Management tries to utilize all the sources of production in a best possible manner. This can be achieved only when employees co-operative in this task. Efforts should be made to motivate employees for contributing their maximum. The efforts of management will not bear fruit if the employees are not encouraged to work more. The motivated employees become an asset to the organization. The following in the importance of motivation.

1. High Performance : Motivated employees will put maximum efforts for achieving organizational goals. The untapped reservoirs, physical and mental abilities are tapped to the maximum. Better performance will also result in higher productivity. The cost of production can also be brought down if productivity is raised. The employees should be offered more incentives for increasing their performance. Motivation will act as a stimulant for improving the performance of employees.

2. Low Employee Turnover and Absenteeism : When the employees are not satisfied with their job then they will leave it whenever they get an alternative offer. The dissatisfaction among employees also increases absenteeism. The employment training of new employees costs dearly to the organization. When the employees are satisfied with their jobs and they are well motivated by offering them financial and non-financial incentives then they will not leave the job. The rate of absenteeism will also be low because they will try to increase their output.

3. Better of Organizational Image : Those enterprises which offer better monetary and non monetary facilities to their employees have a better image among them. Such concerns are successful in attracting better qualified and experienced persons. Since there is a better man-power to development programme, the employees will like to join such organizations. Motivational efforts will simplify personnel function also.

4. Better Industrial Relations : A good motivational system will create job satisfaction among employees. The employment will offer them better service conditions and various other incentives. There will be an atmosphere of confidence among employers and employees. There will be no reason for conflict and cordial relations among both sides will create a health atmosphere. So motivation among employees will lead to better industrial relations.

5. Acceptability to Change : The changing social and industrial situations will require changes and improvements in the working enterprises. There will be a need to introduce new and better methods of work from time to time. Generally, employees resist changes for fear of an adverse effect on their employment. When the employees are given various opportunities of development then they can easily adapt to new situations. They will think of positive side of new changes and will co-operate with the management. If the employees are satisfied with their work and are not offered better avenues then they will oppose everything suggested by the management. Motivation will ensure the acceptability of new changes by the employees.

Motivation is a psychological phenomena which generates within an individual. A person feels the lack of certain needs, to satisfy which he feels working more. The need satisfying ego motivates a person to do better than he normally does. From definitions given earlier the following inferences can be derived :

1. Motivation is an inner feeling which energizes a person to work more.
2. The emotions or desires of a person prompt him for doing a particular work.
3. There are unsatisfied needs of a person which disturb his equilibrium.
4. A person moves to fulfill his unsatisfied needs by conditioning his energies.
5. There are dormant energies in a person which are activated by channelizing them into actions.

Types of Motivation :
When a manager wants to get more work from his subordinates then he will have to motivate them for improving their performance. They will either be offered incentive for more work, or may be in the space of rewards, better reports, recognition etc., or he may instill fear in them or use force for getting desired work. The following are the types of motivation :

1. Positive Motivation: Positive motivation or incentive motivation is based on reward. The workers are offered incentive or achieving the desired goals. The incentives may be in the shape of more pay, promotion, recognition of work etc. The employees are offered the incentives and try to improve their performance willingly. According to Peter Drucker, the real and positive motivators are responsible for placement, high standard of performance information adequate for self-control and the participation of the worker as a responsible citizen in the plant community.” Positive motivation is achieved by the co-operation of employees and they have a feeling of happiness.

2. Negative Motivation : Negative or fear motivation is based on force or fear. Fear cause employees to act in a certain way. In case, they do not act accordingly then they may be punished with demotions or lay-offs. The fear acts as a push mechanism. The employees do not willingly co-operate, rather they want to avoid the punishment. Though employees work upto a level where punishment is avoided but this type of motivation causes anger and frustration. This type of motivation generally becomes a cause of industrial unrest.

In spite of the drawbacks of negative motivation, this method is commonly used to achieve desired results. There may be hardly any management which has not used negative motivation at one or the other time.

In a mixed economy there exist a mixture of government control and free enterprise. It can also be defined as a form of economy where the elements of capitalist economy as well as the social economy can be found. Most developed countries of the world have mixed economy. Mixed economy is also known as dual economy. In some areas of a mixed economy the government can even have a monopoly. Typically in mixed economies, the government runs things like postal services, railways and health care services. The influence of the government is considerable even on the industries that are not owned or run by the government, in the form of regulations and taxes. It is very difficult to define the economy of a country as socialist, capitalists or a mixed one. It has been seen lately that the role of government is increasing rapidly after the recent worldwide depression.

In a mixed economy we see the presence of the private economy freedom along with the centralized planning having a common goal of avoiding the problems that are linked with socialism as well as the capitalist system of economy. In the system of a mixed economy, freedom in economic activities is influenced by the licensing policies and regulations of the government. Mixed economy allows the participation of private entrepreneurs in the field of production and in a competitive environment with the objective of making profit. As against some of the features of socialism, mixed economy includes both public and private ownership in production with a view to maximize the welfare of the society.

Planning is a pervasive function of management and it chalks out a course of action for the enterprise to follow. Planning enables to provide for uncertain future. Planning makes it possible for things to occur which would not otherwise happen and it is mental exercise which requires the use of intellectual facilities. There are two aspects of Indian Planning:

1. Management aspect of Indian Planning
2. Economic aspect of Indian Planning.

In management aspect of Indian planning, we make use of planning for the betterment of business enterprise. Planning is concerned with thinking before doing and deciding in advance what is to be done, how is it to be done, when is it to be done and who is to do it.

According to Theo Haimann, “Planning is deciding in advance what is to be done. When a manager plans, he projects a course of action for the future, attempting to achieve a consistent, coordinated structure of operations aimed at the desired results”.

Planning is universal and every business unit has to plan its economic activity. Planning lays down the means to achieve objectives. Planning is an intellectual process and requires mental exercise. On the basis of facts and figures, planning lays down a course of action to be followed. Planning is always a continuous and perpetual process and if circumstances prevail, changes and modifications are regularly done in the planned course of action on account of changes in environment. Planning must be precise as to its meaning, scope and nature. Finally, in the nature of planning we can say that it covers the entire enterprise will all its segments and every level of management.

Planning must provide some basic concepts like objectives, policies procedures, programs and budgets. Objectives are basic plans which decide goals or end results of the projected actions of an enterprise, Policies provide guide to action. These are generally statements which guide or channel thinking in decision making of subordinates. Procedures indicate the specific manner in which a certain activity is to be performed. A procedure is thus a standing plan which lays down a sequence of step by step actions that are repeatedly followed. It may be durable like policies, but they are not as flexible as policies are Program lays down the course of action that are executed to obtain established set objectives. Programs are necessary for both repetitive and non-repetitive courses of action. Programs are made of many small plans where each plan contributes to the accomplishment of the overall objectives of the enterprise. Budget is an instrument used by management for planning the future course of business. In other words, budgets are plans containing statements of expected results in numerical terms. Budgets and programs are closely interrelated. Many programs are implemented by means of some budgets; the budgets themselves are very often utilized as the entire program in many business enterprises.

Plans can be divided in a number of ways. A manager prepares various types of plans in order to achieve the objectives of an enterprise. According to the nature and use of planning different plans can be divided into three groups, i.e.

(a) Basic Plans
(b) standing Plans
(c) Master plans.

For all types of planning and operations, basic plans are necessary. The entire planning activity is geared into action through the formulation of objectives and strategies. Standing plans serves as a guideline to managerial action. It provides readymade answers to a given situation. Standing plans include policies and procedures which have application only in repetitive action. Master plans indicate the complete course of action along with timing and strategy consideration. There are some types of plans, viz.

(i) Short Range and Long Range Plans
(ii) Financial and Non-Financial Plans
(iii) Formal and Informal Plans

In order to achieve fundamental objectives of the enterprise, a long term plan covering a period of 20 to 25 years are taken. Short range plans are made for guiding the day to day actions of an undertaking. There plans are generally for one year only. Plans dealing with monetary aspects are financial plans and non-financial plans relate to the physical resources of concern. Formal plans are always considered better because they are written whereas informal plans are unwritten and it involves a more thinking on the part of the managers.

The word fiscal is derived from the old French Word Fisc, which means the money basket or the treasury. Thus fiscal means pertaining to treasury or government finance. Fiscal policy means the government policy of taxation, expenditure and public debt etc. Fiscal policy may be defined as ‘a policy under which the government uses its expenditure and revenue programmes to produce desirable effect & avoid undesirable effect on national income, production and unemployment. It emphasizes the effect of government expenditure and revenue upon total economy and argues that they should be used deliberately and consciously as a balancing factor to secure economic stabilization. “Gerhard Colm defines fiscal policy as “the conduct of government expenditure, revenues and debt management in such a way as to take fully into account the effect of these operations in the allocation of resources and the flow of funds and thereby their influence on the level of income prices employment and production.”

In the modern government organization the amounts of public expenditures, revenues and public debt are so huge, that they have began to assume a major importance in the national economy. The desired fiscal policy can be pursued by budgetary measures like taxation, expenditure, public debt etc.

The role of fiscal policy in regulating the economy and protecting it from the ills of the market mechanism were recognized very slowly. As discussed in an earlier lesson, governments were wedded to the traditional ideals of sound budgetary policy of avoiding deficits. Such a policy, amongst other things, was causing to problems. One was as Keynes pointed, the fact that an attempt to balance the budget would put it to an unbalance and vice-versa. The second was that through the process of balanced budget multiplier, the budget was adding to the severity of cyclical fluctuations. It was with great difficulty that the appropriateness and usefulness of the fiscal policy in combating the ills of the economy were recognized, especially during the great Depression of 1930s. It was conceded that the government had a primary responsibility of helping the economy towards stabilization.

As mentioned earlier, the role of fiscal policy in promoting economic stability was recognized slowly, and not sufficiently till the Great Depression of 1930s, Actually, as Keynes pointed out, the orthodox sound budgetary policy of avoiding deficits itself contributed towards greater instability and made the task of keeping the budget balanced, all the more difficult. This is fact, generated a “perverse” policy on the part of the authorities, pushing the expenditure and demand in the economy down during a period of depression and pushing them up during a boom.

The development of the concepts of “multiplier”, and accelerator” and the relationship between the macro-variables like investment, Income consumption and savings enabled the economics to visualize more clearly the machines of trade cycles and the role which fiscal policy could play. This gave rise to the principle of compensatory finance and functional finance. It was realized that through fiscal policy, the government could to a great extent, neutralize the destabilizing movements in the economy. The general theoretical farm work was that a depression is caused by a deficiency of effective demand. Fiscal policy should remedy it by increasing public expenditure and by encouraging private expenditure; similarly during a boom period the need is to control the demand which again can be partly done through curtailing public expenditure and party through curbing the private expenditure.

To encourage demand during depression, the authorities should reduce the tax rates or abolish taxes on various items & activities. This would push up profits and reduce the price through a reduction in the cost of supply. Lower prices are expected to increase demand, production and employment, which in turn would bring further increase in demand and so on. A similar action can be taken in the field of custom duties also. Raising import duties would divert domestic demand from imports to home produced goods or abolishing export duties or giving export subsidies would increase the demand for exports and would contribute towards recovery from depression.