Unit-2

Organizing & Staffing

 Organizing
0 Organizing refers to the way in which the work of a
group of people is arranged and distributed among
group members.
0 The function of organizing includes the
determination of the activities to be performed;
creation of departments, sections and positions to
perform those activities; and establishing
relationships among the various parts of an
organization.
 Purpose
0 The purpose is to create a framework for the
performance of the activities of an organization in a
systematic manner.

REMEMBER
Organizing is a function of management,
while organization refers to a group of
persons who have come together to achieves
some common objectives.
 Nature of Organizing
0 An organization connotes group of persons.
0 Communication is the nervous system of organization.
0 Organizing is a basic function of management.
0 Organizing is a continuous process.
0 Organizing is always related to objectives.
0 Organization connotes a structure of relationship.
0 Organization involves a network of authority and
responsibility relationships.
 Process of Organizing

0 Identification and Division of Work

0 Departmentalization
0 Division of Work
0 Establishing Reporting Relationships.
 Process of Organizing
0 Identification and Division of Work: The first
step in the process of organizing involves
identifying and dividing the work that has to be
done in accordance with previously determined
plans.
0 Departmentalization: Once work has been
divided into small and manageable activities then
those activities which are similar in nature are
grouped together.
 Process of Organizing

0 Division of Work: It is necessary to define the work of

different job positions and accordingly allocate work to
various employees. Once departments have been formed,
each of them is placed under the charge of an individual. Jobs
are then allocated to the members of each department in
accordance to their skills and competencies.
0 Establishing Reporting Relationships: Each individual
should also know who he has to take orders from and to
whom he is accountable. This helps in setting hierarchy and
coordination.
 Importance
0 Benefits of specialization
0 Clarity in working relationships
0 Optimum utilization of resources
0 Adaptation to change
0 Effective Administration
0 Development of Personnel
0 Expansion and Growth
 Organization
0 The end-result of organizing is a framework
of formal relationships among different
departments and positions. This framework
of formal relationships is known as
organization structure.
 Types
0 Formal Organization: Formal organization refers to
the organization structure which is designed by the
management to accomplish a particular task. It
specifies clearly the boundaries of authority and
responsibility and there is a systematic coordination
among the various activities to achieve
organizational goals.
 Formal Organization
0 Advantages 0 Disadvantages
0 Specialization 0 Violates Principle
0 Executive of Unity
Development 0 Too complicated
0 Reduction of 0 Does not develop
Workload Generalists
0 Scope of 0 Too
Expansion Departmentalized
0 Better Control 0 Lack of
Coordination
 Informal Organization

0 Informal organization is a network of

personal and social relations not established
or required by the formal organization but
arising spontaneously as people associate
with one another.
 Informal Organization

0 Advantages 0 Disadvantages
0 Prescribed lines of
communication are not
0 Spreads Rumors
followed. 0 Hard to implement
0 It helps to fulfill the
the informal
social needs of the
members and allows organization.
them to find like minded 0 It pressurizes
people. members to
0 It contributes towards
conform to group
fulfillment of
organizational objectives expectations.
by compensating for
inadequacies in the
formal organization
 Functional Organization

0 Grouping of jobs of similar nature under

functional and organizing these major
functions as separate departments creates a
functional structure. All departments report
to a coordinating head.
Functional Organization
 Functional Organization

0 Advantages 0 Disadvantages
0 Specialization 0 Confusion-
0 Effective Control-  0 Lack of Co-
0 Efficiency- ordination
0 Economy 0 Difficulty in fixing
0 Expansion- responsibility
0 Conflicts
0 Costly
 Line Organization
0  According to this type of organization, the authority
flows from top to bottom in a concern. The line of
command is carried out from top to bottom.  In this
type of organization, the line of command flows on
without any gaps in communication and co-
ordination taking place.
Line Organization
 Line Organization

0 Merits 0 Demerits
0 Simplest 0 Over reliance
0 Unity of Command 0 Lack of specialization
0 Better discipline 0 Inadequate
communication
0 Fixed
0 Lack of Co-ordination
responsibility
0 Authority leadership
0 Flexibility
0 Prompt decision
 Line and Staff Organization
0 Line and staff organization is a modification of line
organization and it is more complex than line
organization. According to this administrative
organization, specialized and supportive activities
are attached to the line of command by appointing
staff supervisors and staff specialists who are
attached to the line authority.
Line and Staff Organization
 Line and Staff Organization
Merits

0 Relief to line of executives

0 Expert advice
0 Benefit of Specialization
0 Better co-ordination
0 Benefits of Research and Development
0 Training
0 Balanced decisions
0 Unity of action
Line and Staff Organization

Demerits
0 Lack of understanding
0 Lack of sound advice
0 Line and staff conflicts
0 Costly
0 Assumption of authority
0 Staff steals the show
 Divisional Organization

0 Divisional Structure is an organizational structure

made up of separate business units or divisions. In
this structure each division has limited autonomy
with a division manager who has authority over his
or her unit and is responsible for performance.
Divisional Organization
 Divisional Structure
0 Merits 0 Demerits
0 Focus on Results 0 Duplication of
0 Allows focus on activities
single product 0 Reduces efficiency
0 Increases cost
 Matrix Organization

0 A matrix structure is one in which both

functional and geographic or product
structures are implemented simultaneously
and resources are shared between the two
structures.
Structure of Matrix Organization
 Matrix Organization
Merits
0 Achieves coordination necessary to meet dual demands
from the operating environment
0 Provides flexible sharing of resources
0 Suited for complex decision making in unstable
environments with high information processing
requirements
0 Provides opportunities for both function and product
knowledge development
 Matrix Organization

Demerits
0 Dual authority can be frustrating and confusing, leading
to higher stress for the shared resources
0 Complex and difficult to implement
0 Shared resources require excellent interpersonal skills
and training
0 Frequent meetings and conflict resolution sessions are
required
0 Requires a collegial (rather than hierarchical) culture
0 Requires offsetting pressures to maintain the dual focus
 Virtual Organization

0 VO's (virtual organizations), refers to a new

organizational form characterized by a temporary or
permanent collection of geographically dispersed
individuals, groups or organization departments not
belonging to the same organization – or entire
organizations, that are dependent on electronic
communication for carrying out their production
process.
 Determining kind of Structure
• Org. structure is an indispensable means towards business
objectives.
• Wrong structure will seriously deter the enterprise from
achieving its objectives.
• Peter Drucker has suggested 4 specific ways to find out what
kind of structure is needed to attain the objectives of a specific
business:
1. Activity Analysis: It helps to find out what work has to be
performed, what work belongs together & how each activity
should be emphasized in the org. structure.
• Example-marketing, personnel, finance, operations, etc.

2. Contribution Analysis: on the basis of the kind of

contribution they make, activities can be grouped into 4
categories:
i. Result producing activities, which directly brings
revenue.
ii. Support activities generate output which contribute
result.
iii) Hygiene & House keeping activities contribute nothing
directly to the result of the business but their
malfunction can, however, damage the business.
iv) Top mgt activities are those, which are carried out by
higher levels of mgt.
3. Decision Analysis: It determines what kind of decisions are
needed, where in the organization they should be made &
how each manager should be involved in them.
Basic characteristics determine the nature of any business
decision:
a) Degree of futurity in the decision
b) Impact of decision on other functions, areas or business as
a whole.
c) The number of qualitative factors that enter like political
beliefs, values, ethics, etc.
d) Whether decisions are recurrent or rare recurrent
4.Relations Analysis: It tells us where a specific component
belongs, it is finding the contribution each manager must
make to programmes, with whom he works & what
contribution other manager must make to him.
 Departmentation
0 The process of grouping of activities into units for the
purpose of administration is called departmentation.
It can be defined "as the process by which activities
or functions of enterprise are grouped
homogeneously into different groups."
 Departmentalization by Type

0 Functional 0 Process
0 Grouping jobs by functions 0 Grouping jobs on the basis
performed of product or customer
0 Product flow
0 Grouping jobs by product 0 Customer
line 0 Grouping jobs by type of
0 Geographical customer and needs
0 Grouping jobs on the basis
of territory or geography
 Functional Departmentalization

• Advantages
• Efficiencies from putting together similar specialties and
people with common skills, knowledge, and orientations
• Coordination within functional area
• In-depth specialization
• Disadvantages
• Poor communication across functional areas
• Limited view of organizational goals
 Geographical Departmentalization

• Advantages
• More effective and efficient handling of specific
regional issues that arise
• Serve needs of unique geographic markets better
• Disadvantages
• Duplication of functions
• Can feel isolated from other organizational areas
 Product Departmentalization

+ Allows specialization in particular products and services

+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions
– Limited view of organizational goals
 Process Departmentalization

+ More efficient flow of work activities

– Can only be used with certain types of products
 Customer Departmentalization

+ Customers’ needs and problems can be met by specialists

- Duplication of functions
- Limited view of organizational goals
 Span of Control
0 A span of control is the number of people who
report to one manager in a hierarchy. The more
people under the control of one manager - the
wider the span of control. Less means a narrower
span of control.
 Span of Control - Narrow

Advantages Disadvantages
0 More Control by Top 0 Less Empowerment
Management 0 Higher Costs
0 More Chances for 0 Delayed Decision Making
Advancement
0 Greater Specialization 0 Less Responsiveness to
Customers
0 Closer Supervision

8-45
 Span of Control - Broad

Advantages Disadvantages
0 Reduced Costs
0 Fewer Chances for
0 More Responsiveness to Advancement
Customers 0 Overworked Managers
0 Faster Decision Making
0 Loss of Control
0 More Empowerment
0 Less Management
Expertise

8-46
 Authority and Responsibility

0 Authority is the right 0 The term

to order or responsibility means
command and is the work or duties
delegated from the assigned to a person
superior to the by virtue of his
subordinate to position in the
discharge his organization.
responsibilities.
 Difference
Authority
0 Authority is the right of a
manager to command his
subordinates and use his
organizational resources.
0 Authority can be delegated
to subordinates
0 Authority flows from
downward from a superior
to his subordinate.
Responsibility
0 Denotes the duties or tasks
assigned to a subordinate by
his boss.
0 Responsibility i.e. obligation
to account for results, can’t
be delegated.
0 Accountability moves in an
upward direction as the
superior is responsible to
his subordinate
 Delegation of Authority

0  Delegation of Authority means division of authority

and powers downwards to the subordinate. Delegation
is about entrusting someone else to do parts of your
job. Delegation of authority can be defined as
subdivision and sub-allocation of powers to the
subordinates in order to achieve effective results.
 Steps

0 Assignment of Duties
0 Granting of authority
0 Creating Responsibility and
Accountability
 Importance

0 Ability to divide work

0 Reduction in Workload can make superior
concentrate on more important matters.
0 Forms the standing of the organization.
0 Opportunity for a subordinate to grow.
0 Provides stability.
 Disadvantages
0 Weakness on the part of Superior:
0 Lack of Receptiveness
0 Lack of ability to direct
0 Unwilling to let go.
0 Lack of trust in subordinates
0 Ineffective controls
 Disadvantages
0 Difficulties on the part of the subordinate
0 Lack of self confidence
0 Desire to play safe by depending on the boss for
all decisions.
0 Fear of communicating mistakes and being
criticized by the boss.
0 Lack of incentives
0 Overburden of duties
 Disadvantages

0 Difficulties on the part of the Organization:

0 Defective organization structure and non-clarity
of authority.
0 Inadequate planning
0 Splintered authority
0 Infringement of principle of unity of command.
0 Lack of effective control mechanism
 Centralization

0 Centralization of authority means

concentration of decision making power at
the top hierarchy of management.
0 Under centralization all important decisions
are made by the top management.
 Advantages

0 To facilitate personal leadership

0 To promote uniformity of action
0 To provide for integration
0 To handle emergencies
0 To check duplication
 Disadvantages

0 There can be a delay in decision making as

decision making is not allowed at lower
levels.
0 Increases the burden at the top.
0 Lowers motivation and morale of low level
executives.
0 Possible misuse of authority at the top level.
 Decentralization

0 Decentralization  is the process of

redistributing or dispersing functions, powers,
people or things away from a central location or
authority.
 Advantages

0  Distribution of burden of top executive

0  Increased motivation and morale
0 Greater efficiency and output
0 Diversification of Activities
0 Better Co-ordination
0 Facilitate effective control and quick decision
 Limitations

0  More cost
0 No Specialization
0 Need more specialists
0 No uniform action
0 No equitable distribution of work
STAFFING
 Staffing
0 The managerial function of staffing involves
manning the organization structure through
proper and effective selection, appraisal and
development of the personnel's to fill the roles
assigned to the employers/workforce.
0 According to Theo Haimann, “Staffing pertains to
recruitment, selection, development and
compensation of subordinates.”
 Importance
0 Discovering Competent Talent
0 Training and Developing employees.
0 Ensures greater production by putting the right man
at the right job.
0 Avoids any shortage of personnel.
0 Avoids over staffing and high costs of labor.
0 Makes sure all important posts all never left vacant.
 Process
0 Manpower requirements
0 Recruitment
0 Selection
0 Orientation and Placement
0 Training and Development
0 Remuneration
0 Performance Management
0 Promotion and Transfer
 Manpower requirements 

0 The very first step in staffing is to plan the manpower inventory

required by a concern in order to match them with the job
requirements and demands.
0 It involves forecasting and determining the future manpower needs of
the concern.
0 Manpower Planning which is also called as Human Resource Planning
consists of putting right number of people, right kind of people at the
right place, right time, doing the right things for which they are suited
for the achievement of goals of the organization.
 Recruitment and Selection
Recruitment- Once the requirements are notified, the concern invites
and solicits applications according to the invitations made to the
desirable candidates.
Selection- This is the screening step of staffing in which the solicited
applications are screened out and suitable candidates are appointed as
per the requirements.
0 Employee Selection is the process of putting right men on right
job. It is a procedure of matching organizational requirements with
the skills and qualifications of people. Effective selection can be done
only when there is effective matching.
0 By selecting best candidate for the required job, the organization will
get quality performance of employees. Moreover, organization will
face less of absenteeism and employee turnover problems
 Orientation and Placement

0 Once screening takes place, the appointed candidates are made familiar to the
work units and work environment through the orientation programmes.

0 Placement takes place by putting right man on the right job.  Placement is said to
be the process of fitting the selected person at the right job or place, i.e. fitting
square pegs in square holes and round pegs in round holes.

0 Once he is fitted into the job, he is given the activities he has to perform and also
told about his duties.

0 The freshly appointed candidates are then given orientation in order to familiarize
and introduce the company to him. 
 Training and Development
0 Training is a part of incentives given to the workers in order to
develop and grow them within the concern.
0 Training is generally given according to the nature of activities and
scope of expansion in it. Along with it, the workers are developed by
providing them extra benefits of in depth knowledge of their functional
areas.
0 Development also includes giving them key and important jobs as a
test or examination in order to analyze their performances.
0 Training is the process of enhancing the skills, capabilities and
knowledge of employees for doing a particular job.
0 Training process moulds the thinking of employees and leads to
quality performance of employees.
 Remuneration/Compensation
0 It is a kind of compensation provided monetarily to the employees for
their work performances. This is given according to the nature of job-
skilled or unskilled, physical or mental, etc.
0 Remuneration forms an important monetary incentive for the
employees. Employee Remuneration refers to the reward or
compensation given to the employees for their work performances.
0 Remuneration provides basic attraction to an employee to perform job
efficiently and effectively.
0 Remuneration leads to employee motivation. Salaries constitutes an
important source of income for employees and determine their
standard of living. Salaries effect the employees productivity and work
performance.
0 Thus the amount and method of remuneration are very important for
both management and employees.
 Performance Evaluation

0 In order to keep a track or record of the behaviour, attitudes as well as

opinions of the workers are seek towards their jobs.
0 For this regular assessment is done to evaluate and supervise different
work units in a concern.
0 It is basically concerning to know the development cycle and growth
patterns of the employees in a concern.
 Promotion and transfer

0 Promotion is said to be a non- monetary incentive in which the

worker is shifted from a higher job demanding bigger responsibilities
as well as shifting the workers and transferring them to different
work units and branches of the same organization.
 Employee selection Process 

1. Preliminary Interviews- It is used to eliminate those candidates who do not

meet the minimum eligibility criteria laid down by the organization. The skills,
academic and family background, competencies and interests of the candidate
are examined during preliminary interview. Preliminary interviews are less
formalized and planned than the final interviews. The candidates are given a brief
up about the company and the job profile; and it is also examined how much the
candidate knows about the company. Preliminary interviews are also called
screening interviews.

2. Application blanks- The candidates who clear the preliminary interview are

required to fill application blank. It contains data record of the candidates such as
details about age, qualifications, reason for leaving previous job, experience, etc.

3. Written Tests- Various written tests conducted during selection procedure are

aptitude test, intelligence test, reasoning test, personality test, etc. These tests
are used to objectively assess the potential candidate. They should not be
biased.
 Employee selection Process 

4. Employment Interviews- It is a one to one interaction between

the interviewer and the potential candidate. It is used to find whether
the candidate is best suited for the required job or not. But such
interviews consume time and money both. Moreover the competencies
of the candidate cannot be judged. Such interviews may be biased at
times. Such interviews should be conducted properly. No distractions
should be there in room. There should be an honest communication
between candidate and interviewer.

5. Medical examination- Medical tests are conducted to ensure

physical fitness of the potential employee. It will decrease chances of
employee absenteeism.

6. Appointment Letter- A reference check is made about the

candidate selected and then finally he is appointed by giving a formal
appointment letter.
DIRECTING
 Definition

0 DIRECTING is said to be a process in which

the managers instruct, guide and oversee the
performance of the workers to achieve
predetermined goals.
 Scope
The directing function thus, involves:
0 telling people what is to be done and explaining to them how
to do it;
0 issuing instructions and orders to subordinates to carryout
their assignments as scheduled;
0 supervising their activities;
0 inspiring them to meet the mangers expectation and
contribute towards the achievement of organizational
objectives; and
0 providing leadership.
 Requirements of Effective Direction

0 Harmony of Objectives: Harmonizing of objectives means

establishing the concurrence of organizational goals and
personal goals of the members of the organization. If a conflict
occurs between the organizational goals and the personal
goals, the achievement of goals becomes harder. Therefore in
such a situation it is up to the manager to harmonize
objectives through proper directing, to ensure the proper
success of the organization and the satisfaction of the
employees.
 Requirements of Effective Direction

0 Related to the Human Factor: Directing mainly consists of

issuing instructions to subordinates and guiding them. Both of
these activities are related to the human factor. It is the human
factor only that utilizes the other non-productive factors of
production. Briefly, it can be stated that directing is concerned
with the productive factors of production and not with non –
productive factors of production.
 Requirements of Effective Direction

0 Group of Various Functions: Directing is a single function,

but consists of various functions that help its course like
communication, motivation and planning.
0 Direct Supervision: Every superior must maintain face to face
communication with his subordinates. It boosts their morale,
increases their loyalty and provides them immediate
feedback.
 Requirements of Effective Direction

0 Efficient Communication: communication is an instrument

of direction. It is through communication the leader gives
orders, allocates jobs, explains duties and ensures
performance. Efficient Communication makes the job simpler
and directing effective as the orders and instructions are
properly understood and carried out.
 Requirements of Effective Direction

0 Following Through: Direction is not only telling the

employees what they should do but also seeing that they do it
in the desired way. The manager should, therefore, follow
through the whole performance of his subordinates not
merely to keep a check on their activities but to help them in
their act , to show them where their deficiency, if any, lies and
to revise their direction if its needs revision, and so on.
 Importance of Directing

0 It Initiates Actions - Directions is the function which is the

starting point of the work performance of subordinates. It is
from this function the action takes place, subordinates
understand their jobs and do according to the instructions
laid. Whatever are plans laid, can be implemented only once
the actual work starts. It is there that direction becomes
beneficial.
 Importance of Directing

0 It Ingrates Efforts - Through direction, the superiors are able

to guide, inspire and instruct the subordinates to work. For
this, efforts of every individual towards accomplishment of
goals are required. It is through direction the efforts of every
department can be related and integrated with others. This
can be done through persuasive leadership and effective
communication. Integration of efforts bring effectiveness and
stability in a concern
 Importance of Directing

0 Means of Motivation - Direction function helps in

achievement of goals. A manager makes use of the element of
motivation here to improve the performances of subordinates.
This can be done by providing incentives or compensation,
whether monetary or non - monetary, which serves as a
“Morale booster” to the subordinates Motivation is also helpful
for the subordinates to give the best of their abilities which
ultimately helps in growth.
 Importance of Directing

0 It Provides Stability - Stability and balance in concern

becomes very important for long term sun survival in the
market. This can be brought upon by the managers with the
help of four tools or elements of direction function -
judicious blend of persuasive leadership, effective
communication, strict supervision and efficient motivation.
Stability is very important since that is an index of growth of
an enterprise.
 Importance of Directing

0 Coping up with the changes - It is a human behavior that

human beings show resistance to change. Adaptability with
changing environment helps in sustaining planned growth
and becoming a market leader. It is directing function which
is of use to meet with changes in environment, both internal
as external. Effective communication helps in coping up with
the changes. It is the role of manager here to communicate
the nature and contents of changes very clearly to the
subordinates. This helps in clarifications, easy adaptions and
smooth running of an enterprise.
Importance of Directing

0 Efficient Utilization of Resources - Direction finance

helps in clarifying the role of every subordinate towards
his work. The resources can be utilized properly only
when less of wastages, duplication of efforts, overlapping
of performances, etc. doesn’t take place. Through
direction, the role of subordinates become clear as
manager makes use of his supervisory, the guidance, the
instructions and motivation skill to inspire the
subordinates. This helps in maximum possible utilization
of resources of men, machine, materials and money
which helps in reducing costs and increasing profits.
 Directing

0 The function of directing thus breaks down to two

parts:
0 Giving orders to employees
0 Leading and Motivating them.
CONTROLLING
 Definition
0 Controlling is a systematic exercise which is called as s process of
checking actual performance against the standards that have
been established by the organization. It also makes sure that
they corrective steps are taken, so that the deviation does not
occur again.
 Purpose of Controlling

0 Controlling has two basic functions:

0 It facilitates co-ordination.
0 It helps in planning.
 Features of Controlling

0 Controlling is an end function: A function which comes

once the performances are made in conformities with
plans.
0 Controlling is a pervasive function: which means it is
performed by managers at all levels of the organization.
0 Controlling is forward looking: because effective
control is not possible without past being controlled.
Controlling always look to future so that follow up can be
made whenever required.
 Features of Controlling

0 Controlling is a dynamic process: since controlling

requires taking review methods, changes have to be
made whenever possible.
0 Controlling is related with planning: planning and
controlling are two inseparable functions of
management. Without planning, controlling is a
meaningless exercise and without controlling,
planning is useless.
 Process of Controlling

0 Establishment of standards: Standards are the plans or

the targets which have to be achieved in the course of the
business function. They are also called as criterions for
judging the performance. They are:
0 Measurable or tangible: those standards which can be
measured and expressed are called as measurable standards.
0 Non measurable or intangible: there are standards which
cannot be measured monetarily.
 Process of Controlling

0 Measurement of Performance: the second major step in

controlling is to measure the performance. Finding out
deviations becomes easy through the measurement of actual
performance. We can measure the actual performance
through quantitative and non quantitative terms.
 Process of Controlling

0 Comparisons of Actual performance against the

standards: after establishing the standards and measuring
the actual performance, we have to compare the actual with
the standard performance. It is through this we come
across deviations. These deviations are those where the
actual performance does not measure up to the standard
performance.
 Process of Controlling

0 Taking remedial actions- Once the causes and extent of

deviations are known, the manager has to detect those
errors and take remedial measures for it. There are two
alternatives here-
0 Taking corrective measures for deviations which have
occurred; and
0 After taking the corrective measures, if the actual performance
is not in conformity with plans, the manager can revise the
targets. It is here the controlling process comes to an end.
Follow up is an important step because it is only through
taking corrective measures, a manager can exercise
controlling.
 Requisites of Controlling

0 Suitable
0 Timely and Forward Looking.
0 Objective and Comprehensible
0 Flexible
0 Economical
0 Prescriptive and Operational
0 Acceptable to Organization Members
0 Motivate People
 Types of Control
0 Feed-forward control: Feed-forward control that they
meet the standards focuses on the regulation of inputs
(human, material, and financial resources that flow into the
organization) to ensure necessary for the transformation
process.
0 Feed-forward controls are desirable because they allow
management to prevent problems rather than having to
cure them later. Unfortunately, these control require timely
and accurate information that is often difficult to develop.
Feed-forward control also is sometimes called preliminary
control, pre-control, preventive control, or steering
control.
 Types of Controls

0 Concurrent control takes place while an activity is in

progress. It involves the regulation of ongoing activities that
are part of transformation process to ensure that they
conform to organizational standards. Concurrent control is
designed to ensure that employee work activities produce
the correct results.
0 Since concurrent control involves regulating ongoing tasks,
it requires a through understanding of the specific tasks
involved and their relationship to the desired and product.
 Types of Control

0 Feedback Control: This type of control focuses on the

outputs of the organization after transformation is
complete. Sometimes called post action or output control,
fulfills a number of important functions. For one thing, it
often is used when feed-forward and concurrent controls
are not feasible or are to costly.
0 Sometimes, feedback is the only viable type of control
available. Moreover, feedback has two advantages over feed-
forward and concurrent control. First, feedback provides
managers with meaningful information on how effective its
planning effort was. If feedback indicates little variance
between standard and actual performance, this is evidence
that planning was generally on target.
 Traditional Types of Control Techniques

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

0 Means showcasing plans and expected results using numerical

information. Budgetary control means controlling regular operations of
an organization for executing budgets.
0 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.
0 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.
0 Next, they will translate these expected results into monetary and
numerical terms, i.e. under a budget.
0 Finally, managers will compare actual performances with their budgets
and take corrective measures if necessary.
 Standard Costing

0 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.
0 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

0 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.
0 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

0 This process requires internal auditors to appraise themselves of

the operations of an organization.
0 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.
0 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

0 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.
0 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

0 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.
0 Managers often use pie charts and graphs to depict their sales,
production, profits, productivity, etc. Such tools have always been
popular traditional control techniques.
 What is Management by Exception?

0 Management by exception is the practice of examining the

financial and operational results of a business, and only bringing
issues to the attention of management if results represent
substantial differences from the budgeted or expected amount.
0 For example, the company controller may be required to notify
management of those expenses that are the greater of $10,000 or
20% higher than expected.
 Advantages of Management by Exception

• It reduces the amount of financial and operational results that

management must review, which is a more efficient use of their time.
• The report writer linked to the accounting system can be set to
automatically print reports at stated intervals that contain the
predetermined exception levels, which is a minimally-invasive
reporting approach.
• This method allows employees to follow their own approaches to
achieving the results mandated in the company's budget.
Management will only step in if exception conditions exist.
• The company's auditors will make inquiries about large exceptions as
part of their annual audit activities, so management should
investigate these issues in advance of the audit.
 Disadvantages of Management by Exception

• This concept is based on the existence of a budget against which actual results are
compared. If the budget was not well formulated, there may be a large number of
variances, many of which are irrelevant, and which will waste the time of anyone
investigating them.
• The concept requires the use of financial analysts who prepare variance summaries
and present this information to management. Thus, an extra layer of corporate
overhead is required to make the concept function properly. Also, an incompetent
analyst might not recognize a potentially serious issue, and will not bring it to the
attention of management.
• This concept is based on the command-and-control system, where conditions are
monitored and decisions made by a central group of senior managers. You could
instead have a decentralized organizational structure, where local managers can
monitor conditions on a daily basis, and so do not need an exception reporting system.
• The concept assumes that only managers can correct variances. If a business were
instead structured so that front line employees could deal with most variances as soon
as they arise, there would be little need for management by exception.
THANKS