour for hard work.
2. Intelligence : A leader should be intelligent enough to examine problems in the right perspective. He should have the ability to assess the pros and cons of his actions in a particular situation. He requires logical lent of mind and an mature outlook.
3. Empathy : Empathy means the ability to look at things from others’ point of view. A good leader must understand the needs, aspirations and feelings of his subordinates. ‘
A leader should have an objective outlook, free from bias and prejudice. He should form his opinion and judgement on the basis of facts alone. He needs an open mind, is willing to listen to others and adopt new ideas.
5. Emotional Stability : The leader should have a cool temperamehtancTemotional balance.
He should not be unduly moved by emotions and sentiments. He should not lose temper or show indecisiveness even in the face of heavy odds.
6. Self Confidence and Will Power : A good leader should have confidence, in his own ability to lead others. He also requires the will power to meet the needs of every situation. He can inspire others and win their trust only when he has full confidence is himself and a strong will to win.
7. Communication Skills : A good leader should be able to communicate clearly and precisely the goals and procedures to be followed. This is necessary for persuading and convincing people. The skills to listen potiently and understand is also necessary.
8. Knowledge of Work : A leader should have full knowledge of the work being performed “ by his subordinates. Only then can he guide and supervise his people and command their respect.
9. Vision and Foresight : A leader should be able to anticipate or visualise the future course of events. He needs a sound judgement and the ability to take right decisions at the right time.
10. Sense of Responsibility : A leader should be trustworthy so that subordinates can depends on him. He should’be willing assume responsibility for results. He needs a strong urge to accomplish the goals.
11. Human Relations Attitude : A good leader must be able to win the confidence and loyalty of people. He should have the capacity to create team spirity among his . followers. He should understand and respect the feelings and aspirations of his subordinates. A leader can develop friendly relations with his people only when he is conversant with human behaviour and maintains personal contact with them.
Discuss Maslow’s Need Hierarchy theory of motivation.
Hierarchy Of Needs
Needs are the stating point in motivation. If the needs of the workers are identified and satisfied, they will feel happy and show higher productivity. The workers contribute their maximum to the organisational goals if their needs are satisfied. However, the needs of people are large in number as shown in fig. and some of the needs are more, complex than others. So it is not easy to satisfy all the management to satisfy the basic needs of workers such as food,clothing
and shelter. But the satisfaction of psychological needs of workers is a difficult job.
Maslow’s Hierarchy of Needs
Abraham Maslow, an eminent US psychologist, offered a general theory of motivation, called the ‘Need hierarchy theory.’ He felt that people have a wide range of needs which motivate them to strive for their fulfilment. As shown in fig., human needs can be categorised into five types : physiological needs, security needs, social needs, esteem needs and self actuaiisation needs.
Various types of human needs are discussed below :
1. Physiological Needs : These needs relate to the survival and maintenance of human life. They include such things as food, clothing, shelter, air, water and other necessities of life.
2. Security Needs : These needs are also important for most of the people. Everybody wants job security, protection against dangers, safety of property, etc.
3. Social of Affiliation Needs : Man is a social being. He is, therefore, interested in conversation, sociability, exchange of feelings, companionship, recognition, belongingness, etc.
4. Esteem or Status Needs : These needs embrance such things as self-confidence, independence, achievement,competence, knowledge, initiative and success. These needs are concerned with prestige and respect of the individuals.
5. Self-actualisation Needs : These are the needs of the highest order. They are generally found in persons whose first four needs have already been fulfilled.
They are concerned with achieving what a person consider to be his mission of life. For instance, getting India free from the British regine was the mission of Mahatma Gandhi. Sense of achievement may be concerned with making new discoveries and doing unique things.
Maslow felt that the above needs have a definite sequence of domination. Second need does not dominate until first need is reasonably satisfied and third need does not dominate until first two needs have been reasonably satisfied and so on. The other side of the need hierarchy is that man is wanting animal, he continues to want something or the other. He is never fully satisfied. If one need is satisfied, the ot,her need arises.
Thus, the management can get desired behaviour from the employees by satisfying their needs by offering incentives. Management can use two types of incentive, namely,
- financial, and
Financial incentives like wages, commission, bonus, etc., can be used to satisfy the physiological, security and social needs of the workers. Monetary benefits can also satisfy a part of status needs Of the employees. But the needs of the biggest order, i.e., self-actualisation can be fulfilled by offering non-financial incentives such as job enrichment, job enlargement, challenging work, etc.
What are the common barriers to effective communication? Suggest measures to overcome them.
Barriers to Effective Communication :Barriers or obstacles to communication cause break-downs, detriorate and inaccurate information. They plaque the daily life and depend upon the accurate transmission of the orders and information for efficient operations.
Whenever a communication is made, there is always a tendency on the part of the receiver to evaluate the message received and then decide to approve or disapprove the same. Another important barrier to communication lies in the layers and spans of management.
In large organisations, there are a number of obstacles which make transmission of message more difficult. In both upward and downward communication, it may happen that some of the persons in the intermediate layers withhold the whole or part of the information because they may feel that by withholding the information they will be better informed than those whom they lead.
It should be noted that although there is no such thing as perfect communication considerable . degree of perfection can be achieved in communication if the barriers to communication are overcome. The main barriers to communication . are discussed below :
1. Complex Organisation Structure : A The organisation structure has an important influence on the ability of the members of the organisation to communicate effectively. These days the organisation structure of most big enterprises is complex involving several layers of supervision and long communication lines Organisation structure creates problems because communication may break down at any level due to faulty transmission.
2. Status Differences : Status of an organisational member is determined by the position he holds in the organisation. This fact is quite apparent when the subordinate talks to his superior. Obstacle in communication occurs when the psychological distance between the two is created because’ of status symbols of the superior. Status symbols include high quality furniture, separate room facilities, etc. A sense of inferiority complex in the mind of the subordinate does not allow him to seek clarification from the superior.
3. Semantic Barriers : Semantic is the science of meaning, words seldom mean the same thing do two persons. Symbols or words usually have a variety of meanings. The sender and the receiver have to choose one meaning from among many. If both of them choose the same meaning, the communication will be perfect.
But this is not so always because of differences in formal education and social background of people and the type of situation faced. The same words may suggest quite different meanings to different people, e.g. ‘profits’ may mean to management efficiency and growth, whereas to employees, profits may suggest excess funds piled up through paying inadequate wages and benefits.
4. Screening or Filtering of Information : Sometimes, the sender screens the information for passing only
such information which will look favourable to the receiver; This is because of the simple reason that no one like to show his mistakes to someone else, especially to his boss. The boss, on the other hand, wants to obtain information about what is actually going on, especially those actions which need his attention.
5. Perceptual Errors : A person’s perception is determined by his needs, social environments, level of education, cultural factors, etc. Every persons tries to interpret the information he receives from his own angle or point of view. This may create complexities in the process of communication. Effective communication requires the willingness to see things through the eyes of others.
6. Predisposition or Closed Mind : Preconceived notions or opinions are a hurdle in communication. If the listener has closed mind, he will evaluate the things from his own point of view and will not be receptive to new ideas. Similarly, if a li stener is suffering from the mirage of too much knowledge, he will , be rigid and dogmatic in attitude.
7. Lack of Ability to Communicate : All persons do not have the skill to communicate. Skills to communicate may come naturally to some, but an average man may need some sort of training and practice by way of interviewing, public speaking, etc.
8. Poor Listening or inattention : Failure to read bulletins, notices, minutes and reports is common among many people. Similarly, verbal communication has no impact on those who are preoccupied or unwilling to listen. If people do not pay the required attention to listening and understanding messages they are supposed to receive, communication will lose its purpose.
Also, some people are too quick in reacting on information as it is being received from the sender, without waiting for full information. This may drive the sender to frustration and into a sense of futility. The sender may then learn to be different in transmitting messages to such premature evaluators.
9. Lack of Credibility of Source : If the receiver has trust and confidence in the words.and actions of the communicators, the message received will be considered credible. But if there is a gap between what the communicator says and what he does, the message from him will not create the desired response from the receiver. The receiver will not take the message seriously because of inconsistency of message and the incredibility of its source.
Overcoming Barriers to Communication : An effective system is one that ensures smooth flow of information in the organisation and overcomes barriers to communication. Such a system has the following characteristics.
(i) Free Flow of Information : The system of communication should be so designed that it has short lines of information flows. There should be free movement of information both vertically and horizontally. The rigid organisation structure should not be allowed to come in the way of smooth and speedy flow of information. Moreover, delegation and decentralisation of authority should be encouraged to cut delays in decision-making and speed up communication.
(ii) Clarity of Message : The message must be as clear as possible. No ambiguity should creep into it. The message can be conveyed properly only if it is clearly formulated in the mind of the communicator. The message should’, be encoded in direct and simple language so that the receiver is able to understand it without much difficulty.
(iii) Positive Attitude : There should be change in the attitudes of superiors and subordinates so that there is open communication at all times various levels. They should overcome the; status barrier to create proper understanding. The superiors must keep the subordinates informed about the policies and programmes and also be in touch with subordinates regarding their problems, suggestions etc. This is necessary to achieve the organisational goals effectively.
(iv) Open Mind : The parties to communication must have open mind. They should not try to hold information just to serve their personal interests. They should attempt to interpret the information without any prejudice or bias. They should also be receptive to view ideas that may come across. They should not react before receiving and understanding the full message.
(v) Communication Skills : Every person should have the necessary skills to share information with superiors, peers and subordinates. This will improve human relations in the organisation and also help in ensuring greater productivity.
(vi) Effective Listening : The sender must listen to the receiver’s words attentively so that the receiver may also listen to the sender at the same time. It is also necessary for every-employee to update his knowledge by reading company notices, bulletins, reports, etc.
(vii) Receptive to new Ideas : The employees should be prepared to accept new ideas and change themselves accordingly. They should be willing to receive information from internal and external sources which calls for change in the organisation.
(viii) Flexibility : A good system should be flexible enough to adjust to the changing requirements. It should be able to carry extra loads of information without much strains. It should absorb new techniques of communications with little resistance. Use of a wide .range of media such as oral and written message, fact-to-face contacts, telephonic calls, group meetings, etc. should be encouraged without any hesitation.
Explain different financial and non-financial incentives used to motivate employees of a company.
Meaning And Types of Incentives
Meaning of Incentives : An incentive is something that stimulates a person towards some goal. It activates human needs and creates the desire to work. Thus, an incentive is a means to motivation. Incentives generally have a direct influence on the degree of motivation.
In organisations, increase in incentive leads to better performance and vice versa. Generally, incentives induce individuals to respond in a desired manner. Both financial and non-financial incentives may be used by the management to motivate the workers. Financial incentives of v motivators are those which are associated with money. They include wages and. salaries, fringe benefits, bonus, retirement benefits, etc. Non-financial motivators are those which are not associated with monetary rewards.
They include intangible incentives like ego satisfaction, self-actualisation and responsibility. Management makes use of financial and non-financial incentives to satisfy the needs of the employees. The satisfied workers are group goals in a better way.
2. Job Security : Generally, workers prefer security of job. They may not prefer jobs with higher wages or salaries which do not carry security job security is an important non-financial incentive for most of the workers.
3. Recognition : Praise or appreciation satisfies one’s egoistic needs. Sometimes, praise is more effective than any financial incentive. However, this incentive should be used with greater .degree of care because praising an incompetent employee “would create resentment among the competent employees. Of course, occasionally, a pat on back on an incompetent employee may act as an incentive to him for improvement.
4. Challenging Job : For some people, challenging work acts as a great non-financial incentive. It inspires them to work hard and provides them job satisfaction. The management can use ‘job enrichment’ to make the jobs more interesting and challenging.
5. Knowledge of Results
Knowledge-of results leads to employee satisfaction. A worker likes to know the result of his performance. He gets satisfaction when his superior appreciates the work he has done.
6. Opportunity for Growth and Achievement : Opportunity for growth is another kind of incentive. If the employees are provided the opportunity for their advancement and growth and to develop their personality, they feel very must satisfied and become more committed to the organisational goals.
7. Opportunity for Participation : For some employees, opportunity for participation in the process of decision-making serves as a non-financial incentive. Active involvement of the subordinates in decision-making may be achieved by delegation of authority, increasing efficiency of workers.
People in higher positions are not motivated by monetary benefits. They may be motivated by money only if the increase is large enough to increase their standard of living and status in the society. But in case of employees at the operative levels, money certainly plays a significant role in motivating them because their basic needs have not been fulfilled.
Incentives which are not measurable in terms of money are knows as non-monetary or non-financial incentives.
Financial incentives do not work for even to motivate the people at work. The employees do not always run after money as it can’t satisfy all their needs. They want status and recognition in the society.
They want to satisfy their egoistic’needs and to achieve something in their lives. Management can use non-financial incentives to satisfy such needs of workers. Non-monetary incentives such as praise, recognition and opportunity for growth can be strong motivators for employees whose psychological needs are stronger.
Role of Non-Financial Incentives
Non financial or non-monetory incentives motivate the employees in the following ways ‘
(i) Non-monetory incentives such as recognition, office with good furniture, etc. satisfy the psychological needs of individuals.
(ii) They motivate the employees by enhancing their status in the organisation.
(iii) They can satisfy the higher level needs.of individuals, e.g., need for self-fulfilment, advancement, etc.
Types of Non-Financial Incentives
Competition is a kind of non-financial incentive. If there is a healthy competitionnmong the individuals employees or better motivated. Then productivity is also higher. Thus, the existence of incentive system plays an important role in motivating the employees and in increasing their efficiency.
2. Types of Incentives
Two kinds of incentives may be provided to the employees, namely,
(i) financial or monetory incentives, and
(ii) non-financial incentives. These are discussed below.
Monetory or Financial Incentives
Monetory incentives are associated with monetary or financial benefits to the employees. These benefits can be expressed in terms of money. Financial incentives are very commonly used in modem organisations to motivate the employees to increase their productivity. These include bonus, profit sharing, commission, insurance, medical allowance, housing facilities and retirement benefits. These are paid in terms of money.
It is generally said that higher the monetory benefits, higher is the productivity of workers. But this is not always so, Monetary benefits have only limited utility in increasing the motivation of employees. After .the basic needs have been met, the role of money in motivating the employees is generally decreased. The management has to make use of non-financial incentives also to motivate the employees.
The popular monetary incentives offered to employees are briefly discussed below
(i) Profit-sharing : Under profit sharing scheme, the employees are given a share in the profits of the company if the profits exceed the level fixed by the management and increase company’s profits so that they may collectively get a share in the increased profits.
(ii) Co-partnership : Under profit sharing, the employees get a share of profits and not the ownership right or shares in the company. But under co-partnership, the employees are issued shares in lieu of profit sharing. Thus, the employees gain the status of co-partners of the company where they are working.
(iii) Bonus : It is customary to distribute bonus to employees every year. The law provides payment of minimum of 8.33% of annual pay as bonus and it does not prescribe any upper limit. Thus, the rate of bonus is paid to the employees around Diwali every year.
(iv) Commission : Commission is the incentive offered to sales persons to motivate them to increase their sales. In addition to their monthly salary, the sales persons become entitled to a percentage of sales revenues (vaiying from I per cent to 5 per cent). This is called commission on sales.
(v) Cash Rewards For suggestions : Many companies have started suggestion schemes under which handsome rewards are given to the employees whose suggestions are implemented by the management. The suggestions may relate to improvement in techn ique and procedure to reduce cost of production. The amount of reward may depend upon the expected-savings is costs during a particular year because of the implementation of the suggestions.
Role of Monetary or Financial Incentives : Money plays an important role in motivation. Managements generally make use of financial incentives to motivate the workers.
The financial incentives can help increase the motivation of workers in the following ways
(i) Financial incentives fulfil the basic physiological needs (food, clothing and shelter) of the workers. Money is the real motivating factor for the workers where basic needs are not fulfilled.
(ii) Money helps in satisfying the social needs of the workers to some extent because money is often recongnised as a basis of status, respect and power.
(iii) Money is regarded as a basic incentive for individuals when economic rewards are based on productivity. It helps in information sharing, receiving suggestions, etc. Participation would increase the commitment and loyality of the workers to the organisation.
Suggestion system satisfies the psychological needs of the employees. The organisation which don’t pay cash rewards for useful suggestions publish the worker’s name with his photograph in the company’s magazine. This motivates the employees to be in search for something which may be of great use to the organisation.
Application Type Questions Answers
The workers always try to show their inability when any new work in given to them. They are always unwilling to take up any kind of work. Due to sudden rise in demand a firm wants to meet excess orders. The supervisor is finding it difficult to coped up with the situation. Suggest ways.for the supervisor to handle ‘ the problem.
Supervisor in the above problem plays a key role for maintaining group unity among the workers and ensures performance of work according to the targets set. He takes responsibility for task achievement and motivates the workers effectively. A supervisor with good leadership qualities can build up high morale among workers.
A skilled and knowledgeable supervisor can build efficient team of workers. In the above situation, the supervisor may set an example by doing himself the work and make sure that the image of the organization will not let down in the eyes of workers and persuade them to follow his actions or deeds.
Workers of a factory often seek guidance of Production Managers, The production manager finds Himself overburdened. Advise the way to relieve production manager.
The production manager of an organization may direct, instruct, guide and council the workers for the attainment of organizational objectives. Production manager may delegate his authorities to immediate supervisor or foreman who may look after the problems of workers. Production manager guides the workers to fully realise their potential and capabilities by motivating and providing effective leadership.
In an organisation employees always feel they are under stress. They take least initiative and fear to express their problems before the manager. What do you think is wrong with the manager?
In the above problem, manager centralised all the powers and authorities by himself. People in an organization work with diverse background and expectations which caused stress in the minds of workers. Manager should convey clear instructions to create local understanding to subordinates. Manager should promote informal groups within the organization to relieve stress among the employees or workers.
In an organisation all the employees take things easy and are free to approach anyone for minor queries and problems. This has resulted in everyone taking to each other and thus resulting in inefficiency in the office. It has also resulted in loss of secrecy and confidential information being leaked out. What system do you think the manager should adopt to improve communication.
In the above problem, the informal or grapevine type of communicate creates problem to the extent that confidential information and matters of utmost secrecy are leaked between the subordinates. Grapevine comniunication spreads rapidly and sometimes gets distorted. An intelligent manager should make use of positive aspects of informal channels and minimise negative aspects of this channel of communication.
Along with informal communication management should use formal communication flow through official channels designed in the organization chart.
Case Problem -1
Y limited is a bank functioning in India. It is planning to diversify into insurance business. Lately the government of India has allowed the private sector to gain entry in the insurance business. Previously it was the prerogative of LIC and GIC to do insurance business. But now with liberalisation of the economy and to make the field competitive other companies have been given licenses to start insurance business under the regulation of ‘Insurance Regulatory and Development Authority’. Y limited plans to recuit high quality employees and agents and exercise effective direction to capture a substantial part of life and non life insurance business.
Identify how the company can supervise its employees and agents effectively. What benefits will the company derive from effective supervision?
Y limited can supervise its employees and agents with the help of good direction, as directing concerns the total manner in which a manager influences the subordinates. It involves good supervision and motivation. Motivation means inspiring the subordinates with a zeal to work. The manager should motivate them and in return they will work with enthusiasm and company will get more insurance policies.
What financial and non-financial insentives can the company use for employees and agents to motivate them? What benefits will company get from them?
It should be a company that actively promote freedom to work, freedom to innovate and even freedom to fail. The company should under go a revolutionary changes in terms of its works (policies) Company should give more insentives and freedom in the market to its employees so that, it could get more profits and name.
How can company ensure that higher order needs i.e. esteem and self-actualisation as specified by Abraham Maslow are met?
As according to Abraham it is the highest level of need in the hierarchy. It refers to drive to become what one is capable of becoming. So company may assure with the help of following process.
Self Actualisation needs
Basic phychoiogical needs
If the company will fulfill the above needs it will get success.
Identify the qualities of leadership in this line of business that the company managers must posses* to motivate employees and agents.
- They must have quality to inspire and influence them.
- They must have the sense of responsibility and a desire to success.
- They must have full knowledge of the subject.
- They must be effective motivators.
Give a model of formal communication system that the company can follow. Identify the barriers in this model. How can they be removed?
In the above problem, the business of banking and Insurance Sector due to entry of private players in the business, the effective system of communication between the various authorities or levels of management is essential. Various formal systems of communication like chain, wheel, circular, free flow and invested takes place in an organization. In the above case the communication channel of free low of information may be used in my opinion, which may be as unde
In this network, each person can communicate with others freely. The flow of communication is fast in this network.
Various Communication barriers like badly expressed messages, unclatified assumptions, Technical terms, loss by transmission and poor retention of information and messages and distrust between communicator and communicate acts as a barrier.
The barriers may be overcome and improve communication effectiveness by clarifying the ideas before communication ensure proper feedback, follow up communication and a feeling of trust and oneness in essential.
How can informal communication help to supplement formal communication model given by you in answer to questions 5?
Information Communication system arises out of needs of employees to exchange their views. Sometimes, grapevine communication or informal communication may be helpful as it carry information rapidly and may be useful for managers.
An intelligent manager should make use of positive aspects of informal channels and minimise negative aspects of informal communication. Management should adopt the cluster type of grapevine communication because in such communication the individual communicates with only those people whom he trust. Cluster is the most popular system of communication in organization.