Principles of Management

Control is the process of measuring actual performance, comparing it with standards and taking corrective action. A control system is effective only if it has the following characteristics.

1. Accuracy. The system must give correct and reliable information, since wrong data lead to wrong decisions.
2. Timeliness. Information must reach managers quickly enough for corrective action before serious damage occurs. Ideally control is preventive (feedforward).
3. Economy (cost-effectiveness). The benefits of control must exceed its cost. Over-controlling small matters wastes resources.
4. Flexibility. The system must adapt to changing conditions and plans, and not become obsolete when circumstances change.
5. Understandability. Standards, reports and procedures should be simple and clear so that users know what is expected.
6. Suitability (appropriateness). Controls should match the nature of the plan, the activity and the level of the manager.
7. Focus on critical points. Control should concentrate on strategic and key result areas, using the principle of management by exception.
8. Objectivity. Standards and measurement should be impartial and quantifiable, not based on personal opinion.
9. Emphasis on exceptions. Only significant deviations should be reported to higher management.
10. Corrective action. The system should indicate who is responsible and what action is needed, not merely detect deviations.
11. Acceptability and integration. Employees should accept the controls, and the controls should fit with the organization's culture, structure and planning.
12. Forward-looking. The control system should anticipate problems rather than simply report past failures.

An effective control system therefore combines accuracy, speed, economy, flexibility and clarity in order to keep performance in line with plans.

Organizational goals are the desired future states or end results that an organization wants to achieve through its existence and operations. They give direction to all members, serve as standards for evaluating performance, justify the use of resources and provide a basis for planning and control. Goals may be strategic (long term, set by top management), tactical (medium term, set for departments) or operational (short term, set for units and individuals).

Formulation of organizational goals

Goals are normally formulated through a sequence of steps involving analysis, negotiation and communication.

1. Analysis of the mission and environment. Goal setting starts from the mission and vision of the organization. Managers scan the external environment (market, competitors, technology, law, economy) and the internal environment (resources, strengths, weaknesses) to find out what is possible and desirable.
2. Identifying stakeholder expectations. Owners want profit, employees want pay and security, customers want quality and fair prices, government wants taxes and compliance, and society wants responsible conduct. Goals are a compromise among these claims.
3. Setting strategic goals at the top. The board and top managers set broad, long-term goals such as market share, growth, profitability, survival and social responsibility.
4. Cascading to lower levels. Strategic goals are broken into departmental (tactical) goals and then individual (operational) goals so that each level supports the one above it. This is a means-ends chain.
5. Participation and bargaining. In practice goals emerge from bargaining among dominant coalitions (managers, departments, owners). Participation as in Management by Objectives (MBO) increases commitment.
6. Making goals SMART. Goals should be specific, measurable, achievable, relevant and time-bound, with a clear time frame and responsible person.
7. Communication and review. Goals are communicated to all members, linked to rewards, and reviewed periodically. When conditions change they are revised, replaced or dropped.

Thus organizational goals are formulated through a continuing process of environmental analysis, stakeholder consideration, top-down setting, bottom-up participation and regular review.

Managers today work in an environment that changes quickly and unpredictably. The main emerging challenges are explained below.

1. Globalization. Markets, competition, capital and labour now cross borders. Managers must deal with foreign competitors, different laws, cultures and currencies, and decide whether to export, outsource or invest abroad.
2. Rapid technological change. Information technology, automation, artificial intelligence and e-commerce shorten product life cycles and change how work is done. Managers must adopt technology, train staff and protect data and systems against cyber threats.
3. Workforce diversity. Employees differ in gender, age, ethnicity, language, religion, education and ability. Managers must avoid discrimination, build inclusive teams and use diversity as a strength while handling conflict.
4. Ethics and social responsibility. Stakeholders expect honesty, fair dealing, environmental protection and community welfare. Corruption, tax evasion and unsafe products damage reputation, so managers must create ethical codes and a culture of integrity.
5. Quality and productivity. Customers demand higher quality at lower cost. Managers must use total quality management, lean operations and continuous improvement to remain competitive.
6. Innovation and change. Organizations must continuously introduce new products, processes and business models. Managers must overcome resistance to change and encourage creativity.
7. Knowledge management and a skilled workforce. Knowledge workers are the main asset. Attracting, motivating and retaining talented people, especially when skilled workers migrate abroad as in Nepal, is difficult.
8. Empowerment and teams. Flatter structures, virtual and remote teams require sharing authority, trust and new styles of leadership and communication.
9. Environmental sustainability. Climate change, resource scarcity and regulation require green practices and sustainable operations.
10. Political and economic uncertainty. Inflation, exchange-rate changes, policy instability and crises such as the pandemic make planning difficult and increase risk.

To meet these challenges, managers need conceptual, human and technical skills, a learning attitude, flexible structures and strong ethical values.

Globalization is the process by which economies, markets, cultures and societies of the world become increasingly integrated and interdependent through the free movement of goods, services, capital, technology, information and people across national borders. It is driven by trade liberalization, advances in transport and communication, multinational companies and international organizations such as the WTO.

Effects of globalization in Nepal

Positive effects

1. Expanded trade and markets. Nepali products such as carpets, garments, tea, handicrafts, pashmina and herbs can reach international markets, and Nepal's WTO membership (2004) provides access and rules.
2. Foreign investment and technology. Foreign direct investment and joint ventures bring capital, technology and managerial skill, notably in hydropower, banking, telecommunications and tourism.
3. Greater choice and quality for consumers. A wide range of goods and services is available, often at lower prices, and competition improves quality.
4. Employment and remittance. Opportunities abroad and in foreign-linked businesses create jobs. Remittances are a major source of foreign exchange and household income.
5. Spread of information, education and technology. Internet, mobile and e-commerce reach Nepalis, enabling outsourcing, IT services and online learning.
6. Tourism growth and cultural exchange. Exposure to the world promotes tourism and international understanding.
7. Management improvement. Domestic firms adopt international standards, such as ISO and quality management, to compete.

Negative effects

1. Competition against local industries. Small and cottage industries struggle against cheaper imports and large foreign firms, and some close.
2. Trade deficit and dependence. Imports greatly exceed exports, and the economy depends on remittances and imports, mainly from India.
3. Brain drain. Skilled and young people migrate, creating labour shortage at home.
4. Cultural erosion. Western consumer culture influences language, food, dress and values, weakening traditions.
5. Inequality. Benefits go mostly to urban, educated and wealthy groups, widening gaps between rich and poor, urban and rural.
6. Vulnerability to external shocks. Global price changes, recession or policy changes in partner countries affect Nepal quickly.
7. Environmental pressure. Increased consumption and industrial activity contribute to pollution and resource exploitation.

Overall, Nepal can gain from globalization if it improves productivity, infrastructure, quality, and policy, and protects local industries and culture.

The service sector covers industries that produce intangible output (skills, convenience, information, experience) instead of physical goods. In Nepal it is the largest part of the economy, contributing more than half of GDP, and it is the main destination of remittance-fed consumption and of the growing educated workforce.

1. Tourism and hospitality

• Hotels, resorts, restaurants, trekking and travel agencies, airlines and guides.
• Nepal's mountains, Lumbini, Pashupatinath, Chitwan and trekking routes (Everest, Annapurna) attract foreign visitors.
• It earns foreign currency and creates jobs in remote areas.

2. Banking, finance and insurance

• Commercial banks, development banks, finance companies, microfinance institutions, cooperatives, insurance companies and the stock exchange (NEPSE).
• Nepal Rastra Bank regulates the system; mobile wallets and digital payments are growing quickly.

3. Transportation and communication

• Road transport, domestic and international air services, ride-hailing and freight/logistics.
• Telecom and internet companies (Nepal Telecom, Ncell, ISPs) provide voice, data and digital connectivity.

4. Information technology and BPO

• Software development, outsourcing, web and mobile app companies, and freelancing, which earn export income.
• E-commerce and fintech are emerging.

5. Education and health

• Private schools, colleges and universities, training institutes, hospitals, clinics, diagnostic centres and pharmacies.
• Many Nepali students and patients still travel abroad, so there is room for growth.

6. Energy, trade and other services

• Wholesale and retail trade, electricity distribution, real estate, advertising, consulting, legal and accounting services, and media.

Significance: the sector creates employment, earns foreign exchange, supports the manufacturing and agriculture sectors and raises living standards.

Problems: weak infrastructure, shortage of skilled workers, political instability, low quality standards, limited foreign investment and heavy dependence on imported inputs.

The service sector consists of industries that provide intangible products such as skills, convenience and information. In Nepal it is the largest sector of the economy, contributing more than half of GDP, and it is growing fastest.

Major service industries in Nepal

1. Tourism and hospitality. Hotels, restaurants, trekking and travel agencies, airlines and tour guides. Natural beauty, heritage sites and adventure activities bring in foreign exchange and rural employment.
2. Banking, finance and insurance. Commercial and development banks, finance companies, microfinance, cooperatives, insurance firms, stock exchange (NEPSE) and digital payment providers. Nepal Rastra Bank regulates the sector.
3. Transportation and logistics. Road and air transport, cargo and courier services.
4. Communication and information technology. Telecom and internet service providers, software companies, outsourcing, e-commerce and fintech.
5. Education and health. Private schools, colleges and universities, coaching centres, hospitals, clinics and laboratories.
6. Trade and other services. Wholesale and retail trade, real estate, energy distribution, media and advertising, consulting, legal and accounting services.

Importance: it provides employment, earns foreign currency, supports industry and agriculture, and improves the quality of life.

Problems: inadequate infrastructure, lack of skilled workers, weak regulation and quality standards, political instability and limited investment.

Business environment is the sum of all external and internal forces, factors and institutions that surround a business and affect its operations, performance and decisions. These include economic, political, legal, social, technological and competitive forces, as well as the organization's own resources and culture.

Components of the internal environment

The internal environment consists of the elements inside the organization that managers can usually control and that determine its strengths and weaknesses.

1. Owners and board of directors. Owners (shareholders, proprietors) set the broad direction and expectations. The board of directors appoints top managers, approves strategy and supervises performance. Their values and interests influence goals and policies.
2. Employees (human resources). The skills, attitudes, motivation, unions and turnover of employees decide how effectively plans are carried out. A good working relationship and labour-management harmony improve productivity.
3. Organizational culture. The shared values, beliefs, norms and behaviours of members shape how people work, communicate and make decisions. A strong supportive culture promotes commitment and change, while a weak one resists it.
4. Organizational structure. The division of work, chain of command, span of control, centralization and departmentation affect coordination, speed of decisions and flexibility.
5. Physical and financial resources. Plant, equipment, buildings, technology, capital and funds available limit or support what the organization can do.
6. Mission, objectives and policies. The purpose of the organization, the goals it pursues and the policies guiding action provide direction and set the limits of managerial choice.
7. Management style and leadership. The way managers plan, lead and control, including their willingness to take risks, affects motivation, innovation and results.
8. Information and technology systems. Internal systems for information, production and communication determine efficiency and quality of decisions.

These factors together define organizational strengths and weaknesses, which managers match against external opportunities and threats (SWOT analysis) when preparing strategy.

Organizing is the management function of dividing work, grouping activities, assigning authority and responsibility, and coordinating people to achieve goals. Different approaches to organizing have developed over time.

1. Classical (traditional) approach. Based on the work of Taylor, Fayol and Weber, it views the organization as a machine and stresses formal structure, division of labour, unity of command, scalar chain, span of control, specialization and rules. Bureaucracy, with a clear hierarchy and impersonal rules, is its typical form. It gives order and efficiency but is rigid and ignores human needs.
2. Neoclassical (behavioural) approach. It accepts the classical structure but recognizes the importance of human relations. It studies informal groups, motivation, participation, communication and job satisfaction. It argues that organization is made of people and that their social needs must be considered.
3. Systems approach. The organization is seen as an open system of interrelated subsystems that takes inputs (materials, labour, money, information) from the environment, transforms them and returns outputs. It stresses interdependence, feedback, synergy and adaptation to the environment.
4. Contingency (situational) approach. There is no single best way to organize. The suitable structure depends on factors such as environment, technology, size, strategy and people. In stable conditions mechanistic structures work well, while in changing conditions flexible organic structures are better (Burns and Stalker; Lawrence and Lorsch).
5. Socio-technical approach. It treats the organization as a combination of a social system (people) and a technical system (tools, methods) and seeks to optimize both together, for example through autonomous work teams.
6. Modern approaches. These include the learning organization, team-based, network and virtual organizations, matrix structure and the process-based approach. They emphasize flexibility, empowerment, flat structure and use of information technology.

In practice managers combine these approaches according to the needs of their organization.

Robert L. Katz identified three basic skills required for managers, and a fourth is often added.

1. Technical skill. The ability to use specific knowledge, methods, techniques and tools of a specialized field, such as accounting, engineering, programming or marketing. It is gained through education, training and experience. It is most important for first-line (supervisory) managers who directly guide operating employees.
2. Human (interpersonal) skill. The ability to work with, understand, motivate and lead people individually and in groups. It includes communication, empathy, team building, conflict handling and the ability to create trust. It is equally important at all levels of management.
3. Conceptual skill. The ability to see the organization as a whole, understand how its parts relate to each other and to the environment, analyse complex situations and form long-term strategies. It is most important for top managers, who make strategic decisions.
4. Design and problem-solving (diagnostic) skill. The ability to identify problems, find their causes, design workable solutions and implement them. It is closely related to conceptual skill and is valuable for middle and top managers.
5. Communication, political and decision-making skills. Managers also need to communicate clearly, build networks and influence power relations, and make timely and sound decisions.

Skill by level. Top managers need more conceptual skill, middle managers need a balanced mix of the three, and first-line managers need more technical skill. Human skill is needed everywhere. Skills can be developed by education, training, job rotation and experience.

The human relations theory (human relations movement) emerged in the 1930s as a reaction to the classical school, which treated workers as machines motivated mainly by money. It stresses that employee productivity depends on social and psychological factors such as feelings, attitudes, group relations and recognition.

Origin: the Hawthorne studies. Elton Mayo and his colleagues conducted experiments at the Western Electric Hawthorne plant (1924-1932). The illumination, relay assembly test room, interviewing and bank wiring observation room studies showed that:

• Output rose even when physical conditions were worsened, because workers felt special attention and importance (the Hawthorne effect).
• Informal groups set their own norms of output and exert strong pressure on members.
• Social needs, recognition, belonging and good supervision affect morale and productivity more than pay and physical conditions alone.

Main ideas

1. The organization is a social system as well as a technical-economic system.
2. Workers are motivated by social and psychological needs, not only by economic rewards.
3. Informal groups and informal leaders influence behaviour and productivity.
4. Participation in decisions, good communication and supportive supervision improve morale and cooperation.
5. Job satisfaction leads to higher productivity ("a happy worker is a productive worker").
6. Managers should be skilled in human relations, listen to employees and treat them with respect.

Contributions. It drew attention to the human element, informal organization, group dynamics, leadership and motivation, and led to the later behavioural science approach (Maslow, McGregor, Herzberg).

Criticisms. It overemphasized the social side and ignored the role of money, structure and technology. Its research methods were weak, and the claim that satisfaction always raises productivity is not proven. Managers sometimes used it only as a technique to manipulate workers.

Differences between strategic and tactical planning

Strategic planning answers "where do we want to go?" while tactical planning answers "how will each department help us get there?". The tactical plans are derived from the strategic plan and are further broken down into operational plans.

A decision is a choice made from available alternatives to solve a problem or exploit an opportunity. Decisions can be classified in several ways.

1. Programmed and non-programmed decisions (Herbert Simon)

• Programmed decisions are routine and repetitive, made by following established rules, procedures or policies, for example reordering stock when it reaches a minimum level, or granting leave. They are common at lower levels and need little judgment.
• Non-programmed decisions are unique, unstructured and novel, with no ready procedure, for example launching a new product, entering a new market or restructuring. They need judgment and creativity and are made mainly by top management.

2. Strategic, tactical and operational decisions

• Strategic decisions concern the long-term direction of the whole organization, such as mission, diversification or merger. They involve large resources and high risk.
• Tactical (administrative) decisions convert strategy into action at departmental level, such as budget allocation or staffing plans.
• Operational decisions concern day-to-day activities, such as scheduling, supervision and quality checks.

3. Individual and group decisions

• Individual decisions are made by one manager and are quick and clear in responsibility, but may lack varied views.
• Group decisions are made by committees or teams, giving more information, acceptance and creativity, but taking more time and possibly leading to conflict or groupthink.

4. Organizational and personal decisions

• Organizational decisions are made in an official capacity and can be delegated. Personal decisions affect the manager personally, such as leaving the job, and cannot be delegated.

5. Basic and routine decisions

• Basic decisions involve long-term commitment of large resources and are hard to reverse. Routine decisions are small, frequent and easily changed.

6. Decisions by condition

• Under certainty, outcomes of each alternative are known. Under risk, probabilities of outcomes are known. Under uncertainty, neither outcomes nor probabilities are known.

Managers should choose the type of decision process that matches the problem's importance and conditions.

Delegation of authority is the process by which a manager assigns part of his or her work, together with the necessary authority, to a subordinate and creates an obligation on the subordinate to perform it. The manager keeps ultimate accountability for the results. In short, delegation means entrusting duties and the right to act to someone at a lower level.

Elements of delegation: (i) assignment of responsibility (duties), (ii) granting of authority (right to take decisions and use resources), and (iii) creation of accountability (obligation to report on results).

Features of delegation of authority

1. Authority is delegated, not responsibility. The superior can pass on authority and the task, but remains answerable to his or her own superior for the final results.
2. It is a process. It involves a series of steps: assigning duties, granting authority, creating obligation and following up.
3. Authority must match responsibility. The authority given should be sufficient for the duties assigned; otherwise the subordinate cannot perform.
4. Accountability cannot be delegated. The subordinate is accountable to the superior for the delegated work, but the superior stays accountable upward.
5. It follows the scalar chain. Authority flows downward through the chain of command, from superior to immediate subordinate.
6. It is a continuing and revocable arrangement. The superior may modify, extend or withdraw delegated authority at any time.
7. It is partial. A manager cannot delegate all authority, otherwise the managerial position loses meaning.
8. It requires trust and clear communication. The limits, objectives, standards and reporting must be clearly stated.
9. It creates a base for decentralization. When delegation is systematically practised throughout the organization, it results in decentralization.
10. It develops subordinates. Delegation frees managers for important work, saves time, speeds decisions and develops subordinates' skills and morale.

Leadership style is the consistent pattern of behaviour a leader uses when influencing followers. The main styles are as follows.

1. Based on use of authority

• Autocratic (authoritarian) leadership. The leader makes all decisions and orders subordinates without consulting them. It gives quick decisions and strict control, useful in emergencies, but reduces morale, creativity and initiative.
• Democratic (participative) leadership. The leader consults the group, shares decision-making and encourages ideas. It raises satisfaction, commitment and creativity, but decisions are slower.
• Laissez-faire (free-rein) leadership. The leader gives complete freedom to the group and interferes minimally. It suits highly skilled and self-motivated professionals, but can cause lack of direction and confusion.

2. Based on concern for task and people

• Ohio State studies: initiating structure (task orientation) and consideration (people orientation).
• Blake and Mouton's Managerial Grid: impoverished management (1,1), country club (1,9), authority-compliance (9,1), middle of the road (5,5) and team management (9,9), which is considered the best.

3. Fiedler's contingency view and situational leadership

• Leaders are task-oriented or relationship-oriented, and effectiveness depends on leader-member relations, task structure and position power. Hersey and Blanchard suggest telling, selling, participating and delegating, depending on followers' maturity.

4. Other contemporary styles

• Transactional leadership relies on rewards and punishments in exchange for performance.
• Transformational leadership inspires followers through vision, charisma and intellectual stimulation to go beyond self-interest.
• Paternalistic leadership treats employees as a family, protecting them in return for loyalty.
• Bureaucratic leadership follows rules and procedures strictly.

No style is best in all situations; an effective leader adapts the style to the task, the followers and the situation.

A group is two or more interdependent and interacting individuals who come together to achieve a common objective.

How groups are formed

Groups form for several reasons.

1. Formal formation. Management creates command groups (a manager and subordinates), task groups, committees and teams to accomplish organizational goals.
2. Informal formation. Employees form friendship and interest groups spontaneously because of common needs.
3. Reasons why people join: security, social needs (belonging), esteem and status, power, shared goals and proximity, and similarity of attitudes, values or background.
4. Stages of group development (Tuckman). Forming (members get acquainted), storming (conflict and role disputes), norming (cohesion, rules and norms develop), performing (the group works effectively) and adjourning (the group disbands or ends).

Characteristics of effective groups

1. Clear common goals. Members understand and accept the group's objectives.
2. Appropriate size. Usually 5 to 9 members, small enough for participation and large enough for diverse skills.
3. Cohesiveness. Members are attracted to the group and loyal to one another, supporting good teamwork.
4. Clear roles and norms. Each member knows his or her role, and norms support productivity and cooperation.
5. Open communication. Information flows freely and members listen and give feedback.
6. Mutual trust and support. Members respect one another and help each other.
7. Participative decision-making. Decisions are made by consensus or participation, with disagreements settled constructively.
8. Competent members and balanced skills. Members have the abilities needed for the task.
9. Effective leadership. The leader guides and facilitates rather than dominates.
10. Group accountability and evaluation. The group assesses its own performance and rewards results.
11. Management support. Adequate resources and recognition from the organization.

Motivation is the internal drive or process that arouses, directs and sustains a person's behaviour toward achieving a goal. It is the willingness to put out high effort for organizational goals while satisfying individual needs. Performance depends on ability and motivation together.

Reward system means the set of financial and non-financial rewards that an organization gives employees in return for their contribution. Financial rewards include salary, bonus, commissions, profit sharing, allowances and benefits such as provident fund, insurance and gratuity. Non-financial rewards include recognition, praise, promotion, responsibility, training opportunities, job security and a good working environment.

Importance of reward system to motivate employees in a developing country like Nepal

1. Satisfies basic needs. Many employees in Nepal have low income and high living costs, so adequate pay and benefits satisfy physiological and security needs first, as Maslow's hierarchy suggests.
2. Improves performance and productivity. Linking rewards to performance (incentives, bonus) encourages effort, in line with expectancy and reinforcement theories.
3. Attracts and retains talent. Many skilled Nepalis migrate abroad for better pay. A competitive reward system reduces brain drain, absenteeism and turnover.
4. Builds fairness and commitment. Equitable rewards, according to equity theory, increase satisfaction and loyalty.
5. Reinforces desired behaviour. Recognition and promotions encourage innovation, quality, punctuality and teamwork.
6. Supports higher-order needs. Non-financial rewards such as respect, responsibility and career growth satisfy esteem and self-actualization needs when basic needs are met, and are low cost for resource-limited organizations.
7. Improves morale and organizational image. A fair reward system creates a positive culture and makes the organization an employer of choice.
8. Reduces corruption and unethical behaviour. Reasonable pay and transparent rewards lessen the temptation to use position for private benefit, which is a problem in the public sector.
9. Encourages learning and skill development. Skill-based pay and training rewards help build a more capable workforce.

For maximum effect, rewards should be fair, timely, clearly linked to performance, suited to employee preferences and affordable, with a mix of financial and non-financial rewards.

Communication is the process of exchanging information, ideas, facts and feelings between two or more persons so that a common understanding is achieved. It involves a sender, message, encoding, channel, receiver, decoding and feedback, and may be disturbed by noise.

Organizational barriers to communication

These are obstacles arising from the structure, policies and climate of the organization.

1. Complex organizational structure. In a tall hierarchy with many levels, messages pass through many people and get delayed, filtered or distorted.
2. Authority and status differences. Subordinates fear to speak openly to superiors and superiors may ignore the views of juniors, which blocks upward communication.
3. Organizational policies, rules and procedures. Rigid rules, excessive formality and "red tape" restrict the free flow of information.
4. Poor or inadequate channels. Lack of suitable formal channels, or over-reliance on written or one-way communication, causes breakdowns and loss of feedback.
5. Information overload. Too many messages, reports and emails cause important information to be missed.
6. Specialization and physical distance. Departments use different technical jargon, work in separate locations or time zones, and have little contact, creating isolation.
7. Lack of trust and poor organizational climate. Where managers are not trusted or conflict exists, people withhold or distort information.
8. Filtering and withholding. Subordinates pass on only favourable information, and managers withhold information to maintain power.
9. Timing and lack of feedback. Late communication loses value, and absence of feedback prevents verification of understanding.
10. Inadequate technology. Poor infrastructure, such as unreliable internet and phone systems, a particular problem in many parts of Nepal, restricts communication.

Overcoming them: simplify structure, encourage open-door policy, use multiple channels, give feedback, train managers in communication, reduce overload and build trust.

Business environment is the totality of all external and internal factors, forces and conditions that surround and influence the operation, decisions and performance of a business. It provides both opportunities and threats and must be continuously monitored.

Basic components

(a) External environment (outside the organization, mostly uncontrollable)

• General (macro) environment:
  1. Economic: inflation, interest rates, income levels, exchange rate, taxation, economic growth.
  2. Political and legal: government policy, political stability, laws on business, labour and taxation.
  3. Socio-cultural: population, values, beliefs, education, lifestyle, attitudes toward work.
  4. Technological: innovation, automation, information technology and research.
  5. International (global): foreign competition, trade agreements, foreign markets and exchange.
  6. Natural/ecological: climate, resources, environmental regulation.
• Task (micro) environment: customers, suppliers, competitors, regulators, financial institutions, labour unions, pressure groups and the media, who interact directly with the organization.

(b) Internal environment (inside the organization, controllable)

• Owners and board of directors, employees, organizational culture, structure, financial and physical resources, mission and objectives, and management style.

Managers study these components through environmental scanning and SWOT analysis to match strengths and weaknesses of the firm with external opportunities and threats.

Planning is deciding in advance what to do, how to do it, when and by whom. It is the primary function of management. Its importance is as follows.

1. Gives direction. Planning sets clear goals and the path to reach them, so that everyone works toward the same ends.
2. Reduces uncertainty and risk. By forecasting future conditions and preparing alternatives, planning helps managers face change with confidence.
3. Ensures economical use of resources. Planning avoids waste, duplication and overlapping by allocating resources efficiently.
4. Provides coordination. Plans integrate the activities of departments and individuals toward common objectives.
5. Facilitates control. Plans create standards against which actual performance is measured. Without plans, there is nothing to control.
6. Improves decision-making. Planning requires analysis of facts and alternatives, leading to rational decisions.
7. Encourages innovation and creativity. It makes managers think ahead and look for new, better ways of working.
8. Improves competitive strength. Prepared organizations respond quickly to opportunities and threats.
9. Motivates employees. Clear targets and involvement in planning increase commitment and morale.
10. Prepares for crises. Contingency plans reduce the damage of unexpected events.

Planning therefore enhances efficiency, effectiveness and survival of the organization, although it cannot remove uncertainty fully and takes time and cost.

Organizational goals are not permanent. They may change over time, and two important processes are goal succession and goal displacement.

Goal succession is the process by which an organization replaces its original goals with new ones, usually after the original goals have been achieved or have become impossible or irrelevant. It is a natural and often healthy process that lets the organization survive and grow.

• Example: The National Foundation for Infantile Paralysis (March of Dimes) was formed to fight polio. After the vaccine eliminated the disease, it adopted the new goal of fighting birth defects and arthritis. Similarly, a firm that achieves its market-entry goal sets a goal of expansion or diversification.
• Causes: achievement of goals, environmental change, new technology, changed needs of members and loss of purpose.

Goal displacement is the process in which the means or procedures of the organization become ends in themselves, replacing the true goals. People focus on rules, procedures, personal interest or sub-unit goals and forget the organization's real purpose. It is generally harmful.

• Example: A government office insists on strict adherence to paperwork and rules (red tape) even when it prevents delivering service to citizens, or a department maximizes its own budget at the expense of the organization.
• Causes: over-emphasis on rules and bureaucracy, difficulty of measuring true goals, pursuit of personal or departmental interests, and rewards that favour the wrong behaviour.

Difference. Succession replaces goals with new legitimate goals in response to change, while displacement replaces the true goals with means or private goals, distorting the organization's purpose.

Outsourcing means contracting out a business function or activity, such as IT, payroll, customer service, logistics or manufacturing, to an outside specialist firm instead of performing it in-house.

Why modern organizations outsource

1. Cost reduction. Outside providers, often in countries with cheaper labour or with economies of scale, can do the work at lower cost than internal staff.
2. Focus on core competence. The organization concentrates on its main strengths and strategic activities, leaving non-core activities to others.
3. Access to expertise and technology. Specialists have skills, equipment and experience that the firm lacks or cannot afford.
4. Improved quality and efficiency. Specialist providers are often more efficient and committed to service-level standards.
5. Flexibility. Capacity can be increased or reduced easily with demand without hiring or firing employees.
6. Reduced investment and risk. Capital investment in plant, technology and training is saved, and some risks are shared with the provider.
7. Speed to market. Outsourcing speeds up production, product development and entry into new markets.
8. Managing complexity. It reduces administrative burden and allows managers to give attention to growth and innovation.
9. Global competition. To remain competitive against rivals who are already outsourcing, firms must adopt it too.

Outsourcing also carries risks such as loss of control, quality problems, confidentiality issues and dependence on suppliers, so providers must be chosen and monitored carefully.

Decision-making under uncertainty refers to making a choice when the decision maker has no reliable information about the possible outcomes of each alternative, or cannot assign probabilities to the likelihood of those outcomes. The future conditions (states of nature) are unknown, and the information is incomplete, ambiguous or unavailable. This is typical of new product launches, entering new markets, or technology changes.

This differs from certainty (outcomes known exactly) and risk (outcomes unknown but probabilities known or estimable).

Features

• The environment is complex and rapidly changing.
• Alternatives and outcomes cannot be predicted with confidence.
• Probabilities cannot be assigned objectively, so judgment, experience and intuition play a large role.

Approaches to deal with uncertainty

1. Maximax (optimistic). Choose the alternative with the best possible payoff.
2. Maximin (pessimistic). Choose the alternative with the best of the worst payoffs.
3. Minimax regret. Choose the alternative that minimizes the maximum regret (opportunity loss).
4. Hurwicz criterion. A weighted combination of optimism and pessimism using a coefficient of optimism.
5. Laplace criterion. Assume all outcomes are equally likely and choose the highest average payoff.

Managers may also gather more information, use scenario planning and forecasting, consult experts, make flexible or contingency plans, and make decisions in stages to reduce uncertainty.

Centralization is the concentration of decision-making authority at the top levels of the organization. Its main disadvantages are as follows.

1. Slow decision-making. Matters must be passed up for approval, causing delays and red tape, and reducing the ability to respond to changes in the market.
2. Overburdening top management. Top managers become overloaded with details and routine decisions, and have less time for strategic matters.
3. Reduced motivation of lower-level managers. Subordinates have little freedom or responsibility, leading to low morale, dissatisfaction and lack of initiative.
4. Poor development of managers. Lower managers have little opportunity to practise decision-making, so successors are not trained for higher positions.
5. Lack of local knowledge. Top managers are distant from the situations and may decide without understanding local conditions, customers or operations, leading to poor decisions.
6. Communication problems. Information has to travel up and down the hierarchy and may be delayed or distorted.
7. Unsuitability for large or diversified organizations. It becomes difficult to control a wide range of activities and locations from one point.
8. Rigidity and low innovation. Dependence on rules and approval discourages creativity and flexibility.
9. Risk of poor decisions and dependence on a few people. If top managers are inexperienced or absent, the whole organization suffers.
10. Higher costs. Extra staff and systems are needed for reporting and control at the centre.

Because of these shortcomings, many organizations adopt a balance of centralization and decentralization.

A group is a collection of two or more interdependent persons who interact to achieve a common goal. The main characteristics of groups are as follows.

1. Two or more members. A group needs at least two people; there is a limit on size beyond which interaction becomes difficult.
2. Interaction. Members communicate and interact regularly, formally or informally.
3. Common goals or interests. Members share objectives that bring them together.
4. Interdependence. The actions and outcomes of one member affect others, so members depend on one another.
5. Roles. Each member has an expected pattern of behaviour, such as leader, organizer or follower.
6. Norms. Groups develop unwritten rules and standards of behaviour (output, dress, attitude) that members are expected to follow.
7. Status. Members have different ranks or prestige within the group.
8. Cohesiveness. Members feel attracted to the group and to each other, giving a sense of "we".
9. Group identity and sense of belonging. Members see themselves as part of the group, distinct from outsiders.
10. Leadership. A formal or informal leader guides the group.
11. Group pressure and conformity. The group influences individuals to conform to its norms.
12. Formal or informal nature. Groups may be created by management or may form spontaneously from social needs.

The hierarchy of needs theory was proposed by the psychologist Abraham Maslow (1943). It is a content theory of motivation, which states that human behaviour is motivated by a set of needs arranged in a hierarchy of five levels, from lowest to highest.

1. Physiological needs. Basic survival needs such as food, water, shelter, sleep and clothing. In organizations they are met by salary and basic working conditions.
2. Safety (security) needs. Protection from physical harm, economic insecurity and uncertainty. They are met by job security, insurance, pension, safe working conditions.
3. Social (belonging) needs. Need for affection, friendship, acceptance and group membership. They are met by teamwork, social interaction and good relations with colleagues and supervisors.
4. Esteem needs. Need for self-respect, status, recognition, achievement and respect from others. They are met by promotion, titles, praise and responsibility.
5. Self-actualization needs. The need to realize one's full potential, growth, creativity and self-fulfilment. They are met by challenging work, autonomy and opportunities for development.

Assumptions

• People are motivated by unsatisfied needs; a satisfied need no longer motivates.
• Lower-level needs must be reasonably satisfied before a higher-level need becomes dominant (the progression principle).
• Needs are in ascending order, and people strive to move up the hierarchy.

Implications for managers: identify the dominant need of each employee and offer rewards matching it, for example pay and security for lower needs and recognition, growth and challenging work for higher needs.

Criticism. The theory has little empirical support for the strict order of needs, needs vary among individuals and cultures, a single behaviour may satisfy several needs, and it is hard to measure satisfaction. Even so, it remains very influential in management.

Interpersonal communication is the exchange of information, ideas and feelings between two or more people, usually face to face or by direct means such as conversation, telephone, meetings, interviews and video calls. It involves two-way interaction with immediate feedback, and may be verbal (spoken or written) or nonverbal.

Features: direct contact, personal relationship, immediate feedback, use of words together with tone and body language, and influence on attitudes and behaviour. It is important in a firm for instructing, coordinating, resolving conflict, building relationships and motivating, though it can suffer from misunderstanding, perception differences and emotional barriers. Effective interpersonal communication needs listening, clarity, empathy, openness and feedback.

Nonverbal communication is the transmission of messages without using spoken or written words. It conveys meaning through body movement, appearance, voice and the use of space and time. It often reveals true feelings and can support, contradict or replace verbal messages.

Main forms:

1. Kinesics (body language): facial expressions, eye contact, gestures, posture and head movements, for example a smile, a nod or crossed arms.
2. Paralanguage: tone, pitch, volume, pace and pauses of voice, which change the meaning of the same words.
3. Proxemics: use of personal space and distance between people.
4. Haptics: touch, such as a handshake.
5. Appearance and artifacts: dress, grooming, office decoration.
6. Chronemics: use of time, such as punctuality or making someone wait.
7. Silence and signs, symbols and colours.

Role: it repeats, complements, substitutes for, emphasizes or contradicts verbal messages, and shows emotions and attitudes. However, its meaning varies across cultures and is easily misread, so it should be interpreted with context and combined with verbal communication.

A multinational company (MNC) is a large firm that owns or controls production or service operations in two or more countries while managed from a home country. Although MNCs bring capital, technology and jobs, they have several disadvantages for host countries, particularly developing ones such as Nepal.

1. Harm to domestic industries. With large capital, advanced technology and strong brands, MNCs outcompete small local firms, which may close or be taken over, creating monopoly power.
2. Outflow of profits. Large profits, royalties and fees are repatriated to the home country, reducing the host country's foreign exchange and savings.
3. Exploitation of natural resources. MNCs may extract resources quickly for their own benefit, leaving environmental damage and little local gain.
4. Environmental pollution. Some MNCs move polluting industries to countries with weak regulations.
5. Interference in politics and policies. Their economic power may be used to influence government decisions, legislation and even political stability, threatening national sovereignty.
6. Technological dependence. Local firms rely on imported technology and do not develop their own research and skills; outdated or unsuitable technology may be transferred.
7. Cultural erosion. Advertising and consumer products promote foreign tastes and lifestyles, weakening local culture and traditions.
8. Unfair labour practices. Low wages, poor working conditions and the use of expatriates for key jobs, giving local people only low-level work.
9. Tax avoidance and transfer pricing. MNCs may shift profits between countries to reduce tax paid in the host country.
10. Unbalanced regional development. Investment concentrates in profitable urban areas and sectors, increasing inequalities.
11. Consumer exploitation. Heavy marketing can create demand for unnecessary or luxury goods and sell products banned elsewhere.
12. Vulnerability to sudden withdrawal. If an MNC leaves, jobs and income are lost quickly.

Governments therefore regulate MNCs through policies on investment, taxation, technology transfer, environment and local employment.

Existing management practices in Nepal

1. Family-based and owner-centred management. Most firms are small, family-owned and run by the founder. Decisions are centralised and personal relations matter more than systems.
2. Centralised, authoritarian decision making. Subordinates seldom take part in decisions, delegation is limited, and a high power distance exists between managers and staff.
3. Informal planning and weak control. Many firms rely on short-term, intuitive plans. Formal budgets, MIS and performance appraisal are used mostly in banks, large companies and multinationals.
4. Traditional HR practices. Recruitment often depends on recommendations, kinship and political links. Training and career planning are weak, and pay is often not linked to performance.
5. Public sector bureaucracy. Government and public enterprises follow rule-bound, hierarchical procedures, with slow decisions, political interference and low accountability.
6. Modernisation in the private sector. Banks, telecom, IT firms and joint ventures are adopting professional management, strategic planning, performance-based pay and technology.
7. Limited use of modern techniques. Concepts such as TQM, MBO and balanced scorecard are known in large firms but rarely used in small ones.

Business culture in Nepal

1. Collectivism and relationships. Business runs on trust, personal contacts, kinship, caste and community networks. Deals are often settled orally.
2. Hierarchy and respect for seniority. Age, status and position are respected, and subordinates avoid challenging seniors.
3. Religion, festivals and tradition. Dashain, Tihar and astrology influence business timing, holidays and decisions. Business is shaped by Hindu and Buddhist values.
4. Flexible attitude to time. Meetings often start late, and schedules are treated loosely.
5. Risk aversion and a trading mentality. Owners prefer trade and real estate to long-term manufacturing. Informal and cash-based transactions are common.
6. Hospitality and negotiation. Tea or meals precede business talk, bargaining is common, and relationship-building comes before closing a deal.
7. Changing culture. Younger professionals, foreign education, IT and start-ups are bringing in openness, teamwork, merit and innovation.

Conclusion: Nepali management is shifting from traditional, family-centred practice towards professional management, but its culture still strongly shapes how organisations operate.

Management is the process of planning, organising, staffing, directing (leading) and controlling the human, financial, physical and informational resources of an organisation so that its goals are achieved efficiently and effectively. In Stoner's words, it is the process of planning, organising, leading and controlling the work of organisation members and using all available resources to reach stated goals.

Principles of management

Principles are fundamental guidelines for managerial action. Henri Fayol gave fourteen principles.

1. Division of work. Specialisation increases output and efficiency.
2. Authority and responsibility. Authority is the right to give orders, and it must be matched by responsibility.
3. Discipline. Obedience and respect for agreed rules are needed. Discipline requires good leaders and fair penalties.
4. Unity of command. Each employee takes orders from one superior only.
5. Unity of direction. One head and one plan for a group of activities with the same objective.
6. Subordination of individual interest to general interest. Organisational goals come first.
7. Remuneration. Pay should be fair to both employees and the organisation.
8. Centralisation (and decentralisation). The degree depends on the situation of the firm.
9. Scalar chain. The line of authority runs from top to bottom. Gang-plank (cross-links) may be used in urgent cases.
10. Order. A place for everything and everything in its place, for people and materials.
11. Equity. Kindness and justice in dealing with employees.
12. Stability of tenure. Low turnover helps efficiency, and employees need time to learn their job.
13. Initiative. Allowing employees to plan and carry out their ideas.
14. Esprit de corps. Unity and team spirit ("union is strength").

F. W. Taylor's scientific management principles are also relevant: a scientific method for each task, scientific selection and training of workers, cooperation between management and workers, and equal division of work and responsibility.

Importance: principles give managers a consistent guide, improve efficiency, help in training, and support the use of resources, though they must be applied flexibly according to the situation.

Planning is the managerial function of deciding in advance what is to be done, when, how and by whom. It involves setting objectives and choosing the courses of action to reach them. It bridges where we are and where we want to be.

Steps in the planning process

1. Being aware of opportunities. Scanning the internal and external environment (market, competitors, resources, strengths and weaknesses) to see where opportunities lie. Planning starts with this awareness.
2. Establishing objectives. Setting goals for the whole organisation and then for each unit, saying what is to be achieved, where the emphasis is, and by when. Objectives should be specific, measurable, achievable, realistic and time-bound.
3. Developing premises. Forecasts and assumptions about the future environment in which plans will operate, such as demand, prices, technology, tax policy and government rules.
4. Identifying alternatives. Looking for several different ways to reach the objective. The best plan is often found by examining alternatives that are not obvious.
5. Evaluating alternatives. Comparing options against objectives and premises by cost, benefit, risk, time and resources. Quantitative techniques such as break-even and cost-benefit analysis may be used.
6. Selecting an alternative. Choosing the best course of action. Sometimes two or more are chosen, with one as a contingency plan.
7. Formulating supporting (derivative) plans. Preparing budgets, schedules, procedures and departmental plans that support the main plan.
8. Quantifying plans by budgeting. Converting plans into numbers: income, expenditure and resource needs. Budgets also work as control standards.
9. Implementation and follow-up. Putting the plan into action, monitoring the results, and revising the plan when conditions change.

Conclusion: the steps form a cycle, and effective planning gives direction, reduces uncertainty, helps coordination and provides standards for control.

Business in Nepal works in a difficult environment. The main problems are as follows.

1. Political instability. Frequent changes of government, unstable policies and strikes (bandhs) disturb production, discourage investors and make long-term planning difficult.
2. Inadequate infrastructure. Poor roads, a weak energy supply (load-shedding in the past and high tariffs for industry), limited airports and logistics raise costs and delay delivery.
3. Shortage of capital and high interest rates. Small firms find it hard to get credit, collateral requirements are strict, and interest rates vary a lot.
4. Landlocked location and trade dependence. Nepal depends on India and on third-country ports. Transit delays, high transport costs and a large trade deficit weaken competitiveness.
5. Bureaucratic red tape and corruption. Slow registration, licensing and tax procedures, and informal payments, increase costs and reduce trust.
6. Lack of skilled manpower and brain drain. Many young and skilled people go abroad for study and work, while firms face a shortage of technicians and managers.
7. Weak industrial and labour relations. Trade union politicisation, labour disputes and low productivity affect industries.
8. Limited technology and low-value production. Small domestic market, low scale, limited research and traditional methods make it hard to compete with imported goods.
9. Informal economy and unfair competition. Tax evasion, smuggling and under-invoicing hurt law-abiding businesses.
10. Taxation and policy problems. Frequent changes in tax and customs policy, and weak implementation of laws.
11. Natural disasters. Earthquakes, floods and landslides, along with the pandemic, damaged businesses and supply chains.

Remedies: political stability, infrastructure investment, simpler procedures, easier credit, skills training, promotion of exports and technology, and a clear, consistent industrial policy.

Learning organization

A learning organization is one that continuously creates, acquires, shares and applies knowledge, and changes its behaviour in the light of new knowledge and experience. The term was popularised by Peter Senge in The Fifth Discipline. Such an organization encourages employees at all levels to experiment, learn from mistakes, share ideas and adapt to a changing environment.

Senge's five disciplines are personal mastery, mental models, shared vision, team learning and systems thinking.

Benefits of learning (learning organization)

1. Adaptability to change. Continuous learning helps the organization respond quickly to new technology, competition and customer needs.
2. Competitive advantage. Knowledge and the ability to learn faster than rivals are hard to copy.
3. Innovation and creativity. An open climate for experiment and idea sharing produces new products and processes.
4. Better performance and quality. Learning from past errors reduces repeated mistakes, waste and cost.
5. Employee development and motivation. People grow in skill and confidence, feel valued, and are more satisfied and committed.
6. Better problem solving and decisions. Shared knowledge and teamwork bring many viewpoints to a problem.
7. Knowledge retention. Knowledge is stored in the organization and does not leave when people leave.
8. Improved customer satisfaction and reputation. Learning from feedback improves service.
9. Stronger teamwork and culture. Trust, openness and a shared vision reduce conflict.

Social responsibility is the obligation of an organisation to act in ways that serve the interests of society and not only its owners. There are four main approaches, which differ in how far a firm goes in accepting this obligation (the social responsibility continuum).

1. Obstructionist approach. The firm does the minimum, or even resists. It denies responsibility, hides information and may break laws or ethics if it benefits profit. Example: dumping waste in a river and hiding it.
2. Defensive approach. The firm does what the law requires and nothing more. It admits responsibility only when forced and tries to defend itself against criticism. Example: installing pollution control only because the law demands it.
3. Accommodative approach. The firm meets its legal and ethical obligations and sometimes does more when asked by pressure groups. It responds to social demands. Example: donating to a community project after a request.
4. Proactive approach. The firm actively seeks to contribute to society, anticipates social needs and acts voluntarily without being asked. It regards itself as a citizen of society. Example: running a scholarship programme, protecting the environment beyond the law, supporting disaster relief.

Other views of responsibility

• Classical (economic) view: the only responsibility is to maximise profit within the law (Milton Friedman).
• Socio-economic view: the firm must also protect and improve society's welfare.

Modern organisations in Nepal, such as banks and telecoms, are moving towards the proactive approach through corporate social responsibility (CSR) funds.

On the basis of urgency, problems are classified into three types.

1. Crisis problems.

   • Problems that are urgent and must be solved immediately because they cause serious damage if ignored.
   • There is no time for detailed analysis, so the manager must act fast and decisively.
   • Examples: a fire in the factory, a sudden strike, a bank run, a major system failure or data breach.

2. Non-crisis (routine) problems.

   • Problems that need attention but are not urgent. The manager has time to study alternatives and choose a good solution.
   • They are solved in the normal course of work by established procedures.
   • Examples: employee complaints, delay in supply, minor quality defects.

3. Opportunity problems.

   • Situations that offer a chance to improve the organisation, and not trouble to be solved. They need to be noticed and used before they disappear.
   • Examples: a new market, a new technology, a favourable government policy, a supplier's discount.

A good manager gives priority to crisis problems, but does not neglect non-crisis problems and opportunities, because ignoring them can later turn them into crises.

Departmentalization by customers is used by customer-oriented (market-based) organisations, where activities are grouped according to the type of customer served. It is common where customers differ in their needs, size or buying behaviour and each group needs special attention.

Types of organisation using it

• Banks and financial institutions: separate departments for retail, corporate, SME, agricultural and priority-sector customers.
• Insurance companies: life, group and corporate clients.
• Retail and wholesale firms: wholesale customers, retail customers, and government customers.
• Hospitals: children's, women's and geriatric wards.
• Educational institutions: schools or sections for adults, regular students and distance learners.
• Manufacturers and software companies: industrial, household and government customers.

Advantages

• Special needs of each customer group are met.
• Specialised knowledge of customers is developed.
• Customer satisfaction and loyalty improve.

Disadvantages

• Duplication of effort and higher cost.
• Difficult to coordinate between customer departments.
• Underuse of resources when a customer group is small.
• Conflict over resources between groups.

Introduction

Conflict is a disagreement or clash between individuals or groups that arises when their goals, interests, values or perceptions are incompatible, or when one party perceives that another is frustrating its concerns. It is natural in organisations. Moderate conflict can stimulate creativity and change, but too much conflict harms morale and performance.

Types of conflict

By level

1. Intrapersonal (intra-individual) conflict. Occurs within one person.
   • Approach-approach: choosing between two attractive options.
   • Avoidance-avoidance: choosing between two undesirable options.
   • Approach-avoidance: one option has both good and bad features.
   • Role conflict and role ambiguity also create it.
2. Interpersonal conflict. Between two or more individuals because of differences in personality, values, goals or perceptions. Example: a manager and subordinate disagreeing on how to do a task.
3. Intragroup conflict. Between members of the same group or team, over tasks, methods, leadership or personal relationships.
4. Intergroup conflict. Between departments or groups, such as production and marketing, caused by competition for resources, goal differences and communication gaps.
5. Inter-organisational conflict. Between organisations such as competitors, or between a firm and its suppliers, unions or government.

By nature

• Functional (constructive) conflict: supports organisational goals and improves performance by generating ideas.
• Dysfunctional (destructive) conflict: hinders performance and causes stress, hostility and turnover.

Other forms: task conflict, relationship conflict, process conflict, and vertical, horizontal, line-staff conflicts.

Handling conflict: avoiding, accommodating, competing, compromising and collaborating (Thomas-Kilmann styles).

Motivation is the process that arouses, directs and sustains behaviour toward the achievement of goals. It is the inner drive that makes people willing to put effort into work to satisfy their needs. A motivated workforce gives higher productivity, lower turnover and more satisfaction.

Herzberg's two-factor theory (motivation-hygiene theory)

Frederick Herzberg interviewed about 200 accountants and engineers in Pittsburgh, asking them to describe times they felt very good or very bad about their jobs. He found that job satisfaction and dissatisfaction are caused by different sets of factors, and are not opposite ends of one scale.

1. Hygiene factors (maintenance factors)

• These are related to the job context or environment.
• Examples: company policy and administration, supervision, working conditions, salary, interpersonal relations, job security, status.
• When these are poor, employees are dissatisfied. When they are good, dissatisfaction is removed, but employees are not motivated. The result is "no dissatisfaction", which is not the same as satisfaction.

2. Motivators (satisfiers)

• These are related to job content.
• Examples: achievement, recognition, the work itself, responsibility, advancement and growth.
• Their presence creates satisfaction and strong motivation. Their absence leads to "no satisfaction", not to dissatisfaction.

Implications for managers

• Remove sources of dissatisfaction first by providing proper hygiene factors.
• Then motivate through job enrichment: give more responsibility, autonomy, challenge, recognition and chances to grow.

Criticisms: based on a limited sample of professionals; relies on self-reports (people credit themselves for good outcomes and blame outside factors for bad ones); ignores individual differences; does not measure the satisfaction-productivity link; and pay may act as a motivator for some people.

A reward system is the set of financial and non-financial rewards used by an organisation to attract, retain and motivate employees. According to the standard textbook treatment, an effective reward system should have the following essentials.

1. Adequacy. Rewards must be enough to meet the basic needs of employees. Inadequate pay causes dissatisfaction and turnover.
2. Equity (fairness). Rewards must be fair compared with others in the organisation (internal equity), with the labour market (external equity) and with the effort an individual puts in (individual equity).
3. Balance. A proper mix of pay, benefits, recognition, promotion and job security. Overemphasis on one reward is not effective.
4. Cost-effectiveness. Rewards should be affordable and must not weaken the firm's competitiveness.
5. Security. Benefits such as pension, insurance, provident fund and medical care give employees safety and a sense of stability.
6. Incentive (link to performance). Rewards should be tied to performance, so that high performers receive more. The link must be visible and timely.
7. Acceptability to employees. Employees should understand and accept the system. Participation in designing it helps.
8. Individual preferences and flexibility. Different people value different rewards, so a cafeteria approach can be used.
9. Consistency and transparency. Clear, communicated rules, applied uniformly, avoid favouritism.
10. Legal compliance. Compliance with labour laws, minimum wage and tax rules.

A system that satisfies these conditions raises motivation, attracts talent and reduces turnover.

Formal communication

Formal communication follows the official channels set by the organisation structure, so it is planned, recorded and authorised. It is of three kinds.

• Downward: from superiors to subordinates, such as instructions, policies, job descriptions and feedback.
• Upward: from subordinates to superiors, such as reports, suggestions and complaints.
• Horizontal (lateral): between people at the same level, to coordinate work among departments.

Features and merits: official, slow but reliable and accurate, documented, supports authority and accountability. Demerits: delays, rigidity, red tape, and possible filtering of information.

Informal communication

Informal communication arises from the social relationships among employees and does not follow the official chain of command. It is also called the grapevine.

• It is spontaneous, flexible and fast, often oral.
• The common grapevine patterns are single-strand, gossip, probability and cluster chains.

Merits: speed, supplies information that formal channels miss, improves relations and morale, and gives managers feedback about employee feelings. Demerits: can spread rumours and distorted information, is difficult to control and fix responsibility on, and may damage morale.

A good manager uses formal channels for official matters and understands informal channels to support them.

Control is the process of measuring actual performance, comparing it with standards and taking corrective action. Control systems can be classified in different ways.

A. By timing (the point at which control is applied)

1. Feedforward (preventive/steering) control. Applied before the activity begins and focuses on inputs. It anticipates problems and prevents them. Examples: screening raw materials, selecting qualified staff, budgets, pre-employment tests.
2. Concurrent (real-time) control. Applied while the activity takes place, by monitoring and correcting immediately. Examples: supervision, on-the-job inspection, automated production-line checks.
3. Feedback (post-action) control. Applied after the activity is completed, by comparing results against standards. It provides lessons for the future but cannot undo the past. Examples: financial statements, quality inspection of finished goods, performance appraisal.

B. By the nature of the control

1. Bureaucratic control. Uses rules, regulations, policies, budgets and procedures to guide behaviour. Suited to stable situations.
2. Market control. Uses economic mechanisms such as price, competition and relative market share. Divisions are judged by profit.
3. Clan (cultural) control. Uses shared values, norms, traditions and informal pressures among members.

C. By the level of the organisation

• Strategic control (top management, long term), tactical control (middle management) and operational control (lower level, daily activities).

D. By the area

• Financial control (budgets, ratio analysis, audit), quality control, inventory control, human resource control, and cost control.

E. By the type of the controlling approach

• Pre-control, post-control, and yes-no (screening) control, plus steering control that corrects during the process.

An organisation normally uses a combination of these to achieve effective overall control.

Globalization has brought economic integration, but it also has negative effects, especially for developing countries like Nepal. Four main ones are as follows.

1. Threat to domestic industries. Cheap imports and large multinational companies, with stronger technology and capital, push small local industries out of business, causing unemployment and trade deficits. Nepal's growing import dependence is an example.
2. Widening income inequality. Benefits go mostly to skilled people, owners and urban areas, while the poor, farmers and unskilled workers gain little. The gap between rich and poor countries also widens.
3. Cultural erosion. Foreign media, brands and lifestyles weaken local languages, traditions, dress and values, creating cultural homogenisation.
4. Environmental damage and exploitation of resources. Pressure for production and trade leads to overuse of natural resources, pollution and the shifting of polluting industries to poorer countries.

Other negative effects include loss of national economic sovereignty, brain drain of skilled people, spread of financial crises across countries, and exploitation of cheap labour.

Definition

An organization is a group of people who work together in a structured way, using resources, to achieve common goals that individuals could not achieve alone. It has people, goals, structure (division of work and authority) and an external environment. Examples: a bank, a school, a software company.

Changing perspectives on organization in present-day business operation

1. From closed to open systems. Earlier organisations were seen as self-contained machines. Today they are open systems that continuously interact with customers, suppliers, competitors, government and technology.
2. From tall to flat structures. Many hierarchical levels are replaced by fewer levels, wider spans of control and empowered teams, giving faster decisions.
3. From rigid to flexible and boundaryless forms. Virtual teams, networks, outsourcing, alliances and project-based forms replace fixed departments. Remote work is more common.
4. From stability to continuous change. Rapid technological and market change makes adaptability, innovation and agility essential.
5. From control to empowerment. The focus is on participation, delegation, teamwork and commitment rather than strict supervision.
6. From mass production to customer focus. Quality, service, speed and customisation are central, supported by TQM and customer relationship management.
7. From physical assets to knowledge. Knowledge, skills and information are the main resources. The learning organisation and knowledge management are important.
8. Technology-driven operation. ICT, ERP, cloud, e-commerce, AI and automation shape work processes and structure.
9. Ethics, social responsibility and sustainability. Stakeholder interests, the environment and corporate governance matter alongside profit.
10. Global perspective. Operating across borders in global markets, supply chains and multicultural workforces.
11. Diversity. Valuing differences of gender, age, culture and background.

Conclusion: organisations are now flexible, networked, knowledge-based and customer-focused, and they adapt constantly.

An IT manager plans, organises and controls the information technology resources of an organisation so that technology supports business goals. The major roles follow Mintzberg's managerial roles as applied to IT.

Major roles of an IT manager

1. Strategic planner. Aligns IT strategy with business strategy, prepares the IT plan and budget, and identifies technology opportunities.
2. Infrastructure manager. Oversees hardware, networks, servers, data centres, cloud and software, ensuring they are available, scalable and reliable.
3. Project manager. Plans, schedules and controls IT projects such as ERP or system development, within time, cost and quality.
4. Information security manager. Protects data and systems from attack, loss and misuse by setting security policy, access control, backup and disaster recovery.
5. Team leader and people manager. Recruits, trains, motivates and appraises technical staff and builds teamwork.
6. Systems and data manager. Ensures good databases, MIS and information reliability for decisions.
7. Vendor and contract manager. Selects vendors, negotiates contracts and service level agreements, and manages outsourcing.
8. Change agent and innovator. Introduces new technologies and helps users adopt them.
9. Liaison and communicator. Links IT with other departments, management and external parties, and explains technical issues in business terms.
10. Support and service manager. Runs the help desk, maintenance and user training.
11. Compliance and risk manager. Ensures compliance with laws such as cyber and electronic transaction rules, and manages IT risk.
12. Budget controller. Controls IT cost and shows the value of IT investment.

An IT manager therefore combines technical knowledge with managerial skills.

Business environment

The business environment is the sum of all internal and external forces, factors and institutions that affect the operation, performance and survival of a business. It is divided into the internal environment (owners, board, employees, culture, resources) and the external environment, which lies outside the firm and is mostly beyond its control.

Components of the external environment

The external environment has two levels.

A. Task (specific/operating) environment – directly affects the firm:

1. Customers – demand, tastes and loyalty.
2. Suppliers – price, quality and reliability of inputs.
3. Competitors – rivals and their strategies.
4. Regulators and government agencies.
5. Labour market and creditors/shareholders.

B. General (macro) environment – affects all firms:

1. Economic environment. Inflation, interest rates, income, growth, exchange rate and fiscal and monetary policy.
2. Political and legal environment. Political stability, government policy, laws on companies, labour, tax and consumer protection.
3. Socio-cultural environment. Population, values, lifestyle, education, religion and attitudes towards work.
4. Technological environment. Innovation, automation, IT, and the pace of technology change.
5. Natural (ecological) environment. Climate, resources and environmental regulations.
6. Demographic and international (global) environment. Age structure, migration, trade agreements, exchange rates, and global events.

These are often analysed using the PESTEL framework.

Importance: scanning the environment helps managers identify opportunities and threats, plan strategy, and adapt to change.

Globalization

Globalization is the process by which the world's economies, markets, cultures and technologies become increasingly integrated and interdependent through the free movement of goods, services, capital, people, information and ideas across national borders. It is driven by trade liberalisation, advanced transport and communication, multinational companies and organisations such as the WTO, IMF and World Bank.

Methods (modes) of globalization / entering foreign markets

1. Exporting. Selling domestically produced goods abroad directly or through agents. It needs low investment and low risk, but has tariff and transport costs and little control over the foreign market.
2. Importing (and global sourcing). Buying goods, services or components from foreign suppliers for lower cost or better quality.
3. Licensing. The owner (licensor) gives a foreign firm the right to use its patent, trademark or technology for a fee or royalty. Low risk, but it may create a future competitor.
4. Franchising. A firm grants a foreign party the right to use its brand and business system for a fee, as with fast-food and hotel chains.
5. Contract manufacturing/outsourcing. Production or services such as call centres or software are contracted out to firms abroad, cutting cost.
6. Joint venture. Two or more firms from different countries create a new company, sharing ownership, risk, cost and local knowledge.
7. Strategic alliances. Cooperative agreements without forming a new firm, for technology, marketing or research.
8. Wholly owned subsidiaries (foreign direct investment). Setting up or acquiring a fully owned unit abroad (greenfield or acquisition). It gives full control but needs high investment and risk.
9. Management contract and turnkey projects. Supplying managerial skill or a completed plant to a foreign client.

The choice of method depends on investment, risk, control, market and government policy.

Contingency theory (situational approach) holds that there is no single best way to manage. The effectiveness of a management style, structure or action depends on (is contingent upon) the situation in which it is used. Managers must analyse internal and external factors and select the technique that fits. Its central idea is "if-then": if the situation is X, then use method Y. Contributors include Fiedler, Lawrence and Lorsch, Woodward, and Burns and Stalker.

Need for contingency theory in management

1. No universal principles. Classical principles do not work everywhere, so management needs a situational approach.
2. Rapidly changing environment. Technology, markets and competition change, so managers must adjust methods and not follow fixed rules.
3. Differences among organisations. Size, technology, goals, culture and ownership differ, and each needs a suitable structure and style.
4. Differences among people. Employees differ in skills, needs and attitudes, so leadership and motivation must vary. For example, a directive leader suits a new employee while a participative leader suits an experienced team.
5. Integration of earlier theories. It combines the valid parts of classical, behavioural and quantitative approaches according to the situation.
6. Better decision making. It encourages analysis of the situation before choosing a response, which improves problem solving.
7. Flexibility and adaptability. Organisations can respond quickly to uncertain conditions, for example choosing mechanistic structures in stable conditions and organic ones in unstable conditions.
8. Practical orientation. It links theory to real situations, makes managers think instead of copying, and improves effectiveness.

Limitation: it is complex, offers no single clear guide, and the number of situational variables is large.

Planning is the process of deciding in advance what to do, how, when and by whom in order to reach objectives. It is the first function of management and involves setting goals and choosing courses of action.

Types of plans

Plans are classified by use, time period, breadth and level.

A. By use

1. Single-use plans – for non-repeating situations.
   • Programme: a set of activities for a major goal.
   • Project: a smaller, separate part of a programme.
   • Budget: a numerical statement of expected results.
2. Standing (repeat-use) plans – for recurring situations.
   • Policies: general guides for decision making.
   • Procedures: sequence of steps for performing a task.
   • Rules: specific, rigid do's and don'ts, with no discretion.
   • Standard methods: prescribed ways of doing a job.

B. By time horizon

• Long-term plans (usually five years or more), medium-term (one to five years) and short-term (up to one year).

C. By breadth (scope)

• Strategic plans: organisation-wide, long-term and set by top management; define mission and direction.
• Tactical plans: carry out strategic plans in the middle term, set by middle managers.
• Operational plans: day-to-day plans for departments and units made by lower managers.

D. By level

• Corporate, business and functional plans.

E. Other

• Contingency plans are made for events that may not happen. They are used as backup when the main plan fails.
• Directional (flexible) vs specific plans.

Together, these types give direction, coordination and a base for control.

Departmentalization by location (territorial or geographic departmentalization) groups activities according to the geographical area in which they are performed. All activities in an area are placed under one manager.

Types of organisation that use it

• Organisations operating over wide geographical areas: banks with provincial and branch offices, insurance companies, telecom firms, and distribution networks.
• Multinational and national companies organised by country or region, such as Asia, Europe and Africa regions.
• Government and public organisations: zonal, provincial or district offices, police, tax offices, and Nepal Electricity Authority distribution centres.
• Retail chains, sales organisations and courier firms with branch outlets.
• Educational and health organisations with campuses or hospitals in several places.

Suitable when

• Local conditions, laws, language or customs differ.
• Quick response to local customers is needed.
• Transport and communication cost can be reduced by operating nearer to customers.

Advantages

• Local knowledge and responsiveness.
• Lower travel and distribution costs.
• Training ground for managers.

Disadvantages

• Duplication of services and higher overhead.
• Difficult to control and coordinate across areas.
• Possible conflict between head office and branches.

Leadership trait theory states that effective leaders possess certain personal qualities that distinguish them from non-leaders. The main traits of a leader are listed below.

1. Intelligence and knowledge. The ability to think, analyse and solve problems, along with job and general knowledge.
2. Self-confidence. Belief in one's own judgement, which inspires followers' trust.
3. Vision and foresight. The ability to see the future, set direction and inspire others with it.
4. Honesty and integrity. Consistency between words and action, and ethical conduct that wins trust.
5. Communication skill. Clear speaking, active listening and persuasive ability.
6. Decisiveness. Taking timely, firm decisions and accepting responsibility for them.
7. Initiative, drive and energy. High motivation for achievement, persistence and ambition.
8. Emotional intelligence. Self-awareness, self-control, empathy and good social skills.
9. Courage and risk-taking. Willingness to take calculated risk and face problems.
10. Empathy and human-relations skill. Understanding and caring for followers' needs and motivating them.
11. Flexibility and adaptability. Adjusting to changing conditions.
12. Social skill and sense of humour, along with fairness and objectivity.
13. Responsibility and dependability. Reliable, accountable and committed to the organisation.
14. Physical stamina and a good personality.

Limitation: no single set of traits guarantees leadership success, as situations differ. Hence later theories (behavioural and contingency) were developed. Traits can also be developed through training and experience.

Abraham Maslow's need hierarchy theory (1943) says that human behaviour is motivated by a set of needs arranged in a hierarchy of importance. People satisfy lower-level needs first, and when a need is satisfied it stops motivating, so the next higher need becomes dominant.

Levels of needs (from lowest to highest)

1. Physiological needs. Basic survival needs: food, water, shelter, clothing, sleep, rest. In organisations: basic salary, working conditions, break time.
2. Safety (security) needs. Protection from danger, threats and uncertainty: job security, pension, insurance, safe working environment.
3. Social (belonging/love) needs. Friendship, affection, acceptance, belonging to groups: teamwork, good relations with colleagues and supervisors, social events.
4. Esteem needs. Self-respect, status, recognition, achievement and respect from others: titles, promotions, awards, responsibility.
5. Self-actualization needs. The need to realise one's full potential, grow and be creative: challenging work, creative tasks, personal development.

The first two are lower-order (deficiency) needs and the last three are higher-order (growth) needs.

Main assumptions

• Only an unsatisfied need motivates.
• Needs are satisfied in order, from lowest upward.
• A satisfied need is no longer a motivator.

Managerial implications

• Find the dominant need of each employee and offer rewards that match it.
• Fair pay and safe conditions for lower needs. Teamwork, recognition, and growth opportunities for higher needs.

Criticisms

• The order is not rigid, as it varies among individuals and cultures.
• Lacks strong empirical support, and needs overlap.
• Hard to measure satisfaction of a need.

Despite this, the theory remains one of the most popular and widely used motivation theories.

(a) Communication

Communication is the process of exchanging facts, ideas, opinions and feelings between a sender and a receiver so that both reach a common understanding. In management it is the thread that links planning, organizing, leading and controlling. The basic elements are the sender, message, encoding, channel, receiver, decoding and feedback.

(b) Barriers to effective communication

1. Semantic (language) barriers: Technical jargon, ambiguous words, poor translation or different meanings of the same word distort the message.
2. Psychological barriers: Emotions, prejudice, inattention, fear, stress and lack of trust make the receiver misread or ignore the message. Premature evaluation and selective perception belong here.
3. Physical (environmental) barriers: Noise, distance, poor equipment, faulty telephone or network lines, and interruptions block transmission.
4. Organizational barriers: A long chain of command, rigid hierarchy, unclear authority, complex structure and poor communication policy delay or filter information.
5. Personal barriers: Differences in perception, status, poor listening habits, lack of confidence, and reluctance of subordinates to pass bad news upward.
6. Cultural barriers: Differences in customs, gestures, values and language between regions or countries lead to misunderstanding.
7. Information overload and filtering: Too much information reduces attention, and senders may hold back or alter facts to please superiors.
8. Lack of feedback: Without feedback the sender cannot confirm that the message was understood.

Overcoming the barriers: use simple and clear language, encourage two-way communication and feedback, practise active listening, reduce the number of levels, choose the right channel and timing, and train staff in communication skills.

Decision making is the process of choosing the best course of action from the available alternatives. The conditions under which a manager decides depend on how much is known about the outcomes. There are three conditions.

(a) Certainty

The manager knows exactly what each alternative will lead to, because all the facts are known and reliable. The task is only to compute and pick the alternative with the best outcome.

Example: Investing Rs 1,00,000 in a fixed deposit that pays a known 8% interest. Linear programming and break-even analysis are typical tools. Such conditions are rare in real business.

(b) Risk

The outcome of an alternative is not known for sure, but the manager can estimate the probability of each possible outcome from past data or experience. The choice is made by comparing expected values.

$EV = \sum p_i \times V_i$

Example: A new product may earn Rs 5,00,000 with probability 0.6 or lose Rs 1,00,000 with probability 0.4, so $EV = 0.6(5{,}00{,}000) + 0.4(-1{,}00{,}000) =$ Rs 2,60,000. Decision trees and probability theory are used.

(c) Uncertainty

The manager has neither complete information nor reliable probabilities for the outcomes. Decisions rely on judgement, intuition, experience and creativity. Criteria used include:

• Maximax (optimistic): pick the alternative with the best possible payoff.
• Maximin (pessimistic): pick the alternative whose worst payoff is the best.
• Minimax regret: minimize the maximum regret.
• Laplace: assume equal probabilities for all outcomes.

Example: Launching a product in a completely new market with no history. This is the most difficult condition and is common in strategic decisions in a changing environment.

(a) Conflict

Conflict is a disagreement or clash between individuals or groups that arises when their goals, interests, values or perceptions are incompatible, or when one party feels that another is blocking its objectives. It can occur within an individual, between individuals, between groups and between organizations. Its main causes are limited resources, differences in goals, role ambiguity, poor communication, interdependence of tasks and personality differences. Moderate conflict can stimulate creativity, but unmanaged conflict reduces morale and productivity.

(b) Methods of managing conflict

1. Avoidance (withdrawal): Ignore or postpone the issue. It suits trivial matters or lets tempers cool, but it does not solve the cause.
2. Accommodation (smoothing): One party gives in to the other to preserve harmony. It is useful when the issue matters more to the other side.
3. Competition (forcing): One party pursues its own goal using authority or power. It is suitable for emergencies and unpopular but necessary decisions.
4. Compromise: Each side gives up something and a middle position is reached. It is quick but nobody is fully satisfied.
5. Collaboration (problem solving): Both parties openly discuss and find a solution that fully meets the concerns of both. This is a win-win approach and the most durable, though it takes time.
6. Structural methods: Clarify roles and authority, set superordinate (common) goals, redesign jobs, add liaison roles or increase resources.
7. Third-party intervention: Mediation or arbitration by a neutral person such as a senior manager or outside expert.
8. Confrontation and negotiation: Parties meet face to face and bargain towards an agreement.

A manager should choose the method according to the importance of the issue, the time available and the relationship between the parties.

Control is the managerial function of ensuring that actual performance matches planned performance and of taking corrective action when it does not. The control system works as a cycle of the following steps.

1. Establishing standards: Set the targets against which performance will be measured. They may be quantitative (sales, cost, output, time) or qualitative (quality, customer satisfaction), and should be clear, achievable and linked to the plan.
2. Measuring actual performance: Collect data on what is actually being achieved through reports, personal observation, audits, statistical records and inspections. The measure should be accurate and use the same units as the standard.
3. Comparing performance with standards: Compare the measured results with the standards to find the deviation. Management by exception applies here: only significant deviations need attention.
4. Analysing deviations: Find out the causes of the gap, such as faulty planning, poor performance, changed conditions or unrealistic standards, and decide whether it is controllable.
5. Taking corrective action: If performance is below the standard, remedy it by retraining, better supervision, changing methods, reallocating resources, or revising the standard itself if it was unrealistic.
6. Feedback and follow-up: Results of the action are fed back into the system so that standards and plans are improved. This closes the loop.

The system is thus a continuous cycle: standard, measure, compare, correct, and feed back.

A multinational company (MNC) is a firm that owns and operates production or service units in two or more countries while being controlled from a home country. Its advantages are as follows.

To the host country (such as Nepal)

1. Capital inflow: MNCs bring foreign direct investment that fills the gap in domestic savings.
2. Technology transfer: Modern technology, machinery and know-how are introduced and spread to local firms.
3. Employment creation: Direct jobs in the company and indirect jobs among suppliers and distributors.
4. Managerial and skill development: Local staff are trained in modern management and technical skills.
5. Export promotion and foreign exchange: Output sold abroad earns foreign currency and improves the balance of payments.
6. Import substitution and better products: Local production replaces imports, and consumers get quality goods at competitive prices.
7. Infrastructure and revenue: Investment in roads, power and communications, and tax revenue for the government.
8. Competition: Local firms are pushed to raise efficiency and quality.

To the MNC itself

1. Access to large markets and cheaper raw materials and labour.
2. Economies of scale and spreading of risk across countries.
3. Ability to avoid trade barriers by producing locally.
4. Better use of its brand, research and technology worldwide.

Together these advantages raise the output, income and living standard of the host country while increasing profit for the company.

Although Nepal has potential in agriculture, tourism, hydropower and manufacturing, business firms face many obstacles.

1. Political instability: Frequent changes of government and unstable policies discourage long-term investment.
2. Inadequate infrastructure: Poor roads, unreliable electricity (especially in the past), weak transport and limited communication raise costs.
3. Landlocked location and dependence on India: Transit difficulties, delays at customs and dependence on one trading partner increase transport cost and risk.
4. Shortage of capital and high interest rates: Small domestic savings, difficult access to loans and strict collateral requirements hinder expansion.
5. Weak industrial and labour relations: Strikes, bandhs, trade-union disputes and labour unrest disrupt production.
6. Bureaucratic hurdles and corruption: Lengthy procedures, delays in licences and registration, and informal payments increase cost and uncertainty.
7. Lack of skilled manpower and technology: Brain drain and migration of young workers abroad, and limited technology and research.
8. Small domestic market: Low purchasing power limits economies of scale.
9. Unfair competition and informal sector: Smuggling, under-invoicing and the open border with India damage domestic producers.
10. Frequent policy and tax changes, and natural disasters: Earthquakes, floods and landslides damage property and trade.

To overcome these, Nepal needs political stability, better infrastructure, simpler procedures, access to finance and skill development.

(a) Management

Management is the process of planning, organizing, leading and controlling the efforts of the members of an organization and using its resources so as to achieve stated goals efficiently and effectively. Efficiency means doing things right (minimum input for output), and effectiveness means doing the right things (achieving goals).

(b) Functions of management

1. Planning: Deciding in advance what is to be done, when, how and by whom. It includes setting objectives, forecasting, forming policies, procedures, programmes and budgets, and selecting the best course of action. It gives direction and reduces uncertainty.
2. Organizing: Arranging resources and activities to carry out the plan. It involves dividing work, grouping jobs into departments, assigning duties and authority, establishing relationships, and coordinating effort.
3. Staffing: Recruiting, selecting, training, appraising and compensating people to fill the positions created by the organization structure.
4. Directing / Leading: Guiding, motivating, supervising and communicating with employees so that they work willingly towards goals. It includes leadership, motivation, communication and supervision.
5. Controlling: Setting standards, measuring actual performance, comparing it with the standards and taking corrective action to keep the organization on track.
6. Coordinating: Harmonizing the activities of individuals and departments. Some authors treat this as the essence of management that runs through all functions.

These functions are interrelated and are performed as a continuous cycle. The time a manager spends on each varies with the managerial level: top managers spend more on planning and organizing, while lower managers spend more on directing and controlling.

Business environment consists of all the forces surrounding a business that affect its performance. The internal environment comprises the factors within the organization that are generally controllable by management. Its main components are as follows.

1. Mission, vision and objectives: The organization's purpose and goals shape strategy, priorities and the way resources are used.
2. Organizational structure: The pattern of authority, departmentalization, span of control and communication flows. A flexible structure helps in responding to change.
3. Organizational culture: The shared values, beliefs, norms and behaviour that influence how people work and make decisions.
4. Human resources: The skills, attitudes, motivation, experience and labour relations of employees and managers. They largely determine productivity and quality.
5. Physical and technological resources: Plant, machinery, buildings, location and technology, which determine capacity, cost and quality of output.
6. Financial resources: Capital structure, availability of funds, liquidity and profitability, which decide the ability to invest and expand.
7. Management style and leadership: The quality of top management, decision-making style and the board's policies and values.
8. Company image and brand: Goodwill and reputation with customers, suppliers and investors.
9. Owners and shareholders: Their expectations and the board of directors influence policy and strategic direction.

The strengths and weaknesses found in the internal environment are analysed in SWOT to match the organization with external opportunities and threats.

(a) Planning

Planning is the managerial function of deciding in advance what to do, how to do it, when, and who is to do it. It bridges the gap between where the organization is and where it wants to be. It is a primary, continuous and pervasive function that reduces uncertainty, gives direction, coordinates effort and provides a basis for control.

(b) Process of planning

1. Being aware of opportunities: Scan the environment and the organization's strengths and weaknesses to see opportunities and threats (SWOT analysis).
2. Establishing objectives: Set specific and measurable goals for the whole organization and then for each unit, stating what is to be achieved and by when.
3. Developing premises: Make assumptions about the future conditions in which plans will operate, such as forecasts, tax rates, demand, and existing policies.
4. Identifying alternatives: List the different ways of reaching the objectives.
5. Evaluating alternatives: Weigh each alternative against objectives, cost, risk, resources and benefit, using tools such as cost-benefit analysis and operations research.
6. Selecting an alternative: Choose the best course of action. Sometimes a mix of alternatives is adopted, and a standby plan may be kept.
7. Formulating derivative (supporting) plans: Prepare detailed plans for each department, such as purchasing, hiring, and training, to support the main plan.
8. Quantifying plans by budgets: Convert plans into numbers (money, time, labour hours) to make them clear and controllable.
9. Implementation and follow-up: Put the plan into action, monitor results and revise when conditions change.

(a) Departmentalization

Departmentalization is the process of grouping related activities and jobs into units or departments under a manager, so that work is coordinated and responsibilities are clear. It follows from division of labour and it determines the structure of the organization.

(b) Types of departmentalization

1. By function: Grouping by the work performed, such as production, marketing, finance and personnel. Advantages: specialization, simple and logical, efficient use of skills. Disadvantages: narrow outlook, poor coordination between departments.
2. By product: Each product or product line has its own department with all functions needed. Suited to large firms with diverse products. It improves focus and accountability but duplicates resources.
3. By territory (geography): Units are formed for each region, such as Province or country. It meets local needs and suits widely scattered operations, but needs more managers and control.
4. By customer: Departments serve particular customer groups, such as retail, wholesale, corporate and government. It satisfies special customer needs but may under-use facilities.
5. By process or equipment: Grouping by production process, such as cutting, assembly and painting. It makes efficient use of equipment and skills, typical in manufacturing.
6. By time (shift): Used where operations continue around the clock, such as morning, day and night shifts in hospitals and factories.
7. By project / matrix: Staff from different functions are put together for a particular project, giving two lines of authority (function and project). It is flexible but can cause conflict over command.

Large organizations usually combine more than one basis.

Goal formulation (setting objectives) is the first step of planning, and several problems arise in practice.

1. Conflict between goals: Goals of different groups, such as owners (profit), employees (wages), customers (low prices) and government (taxes), may clash, so a goal may help one group and hurt another.
2. Multiplicity of goals: An organization needs goals in many areas, such as profit, growth, quality and social responsibility. Too many goals cause confusion, so priorities are hard to set.
3. Vague and unclear goals: Goals stated in general terms such as "improve service" cannot be measured or acted on.
4. Unrealistic goals: Goals that are too high demoralize staff, while goals that are too low give no challenge.
5. Lack of information and uncertainty: Poor or incomplete data about the environment and the future leads to wrong goals.
6. Short-term versus long-term conflict: Pressure for immediate profit may harm long-term growth and investment.
7. Lack of participation and acceptance: If goals are imposed from the top without involving employees, they are not accepted or committed to.
8. Quantification difficulty: Qualitative goals such as morale, social responsibility and goodwill are hard to measure.
9. Changing environment: Goals set earlier become outdated when technology, competition or laws change.
10. Resource limitations: Shortage of money, people and time restricts what can be set as a goal.

Remedies: set SMART goals, involve people at all levels, rank goals by priority, review goals regularly, and link goals to resources.

The system theory (systems approach) of management views an organization as a system, that is, a set of interrelated and interdependent parts working together to achieve a common purpose. It was developed from general systems theory by Ludwig von Bertalanffy and applied to management by Kast, Rosenzweig, Johnson and others.

Basic concepts

• Inputs: Resources taken from the environment such as men, money, materials, machines and information.
• Transformation process: The activities that convert inputs into outputs (production, management processes).
• Outputs: Goods, services, profit, satisfaction and waste returned to the environment.
• Feedback: Information on results that is used to correct and improve the system.
• Environment: The surroundings with which the system interacts.

Types of systems

• Closed system: Does not interact with its environment (mostly theoretical).
• Open system: Continuously interacts with its environment. An organization is an open system.

Key features

1. The organization consists of subsystems (departments such as production, finance, marketing) that depend on each other.
2. Synergy: The whole is greater than the sum of its parts.
3. Boundaries separate the system from the environment, but they are permeable.
4. Equifinality: The same goal can be reached by different routes.
5. Systems seek balance (homeostasis) through feedback.

Significance: It encourages managers to think in an integrated way, to see the effect of a decision in one area on the others, and to give attention to the environment. Limitation: It is abstract and gives few practical tools for solving specific problems.

A decision is a choice among alternative courses of action. Decisions are classified in several ways.

1. Programmed and non-programmed decisions

• Programmed decisions are routine and repetitive, made by fixed rules, procedures or policies, e.g. reordering stock, granting leave, payroll. They are made at lower levels and have little risk.
• Non-programmed decisions are new, unstructured and non-recurring, with no ready procedure, e.g. entering a new market, merging with another firm. They need judgement and creativity and are made at higher levels.

2. Strategic, tactical and operational decisions

• Strategic decisions concern the long-term direction and the whole organization (new products, diversification). They are made by top management.
• Tactical (administrative) decisions put strategy into effect in a department over a medium term (budgets, staffing plans). They are made by middle management.
• Operational decisions concern daily activities (scheduling, supervision) and are made by lower management.

3. Individual and group decisions

An individual decision is made by one manager and is quick, but may lack variety of views. A group or committee decision uses more knowledge and gains commitment, but takes more time.

4. Organizational and personal decisions

Organizational decisions are made in an official capacity and can be delegated, while personal decisions concern the manager's own affairs and cannot be delegated.

5. Policy and operating decisions

Policy decisions set the framework by top management; operating decisions are made within it.

6. Decisions by condition

Decisions are made under certainty, risk or uncertainty, depending on the information available about outcomes.

Centralization means that decision-making authority is concentrated at the top levels of the organization. Decentralization means that authority is systematically delegated and dispersed to lower levels.

Conclusion: Absolute centralization or decentralization is not possible. The degree depends on the size of the organization, the cost and importance of the decision, the managers' abilities, the environment and the philosophy of top management.

Motivation is the process of stimulating people to act willingly to accomplish goals. Common techniques fall under financial and non-financial incentives.

(a) Financial (monetary) techniques

1. Pay and salary: A fair and competitive basic wage is the foundation of motivation.
2. Bonus and profit sharing: Extra payments linked to the organization's profit or to performance.
3. Incentive plans: Piece rates, commissions and merit pay.
4. Fringe benefits: Provident fund, insurance, medical care, housing, paid leave and pension.
5. Stock options and employee ownership: Giving employees shares in the company.

(b) Non-financial techniques

1. Job enrichment: Adding responsibility, autonomy and challenge to the job (Herzberg).
2. Job enlargement and rotation: Widening tasks or moving workers between jobs to reduce monotony.
3. Participation and empowerment: Involving employees in decisions and delegating authority. Management by objectives (MBO) is an example.
4. Recognition and praise: Awards, certificates, "employee of the month" and appreciation.
5. Career development and promotion: Training, growth opportunities and clear career paths.
6. Job security: Stable employment reduces fear.
7. Good working conditions and quality of work life: Safe, clean workplace, flexible hours and work-life balance.
8. Good leadership and communication: Supportive supervision, fairness and open communication.
9. Social needs: Team spirit, friendly relations and a sense of belonging.

A manager should select techniques according to individual needs, as taught by Maslow's hierarchy, Herzberg's two-factor theory and expectancy theory.

Communication is the exchange of information and understanding between a sender and a receiver. Anything that distorts, blocks or delays the message is a barrier.

1. Semantic barriers: Jargon, ambiguity, different meanings of words and poor translation cause the message to be misunderstood.
2. Psychological barriers: Emotions, anger, fear, prejudice, lack of attention and distrust affect the way a message is sent and received. Selective perception makes people hear only what they expect.
3. Physical barriers: Noise, distance, faulty equipment, poor lighting and interruptions.
4. Organizational barriers: Long chains of command, complex structure, rigid rules, status differences and lack of communication policies that cause delays and filtering.
5. Personal barriers: Poor listening, lack of confidence, reluctance to pass on bad news, fear of the superior's reaction, and differing perception of the same event.
6. Cultural barriers: Different languages, customs, gestures and values, especially in a diverse or international workforce.
7. Information overload: Too much information cannot be processed, so important points are lost.
8. Technological barriers: Failure of systems, network problems and unfamiliarity with new tools.
9. Lack of feedback: The sender does not know whether the message was understood.

Overcoming: use clear and simple language, listen actively, seek feedback, choose suitable channels, reduce levels, and train employees in communication.

Globalization is the growing integration of national economies through trade, investment, technology, finance and the movement of people and ideas. Its positive effects are as follows.

1. Expansion of markets and trade: Firms can sell to a worldwide market, which raises exports and sales volume.
2. Foreign investment and capital flow: Inflow of foreign direct investment adds capital to developing countries such as Nepal.
3. Transfer of technology and knowledge: Access to modern technology, management methods and research improves productivity.
4. Employment and income generation: New industries and services create jobs and raise incomes.
5. More choice and lower prices for consumers: Competition brings varied, better quality goods at lower prices.
6. Efficiency and competitiveness: Domestic firms improve quality, cost and innovation to survive against foreign competitors.
7. Economies of scale and specialization: Countries specialize in what they produce best, and firms lower unit cost.
8. Remittance and labour mobility: Workers abroad send money home and gain skills.
9. Cultural exchange and awareness: Exposure to other cultures, ideas and education.
10. Better communication and infrastructure: Spread of the internet and information technology.
11. Economic growth and poverty reduction: Overall rise in the standard of living.

Principles of organization are the guidelines that managers follow when designing an effective organization structure.

1. Principle of objective: Every part of the organization should contribute to the main objective.
2. Division of work (specialization): Work should be divided so that each person performs the job he is best suited for.
3. Unity of command: Each employee should receive orders from one superior only, to avoid confusion and conflict.
4. Scalar chain: A clear line of authority runs from the top to the lowest level, and communication should follow it.
5. Span of management: The number of subordinates one manager can effectively supervise should be limited and suitable.
6. Authority and responsibility: Authority must be equal to the responsibility assigned, and the person remains accountable.
7. Delegation: Authority should be passed down to the lowest level capable of using it.
8. Coordination: Activities should be harmonized so that all work together for a common purpose.
9. Balance: Between centralization and decentralization, and among departments, so that none gets excess emphasis.
10. Flexibility: Structure should be adaptable to changes in the environment.
11. Unity of direction: One head and one plan for a group of activities with the same objective.
12. Continuity and efficiency: The organization should be able to continue and operate with the least cost.
13. Simplicity and clarity: Structure and duties should be clear to everyone.

The technological environment consists of the technological forces that influence a business, including the pace of innovation and the use of technology in production and distribution. Its main factors are:

1. Rate of technological change and innovation: Frequent changes make products and processes obsolete quickly.
2. Research and development (R&D) activity: Spending by the government and industry on new products and methods.
3. Information and communication technology: The internet, e-commerce, mobile technology, cloud, big data and artificial intelligence.
4. Automation and mechanization: Use of robots and computerized machines, which affects labour, cost and quality.
5. Technology transfer and availability: Ease of access to imported and local technology and to patents and licences.
6. Government policy on technology: Incentives, patent and intellectual property laws, and technology standards.
7. Cost of technology and skilled manpower: The capital needed to adopt technology and the availability of trained people.
8. Impact on products and competition: New technology creates new products and substitutes and changes the competitive position.
9. Infrastructure for technology: Electricity, internet bandwidth and transport.
10. Social acceptance and ethical issues: Resistance to change, privacy and environmental effects of technology.

Export-oriented industries are those which mainly produce goods for sale in foreign markets and earn foreign exchange. In Nepal the main ones are as follows.

1. Carpets: Hand-knotted woollen (Tibetan) carpets were for long Nepal's leading export, sent to Germany, the USA and Europe.
2. Readymade garments: Garments made for the European and US markets, supported by trade preferences, but the sector has declined.
3. Pashmina and woollen products: Shawls, scarves and sweaters made from Himalayan fine wool, exported to Europe, the USA and Japan.
4. Handicrafts: Metal craft, wood carving, paper products (lokta), Thangka paintings, pottery and jewellery, rooted in Nepali art and culture.
5. Tea and coffee: Orthodox tea from Ilam and the eastern hills and organic coffee from the hill districts.
6. Cardamom, ginger and other spices, and herbs: Large cardamom is a main agricultural export, together with medicinal plants and essential oils.
7. Agro-based and processed foods: Vegetable ghee, soybean and palm oil, jute goods, lentils, honey and noodles, many going to India.
8. Hydropower: Electricity export to India and Bangladesh is a growing source of revenue.
9. Cement, steel and metal products, and leather and footwear.
10. Information technology and services: Software outsourcing and tourism services (not goods but export earnings).

Constraints: landlocked location, high transport cost, dependence on a few products and markets, power shortages in the past and weak quality standards. Better trade policy, quality certification and market diversification are needed.