PRINCIPLES OF MANAGEMENT

UNIT – V
III B.COM

Prepared by

Dr.A.SULTHAN MOHIDEEN,

M.Com.,M.Phil.,MBA.,PGDCA.,BLISc.,PIPM,DCPME, EIPC,DiMP,Ph.D.,D.Litt.,SET.,

Assistant Professor of Commerce,

Hajee Karutha Rowther Howdia College, Autonomous,

Reaccredited with A++ Grade by NAAC,

Uthamapalayam
 UNIT -5 PRINCIPLES OF MANAGEMENT
COMMUNICATION: MEANING, PURPOSE, IMPORTANCE AND
PRINCIPLES

Meaning and Nature of Communication:

The exchange of information or passing of information, ideas or thought from one
person to the other or from one end to the other is communication. According to
McFarland communication is, “a process of meaningful interaction among human beings.
More specifically, it is the process by which meanings are perceived and understandings
are reached among human beings.” Newman and summer defined communication as “an
exchange of facts, ideas, opinions or emotions by two or more persons.”

Communication is the process of passing information from one person to another.

The purpose of communication understands of information. Whatever one wants to say to
someone should be clearly understood by him else the very purpose of the
communication would be defeated.

In an organisation communication facilitates the flow of information and understanding

between different people and departments through different media using all the channels
and networks. This flow of information is vital for managerial effectiveness and decision
making in general and for human resource manager in particular as he has to be in contact
with the managers of various departments, employees and workers and trade union
leaders.

Communication thus helps understand people better removing misunderstanding and

creating clarity of thoughts and expression. It also educates people. The communication
may be written or oral, formal, informal, and upward, downward, horizontal, diagonal,
interpersonal, intrapersonal, interdepartmental, intra-organisational.

The communication brings people together, closer to each other. The communication is
an important management function closely associated with all other managerial functions.
It bridges the gap between individuals and groups through flow of information and
understanding between them. Information is the most vital aspect for communication. It
is the information which is transmitted, studied, analyzed and interpreted and stored. The
manager therefore has to spare time to collect, analyze and store the information for
decision-making and routine day to day business.
Purpose of Communication:
Management is getting the things done through others. The people working in the
organisation should therefore be informed how to do the work assigned to them in the
best possible manner. The communication is essential in any organisation.

The purpose of the communication can be summed up into the following:

1. Flow of Information:
The relevant information must flow continuously from top to bottom and vice versa. The
staff at all levels must be kept informed about the organisational objectives and other
developments taking place in the organisation. A care should be taken that no one should
be misinformed. The information should reach the incumbent in the language he or she
can understand better. The use of difficult words should be avoided. The right
information should reach the right person, at right time through the right person.

2. Coordination:
It is through communication the efforts of all the staff working in the organisation can be
coordinated for the accomplishment of the organisational goals. The coordination of all
personnel’s and their efforts is the essence of management which can be attained through
effective communication.

3. Learning Management Skills:

The communication facilitates flow of information, ideas, beliefs, perception, advice,
opinion, orders and instructions etc. both ways which enable the managers and other
supervisory staff to learn managerial skills through experience of others. The experience
of the sender of the message gets reflected in it which the person at the receiving end can
learn by analyzing and understanding it.

4. Preparing People to Accept Change:

The proper and effective communication is an important tool in the hands of management
of any organisation to bring about overall change in the organisational policies,
procedures and work style and make the staff to accept and respond positively.

5. Developing Good Human Relations:

Managers and workers and other staff exchange their ideas, thoughts and perceptions
with each other through communication. This helps them to understand each other better.
They realize the difficulties faced by their colleagues at the workplace. This leads to
promotion of good human relations in the organisation.

6. Ideas of Subordinates Encouraged:

The communication facilitates inviting and encouraging the ideas from subordinates on
certain occasions on any task. This will develop creative thinking. Honoring
subordinates’ ideas will further motivate them for hard work and a sense of belonging to
the organisation will be developed. It will provide them with the encouragement to share
information with their superiors without hesitation. The managers must know the ideas,
thoughts, comments, reactions and attitudes of their subordinates and subordinates should
know the same from the lowest level staff of their respective departments.

Importance of Communication:
Effective communication is vital for efficient management and to improve industrial
relations. In modern world the growth of telecommunication, information technology and
the growing competition and complexity in production have increased importance of
communication in organisations large and small irrespective of their type and kind. A
corporate executive must be in a position to communicate effectively with his superiors,
colleagues in other departments and subordinates. This will make him perform well and
enable him to give his hundred percent to the organisation.

The following points can illustrate the importance of communication in human

resource management:
1. Base for Action:
Communication acts as a base for any action. Starting of any activity begins with
communication which brings information necessary to begin with.

2. Planning Becomes Easy:

Communication facilitates planning. Planning is made easy by communication. Any type
of information regarding the human resource requirement of each department of the
organisation with their qualifications, the type and kinds of job etc. can be collected
through communication which helps in human resource planning. Policies and
programmes for their acquisition can be prepared and implemented. In the entire process
communication plays a vital role, it also facilitates managerial planning of the
organisation.

3. Means of Coordination:
Communication is an important tool for coordinating the efforts of various people at
work in the organisation.

4. Aids in Decision-Making:
The information collected through communication aids in decision-making.
Communication facilitates access to the vital information required to take decisions.

5. Provides Effective Leadership:

A communication skill bring manager near to his subordinates and exchange ideas and
submits appropriate proposals, knows their opinions, seeks advices and make decisions.
This enables a manager to win confidence of his subordinates through constantly
communicating with them and removing probable misunderstandings. In this way he
leads his people to accomplish the organisational goal.
6. Boosts Morale and Motivation:
An effective communication system instills confidence among subordinates and workers
ensuring change in their attitude and behaviour. The main cause of conflict and
dissatisfaction is misunderstanding which can be removed through communication skills.
The removal of misunderstanding makes manager and his subordinates understand each
other and create good industrial relations. This boosts up the morale of the people and
motivates them to work harder.

Principles of Communication:
Lack of effective communication renders an organisation handicapped. So to have
effective communication certain principles are to be followed.

They are as follows:

1. Clarity:
The principle of clarity means the communicator should use such a language which is
easy to understand. The message must be understood by the receiver. The words used
should be simple and unambiguous. The language should not create any confusion or
misunderstanding. Language is the medium of communication; hence it should be clear
and understandable.

2. Adequacy and Consistency:

The communicator must carefully take into account that the information to be
communicated should be complete and adequate in all respect. Inadequate and
incomplete message creates confusion and delays the action to be taken. The adequate
information must be consistent with the organizational objectives, plans, policies and
procedures. The message which is inconsistent may play havoc and distort the corporate
interests.

3. Integration:
The principle of integration portrays that through communication the efforts of human
resources of the organisation should be integrated towards achievement of corporate
objectives. The very aim of communication is to achieve the set target. The
communication should aim at coordinating the activities of the people at work to attain
the corporate goals.

4. Economy:
The unnecessary use of communication system will add to cost. The system of
communication must be used efficiently, timely i.e. at the appropriate time and when it is
necessary. The economy in use of communication system can be achieved in this way.

5. Feedback:
The purpose of communication will be defeated if feedback is not taken from the
receiver. The confirmation of the receipt of the message in its right perspective from its
receiver fulfills the object of communication. The feedback is essential only in case of
written communication and messages sent through messengers. In case of oral type of
communication the feedback is immediately known.

6. Need for Communication Network:

The route through which the communication passes from sender or communicator to its
receiver or communicate refers to communication network. For effective communication
this network is essential. The managerial effectiveness will also depend upon the
availability of adequate network.

7. Attention:
The message communicated must draw the attention of the receiver staff and ensure
action from him in the right perspective. The efficient, sincere and prompt manager
succeeds in drawing the attention of his subordinates to what he is conveying.

It is the psychology of the people that they watch their superiors closely and then respond
to their orders or instructions. Lazy and insincere superiors fail to garner support for
themselves and their instructions usually are not taken seriously by their subordinates.
Adhering to the above principles shall make communication effective, minimize the
human relations problems and increase the overall efficiency.

METHODS OF COMMUNICATION
The standard methods of communication are speaking or writing by a sender and
listening or reading the receiver. Most communication is oral, with one party speaking
and others listening.

However, some forms of communication do not directly involve spoken or written

language. Nonverbal communication (body language) consists of actions, gestures, and
other aspects of physical appearance that, combined with facial expressions (such as
smiling or frowning), can be powerful means of transmitting messages. At times, a
person's body may be “talking” even as he or she maintains silence. And when people do
speak, their bodies may sometimes say different things than their words convey. A mixed
message occurs when a person's words communicate one message, while nonverbally, he
or she is communicating something else.

Although technology such as e‐mail has lessened the importance of nonverbal

communication, the majority of organizational communication still takes place through
face‐to‐face interaction. Every verbal message comes with a nonverbal component.
Receivers interpret messages by taking in meaning from everything available. When
nonverbal cues are consistent with verbal messages, they act to reinforce the messages.
But when these verbal and nonverbal messages are inconsistent, they create confusion for
the receiver.
The actions of management are especially significant because subordinates place more
confidence in what managers do than what they say. Unless actions are consistent with
communication, a feeling of distrust will undermine the effectiveness of any future social
exchange.

Oral communication skills

Because a large part of a manager's day is spent conversing with other managers and
employees, the abilities to speak and listen are critical to success. For example, oral
communication skills are used when a manager must make sales presentations, conduct
interviews, perform employee evaluations, and hold press conferences.

In general, managers prefer to rely on oral communication because communication tends

to be more complete and thorough when talking in person. In face‐to‐face interactions, a
person can judge how the other party is reacting, get immediate feedback, and answer
questions. In general, people tend to assume that talking to someone directly is more
credible than receiving a written message. Face‐to‐face communication permits not only
the exchange of words, but also the opportunity to see the nonverbal communication.

However, verbal communicating has its drawbacks. It can be inconsistent, unless all
parties hear the same message. And although oral communication is useful for conveying
the viewpoints of others and fostering an openness that encourages people to
communicate, it is a weak tool for implementing a policy or issuing directives where
many specifics are involved.

Here are two of the most important abilities for effective oral communication:

 Active listening. Listening is making sense of what is heard and requires paying
attention, interpreting, and remembering sound stimuli. Effective listening is
active, requiring the hearer to “get inside the head” of the speaker so that he or she
can understand the communication from the speaker's point of view. Effective
listeners do the following:

o Make eye contact.

o Schedule sufficient, uninterrupted time for meetings.
o Genuinely seek information.
o Avoid being emotional or attacking others.
o Paraphrase the message you heard, especially to clarify the speaker's
intentions.
o Keep silent. Don't talk to fill pauses, or respond to statements in a point‐
counterpoint fashion.
o Ask clarifying questions.
o Avoid making distracting gestures.
  Constructive feedback. Managers often do poor jobs of providing employees
with performance feedback. When providing feedback, managers should do the
following:

o Focus on specific behaviors rather than making general statements

o Keep feedback impersonal and goal‐oriented
o Offer feedback as soon after the action as possible
o Ask questions to ensure understanding of the feedback
o Direct negative feedback toward behavior that the recipient can control

Written communication skills

Written communication has several advantages. First, it provides a record for referral and
follow‐up. Second, written communication is an inexpensive means of providing
identical messages to a large number of people.

The major limitation of written communication is that the sender does not know how or if
the communication is received unless a reply is required.

Unfortunately, writing skills are often difficult to develop, and many individuals have
problems writing simple, clear, and direct documents. And believe it or not, poorly
written documents cost money.

How much does bad writing cost a company annually? According to a Canadian
consulting and training firm, one employee who writes just one poorly worded memo per
week over the course of a year can cost a company $4,258.60.

Managers must be able to write clearly. The ability to prepare letters, memos, sales
reports, and other written documents may spell the difference between success and
failure. The following are some guidelines for effective written communication:

 Use the P.O.W.E.R. Plan for preparing each message: plan, organize, write, edit,
and revise
 Draft the message with the readers in mind
 Give the message a concise title and use subheadings where appropriate
 Use simple words and short, clear, sentences and paragraphs
 Back up opinions with facts
 Avoid “flowery” language, euphemisms, and trite expressions
 Summarize main points at the end and let the reader know what he must do next
BARRIERS TO EFFECTIVE COMMUNICATION
Communication is defined as the process by which information is exchanged between
individuals through a system of signs, symbols. The concept of communication involves
a sender, a message and a recipient.
The sender sends the message and the recipient is the receiver of the message. The
process of communication is never smooth as it is affected by the barriers of
communication.
Barriers to effective communication can result in confusion which can lead to incorrect
information being conveyed or miscommunication which can lead to loss of business.
Following are some of the barriers to effective communication:
1. Semantic barriers
2. Psychological barriers
3. Organisational barriers
4. Cultural barriers
5. Physical barriers
6. Physiological barriers
Let us study in detail about the various types of barriers to effective communication.
Semantic barriers: Semantic barriers are also known as language barriers. These
barriers are caused due to improper communication between the sender and the receiver.
The following instances of semantic barriers can be witnessed in communication.
Poor quality of message: Message when communicated should be precise and easy to
understand, that makes it easy for the receiver to grasp the information conveyed.
Sometimes, due to the lack of clarity or complexity of the way of providing information
from the sender, there can be a case of semantic barriers.
For e.g. A manager is conversing in English to a group of workers who understand and
speak Bengali. It will create confusion among workers as they will not be able to
understand what is being conveyed by the manager.
Technical language: Language barriers also arise when the sender of the message is
speaking in technical terms while the receiver is unaware of the terms. It creates
confusion and misunderstanding between the sender and receiver by acting as a barrier to
effective communication.
Psychological Barriers: Psychological barriers play an important role in interpersonal
communication as the state of the mind of the sender or the receiver can make it difficult
to understand the information that is conveyed, which often leads to misunderstanding.
Here are some instances where psychological barriers to communication can be seen.
1. Premature evaluation of information by the receiver even before it is transmitted can
lead to barriers in communication, as it will create premature conclusion to the message,
which withholds the original message.
2. Inadequate attention from the receiver’s end at the time of communication can lead to
barriers of communication as the information conveyed by the sender is not properly
received by the receiver.
3. When information is passed within multiple sources, the final information is distorted
as the receivers of the message are not able to retain everything that was conveyed. This
can cause communication barriers.
Organisational barriers: Organisational barriers are those barriers that are caused due to
the structure, rules and regulations present in the organisation. The various types of
barriers that can be encountered due to superior subordinate relationships where the free
flow of communication is not possible.
Sometimes the complexity of organisational structure and multiple managers make it
difficult to convey information properly, and the information gets distorted leading to
miscommunication.
Cultural barriers: Cultural barriers are those that arise due to lack of similarities among
the different cultures across the world. A term that can be harmless in one culture can be
regarded as a slang in another culture. Moreover, various beliefs can differ from one
culture to another.
Physical barriers: Physical barriers to communication are those that arise due to certain
factors like faulty equipment, noise, closed doors and cabins that cause the information
sent from sender to receiver to become distorted, which results in improper
communication.
Physiological barriers: Physiological barriers arise when a sender or the receiver of the
communication is not in a position to express or receive the message with clarity due to
some physiological issues like dyslexia, or nerve disorders that interfere with speech or
hearing.
This concludes our article on the topic of Barriers to Effective Communication, which is
an important topic in Business Studies for Commerce students. For more such interesting
articles, stay tuned to BYJU’S.

REPORTING

Reporting is providing information about serious wrongdoing that you have become
aware of at your workplace/ place of study. Reporting is about notifying concerning what
you believe to be the discovery of breaches of laws and regulations, breaches of ethical
norms or serious conditions which might harm individuals, the university, cooperative
partners, or society as a whole.

According to The Working Environment Act § 2-4, employees have the right and, in
some cases, duty to report wrongdoing at the institution, such as when there is a danger
posed to life and health.

Examples of situations where employees need to speak out:

 Defects or shortcomings which could lead to a danger posed to life or health
 Breaches of professional and research-oriented ethical guidelines
 When fellow students or colleagues are bullied, harassed (including sexual
harassment) or discriminated against in connection with their work at UIA
 Drug use or other forms of problematic addiction (AKAN)
 Environmental crime
 Activities which could damage property or infrastructure

Reporting regarding conditions which are only of internal or personal interest, for
example internal personal conflicts in which the employee can be considered to be a part
of the conflict, shall be dealt with in accordance with UIA’s guidelines for managing
conflict.

Students’ complaints concerning the teaching environment are dealt with in accordance
with the Act relating to universities and university colleges § 4-3.
Responsible for this page: webredaksjonen@uia.no

REPORTING TO MANAGEMENT – MEANING

The reporting to management is a process of providing information to various levels of
management so as to enable in judging the effectiveness of their responsibility centres
and become a base for taking corrective measures, if necessary.

Definition of Reporting to Management

S.N.Maheshwari,
“Reporting to Management can be defined as an organized method of providing each
manager with all the data and only those data which he needs for his decisions, when he
needs them and in a form which aids his understanding and stimulates his action”.
The reporting to management can also be called as management reporting or internal
reporting.
OBJECTIVES OR PURPOSE OF REPORTING TO MANAGEMENT
A Management Accountant has to prepare the report for the following purposes.

1. Means of Communication: A report is used as a means of upward communication. A

report is prepared and submitted to someone who needs that information for carrying out
functions of management.
2. Satisfy Interested Parties: The interested parties of management report are top
management executives, government agencies, shareholders, creditors, customers and
general public. Different types of management reports are prepared to satisfy above
mentioned interested parties.
3. Serve as a Record: Reports provide valuable and important records for reference in
the future. As the facts and investigations are recorded with utmost care, they become a
rich source of information for the future.
4. Legal Requirements: Some reports are prepared to satisfy the legal requirements. The
annual reports of company accounts is prepared to furnished the same to the shareholders
of the company under Companies Act 1946. Likewise, audit report of the company
accounts is submitted before the income tax authorities under Income Tax Act 1961.
5. Develop Public Relations: Reports of general progress of business and utilization of
national resources are prepared and presented before the public. It is useful for increasing
the goodwill of the company and developing public relations.
6. Basis to Measure Performance: The performance of each employee is prepared in a
report form. In some cases, group or department performance is prepared in a report
form. The individual performance report is used for promotion and incentives. The group
performance report is used for giving bonus.
7. Control: Reports are the basis of control process. On the basis of reports, actions are
initiated and instructions are given to improve the performance.

CONTROL: DEFINITION, CHARACTERISTICS, IMPORTANCE AND

LIMITATIONS
Control: Definition, Characteristics, Importance and Limitations!
Definition:
George R. Terry:
“Controlling is determining what is being accomplished that is evaluating the
performance and, if necessary, applying corrected measures so that the performance takes
place according to plans.” In Terry’s view, controlling helps in proper implementing of
plans. If the plans are not progressing at a proper pace than necessary measures are taken
to set the things right. Controlling is a channel through which plans may be properly
implemented.

Robert N. Anthony:
“Management Control is the process by which managers assure that resources are
obtained and used effectively and efficiently in the accomplishment of an organization’s
objectives.” Control is a tool in the hands of management for ensuring better utilization
of resources. Anthony even goes to the extent of saying that control even ensures the
arrangement of required resources.

Earnest Dale:
“The modern concept of control envisages a system that not only provides a historical
record of what has happened to the business as a whole but pin-points the reason why it
has happened and provides data that enables the chief executive or the departmental head
to take corrective steps if he finds he is on the wrong track.” Dale has enlarged the scope
of control by saying that it helps in finding out the reasons for low performance and then
suggesting the ways of improving it. It also gives information to the top executives to
assess their performance and then take corrective measures if necessary.

Koontz and O’Donnell:

“The measurement and correction of the performance of activities of subordinates in
order to make sure that enterprise objectives and plans devised to attain them are being
accomplished.” The accomplishment of organizational goals is the main aim of every
management. The performance of subordinates should be constantly watched to ensure
proper implementation of plans. Co-ordination is the channel through which goals can be
achieved and necessary corrective actions may be taken if things are not going as per the
objectives.

Henry Fayol:
“In an undertaking control consists in verifying whether everything occurs in conformity
with the plan adopted, the instructions issued and principles established.” It has to point
out weaknesses and errors in order to rectify them and prevent recurrence. It operates on
everything things, people, actions, etc.

Characteristics of Control:
From the discussion of above given definitions, following inferences may be drawn:
1. Managerial Function:
Control is one of the managerial functions. It is not only the function of chief executive
but is the duty of every manager. A manager is responsible for whatever work is assigned
to him. He will control the performance of his subordinates for ensuring the
accomplishment of goals. Control is mainly the function of line organization but manager
may ask for data from staff personnel.
2. Forward Looking:
Control is forward looking. Past is already gone thus, cannot be controlled. Measures can
be devised to control future activities only. Past provides a base for determining controls
for future. The manager will study the past performance in order to find out the reasons
for low results. A corrective action will be taken to ensure that work in future is not
adversely affected. Take for example, production for a particular month is low than the
standard. Manager will not be able to do anything about the past performance. However,
he may study the reasons for low production. He should take appropriate steps so that the
same mistakes are not repeated and production will not suffer in future.

3. Continuous Activity:
Control is regularly exercised. It is not an activity in isolation. The manager will have to
see that his subordinates perform according to plans at all the time. Once the control is
withdrawn it will adversely affect the work. So control will have to be exercised
continuously.

4. Control is Related to Planning:

Planning is the first function of management while control is the last. Control cannot be
exercised without planning. First the objectives are set and then efforts are made to see
whether these are accomplished or not. Whenever there is a laxity in performance or
things are not happening as per the plans then corrective measures are taken immediately.
So planning provides a base for controlling.

5. Essence of Control is Action:

Whenever performance is not as per the standards the immediate action is needed to
correct the things. The purpose of control will be defeated if corrective action is not taken
immediately. If the sales are less than the standard set for marketing department then
steps will be taken to ensure that performance is not low in future. If no such steps are
taken then there will be a lack of control. In practice, immediate action is the essence of
control.

Importance of Control:
The control function helps management in various ways. It guides the ‘management in
achieving pre-determined goals. The efficiency of various functions is also ensured by
the control process. The shortcomings in various fields are also reported for taking
corrective measures.

The following are some of the advantages of control system:

1. Basis for Future Action:
Control provides basis for future action. The continuous flow of information about
projects keeps the long range planning on the right track. It helps in taking corrective
action in future if the performance is not up to the mark. It also enables management to
avoid repetition of past mistakes.
2. Facilitates Decision-making:
Whenever there is deviation between standard and actual performance the controls will
help in deciding the future course of action. A decision about follow up action is also
facilitated.

3. Facilitates Decentralization:
Decentralization of authority is necessary in big enterprise. The management cannot
delegate authority without ensuring proper controls. The targets or goals of various
departments are used as a control technique. If the work is going on satisfactorily then top
management should not worry. The ‘management by exception’ enables top management
to concentrate on policy formulation. Various control techniques like budgeting, cost
control, pre action approvals allow decentralization without losing control over activities.

4. Facilitates Co-ordination:
Control helps in coordination of activities through unity of action. Every manager will try
to co-ordinate the activities of his subordinates in order to achieve departmental goals.
Similarly, chief executive will co-ordinate the functioning of various departments. The
controls will act as checks on the performance and proper results will be achieved only
when activities are coordinated.

5. Helps in Improving Efficiency:

The control system helps in improving organizational efficiency. Various control devices
act as motivators to managers. The performance of every person is regularly monitored
and any deficiency is corrected at the earliest.

6. Psychological Pressure:
Controls put psychological pressure on persons in the organization. Everybody knows
that his performance is regularly evaluated and he will try to improve upon his previous
work. The rewards and punishments are also linked with performance. The employees
will always be under pressure to improve upon their work. Since performance
measurement is one of the important tools of control it ensures that every person tries to
maximize his contribution.

Limitations of Control:
Though control is essential for better performance and maintenance of good standards,
there are certain limitations also.

Some of the limitations are discussed as such:

1. Influence of External Factors:
There may be an effective control system but external factors which are not in the ambit
of management may have adverse effect on the working. These factors may be
government policy, technological changes, change in fashion, etc. The influence of these
factors cannot be checked by the control system in the organization.
2. Expensive:
The control system involves huge expenditure on its exercise. The performance of each
and every person in the organization will have to be measured and reported to higher
authorities. This requires a number of persons to be employed for this purpose. If the
performance cannot be quantitatively measured then it will be observed by the superiors.
The exercise of control requires both time and effort.

3. Lack of Satisfactory Standards:

The performance of certain activities involving human behaviour cannot be fixed in terms
of quantities. It is difficult to fix standards for activities like public relations, management
development, human relations, research, etc. The evaluation of work of persons engaged
in these activities will be difficult.

4. Opposition from Subordinates:

The effectiveness of control process will depend upon its acceptability by subordinates.
Since control interferes with the individual actions and thinking of subordinates they will
oppose it. It may also increase the pressure of work on subordinates because their
performance is regularly monitored and evaluated. These factors are responsible for the
opposition of controls by subordinates.

PRINCIPLES OF CONTROL : METHODOLOGIES AND TECHNIQUES

Controlling is a crucial activity of managers. Controlling plays a vital role in management
which involves several procedures, principles, methods, etc. All the managers are
required to understand the importance of controlling and the methods involved in it. Let
us know about the principles of control in management and explaining each principle in
detail makes the readers have prior knowledge on this.

Definition and List of the Principles of Control

The Principles of control can be defined as different methodologies, techniques used by
the managers to control and monitor various business activities which help for the growth
of the organization. These principles also help to protect and safeguard the organization,
its assets, liabilities, resources, etc. Given below are the list of principles of controlling:
 Principle of Reflection of Plans - Planning and controlling go hand in hand. If
any entity has a proper plan then it is much easier to make a control system for
that entity. Overall, a proper plan means the control will be more effective. It is the
basic principle of control. The principle of reflection of plants plays a predominant
role in the organization for its growth in terms of quality and quantity. Planning
 and controlling are like side by side of a coin. This principle helps to reflect all the
plants that were designed in the first stage of the organization.
 Principle of Prevention - There is a concept named as prevention is better than
cure. This will apply to the control function as well. Hence, control does not
always focus on the improvement but also on solving the problems as well. It is
another important principle of control that helps to prevent the negative aspects of
the firm at the initial stage. From the ancient days as we believed prevention is
better than cure, this principle helps to realize defects in the beginning and also
tries to find remedies for them. Feedforward control is a famous technique used in
the principle of prevention.
 Principle of Future Directed Control - Control is a function which looks
forward. With the help of relevant information controls can be directed towards
the future and can help in making things much better.
 Principle of Efficiency of Control - It is very necessary and important that there
needs to be efficiency in the approaches and techniques of the system of control.
 Principle of Action - Control function will only be justified only when there will
be remedial action to take. Pointing out the drawbacks will not be enough. There is
a need to take action as well to make the management effective and efficient.
Every task cannot be made with a plant design on paper. It should take a physical
form and put it into action. Then only we can move forward either in Life or in
work. This principle of action is also an extension of finding out defects and
deviations. It helps to take necessary remedial actions for the findings.
 Principles of Standards - There are predetermined standards which are already
being set up by the company and that needs to be achieved by the workers.
 Principles of Assurance of Objectives - Just by detecting the deviations in the
work, the company's objectives can be achieved on a quick and more efficient and
effective basis.
 Principle of Organizational Suitability - For having an efficient and effective
control, the business organisation structure must be well integrated and clear. It is
the most important principle of control in management. Every organization needs
to choose a set of principles that are suitable for that particular organization
because every organization may vary from its type, size, methodologies, etc.

 Principle of Responsibility:- Apart from the principles of control, responsibility

is the basic duty that should be owned by every employee from a lower level to a
 higher level of the organization for its smooth and safe growth. It was also helpful
in gaining name and fame for the organization.

 Principle of Exception:- This principle majorly concentrates on minor

exceptional cases that may deviate slightly from the standards stated at the
beginning of the organization. It also takes care that these exceptions may not
disturb or affect the growth of the organization.

 Principle of Critical Points:- Each organization plays several critical points

because of various factors. At that time, the principles of control in management
help the managers to pay more attention to these critical points, whether they are
expected or unexpected.

 Principle of the Pyramid:- It is also one of the principles of control that explains
the delegation of authority as well as the direction of a message which can pass
from the lower level to a higher level. Even though it seems to be General, it plays
a very significant role as certain issues may arise for the middle-level employees
because of superiors and subordinates.

 Principle of Future-directed Control:- This principle of control is completely

contrasted to the above principle, which is the feedback principle. It is simply
known as the feed-forward principle. Along with the low-level employees,
planning and controlling the action, the high-level employees will forecast and
monitor the activities going on in The firm, and it takes care of all the activities
that need to move smoothly without any deviations or disturbances.

 Principle of the Standard:- Every organization has a set of standards that need to
be obeyed and followed by all levels of the organization. These should be
productive and qualitative, for example, punctuality, delegating work, reporting to
the required people, etc., all these Commander standards should be transparent and
specific to their organization.
  Principle of Objective:- It is the most common principle of control. Because
every organization's motive is to achieve its objective either monetary benefit or
fame or any other, this principle always monitors the works for the final objective.
It also controls all the deviations and looks after the remedies facilitated to that
particular deviation.

Meaning of Controlling
Controlling is one of the important elements in the field of management process and is
one of the managerial functions. Controlling is the last managerial function after
planning, organizing, staffing and directing. Basically, controlling makes sure that the
activities which are already planned are accomplished or not. It helps in achieving the
desired goals by planning. Controlling is all about comparing the actual results with the
standards which are pre determined and take necessary corrective measures. In other
words, it is the process of analysing the work by comparing it with the goals and taking
steps to make it better.

Nature of Controlling
 Controlling is a function of management or we can say that actually is actually a
follow up action for the other functions of management.
 Under control, actual performance is determined against the predetermined
standards and makes necessary changes or actions. Its work is based on the actual
plan which was made at the start. Hence, control is based on planning.
 Controlling is all about reviewing the standards of performance on a continuous
basis and taking corrective measures based on that. Hence, it is a dynamic
process.
 Controlling works on comparing the actual work and the standards made for it.
Corrective actions are also made for improving its future performance. Hence, it is
to be said that controlling aims at the future.
 Controlling is a continuous process and not only one step process as it involves
constant analysis of actual and planned performance.

STEPS INVOLVED IN CONTROL PROCESS

The following are the steps involved in the control process:
1. Establishing standards and methods or ways to measure performance
2. Measuring actual performance
3. Determining if the performance matches with the standard
4. Taking corrective action and re-evaluating the standard
Let us go ahead and discuss the above mentioned steps in detail.
Establishing performance standards: Although setting of goals and standards are part
of the planning process, it also plays an important role in controlling.
The main objective of controlling is to guide the business towards the desired target.
Therefore, if the employees or members of a business are well aware of the target, it will
result in more awareness about the target.
The managers must communicate the goals and objectives clearly to the employees
without any ambiguities. An organisation in which everyone is working towards a
common objective has a better chance to grow and prosper.
Measuring actual performance against the set standards : The immediate action that
managers need to take after being made aware of the goals, is to measure their actual
performance and compare that with the standards already set. This helps in identifying if
the plan is actually working as was thought to be.
Once a plan is implemented, the task of managers is to monitor the plans and evaluate.
Managers must be ready with an alternative plan or suggest corrective measures in case
the plan is not going as was intended.
This can be done only when managers are measuring their actual performance. The way
performance can be evaluated is to measure it in monetary terms, hiring financial experts.
This step of controlling is helpful in detecting future problems and issues and is essential
for taking decisions immediately so that the company is able to recover from the losses.
Determining if the performance matches with the standard: Checking if the
performance matches with the standards is very important. It is an important step in
controlling. In this step, the results are measured with the already set standards.
Taking corrective action and re-evaluating the standard: Corrective measures need to
be taken when there is a discrepancy. Correct actions provide protection against loss and
stop them from reappearing in future.
Types of Control
Types of Control Techniques in Management

Management theorists and experts have devised several techniques over the years. They
often divide these techniques into two categories: traditional and modern. Traditional types
of techniques generally focus on non-scientific methods. On the other hand, modern
techniques find their sources in scientific methods which can be more accurate.
Traditional Types of Control Techniques in Management

 Budgetary Control
 Standard Costing
 Financial Ratio Analysis
 Internal Audit
 Break-Even Analysis
 Statistical Control

Despite the emergence of modern techniques, traditional practices are still widely in use
these days. Let us discuss them one by one.

Budgetary Control
Budgeting simply means showcasing plans and expected results using numerical
information. As a corollary to this, budgetary control means controlling
regular operations of an organization for executing budgets.
A budget basically helps in understanding and expressing expected results of projects and
tasks in numerical form. For example, the amounts of sales, production output, machine
hours, etc. can be seen in budgets.

There can be several types of budgets depending on the kind of data they aim to project. For
example, a sale budget explains selling and distribution targets. Similarly, there can also be
budgets for purchase, production, capital expenditure, cash, etc.

The main aim of budgetary control is to regulate the activity of an organization using
budgeting. This process firstly requires managers to determine what objectives they wish to
achieve from a particular activity. After that, they have to lay down the exact course of
action that they will follow for weeks and months.

Next, they will translate these expected results into monetary and numerical terms, i.e. under
a budget. Finally, managers will compare actual performances with their budgets and take
corrective measures if necessary. This is exactly how the process of budgetary control
works.

Standard Costing
Standard costing is similar to budgeting in the way that it relies on numerical figures. The
difference between the two, however, is that standard costing relies on standard and
regular/recurring costs.

Under this technique, managers record their costs and expenses for every activity and
compare them with standard costs. This controlling technique basically helps in realizing
which activity is profitable and which one is not.

Financial Ratio Analysis

Every business organization has to depict its financial performances using reports like
balance sheets and profit & loss statements. Financial ratio analysis basically compares
these financial reports to show the financial performance of a business in numerical terms.

Comparative studies of financial statements showcase standards like changes in assets,

liabilities, capital, profits, etc. Financial ratio analysis also helps in understanding the
liquidity and solvency status of a business.
Internal Audit
Another popular traditional type of control technique is internal auditing. This process
requires internal auditors to appraise themselves of the operations of an organization.

Generally, the scope of an internal audit is narrow and it relates to financial and accounting
activities. In modern times, however, managers use it to regulate several other tasks.

For example, it can also cover policies, procedures, methods, and management of an
organization. Results of such audits can, consequently, help managers take corrective action
for controlling.

Break-Even Analysis
Break-even analysis shows the point at which a business neither earns profits nor incurs
losses. This can be in the form of sale output, production volume, the price of products, etc.

Managers often use break-even analysis to determine the minimum level of results they
must achieve for an activity. Any number that goes below the break-even point triggers
corrective measures for control.

Statistical Control
The use of statistical tools is a great way to understand an organization’s tasks effectively
and efficiently. They help in showing averages, percentages, and ratios using
comprehensible graphs and charts.

Managers often use pie charts and graphs to depict their sales, production, profits,
productivity, etc. Such tools have always been popular traditional control techniques.

Types of Organizational Controls

Control can focus on events before, during, or after a process. For example, a local
automobile dealer can focus on activities before, during, or after sales of new cars.
Careful inspection of new cars and cautious selection of sales employees are ways to
ensure high quality or profitable sales even before those sales take place. Monitoring how
salespeople act with customers is a control during the sales task. Counting the number of
new cars sold during the month and telephoning buyers about their satisfaction with sales
transactions are controls after sales have occurred. These types of controls are formally
called feedforward, concurrent, and feedback, respectively.
 Feedforward controls, sometimes called preliminary or preventive controls,
attempt to identify and prevent deviations in the standards before they occur.
Feedforward controls focus on human, material, and financial resources within the
organization. These controls are evident in the selection and hiring of new
employees. For example, organizations attempt to improve the likelihood that
employees will perform up to standards by identifying the necessary job skills and
by using tests and other screening devices to hire people with those skills.
 Concurrent controls monitor ongoing employee activity to ensure consistency
with quality standards. These controls rely on performance standards, rules, and
regulations for guiding employee tasks and behaviors. Their purpose is to ensure
that work activities produce the desired results. As an example, many
manufacturing operations include devices that measure whether the items being
produced meet quality standards. Employees monitor the measurements; if they
see that standards are not being met in some area, they make a correction
themselves or let a manager know that a problem is occurring.
 Feedback controls involve reviewing information to determine whether
performance meets established standards. For example, suppose that an
organization establishes a goal of increasing its profit by 12 percent next year. To
ensure that this goal is reached, the organization must monitor its profit on a
monthly basis. After three months, if profit has increased by 3 percent,
management might assume that plans are going according to schedule.

REQUIREMENTS OF EFFECTIVE CONTROL

Control is necessary in every organization to ensure that everything is going properly.

1. Reflecting Organizational Needs

All control systems and techniques should reflect the jobs they are to perform. There
may be several control techniques which have general applicability such as,
budgeting, costing, etc.

2. Forward Looking

Control should be forward looking. Though many of the controls are instantaneous,
they must focus attention as to how future actions can be conformed with plans.

3. Promptness in

An ideal control system detects deviations promptly and forms the manager
concerned to take timely actions.
4. Pointing out Exceptions at Critical Points

Control should point exception at critical points and suggest whether action is to be
taken for deviations or not some deviations in the organizations have no impact while
others, through very little in quantity, may have great significance. Thus control
system should provide formation for critical point control and control on exception.

5. Objectives

The control should be objective, definite and determinable in a clear and positive way.
The standards of measurement should be quantified as far as possible. If they are not
quantifiable, such as training effectiveness etc. they must be determinable and
verifiable.

6. Flexible

Control should be flexible so that it remains workable in the case of changed plans,
unforeseen circumstances or outright failures.

7. Economical

Control should be economical and must be worth its costs. Economy is relative, since
the benefits vary with the importance of the activity, the size of the operation, the
expense that might be incurred in the absence of control and the contribution the
control system can make.

8. Simple

Control system must be simple and understandable so that all managers can use it
effectively.

9. Motivating

Control system should motivate both controller and controlled.

10. Reflecting
The control system should reflect orgnaisational pattern by focusing attention on
positions in organisation structure through which deviations are corrected.
MODERN TECHNIQUES OF MANAGERIAL CONTROL

Modern techniques of controlling are those which are of recent origin & are comparatively
new in management literature. These techniques provide a refreshingly new thinking on the
ways in which various aspects of an organization can be controlled. These include:

 Return on investment
 Ratio analysis
 Responsibility accounting
 Management audit
 PERT & CPM
1. Return on Investment
Return on investment (ROI) can be defined as one of the important and useful techniques. It
provides the basics and guides for measuring whether or not invested capital has been used
effectively for generating a reasonable amount of return. ROI can be used to measure the
overall performance of an organization or of its individual departments or divisions. It can
be calculated as under-

Net income before or after tax may be used for making comparisons. Total investment
includes both working as well as fixed capital invested in the business.

2. Ratio Analysis
The most commonly used ratios used by organizations can be classified into the following
categories:

 Liquidity ratios
 Solvency ratios
 Profitability ratios
 Turnover ratios
3. Responsibility Accounting
Responsibility accounting can be defined as a system of accounting in which overall
involvement of different sections, divisions & departments of an organization are set up as
‘Responsibility centers’. The head of the center is responsible for achieving the target set for
his center. Responsibility centers may be of the following types:

 Cost center
 Revenue center
 Profit center
 Investment center
4. Management Audit
Management audit refers to a systematic appraisal of the overall performance of the
management of an organization. The purpose is to review the efficiency &n effectiveness of
management & to improve its performance in future periods.

5. PERT & CPM

PERT (programmed evaluation & review technique) & CPM (critical path method) are
important network techniques useful in planning & controlling. These techniques, therefore,
help in performing various functions of management like planning; scheduling &
implementing time-bound projects involving the performance of a variety of complex,
diverse & interrelated activities.

Therefore, these techniques are so interrelated and deal with such factors as time scheduling
& resources allocation for these activities.

MANAGEMENT BY EXCEPTION (MBE)

Management by exception is a workplace practice that finance and business industries

often use. This practice allows employees to only involve their managers on specific
issues. For example, an employee who monitors the company's budget may only need to
contact their manager if the account falls under a certain amount. This practice allows
professionals to work independently and creates time for managers to handle more
pressing issues than regular daily operations.

It also ensures that management professionals invest most of their time in effort in
establishing new policies and making company decisions rather than being involved in
the daily activity of the company.
How does management by exception work?

Management by exception functions by following these steps:

1. Set a standard for normal operations

In order to decide what issues employees contact managers for, the company must set a
standard for daily operations. This means every employee understands the normal
happenings of a workday as well as the norm for certain topics.

For example, if a company account receives a deposit every Friday, it is important for the
employees responsible for the account to recognize that weekly pattern. This allows the
employees to notify a manager if the account does not receive a deposit on Friday, as that
happening would be outside the normal standards of operation.

2. Establishing a hierarchy

When practicing management by exception, some companies organize the leadership

within their company to ensure lower-level managers solve the minor issues, while
members of upper-level management address major issues. While not all companies
adopt this method of including hierarchy in their management by exception practices, the
ones that do establish who employees report certain issues with.

For example, one manager in a company may be responsible for all budget-related issues,
while another may handle employee behavioral issues.

3. Assessing employee performance

Assessing employee performance allows management professionals to understand how

their employees' productivity compares to the ideal company standard. Monitoring
company activity is an important step in managing my exception because it allows
managers and other employees to notice when manager intervention is necessary.

4. Investigating and solving exceptions

When professionals find situations or data that goes against the company norm, they
report it to the appropriate manager. The manager then works on a team or independently
to address the issue. For example, if a manager learns that a department is not reaching its
productivity goals, they investigate to find the cause. This leads them to create a solution
to the issue and restore the company standards.

MANAGEMENT BY EXCEPTION

Professionals characterize management by exception with these principles:

Delegation

Management by exception works through the delegation of lower-priority tasks. Because

this business practice doesn't require managers to be involved in all aspects of a
company's daily operations, employees handle more routine tasks and help monitor
productivity. Managers are responsible for larger tasks, such as making financial
decisions for the company and implementing workplace policies.

Organization

In order for a company to practice management by exception efficiently, professionals

use organizational skills to observe any deviations from the company norms. Then, the
professionals consider the organization of leadership within their company in order to
decide who to alert about the deviation.

Professional improvement

By setting a standard for company productivity and allowing professionals to address

minor problems independent of supervision, management by exception encourages
professional growth. The standard of productivity may also allow employees who are
performing below this standard to understand and visualize how to increase their work
potential.

Productivity

Businesses that practice management by exception aim to foster an efficient and

productive workplace. Management by exception helps companies achieve this by
ensuring upper-level professionals focus on the company's development, while other
professionals help achieve the daily operation goals.

Common goals

When deciding on a standard of workplace production norms, companies also establish

company goals. This is because the standard a company sets for employees likely reflects
what needs to be accomplished in order for the company to be successful. Each employee
in the company then works to achieve these goals by upholding the company standards.

Analysis

Managers and employees use analysis principles and skills to monitor company activity.
This allows professionals to ensure company standards and notice any issue that may
arise. Managers also use analysis to create solutions for these problems.
Cons of management by exception

While some companies thrive using management by exception practices, the method may
not be right for all companies. Here's a list of cons about management by exception to
consider:

Less preventive

Because management by exception relies on reacting to a problem, it can neglect to put

preventative measures in place. This means that a company may be more prepared to
handle a problem instead of keeping it from happening in the first place. However, many
companies keep this in mind while using management by exception practices and take
extra care to both react to and prevent problems.

Requires close monitoring

In order to work efficiently, companies who implement management by exception need

to establish close monitoring practices ensuring professionals alert the managers when a
problem arises. Because these managers do not focus on daily operations, they rely on
other professionals to keep them informed about any issues.

However, most companies that use management by exception train their employees to
use strong observation skills and hire responsible professionals to keep the management
system efficient and accurate.

Advanced problem-solving

Management by exception also requires all leaders within a company to have exceptional
problem-solving skills. This helps them quickly address issues and find creative solutions
for them. While this is an advanced skill, most management professionals train to possess
this skill regardless of the company's management method.

Pros of management by exception

When company leaders implement management by exception practices in their

organization, it can be beneficial. Here are some pros about management by exception to
consider:

Efficient practices

Management by exception allows managers to lead their company efficiently by

delegating tasks. Managers focus on achieving the company's vision while other
employees work on daily tasks to keep the company operational. This allows all company
employees to stay productive and specialize in certain tasks.
Sets clear priorities

By establishing a company standard for productivity, managers can set clear priorities.
For example, if an employee knows when they should notify a manager if they sign a
high-profile client, then the employee also understands how important that activity is.
Similarly, if employees can change certain business practices without manager
intervention, they can guess that it is a low-level priority.

Motivates employees

Because management by exception allows employees to work independently, it can

motivate employees to take more responsibility at work. As this business practice
encourages professionals to focus on productivity, it can also help employees increase
their work potential. If a professional is especially interested in problem-solving,
management by exception can also motivate employees to seek management positions.

Quickly addresses problems

When practicing management by exception, professionals quickly react to any issue that
arises. This can help companies address problems in a timely manner. Management by
exception also encourages efficient communication, which allows managers to find fast
solutions for issues