AEC 4204- Agribusiness

Management

Lecture 5 - Decision making, planning, organizing,

Directing, and controlling

Paul Aseete, PhD

October 1st, 2021

 ORGANIZING
• Organization means a system with parts which work
together, or system with parts dependent upon each
other

• Organization is a process of identifying and grouping

the work to be performed, defining and delegating
responsibility and authority, and establishing
relationships for the purpose of enabling people to
work most effectively together in accomplishing
objectives
Nature or Characteristics of an
Organization
• Division of Labor – work is divided into different functions
and subfunctions
• Co-ordination - suitable methods to ensure proper co-
ordination of the different activities perform at various work
spots.
• Must have a proper relationship between a) an
employee and his work, b) one employee and
another and c) one department or sub-department
and
• Objectives - a business cannot be accomplished without an
organization; similarly, an organization cannot exist for long
without objectives and goals
Nature or Characteristics of
an Organization
• Authority – Responsibility Structure - positions of personnel
are so ranked that each of them is subordinates to the one
above it, and superior to the one below it.
• Communication – this ensures that there is proper
understanding between people
• The channels of communication may be formal, informal,
downward, and upward to horizontal
Process of Organization
• The important steps in the organization process
are:
1. Determining the Activities to be performed
2. Assignment of Responsibilities
3. Delegation of Authority
4. Selecting Right person for Right Jobs
5. Providing Right Environment
Key Elements of the
Organization Process
• The key elements in the process of organization
1. Departmentation
2. Delegation and
3. Decentralization
Key Elements of the
Organization Process
A. Departmentation/Departmentalizing
Departmentation implies the grouping of various activities based on their
similarity, into separate units.
• Departmentation of the enterprise activities can be done by:
1. Functions: production, sales, finance and personnel departments can be
created.
2. Production: For each product or group of products, a separate department
is created.
3. Territory: For each geographical division or territory, a separate
department is created.
4. Customer: Departmentation by customer is followed to look after the sales
function where, in the interest of efficiency and economy, special attention
needs to be given to different customers.
5. Number: In case departmentation by numbers, activities are grouped on
the basis of their performance by a certain number of persons, whereas
under departmentation by time, activities are grouped on the basis of the
time of their performance
Key Elements of the
Organization Process
B. Delegation
The delegation has three important features, namely,
1. Assignment of duties and responsibilities.
2. Delegation of authority to perform the assigned duties
and responsibilities.
3. Accountability.
Key Elements of the
Organization Process
C. Decentralization
• Decentralization refers to dispersal of decision-making
authority
• Means that decisions are to be made by persons and at
places away from the center.
• Decentralization may take the form of:
 departmentation of enterprise activities;
 dispersal of decision-making powers among executives at various
levels.
 Importance of Organization
• Efficiency in Management
• Organization is an effective instrument for realizing the objectives of
an enterprise
• Planning, direction and control can have meaning only when these
functions are undertaken within the frame work of a properly
designed and balanced organization
• Instrument of Development
• A balanced organization helps an enterprise to grow and enter new
lines of business.
• Adoption of New Technology
• effective management can changes in the environment which will
involve rescheduling of activities as a new approaches to delegation
of authority and responsibility emerge
• Aid to Initiative
• An organization should encourage initiative among its staff and
discover talents and creativity among its employees.
Additional Reading
• Principles of Organization
1. Objectives
2. Unity of Command
3. Span of Control
4. Scalar pattern
5. Clear Definition of Authority and Responsibility
6. Balance between Authority and Responsibility
7. Absolute Responsibility of Managers for Acts of Subordinates
8. Power
9. Accountability
10. Delegation
11. Job Range and Depth
12. Specialization
13. Distinction between Line and Staff Functions
14. Flexibility
15. Simplicity
Additional Reading
• Patterns in Organization Structure: Common
patterns of organization structure include:
1. Line organization
2. Functional organization
3. Line and Staff organization
4. Project organization
5. Committee organization
6. Free-form organization
DIRECTING
• Directing is concerned with telling subordinates
what to do and seeing that they do it as best they
can
• Directing includes:
• assigning tasks and duties, explaining procedures, issuing
orders, providing on-the-job instructions, monitoring
performance, and correcting deviations
DIRECTING
• The directing function includes the following:
1. Supervising - ensure that sub-ordinates work efficiently to accomplish
the tasks assigned. Provide leadership to effectively accomplish tasks.

2. Guiding - a specialized task of leading the sub-ordinates to accomplish

the result by overcoming the hurdles.

3. Leading - the ability of a superior to influence the behaviour of his

subordinates and persuade them to follow a particular course of action

4. Motivating- goal-directed behaviour - what a person will choose to do

when several alternatives are available to him

5. Communicating - sharing ideas in common. a technique for

expressing ideas effectively
 CONTROLLING
• Control means the power or authority to direct,
order or restrain.
• Comparing operating results with the plans, and
taking corrective action when results deviate from
the plans
• Control requires:
• Cut and specific plan according to which any work is to
proceed
• A means of measuring results of an operation and
detecting deviations
Steps in Controlling Process
Identification of Deviations

Evaluation of Actual Performance

Measurement of Actual Performance

Actual Performance
Why Control?
• A control system is needed for three purposes to
1. Measure progress - control consists in verifying whether
everything is occurring in conformity with plans adopted, the
instructions issued, and principles established

2. Uncover deviation – Changes, complexity, mistakes and

delegation

3. Taking corrective action - reveal that plans need to be redrawn

or goals needed to be modified, a need for reassignment or clarification
of duties
Steps in a Control Process -1
• Three steps in control process
1. Establishing standards
2. Measuring and comparing actual against standards
3. Taking corrective action
Steps in a Control Process -2
1. Establishing Standards as a manager:
• Physical standards e.g., Labour hours per unit of output, Level of
production per machine hour

• Cost Standard - Direct and indirect costs per unit produced, material cost
per unit, selling cost per unit of sale

• Revenue Standard - Average sales per customer, sales per capita in each
market area etc.

• Capital Standard - Rate of return on capital invested, Current asset /

current liabilities = current ratio.

• Intangible standard - Competence of manager and employees. Standards

should emphasis the achievement of result more than conformity to rules to
methods.
Steps in a Control Process -3
2. Measuring and Comparing Actual Results Against
Standards
This can be by personal observation while work is ongoing and by a study
of summaries of figures, reports, charts and statements.
When making comparisons, Note:
• Desirable Variations e.g. Output above the standard or expenses below
the standard
• Undesirable Variations e.g. A variation in the delivery schedule agreed upon
with the customer, or variations in diesel consumption by vehicles
• When to Introduce a Control System
Steps in a Control Process -4
3. Taking Corrective Action
• Compare actual performance with prescribed standards and
find deviations
• Undertake corrective actions as soon as possible
• Identify the causes of deviations and look into possible
remedies if required
Important Devices or Tools of
Control for managers
1. Traditional Devices
a) Budgeting or budgetary control
b) Cost control
c) Production control
d) Inventory control
e) Break-even point analysis
f) profit or loss control
g) Statistical Data Analysis
h) Audit
Important Devices or Tools of
Control for managers
2. Modern Devices
a) Return on Investment Control
b) Programme Evaluation and Review Technique (PERT)
c) Management Information System (MIS)
d) Cybernetics
e) Management Audit
Important Devices or Tools of Control
for managers - Traditional Devices
a). Budgetary Control
A budget is a financial plan for a definite period time.
Budgetary control involves a course of action that would make the realization of
the budgeted targets possible
Zero-based budgeting as a method of budgeting under which all activities are
reevaluated each time a budget is formulated.

b). Cost Control

It refers to control of all the costs of an undertaking, both direct and indirect, in
order to achieve cost effectiveness in business operations.
Important Devices or Tools of Control
for managers - Traditional Devices
c). Production Control
Production control is the process of planning production in advance of operations,
establishing the exact route of each individual item, part or assembly, setting,
starting and finishing dates for each important item.
It includes assembly and the finished product; and realizing the necessary orders
as well as initiating the required follow up to effect the smooth functioning of the
enterprise.

d). Inventory Control

It refers to controlling the kind, amount, location, movement, and timing of the
various commodities used in and produced by the industrial enterprises.
Important Devices or Tools of Control
for managers - Traditional Devices
e). Break – Even Point Analysis
A break-even point is a point when sales revenue is equal to total cost (fixed and
variable).
That point in the production where profit is Zero and Loss is Zero
Y Total Revenue
Cost and Revenue (UGX)

Profit Total Cost

Loss

Break even Point

Break Even Output

Units of Output X
Important Devices or Tools of Control
for managers - Traditional Devices
F). Profit and Loss Control
Profit and Loss Control refers to a control system under which
sales, expenses, and hence profits of each branch or “product
division” are compared with those of other branches and
product divisions.

These could be compared with historical trends to measure

deviations and take corrective action.
Important Devices or Tools of Control for
managers - Traditional Devices
g). Statistical Analysis

Comparison of ratios,
percentages, averages,
correlations, relations,
causation etc. of
different periods can
be done to monitor –
deviations and their
causes.
Important Devices or Tools of Control
for managers - Traditional Devices
h). External and Internal Audit
External audit is enforced by law in respect of all joint stock
companies, co-operatives etc. Its objective is to safeguard the
interest of the share holder against the malpractices of
management.
Internal audits may be done by staff members to verify
financial transactions and financial records for analyzing the
overall control system of the organization.