Module II PDF

NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM
Ravangla Campus
Barfung Block, Ravangla Sub Division, South Sikkim-737139
Department of Mechanical Engineering

Module - II
Principles of Management (HS16101)
Module Outline
Lesson no. Topic

Dimensions of P-O-L-C, Vision & Mission,
7
Planning, Strategizing, Goals & Objectives
SWOT Analysis, Management By Objectives

8
(MBO)
Organisational Structure, Coordination

9
mechanism
Centralization & Decentralization,

10
Departmentalisation
Span of Management, Organisation Life

11 Cycle, Organisational Effectiveness,
Motivation and Work Teams
Leadership and Communication,

12
Interpersonal Skill and Conflict
13 Human Resource Management
Controlling and Managerial Control

14
Techniques
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Module: 2 Lecture No: 7
Learning Objectives
 To discuss the Planning-Organising-Leading-Controlling framework.

 To learn about the importance of planning and controlling in management.
 To discuss different terminologies which are useful to understand the concept of
planning.
 To understand different steps in planning.
 To discuss different types of planning.
 To discuss different levels of planning.
Important & Relevant Questions
 ‘Without planning, controlling in meaningless.’ – Justify the statement with suitable

example.
 Identify the steps involved in planning.
 What are the different level of planning carried out in business organisations?
Evaluation Questions
 Why planning and controlling are inseparable?

 What is mission, goal, strategy, policy, rule and budget?
 What are the steps involved in planning?
 What are the types of planning?
 What are the levels of planning?
References
 Koontz H. and Weihrich H., Essentials of Management: An International, Innovation,

and Leadership Perspective, Ed. 3, McGraw Hill Education Private Limited, India.
 Bhat A. and Kumar A., Management: Principles, Processes, and Practices, Ed. 10,
Oxford University Press, India.
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P-O-L-C Framework
The principles of management have been categorized into the four major functions of
planning, organizing, leading, and controlling popularly known as the P-O-L-C framework.
Table 1: P-O-L-C framework
 Planning
Planning is the first and the most important function of management that involves
setting objectives and determining a course of action for achieving those objectives.
Planners are essentially the managers who are best aware of environmental
conditions facing their organisation and are able to effectively analyze and predict
future conditions. It also requires that managers should be good decision makers.
Planning and controlling are inseparable twins of management. Planning and
controlling functions always co-exist or have to exist together as one function
depends on the other.
Figure 1: Planning and controlling

A system of control presupposes the existence of certain standards. These standards
of performance which serve as the basis of controlling are provided by planning.
Once a plan becomes operational, controlling is necessary to monitor the progress,
measure it, discover deviations and initiate corrective measures to ensure that events
conform to plans. Thus, planning without controlling is meaningless. Similarly,
controlling is blind without planning. If the standards are not set in advance,
managers have nothing to control.
 Terminology
 Missions or Purposes – The basic purpose or function or task of an
enterprise.
 Goals and Objectives – The ends towards which an activity is aimed.
 Strategies – Determination of long-term objectives; adoption of
course of action; allocation of resources.
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 Policies – General statements or understandings that guide in

decision making.
 Procedures – Plans that establish a required method of handling
future activities.
 Rules – Spell out specific required actions or non-actions, allowing
no discretion.
 Programs – A complex of goals, policies, procedures, rules, task,
steps to be taken, resources to be employed to
carryout a given course of action.
 Budgets – A statement of expected results expressed in numerical
terms.
 Steps in planning
Followings are the steps involved in planning a project.
I. Being aware of opportunities
II. Setting objectives or goals
III. Considering planning premises
IV. Identifying alternatives
V. Comparing alternatives with goals
VI. Choosing an alternative
VII. Formulating supporting plans
VIII. Quantifying plans by marketing budgets
Figure 2: Steps involved in planning

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 Types of planning
There are three types of planning based on the duration for execution of the
plan.
I. Short-term planning: Time period of less than 6 months.
II. Medium-term planning: Time period of 6 months to 3 years.
III. Long-term planning: Time period of 3-5 years.
Figure 3: Planning types

 Levels of planning
There are three levels of planning based on the managerial levels, who carry
out those plannings.
I. Strategic planning: Top level management.
II. Tactical planning: Middle-level management.
III. Operational planning: Low-level management.
Figure 4: Planning levels

 Strategic planning involves analyzing competitive opportunities and
threats, as well as the strengths and weaknesses of the organization. It
also involves determining how to position the organization to compete
effectively in their environment.
 Framework for decision-making and securing approval.
 Basis for detailed more detailed planning.
 An insight about the business to others in order to inform,
motivate, and involve.
 Mechanism for performance monitoring.
 Long-term direction for the business.
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 Tactical planning is creating the blueprint for the lager strategic plan.
These plans are often short term and are carried out by middle-level
managers.
 Turns strategy into reality.
 Usually has medium term, i.e., one to two years.
 Derives input from the strategic plan and usually integrated
with the annual budget process.
 Focus on project plans and project budgets.
 Operational planning generally covers the entire organization’s goals
and objectives and put into practice the ways and action steps to
achieve the strategic plans. They are very short terms usually less than
a year.
 Deals with specific systems, procedures, and processes required
to implement the tactical.
 Usually has a very short time span, i.e., daily/weekly/monthly.
 Focuses on routine tasks such as daily production planning and
control, sales, delivery schedule, and personnel management
aspects.
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Learning Objectives
 To discuss SWOT analysis.

 To understand the elements of SWOT analysis.
 To discuss the principles of Management By Objectives (MBO).
 To understand the MBO process.
 To discuss the advantages and disadvantages of MBO management system.
 What is SWOT analysis? Describe each elements of the SWOT analysis with suitable
example.
 What do you understand by Management By Objectives? Discuss the process of MBO.
 What are the strengths, weaknesses, opportunities, and threats to an business enterprise?
 Which elements of SWOT analysis are the part of external environment to an business
organisation?
 Which elements of SWOT analysis are the part of internal environment to an business
organisation?
 What is Management By objectives?
 What are the salient features of MBO management system?
 What are the characteristics of MBO management system?
 What the steps of MBO process?
References

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SWOT analysis
A SWOT analysis is a technique used to determine and define the Strengths, Weaknesses,
Opportunities, and Threats to an organisation. SWOT analysis can be applied to an entire
company or organisation, or individual projects within a single department. Most
commonly, SWOT analysis are used at the organisational level to determine how closely a
business is aligned with its growth trajectories and success benchmarks, but they can also
be used to ascertain how well a particular project.
Figure 1: SWOT analysis

 Strengths
 Characteristics of the business or individual that give it an advantage over
others in the industry.
 Positive tangible and intangible attributes, internal to an organisation or
individual.
 Beneficial aspects of the organisation or the capabilities of an organisation,
process capabilities, financial resources, products and services, customer
goodwill and brand loyalty.
 Examples - Abundant financial resources, Well-known brand name, Lower
costs [raw materials or processes], Superior management talent, Better
marketing skills, Good distribution skills, Committed employees.
 Weaknesses
 Characteristics that place the firm or individual at a disadvantage relative to
others.
 Detract the organisation from its ability to attain the core goal and influence
its growth.
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 Weaknesses are the factors which do not meet the standards we feel they
should meet. However, weaknesses are controllable. They must be
minimized and eliminated.
 Examples - Limited financial resources, Very narrow product line, Limited
distribution, Higher costs, Weak market image, Poor marketing skills,
Limited management skills, Under-trained employees.
 Opportunities
 Are external attractive factors that represent reasons your business is likely
to prosper.
 Chances to make greater profits in the environment - External attractive
factors that represent the reason for an organisation to exist & develop.
 Arise when an organization can take benefit of conditions in its environment
to plan and execute strategies that enable it to become more profitable.
 Organisation should be careful and recognize the opportunities and grasp
them whenever they arise.
 Examples - Rapid market growth, Rival firms are complacent, Changing
customer needs/tastes, New uses for product discovered, Economic boom,
Government deregulation, Sales decline for a substitute product.
 Threats
 External elements in the environment that could cause trouble for the
business - External factors, beyond an organisation’s control.
 Arise when conditions in external environment jeopardize the reliability and
profitability of the organisation’s business.
 Examples - Entry of foreign competitors, Introduction of new substitute
products, Product life cycle in decline, Changing customer needs/tastes,
Rival firms adopt new strategies, Increased government regulation,
Economic downturn.
The purposes of SWOT analysis are to –
 Help decision makers share and compare ideas.
 Bring a clearer common purpose and understanding of factors for success.
 Organise the important factors linked to success and failure in the business world.
 Help individual or organisation to understand their strengths and weaknesses.
 Promote strategic thinking.
Management By Objectives (MBO)
Management By Objectives (MBO) can be defined as a process whereby the performance
goals and objectives are set by each subordinate in collaboration with his/her superior at
the start of the appraisal period. It is a participative system of managing in which managers
look ahead for improvements, think strategically, stretch objectives at the beginning of a
time period, develop action and supporting plans, set performance, and ensure
accountability for results at the end of the time period. It aims at enhancing organisational
performance by synchronizing goals and subordinate objectives throughout the
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organisation. MBO is an appraisal tool – a motivational technique – a planning and control

method.
 Features of MBO
Figure 2: Salient features of MBO

 Characteristics of MBO
Figure 3: Characteristics of MBO

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 MBO process
Figure 4: Process of MBO

 Benefits of MBO
 Ensures personal commitments to organisational goals.
 Provides goal and role clarity in the organisation and in turn, helps in
improving efficiency and effectiveness.
 Ensures result-oriented planning.
 Develops effective control mechanism leading to timely corrective actions.
 Less supervision of subordinates and increased motivational level.
 Improves managerial effectiveness and efficiency.
 Disadvantages of MBO
 Failure to teach the philosophy of MBO across the organisation.
 Lack of guidelines to goal setters.
 Difficulty in setting verifiable objectives.
 Over-emphasis on short-term achievements at the cost of long-term growth
and development.
 Lack of flexibility to adopt changes with changing environmental factors.
 Over-emphasis on quantitative objectives.
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Learning Objectives
 To understand what is meant by organisational structure.

 To understand structural configurations of organisation.
 To understand different coordination mechanism within organisation.
 To understand different organisational structures.
 To understand the key parts of different organisational structures.
 What are major areas of classical management theory?

 What is the major difference between classical and behavioural management theory?
 Explain the difference between closed system management approach and open system
management approach with suitable examples.
 What is total quality management philosophy? Elaborate different tools and principles
used by the managers for total quality management in the organisation.
 What is scientific in scientific management?

 What is the major difference between classical and behavioural management theory?
 What is closed and open systems management approach?
 What is the major difference between Indian management style and Japanese
management style?
References

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An organisation chart formally describes the division of activities within an organisation. It

indicates reporting structure (who reports to whom) and describes the vertical channels of
communication that link the CEO with the operating level. It also maps different departments,
which exist because of functional differentiation horizontally.
Organisational structure is a framework on which an organisation is patterned for
coordinating and carrying out organisational activities. Henry Mintzberg, the organisational
theorist, has elegantly typified certain organisational configurations based on the key part of
the organisation and the predominating coordinating mechanism employed by that type in
following figure.
Figure 1: Five basic parts of an organisation
 Operating core
The operating core consists of operators who perform the main work directly related to
the production of goods and services. For example, lecturers in a university or assembly
line workers in an automobile plant would constitute the operating core of the
organisation.
 Strategic apex
It refers to the top level management that has the ultimate responsibility of guiding the
organisation towards its mission and goals. For example, a company’s board of
directors, its CEO, and VPs would constitute the strategic apex, primarily responsible
to the company’s various stakeholders.
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 Middle-line
The top management of a company is joined to its operating core by a chain of middle-
line managers, who given formal authority. They play an important role in transferring
information from top level managers to operating core. For example, general managers,
divisional managers, factory heads, etc.
 Techno-structure
Different departments within an organisation control particular form of standardization
in the organisation. For example, the inspection department controls the quality of
inputs, process, and the final outputs. The personnel department controls the quality of
manpower according their knowledge, expertise, skill, and attitude norms, while the
designdepartment specifies and standardizes product dimensions, processes, etc.
 Support staff
This refers to all other departments/units that exist to provide support to the organisation
outside its main work area. For example, transportation department, canteen, security
services unit, etc. Most of the time it makes a greater sense to ousource these specialized
services.
Further, as per Mintzberg, there are five types of mechanisms employed by the organisations
to coordinate their activities. These coordinating mechanisms are:
1. Direct supervision
When one person supervises the work of others, as in case of an entrepreneur in a small
start-up who supervises his/her workers directly to achieve the objectives thus, acting
as the main and only link to achieve coordination.
Figure 2: Direct supervision coordination mechanism

2. Mutual adjustment
This method of coordination can be achieved only when a degree of informal
communication happens between different functional experts in a project team.
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Figure 3: Mutual adjustment coordination mechanism

3. Work process standardization
The work process standardization itself can promote coordination between different
units as is exemplified, for instance in the process of an assembly line.
Figure 4: Work process standardization coordination mechanism

4. Outputs standardization
This happens, for example, finished product or service specifications and standards act
as means of coordinating work as concerned departments have to coordinate till the
output meets the specification.
Figure 5: Outputs standardization coordination mechanism

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5. Skill or knowledge standardization

Often the qualifications, training, and experience of the personnel may act as a major
source of coordination in an organisation. For example, in an operation theatre of a
hospital, the anesthesist, the surgeon, and the staff nurses coordinate to complete the
operation successfully.
Figure 6: Skill and knowledge standardization coordination mechanism

As an organisation grows big and complex, the preffered means of coordination are
from type 2  1  3  4  5.
Taking into account the key role that the various parts of an organisation play and the
predominant or the main coordinating mechanism that they employ, Mintzberg further
classifies organisations into the following configurations – simple structure, machine
bureaucracy, profession bureaucracy, divisionalized structure, and adhocracy.
I. Simple structure
A medium-sized retail store, a corporation run by an aggressive entrepreneur, a
government run by an autocratic politician, etc. are all examples of a simple
structure. The key part in this type of structure is the strategic apex that tries to
centralize and control. The main coordinating mechanism is direct supervision.
The strategic apex, in order to centralize and coordinate bu direct supervision,
structures the organisation as a simple structure.
II. Machine bureaucracy
A security agency, national post office, a steel company, a custodial prison,
national railways, etc. are all examples of a machine bureaucracy. The chief
component in this organisation is the techno-structure and the main coordinating
mechanism work process standardization. The techno-structure strives to
coordinate by the standardization of the work process and to structure the
organisation as a machine bureaucracy. The prime desire of the key part is to
increase its influence.
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III. Professional bureaucracy

A general hospital, a university, public accounting firms, and social work
agencies are all examples of organisations that follow the structure of a
professional bureaucracy. The key part in this type of structure is its operating
core and the main coordinating mechanism is the skill or knowledge
standardization. The operators within this structure tend to professionalise,
coordinate by standardization of skills, and structure the organisation as a
professional bureaucracy. The main desire of the key part is to maximize their
autonomy.
IV. Divisionalized structure
The divisionalized structure is followed by a vast majority of private firms. The
main part of such organisation is the middle-line management and the main
coordinating mechanism is outputs standardization. The middle management
tries to group together the organisation, with coordination restricted to the
stnadardization of outputs, to structure the organisation as a divisionalized
structure. The main desire of the key part is to garner autonomy so as to manage
their units.
V. Adhocracy
A space agency, a factory manufacturing complex prototypes, consultancy
organisations, etc. are all examples of adhocracy structures. The chief
component in this structure is the support stff and the main coordinating
mechanism mutual adjustment. The support staff tries to coordinate by mutual
adjustment so as to structure the organisation as an adhocracy. The main desire
of the key part is for collaboration and innovation in decision-making.
Table 1: Structure configurations and coordinating mechanisms
Structural Prime coordinating Key part of

configurations mechanism organisation
Simple structure Direct supervision Strategic apex
Machine Work process Techno-structure

bureaucracy standardization
Professional Skill or knowledge Operating core

bureaucracy standardization
Divisionalized Outputs standardization Middle-line

structure
Adhocracy Mutual adjustment -

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Learning Objectives
 To discuss different dimensions of organisational structure.

 To discuss centralization management system and decentralization.
 To understand decentralization technique.
 To discuss departmentalisation in organisation.
 To discuss classifications of departmentalisation.
 What are the dimensions of an organisation structure? How significance these

dimensions in defining an organisation structure?
 Identify the different types of decentralization management system in business
organistaions.
 Explain depratmentalization. Describe different types of departmentalization methods
with suitable example.
 What are the dimensions of an organisation structure?

 What are different types of decentralization management system?
 What is departmentalization?
 What are different types of departmentalization methods?
References

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Dimensions of organisation structure

The organisation dimension covers the structure and general managerial mechanisms of a
business organisation. The organisation is the backbone and basic basic building of a business
firm that influences the way in which all of the other internal dimenstions are formed and run.
The major three dimensions that define an organisation structure are specialisation, behavior
formalization, and centralization.
Figure 1: Dimensions of organisation structure
 Specialization
Organisational structure provides the pathway for the system of coverage that drives a
business, dividing it into areas or departments that are responsible for certain aspects
of the organisation’s purpose. When an individual perform certain job several time on
daily bases, that individual get habitual to that specific task and become experienced by
doing that task again and again, this is called as work specialisation, and deviding the
organisation based on the speciality of the employees describes the specialisation
dimenstion of an organisation structure. There are two basic ways of making the
employees of an organisation specialized, and these two methods are
I. Job enlargement, which is job speacilisaion in the horizontal dimension,
expands the breadth or scope of a job.
II. Job enrichment, which is vertical job enlargement or job speacilisaion in the
vertical dimension, expands the depth of a job.
 Behavior formalization
Behavior formalization is another dimension of defining the organisation structure. It
is the method of formalizing the behavior of the employees by positions (job
description), by work-flow (process description), and by specifying rules (regulations,
policy manuals, code and conduct rules etc.).
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 Centralization and decentralization

Centralization refers to the hierarchical level within an organisation that has authority
to make decisions. When decision making is kept at the top level, the organisation is
centralised; when it is delegated to lower organisational levels, it is decentralised. In
decentralization structure, employees at various levels within the organisation have the
right to make decisions. There are Four types of decentralization
I. Horizontal decentralization
The extent to which non-managers control decision processes.
II. Vertical decentralization
The dispersal of formal power down the chain of line authority.
III. Selective decentralization
The power over different kinds of decisions rests in different places in the
organisation. Example: Finance decision by the top management; production
decisions by frontline managers etc.
IV. Parallel decentralization
Dispersal of power for many kinds of decisions in the same place. Example:
Finance, marketing, production decisions, etc. would be made by division
managers in the middle line.
Departmentalization
Departmentalization refers to the grouping of activities at every level in the organisation which
is the first step towards organising an enterprise. The different types of departmentalization
methods are listed below.
 Functional structure
 Product/Product line structure
 Territory-based structure
 Customer-based structure
 Process-based structure
 Matrix structure
 Cross functional team
 Virtual network structure
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 Functional structure
Grouping of manpower on the basis of function, e.g., production; marketing; finance;
etc.
Figure 2: Functional structure

 Product/Product line structure
Grouping is done on the basis of the product.
Figure 3: Product/Product line structure

 Territory-based structure
Grouping is done based on geographical location.
Figure 4: Territory-based structure

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 Customer-based structure
Grouping of organisational activities according to its customers.
Figure 5: Customer-based structure

 Process-based structure
Grouping organisational activities based on the process used for production.
Figure 6: Process-based structure

 Matrix structure
It is a combination of functional and divisional structures. Within this structure, an
employee has to report to two bosses, the functional boss as well as the product line
boss.
Figure 7: Matrix structure

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 Cross-functional team
The members are drawn from different functional areas and focus on solving problems
of mutual interest.
Figure 8: Cross-functional structure

 Virtual network structure
An outcome of focusing on one’s core competency and outsourcing most of secondary
activities.
Figure 9: Virtual network structure

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Learning Objectives
 To discuss regarding span or expansion of management function.

 To discuss about flat and taller management structure.
 To understand different stages of an organisation life cyce.
 To discuss about the criterion of organisational effectiveness.
 To discuss about the parameters or characteristics of organisational effectiveness.
 To understand the keys to motivate workers in an organisation.
 To discuss about teamwork practice in organisation.
 Identify the stages of organisation life cycle.

 Illustrate the measurements of organisational effectiveness.
 Describe the importance of teamwork in managing an organisation, and identify the
features of a good team.
 What defines the span of a management system?

 What are the differences between flat and taller organisation structure?
 What are the stages of organisation life cycle?
 How organisational effectiveness is measured?
 What are the different types of team in organistion management system?
 What are the features of a good team?
References

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Span of management
The span of a management system simply refers to the number of subordinates whose work a
manager can effectively manage. Generally, the span of management is broader at the last level
of departmentalization than it is at the primary or intermediate level. It depends on various
organisational factors, such as
 Organisation level
 Kind of activity being supervised
 Kind of personnel being supervised
 Type of the organisation
Based on the span of management system, the structure of an organisation can also be
catagorised as flat organisation structure and taller organisation structure.
 Flat organisation structure
A flat structure has fewer hierarchical levels and a broader span of management. In flat
organisations, the number of people directly supervised by each manager is large, and
the number of people in the chain of command above one is small.
Figure 1: Flat organisation structure

A manager in a flat organisation possesses more responsibility than a manager in taller
organisation structure because there is a greater number of individuals immediately
below who are dependent on direction, help, and support. Moreover, managers in a flat
organisation rely less on guidance from superiors because the number of superiors
above the manager is limited.
 Taller organistaion structure
A tall organisational structure definition is an organisation broken down into a distinct
hierarchy. With this structure, an organisation will have a number of managers, each of
which will be responsible for controlling a portion of the organisation.
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Figure 2: Taller organisation structure

As an organistaion grows, so will its hierarchy, with largest tall organisations having
very complicated chain of command. When a tall organisation is very large, it can make
it difficult to move information throughout the organisation quickly.
Organisation life cycle
A life cyscle refers to a pattern of predictable change. By applying it to an organisation, we
interpret the distinct stages through which organisations proceed, the pattern of the stages, the
transition from one stage to another predicatble stage rather than random occurrences.
Figure 3: Organisation life cycle

 Entrepreneurial stage
At this stage, the organisation is in its infancy, goals of the oragnistaion tend to be
ambiguous, and creativity level is high.
 Collectivity stage
At this stage, mission of the organisation id clarified, communication and structure
within the organisation remain informal.
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 Formalization and control stage

At this stage, organisation structure is stabilized with rules and procedures being
imposed, organisation exists beyond the presence of any one individual.
 Elaboration f structure stage
At this stage, organisation diversifies its products and services in the market, decisions
are decentralized.
 Decline stage
As a result of competition, at this stege, demand of the products or services of the
organisation decreases. Management looks for alternatives to sustain and development
of new product or service.
Organisational effectiveness criteria
Organisational effectiveness can be defined as the efficiency with which an association is able
to meet its objectives. This means an organisation that produces a desired effect or an
organisation that is productive without waste. Organisational effectiveness is about each
individual doing everything they know how to do and doing it well; in other words
organisational efficiency is the capacity of an organisation to produce the desired results with
a minimum expenditure of energy, time, money, and human and material resources. The
desired effect will depend on the goals of the organisation, which could be, for example,
making a profit by producing and selling a product. An organisation, if it operates efficiently,
will produce a product without waste. If the organisation has both organisational effectiveness
and efficiency, it will achieve its goal of making a profit by producing and selling a product
without waste.
Figure 4: Organisational effectiveness criteria

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The main measure of organisational effectiveness for a business will generally be expressed in
terms of how well its net profitability compares with its target profitability. Additional
measures might include growth data and the results of customer satisfaction surveys.
 Characteristics of effective organisation
Highly effective organisations exhibit strengths across five areas: leadership, decision
making and structure, people, work processes and systems, and culture. For an
organisation to achieve and sustain success, it needs to adapt to its dynamic
environment. Evaluating and improving organisational effectiveness and efficiency is
one strategy used to help insure the continued growth and development of an
organization. The following table defines the major characteristics of an effective
organisation.
Table 1: Characteristics of effective organisation
Job satisfaction – key to motivation

Job satisfaction can be defined as the attitude of an employee towards his/her job that results
from the incumbent's comparison of the actual outcomes with those that are desired. An
employee who is satisfied feels fulfilled doing the job. However, an employee's level of
satisfaction can differ with specific aspects of the job. Job satisfaction is a psychological
concept that refers to job related attitudes and characteristics such as pay and reward, policies,
leadership behaviours, management styles and co-workers. These characteristics are influenced
to a large extent by a person's disposition. For example, extroverted individuals have been
found to experience greater job satisfaction.
Motivation refers to the decision making process through which an individual chooses desired
outcomes and sets in motion the behaviours appropriate to acquiring them. It explains why
individuals choose to expend a degree of effort towards achieving particular goals. Motivation
is considered a complex subject that is also influenced by numerous variables. It is considered
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very personal and internal, driven by a variety of changing and often conflicting
needs.However, understanding how motivation fully works is a challenge for managers
because it arises from within and differs for each individual.
In discussion on relationship between job satisfaction and motivation, it is implied that
motivation is a forward looking perception influenced by the relationship between performance
and reward where as satisfaction refers to reward they have received based on employees
feeling. Managers can potentially enhance employees’ motivation through various attempts to
increase job satisfaction. Job satisfaction is the most prominent result of work motivation.
Motivational concepts are often used to analyse and predict a wide range of individual
expressions relevant to organisations such as attitudes, perceptions, emotions and behaviour.
Figure 5:Motivation and job satisfaction

A satisfied and motivated work force can undoubtedly help sustain productivity. job
satisfaction could lead to cost reduction by reducing absences, errors and turnovers which leads
to greater productivity and economic and industrial growth which is a major drive of most
organisations.
Work team in management
A team is a relatively permanent work group whose members must coordinate their activities
to achieve one or more common objectives. The objectives might include advising others in
the organization, producing goods or services, and carrying out a project. A work team
generates positive synergy through coordinated effort. Their individual efforts result in a level
of performance that is greater than the sum of those individual inputs. Thus, they have become
an essential part of the way business is being done.
Although the desire to achieve high levels of commitment and coordination is common among
organizations using teamwork, the nature of specific teams varies considerably. Two major
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dimensions along which teams differ are differentiation of team roles and integration into the
organization.
I. Differentiation
It is the extent to which team members are specialized relative to others in the
organization.
II. Integration
It is the degree to which the team must coordinate with managers, employees, suppliers
and customers outside the team.
 Types of teams
Based on the objectives, teams may be classified as follows:
Figure 6: Types of teams

 Functional team
A Functional Team is a group of people with a common functional expertise
working toward shared objectives. Functional teams are traditional corporate teams
often coinciding with a whole department, or with a part of it.
 Cross-functional team
Cross-functional teams are made up of employees from about the same hierarchical
level, but from different work areas, who come together to accomplish a task. Cross-
functional teams are an effective way to allow people from diverse areas within an
organisation (or even between organisation) to exchange information, develop new
ideas and solve problems and coordinate complex projects. These teams are not
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easy to manage. Their early stages of development are often very time consuming
as members learn to work with diversity and complexity. It takes time to build trust
and teamwork, especially among people from different backgrounds, with different
experiences and perspectives.
 Problem solving team
Problem-solving teams consists of groups of 5 – 10 employees from the same
department who meet for a few hours each week to discuss ways of improving
quality, efficiency and the work environment. These members share ideas or offer
suggestions on how work processes and methods can be improved. Problem-solving
teams meet regularly to discuss their quality problems, investigate causes of the
problems recommend solutions and take corrective actions.
 Virtual team
A virtual team is a group of people who participate in common projects by making
collaborative efforts to achieve shared goals and objectives. These people perform
tasks and jobs in a virtual work environment created and maintained through IT and
software technologies.
 Self-managed team
A self-managed team includes collective control over the pace of work,
determination of work assignments, organisation of breaks, and collective choice of
inspection procedures. Fully self-managed work teams even select their own
members and have the members evaluate each others performance. As a result,
supervisory positions take on decreased importance and may even be eliminated.
 Advisory team
Advisory teams are a group of individuals that effectively supplement the board's
skills and abilities to help guide the organisation toward its stated mission. Advisory
teams don't typically have any authority. In most cases, the board of directors retains
the ultimate governing authority.
 Features of a good team
The followings are the features of a good work team:
 Clearly defines the problem
 Looks for commonalities
 Respect all contributions
 Recognize multiple interests
 Respect all individuals
 Looks towards solutions
 Moves from WIIFM to WIIFU
 Focuses on benefits
 Allows time to evaluate and make decisions
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Learning Objectives
 To discuss about effective organisational communication.

 To discuss regarding different types of organisational communication strategy.
 To understand conflict of interest in organisation.
 To discuss different approaches of organisational conflict.
 To understand causes of organisational conflict.
 To discuss conflict management styles.
 Why effective communication is important for management process? Discuss different

types of organisational communication methods.
 Define conflict of interest. Explain the causes of organisational conflict.
 Discuss the effects of conflict of interest on the management system.
 Describe the conflict management strategies a manger should adopt under different
situations.
 What is the importance of effective communication in organisation.

 What are the methods of organisational communication?
 What is conflict of interest and why it occurs in organisation?
 What the positive and negative effects of conflict of interest on organisation?
 What are the conflict management styles?
 Which type of conflict management style should be adopted under what situation?
References

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Organisational communication
In business world, communication is necessary for conducting business in an efficient manner.
Any business involves two types of communication: external communication that is directed
to the actors in the business environment, and internal communication or organizational
communication that is directed to employees.
Further, it is not possible to imagine organisational communication without conflicts. Conflicts

are normal in any organisation, because people have different opinions, while some individuals
cannot accept other people’s different opinions. It is dangerous for an organisation to have too
many conflicts, as well as not to have any conflicts at all.
Communication is transfer of information from sender to receiver, implying that the receiver
understands the message. Communication is also sending and receiving of messages by means
of symbols. In this context, organisational communication is a key element of organizational
climate. Finally, organizational communication is the process by which individuals stimulate
meaning in the minds of other individuals by means of verbal or nonverbal messages.
For efficient communication, it is necessary that the receiver understands the meaning of the
message and indicates it to the sender through some expected reactions. Each organization must
enable communication in several directions: Downward communication, Upward
communication, Horizontal communication, and Diagonal communication, as illustrated by
Figure 1.
Figure 1: Types of organisational communication

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 Downward communication
Downward communication flows from top management to employees. This type of
communication is characteristic for companies with an authoritative style of
management.
 Upward communication
Upward communication flows from employees to top management. The main task
of this communication is to inform top management of the situation on the lower
levels. It is the best way for top management to analyze the efficiency of downward
communication and organisational communication in general.
 Horizontal communication
Horizontal communication flows between employees and departments, which are
on the same organisational level. It enables coordination and integration of activities
of departments, engaged in relatively independent tasks.
 Diagonal communication
Diagonal communication flows between people, which are not on the same
organisational level and are not in a direct relationship in the organisational
hierarchy. This type of communication is rarely used – usually in situations when it
supplements other types of communication. Diagonal communication is used, e.g.
as labor unions organise direct meetings between employees and top management,
avoiding the first line and middle level managers.
Conflict in an organisation
Practical experience shows that there is no communication without conflicts. Sometimes,
conflicts can be useful, as they help to make correct decision, although they might represent a
huge obstacle to an organisation and its business. Conflict is a process of social interaction and
a social situation, where interests and activities of participants (individuals or groups) actually,
or apparently, confront, block and disable the realisation of one party’s objectives.
In addition, conflict is a process where person A deliberately makes an effort to prevent efforts
of person B with an opposing action, which will result in frustrating Person B to achieve his
goals or satisfy his interests. Organisational conflict occurs, as actors engage in activities that
are incompatible with those of colleagues within their network, members of other
organizations, or unaffiliated individuals who utilize the services or products of the
organization. If the managers apply direct communication on time, the conflict can be avoided,
or its impact can be minimized.
There are several approaches to types of organisational conflicts, as follows:
 Vertical conflicts occur because the supervisor is always telling an employee what
to do and tries to ‘micro-manage’, while/although he/she should let the employee
to do his/her job. This type of conflict exists in organizations where the
organizational structure has a high degree of formality.
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 Horizontal conflicts occur between employees within the same department, i.e. on
the same hierarchical level. These conflicts can manifest themselves for many
reasons, such as the different interests/ideas related to distribution of resources.
 Line Staff conflicts occur between support staff and line employees, within a
department or an organization.
 Role conflicts can stem from an incomplete or otherwise fallacious understanding
of the assignment given to an employee at a specific moment in time.
There are two types of conflict cases: Personal and Organisational. Personal causes come
from personal characters when people interact. Personal causes can be summarized in the next
four groups:
 Bad estimation of a person. Conflicts often happen because of bad perception of
the other side. The sides in conflict are not objective and understand the behavior
of opposite side, as they wish to hurt the other side and its interests.
 Errors in communication. These errors come from people’s inability to listen to
each other. In addition, errors come from information lost in upward and downward
communication, due to inadequate understanding, or from one’s emotional status in
the moment of communication.
 Distrust among people in the organization. Trust is the foundation of good
interpersonal relations, as it develops and consolidates the system of values and
confidence to each other. Five dimensions are important for developing trust in an
organization: integrity, competence, consistency, loyalty, and openness. Distrust
and suspiciousness create a good foundation for a potential conflict.
 Personal characteristics. Some people start conflict, because of their personal
disliking. When people with completely different personalities need to work
together, conflict cannot be avoided.
Organisational causes of conflict are consequence of the characteristics of organisational
design, limited resources and characteristics of organisational systems, such as: compensations,
decision-making, planning and budgeting. Some aspects of organisational causes of conflict
are:
 Dependence in work activities. When a member of an organisation cannot start
his/her job, since another member has not finished his/her job, or if an individual
significantly influences a colleague’s job, then this might cause conflict.
 Differentiation of organisational units and incompatibility of operating goals.
The specialization of organizational units (manufacturing, purchasing, finance,
sales, etc.) manifests in everyday work as differences in working manners, goals
and culture. These differences, as well as difference in their operative goals create
a potential for emergence of horizontal conflict.
 Sharing limited resources. Resources in an organisation are related to of power
and influence, with each department trying to obtain a larger share. These resources
are not only financial, but are also related to information technology, human
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resources, redistribution of employees, etc. The insufficiency of resources can also

be a foundation for a potential conflict.
 Compensation system. The compensation system has a direct influence on people's
behavior, their satisfaction and feeling for justice and equality. In this situation,
conflict can start because of inconsistencies, which means that the employees in
different departments might be rewarded by using different criteria. Salaries of
employees will always be a cause of dissatisfaction of individuals, because it is
difficult to be objective and measure all the employees' achievements and
contributions at their workplaces. However, it is possible to standardize the criteria
for awarding compensation, in order to make the differences rational and
acceptable.
 Organisational indistinctness and neglect. Unclear organisation of work or
delegation of authority can cause conflict. If obligations and responsibilities of
employees are not clearly determined, conflicts are unavoidable. Low level of
formalization stimulates conflicts, especially in small and mid-sized enterprises,
where there is no specialization of employees, or delegation of authority among
managers.
Conflict can have positive and negative effects on the organization:
 Positive effects initiate necessary social changes, developing of creative ideas and
innovations, presenting important problems, making quality decisions and solving
problems, organization re-engineering, developing solidarity and group cohesion.
 Negative effects are similar to bad cooperation, as they waste time that can be used
in a more productive manner.
Conflict management
Having defined causes, importance and effects of conflicts, one is expected to start solving
them. In order to do so, managers must have a clearly defined strategy. Since conflicts can have
a positive side, there should be, also, a clearly defined strategy for stimulating conflicts. In
addition, strategy must be followed by an adequate conflict management style.
Depending on conflict intensity and care for other people, managers can use five styles of
conflict management, illustrated by Figure 2:
 Integrating
This style assumes confrontation of attitudes, joint identification of the problem and
proposing a potential solution. This style is appropriate for complex problems,
which are not always clearly understood. In the long run, this style is effective.
However, it is not appropriate for conflicts emerging from different values. Despite
the positive sides of this style, managers should know that it takes a lot of time.
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Figure 2: Styles of conflict management

 Obliging
This style assumes reduction of differences and focusing on common interests. Its
advantage is encouragement of cooperation, but it does not solve the cause of the
problem. This style is not appropriate for escalating problems.
 Dominating
This style is common for people who are more focused on personal, than on
common interests. By using this style, managers force employees to obey. This style
is appropriate when unpopular working solutions must be applied, when the
deadline is tight, as well as in case of small issues. It does not take a lot of time to
be implemented, but it is associated with disapproval and resistance of employees.
 Avoiding
This is passive style, characterized by distancing from problems and hiding them.
It is appropriate for trivial problems, rather than for difficult and escalating
problems, as it cannot solve the essence of the problem.
 Compromising
This style requires achieving of balance between personal and common interests.
All participants must change some attitudes through interventions, negotiations and
voting. This style is appropriate, when a balance of forces exists, but it should be
avoided, if it results in something negative such as a delay in production, etc. It
leads to democratic solution, but may prevent arriving to a creative solution of the
problem.
In Table 1, summary of previously described styles is presented, along with situations, in which
they are appropriate for implementation (or not).
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Table 1: Conflict management styles and the situations where they are (in)appropriate
Finally, the most important criterion for choosing the conflict management style is the nature
of the objective, i.e. beating the opposite side, or finding a solution which will be useful for all.
For managers, the choice depends on the objective, i.e. demonstrating authority, creating a
compromise, or developing a good image.
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Learning Objectives
 To define human resource management.

 To understand the transformation of personnel management to human resource
management.
 To explain the four key dimensions to human resource management.
 To outline the roles and purpose of human resource in organisations.
 To enumerate the human resource management activities.
 Identify the key dimensions of human resource management.

 List out the roles and purpose of human resource in organisations.
 Enumerate the human resource management activities in organisations.
 What is human resource management?

 What are the key dimensions of human resource management?
 What are the roles of human resource in organisations?
 What is the purpose o human resource in organisation?
 What are the human resource management activityies?
References

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Human resource management

Human resource management can be defined as a distinctive approach to employment
management which seeks to achieve competitive advantage through the strategic deployment
of a highly committed and capable workforce, using an integrated array of cultural, structural
and personnel techniques. Further, it is an activity designed to provide for and coordinate the
human resources of an organisation.
There have been many controversies concerning the responsibilities and duties of Human
Resource Management departments in organisations. The foremost and earliest role of
Personnel Managers in the 1970s was not to manage employees and the issue of welfare was
not of great importance to the Management but rather they play the role of fierce and tough
negotiators always prepare to be hard on unions. This, however, had created a barrier between
management and their employees. The employees are compelled to look in the direction of the
unions for their welfare in terms of financial and occupational concerns. Evidently, employees
were left with no other choice than to follow the leadership of their union and go contrary to
the management, which results to low productivity and thereby makes the organisational goals
unachievable. In 1989, the four major policy goals that distinguish the new concept of Human
Resource Management from the ‘personnel’management are:
 Encourage the commitment of employees to increase their performance and also be

loyal to the organisation as a whole;
 Emphasis on the quality of employees engaged in organisations goes a long way in
producing quality goods and services, which is of great benefit both to the customers
and the organization;
 Ensuring flexibility plays an important part in the way employees are organised, this
makes them to be adaptive and receptive to all forms of changes in all aspects of their
jobs such as work hours; working methods and;
 Integrating organisational goals into strategic planning in order to make these policies
cut across ranks and files of organisation and ensuring that they are gladly accepted and
implemented on daily routine by line managers.
The concern regarding employees’ welfare in organisations came on board in the 1990s in order
to make employees increase their commitments to the organisations and also increase the level
of their job satisfaction.
The four key dimensions to human resource management include;
I. Commitment
It is expected of employees to identify the interests and goals of the organisations,
and be aligned and committed in achieving these goals.
II. Flexibility
Employees are expected to adapt willingly to change within the organisational
structure, without any strife or prejudice.
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III. Quality
High levels performance attainment of organisation depends on the quality of
members of staff and management of such organisation.
IV. Integration
It involves the matching of human resources strategies to the needs of the business
strategy.
Human resource in organisations
Generally, all managers in organizations are regarded as human resource managers. College
Dean, Matron, Sales managers, and Supervisors are all assumed to engage in human resource
management, but their effectiveness and efficiency depend on how human resource system is
being organised and managed in organisations. Essentially, it is inappropriate to engage a
Matron (Head nurse) or an Engineering manager in designing and administering human
resource activities such as pay system and reward; human resource planning; recruitment and
selection; employment regulations etc. Therefore, medium and large organisations create
human resource department and equip it with human resource specialists that can conveniently
handle these activities. However, smaller organisations do engage in some of these activities,
where the owner usually handles them. And in some other small businesses, clerical assistant
is employed to handle the payroll systems, record keeping and other clerical work. Supervisors
and Managers (irrespective of their departments) are involved in recruiting, selecting and
training prospective employees, as a result these activities tend to shift their attention away
from their primary assignments and reduce the time they spend on their core and other business
areas.
 Role and purpose of Human Resource (HR) in organisation
Human resource units can perform several roles, which depend on the nature and terms
of reference provided by the decision makers on one hand; and competencies earlier
demonstrated in the line of their duties. The four major roles of HR practitioners are
illustrated in Figure 1.
Figure 1: Roles of human resource practitioners

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However, these roles are summarized into three types:

 Administrative role
 Operational and employee advocate role
 Strategic role
Administrative role
Administrative role of is majorly concerned with the clerical works such as
record keeping, which has remained prominent task of HR. If the role of HR is
restricted to administrative role, HR practitioners would be only seen as clerical
administrative, task that could be handled by non-HR practitioners. The recent
use of technology and outsourcing has transformed the administrative role of
HR.
 Use of Technology. Technology has transformed the administrative
role of HR practitioners; thus making them more effective and
efficient toward employees and managers. Further, tasks such as
posting of vacancies, e-recruitment, e-learning, etc., performed by HR
practitioners are now available electronically, thereby reducing the
amount of time and members of staff.
 Outsourcing of HR. Outsourcing many of the tasks perform by HR
department is becoming a fashion in some organisations to save
employers labour costs and be able to focus more on the strategic roles
of HR practitioners; thereby reducing the number of staff in HR
departments. Organisations outsource some HR activities such as
recruitment and selection, training and development to some private
independent HR practitioners/consultants.
However, there is rapid change in this regard, fewer HR practitioners are
concerned with clerical work, while they concentrate and devote more time to
strategic roles of HR management.
Operational and employee advocate role
Large private and commercial organisations usually have HR Director or
Manager, who sees to the smooth running of every aspect of employees in the
organisation from recruitment to dismissal or retirement. In such organisations,
HR department is at the pivot of decision making reporting directly to the
CEO/Managing Director and also involve in policy making. However, the
potential, business nature, culture and resource of organisation will determine
if HR Manager/administrator would be involved in performing such role. Some
organisations would only require regulatory HR task, which is referred to as
operational HR management, where HR sees that employees are well resourced
and functional. In performing operational role, HR specialists are expected to
identify and implement required policies in collaboration with operating
managers. HR practitioners are seen as ‘welfare officers & advocate’, who see
to the betterment of the employees in organisations, who do not care about
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business realities and neither contribute to the attainment of the organisational

goals. It is important noting that HR practitioners spend quality time in
managing ‘organisation crisis’ regarding employees both work and non-work
related challenges, without which could have resulted to lawsuits and
complaints. Welfare/advocate role is important to make organisations better
place to work and employees receive fair and equitable treatment irrespective
of their circumstances.
Strategic role
For HR practitioners to perform their strategic role in organisations; they must
be ready to contribute their quota to the development and growth of their
organisations. In other words, they should be ready to add tangible value to
organisation’s effectiveness and efficiency. HR practitioners would require
being proactive in dealing with organisational policies and being futuristic
regarding human resource planning, compensation strategies, and add value to
the management of their organisations.
Human Resource management activities
HR activities are modelled in various dimensions. Here, the HR activities are grouped into four
dimensions as depicted in Figure 2.
Overview of HR management Employment of HR

• Introduction to HR management • Human resource planning
• External environment: Legal, political, • Job analysis and design
economical, social, cultural & • Staffing process and retention
technology. • Socialization
HR activities
Employee relations Management and development of HR

• Grievance handling • Managing careers
• Disciplinary action • Performance appraisal & management
• Trade unions • Employee training
• Occupational safety and health
• Compensation management
Figure 2: HR management activities
Employment of HR
Human Resource Planning (HRP) plays a vital role in securing organisation
competitive advantage. By ensuring right people with necessary and adequate
skills are rightly placed at the right time. Retaining employees through strategic
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policies such as career path planning, pay and benefits; also engaging in
operational strategies, like re-training, re-deployment or relocation in order to
make sure employees move in the right perspective by putting in place
standards, good reward systems and employee-employer relationships. By
studying the functions of employees, job analysis tends to gather information
on each job and subsequently organise and compile in a job description, which
would be used during recruiting qualified job candidates from which selection
can be made to occupy the vacancies.
Management and development of HR
Management and Development of HR include varieties of training, such as
induction/orientation of new employees and development of all categories of
employees without exemption in order to prepare for organisation future
challenges. Managing career helps employees in pursuing their career path as
they grow with the organisation. Performance Appraisal; as employees develop,
there is need to assess how they perform on their jobs. Compensation
management is developed in order to reward employees for rendering services
to the organisations and this could be in form of wages & salaries, incentives &
benefits. Therefore, employers need to design definite and reasonable pay
systems; in addition, incentive programmes should be included in order to
reward performance handsomely. Occupational Safety, Security and Health is
important to organisations, therefore, there is need to provide safe and secured
work environment in order to reduce accidents and injuries, also employers
should ensure that work is planned in a manner employees’ health will not be at
stake.
Employee relations
Employee Relations entails the relationship between employees and
management, which stem directly or indirectly from union-employer
relationship. However, there is need to manage this relationship effectively in
order to achieve organisational goals and employees’ goals. Employees should
not be denied of their rights, it is therefore essential to develop strategies and
communicate with both the managers and employees terms of reference.
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Learning Objectives
 To explain the meaning of controlling.

 To state importance of controlling.
 To explain the steps in the process of control.
 To describe the techniques of controlling.
 Discuss the relationship between planning and controlling.

 Explain the various steps involved in the process of control.
 Explain the importance of controlling in an organisation. What are the problems faced
by the organisation in implementing an effective control system?
 What is controlling?
 How controlling and planning are related?
 What are steps of controlling?
 What are the traditional managerial control techniques?
 What are the modern managerial control techniques?
References

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Controlling
Controlling is one of the important functions of a manager. In order to seek planned results
from the subordinates, a manager needs to exercise effective control over the activities of the
subordinates. In other words, controlling means ensuring that activities in an organisation are
performed as per the plans. Controlling also ensures that an organisation’s resources are being
used effectively and efficiently for the achievement of predetermined goals. Controlling is,
thus, a goal-oriented function.
Controlling function of a manager is a pervasive function. It is a primary function of every

manager. Managers at all levels of management- top, middle and lower-need to perform
controlling functions to keep a control over activities in their areas. Moreover, controlling is as
much required in an educational institution, military, hospital, and a club as in any business
organisation.
Controlling should not be misunderstood as the last function of management. It is a function

that brings back the management cycle back to the planning function. The controlling function
finds out how far actual performance deviates from standards, analyses the causes of such
deviations and attempts to take corrective actions based on the same. This process helps in
formulation of future plans in the light of the problems that were identified and, thus, helps in
better planning in the future periods. Thus, controlling only completes one cycle of
management process and improves planning in the next cycle.
 Importance of controlling
Control is an indispensable function of management. Without control the best of plans
can go awry. A good control system helps an organisation in the following ways:
 Accomplishing organisational goals
The controlling function measures progress towards the organisational goals
and brings to light the deviations, if any, and indicates corrective action. It, thus,
guides the organisation and keeps it on the right track so that organisational
goals might be achieved.
 Judging accuracy of standards
A good control system enables management to verify whether the standards set
are accurate and objective. An efficient control system keeps a careful check on
the changes taking place in the organisation and in the environment and helps
to review and revise the standards in light of such changes.
 Making efficient use of resources
By exercising control, a manager seeks to reduce wastage and spoilage of
resources. Each activity is performed in accordance with predetermined
standards and norms. This ensures that resources are used in the most effective
and efficient manner.
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 Improving employee motivation

A good control system ensures that employees know well in advance what they
are expected to do and what are the standards of performance on the basis of
which they will be appraised. It, thus, motivates them and helps them to give
better performance.
 Ensuring order and discipline
Controlling creates an atmosphere of order and discipline in the organisation. It
helps to minimise dishonest behaviour on the part of the employees by keeping
a close check on their activities. The box explains how an importexport
company was able to track dishonest employees by using computer monitoring
as a part of their control system.
 Facilitating coordination in action
Controlling provides direction to all activities and efforts for achieving
organisational goals. Each department and employee is governed by
predetermined standards which are well coordinated with one another. This
ensures that overall organisational objectives are accomplished.
 Limitations of controlling
Although controlling is an important function of management, it suffers from the
following limitations.
 Difficulty in setting quantitative standards
Control system loses some of its effectiveness when standards cannot be defined
in quantitative terms. This makes measurement of performance and their
comparison with standards a difficult task. Employee morale, job satisfaction
and human behaviour are such areas where this problem might arise.
 Little control on external factors
Generally an enterprise cannot control external factors such as government
policies, technological changes, competition etc.
 Resistance from employees
Control is often resisted by employees. They see it as a restriction on their
freedom. For instance, employees might object when they are kept under a strict
watch with the help of Closed Circuit Televisions (CCTVs).
 Costly affair
Control is a costly affair as it involves a lot of expenditure, time and effort. A
small enterprise cannot afford to install an expensive control system. It cannot
justify the expenses involved. Managers must ensure that the costs of installing
and operating a control system should not exceed the benefits derived from it.
 Process of controlling
Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
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3. Comparison of actual performance with standards

4. Analysing deviations
5. Taking corrective action
Figure 1: Controlling process

 Setting performance standards
The first step in the controlling process is setting up of performance standards.
Standards are the criteria against which actual performance would be measured.
Thus, standards serve as benchmarks towards which an organisation strives to
work. Standards can be set in both quantitative as well as qualitative terms. For
instance, standards set in terms of cost to be incurred, revenue to be earned,
product units to be produced and sold, time to be spent in performing a task, all
represents quantitative standards. Sometimes standards may also be set in
qualitative terms. Improving goodwill and motivation level of employees are
examples of qualitative standards. Table 1 gives a glimpse of standards used in
different functional areas of business to gauge performance.
At the time of setting standards, a manager should try to set standards in precise
quantitative terms as this would make their comparison with actual performance
much easier. For instance, reduction of defects from 10 in every 1,000 pieces
produced to 5 in every 1,000 pieces produced by the end of the quarter.
However, whenever qualitative standards are set, an effort must be made to
define them in a manner that would make their measurement easier. For
instance, for improving customer satisfaction in a fast food chain having self-
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service, standards can be set in terms of time taken by a customer to wait for a
table, time taken by him to place the order and time taken to collect the order.
Table 1: Standards used in functional areas to gauge performance
It is important that standards should be flexible enough to be modified whenever

required. Due to changes taking place in the internal and external business
environment, standards may need some modification to be realistic in the
changed business environment.
 Measurement of actual performance
Once performance standards are set, the next step is measurement of actual
performance. Performance should be measured in an objective and reliable
manner. There are several techniques for measurement of performance. These
include personal observation, sample checking, performance reports, etc. As far
as possible, performance should be measured in the same units in which
standards are set as this would make their comparison easier.
It is generally believed that measurement should be done after the task is
completed. However, wherever possible, measurement of work should be done
during the performance. For instance, in case of assembling task, each part
produced should be checked before assembling. Similarly, in a manufacturing
plant, levels of gas particles in the air could be continuously monitored for
safety.
Measurement of performance of an employee may require preparation of
performance report by his superior. Measurement of a company’s performance
may involve calculation of certain ratios like gross profit ratio, net profit ratio,
return on investment, etc., at periodic intervals. Progress of work in certain
operating areas like marketing may be measured by considering the number of
units sold, increase in market share etc., whereas, efficiency of production may
be measured by counting the number of pieces produced and number of
defective pieces in a batch. In small organisations, each piece produced may be
checked to ensure that it conforms to quality specifications laid down for the
product. However, this might not be possible in a large organisation. Thus, in
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large organisations, certain pieces are checked at random for quality. This is
known as sample checking.
 Comparing actual performance with standards
This step involves comparison of actual performance with the standard. Such
comparison will reveal the deviation between actual and desired results.
Comparison becomes easier when standards are set in quantitative terms. For
instance, performance of a worker in terms of units produced in a week can be
easily measured against the standard output for the week.
 Analizing deviations
Some deviation in performance can be expected in all activities. It is, therefore,
important to determine the acceptable range of deviations. Also, deviations in
key areas of business need to be attended more urgently as compared to
deviations in certain insignificant areas. Critical point control and management
by exception should be used by a manager in this regard.
 Critical Point Control
It is neither economical nor easy to keep a check on each and every
activity in an organisation. Control should, therefore, focus on key result
areas (KRAs) which are critical to the success of an organisation. These
KRAs are set as the critical points. If anything goes wrong at the critical
points, the entire organisation suffers. For instance, in a manufacturing
organisation, an increase of 5% in the labour cost may be more
troublesome than a 15% increase in postal charges.
 Management by Exception
Management by exception, which is often referred to as control by
exception, is an important principle of management control based on the
belief that an attempt to control everything results in controlling nothing.
Thus, only significant deviations which go beyond the permissible limit
should be brought to the notice of management. Thus, if the plans lay
down 2% increase in labour cost as an acceptable range of deviation in
a manufacturing organisation, only increase in labour cost beyond 2%
should be brought to the notice of the management. However, in case of
major deviation from the standard (say, 5%), the matter has to receive
immediate action of management on a priority basis.
After identifying the deviations that demand managerial attention, these
deviations need to be analysed for their causes. Deviations may have multiple
causes for their origin. These include unrealistic standards, defective process,
inadequacy of resources, structural drawbacks, organisational constraints and
environmental factors beyond the control of the organisation. It is necessary to
identify the exact cause(s) of deviations, failing which, an appropriate corrective
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action might not be possible. The deviations and their causes are then reported
and corrective action taken at appropriate level.
 Taking corrective action
The final step in the controlling process is taking corrective action. No
corrective action is required when the deviations are within acceptable limits.
However, when the deviations go beyond the acceptable range, especially in the
important areas, it demands immediate managerial attention so that deviations
do not occur again and standards are accomplished.
Corrective action might involve training of employees if the production target
could not be met. Similarly, if an important project is running behind schedule,
corrective action might involve assigning of additional workers and equipment
to the project and permission for overtime work. In case the deviation cannot be
corrected through managerial action, the standards may have to be revised.
Table 2 below cites some of the causes of deviations and the respective
corrective action that might be taken by a manager.
Table 2: Example of corrective action
Sl no. Cause of deviation Corrective action to be taken
Change the quality specification for the

1 Defective material
material used.
Repair the existing machine or replace the

2 Defective machinery
machine if it cannot be repaired.
Undertake technological upgradation of

3 Obsolete machinery
machinery.
4 Defective process Modify the existing process.
Defective physical
5 Improve the physical conditions of work.
conditions of work
 Techniques for managerial control

The various techniques of managerial control may be classified into two broad
categories: traditional techniques, and modern techniques.
 Traditional techniques
Traditional techniques are those which have been used by the companies for a
long time now. However, these techniques have not become obsolete and are
still being used by companies. These include:
1) Personal observation
2) Statistical reports
3) Breakeven analysis
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4) Budgetary control
 Personal observation
This is the most traditional method of control. Personal observation enables
the manager to collect first hand information. It also creates a psychological
pressure on the employees to perform well as they are aware that they are
being observed personally on their job. However, it is a very time-
consuming exercise and cannot effectively be used in all kinds of jobs.
 Statistical reports
Statistical analysis in the form of
averages, percentages, ratios, correlation, etc., present useful information to
the managers regarding performance of the organisation in various areas.
Such information when presented in the form of charts, graphs, tables, etc.,
enables the managers to read them more easily and allow a comparison to
be made with performance in previous periods and also with the
benchmarks.
 Breakeven analysis
Breakeven analysis is a technique used by managers to study the
relationship between costs, volume and profits. It determines the probable
profit and losses at different levels of activity. The sales volume at which
there is no profit, no loss is known as breakeven point. It is a useful
technique for the managers as it helps in estimating profits at different levels
of activities.
 Budgetary control
Budgetary control is a technique of managerial control in which all
operations are planned in advance in the form of budgets and actual results
are compared with budgetary standards. This comparison reveals the
necessary actions to be taken so that organisational objectives are
accomplished. A budget is a quantitative statement for a definite future
period of time for the purpose of obtaining a given objective. It is also a
statement which reflects the policy of that particular period. It will contain
figures of forecasts both in terms of time and quantities. The box shows the
most common types of budgets used by an organisation.
 Mordern techniques
Modern techniques of controlling are those which are of recent origin and are
comparatively new in management literature. These techniques provide a
refreshingly new thinking on the ways in which various aspects of an
organisation can be controlled. These include:
1) Return on investment
2) Ratio analysis
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3) Responsibility accounting
4) Management audit
5) PERT and CPM
6) Management information system
 Return on investment
Return on Investment (RoI) is a useful technique which provides the basic
yardstick for measuring whether or not invested capital has been used
effectively for generating reasonable amount of return. RoI can be used to
measure overall performance of an organisation or of its individual
departments or divisions. It can be calculated as under.
𝑵𝒆𝒕 𝒊𝒏𝒄𝒐𝒎𝒆 𝑜𝑟 𝑷𝒓𝒐𝒇𝒊𝒕

Return on Invetsment = 𝑻𝒐𝒕𝒂𝒍 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕
RoI provides top management an effective means of control for measuring

and comparing performance of different departments. It also permits
departmental managers to find out the problem which affects RoI in an
adverse manner.
 Ratio analysis
Ratio Analysis refers to analysis of financial statements through
computation of ratios. The most commonly used ratios used by
organisations can be classified into the following categories:
1) Liquidity Ratios
Liquidity ratios are calculated to determine short-term solvency of
business. Analysis of current position of liquid funds determines the
ability of the business to pay the amount due to its stakeholders.
2) Solvency Ratios
Ratios which are calculated to determine the long-term solvency of
business are known as solvency ratios. Thus, these ratios determine
the ability of a business to service its indebtedness.
3) Profitability Ratios
These ratios are calculated to analyse the profitability position of a
business. Such ratios involve analysis of profits in relation to sales
or funds or capital employed.
4) Turnover Ratios
Turnover ratios are calculated to determine the efficiency of
operations based on effective utilisation of resources. Higher
turnover means better utilisation of resources.
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 Responsibility accounting
Responsibility accounting is a system of accounting in which different
sections, divisions and departments of an organisation are set up as
‘Responsibility Centres’. The head of the centre is responsible for achieving
the target set for his centre. Responsibility centres may be of the following
types:
1) Cost Centre
A cost or expense centre is a segment of an organisation in which
managers are held responsible for the cost incurred in the centre but
not for the revenues. For example, in a manufacturing organisation,
production department is classified as cost centre.
2) Revenue Centre
A revenue centre is a segment of an organisation which is primarily
responsible for generating revenue. For example, marketing
department of an organisation may be classified as a revenue center.
3) Profit Centre
A profit centre is a segment of an organisation whose manager is
responsible for both revenues and costs. For example, repair and
maintenance department of an organisation may be treated as a profit
center if it is allowed to bill other production departments for the
services provided to them.
4) Investment Centre
An investment centre is responsible not only for profits but also
for investments made in the centre in the form of assets. The
investment made in each centre is separately ascertained and return
on investment is used as a basis for judging the performance of the
centre.
 Management audit
Management audit refers to systematic appraisal of the overall performance
of the management of an organisation. The purpose is to review the
efficiency and effectiveness of management and to improve its performance
in future periods. It is helpful in identifying the deficiencies in the
performance of management functions. Thus, management audit may be
defined as evaluation of the functioning, performance and effectiveness of
management of an organisation.
 PERT and CPM
PERT (Programme Evaluation and Review Technique) and CPM (Critical
Path Method) are important network techniques useful in planning and
controlling. These techniques are especially useful for planning, scheduling
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and implementing time bound projects involving performance of a variety

of complex, diverse and interrelated activities. These techniques deals with
time scheduling and resource allocation for these activities and aims at
effective execution of projects within given time schedule and structure of
costs. The steps involved in using PERT/CPM are as follows:
 The project is divided into a number of clearly identifiable activities
which are then arranged in a logical sequence.
 A network diagram is prepared to show the sequence of activities,
the starting point and the termination point of the project.
 Time estimates are prepared for each activity. PERT requires the
preparation of three time estimates – optimistic (or shortest time),
pessimistic (or longest time) and most likely time. In CPM only one
time estimate is prepared. In addition, CPM also requires making
cost estimates for completion of project.
 The longest path in the network is identified as the critical path. It
represents the sequence of those activities which are important for
timely completion of the project and where no delays can be allowed
without delaying the entire project.
 If required, the plan is modified so that execution and timely
completion of project is under control.
PERT and CPM are used extensively in areas like ship-building,
construction projects, aircraft manufacture, etc.
 Management information centre
Management Information System (MIS) is a computer-based information
system that provides information and support for effective managerial
decision-making. A decision-maker requires up-to-date, accurate and timely
information. MIS provides the required information to the managers by
systematically processing a massive data generated in an organisation. Thus,
MIS is an important communication tool for managers.
MIS also serves as an important control technique. It provides data and
information to the managers at the right time so that appropriate corrective
action may be taken in case of deviations from standards.

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NATIONAL INSTITUTE OF TECHNOLOGY SIKKIM

Department of Mechanical Engineering

Lesson no. Topic

SWOT Analysis, Management By Objectives

Organisational Structure, Coordination

Centralization & Decentralization,

Span of Management, Organisation Life

Leadership and Communication,

13 Human Resource Management

Controlling and Managerial Control

Module: 2 Lecture No: 7

 To discuss the Planning-Organising-Leading-Controlling framework.

Important & Relevant Questions

 ‘Without planning, controlling in meaningless.’ – Justify the statement with suitable

 Why planning and controlling are inseparable?

 Koontz H. and Weihrich H., Essentials of Management: An International, Innovation,

Figure 1: Planning and controlling

 Policies – General statements or understandings that guide in

Figure 2: Steps involved in planning

Figure 3: Planning types

Figure 4: Planning levels

Module: 2 Lecture No: 8

 To discuss SWOT analysis.

Important & Relevant Questions

 Koontz H. and Weihrich H., Essentials of Management: An International, Innovation,

Figure 1: SWOT analysis

organisation. MBO is an appraisal tool – a motivational technique – a planning and control

Figure 2: Salient features of MBO

Figure 3: Characteristics of MBO

Figure 4: Process of MBO

Module: 2 Lecture No: 9

 To understand what is meant by organisational structure.

Important & Relevant Questions

 What are major areas of classical management theory?

 What is scientific in scientific management?

 Koontz H. and Weihrich H., Essentials of Management: An International, Innovation,

An organisation chart formally describes the division of activities within an organisation. It

Figure 1: Five basic parts of an organisation

Figure 2: Direct supervision coordination mechanism

Figure 3: Mutual adjustment coordination mechanism

Figure 4: Work process standardization coordination mechanism

Figure 5: Outputs standardization coordination mechanism

5. Skill or knowledge standardization

Figure 6: Skill and knowledge standardization coordination mechanism

III. Professional bureaucracy

Structural Prime coordinating Key part of

Machine Work process Techno-structure

Professional Skill or knowledge Operating core

Divisionalized Outputs standardization Middle-line

Adhocracy Mutual adjustment -

Module: 2 Lecture No: 10

 To discuss different dimensions of organisational structure.

Important & Relevant Questions

 What are the dimensions of an organisation structure? How significance these

 What are the dimensions of an organisation structure?

 Koontz H. and Weihrich H., Essentials of Management: An International, Innovation,

Dimensions of organisation structure

Figure 1: Dimensions of organisation structure

 Centralization and decentralization

Figure 2: Functional structure

Figure 3: Product/Product line structure

Figure 4: Territory-based structure

Figure 5: Customer-based structure