Note : Islamic Management

Islamic Leadership
Islamic Leadership is the process of guiding a group of people, called followers in the way of Allah (SWTA) following the guidelines of Islamic ‘Shariah’ for the purpose of betterment and well being of them (the followers).

Features of Islamic Leadership
Islamic leadership has the follower features.
  • The main purpose of Islamic leadership is to help the followers to have the blessings of Allah (SWAT) and His prophet.
  • Islamic leadership endeavours to effectuate the wellbeing of the followers.
  • It has got two roles to play (Servant leadership role & Guardian leadership role)
Islamic Model of Leadership
Basic three elements of leadership as shown in the model are organization, leaders and followers. A leader will take decisions consulting with the followers. Leaders will practice both the roles of servant and guardian leadership whole the followers will show dynamism in their participation and action. Leaders will be gentle to the followers and they should never be harsh with them. They must consult with the followers when necessary. After consulting leaders must decide and put trust in Allah (SWTA).

The role of followers in Islamic leadership process will be positive. They must be co-operative with their leaders. They provide necessary suggestions to their leaders and thus contribute to decision-making. They also warn their leaders of their actions if necessary. The followers must withdraw their support if and when the leaders are seen deviating from the right path of Islam. Thus they will play the role of dynamic rather than blind followership.

Qualities of a Muslim leader
Faith, Practicing Muslim, Taqwa, Ihsan, Justice, Trust, Righteousness, Striving for self-improvement, Keeping promise, Honesty, Patience, Inspiration & initiative, Competency, Consulting nature, Humility

Islamic Planning
Islamic planning is deciding in advance in halal ways what is to be done. An Islamic plan is a projected course of halal action.

Steps of Planning
Being aware of opportunities: Before starting any sort of planning the planners must be aware of the existing opportunities of the organization as to its market, competition, customers, strengths and weaknesses.

Establishing objectives: The second step of planning is to establish the organization’s objectives or goals. It means to decide, ‘what is to be accomplished? When and where?’

Developing premises:
It is the consideration of internal and external environment wherein the plan will operate. Thus it decides on the forecasts, applicable basic policies, and existing company plans.

Determining alternative courses: This means the finding different alternatives for achieving the objectives.

Evaluating alternative courses: The fifth step of planning is to evaluate the costs and benefits of each alternative by considering all quantitative and qualitative factors.

Selecting a course: This point of decision making means selecting the best alternative among the available alternatives.

Formulating derivative plans: Next step of planning is to develop the derivative plans from the basic plan. These are the supportive and more detailed of basic plan.

Quantifying plans: This means converting plans in terms of physical quantities and monetary figures for a definite future period. That is preparing budgets, targets, standards etc. This constitutes the last step of planning.

Nature of Islamic Planning
  1. It made following rules of Shariah
  2. It is done following the rules and principles of Islam
  3. It is performed following Islamic ethics
  4. It is based on fact rather than on imaginary figures
  5. When objectives of the organization are not in contrast with the Islamic Shariah
  6. The objectives as to profit earning, marketing achievement, productivity performance, physical expansion & financial performance must be Islamic and any un-Islamic objectives in this regard cannot be decided upon. It is mentioned in the Holy Qur’an “...Help you one another in ‘al-Birr’ and ‘AL-Taqwa’ (Virtue, righteousness and piety); but do not help one another in sin and transgression. And fear Allah. Verily, Allah is Severe to punishment.” (5:2)

Profit Earning
Regarding profit earning a reasonable and normal profit rather than exorbitant profit is to be determined.
Virtually, one can arrive at a range of reasonable profit by considering the following factors:

Cost of product: Whether the profit is reasonable or unreasonable one can realize by considering its cost of procurement of procurement or manufacturing.

Its Quality: Higher the quality of the product the more can it be profitable. It has been observed that a consumer wants to buy a quality product by giving some extra premium for it.

Its utility and satisfaction to the consumer: Products having high utility and satisfaction can earn more profit and hence their profit targets will be reasonably high.

Prices of similar products: Reasonableness of profit can also be justified by comparing and considering the prices of similar products in the market, it available.

Risk of the product and industry: If the product risks and industrial risk of product are very high but the product is very much essential it is reasonable to assign more profit for the purpose of covering its risk.

Planning Tools and Techniques
a. Environmental scanning
A manager can analyze his organization's environment by using the techniques of environmental scanning, forecasting and benchmarking. Environmental scanning means scanning of large amounts of information to detect emerging trends and create scenarios.

b. Forecasting
There are two important types of forecasting. One is revenue forecasting and the other is technological forecasting.
There are two types of forecasting techniques. One is quantitative technique which applies a set of mathematical rules to a series of past data to predict future outcomes. On the other hand, qualitative techniques use the judgment and opinions of knowledgeable people.

c. Benchmarking
A third strategic planning tool is the benchmarking that means search for the best practices and copying and implementing it.

There are four steps of benchmarking process as described below:
  • First, a benchmarking planning team is to be formed by the organization.
  • The team will have collected data internally from its own organization and externally from the other organizations.
  • The data are to be compared and analyzed in order to identify the own performance gap and the causes of differences.
  • An action plan meeting or exceeding the standards of others will then be prepared and implemented.

Operational Planning tools:
  • Scheduling
  • Break-even analysis
  • Linear programming
  • Queuing theory
  • Probability theory
  • Marginal analysis
  • Simulation
After planning the next function of management is organizing. Organizing means the process of creating an organizational structure. It involves the following five steps:

Considering the organization’s objectives plan. Objectives and plans will dictate the purposes and actives for which the organization is to be developed.

Determining the necessary functions and activities. At this stage, all activities and tasks are to be identified and enlisted in order to achieve the organization’s objectives.

Classification and grouping of activities: this step involves three major tasks. (a) Examining each activity identified in order to determine its general nature whether it relates to major operations like marketing, production, finance or personnel (b) Grouping the activities into these related areas (c) Establishing the basic departmental design for the organization structure.

Step four involves assigning work and delegating appropriate authority. After identifying the grouping them into major operational areas and selecting a departmental structure, the manager must assign them to human resource who are simultaneously given the appropriate authority to accomplish the task.

Designing the hierarchy of relationship; This is the final step of organizing. In this step, both the vertical and horizontal operating relationship of organization as a whole is determined. The result of this step is a complete organization structure which can be represented by an organization.

Structure of Management Organization
  • Line organization
  • Line and staff organization
  • Functional organization
  • Committee
  • Matrix organization
The willingness to exert high levels of effort to reach organizational goals conditioned by the effort’s ability to satisfy some individual needs.
The processes that account for an individual’s willingness to exert high levels of effort to reach organisational goals, conditioned by the effort’s ability to satisfy some individual need.

Herzberg’s Two-factor Theory:
Motivators: Achievement, Recognition, Work itself, Responsibility, Advancement, Growth (Extremely Satisfied)

Hygiene Factors: Supervision, Company policy, Relationship with supervisor, Working conditions, Salary, Relationship with peers, Personal Life, Relationship with Subordinates, Status, Security. (Extremely Dissatisfied)

Traditional View:
Herzberg’s View: Motivators (Satisfaction/No Satisfaction) Hygiene Factors (No Dissatisfaction/Dissatisfaction)

Maslow’s hierarchy of needs Theory:
Physiological: Food, Drink, Shelter etc (Low Order Needs)
Safety: Security, Protection (Low Order Needs)
Social: Affection, Acceptance, Belongingness, Friendship (High Order Needs)
Esteem: self-respect, autonomy, status, recognition, attention (High Order Needs)
Self-actualization: growth, achieving one’s potential, drive to become what one is capable of becoming. (High Order Needs)

McGregor X and Y Theory:
Theory X
Symptoms: Workers have little ambition, Dislike work, Want to avoid responsibility, Need to be closely controlled to work effectively.
Motivating: Monitoring, Supervising, Direction, Punishment.

Theory Y
Symptoms: Workers can exercise self-direction, accept and actually seek out responsibility, consider work to be a natural activity.
Motivating: Participation in decision making, Responsible and challenging jobs, Good group relations.

Islamic Business
There are six types of business from which one can earn just halal income.
  • Purchase and Sale
  • Reba or business liked with interest
  • Advance or loaning business
  • Earning through labour, and rent
  • Business by contributing capital
  • Prefixing shares doing business together in partnership business. 

Partnership Business
First type:
If the two partners form a partnership, sharing profit and loss, but keep their individual commodities separately it will not be permitted in Islam. But if they mix their commodities and carry on business then it will be ‘halal’

Second type:

It should not be made a condition to distribute the share of labour involved in partnership business. If it is done then it will be haram.
Third type:
Here, one supplies capital and another is a man of high rank and status. If an agreement is made of distributing equally the profits earned as per decision of the man of status then it will not be valid.

Fourth type
Only this type of partnership business is valid in Islam. In this pattern of business, the capitals of both are mixed together, either of the partners, authorizes the other for doing business, and both share profit and losses in proportion to their invested capital.

These, minimum knowledge of ‘Fikah’ is ‘Wazed’ for every Muslim engaged in business.

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