Professional Documents
Culture Documents
1.1 Perspective Management-Dr - Meena
1.1 Perspective Management-Dr - Meena
PERSPECTIVE MANAGEMENT
PREPARED BY
MAHATMA EDUCATION SOCIETYS PILLAIS INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH NAVI MUMBAI
Perspective Management
Contents
1. Introduction to Management Science, Theory & Practice, Environment of Management, Managers & Entrepreneurs, Managerial Roles & Skills, Managers Social & Ethical Responsibilities. 2. Planning Role, Need for planning, Types of Planning, Levels of Planning, Corporate Planning & Long range planning 3. Organizing Nature, Types of organizations, Designing Organization structure, Delegation and Autonomy 4. Leadership & Management Role of committees & Group decision Making in Management, organizational communication, Management of Change 5. Control process & Techniques: Use of Information Technology for controlling
Reference texts 1. 2. 3. 4. 5. 6. 7. Essential of Management Harold Koontz and Heinz Weihrich Management text and cases VSP Rao and V Hari Krishna Management principles and practices Dr. M. Sakthivel Murugan Principles of Management Davar Essentials of Management Massie, Joseph L. Principles of management G. R. Terry Management and organization L.A. Allen
CHAPTER I
INTRODUCTION TO MANAGEMENT
Meaning and definition of management Nature of management Management and administration Importance of management Levels of management Principles of management Environment of management Managers and entrepreneurs Functions of management Managerial roles and skills Managers social and ethical responsibilities
Introduction
Management is needed to manage individual, local, regional, national or public problems. Everybody, from the head of the family to the Prime Minister of a country or the Managing Director of a company is engaged in the management of the different types of affairs that he comes across in the performance of his obligations. It is also needed to manage specific resources and operations such as personnel management, financial management or marketing management etc. Increasing size of business units, the growth of technical knowledge, changes in the methods of production, joint stock companies with separation between ownership and management, increasing government interference in business and the growth of labour movement, which have caused the growth of functional specialists, has also increased the importance of the study of management as a subject. Today, it has developed as a specialized knowledge and it is often considered as a profession itself. As a science, management has its own principles and as an art, it has its skill of application.
Effectiveness
Concept of Management from different viewpoints: Productivity : Art of securing optimum productivity Human Relations : Art of getting things done through people Decision making : Art of correct decision making Leadership : Art of executive leadership Coordination: Manager is what a manager does.
Management focuses on the entire organization from both a short and a long-term perspective. Management is the managerial process of forming a strategic vision, setting objectives, crafting a strategy and then implementing and executing the strategy. Management goes beyond the organizations internal operations to include the industry and the general environment. The key emphasis is on issues related to environmental scanning and industry analysis, appraisal of current and future competitors, assessment of core competencies, strategic control and the effective allocation of organizational resources.
2. As an art: Art is the application of knowledge and personal skills to achieve results. Practical knowledge, personal skill, result-oriented approach, creativity and continuous practice are the key elements. Management is basically an art as it involves the use of knowhow and skills like any other art such as music, painting, sculpture, etc. The practical knowledge acquired in the areas of planning, decision-making and motivating helps the managers to tackle problems in a better way. 3. As a profession: Specialized body of knowledge, formal education and training, service motive, representative association, and code of conduct. It is an (a) occupation for which specialized knowledge, skills and training are required and (b) these skills are used for larger interests of the society and (c) the success of these skills is not measured in monetary terms always.
3 4
It is a determinative or thinking function It is concerned with the Type of work determination of major objectives and policies Level of It is mainly a top-level function authority Administrative decisions are Influence influenced mainly by public opinion and other outside forces. Direction of It is not directly concerned with human efforts direction of human efforts.
It is an executive or doing function It is concerned with the implementation of policies. It is largely a middle and lower level function Managerial decisions are influenced mainly by objectives and policies of the organization.
It is actively concerned with direction of human efforts in the execution of plans. Main functions Planning and control are the Directing and organizing are main functions involved in it. the main functions involved in it. Technical and human skill Skills required Conceptual and human skill
8 9
Usage Illustrations
Used largely in government and public sector. Minister, Commander, Commissioner, Registrar, Vicechancellor, Governor, etc.
Used mainly in business organizations. Managing Director, General Manager, Sales Manager, Branch manager, etc.
Management
Top Management
Importance of Management
Levels of Management
The term levels of management refers to a line of demarcation between various managerial positions. In every organization there is a chain of superiors and subordinates from the highest level to the lowest. This chain is known as chain of command or scalar chain. The chain consists of a series of managerial positions like chief executive, departmental heads, section officers and supervisors. The level of manager in this chain determines his authority and status. Generally, this chain is divided into three levels of management;
Laying down the overall objectives and broad policies of the enterprise. Organizing the business into various departments and divisions. Provides guidance and direction. Coordinating the work of different departments. Monitoring business environments Maintaining good public relations
Setting objectives consistent with top management goals, planning, strategies, etc. Issues detailed instructions. Coordinating and linking groups, departments, and divisions. Monitoring and managing the performance of subunits and managers who report to them. Implementing the changes or strategies generated by top managers Participates in operating decisions, Trains other managers.
Managing the performance of entry-level employees Teaching entry-level employees how to do their jobs Making schedules and operating plans based on middle managements intermediate-range plans
Facilitating team performance Managing external relationships Facilitating internal team relationships
Principles of Management
A principle is a fundamental statement of fact which establishes a cause-andeffect relationship. A principle may be descriptive or prescriptive. A principle is called descriptive, if it simply describes a relationship between variables. It is known as prescriptive or normative, when it indicates what a person should do. The nature of principles of management; universal, flexible, cause-and-effect relationship, equality and human aspects. Need for principles of management; to increase efficiency, to highlight the true nature of management, to aid in training of managers, to improve research and to attain social goals.
Scientific management F.W. Taylor is the Father of Scientific management. According to him Scientific Management means knowing exactly what you want men to do and seeing that they do it in the best and cheapest way. Principles of Scientific Management 1. 2. 3. 4. 5. 6. Science not rule-of-thumb Development of each employee to his greatest efficiency Close cooperation between workers and management Equal division of work and responsibility Maximum prosperity for both employers and employees Cooperation not individualism- mental revolution
Fayols Principles of Management Henry Fayol suggested the following 14 principles of management in order to make the job of managing more effective. 1. 2. 3. 4. 5. 6. 7. Division of work 8. Centralization Authority and responsibility 9. Scalar Chain Discipline 10.Order Unity of command 11.Equity Unity of direction 12. Stability of tenure Subordination of individual interest to general interest 13. Initiative Remuneration of personnel 14. Esprit de corps
Environment of Management
All organizations whether they are engaged in business or non-business activities draw the inputs from the environment, convert the inputs into outputs and send them back to the environment. The environment of the business consists of two components- internal as well as external environment. Internal refers to the various systems inside the organization such as, technology, structure, processes and people. External environment have a bearing on the successful functioning and survival of the business. The external environment affecting the organization is divided into two major categories Direct action and indirect action environment. Direct consists of those factors that directly affect and are affected by the organizations operations. These factors would include suppliers, labour unions, the various laws of land, customers and competitions. The indirect environment consists of those factors that may not have an immediate, direct effect on operations but nevertheless influence the activities of the firm. These include such as technology, socio-cultural and political factors, general economic conditions and so on.
The managers success lies in understanding the trend in the environment. The trends contain signals and give clues about the potential opportunities and impending threats. The investment in large business enterprise today runs into hundreds of crores of rupees. The gestation period is too long. During this period many things may change. For eg; the case of the Enron Power Project in Maharashtra. The agreement to construct a mega power project was entered into by the U.S. Enron power corporation and the then Maharashtra government. The company also commenced the work. In the meantime, the changes in the state government resulted in the reversal of the earlier governments decision, causing lot of embarrassment to the parties involved. This case demonstrates the need for close monitoring of the potential threats in the environment. In one of the example converting the threats in to opportunities by the organizational decisional is , when the crude oil prices were hiked in 1973 by the OPEC countries it created a have on petro-based industries. Automobile companies as a result were forced to change to small fuel efficient cars. In this case, the threat was converted into an excellent opportunity. Small car thus has become the fashion of the day.
Entrepreneur
Entrepreneurship
Enterprise
Person
Process of Action
Object
Functions of Management
Management is what management does. It is the art of getting things done through and with people in formally organized groups. Management includes two types of functions: i) Preparation for actual work, i.e., management in preparation, which includes planning and organization, and ii) Getting the actual work done, i.e., management in action, to include direction, motivation, coordination and control. A manager is a man who gets things done by working with people and other resources in order to achieve an objective. He coordinates the activities of others rather than performs the operations himself. According to George Terry, The four functions of management planning, organizing, actuating and controlling - constitute the management processes.
Planning
Organizing
Controlling
Functions of Management
Staffing
Directing
Planning is the ongoing process of developing the business' mission and objectives and determining how they will be accomplished. Planning includes both the broadest view of the organization, e.g., its mission, and the narrowest, e.g., a tactic for accomplishing a specific goal. It involves taking decisions in advance of action. The process of planning consists of: Establishing objectives Making forecasts Formulating policies, Procedures and rules Drawing programmes, schedules, budgets, etc.
Organizing is establishing the internal organizational structure of the organization. The focus is on division, coordination, and control of tasks and the flow of information within the organization. It is in this function that managers distribute authority to job holders. The process of organizing involves: Identifying the activities necessary to achieve the objectives Grouping the activities into manageable units Assigning duties or tasks to appropriate individuals Delegating necessary authority to individuals and fixing responsibilities for results Defining authority-responsibility relationships among individuals
Staffing is filling and keeping filled with qualified people all positions in the business. Recruiting, hiring, training, evaluating and compensating are the specific activities included in the function. In the family business, staffing includes all paid and unpaid positions held by family members including the owner/operators. It is concerned with human resources. Its aim is to fit individuals and jobs, i.e., right man for the right job. Staffing consists of the following activities: Manpower planning, i.e., determining the number and quality of employees required in organization Recruitment, selection and placement Training and development Appraisal, promotion and transfer Employee remuneration, etc.
Directing is influencing people's behavior through motivation, communication, group dynamics, leadership and discipline. The purpose of directing is to channel the behavior of all personnel to accomplish the organization's mission and objectives while simultaneously helping them accomplish their own career objectives. Directing is concerned with the execution of plans. it initiates organized action and breathes life into the organization. It constitutes the life spark of the enterprise and sets into motion like the electric power. Directing is also known as management in action. It involves: Influencing, guiding and motivating the subordinates for the achievement of organizational objectives. Supervision, motivation, leadership and communication are the sub-functions of directing.
Controlling is a four-step process of establishing performance standards based on the firm's objectives, measuring and reporting actual performance, comparing the two, and taking corrective or preventive action as necessary. The essence of control is in determining whether the activity is achieving the desired results. It is to ensure that everything in the organization occurs in accordance with the predetermined plans. The process of control consists of the following steps:
Setting standards or norms for the desired performance Measuring the actual performance Interpreting and comparing actual performance with the set standards Analyzing deviations to fix responsibility Taking corrective actions
No business can succeed without proper planning and without direction; no plan can be put in operation. Better operation and correct performance of business can be achieved only by motivation, co-ordination and control of its different activities. Achievement of the objectives of business requires
Planning
Organizing
Staffing
Direction
Control
Of
Men
Money
Materials
Machines
Methods
Administrative Skills i) ii) iii) iv) v) vi) Planning Organizing Motivating Directing Controlling Coordinating
Technical Skills i) Production ii) Purchase iii) Finance iv) Marketing v) Office & Records vi) Personnel
To satisfy the interests of i) Business ii) Employees iii) Consumers iv) Community
Managerial Roles According to Mintzberg (1973), managerial roles are as follows: 1. Informational roles 2. Decisional roles 3. Interpersonal roles
Interpersonal
Informational
Decisional
Figure head
Monitor
Entrepreneur
Leader
Disseminator
Disturbance handler
Liaison
Spokesperson
1. Informational roles: This involves the role of assimilating and disseminating information as and when required. Following are the main sub roles,which managers often perform: a. Monitor-collecting information from organizations, both from inside and outside of the Organization b. Disseminator-communicating information to organizational members c. Spokesperson-representing the organization to outsiders 2. Decisional roles: It involves decision making. Again, this role can be subdivided in to the following: a. Entrepreneur-initiating new ideas to improve organizational performance b. Disturbance handlers-taking corrective action to cope with adverse situation c. Resource allocators-allocating human, physical, and monetary resources d. Negotiator - negotiating with trade unions, or any other stakeholders 3. Interpersonal roles: This role involves activities with people working in the organization. This is supportive role for informational and decisional roles. Interpersonal roles can be categorized under three subheadings: a. Figurehead-Ceremonial and symbolic role
b. Leadership-leading organization in terms of recruiting, motivating etc. c. Liaison-liasoning with external bodies and public relations activities. Management Skills Katz (1974) has identified three essential management skills: technical, human, and conceptual. Technical Skills Human Skill
Conceptual Skill
Motivation to Manage
Technical skills: The ability is to apply specialized knowledge or expertise. All jobs require some specialized expertise, and many people develop their technical skills on the job. Vocational and onthejob training programs can be used to develop this type of skill. Human Skill: This is the ability to work with, understand and motivate other people (both individually and a group). This requires sensitivity towards others issues and concerns. People, who are proficient in technical skill, but not with interpersonal skills, may face difficulty to manage their subordinates,. To acquire the Human Skill, it is pertinent to recognize the feelings and sentiments of others, ability to motivate others even in adverse situation, and communicate own feelings to others in a positive and inspiring way. Conceptual Skill: This is an ability to critically analyze, diagnose a situation and forward a feasible solution. It requires creative thinking, generating options and choosing the best available option.
responsiveness led to the development of social audits. Social audits are of two types audits required by the government and voluntary audits. Although social audits are not legally mandatory, many organizations make social involvement disclosures in their annual reports. This shows the growing concern among major firms about their social responsibility. The ethical conduct of an organization depends on the ethical standards of its managers. Business should be conducted in a manner that it earns the good will of all concerned through quality, transparency and good values. Three types of management have been identified, depending on the ethical or moral nature of their decisions. These are moral, amoral and immoral management. Moral management is in the best interests of the organization in the long run. However, most companies follow the principles of amoral management. To conduct business in an ethical manner, managers should be aware of the factors that affect ethical behavior. Through mechanisms such as top management commitment, code of ethics, ethics committees, ethics audits, ethics training and ethics hotlines, managers can inculcate ethical behavior in the employees. Responsibilities to various groups Towards the customers Production and supply of quality goods and services at an affordable price is the primary responsibility of business. Customer service should be the motto of the business. It involves offering a fair deal to the customer by indulging in ethical business practice. Therefore, every manager in order to serve the customers in an effective way should restrain from:
Making misleading advertisements aimed at deceiving the consumer; Giving wrong or false information about the ingredients, quality, origin, etc., of the product. Entering into collusive agreements with other firms to exploit the customers; Making false claims of being an authorized dealer/importer of certain goods; and Giving misleading names to the products, etc.
Proper election, training and promotion; Recognition of the value of human resource; Maintaining cordial relations with employees; Recognition and encouragement of constructive unionism; Fair wage in relation to the cost of living; Better working conditions; Initiating appropriate measures for the development of human resource; and Increase in productivity and efficiency by recognition of merit, by providing opportunities for creative talent and incentives.
Towards the Shareholders Shareholders are the real owners of a corporation. In view of the several practical limitations for them in overseeing the day-to-day operations of the business, an organization must strive to provide:
Security to their funds Fair rate of return on their investment Correct information about the operations of the company; and Proper appreciation of the value of their investment in the company by identifying new opportunities that contributes for the growth of business.
Towards the Creditors/suppliers Creditors or suppliers provide the necessary inputs to the business. Business management has certain responsibilities to them. These can be discharges by; realizing the importance of maintaining good business relations with them; meeting the payment obligations timely; providing true and correct picture about the financial aspects of the company; and Helping them grow along with the growth of the company, etc.
Towards Government Government provides various facilities for the development of business. Infrastructural facilities like roads, telecommunication, transport, banking, insurance, etc. Therefore, business also in turn owes to the government in the following ways: business enterprises should act like law-abiding citizens; taxes and other duties should be paid timely and honestly; Compliance with the rules and regulations as stipulated by various laws of the land, and Supplementing the governments efforts in the developmental activities, etc. Towards the society at large Any business can exist as long as it enjoys societal sanction. If it fails to safeguard the interests of the society, the pressure from various segments of the society mounts up. An organization can act in a socially responsible way by: Properly deciding the product policies in line with the national priorities; Preventing the creation of monopolies; Ensuring hygienic disposal of smoke and waste and other effluents; Providing to the community accurate information about its working; and
Preserving the national resources of the nation by not indulging in reckless exploitation of the resources, etc.
Questions 1. What is management? Distinguish clearly between management and administration. 2. Management is the art of getting things done through and with people in formally organized groups. Do you agree? Give reasons. 3. Managers should be leaders but leaders need not be managers. (Koontz) Comment. 4. Explain the functions of management. 5. Describe in brief Fayols Principles of management. 6. Briefly describe the social responsibilities of business. 7. If you are a practicing manager, analyze the various skills you posses in relation to the level o your job. 8. Select the two best companies and explain how they responded to changes in the environment.
CHAPTER II
PLANNING
Meaning and definition of Planning Role and need for planning Characteristics of a good plan Types of planning Levels of planning Corporate planning and Long-range planning
Planning pervades all managerial activity. It is an intellectual process. It is always goal oriented. It is a primary function and involves a choice between alternative courses of action. It is an interdependent and a consistent process. It is direct towards efficiency. Without a plan you will never succeed. If you happen to make it to the goal, it will have been by luck or chance and is not repeatable. You may make it as a flash-in-the-pan, an overnight sensation, but you will never have the track record of accomplishments of which success is made. Figure out what your goal is (or listen when your boss tells you). Then figure out the best way to get there. What resources do you have? What can you get? Compare strengths and weaknesses of individuals and other resources. Will putting four workers on a task that takes 14 hours cost less than renting a machine that can do the same task with one worker in 6 hours? If you change the first shift from an 8 AM start to a 10 AM start, can they handle the early evening rush so you don't have to hire an extra person for the second shift? Look at all the probable scenarios. Plan for them. Figure out the worst possible scenario and plan for that too. Evaluate your different plans and develop what, in your best judgment, will work the best and what you will do if it doesn't. The key terms of planning are defined as follows: Vision :Nonspecific directional and motivational guidance for the entire organization. Top managers normally provide a vision for the business. It is the most emotional of the four levels in the hierarchy of purposes. Mission: An organization's reason for being. It is concerned with scope of the business and what distinguishes this business from similar businesses. Mission reflects the culture and values of top management.
Objectives: Objectives refine the mission and address key issues within the organization such as market standing, innovation, productivity, physical and financial resources, profitability, management and worker performance and efficiency. They are expected to be general, observable, challenging, and untimed. Goals: Goals are specific statements of anticipated results that further define the organization's objectives. They are expected to be SMART: Specific, Measurable, Attainable, Rewarding, and Timed.
To focus attention on objectives Making control effective Caring for future uncertainty and change
Importance of Planning
Securing coherent and consistent decisions Operations in securing economy
A plan is like a map. When following a plan, you can always see how much you have progressed towards your project goal and how far you are from your destination. Knowing where you are is essential for making good decisions on where to go or what to do next. One more reason why you need planning is again the 80/20 Rule. It is well established that for unstructured activities 80 percent of the effort give less than 20 percent of the
valuable outcome. You either spend much time on deciding what to do next, or you are taking many unnecessary, unfocused, and inefficient steps. Planning is also crucial for meeting your needs during each action step with your time, money, or other resources. With careful planning you often can see if at some point you are likely to face a problem. It is much easier to adjust your plan to avoid or smoothen a coming crisis, rather than to deal with the crisis when it comes unexpected. Characteristics of a good Plan 1. 2. 3. 4. 5. 6. 7. Simple Clearly defined objectives Proper analysis and classification of actions to establish standards Plan must be Flexible and dynamic Balanced practicable and suitable according to the size and form of the business Maximum utilization of available resources. Comprehensive and includes each and every aspect of the objectives.
Types of Planning
The process of planning may be classified into different categories on the basis of nature of planning, duration of planning or the use of planning. Business Plans
Formal and Informal Planning: Planning is formal when it is reduced to writing. It would be advantageous to prepare a formal plan for the success of the enterprise when the number of action is large, as it will facilitate adequate control and pinpoint the weaknesses, if any. An informal plan is one which is not reduced to writing but is conceived in the mind of the manager. Informal planning may be adopted if the number of actions to be taken is less and the actions have to be taken in a short period.
Sort and Long-range planning: The difference between short and long-range planning is based on the period which is kept in view while formulating a plan. Generally, shortterm planning is one which covers a period from one to twelve months. Long-range planning usually covers a period of usually more than five years. In between, there may be medium-term plans. Short-term plans must be formulated in a manner consistent with long-term plans. Both the plans are complementary and not competitive to each other. Short-term planning is considered as tactical planning and long-term planning is taken as strategic planning. Long-term planning has an enduring effect on the business and is the responsibility of the top management. It involves determination of the long-range goals and the laying down of procedure, programmes and policies to achieve those goals. It is concerned more with distant future. It involves the work of increasing or reducing the resources of the business also. Short-term plans are concerned with immediate futures. It takes into account the available resources only and is mainly concerned with the current operations of the business. Single use and Standing planning: A single-use planning is one which sets a course of action for a particular set of circumstances and is used up once the particular goal is achieved. They may include programmes, budgets, projects and schedules. This plan is prepared by lower- level management. These plans are also called specific planning. Standing planning is one which is designed to be used over and over again. Standing plans are of a permanent nature and are meant for repeated use. Objectives, policies, procedures, methods, rules and strategies are included in standing plans. Its nature is mechanical. It helps the higher executives to reduce their work load. Standing planning is also called Routine planning. These plans are prepared by top-level management. Examples of plans or planning
Architectural planning Business plan Comprehensive planning Enterprise Architecture Planning Event Planning and Production planning Family planning Financial planning Land use planning Marketing plan Network resource planning Strategic planning
Corporate Planning & Long range planning Corporate planning and long-range planning is the process of determining the major objectives , policies and strategies that will govern the acquisition, use and disposition of resources to achieve those objectives of an organization and is done at high /top level of the organization. It provides the answer to the basic questions like; Where are we now? Where we want to go? Why do we want to go? How we will go? Etc. Features of corporate planning: i) Systematic: Corporate planning is a systematic way of setting the Long-term goals of a company and deciding the means to achieve them taking internal as well as external factors into account. Continuous: Corporate planning is a continuous, on-going process. Corporate plans move in tune with internal as well as external changes. They are subject to revision and updating from time to time. Company wide plan: Corporate plan is a kind of master plan covering the company as a whole. All functional plans are offshoots of the corporate plan. Long-term view: Corporate planning takes a long-term view of business and does not deal with day-to-day operations. Top level activity: Establishing longterm corporate goals and the means of achieving these, is a top management responsibility. Of course, in the process of building corporate goals, inputs from executives working at various levels are also taken into account. Forward looking: Corporate planning tries to put the company ahead of its rivals through a careful evaluation of all relevant internal as well as external factors having a bearing on overall performance. The whole exercise is forward looking in nature, in that it tries to match a companys internal strengths with external opportunities and utilize the corporate resources in the best possible way. Comprehensive: Corporate planning covers both strategic planning and operational planning. Strategic planning is designed to help companies achieve competitive advantage by trying to exploit external opportunities through unique internal capabilities. Operational plans such as production plan, marketing plan, and finance plan are designed to implement strategic plans.
ii)
iii)
iv)
v)
vi)
vii)
Every company has its own strategies, corporate mission, planning, organization vision etc. Eg; Public sector giant HMT which prided itself, for a long time on its dominance in the Indian wrist watch market. The company was on a high tide for a long time and failed to understand the shift in the consumer preference towards the trendier, sleek quartz watches. It took the market for granted and in the meantime HMTs traditional markets captured by TITAN with its innovative marketing strategies and changed the face of the Indian watch market.
If you were one of the newer managers in the company and had taken a course in the basics of management, what would you say to Mr. Ramesh? Outline exactly how would you show him that planning and policy making are important to the company if it has to grow effectively.
Exercise Raju was the maintenance supervisor for Hyderabad Products Company (HPC), producer of plastic pipe and fittings. In early December, 2000, he was tole by the plant manager to make plans to refurbish the number 4 extruding machine. This was to be done before January 13 and 14. The extruding machine was an important part of HPC. Raju had been keeping a checklist of needed repairs. But, carrying out repairs had not been possible because the machine had not been shut down for a single day since August. Raju stayed on the job late that evening to inspect the machine and to update his checklist. He checked the stores section to see whether all the spares are readily available or not. The next day, Raju held a meeting with his maintenance workers so that they would get ready. Over the next several days, he looked at each repair item and prepared a written task assignment schedule. He assigned each task to the worker, he considered most competent to do it. Raju knew that after the machine was shut down, he would encounter some unexpected defects. After all, everything does not go exactly as planned. So, he picked up his best worker, Babu Lal, to handle the unexpected repairs and help the other workers when needed.
When the workers returned from the Pongal holidays, Raju handed over each person a list of that persons repair task for the machine. On January 16, he held a final meeting to prepare for the shutdown. Raju worked some extra hours that weekend. But because everything had been planned well, the machine was back on line in good condition on Monday morning. In your view, was Raju an effective planner?
CHAPTER III
ORGANIZING
Meaning and definition of organizing Nature of organization Types of organizations Organizational structure and designing Delegation and Autonomy
Delegation of Authority
Identification of activities
Organizing
Assignment of activities
Grouping of activities
Organizing is the human relationship in group activity equivalent to social structure. It is concerned with the authority structure of an enterprise. It involves the extent of delegation, degree of work, specialization, span of control and use of specialists as well as informal organization. In the words of Terry: the task of organizing is to harmonize a group of different personalities, to fuse various interests and to utilize abilities all towards a given direction.
Organizational Structure
Each organization has an organizational structure. Organizational structure is described on the organization chart that shows all the positions in an organization and their formal relationships to one anther. It illustrates an organizations overall shape and the levels of management in a comprehensible manner. Ideally, in developing an organizational structure and distributing authority, managers' decisions reflect the mission, objectives, goals and tactics that grew out of the planning function.
Organizational Chart
Organizational chart shows the hierarchical structure of the organization with the number of management levels. Scope of authority and status of the individuals as indicated by the location of their positions in relation to other positions. Organisations activities are grouped in terms of departments (whether by function, by territory and so on).
Chairman
Manager Production
Manager Marketing
Manager Finance
Manufacturing
Quality
Sales
Advertising
Accounting
Taxes
The organization chart of any company enables one to understand easily three classical principles of organizing, viz., chain of command, unity of command and span of control. Chain of command Chain of superiors from top to bottom ranging from ultimate authority to lower ranks. It also suggests the routes through which information flows within an organization and facilitates quick communication between one link of the chain and the other. It is also called scalar chain.
Chairman
Production Manager
Plant Manager
Department Head
Supervisor
Unity of command One subordinate - one boss. If the efforts of subordinates are to be effectively coordinated, it is necessary that they must have a reporting relationship with only one superior. Unity of command principle avoids the confusion as to who should report to whom and who should issue orders to whom.
Span of Control Span of control refers to the number of subordinates that report directly to a manager. Division of Labor Division of labor is captured in an organization chart, a pictorial representation of an organization's formal structure. An organization chart is concerned with relationships among tasks and the authority to do the tasks. Eight kinds of relationships can be captured in an organizational chart: 1. The division/specialization of labor 2. Relative authority 3. Departmentation 4. Span of control 5. The levels of management 6. Coordination centers 7. Formal communication channels 8. Decision responsibility
Delegation of Authority
Authority is legitimized power. Power is the ability to influence others. Delegation is distribution of authority. Delegation frees the manager from the tyranny of urgency. Delegation frees the manager to use his or her time on high priority activities. Delegation of authority is guided by several key principles and concepts: Exception principle - Someone must be in charge. A person higher in the organization handles exceptions to the usual. The most exceptional, rare, or unusual decisions end up at the top management level because no one lower in the organization has the authority to handle them. Scalar chain of command - The exception principle functions in concert with the concept of scalar chain of command - formal distribution of organizational authority is in a hierarchial fashion. The higher one is in an organization, the more authority one has.
Decentralization - Decisions are to be pushed down to the lowest feasible level in the organization. The organizational structure goal is to have working managers rather than managed workers. Parity principle - Delegated authority must equal responsibility. With responsibility for a job must go the authority to accomplish the job. Span of control - The span of control is the number of people a manager supervises. The organizational structure decision to be made is the number of subordinates a manager can effectively lead. The typical guideline is a span of control of no more than 5-6 people. However, a larger span of control is possible depending on the complexity, variety and proximity of jobs. Unity principle - Ideally, no one in an organization reports to more than one supervisor. Employees should not have to decide which of their supervisors to make unhappy because of the impossibility of following all the instructions given them. Line and staff authority - Line authority is authority within an organization's or unit's chain of command. Staff authority is advisory to line authority. Assume a crew leader reports to the garden store manager who in turn reports to the president. Further assume that the crew leader and store manager can hire and fire, and give raises to the people they supervise. Both the crew leader and store manager have line authority. To contrast, assume that the president has an accountant who prepares monthly financial summaries with recommendations for corrective action. The accountant has staff authority but not line authority. Departmentation Departmentation is the grouping of jobs under the authority of a single manager, according to some rational basis, for the purposes of planning, coordination and control. The number of departments in an organization depends on the number of different jobs, i.e., the size and complexity of the business. Farm businesses are most likely to have departments reflecting commodities and services. For example, a large dairy farm might be organized into dairy, crop, equipment and office departments. The dairy department might be further divided into milking, mature animal and young stock departments. Informal Structure The formal structure in each organization that has been put in place by management has an accompanying informal structure. Management does not and cannot control the informal structure.
The informal structure has no written rules, is fluid in form and scope, is not easy to identify, and has vague or unknown membership guidelines. For management, the informal structure may be positive or negative. Positive qualities include the ability to quickly spread information and provide feedback to the information. The informal structure gives people a sense of being in the know. Management can feed information into the informal structure at very low cost. The informal structure can also help satisfy employees' social needs. The negative qualities of the informal structure mirror the positive qualities in several ways. The more juicy a rumor, the more likely is the informal structure to repeat it, expand it and make it into the "truth." Management may not know what information is flowing through the informal structure. Employees can waste a great deal of time nurturing and participating in the informal structure. Finally, the informal structure can fence out new employees, "rate breakers," and change agents no matter the extent to which the formal structure makes them a part of the organization.
Formal Organization: It refers to the structure of jobs and position with clearly defined functions and relationships. Under a formal organization, the activities of two or more persons are consciously co-ordinated towards a given objective. In formal organization, every subordinate must obey his superior, whether he likes him or not. As such everybody becomes responsible for the performance of a given task. Characteristics of a Formal Organization
Formal organization is consciously designed. It provides for specialization. It is based on delegated authority. It is based on ideal relationship i.e., the authority, responsibility and accountability of each level is clearly defined. The principle of unity of command is usually observed. It is deliberately impersonal. It is usually supported by organizational charts.
It is based on the rabble hypothesis of the nature of man, i.e., there will be the same kind of reaction if human beings are punished or rewarded.
Informal organization: It refers to the personal relationships developing spontaneously as people work together outside the formal organizational structure, like friendship, etc., which are unconsciously co-ordinated. In this case, a subordinate may offer an advice to his superior as his friend. Management cannot be effective unless it recognizes and makes use of the informal organization. Characteristics of an Informal Organization
An informal organization arises spontaneously. It is based on personal attitudes, emotions, likes and dislikes etc. It provides for social satisfaction to its members. It is an integral part of a total organization and the management cannot eliminate it. It has no place in the formal chart. It is a net-work of personal and social relations. It has its own rules and traditions. It is indefinite and has no structure.
A manager can establish or cancel any of the formal organizations. However, he can neither create nor cancel an informal organization. Informal relationships do affect the workers behavior. A good management must recognize the impact of informal groups if it wants to succeed.
Basis 1 Formation
Formal Organization Deliberately planned and created by management To achieve planned goals of the organization A well-defined structure of tasks and relationships Rigid, stable and predictable Jobs, functions and technical aspects Standards of behavior are prescribed and enforced by
Informal Organization Emerges spontaneously as a result of social interactions among people To provide social satisfaction to members No clear-cut structure. A complex network of relations Flexible, unstable and unpredictable Interests and other human aspects Standards of behavior are evolved by mutual consent
2 3 4 5 6
management Managers act as leaders by 7 leadership virtue of their superior position 8 Communication Formally established or official lines of communication Official structure, can be shown 9 Organization in the form of a chart Chart Written and fixed 10 Rules and Regulations
among members Members voluntarily choose their leaders Members communicate according to convenience Unofficial structure, not shown on the chart of the company Oral norms
Line Organization: It is also known as military or departmental or scalar type organization and is the oldest form of organization structure. It is called military system for the reason that it was followed in the army in its pure form. Line organization is characterized by clear cut division of authority and responsibility. It does not make any provision for staff specialist. It provides for downward flow of authority and upward flow of responsibility. The authority flows directly and vertically from the boss to sub-executives, from the man at the top to the man at the bottom, i.e., only one chain of command. Every manager enjoys general authority over all the lower managers in the organization hierarchy. Koontz and ODonnel have defined organization as, Authority relationships in an organization position where one person has responsibility for the activities of another person. No subordinate is required to obey two bosses. The command is given to the subordinates through the immediate superiors and the number of subordinates whose work is directly commanded by the superiors is kept within reasonable limits. Features of Line organization
Line, as a chain of command, establishes superiors right to order and subordinates obligation to obey the orders. Line also serves as a means of communication between the members of the organization. Vertical communication flows through the line relationship. Line facilitates effective communication. As a carrier of accountability, line organization makes all superiors accountable for the activities of their subordinates. Since the line organization is established through the authority-responsibility relationships, the assignment of activities will go down to the lowest levels of management where actual work is done and the accountability for tasks assigned will automatically be created throughout the management hierarchy.
Line organization may be classified into two types 1) Pure line organization: Wherein the activities at every level are the same and everybody performs the same type of work. The divisions exist solely as a basis of control and direction. It is simple in nature and is possible only in small enterprise units not in bigger enterprises.
PRODUCTION MANAGER
FORMAN X
FORMAN Y
FORMAN Z
WORKERS
WORKERS
WORKERS
2) Departmental line organization: In this the business is first divided into broad departments which are put in charge of various departmental heads. These departmental heads have complete authority and control over their departments. They form an autonomous body in themselves. They purchase their own raw materials, hire their own labour and do all what is necessary for the working of their departments. The only interrelationship between the various departments is such as the general manager or the chief executive may establish. The flow of authority under this system can be shown by means of the following diagrams:
PRODUCTION MANAGER
WORKERS
WORKERS
WORKERS
WORKERS
The line organization, whether pure of departmental, is best suited where, The scale of operation is small, The work is simple and of routine type, Machines used are mainly automatic, The labour management relations are simple, and Where the process of manufacture is continuous. The success of such an organization depends mainly upon the capacity of the general manager and the departmental head. Under a strong man, capable of carrying a great responsibility, this system thrives best. Merits and Demerits of Line organization
MERITS Simple and economic Accountability Discipline Speedy action All-round development Self-confidence Flexible
DEMERITS Over loading Lack of specialization Creates confusion Lacks coordination Dictatorial tendencies Causes inefficiency Instability
Functional Organization: Functional organization is based upon the existence of functional authority in the organization. It is established by grouping activities of the enterprise into certain major functional departments. Under this system, the whole task of management and direction of subordinates is divided according to the type of work involved, and thus, the scope of the work is kept limited but the area of authority is left unlimited. Functional organization refers to the organization which is divided into a number of functions such as finance, production, sales, personnel, office and research and development and each of the functions are performed by an expert. The following diagram illustrates the functional organization:
GENERAL MANAGER
PRODUCTION
MARKETING
FINANCE
PERSONNEL
PLANT A
PLANT B
PLANT C
Under this system each worker receives instructions not only from one supervisor, but from a group of specialists. He does not remain under one boss, but has as many as his work warrants. The system proves successful in concerns manufacturing a limited line of products and where organization is not complicated, e.g., Shoe manufacturing.
Difference between Line Organization and Functional Organization LINE ORGANISATION 1. All functions are performed by one man, who need not be an expert 2. Decision-making - action, doing of actual work 3. Centralized authority 4. One superior to one subordinate 5. Fixed responsibility 6. More flexible 7. Engaged in both physical and mental work 8 Less expensive simple and routine FUNCTIONAL ORGANISATION Of the various functions each function is performed by an expert Advisory Knowing, thinking and planning Decentralized authority Several advisors to one subordinate No Fixed responsibility Less flexible Only mental specialized work Costly specilaised suitable for big business
Line and Staff Organization: This is an improvement over the other two types of organizational structures. It tries to maintain a balance between too much concentration of control under line system and too much division of function under functional organization. Under this system, the staff organization does not exist independently, but a body of experts is employed more or less permanently to assist the line officials. Thus, staff makes investigation, collects information, chalks out plans and prepares schemes. The line officials select the best scheme and give instructions accordingly. The role of staff is essentially one of advice and assistance and to provide for expert and specialized
services. The staff occupies only an advisory capacity. They have no control over the workers or the foremen, and thus, they cannot give them any direct instructions. They simply assist the line officials by providing advice on special subjects. The final decision is taken by the top officer, who may, at his own responsibility, reject the advice of the expert staff, if not satisfied. To illustrate, a production manager who is directly responsible for achieving the fixed targets may be advised and supported by an industrial engineer who is not directly responsible for those production targets. Similarly, a marketing manager who is responsible for the selling of goods may obtain wide support from the market research manager who collects market information. Line and staff organization came into being as a result of inability of the departmental managers to investigate, think and plan at the same time, as they were performing the ordinary tasks of production and selling. Consequently, the work of investigation, research, recording, standardization and advising, i.e., the work of the experts was wholly distinguished and separated from the routine process of manufacturing and selling with the result that there arose a clear demarcation between thinking and doing, the staff being the thinkers and the line being the doers. Line and Staff organization Board of Directors
Personal Assistant
Sales Manager
Production Manager
Industrial Engineer
Foremen
Salesmen
Workers
Merits and Demerits of Line and Staff organization Merits Efficient Management Greater Coordination Quick action Balanced decision Training Facilities Discipline Flexibility Demerits Confusion in organization Harmful to business Conflict between line and staff Expensive Ineffectiveness of staff
Delegation and Autonomy Delegation is the dynamics of management. It is a total philosophy or concept how to manage people. Just as authority is key to the managers job, delegation of authority is the key to organization. Managers competence is not judged by the work he actually performs on his own but by his ability to multiply himself through others, i.e., to obtain results through others. Delegation of authority is indispensable for the success of management. Delegation is an art of management and has certain working rules and principles. It leads to managerial development and makes specialized service available to the business. According to L.A.Allen It is the ability to get results through others. It is the dynamics of management; it is the process a manager follows in dividing the work assigned to him so that he performs that part which only he, because of his unique organizational placement, can perform effectively and so that he can get others to help him with what remains.
Questions 1. Organization is an important tool to achieve enterprise objectives. Discuss. 2. What do you understand by informal organization? How does it differ from formal organization? 3. Explain the term organization. Why is it regarded as the foundation upon which the whole structure of management is built. 4. What is line organization? State its advantages and disadvantages. 5. Distinguish between line organization and functional organization. 6. Line and staff are characterized by relationship and not by departmental activities. (Koontz), Discuss.
CHAPTER IV
Meaning and definition of leadership Need for leadership Types of leadership Functions of a leader Qualities of a good leader Role of committees in group decision making in management Organizational communication Management of change Management Vs. Leadership
Types of leadership
Leadership may be ; I) Laissez-faire Leadership II) Autocratic leadership III) Democratic leadership IV) Intellectual or functional leadership V) Institutional leadership VI) Paternalistic leadership Laissez faire leadership is free from any interference by the superior in the work of subordinates. The leader only fixes the goals and leaves the steps to achieve them entirely to his subordinates. The leader even does not check the performance. Such a leadership generally proves to be a failure. An autocrat leader does not entertain any suggestions or initiative from his subordinates. He expects complete obedience to his command. Such a leadership is difficult to last for long.
Democratic leadership is a compromise between laissez faire and autocratic leadership. In this, solutions to the problems are found out by mutual discussions. It is more rewarding and stable. Intellectual or functional leadership is based on informal authority. Leadership is acquired by technical superiority such as Accountant, Engineer, etc. Under institutional leadership, a person becomes leader and commands authority because of his high official position though he may not be an expert in the field of activity, e.g., IAS officers acting as directors of some enterprises. Paternal leadership is based on sentiments and emotions of the people. A paternal leader though gives protection and support to all his subordinates but under him no one grows. The worker is spoiled like a pampered child. Leadership basically is a process of motivation. Different leaders have different styles to motivate the people. Some leaders motivate their subordinates by introducing a severe system of punishment for the disobedient ones, while others adopt persuation and active participation as their techniques of motivation. An effective leader can motivate his workers better by enlisting their voluntary cooperation, directing and disciplining them and by keeping open channels of communication.
Functions of a Leader
A leader has to undertake three major functions as given below in order to guide and motivate the employees and to understand their feelings and emotions:
Voluntary cooperation may be obtained by offering friendliness and reposing trust in the subordinates. It can be obtained by inviting subordinates for a democratic participation and giving necessary support to the subordinates. A leader must maintain consistent and fair behavior. He must establish his reputation for genuineness of purpose and integrity of character. He must adopt a positive approach and help in removing the legitimate grievances of the employees in order to seek their best cooperation. He must also recognize differences in individual temperaments of the subordinates and change his behavior to suit each individual. Two way communications between the manager and workers are indispensable for good leadership. Information, must flow both upward and downward, i.e., from the leader to the subordinate and vice-versa. Due consideration must be paid to differences in personal view-point, difficulties of language, organizational distances and inferred meaning. All communications must be complete, clear and easily understandable. Undesirable behavior of the subordinate must immediately de disciplined and corrected by adopting
fair and impersonal methods. Power must be used with humility and with a sense of obligation to use it carefully and discretely. Qualities of a good leader 1) Good personality physical and mental fitness 2) Emotional stability 3) Good understanding and better judgment and foresight 4) Balanced approach and behavior 5) Ability to guide and motivate subordinates 6) Communicating skill 7) Sociability 8) Technical superiority with sound general education 9) Sincere, fair and honest dealings 10) Courage to accept responsibility.
Role of committees
A committee consists of a group of people specifically designated to perform some administrative acts. It functions only as a group and requires the free interchange of ideas among its members. There is no piece of work in a modern business house which does not affect the work in other departments. For example, If the production manager wants to change the product even slightly, the sales manager would be deeply concerned because he has to convince his customers that the change is all to the good. Similarly, the sales manager cannot follow a policy without consulting the finance manager or the production manager. The decisions in a particular department should be made by the managers with the committees of the departments. This committee should preferably be presided over by the general manager. This will ensure that when a decision is arrived at, all departments are consulted and that, therefore, when the decision is put in to effect all departments will cooperate. When important policy decisions are arrived at only through committees, the various departmental managers will automatically begin to consider the viewpoints of other departments when they decide matters. Benefits of committees Committees have become popular with business organizations on account of the following advantages: These provide opportunities for pooling of ideas and lead to integrated group judgment. Personal bias and prejudice is eliminated from decisions and the problems are looked at from diverse angles. Committees promote co-ordination of various activities of an enterprise. This is possible because committee work develops awareness of the problems of other organizational units among members.
Committees secure co-operation of the various parts of the organization in the execution of plans. When an executive participates in the formulation of a plan in a committee, he naturally acquires a special interest in its execution. Committees train members in the problems of various divisions and make for continuity as some members may stay on the committees while others retire. Committees provide a safeguard against the evils of the concentration of power and bring about dispersal of authority.
possible to select the best alternative for a given problem for want of complete information, time and resources. In such a case, the manager ha to satisfy with limited information and optimize the yields under a given set of circumstances. Once an alternative is selected, it has to be implemented in a systematic way. The required resources for the implementation and the necessary cooperation from the people concerned with or affected by the decision have to be ensured. f) Follow-up and feed back Once the decision is implemented, it has to be closely monitored. Adequate follow-up measures have to be taken. Constant follow-up helps to take corrective measures as and when necessary and enables to identify the shortcomings or negative consequences of the decision. It provides valuable feed-back on which the decision may be reviewed or reconsidered.
Management of Change
In large scale organizations, changes seldom occur without a bit of chaos. Usually change agents try to minimize it by imposing some order on the change process. Change becomes orderly when it is planned and implemented in a systematic way. The process of planned change comprises the following steps: 1. Identify the need for change: The manager should identify the forces demanding change. Those forces may be internal or external. Internal forces include; employee turnover, change related role conflicts, mounting problems from its growing size, any other internal change like; introduction of new department due to expansion in sales, production, etc. External sources include; technological changes, new marketing strategies, new production techniques, etc.
2. Diagnose the problem: This step involves the identification of the root cause. Several techniques are used for diagnosis, e.g. interviews, attitude surveys, team meetings, questionnaires, etc. Where the problem can be traced to a single department, the focus of diagnosis is limited to that area. If the problem has wider implications and affects a large number of departments, organizational analysis is required. Organizational analysis includes exhaustive study of organizational goals, principles, practices and performance at a macro level. After such an exhaustive analysis, the change agent would be in a position to identify the areas where modifications have to be made.
Technology
Strategy
Products
Culture/people
3. Plan the change: This is a critical step in the management of change. It involves answering three important questions (i) when to bring the change (timing), (ii) how to bring the change (methods), and (iii) who will introduce the change (change agent). While introducing change, reactions from people must be carefully assesses. People affected by change must be consulted; the likely impact should be explained patiently; sufficient time to pick up new skills should be given and adequate reward to those who follow change should be indicated.
4. Implement the change: While implementing any change programme, managers encounter three programmes- resistance, power and control. Implementation of change: action steps Problem Implication Resistance Need to motivate
Action Steps Invite participation from people. Offer appropriate rewards. Encourage open communication. Explain why change is essential. Use multiple and consistent leverage points. Develop organizational arrangements for transition. Build in feedback machinations. Assure the support of key groups. Use leader behavior to get support of change. Use symbols and language.
Control
Need to transition
manage
the
Power
the
5. Follow-up and feedback: Management of change is incomplete without proper follow-up. Organization must evaluate the effects of change. Objectives must be present and be compared with the performance to see the degree of success in change. End results should be operationally defined and measurements must be done both before and after the implementation of change.
Organizational Communication
Communication is an ever present activity. It is the means by which people exchange information with one another in an organization. Communication is as necessary to an organization as the blood stream to a person. Every manager has to communicate in the form of instructions, reports, notices, advertisements, etc. He also receives various communications in the form of suggestions, ideas, complaints, praise, etc. Communication is a process of transmitting information from one person to another and a means by which organized activity is justified. It encircles all functions of management and without it no function can be performed. Characteristics of communications Communication is an exchange of information between two or more persons. It is a two-way traffic of transmitting information from one person to another. It is a continuous process. It is a pervasive function which covers all levels of authority. Its main purpose is to cause mutual understanding. It has a circular flow which leads to some response or reaction.
Objectives of communication 1. 2. 3. 4. 5. To exchange information for better understanding To motivate employees To educate people and spread knowledge To change peoples attitude, behavior and action To fill up gaps between level of decisions and levels of their implementation
Message
Communicator
Flow of Communication
Communicatee
Feedback
Importance of communication Communication is one of the most important functions of management. It may cement an organization or disrupt. It promotes managerial efficiency and induces the human elements in an organization to develop a spirit of cooperation. It has become one of the most vital factors in the efficient performance of management. Efficient and smooth running of an enterprise Basis of decision making Proper planning and coordination For higher productivity at minimum cost Morale building Democratic management Binds people together Creates mutual trust and confidence.
Clarification
Evaluation
Participation
Motivation
Transmission
1. Clarity: Every communication involves transmitting of an idea and unless the idea is clearly formulated and understood by the communicator, the communication is likely to be misunderstood. Contents of communication must be clear and not vague and confusing. 2. Participation: Good communication must be a two-way traffic, i.e., it must include telling by the communicator and listening by the recipient of the information. 3. Transmission: transmission of communications must be simple, clear and complete to ensure the desired result. 4. Motivation: A successful communication must arouse response. It must be clearly understood, accepted and acted upon by the person for whom it is meant. 5. Evaluation: Communication must provide for the assessment of their results by surveys or investigations, etc. to ascertain the effectiveness of each type of communication.
Questions 1) Managers should be leaders but leaders need not be managers. Discuss. 2) What do you mean by leadership in business? What are the essential qualities of a good business leader?
CHAPTER V
Meaning and definition of controlling Process of controlling Planning and Control Tools and Techniques of Control Use of information technology for controlling
Process of controlling
The process of control consists of the following steps: Establishment of standards Measuring actual or expected performance against the established standards. Finding out reasons for not reaching the standards Correcting deviations from standards and plans.
Standards (Plans)
Corrective action
Actual Performance
Planning
Actions
Controlling
Interrelationship between Planning and Control Controlling and planning are inter-linked. Managerial planning seeks consistent, integrated and articulated programmes while management control seeks to compel events
to conform to plans. Control will be much better if the plans are more clear, complete and well coordinated and cover a longer period. The best control corrects deviations from plans before they occur. The next best detects them as they occur. Thus, planning and control are inter-dependent and complementary to each other.
Techniques of Control
A variety of tools and techniques are used by managers, now-a-days, to put their house in order and to ensure better control over the use of resources at various levels. A manager has many controlling techniques at his disposal. He employs these at various points of time, depending on the suitability of a particular technique. Control Techniques
Modern Control techniques Return on Investment Control Programme Evaluation and Review Technique (PERT) Critical Path Method (CPM) Management Information System (MIS) Total Quality Management (TQM) Quality Control Management Audit
Personal Observation Statistical Reports and Analysis Cost control Budgetting Production Planning and control Inventory Control External Audit Control Break Even Analysis Standard Costing Financial Statement Analysis
Statistical data: statistical analysis of the various aspects of the operations of the business helps a great deal in its better control. It provides necessary feed-back. It facilitates comparison between performance and standards. Data must be clearly presented either in the form of tables or charts. It must clearly indicate the trend for effective control. Break-even point analysis: It is generally used to determine profitability of a given course of action as compared with the alternatives. It aims at the formulation of ratios between profit and sales after taking into account the gross revenues, fixed and variable expenses. Breakeven point analysis is the analysis of cost behavior in relation to changing volume of sale and its impact on profits. Breakeven point is the volume of sale or the point of production at which there is no profit no loss. When the sales increase over the breakeven volume, there will be profit.
Special reports and analysis: If the routine accounting and statistical data is inadequate for an effective control, special reports and analysis is used. Internal and external audits: Audits, besides ensuring arithmetical accuracy, establish substantial accuracy of the records of the business. Internal auditors give independent appraisal of the operations of the business. They may suggest improvements in policies, procedures, exercise or authority, etc., to make control more effective. They are concerned with all the aspects of business. Budget: Exercise of control through the pre-determined costs is popularly known as budget. An efficient businessman, in order to achieve maximum production at minimum cost, plans his budget much in advance on the basis of past experience and judgment and estimation about the future business opportunities. Budgeting helps a businessman in regulating and increasing the efficiency of his business. Profitability of a business will largely depend upon proper budgeting and budgetary control. Return on Investment: it measures the relationship between the amount of net profits and the size of investment in an enterprise. It is a key measure of overall performance, and an important technique of financial control. It can be calculated as: Net Income Sales ROI = ----------------------- X ---------------------------Sales Total Investment
PERT and CPM : These are the techniques useful for planning, scheduling and implementing time bound projects involving performance of variety of complex, diverse and inter-related activities. Under both the techniques all activities of a project are integrated in a logical sequence to find out the minimum time required to complete the project. Total Quality management (TQM) : TQM refers to meeting the requirements of customers consistently by continuous improvement in the quality of work of all employees. For achieving total quality, three things are essential: a) Meeting customers requirement b) Continuous improvement through management process and c) Improvement of all employees.
The systems model of management shows that communication is needed for carrying out the managerial functions and for linking the organization with its external environment. The management information system (MIS) provides the communication link that makes managing possible. MIS is an integrated technique for gathering relevant information from whatever source it originates, and transferring it into usable form for the decisionmakers in management. It is a system of communications primarily designed to keep all levels of organizational personnel abreast of the developments in the enterprise that affect them. MIS provides working tools for all the management personnel in order to take the best possible action at the right time with respect to the operations and functions of the enterprise for which they are largely responsible. The emphasis of MIS is on information for decision-making. MIS and its role: 1. MIS performs a useful triple service function to management. MIS is a three phase process data generation, data processing and information transmission. Management information system enhances managements ability to plan, measure and control performance by taking necessary and appropriate action at a right time. 2. Facilitates total performance by providing more specialized and technical kind of information for the concerned managers. It provides multiple types of information for all management levels on a large variety of organizational matter. 3. MIS takes into account important dimensions such as (1) real time requirement (how timely the information should be), (2) Frequency requirement (how often the information must be available), (3) accuracy requirement(how detailed or correct the information must be), (4) data reduction requirement(what volumes of data is to be processed), (5) distribution requirement(where the information must be supplied), (6) storage requirement (where the information must be stored), MIS provides answers to all these questions. 4. MIS reduces overload of information. MIS undertakes a painstaking collection of all forms and regular charts and reports, and then subjects them to a series of interpretation, refinement, consolidation. Thus, the information is literally churned out of the available and procured data. Any firm, large or small, uses MIS for its daily business. Not all MIS are computer based. Smaller organizations may use MIS by manual system. However, large organizations use computers (hardware) in conjunction with the programmes (software) that give direction to the computer what to do. One advantage of having computer-based MIS is that the computer has an impressive capability for analyzing huge quantities of data in a more accurate fashion and removes any perceived complexities in interpretation of data.
Questions 1. Define control and discuss the elements of controlling process. 2. Planning looking forward and control looking backward explain this statement. 3. Controlling ensures an efficient performance of other managerial functions. Comment. 4. Discuss the techniques of control. 5. Comment on Management Information System as a technique to controlling.
Reg Revans Action Learning Robert S. Kaplan Balanced Scorecard Indian Management Gurus C.K Prahlad - In search of Excellence Gita Piramal - Business Legends, Business Mantras Sumantra Ghoushal - Transnational Management Ram Charan Profitable growth is every ones Business Arindam Chaudhuri - Count your chickens before they hatch Promod Batra Management Thoughts Shiv Khera Winning Strategy Venkatram Ramaswamy Customer competence Vijay Vishwanath Art of developing Leaders Partha Bose - Alexander the Greats Art of Strategy Rita Bhimani Corporate Peacock Jeetendra Jain Sack the CEO Ashwath Damodaran Corporate Finance The phrase Management Guru describes a person who is intellectual, experienced, ingenious and a person who develops business perspectives that provide beneficial outlooks and practices. With reference to the adage An idea is only a thought until it is materialised, the most successful Business Thinkers are those who have ensured the successful implementation of their thoughts.