Prof.

Naveen N
Management of Principles and Practice Dept. of Commerce and Management

Unit - 5
COORDINATING AND CONTROL
If everyone is moving forward together, then success takes care of itself.
- Henry Ford
Coordination is the integration, unification, synchronization of the efforts of the departments
to provide unity of action for pursuing common goals. A force that binds all the other
functions of management.
The management of an organization endeavours to achieve optimum coordination through its
basic functions of planning, organizing, staffing, directing, and controlling.
“Co-ordination is orderly arrangement of group efforts to provide unity of action in the
pursuit of common goals”. – Mooney and Reelay
“Co-ordination is the integration of several parts into an orderly hole to achieve the purpose
of understanding”. – Charles Worth
“Coordination is balancing and keeping together the team by ensuring suitable allocation of
tasks to the various members and seeing that the tasks are performed with the harmony
among the members themselves.” – Brech

PRINCIPLES OF COORDINATION
1. Direct Contact:
Co-ordination should be attained by direct contact with the parties concerned. Direct personal
communications bring about agreement on methods, actions and ultimate achievement. Direct
contact is an effective means of co-ordination.
2. Early Beginning:
Co-ordination can be achieved more readily at the initial stages of planning and policy-
making. Therefore, direct contact must begin in the very early stages of the process.
3. Continuity:
Co-ordination must be maintained as a continuous process. It starts from planning and ends
when the objective is accomplished. Whenever there is division and distribution of functions
among the managers and departments, co-ordination is necessary. Every time a new situation
arises, a fresh effort of co-ordination is needed. So, the manager must constantly work at it
until the purpose is served.
4. Reciprocal Relationship:
Co-ordination should be regarded as a reciprocal relating to all factors in a situation, viz.
production, sales, finance, men, and management. For example, when ‘P’ works with ‘Q’ and
‘Q’ in turn, works with ‘R’ and ‘S’ each of the four finds himself influenced by the others.

5. Effective Communication:
Effective communication is necessary for proper co-ordination. The individual and
departmental problems can be solved with the help of co-ordination. In addition, the efforts of
a staff are effectively utilised to achieve the objectives of the organisation.

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

6. Pervasiveness:
Co-ordination is an all-embracing activity in every management function. It is required in all
the activities at every level of the organisation. It is to be exercised both within and outside
the organisation.

7. Leadership:
Leadership is the most effective instrument of co-ordination. A leader in a group is the
coordinator of the group activities. He harmonizes all efforts of persons in the group.

8. Integrating:
All activities, decisions and opinions are to be integrated to achieve the enterprise objective.
For integration what is necessary is that all men and departments must perform their jobs at
the right time.

TYPES OF COORDINATION
1. Internal Co-Ordination:
Coordination is internal when it is established between different departments and units of an
organisation. It is related with the internal activities and human efforts of an enterprise. e.g.
when the relationship is established between the managers, executives and other departmental
heads to coordinate all the activities within an organization. Internal coordination may have
the following two forms.
 Vertical coordination
Vertical coordination is achieved amongst activities of people working at different levels. It
coordinates the activities of top managers with those of middle and lower level managers. It
is “the linking of activities at the top of the organisation with those at the middle and lower
levels in order to achieve organisational goals.” Vertical coordination can be achieved
through span of management, centralisation, decentralisation and delegation.

 Horizontal coordination
Horizontal coordination is achieved amongst activities of people of different departments
working at the same level. It is the linking of activities across departments at similar levels.
e.g., co-ordination between different departmental heads, foremen of different workshops,
superintendents of different sections etc.

2. External Co-Ordination:
External coordination refers to the coordination between an organization and its external
environment. External co-ordination thus refers to the efforts undertaken to adopt and
integrate the enterprise with the dynamic business world and factors external to it.
The important external factors are interests of customers, suppliers, investors, em-ployees,
changes in competitive situation, other enterprise, technological advances, and Government
policies and regulations.

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

TECHNIQUES OF ESTABLISHING COORDINATION

1. Clearly Defined Objectives:
Each and every organisation has its own objectives. These objectives would be clearly
defined. Then, the employees of the organisation should understand the objectives of
organisation well. Unity of purpose is a must for achieving proper co-ordination.

2. Effective Chain of Command:

In each organisation, the line of authority decides who is responsible and to whom. If the line
of authority and responsibility are clearly defined, the superior has proper control over his
sub-ordinates. Then, the superior or manager can co-ordinate the efforts of his subordinates
by means of his authority. If the line of authority is clearly defined, the superior could
decrease the conflicts and get co-ordination.

3. Effective Communication:
Effective communication promotes mutual understanding and co-operation among the
various officials in an organisation. The communication should be direct as far as possible.
The direct communication alone avoids any misunderstandings and misinterpretation.

4. Simplified / Sound Organizational Structure:

Organization is a very important device for achieving coordination. Simplified organization
facilitates effective coordination. The management can arrange the departments in such a way
so as to get better coordination among the departmental heads. The lines of authority and
responsibility of each individual member of the organization must also be spelt out clearly.

5. Co-Ordination through Group Meetings:

The common group of problems of an organisation is discussed by the officials in group
meetings. Such group meetings help in achieving co-ordination. The group meetings are
easily convened. The reason is that there is an obligation on the part of group members to
extend their co-ordination.

6. Co-Ordination by Leadership:
A manager uses his leadership skills to induce the subordinates to co-ordinate willingly. A
leader can motivate the subordinates and identify the interests of individuals. These are used
to get co-ordination. Many conflicts and unpleasant situations may be avoided with the help
of good leadership.

7. Rules and Procedures:

The most simplistic method for achieving coordina-tion is through rules and procedures.
Routine coordina-tion problems can be easily handled by policies and standard operating
procedures. Rules and procedures provide a basis for standardization of activities and
guid-ance for consistent actions.
8. Liaison Offices:
Establishment of liaison offices may help in achieving coordination among different
department. They officers are supposed to be in touch with the heads of the departments and

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

reconcile differences and restore co-ordination. Liaison officer is responsible for making
connections, developing relationships and fostering a sense of cooperation between different
employees working in various department of the organisation.

IMPORTANCE OF COORDINATION
1. Unity of Direction
An organization needs to integrate the efforts and skills of different employees in order to
achieve common objectives. Different segments of the business may set different goals. Each
department performs different activities. Coordination integrates (bring together) these
activities for achieving the common goals or objectives of the organization. The co-
ordination process helps in synchronising various efforts and also eliminates duplication of
work leading to cost-efficient operations.
2. Unity in Diversity
Every large organization has a large number of employees, each with a different vision or
ideas, activities and background. Therefore, there are different functions in an organization.
However, all these activities would not be so effective without communication. Therefore,
cooperation is essential for unity in diversity.

3. Coordination helps to achieve objectives quickly

Coordination helps to minimize the conflicts, rivalries, wastages, delays and other
organizational problems. It ensures smooth working of the organization. Therefore, with the
help of coordination an organization can achieve its objectives easily and quickly.
4. Optimum Utilization of Resources
Primarily, coordination ensures that employees do not engage in cross-purpose work since it
brings together the human and material resources of the organization. Therefore, there is less
wastage of resources which helps the organization utilize them optimally.
5. Coordination improves relations in the organization
The Top Level Managers coordinates the activities of the Middle Level Managers and
develop good relations with them. Similarly, the Middle Level Managers coordinate the
activities of the Lower Level Managers and develop good relations with them. Also, the
Lower Level Managers coordinate the activities of the workers and develop good relations
with them. Thus, coordination, overall improves the relations in the organization.

6. Coordination leads to higher efficiency

Efficiency is the relationship between Returns and Cost. There will be higher efficiency when
the returns are more and the cost is less. Since coordination leads to optimum utilization of
resources it results in more returns and low cost. Thus, coordination leads to higher
efficiency.

7. Functional Differentiation
An organization has many departments or sections performing different functions. All these
functions are important for achieving the overall goals of the organization. If all departments
work in isolation from the others, then they might not work in tandem. Therefore,
coordination is essential for integrating the functions.
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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

8. Encourage Team Spirit

In an organization, there exist many conflicts between employees, departments, etc.
Coordination encourages people and departments to work as one big team and achieve the
common objectives of the organization. Therefore, it encourages team spirit.

9. Coordination facilitates motivation

Coordination gives complete freedom to the employees. It encourages the employees to show
initiative. It also gives them many financial and non-financial incentives. Therefore, the
employees get job satisfaction, and they are motivated to perform better.

10. Lesser disputes

Many departments play an important role in helping the organization achieve its goals. They
are also capable of assessing the nature and scope of work they perform. However, they are
usually unaware of the importance of other department’s roles leading to disputes.
Coordination can help solve such disputes.

CONTROLLING
Control is one of the managerial functions like planning, organizing, staffing and directing. It
is an important function because it helps to check the errors and to take the corrective action
so that deviation from standards are minimized and stated goals of the organization are
achieved in desired manner.

Controlling consists of verifying whether everything occurs in confirmities with the plans
adopted, instructions issued and principles established. Controlling ensures that there is
effective and efficient utilization of organizational resources so as to achieve the planned
goals. Controlling measures the deviation of actual performance from the standard
performance, discovers the causes of such deviations and helps in taking corrective actions.

‘Control of an undertaking consists of seeing that everything is being carried out in

accordance with the plan which has been adopted, the orders which have been given, and the
principles which have been laid down. Its object is to point out mistakes in order that they
may be rectified and prevented from recurring’. – Henry Fayol

‘Control is checking current performance against pre­determined standards contained in the

plans, with a view to ensure adequate progress and satisfactory performance’ – EFL BRECH

FEATURES AND CHARACTERISTICS OF CONTROL

The purpose of control is to create positive effects on both the organizational and individual
levels. At the organizational level, it aims to achieve organizational goals. At the individual
level, control strives to increase productivity and make individuals more profitable.
Therefore, control has a good purpose in every way.

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

1. Control is a Management Function:

In management, there are various functions like planning, directing, staffing, organizing and
controlling. Controlling is one of the essential functions without which all other functions are
rendered meaningless.

2. Control is Embedded at each level of the Hierarchy:

All managers follow the practices of control management to accomplish their tasks and keep
a check on their reporters to ensure the attainment of goals. Although control exists at every
level, it differs, for example, the top management involves strategic control, middle
management in tactical control and lower management in operational control.

3. Control is a Continuous Activity:

Controlling is not a single time activity but instead a continuous process that involves a
timely review of performances and results in corrective action.

4. Control is both Backward and Forward-Looking:

We compare the performance with the standards which are set during the planning and
processing. The past data or activities are used for the analysis of deviations, hence control is
backwards-looking. Control is also related to the future as past activities cannot be controlled.
The data analyzed is used to take corrective measures in the future.

5. Control is Closely Linked with Planning:

Planning and Controlling are closely linked and run hand in hand. Planning sets the action
course while controlling keeps track of it. If there is any deviation in the course, controlling
helps to find errors and design new strategies to get it back on track. The findings from the
process of controlling act as an input to the planning process.

6. Control is Related to Results:

The assessment of progress is based on the results. Any deviation from the required results
control has to be incorporated to take corrective actions.

STEPS IN CONTROL PROCESS

1. Establishment of Standard:
First step in establishing control system is setting standards. Standards serve as a basic for
measuring performance. They may be expressed in quantitative or qualitative terms. A
standard is a criterion against which results can be measured. In quantitative terms they are
expressed in numbers.

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

2. Measuring Performance:
The second step of process of control is to measure the actual performance in the same terms
in which standards have been established. Accurate and timely measurement of results
requires effective system of reporting. Measurement is not difficult in case of physical
operations(Quantitative), e.g., units produced, cost incurred, time spent etc., as these can be
easily measured. Performance can be measured by observations, inspection and reporting.

3. Comparison of Performance with Standards:

The next step in the control process is comparison of actual performance against the
standards. In case the standards set are well defined and can be measured objectively,
comparison becomes very simple.
Comparison of actual and standard performance may lead to three possible outcomes – actual
performance may be – (a) equal to, (b) more than, (c) less than the standard. If actual
performance is equal to the standard managers need not take any action but where deviations
are noticed, corrective action becomes necessary.

4. Taking Corrective Action:

Once the causes for deviations become known, the next step is to go in for a corrective action
which may involve revision of standards, changing the methods of selection and training of
worker or providing better motivation. Managers should concentrate only on major
deviations.

IMPORTANCE OF CONTROL IN MANAGEMENT

1. Accomplishing Organizational Goals:
Control measures the progress of organizational goals and accentuate deviations, if any, and
lays out the basis for corrective measures. It ensures that the organizational goals are on
track.

2. Efficient Use of Resources:

Wastage and spoilage of resources are reduced. For example, in damage control, the defective
products are examined and the production will be modified to reduce errors and produce
error-free products and thereby reducing further wastage of materials. Thus it ensures that
resources are used in the most effective and efficient manner.

3. Judges Accuracy of Standards:

The management will be able to verify whether the standards set by the organization are
accurate. According to the changes in the environment, the standards can be reviewed and
revised by exercising control.

4. Employee Motivation:
When standards are set by the organization, employees will know beforehand as to what is
expected from them and perform accordingly, based on their performance, they will be
appraised. When control is practiced to check the tasks, the performances will be better and
so will be the appraisals which in turn will motivate the employees.

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

5. Ensuring Order and Discipline:

Controlling keeps a close check on the employee’s activities and ensures the activities are
performed honestly. It fosters a sense of discipline and order in the organization.

6. Facilitating Coordination in Action:

At every level in the management, the activities of the subordinates will be checked and
coordinated by the managers which lead towards the accomplishment of organizational goals.

TYPES OF CONTROL
1. Feed Forward Control (Pre-Action Controls):
It is an approach to control the performance of an organisation that attempts to forecast the
future state of affairs and to take the necessary action before problems arise. It is called feed
forward control because it takes place in advance of the actual activity.

2. Concurrent Control:
Concurrent control, as its name implies, takes place while an activity is in progress. The best-
known form of concurrent control is direct supervi-sion. When a manager directly oversees
the actions of a subordinate, the manager can concurrently monitor the employee’s actions
and correct problems as they occur.

3. Feedback Control (Post Action Controls):

The most popular type of control relies on feedback. As the term suggests, post-action
controls measure the results after the activity is done. The focus is on results of operations.
Examples of feedback controls include periodical (weekly, monthly, quarterly, annual)
reports. Post-action controls are also used as a basis for rewarding or encouraging employees.

ESSENTIALS OF EFFECTIVE CONTROL SYSTEM

1. Simplicity:
A good control system must be simple and easily understandable so that all the managers can
apply it effectively. Complicated control techniques fail to communicate the meaning of
control data to the managers.

2. Objectivity:
The standards of performance should be objective and specific, quantified and verifiable.
They should be based on the facts so that control is acceptable and workable.

3. Promptness in Reporting of Deviation

The control system should provide information soon enough so that the managers can detect
and report the deviations promptly and necessary corrective actions may be taken in proper
time. Corrective measures are of no value if those are taken too late.

4. Enforceable and Economical :

The control system must justify the expenses involved. In other words, anticipated earnings
from it should be greater than the expected costs in its working. A small organisation cannot
use the expensive control technique applied in large enterprises.

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

5. Flexibility:
Internal goals and strategies must be responsive to the changes in the environment and the
control system should be flexible enough to adapt the changing conditions or unforeseen
situations. It should be adaptable to the new developments. Flexibility in control system can
be introduced by making alternative plans.

6. Accuracy:
The control system should encourage accurate information in order to detect deviations. The
technique of control used should be appropriate to the work being controlled.
7. Suitability:
Control must reflect the needs and nature of the activities of the organisation, The control
system should focus on achieving the organisational goals.

8. Forward-looking Nature / Futuristic :

The control system must be directed towards the future. It must pay attention on how the
future actions can be conformed with the plans adopted.

9. Focus on Strategic Points:

The control system should focus attention on strategic or critical deviations. Only exceptional
deviations require the attention of the managers.

10. Motivating:
A good control system should pay due attention to the human factor, It should be designed to
secure positive action from the workers. Self-control tends to be motivated. Direct contact
between the controller and the controlled also helps in making the control system
motivational.

11. Reflection of Organisation Pattern:

Control must reflect organisation pattern. Since the events are controlled through people, it is
essential that controls must conform to the organisation pattern. The control process should
be acceptable on the psychological front.

12. Corrective Action:

Control system must ensure corrective actions. An adequate control technique should not
only detect the deviations and failures, but should also disclose where they are occurring;
who is responsible for them; and what should be done to correct them.

TECHNIQUES OF CONTROL
1. Traditional Techniques
2. Modern Techniques

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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

Traditional Techniques
1. Personal Observation:
The simplest way to control organisational activities is that managers take round at the work
place and observe the progress of the work. Any defect in performance can be spotted and
corrected immediately. A face-to-face interaction is possible where workers get their doubts
solved on-the-job and guidance and counselling can also be provided there and then.

2. Budgetary Control
A budget is a statement which reflects future incomes, expenditures and profits that can be
earned by a firm. It is a future projection of the firm’s financial position. Non-financial
aspects like units produced, units sold, unit cost of material and labour etc. can also be
important components of a budget.
Budget is “the process of stating in quantitative terms, planned organisational activities for a
given period of time.” Budgeting control refers to comparison of actual performance with
planned or budgeted performance. It is a basic technique of control and is used at every level
of organisation. Budgets are prepared for the organisation as a whole and for each
departmental unit.

3. Break-Even Analysis:
Break Even Analysis or Break Even Point is the point of no profit, no loss.
Break-even analysis or cost-volume-profit analysis defines the relationship between sales
volume, costs and profits to arrive at a figure of sales at which sales revenue is equal to cost.
The point at which sales revenue is equal to cost (fixed cost plus variable cost) is the break-
even point.
Sales beyond the break-even point will earn profits for the organisation and sales below the
break-even point is a situation of loss.

4. Financial Statements:
Financial statements depict financial position of the firm over a period of time, generally one
year. The statements are prepared along with last year’s statements so that firm can compare
present performance with last year’s performance and take action to improve its future
performance. As these statements are prepared at the end of the financial year, as a measure
of control, they guide managers to improve future performance.

5. Statistical Data and Reports:

Data helps in applying statistical techniques of averages, regression, correlation etc. to predict
financial performance. Data can be used for diagrammatic representations like trend charts,
histograms, pie charts, and bar graphs etc. which assess the company’s performance.
Deviations can be pointed out and corrected.
Report is a statement that represents data in the form of information for carrying out the
controlling function.
Statistical data and regular reporting system provide information about company’s financial
and non-financial performance.
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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

Modern Techniques
1. Return on Investment Control (ROI):
One of the most successfully used control technique of measuring both the absolute and the
relative success of a company is by the ratio of net earnings to investment the company has
made. This approach often referred to a ROI. If the rate of return on investment is
satisfactory, it will be considered as good performance.

2. Ratio Analysis:
A ‘Ratio’ is an arithmetical relationship between two figures. ‘Ratio Analysis’ is a study of
ratios between various items or groups in the financial statement of an organisation. With the
help of such analysis, the efficiency of financial performance of an enterprise can be judged.
It measures financial condition, profitability and efficiency of the enterprise. This analysis is
an important technique to exercise control over the departments of an enterprise. Some
important examples of Ratio Analysis are the analysis of Liquidity Ratio, Leverage Ratio,
Turnover Ratio, Profitability Ratio, Valuation Ratio, etc.

3. Management Audit
Management Audit is an evaluation of the management as a whole. It critically examines the
full management process, i.e. planning, organising, directing, and controlling. It finds out the
efficiency of the management. To check the efficiency of the management, the company's
plans, objectives, policies, procedures, personnel relations and systems of control are
examined very carefully. Management auditing is conducted by a team of experts. They
collect data from past records, members of management, clients and employees. The data is
analysed and conclusions are drawn about managerial performance and efficiency.

4. Responsibility Accounting:
It divides the organisation into smaller units where each unit is headed by a manager who is
responsible for achieving the targets of his unit. These units are called responsibility centre's,
which is also called as ''profit centre'', ''cost centre'' and ''investment centre'' and the
head of each responsibility centre is responsible for controlling the activities of his centre.
Performance of each responsibility centre is judged by the extent to which targets of that
centre are achieved.

5. Network Techniques (PERT and CPM):

When a complex project is undertaken which involves a series of inter-related or inter-
dependent activities, the network models or techniques help in planning, coordinating and
controlling the network of activities. Various sequences of activities are scheduled with
reference to time and cost and managers execute the project within the constraints of time
and cost.
PERT – Programme Evaluation and Review Technique - It is a network of events and
activities on a project with estimated time for completion of each activity.
CPM – Critical Path Method - CPM determines critical activities for completing the project,
assumes expected time as the time taken to complete the project and concentrates on this
critical sequence of activities to optimise the use of time and resources. It concentrates only
on the critical path and not the whole project.
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 Prof. Naveen N
Management of Principles and Practice Dept. of Commerce and Management

6. Management Information System:

‘Management Information System’ (MIS) is the method of providing the relevant and
required information through computer to each manager of an organisation at the proper time
and in the right form which aids his understanding and stimulates his action.
In other words, it is the system of giving the past, present and projection information
regarding internal operations and external intelligence. It supports the planning, control and
operational functions of an organisation by providing uniform information in right time and
correct form to assist the decision-making process.

7. Economic Value Added (EVA):

Value added is an important tool to measure financial performance of a company. It indicates
net wealth or value created by the company. Its major goal is to maximise shareholders’
wealth. Companies must generate wealth to survive and grow. A company may survive
without profits in the short-run but it cannot survive without adding value to its wealth. It
covers financial management functions that result in wealth creation.
Economic value added is “a financial tool for measuring corporate and divisional
performance calculated by taking operating profit after-tax minus the total annual cost of
capital.” (Equity + Debt). It measures how much value has been created by a business
enterprise. Increase in value of investors’ capital is value added.

8. Market Value Added (MVA):

Market value added is “a financial tool that measures the stock market’s estimate of the value
of a firm’s past and expected investment projects.” Thus, it measures market value of the
firm’s stock. If company’s market value is more than the capital invested (share capital,
debentures and retained earnings), the company will have positive MVA. It means managers
have created wealth. If, on the other hand, market value is less than capital invested in the
firm, MVA will be negative which means managers have destroyed wealth.

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