PRINCIPLES OF MANAGEMENT-JNTUK-UNIT-3-2016-2018 BATCH

PRINCIPLES OF MANAGEMENT

PRINCIPLES OF MANAGEMENTUNIT-3sanjaykanagala,rimsmba,kakinada

Directing and controllingDefinition of Co-ordination Significance and principles of CoordinationLeadership behavior and styles Leadership in cross cultural environment.Nature and importance of controlling Controlling process Requirements of effective control Establishing controlling system Controlling techniques.

LEARNING OBJECTIVESsanjaykanagala,rimsmba,kakinada

A basic management function that includes building an effective work climate and creating opportunity for motivation, supervising, scheduling, and disciplining.

DIRECTINGsanjaykanagala,rimsmba,kakinada

DIRECTINGis said to be a process in which the managers instruct, guide and oversee the performance of the workers to achieve predetermined goals. Directing is said to be the heart of management process.Planning,organizing, staffing have got no importance if direction function does not take placeDIRECTINGCONTINUE..sanjaykanagala,rimsmba,kakinada

Directing initiates action and it is from here actual work starts. Direction is said to be consisting of human factors. In simple words, it can be described as providing guidance to workers in doing work. In field of management, direction is said to be all those activities which are designed to encourage the subordinates to work effectively and efficiently. DIRECTINGCONTINUE..sanjaykanagala,rimsmba,kakinada

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According to Human, Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned Therefore, Directing is the function of guiding, inspiring, overseeing and instructing people towards accomplishment of organizational goals.

DIRECTINGCONTINUE..sanjaykanagala,rimsmba,kakinada

Pervasive (General)Function Continuous Activity Human FactorCreative Activity Executive (Managerial) Function Delegate (Representative) FunctionCHARACTERISTICS OF DIRECTIONsanjaykanagala,rimsmba,kakinada

Pervasive Function -Directing is required at all levels of organization. Every manager provides guidance and inspiration to his subordinates.Continuous Activity -Direction is a continuous activity as it continuous throughout the life of organization.Human Factor -Directing function is related to subordinates and therefore it is related to human factor. Since human factor is complex and behaviour is unpredictable, direction function becomes important.CHARACTERISTICS OF DIRECTIONsanjaykanagala,rimsmba,kakinada

Creative Activity -Direction function helps in converting plans into performance. Without this function, people become inactive and physical resources are meaningless.Executive Function -Direction function is carried out by all managers and executives at all levels throughout the working of an enterprise, a subordinate receives instructions from his superior only.Delegate Function -Direction is supposed to be a function dealing with human beings. Human behavior is unpredictable by nature and conditioning the peoples behavior towards the goals of the enterprise is what the executive does in this function. Therefore, it is termed as having delicacy in it to tackle human behavior.

CHARACTERISTICS OF DIRECTION CONTINUE..sanjaykanagala,rimsmba,kakinada

Leadership Behaviorsare easy to understand, though perhaps requiring effort to perform consistently. Behavior change gives every leader a path forward to increasing effectiveness.Behaviors can be learned whereas characteristics, such as charisma, seem inborn and more difficult to practice.Kouzes and Posner have develop a straight forward series of leadership practices(behaviors)Inspire the VisionModel the WayChallenge the Status QuoEncourage the HeartEnabling Others to Act

LEADERSHIP BEHAVIORsanjaykanagala,rimsmba,kakinada

Aleadership styleis aleader's styleof providing direction, implementing plans, and motivating people. There are many differentleadership stylesproposed by various authors, that can be exhibited byleadersin the political, business or other fields.LEADERSHIP STYLEsanjaykanagala,rimsmba,kakinada

sanjaykanagala,rimsmba,kakinada

Daniel Goleman, Richard Boyatzis and Annie McKee, inPrimal Leadership, describe six styles of leading that have different effects on the emotions of the target followers.These are styles, not types. Any leader can use any style, and a good mix that is customised to the situation is generally the most effective approach.

GOLEMAN LEADERSHIP STYLESsanjaykanagala,rimsmba,kakinada

The Visionary LeaderThe Coaching LeaderThe Affiliative LeaderThe Democratic LeaderThe Pace-setting LeaderThe Commanding LeaderGOLEMAN LEADERSHIP STYLESsanjaykanagala,rimsmba,kakinada

The Visionary Leader moves people towards a shared vision, telling them where to go but not how to get there - thus motivating them to struggle forwards. They openly share information, hence giving knowledge power to others.They can fail when trying to motivate more experienced experts or peers.This style is best when a new direction is needed.Overall, it has a very strong impact on the climate.

The Visionary Leadersanjaykanagala,rimsmba,kakinada

The Coaching Leader connects wants to organizational goals, holding long conversations that reach beyond the workplace, helping people find strengths and weaknesses and tying these to career aspirations and actions. They are good at delegating challenging assignments, demonstrating faith that demands justification and which leads to high levels of loyalty.Done badly, this style looks like micromanaging.It is best used when individuals need to build long-term capabilities.It has a highly positive impact on the climate.

The Coaching Leadersanjaykanagala,rimsmba,kakinada

The Affiliative Leader creates people connections and thus harmony within the organization. It is a very collaborative style which focuses on emotional needs over work needs.When done badly, it avoids emotionally distressing situations such as negative feedback. Done well, it is often used alongside visionary leadership.It is best used for healing rifts and getting through stressful situations.It has a positive impact on climate.

The Affiliative Leadersanjaykanagala,rimsmba,kakinada

The Democratic Leader acts to value inputs and commitment via participation, listening to both the bad and the good news.When done badly, it looks like lots of listening but very little effective action.It is best used to gain buy-in or when simple inputs are needed ( whenyouare uncertain).It has a positive impact on climate.

The Democratic Leadersanjaykanagala,rimsmba,kakinada

The Pace-setting Leader builds challenge and exciting goals for people, expecting excellence and often exemplifying it themselves. They identify poor performers and demand more of them. If necessary, they will roll up their sleeves and rescue the situation themselves.They tend to be low on guidance, expecting people to know what to do. They get short term results but over the long term this style can lead to exhaustion and decline.Done badly, it lacks Emotional Intelligence, especially self-management. A classic problem happens when the 'star techie' gets promoted.It is best used for results from a motivated and competent team.It often has a very negative effect on climate (because it is often poorly done).

The Pace-setting Leadersanjaykanagala,rimsmba,kakinada

The Commanding Leader soothes fears and gives clear directions by his or her powerful stance, commanding and expecting full compliance (agreement is not needed). They need emotional self-control for success and can seem cold and distant.This approach is best in times of crisis when you need unquestioned rapid action and with problem employees who do not respond to other methods.

The Commanding Leadersanjaykanagala,rimsmba,kakinada



TransformationalTransactionalParticipativeAutocraticLaissez-Faire

GENERALLY, 5 Different Types of Leadership Stylessanjaykanagala,rimsmba,kakinada

The transformational leadership style depends on high levels of communication from management to meet goals. Leaders motivate employees and enhance productivity and efficiency through communication and high visibility. This style of leadership requires the involvement of management to meet goals. Leaders focus on the big picture within an organization and delegate smaller tasks to the team to accomplish goals.

Transformationalsanjaykanagala,rimsmba,kakinada

Managers using the transactional leadership style receive certain tasks to perform and provide rewards or punishments to team members based on performance results. Managers and team members set predetermined goals together, and employees agree to follow the direction and leadership of the manager to accomplish those goals. The manager possesses power to review results and train or correct employees when team members fail to meet goals. Employees receive rewards, such as bonuses, when they accomplish goals.

Transactionalsanjaykanagala,rimsmba,kakinada

Often called the democratic leadership style, participative leadership values the input of team members and peers, but the responsibility of making the final decision rests with the participative leader. Participative leadership boosts employee morale because employees make contributions to the decision-making process. It causes them to feel as if their opinions matter. When a company needs to make changes within the organization, the participative leadership style helps employees accept changes easily because they play a role in the process. This style meets challenges when companies need to make a decision in a short period.

Participativesanjaykanagala,rimsmba,kakinada

The autocratic leadership style allows managers to make decisions alone without the input of others. Managers possess total authority and impose their will on employees. No one challenges the decisions of autocratic leaders. Countries such as Cuba and North Korea operate under the autocratic leadership style. This leadership style benefits employees who require close supervision. Creative employees who thrive in group functions detest this leadership style.

Autocraticsanjaykanagala,rimsmba,kakinada

A laissez-faire leader lacks direct supervision of employees and fails to provide regular feedback to those under his supervision. Highly experienced and trained employees requiring little supervision fall under the laissez-faire leadership style. However, not all employees possess those characteristics. This leadership style hinders the production of employees needing supervision. The laissez-faire style produces no leadership or supervision efforts from managers, which can lead to poor production, lack of control and increasing costs.

Laissez-Fairesanjaykanagala,rimsmba,kakinada

Cross-Cultural LeadershipLauren GruchalaKaci Grantsanjaykanagala,rimsmba,kakinada

The Dutch place emphasis on egalitarianism and are skeptical about the value of leadership. Terms like leader and manager carry a stigma. If a father is employed as a manager, Dutch children will not admit it to their schoolmates.Arabs worship their leaders- as long as they are in power!Iranians seek power and strength in the leaders.The Malaysian leader is expected to behave in a manner that is humble, modest, and dignified.sanjaykanagala,rimsmba,kakinada

Statements taken from interviews with members of various countries30

Why is this important?GlobalizationIncreased interconnection between peopleNeed for leaders to become competent in cross-cultural awareness and practiceDiversity in our countrysanjaykanagala,rimsmba,kakinada

International trade, cultural exchange, and worldwide telecommunication systemsMultinational organizations and culturally diverse employeesCreate transcultural visions for organizations31

Cross-Cultural Research EndeavorLeadership research is tricky:No consistency agreed upon definition of leadershipNo clear understanding of the boundaries of the construct spacesanjaykanagala,rimsmba,kakinada

Culture DefinedThe learned beliefs, values, rules, norms, symbols, and traditions that are common to a group of people (Northouse)A set of patterns for social collectivities that differentiates among them in meaningful ways (House, Wright & Aditya)sanjaykanagala,rimsmba,kakinada

Culture is an abstract term that is hard to define. Many different people define it in dissimilar ways.33

Essential Parameters of CultureCulture represents some form and degree of collective agreementCulture refers to sharing of important interpretations of entities, activities, and eventsCultural norms and cultural forces are manifested linguistically, behaviorally, and symbolically in the form of artifactsCommon member experiences are inherent in the notion of cultureCultural variables take on the force of social influence largely because members of collectivities identify with an agreed-upon specific set of values and common social identitiessanjaykanagala,rimsmba,kakinada

Even though there is a lack of consensus on the definition of culture, there are several essential common threads in the may definitions and conceptualizations. 34

Essential Parameters of CultureCommon experiences and agreed-upon norms have powerful socialization effects on the members of culturesCultural interpretations, symbols, artifacts, and effects are transmitted across generationsThe social influence of cultural forces is assumed to provide a set of compelling behavioral, affective, and attitudinal orientations for members of culturesMembers of specific cultures are presumed to abide by a set of norms that reflect the above-mentioned commonalitiessanjaykanagala,rimsmba,kakinada

Related ConceptsEthnocentrism: the tendency for individuals to place their own group at the center of their observations of others and the worldObstacle because it prevents people from fully understanding or respecting the world of othersPrejudice: a largely fixed attitude, belief, or emotion held by an individual about another individual or group that is based on faulty dataBoth can have an impact on how leaders influence others.sanjaykanagala,rimsmba,kakinada

Related ConceptsMulticultural: an approach or system that takes more than one culture into account; a set of subcultures defined by race, gender, ethnicity, sexual orientation, and ageDiversity: the existence of different cultures or ethnicities within a group or organizationMonolithic cultures: provide approximately common experiences for members of collectivities (no variation)Pluralist cultures: contains two or more subgroups that share some common experiences but not others


Monolithic- having a massive uniform structure that does not permit individual variationsPluralist- may share common form of government, common borders, common currency, or a common economic system but not share the same origin, religion, language or history37

Cross-Cultural StudiesHaire, Ghiselli and Porter (1966)Studied responses from 3,641 managers from 14 countriesManagers favored democratic styles of management; consistently felt that subordinates lacked necessary abilities to be led democratically; most endorsed egalitarian organizational structures, however saw themselves as part of elite group; better to direct than persuadesanjaykanagala,rimsmba,kakinada

Two studies that examined 12 or more countries that had substantial contributions38

Cross-Cultural StudiesBass, Burger, Doktor & Barrett (1979)Based on multiple measures of observed behavior and questionnaire responses of 8,566 middle managers from 12 different countriesData collected between 1966 and 1973Strong main effects of national citizenship and modest main effects of rate of advancement on many of the dependent variables (i.e., managers responses to questionnaires, self-reports of behavior in exercises, observations of each others behavior)Table 20.1 (Earley & Erez)sanjaykanagala,rimsmba,kakinada

20.1- empirical cross-cultural leadership studies conducted since 198939

Hofstede (1980,2001)Most referenced research concerning dimensions of cultureBased on questionnaires from 100,000 people in more than 50 countries (IBM HQ Staff)Cultural differences primarily encountered as differences in shared valuesValues defined as broad tendencies to prefer certain states of affairs over others


Hofstedes 3 Core QuestionsThree core questions that have to be addressed in all cross-cultural research:What are we comparing?Are nations suitable units for comparison?Are the phenomena we look at functionally equivalent?sanjaykanagala,rimsmba,kakinada

Hofstede DimensionsPower DistanceThe degree to which less powerful members of a society accept a hierarchical or unequal distribution of power in organizations/societyUncertainty AvoidanceThe degree to which members of a given society feel uncomfortable in ambiguous situations and have created beliefs, norms, and institutions that are intended to minimize the occurrence of or cope with such situationsLong-term-Short-term OrientationLong-term- thrift and perseveranceShort-term- respect for tradition, fulfilling social obligations, protecting ones face


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Hofstede DimensionsIndividualism-CollectivismIndividualist- the degree to which individuals function independently of each other and are expected to look after themselves and their immediate familiesCollectivist- the degree to which individuals are integrated into groups that are expected to look after these individuals in exchange for loyalty to the groupMasculinity-FemininityHigh scores- the degree to which members of cultural entities look favorably on assertive, aggressive, competitive, and materialist behavior and striving for successLow scores- the degree to which members value supportive behavior, nurturance, care, and service and endorse gender role differentiation and discriminationsanjaykanagala,rimsmba,kakinada

US Hofstede Profile

Power Distance: 40 Individualism: 91

Masculinity: 62

Uncertainty Avoidance Index: 46

Long-term Orientation: 29 sanjaykanagala,rimsmba,kakinada

There are only seven (7) countries in the Geert Hofstede research that have Individualism (IDV) as their highest Dimension: USA (91), Australia (90), United Kingdom (89), Netherlands and Canada (80), and Italy (76).The high Individualism (IDV) ranking for the United States indicates a society with a more individualistic attitude and relatively loose bonds with others. The populace is more self-reliant and looks out for themselves and their close family members. The next highest Hofstede Dimension is Masculinity (MAS) with a ranking of 62, compared with a world average of 50. This indicates the country experiences a higher degree of gender differentiation of roles. The male dominates a significant portion of the society and power structure. This situation generates a female population that becomes more assertive and competitive, with women shifting toward the male role model and away from their female role. World averages shown above are: 55 - 43 - 50 - 64 - 45The United States was included in the group of countries that had the Long Term Orientation (LTO) Dimension added. The LTO is the lowest Dimension for the US at 29, compared to the world average of 45. This low LTO ranking is indicative of the societies' belief in meeting its obligations and tends to reflect an appreciation for cultural traditions.The next lowest ranking Dimension for the United States is Power Distance (PDI) at 40, compared to the world Average of 55. This is indicative of a greater equality between societal levels, including government, organizations, and even within families. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural environment.The last Geert Hofstede Dimension for the US is Uncertainty Avoidance (UAI), with a ranking of 46, compared to the world average of 64. A low ranking in the Uncertainty Avoidance Dimension is indicative of a society that has fewer rules and does not attempt to control all outcomes and results. It also has a greater level of tolerance for a variety of ideas, thoughts, and beliefs

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Hofstede ConclusionsGives us insights into other cultures so that we can be more effective when interacting with people in other countries3 noted studies have failed to demonstrate consistency with Hofstedes dimensionsGerstner and Day (1994); Ng et al. (1982); Chinese Culture Connection (1987)


This is important because, like it was stated before, Hofstedes research is the most cited research concerning cultural dimensions. These other studies found strong evidence that these dimensions may not hold up in all cultures, and that there may be dimensions that have been left out.45

GLOBEGlobal Leadership & Organizational Behavior Effectiveness Robert House (1991)Purpose: Increase understanding of cross-cultural interactions and the impact of culture on leadership effectiveness Quantitative methodology Responses of 17,000 managers; 950 organizations; 62 cultures9 cultural dimensions 7 derived from Hofstedesanjaykanagala,rimsmba,kakinada

GLOBEFor each of the nine dimensions, items were developed at both the societal and organizational level 2 measures were used for all 9 dimensions:Items phrased in terms of the society or organization as they areItems phrased to evaluate what practices should be enacted in the society or organization


Dimensions of GLOBEUncertainty Avoidance: Extent to which a society, organization, or group relies on established norms, rituals, and procedures to avoid uncertaintyUncertainty accepting societies have been found to be more innovativeMangers from high UA countries tend to be more controlling, less delegating, and less approachableHigh UA value career stability, formal rules, & the development of expertiseLow UA value career mobility and general skills rather than specialized skills Low UA managers expect resourcefulness & improvisationHigh UA managers expect reliability & punctuality


Dimensions of GLOBE2. Power Distance: Degree to which members of group expect & agree that power should be shared unequally Participative leadership significantly predicted by the degree of PDGermanic, Anglo, & Nordic Europeans attuned to PLMiddle Eastern, East European, Confucian Asian, & Southern Asian clusters do not endorse


Dimensions of GLOBE3. Institutional Collectivism: Degree to which organization or society encourages institutional or societal collective action

4. In-Group Collectivism: Degree to which people express pride, loyalty, & cohesiveness in their organizations or familiessanjaykanagala,rimsmba,kakinada

Dimensions of GLOBE5. Gender Egalitarianism: Degree to which an organization or society minimizes gender role differences and promotes gender equalityHigh GE countries endorse charismatic leader attributes & participative leader attributes:Foresight, enthusiasm, & self-sacrifice Delegation

6. Assertiveness: Degree to which people in a culture are determined, assertive, confrontational, and aggressive in their social relationshipssanjaykanagala,rimsmba,kakinada

Dimensions of GLOBE7. Future Orientation: Extent to which people engage in future-oriented behaviors such as planning, investing in the future, and delaying gratification

8. Performance Orientation: Extent to which and organization or society encourages and rewards group members for improved performance and excellencesanjaykanagala,rimsmba,kakinada

Dimensions of GLOBE9. Humane Orientation: Degree to which a culture encourages and rewards people for being fair, altruistic, generous, caring, and kind to others

9 dimensions used to analyze attributes of 62 different countriessanjaykanagala,rimsmba,kakinada

Clusters of World Cultures62 Countries divided into regional clusters

Clusters determined by:Common languageGeographyReligionHistorical Accounts

10 distinct clusters formedsanjaykanagala,rimsmba,kakinada


Characteristics of Clusters


Leadership Behavior and Culture ClustersDerived in part from Lord and Maher (1991)- implicit leadership theoryIndividuals have implicit beliefs & convictions about the attributes and beliefs that distinguish leaders from non-leaders and effective leaders from ineffective leaders Leadership is in the eye of the beholder- what people see in others when they are exhibiting leadership behaviorsGLOBE researchers identified 6 global leadership behaviors sanjaykanagala,rimsmba,kakinada

Global Leadership BehaviorsCharismatic/value-based leadership: Ability to inspire, motivate, and expect high performance from others based on strongly held core valuesVisionaryInspirationalSelf-sacrificingTrustworthyDecisivePerformance orientedsanjaykanagala,rimsmba,kakinada

Global Leadership Behaviors2. Team-oriented leadership: Emphasizes team building and a common purpose among team membersCollaborativeIntegrativeDiplomaticAdministratively competent sanjaykanagala,rimsmba,kakinada

Global Leadership Behaviors3. Participative leadership: The degree to which leaders involve others in making and implementing decisionsParticipativeNonautocratic

4. Human oriented leadership: Emphasizes being supportive, considerate, compassionate, & generousModestySensitivity to peoplesanjaykanagala,rimsmba,kakinada

Global Leadership Behaviors5. Autonomous leadership: Refers to independent and individualistic leadershipAutonomousUnique

6. Self-protective leadership: Reflects behaviors that ensure the safety & security of the leader & and the groupSelf-centeredStatus consciousConflict inducingFace saving



Universally Desirable Leadership Attributes


Universally Undesirable Leadership Attributes


Strengths of GLOBEOnly study to analyze how leadership viewed by cultures around the worldLarge ScopeWell-developed quantitative research designStandardized instruments = generalizeableCultural dimensions more expansive than HofstedeProvide information about what is universally accepted as good & bad leadership Expand our knowledge to view leadership outside our perspectivessanjaykanagala,rimsmba,kakinada

Criticisms of GLOBENo clear set of assumptions & propositions to form a single theory about the way culture relates to leadership or influences the leadership processSome cultural dimensions and leaderships behaviors are vague (e.g. power distance, self-protective leadership)Implicit leadership theory- ignores research that frames leadership in terms of what people do (e.g. transformational leadership)sanjaykanagala,rimsmba,kakinada

Application of GLOBEHelp leaders understand their own cultural biases & preferencesHelp leaders understand what it means to be a good leaderHelp leaders communicate more effectively across cultural and geographic boundariesPractical Ways:Culturally sensitive websitesDesign new employee orientation programsImprove global team effectivenesssanjaykanagala,rimsmba,kakinada

Future of Cross-Cultural LeadershipInternet has made it easier to obtain samples & answer questions quickly Web-based surveysReal time chatVideo Conferencing

Blessing & a curseUnqualified individuals try to collect & interpret datasanjaykanagala,rimsmba,kakinada

Unresolved Issues/ LimitationsMagnitude of the effect of cultural influences unknownThe influence of cultural forces on local conceptions of leadership, the social status of leaders, and the amount of influence granted to leadersProcesses by which cultural entities affect member psychological states and behavior not clearConvenience samplingValid information in interviews, self-report measures, etc.sanjaykanagala,rimsmba,kakinada

-Environmental factors and external forces such as international competition, military aggression, political conflict, economic environment, technology, etc.Within cultural entities, psychological commonalities very likely enhance or constrain leaders and their influence results in unmatched samples and samples of varying sizes which reduces a studys ability to identify differences in cultural entities69

CONTROLLING


The basic management function of establishing benchmarks or standards, (2) comparing actual performance against them, and (3) taking corrective action, if required.

CONTROLLINGsanjaykanagala,rimsmba,kakinada

(1)Controlling is a Fundamental Management Function:There are many functions of management like planning, organizing, staffing, directing and controlling. Out of all these functions, controlling is the most important. If controlling is excluded, all other functions of management are rendered meaningless.

CHARACTERISTICS OF CONTROLLINGsanjaykanagala,rimsmba,kakinada

(2)Essential Function of Every Manager:The controlling is a pervasive function of management as it is performed in all organizations (business and non-business) and at all the managerial levels. It is that function of management under which every manager at every level assures that the actual progress is in conformity with the plans.(3)Controlling is a Continuous Activity:Control does not mean any activity which is performed only for once or is repeated after a long interval but it is needed at all times. Under controlling, the progress has to be assessed continuously.

CHARACTERISTICS OF CONTROLLINGCONTINUEsanjaykanagala,rimsmba,kakinada

(4)Controlling is Both the Beginning and the End of the Process of Management:The need of control is felt both at the beginning and end of the process of management.(5)Controlling is related to Results:Control is related to results because we assess progress on the basis of results and take corrective action after finding out the deviations.

CHARACTERISTICS OF CONTROLLINGCONTINUEsanjaykanagala,rimsmba,kakinada

Co-ordination is the unification, integration, synchronization of the efforts of group members so as to provide unity of action in the pursuit of common goals. It is a hidden force which binds all the other functions of management. According toMooney and Reelay, Co-ordination is orderly arrangement of group efforts to provide unity of action in the pursuit of common goals. According toCharles Worth, Co-ordination is the integration of several parts into an orderly hole to achieve the purpose of understanding.

CO-ORDINATION sanjaykanagala,rimsmba,kakinada

Management seeks to achieve co-ordination through its basic functions of planning, organizing, staffing, directing and controlling. That is why, co-ordination is not a separate function of management because achieving of harmony between individuals efforts towards achievement of group goals is a key to success of management. Co-ordination is the essence of management and is implicit and inherent in all functions of management.A manager can be compared to an orchestra conductor since both of them have to create rhythm and unity in the activities of group members.


Co-ordination is an integral element or ingredient of all the managerial functions as discussed below: -Co-ordination through Planning -Planning facilitates co-ordination by integrating the various plans through mutual discussion, exchange of ideas. e.g. - co-ordination between finance budget and purchases budget.Co-ordination through Organizing -Mooney considers co-ordination as the very essence of organizing. In fact when a manager groups and assigns various activities to subordinates, and when he creates departments co-ordination uppermost in his mind.FUNCTIONS OF COORDINATIONsanjaykanagala,rimsmba,kakinada

Co-ordination through Staffing -A manager should bear in mind that the right no. of personnel in various positions with right type of education and skills are taken which will ensure right men on the right job.Co-ordination through Directing -The purpose of giving orders, instructions & guidance to the subordinates is served only when there is a harmony between superiors & subordinates.Co-ordination through Controlling -Manager ensures that there should be co-ordination between actual performance & standard performance to achieve organizational goals.

FUNCTIONS OF COORDINATIONCONTINUE..sanjaykanagala,rimsmba,kakinada

Co-ordination is an orderly arrangement of efforts to provide unity of action in the fulfillment of common objective whereas co-operation denotes collective efforts of persons working in an enterprise voluntarily for the achievement of a particular purpose. It is the willingness of individuals to help each other.Co-ordination is an effort to integrate effectively energies of different groups whereas co-operation is sort to achieve general objectives of business.

Coordination and Cooperationsanjaykanagala,rimsmba,kakinada

BasisCo-ordinationCo-operationMeaningIt is an orderly arrangement of group efforts in pursuit of common goals.It means mutual help willingly.ScopeIt is broader than co-operation which includes as well because it harmonizes the group efforts.It is termed as a part of co-ordination.ProcessThe function of co-ordination is performed by top management.The functions of co-operation are prepared by persons at any level.RequirementsCo-ordination is required by employees and departments at work irrespective of their work.Co-operation is emotional in nature because it depends on the willingness of people working together.RelationshipIt establishes formal and informal relationships.It establishes informal relationship.FreedomIt is planned and entrusted by the central authority & it is essential.It depends upon the sweet will of the individuals and therefore it is not necessary.SupportIt seeks wholehearted support from various people working at various levels.Co-operation without co-ordination is fruitless & therefore it may lead to unbalanced developments.


It encourages team spirit,It gives proper direction,It facilitates motivation,It makes optimum utilization of resources,It helps to achieve objectives quickly,It improves relations in the organization,It leads to higher efficiency andIt improves goodwill of the organization.

SIGNIFICANCEsanjaykanagala,rimsmba,kakinada

Follett's Four Principles of CoordinationMary Parker Follettgavefourmain Principles ofCoordination. These four principles of co-ordination are called are Follett'sPrinciples of Coordination. These four principles must be followed to make co-ordination effective.PRINCIPLES OF COORDINATIONsanjaykanagala,rimsmba,kakinada


Four Principles of Coordination Given By Mary Parker Follett1. Principle of Early Stage

According to this principle, coordination must start at an early stage in the managementprocess. It must start during the planning stage. This will result in making the best plans and implementing these plans with success. If coordination is started early only then all the management functions will be performed successfully. Thus by initiating proper coordination the organisation will achieve all its objectives easily and quickly.

2. Principle of Continuity

According to this principle, coordination must be a continuous process. It must not be a one-time activity. The process of coordination must begin when the organisation starts, and it must continue until the organisation exists. Coordination must be done continuously during the management process. It must be done during planning, organising, directing and controlling.


3. Principle of Direct Contact

According to this principle, all managers must have a Direct Contact with their subordinates. This will result in good relations between the manager and their subordinates. This is because direct contact helps to avoid misunderstandings, misinterpretations and disputes between managers and subordinates. It enables the managers to coordinate all the different activities of their subordinates effectively and efficiently.

4. Principle of Reciprocal Relations

The decisions and actions of all the people (i.e of all managers and employees) and departments of the organisation are inter-related. So, the decisions and actions of one person or department will affect all other persons and departments in the organisation. Therefore, before taking any decision or action all managers must first find out the effect of that decision or action on other persons and departments in the organisation. This is called the Principle of Reciprocal Relations. Co-ordination will be successful only if this principle is followed properly.

Four Principles of Coordination Given By Mary Parker Follettcontinue..sanjaykanagala,rimsmba,kakinada


Principle of Effective Communication

Co-ordination will be successful only in the presence of an effective communication. Good communication must be present between all departments, within employees themselves and even between managers and their subordinates. All communication barriers and gaps must be avoided and fixed. Good communication helps to avoid misunderstandings in the organisation. This overall helps in coordination.

6. Principle of Mutual Respect

Coordination will be successful only if there exist a mutual respect throughout the organisation. All managers working at different levels (top, middle or lower) must respect each other. Similarly, all employees must show a friendly attitude and should respect each other during interactions. There must also exist a feeling of brotherly hood among managers and employees. The managers must respect the feelings and emotions of the employees. On the other hand, employees too must understand and acknowledge their bosses. Without mutual respect, coordination may not survive, and it will eventually fail.


7. Principle of Clarity of Objectives

Co-ordination will be successful only if the organisation has set its clear objectives. Everyone in the organisation must know the objectives very clearly. No one must have any doubts about the objectives of the organisation. Clear objectives can be achieved easily and quickly.

8. Principle of Scalar Chain

To read and understand the principle of a scalar chain, please refer to point no.13 of the article titled, "Henri Fayol's 14 Principles of Management"


The controlling process involves:1. Setting Performance Standards 2. Measurement of Actual Performance 3. Comparing Actual Performance with Standards 4. Analyzing Deviations 5. Taking Corrective Action.

CONTROLLING PROCESSsanjaykanagala,rimsmba,kakinada


The first step in the process of controlling is concerned with setting performance standards. These standards are the basis for measuring the actual performance.Thus, standards act as a lighthouse that warns & guides the ships at sea. Standards are the benchmarks towards which efforts of entire organisation are directed. These standards can be expressed both in quantitative and qualitative terms.Examples of Quantitative Standards:(a) Revenue to be earned.(b) Units to be produced and sold.(c) Cost to be incurred.(d) Time to be spent in performing a task.(e) Amount of inventories to be maintained etc.1. Setting Performance Standards:sanjaykanagala,rimsmba,kakinada

(a) Improving motivation level of employees.(b) Improving labour relations.(c) Improving quality of products.(d) Improving goodwill etc.In order to facilitate easy comparison of actual performance with the standards, a manager should try to set these standards in quantitative terms as far as possible. However, in case of qualitative standards, effort should be made to define these standards in such a way that comparison becomes easily understandable.For example, for improving customer satisfaction in a restaurant having self service, standard can be set in terms of time taken to get a table, place the order and collect the order. Moreover, the standards set should be flexible enough so that necessary changes can be made according to varying situations.

Examples of Qualitative Standards:sanjaykanagala,rimsmba,kakinada

Once the standards have been determined, the next step is to measure the actual performance. The various techniques for measuring are sample checking, performance reports, personal observation etc. However, in order to facilitate easy comparison, the performance should be measured on same basis that the standards have.2.Measurement of Actual Performance:sanjaykanagala,rimsmba,kakinada

(a) Superior prepares a report regarding the performance of an employee.(b) Various ratios like gross profit ratio, debtor turnover ratio, return on investment, current ratio etc. are calculated at periodic intervals to measure companys performance.(c) Progress made in areas like marketing can be measured by considering the number of units, increase in market share etc.(d) In small organisations, each unit produced can be checked personally to ensure the quality standards.(e) In large organisation, the technique of sample checking is used. Under this technique, some pieces are checked at random for quality specifications.

Following are some of the ways for measuring performance:sanjaykanagala,rimsmba,kakinada

This step involves comparing the actual performance with standards laid down in order to find the deviations. For example, performance of a salesman in terms of unit sold in a week can be easily measured against the standard output for the week.

3.Comparing Actual Performance with Standards:sanjaykanagala,rimsmba,kakinada

Some deviations are possible in all the activities. However, the deviation in the important areas of business needs to be corrected more urgently as compared to deviation in insignificant areas. Management should use critical point control and management by exception in such areas.(a) Critical Point Control(b) Management by Exception

4. Analyzing Deviations:sanjaykanagala,rimsmba,kakinada

Since it is neither easy nor economical to check each and every activity in an organisation, the control should focus on Key Result Areas (KRAs) which act as the critical points. The KRAs are very essential for the success of an organisation. Therefore, the entire organisation has to suffer if anything goes wrong at these points. For example, in a manufacturing organisation, an increase of 7% in labour cost is more troublesome than an 18% increase in stationary expenses.

(a) Critical Point Control:sanjaykanagala,rimsmba,kakinada

Management by exception or control by exception is an important principle of management control. According to this principle, an attempt to control everything results in controlling nothing. Thus only the important deviations which exceed the prescribed limit should be brought to the notice of management. Thus, if plans provide for 3% increase in labour cost, deviations beyond 3% alone should be brought to the notice of the management.

(b) Management by Exception:sanjaykanagala,rimsmba,kakinada

(i) Since managers deal only with important deviations, it results in saving time and efforts.(ii) It helps in identifying important deviations which need timely action to keep the organisation at the correct path.(iii) By handing over the routine problems to the subordinates, management by exception facilitates delegation of authority and helps in increasing morale of employees.(iv) It ensures better utilization of managerial expertise by focusing managerial attention only on important areas.After identifying the deviations, various causes for these deviations are analyzed. The main causes can be structural drawbacks, shortage of resources, environmental factors beyond organizational control, unrealistic standards, defective process etc. Exact cause or causes of deviation must be identified correctly in order to take effective corrective measures.

Advantages of Critical Point Control and Management by Exception are as follows:sanjaykanagala,rimsmba,kakinada

The last step in the process of controlling involves taking corrective action. If the deviations are within acceptable limits, no corrective measure is required. However, if the deviations exceed acceptable limits, they should be immediately brought to the notice of the management for taking corrective measures, especially in the important areas.

5. Taking Corrective Action:sanjaykanagala,rimsmba,kakinada

Causes of DeviationCorrective action to be taken(i) Obsolete MachineryTechnological Upgradation of machinery(ii) Defective Process manufacturing process.Change the specification standards for the(iii) Defective Material used.Change the quality standards for material(iv) Defective physical conditions of work.Improvement in physical conditions of work.(v) Defective machinery.Repair the existing machine or purchase new machine if it cannot be repaired.

Following are some of the examples of corrective action:sanjaykanagala,rimsmba,kakinada

(1)Objectives(2)Suitability:(3)Forward looking:(4)Feedback:(5)Quick action:(6)Directness:(7)Flexibility:(8)Economy:(9)Regular revision:(10)Active Participation:(11)Suggestive:(12) Competent and talented staff:

REQUIREMENTS OF EFFECTIVE CONTROL sanjaykanagala,rimsmba,kakinada

A system of control can work more effectively when it is based on the main objectives or goals of the organisation. It should be related to the persons. It becomes essential that the standards, which are set by the management, should not be too high or too low. These should be told to the workers in time so that the standards can be judged with the actual performance.

(1)Objectivessanjaykanagala,rimsmba,kakinada

A business organisation should adopt such a system of control which suits its requirement.-There is no hard and fast rule and readymade system of control which give the correct and most favourbale, results in all type of organisations and in all circumstances.Suitability of a system of control differs from organisation to organisation and to make it favourable, it is necessary to know the nature of the business, needs of the workers a circumstances prevailing inside the organisation.

(2)Suitabilitysanjaykanagala,rimsmba,kakinada

The system of control should be forward looking which enables the managers to keep a control on operations in advance. Each and every deviation from the standards should be noted in time to take corrective action before the task is completed. This will avoid or minimise the deviation in future.

(3)Forward lookingsanjaykanagala,rimsmba,kakinada

The success of a business depends on a system of control and for a systematic control advance planning is needed. This advance planning should be based on actual accurate post information collected through investigation.The control system should be such that it is based on past information and. which would also adjust if necessary to future actions.

(4)Feedbacksanjaykanagala,rimsmba,kakinada

Management gets the information from various line managers or supervisors about the deviation in standards and these should be suggested to the planner to take a correct and quick action to avoid future wastage. Actually speaking, the success of control depends entirely on quick action and its implementation.

(5)Quick actionsanjaykanagala,rimsmba,kakinada

In order to make the system of control more effective, it is necessary that the relation between the workers and management should be direct. It is quite obvious that if the number of line supervisors is less in the organisation then workers would work effectively and objectives may be achieved in time because they will not take much time in getting the correct information.

(6)Directnesssanjaykanagala,rimsmba,kakinada

The system of control should be such that it accommodates all changes or failures in plans. If plans are to be revised due to change in its objectives, the system of control should also be adjusted to suit the changed circumstances.

(7)Flexibilitysanjaykanagala,rimsmba,kakinada

The system of control must be economical. In simple words, cost of the control system should not exceed its benefits. A system of control to be adopted by the organisation should be cheaper in terms of expenses.

(8)Economysanjaykanagala,rimsmba,kakinada

The system of control should be based art objective results, after proper technical and analytical studies. They must be revised regularly and kept to meet the objectives of the organisation.

(9)Regular revisionsanjaykanagala,rimsmba,kakinada

All members in the organisation should participate in the effective implementation of the control system. This is only possible when each and every worker in the organisation is asked to take active part in the discussions and exchange views while selecting the system of control.

(10)Active Participationsanjaykanagala,rimsmba,kakinada

The control system should also be suggestive. A system which detects deviations only should not be held good, but should also tell the accurate and correct alternative.

(11)Suggestivesanjaykanagala,rimsmba,kakinada

Controlling A system of control can work more effectively if it has talented and competent people to work in the organisation.

(12) Competent and talented staffsanjaykanagala,rimsmba,kakinada

Establishing controlling system



In order to set up a controlling system in an organization, you must first decide on the objectives and anticipated goals before using the system. Also, make sure that certain requirements are fulfilled before you setup the controlling department. This includes writing down the responsibilities of the department as a whole, the responsibilities for key people within the department, and the policies the department will follow.

Establishing controlling system sanjaykanagala,rimsmba,kakinada

Make sure there are approval and commitment from the Board and ManagementIdentify obvious needs and have systematic processes for the ICMove step-by-stepTrain all staff connected to the control systemDefine roles and dutiesMake sure resources are available:Prepare the Internal Control System for potential problemsEffectiveness of the Control System supervised by the Board and ManagementUnderstand that theres no such thing as complete security:Points to keep in mind before setting up a controlling departmentsanjaykanagala,rimsmba,kakinada

Make sure there are approval and commitment from the Board and Management: Each internal controlling system needs to have the support and commitment of the Board and Management.Identify obvious needs and have systematic processes for the ICS:The organization needs to define fundamental concepts of how the system will work. A standardized approach guarantees that the staff works along similar lines that result in a similar impact.Move step-by-step:An ICS should be modified according to the organization itself. It is important for the organization to establish, evaluate and modify the ICS that also covers all aspects of the business.Define roles and duties:Duties for particular controls ought to be clearly designated to a department or an individual to ensure efficiency. Within this context, the company needs to hire a controlling officer.Train all staff connected to the control system:Employee trainingis a key factor in guaranteeing the efficiency of any Internal Control System. Everybody needs to comprehend that being part of the internal controlling system requires they familiarize themselves with major risks, or alterations that might need to be made in any given situation. This will help ensure that corresponding controls can be put into practice.Points to keep in mind before setting up a controlling departmentsanjaykanagala,rimsmba,kakinada

Make sure resources are available:Improving or establishing an ICS means making substantial resources available throughout the process. Whether this is in the form of software, HR or financial leeway to make necessary purchases, the department needs to have the resources required to function properly.Prepare the Internal Control System for potential problems: New problems come up and existing ones must be catered to. Thus, the controls should also be modified accordingly. The internal control system is only going to remain effective if risks are evaluated continuously and necessary action is taken accordingly.Effectiveness of the Control System supervised by the Board and Management:The department should be supervised on an ongoing basis to make sure that controls are effectively carried out. The Board must ensure that the control system is frequently updated.Understand that theres no such thing as complete security:A Controlling System always involves evaluating potential risks that a company is exposed to and also predicting expenses. Due to various reasons, its impossible to reduce every risk since risks cannot completely be eliminated. The most important thing would be that the companys Board and Management fully understand this risk.

Points to keep in mind before setting up a controlling departmentsanjaykanagala,rimsmba,kakinada

The controlling department should not be setup without proper planning. From commitment at the top-level, to ensuring everyone understands their responsibilities, it is important to keep several things in mind while adding this department to your organization.

CONSIDERATIONS WHILE CREATING THE CONTROLLING DEPARTMENTsanjaykanagala,rimsmba,kakinada

Direct participation of the top management in internal control is an important factor for the companys success. For control management, it helps increating and helping the standard committee,creating and determining recommendations and goals,delivering assets and training,supervising implementation at every level of the company, andassessing and revising in accordance with the results accomplished.

Commitment at the Top Levelsanjaykanagala,rimsmba,kakinada

TheBoard of Directorshas ultimate responsibility for a companys Internal Control system department. Here is alist of responsibilities for the board:It should carefully set recommendations and update the guidelines accordingly.Observe the organizational risks identified and review them. They must decide if the ICS is able to control these risks.After half a year, when the Annual Report as well as the First-Half Report is approved, assess the strength of the Groups Internal Control System to make sure that the principal risks faced by the organization are being adequately dealt with.To correctly execute the duties designated, the Board of Directors will need to depend on the appropriate resources to oversee the Control System. First and foremost, it must determine a control committee that can help them by delivering recommendations and plans for the Internal Control System. It appoints individuals from the Committee and chooses its Chairman within the committee membershipIn addition, it must hire the ICS Compliance officer, and evaluate his independence and professional capability.

Commitment to Controlling Department at every Organizational Level Responsibilities of the Board of Directorssanjaykanagala,rimsmba,kakinada

All employees, according to the duties designated to them by the company, must also carry out a few tasks for internal controlling and follow a set criterion.If these employees have been hired for the ICS, then it can be assumed that they meet a certain company criteria because of which they can be trusted with new responsibilities that come with the control system. All other employees must be trained and taught their roles and responsibilities towards the ICS.

Responsibilities of Employeessanjaykanagala,rimsmba,kakinada

No one person shouldassess the accounting process, nor does one staff member handle every facet of a transaction. However, if an individual worker produces assessments, then another employee should cross-check. Switch tasks each month and its recommended to avoid letting one employee hold all control of any essential process.When walking in the office, keep yourself familiar with what the employees do so that they are aware that they are being watched. This also reduces communication barrier with employees. By making regular rounds, employees remain cautious and they keep focused on their work.

Division of dutiessanjaykanagala,rimsmba,kakinada

A periodic review of the efficiency of the ICS should be carried out. Such a periodic review can be a task delegated to the Board of Directors that helps the Internal Control Committee. In undertaking this evaluation, the directors will be conscious in not just reviewing the working system of an ICS within the company but also regularly assessing the structure of the Internal Control System, its competence, efficiency as well as actual functioning.The Board of Directors should evaluate the ICS every six months. They can go through the reviews submitted by IC Compliance Officer, evaluating (i) when the present structure in the ICS was efficient in achieving the goals (ii) whether any reported flaws have a noteworthy difference in the system.

Assessment of the Efficiency and Effectiveness of the Controlling Departmentsanjaykanagala,rimsmba,kakinada

Each year after the approval of the Annual Report is given by the Board of Directors, they will also:Browse the major organizational risks given for consideration and review as to how they have been recognized, examined and handled. Particularly, it must consider the alterations.Review the strength of the Internal Control System in managing the risks mentioned above, particularly when it comes to reporting any significant mistakes or flaws in an internal control.Bear in mind which actions are taken or should instantly be remedied in case of flaws.Prepare any other recommendations, processes and behavior rules that will adequately counteract new risks or previous ones that werent handled properly.


1. Traditional Techniques:Traditional techniques refer to the techniques that have been used by business organisation for longer period of time and are still in use.Such techniques are:a. Personal Observationb. Statistical Reports.c. Breakeven Analysis.d. Budgetary Control.

2. Modern Techniques:Modem techniques are those techniques which are very new in management world. These techniques provide various new aspects for controlling the activities of an organisation.These techniques are as follows:(a) Return on Investment.(b) Ratio Analysis.(c) Responsibility Accounting.(d) Management Audit.(e) PERT and CPM.(f) Management Information System.

Controlling techniques.sanjaykanagala,rimsmba,kakinada


1. Traditional Techniques


This is the most traditional technique of control. It helps a manager to collect first hand information about the performance of the employees. It also creates psychological pressure on the employees to improve their performance as they are aware that they are being observed personally by the manager. However, this technique is not to be effectively used in all kinds of jobs as it is very time consuming.

(a) Personal Observation:sanjaykanagala,rimsmba,kakinada

Statistical analysis in the form of percentages, ratios, averages etc. in different areas provides useful information regarding performance of an organisation to its managers. When such information is presented in the form of tables, graphs, charts etc., it facilitates comparison of performance with the standards laid and with previous years performance.

(b)Statistical Reports:sanjaykanagala,rimsmba,kakinada

The technique used by managers to study the relationship between sales volume, costs and profit is known as Breakeven Analysis. This technique helps the managers in estimating profits at different levels of activities. The following figure shows breakeven chart of a firm.The point at which the total revenue and total cost curves intersect is breakeven point. The figure shows that the firm will have the breakeven point at 60,000 units of output. At this point, there is neither profit nor loss. The firm starts earning profit beyond this point.Breakeven Point= Fixed Cost/ (Selling Price per unit- Variable cost per unit).

(c) Breakeven Analysissanjaykanagala,rimsmba,kakinada


(d)Budgetary ControlUnder this technique, different budgets are prepared for different operations in an organisation in advance. These budgets act as standards for comparing them with actual performance and taking necessary actions for attaining organisational goals.A budget can be defined as a quantitative statement of expected result, prepared for a future period of time. The budget should be flexible so that necessary changes, if need be, can be easily made later according to the requirements of the prevailing environment.


2. Modern Techniques


Return on investment is very useful technique for determining whether the capital invested in the business has been effectively used or not for generating reasonable amount of return.Return on Investment= (Net Income / Total Investment) X 100 Net Income before or after tax can be used for calculating ROI. Total investment includes investment in fixed Assets as well as working capital.It acts as an effective control device in measuring and comparing the performance of different departments. It also helps departmental managers to find out the problems which adversely affect ROI.

(a)Return on Investment:sanjaykanagala,rimsmba,kakinada

Ratio Analysis is a technique of analyzing the financial statements of a business firm by computing different ratios.(i) Liquidity Ratios:(ii)Solvency Ratios:(iii) Profitability Ratios:(iv)Turnover Ratios:

(b)Ratio Analysissanjaykanagala,rimsmba,kakinada

(i) Liquidity Ratios:Liquidity ratios are calculated to know short term financial position of business and its ability to pay short term liabilities. It includes current ratio and quick ratio.a. Current Ratio = Current Assets/Current Liabilitiesb. Quick Ratio = Cash + Bills Receivable/Current Liabilities(ii)Solvency Ratios:Solvency ratios are calculated to know long term solvency of the business and its ability to pay its long term debts. It includes debt equity ratio, proprietary ratio, interest coverage ratio etc.a. Debt Equity Ratio= Debt/Equity Share Holders Fundb. Proprietary Ratio = Shareholders fund/Total AssetsThe most commonly used ratios have been grouped under following categories:sanjaykanagala,rimsmba,kakinada

(iii) Profitability Ratios:Profitability ratios like gross profit ratio, net profit ratio, operating ratio, etc. help to analyze the profitability position of a business.a. Gross Profit Ratio = Gross Profit/Net Sales 100b. Net Profit Ratio = Net Profit/Net Sales x 100(iv)Turnover Ratios:The various turnover ratios like Inventory turnover ratio, debtors turnover ratio, fixed assets turnover ratio etc. help in knowing whether the resources are effectively used for increasing the efficiency of operations of business or not. Higher turnover indicates better utilization of resources.a. Inventory Turnover Ratio = Cost of goods sold/Average Stockb. Debtors Turnover Ratio = Net Credit Sales/Average Accounts Receivables


Under this system of accounting, various sections, departments or divisions of an organisation are set up as Responsibility Centers. Each centre has a head who is responsible for attaining the target of his centre.

(c) Responsibility Accounting:sanjaykanagala,rimsmba,kakinada

(i) Cost Centre:Cost centre, also known as expense centre, refers to a department of an organisation whose manager is held responsible for the cost incurred in the centre but not the revenues. For example, Production department of an organisation may be classified as Cost Centre.(ii) Revenue Centre:A revenue centre refers to a department which is responsible for generating revenues. For example, marketing department.

The various responsibility centres are as follows:sanjaykanagala,rimsmba,kakinada

(iii)Profit Centre:A profit centre refers to a department whose manager is responsible for both cost and revenues. For example, Repair and Maintenance department.(iv)Investment Centre:An investment centre is responsible for profits as well as investments made in the form of assets. For judging the performance of investment centre, return on investment (ROI) is calculated and compared with similar data for previous years for ones own centre as well as other similar enterprises. It is also compared with current data of competing enterprises.


Management Audit is a process of judging the overall performance of the management of an organisation. It aims at reviewing the efficiency and effectiveness of management and improving its future performance. Its basic purpose is to identify the deficiencies in the performance of management functions. It also ensures updating of existing managerial policies.

(d)Management Auditsanjaykanagala,rimsmba,kakinada

(i) It identifies the deficiencies in the performance of management functions.(ii) It helps in improving coordination among the functions of various departments.(iii) It ensures required modification in the existing managerial policies and techniques according to environmental changes.(iv) The continuous monitoring of the performance of management helps in improving control system.There is no proper technique of management audit and also it is not compulsory under any law.

Following are the main advantages of management audit:sanjaykanagala,rimsmba,kakinada

PERT (Programme Evaluation and Review Technique) and CPM (Critical Path Method) are two important techniques used in both planning and controlling. These techniques are used to compute the total expected time needed to complete a project & it can identify the bottleneck activities that have a critical effect on the project completion date. Such techniques are mainly used in areas like construction projects, aircraft manufacture, ship building etc.(e)PERT and CPMsanjaykanagala,rimsmba,kakinada

(i) The project is first divided into various activities and then these activities are arranged in a logical sequence.(ii) A network diagram is prepared showing the sequence of activities.(iii)Time estimates are laid down for each activity. PERT prepares three time estimates-(i) Optimistic (shortest time) (ii) Most likely time & (iii) Pessimistic (longest time).In CPM, only one time estimate is prepared. Along with this, CPM also lays down the cost estimates for completing the project.(iv) The most critical path in the network is the longest path. Longest path consists of those activities which are critical for completing the project on time; hence the name CPM.(v) If required, necessary changes are made in the plan for completing the project on time.

The various steps involved in using these techniques are as follows:sanjaykanagala,rimsmba,kakinada

Management Information System (MIS) is a computer based information system which provides accurate, timely and up-to-date information to the managers for taking various managerial decisions. Thus, it is an important communication tool as well as an important control technique. It provides timely information to the managers so that they can take appropriate corrective measures in case of deviations from standards.

(f) Management Information System (MIS)sanjaykanagala,rimsmba,kakinada

(a) It provides only relevant information to the managers thus saving them him from information overload.(b) It facilitates collection and management of information at different levels and departments of the organisation.(c) It helps in planning, controlling and decision making at all levels of an organisation.(d) It helps in improving the quality of information.(e) It ensures cost effectiveness by providing all important information to the management in time.

Advantages of management information system are as follows:sanjaykanagala,rimsmba,kakinada

The final step in the process of controlling involves taking corrective action. If the deviations are within acceptable limits no corrective measure is required.

(ii) Taking Corrective Actionsanjaykanagala,rimsmba,kakinada

1. Direct Supervision and Observation2. Financial Statements3. Budgetary Control4. Break Even Analysis5. Return on Investment (ROI)6. Management by Objectives (MBO)7. Management Audit8. Management Information System (MIS)9. PERT and CPM Techniques

Other controlling techniques aresanjaykanagala,rimsmba,kakinada

'Direct Supervision and Observation' is the oldest technique of controlling. The supervisor himself observes the employees and their work. This brings him in direct contact with the workers. So, many problems are solved during supervision. The supervisor gets first hand information, and he has better understanding with the workers. This technique is most suitable for a small-sizedbusiness.

1. Direct Supervision and Observationsanjaykanagala,rimsmba,kakinada

All business organisations prepare Profit and Loss Account. It gives a summary of the income and expenses for a specified period. They also prepare Balance Sheet, which shows the financial position of the organisation at the end of the specified period. Financial statements are used to control the organisation. The figures of the current year can be compared with the previous year's figures. They can also be compared with the figures of other similar organisations.Ratio analysiscan be used to find out and analyse the financial statements. Ratio analysis helps to understand the profitability, liquidity and solvency position of the business.

2. Financial Statementssanjaykanagala,rimsmba,kakinada

Abudgetis a planning and controlling device. Budgetary control is a technique of managerial control through budgets. It is the essence of financial control. Budgetary control is done for all aspects of a business such as income, expenditure, production, capital and revenue. Budgetary control is done by the budget committee.

3. Budgetary Controlsanjaykanagala,rimsmba,kakinada

Break Even Analysis or Break Even Point is the point of no profit, no loss. For e.g. When an organisation sells 50K cars it will break even. It means that, any sale below this point will cause losses and any sale above this point will earn profits. The Break-even analysis acts as a control device. It helps to find out the company's performance. So the company can take collective action to improve its performance in the future. Break-even analysis is a simple control tool.

4. Break Even Analysissanjaykanagala,rimsmba,kakinada

Investment consists of fixed assets and working capital used in business. Profit on the investment is a reward for risk taking. If the ROI is high then the financial performance of a business is good and vice-versa.ROIis a tool to improve financial performance. It helps the business to compare its present performance with that of previous years' performance. It helps to conduct inter-firm comparisons. It also shows the areas where corrective actions are needed.

5. Return on Investment (ROI)sanjaykanagala,rimsmba,kakinada

MBOfacilitates planning and control. It must fulfill following requirements :-Objectives for individuals are jointly fixed by the superior and the subordinate.Periodic evaluation and regular feedback to evaluate individual performance.Achievement of objectives brings rewards to individuals.

6. Management by Objectives (MBO)sanjaykanagala,rimsmba,kakinada

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

7. Management Auditsanjaykanagala,rimsmba,kakinada

In order to control the organisation properly the management needs accurate information. They need information about the internal working of the organisation and also about the external environment. Information is collected continuously to identify problems and find out solutions.MIScollects data, processes it and provides it to the managers. MIS may be manual or computerised. With MIS, managers candelegate authorityto subordinates without losing control.

8. Management Information System (MIS)sanjaykanagala,rimsmba,kakinada

Programme Evaluation and Review Technique (PERT) and Critical Path Method (CPM) techniques were developed in USA in the late 50's. Any programme consists of various activities and sub-activities. Successful completion of any activity depends upon doing the work in a given sequence and in a given time.CPM / PERT can be used to minimise the total time or the total cost required to perform the total operations.Importance is given to identifying the critical activities. Critical activities are those which have to be completed on time otherwise the full project will be delayed.So, in these techniques, the job is divided into various activities / sub-activities. From these activities, the critical activities are identified. More importance is given to completion of these critical activities. So, by controlling the time of the critical activities, the total time and cost of the job are minimised.

9. PERT and CPM Techniquessanjaykanagala,rimsmba,kakinada

Self-Control means self-directed control. A person is given freedom to set his own targets, evaluate his own performance and take corrective measures as and when required. Self-control is especially required for top level managers because they do not like external control.The subordinates must be encouraged to use self-control because it is not good for the superior to control each and everything. However, self-control does not mean no control by the superiors. The superiors must control the important activities of the subordinates.

10. Self-Controlsanjaykanagala,rimsmba,kakinada

Define Directing Definition of Co-ordination Write the Significance and principles of CoordinationWhat is meant by leadership discuss various Leadership behavior and styles Describe Leadership in cross cultural environment.Write the Nature and importance of controlling Elucidate Controlling process What are the Requirements of effective control and Explain the Establishing controlling system Give an account of Controlling techniques with an illustration.

Questions sanjaykanagala,rimsmba,kakinada


PRINCIPLES OF MANAGEMENT-JNTUK-UNIT-3-2016-2018 BATCH

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Transcript of PRINCIPLES OF MANAGEMENT-JNTUK-UNIT-3-2016-2018 BATCH