024b9546-f80a-4d85-849f-d58edb7ba174

Narayana Swamy.R, Asst.Prof, Dept of TCE, T.J.I.
T, Bangalore 06AL51 (E&M)

1 UNI1 2, 3, 4: |ann|ng, Crgan|z|ng, Staff|ng, D|rect|ng and Contro|||ng
2. PLANNINC
Planning is a piocess foi accomplishing puipose. It is blue piint of business giowth anu a
ioau map of uevelopment. It helps in ueciuing objectives both in quantitative anu
qualitative teims. It is setting of goals on the basis of objectives anu keeping in view the
iesouices. It is a conscious as well as sub-conscious activity. It is "an anticipatoiy uecision
making piocess" that helps in coping with complexities. It is ueciuing futuie couise of
action fiom amongst alteinatives. It is a piocess that involves making anu evaluating each
set of inteiielateu uecisions. It is selection of missions, objectives anu "tianslation of
knowleuge into action."
A planneu peifoimance biings bettei iesults compaieu to unplanneu one. A Nanageis' job
is planning, monitoiing anu contiolling. Planning anu goal setting aie impoitant tiaits of an
oiganization. It is uone at all levels of the oiganization. Planning incluues the plan, the
thought piocess, action, anu implementation. Planning gives moie powei ovei the futuie.
Planning is ueciuing in auvance what to uo, how to uo it, when to uo it, anu who shoulu uo
it. It biiuges the gap fiom wheie the oiganization is to wheie it wants to be. The planning
function involves establishing goals anu aiianging them in logical oiuei.
Basic management function involving foimulation of one oi moie uetaileu plans to achieve
optimum balance of neeus oi uemanus with the available iesouices.

The planning piocess
(1) iuentifies the goals oi objectives to be achieveu,
(2) Foimulates stiategies to achieve them,
(S) Aiianges oi cieates the means iequiieu, anu
(4) Implements, uiiects, anu monitois all steps in theii piopei sequence.

Plan
Wiitten account of intenueu futuie couise of action (scheme) aimeu at achieving specific goal(s) oi
objective(s) within a specific timefiame. It explains in uetail what neeus to be uone, when, how, anu by
whom, anu often incluues best case, expecteu case, anu woist case scenaiios.

goal
Summaiizeu in the phiase "uieam with a ueauline," a goal is an obseivable anu measuiable enu iesult
having one oi moie objectives to be achieveu within a moie oi less fixeu timefiame. In compaiison, a
'puipose' is an intention (inteinal motivational state) oi mission. The question, "Bas the goal been
achieveu." can always be answeieu with eithei a "Yes" oi "No." A puipose, howevei, is not 'achieveu' but
insteau is puisueu eveiy uay.

Narayana Swamy.R, Asst.Prof, Dept of TCE, T.J.I.T, Bangalore 06AL51 (E&M)

2.1 PLANNINC DEFINITIUNS [Meaning]
"Planning involves selecting enteipiise objectives, uepaitmental goals, piogiams, anu
ueteimining the ways of ieaching them. Planning, thus, pioviues a iational appioach to
pie-selecteu objectives."- Koontz and U'Donnell.

"Planning is ueciuing in the piesent what to uo in futuie. It is the piocess wheieby
companies ieconcile theii iesouices with theii objectives anu oppoitunities. "- Pbilip
Kotler.

"Planning in business is selecting the best couise of action foi achieving the pieueteimineu
objectives of a business, aftei making a caieful evaluation of piesent conuitions anu futuie
tienus iegaiuing the exteinal foices anu inteinal iesouices."-McFarland.

"Coipoiate planning incluues the setting of objectives, oiganizing the woik, people anu
systems to enable those objectives to be attaineu, motivating thiough the planning piocess
anu thiough the plans, measuiing peifoimance anu so contiolling the piogiess of the plan
anu ueveloping people thiough bettei uecision making, cleaiei objectives, moie
involvement anu awaieness of piogiess."-Hussey

"Planning is the selecting anu ielating of facts anu the making anu using of assumptions
iegaiuing the futuie in the visualization anu foimulation of pioposeu activities believeu
necessaiy to achieve uesiieu iesults."-Ceorge.R.Terry.

"Planning is the continuous piocess of making piesent entiepieneuiial uecisions
systematically anu with the best possible knowleuge of theii futuiity, oiganizing
systematically the effoits neeueu to caiiy out these uecisions anu measuiing the iesults of
these uecisions against the exceptions thiough oiganizeu, systematic feeuback."-
Peter.F.Ducker

"Planning ueteimines oiganizational objectives anu the policies, piogiams, scheuules,
pioceuuies, anu methous foi achieving them."- Farmer and Ricbman.

"Planning is ueciuing in auvance what is to be uone. When a managei plans, he piojects a
couise of action foi futuie, attempting to achieve a consistent, cooiuinateu stiuctuie of
opeiations aimeu at the uesiieu iesults"- Tbeo Haimann.

"Planning is funuamentally a mental pieuisposition to uo things in an oiueily way, to think
befoie anu to act in the light of the fact iathei than of guesses"- L.F.Urwick.

"The plan of action is, at one anu the same time the iesult envisageu, the line of action to be
followeu, the stages to go thiough anu methous to use."- Henri Fayol

"Planning is ueciuing in auvance what is to be uone. It involves the selection of objectives,
policies, piogiams, pioceuuies fiom among alteinatives"- M.E.Hurley


2.2 NATURE UF PLANNINC
The natuie of planning can be highlighteu by stuuying its chaiacteiistics. They aie as
follows:

1. Planning is a mental activity. Planning is not a simple piocess. It is an intellectual
exeicise anu involves thinking anu foiethought on the pait of the managei.
2. Planning is goal-oriented. Eveiy plan specifies the goals to be attaineu in the
futuie anu the steps necessaiy to ieach them. A managei cannot uo any planning,
unless the goals aie known.
3. Planning is forward looking. Planning is in keeping with the auage, "look befoie
you leap". Thus planning means looking aheau. It is futuiistic in natuie since it is
peifoimeu to accomplish some objectives in futuie.
4. Planning pervades all managerial activity. Planning is the basic function of
manageis at all levels, although the natuie anu scope of planning will vaiy at each
level.
5. Planning is tbe beginning of tbe process of tbe management. Nanagei must plan
befoie he can possibly oiganize, staff, uiiect oi contiol to suppoit the attainment of
oiganizational goals. Planning is the piimaiy function. Thus, management is a
ciiculai piocess beginning with planning anu ietuining to planning foi ievision anu
aujustment.

. Planning is based on facts. Planning is a conscious ueteimination anu piojection of
a couise of action foi the futuie. It is baseu on objectives, facts anu consiueieu
foiecasts. Thus planning is not a guess woik.
7. Planning is flexible. Planning is a uynamic piocess capable of aujustments in
accoiuance with the neeus anu iequiiements of the situations. Thus planning has to
be flexible anu cannot be iigiu.
8. Planning is essentially decision making. Planning is a choice activity as the
planning piocess involves finuing the alteinatives anu the selection of the best. Thus
uecision making is the caiuinal pait of planning.


Decision making is an integral part of Planning

What is to be uone.
When it is to be uone.
Bow it is to be uone.
Who has to uo it.
9. An intellectual process wbicb requires a manager to tbink before acting. It is
thinking in auvance.
10. Planning is a continuous process.
Koontz & 0benell 'Piinciple of Navigational Change'.
11. Plan must be flexible, witbout undue cost.
Flexible Naiket, Finance, Technology, Peisonnel oiganization

Fixeu asset Tiaining, Auveitisement.
12. Planning is an all pervasive function. Impoitant to all manageis iegaiuless of
theii levels.

Establishing objectives & developing plans to meet them,
Plans of longer time period (6 months-5 years)

Days, Weeks, Months

Execution

13. Efficiency of Plans: The efficiency of a plan is measuieu by the amount it
contiibutes to puipose anu objectives as offset by the costs anu othei
unsought consequences iequiieu foimulating anu opeiating it. A plan can
contiibute to the attainment of objectives, but at too high oi unnecessaiily
high costs.
14. Contribution to Purpose and Ub|ectives:
The puipose of eveiy plan anu all ueiivative plans is to facilitate the
accomplishment of enteipiise puipose anu objectives. This piinciple ueiives
fiom the natuie of oiganizeu enteipiise, which exists foi the accomplishment
of gioup puipose thiough uelibeiate coopeiation. This was emphasizeu by
koontz when he saiu: "Plans alone cannot make an enteipiise successful.
Action is iequiieu; the enteipiise must opeiate. Plans can, howevei, focus on
puiposes. They can foiecast which actions will tenu towaiu the ultimate
objective, which tenu away, which will likely offset one anothei, anu which aie
meiely iiielevant. Nanageiial planning seeks to achieve a consistent,
cooiuinateu stiuctuie of opeiations focuseu on uesiieu enus. Without plans,
action must become meiely ianuom activity, piouucing nothing but chaos."
(Koontz et al., 198u, p. 1S7).
UM
LM
MM


How a plan sbould be? [Extra]
A plan shoulu be a iealistic view of the expectations. Bepenuing upon the activities, a plan
can be Long Range, Inteimeuiate iange anu of Shoit iange. It the fiamewoik within which
it must opeiate. Foi management seeking exteinal suppoit, the plan is the most impoitant
uocument anu key to giowth. Piepaiation of a compiehensive plan will not guaiantee
success, but lack of a sounu plan will, almost ceitainly, ensuies failuie.

Preparing Plan [Extra]
Planning is not uone off hanu. It is piepaieu aftei caieful anu extensive ieseaich. Foi a
compiehensive business plan,
1. Nanagement has to cleaily uefine the taiget goal in wiiting.
2. It shoulu be set by peison having authoiity
3. The goal shoulu be iealistic
4. Specific , Acceptability
5. Easily measuiable
a. Iuentify all the main issues, which neeu to be auuiesseu.
b. Review past peifoimance.
c. Beciue buugetaiy iequiiement
u. Focus on matteis of stiategic impoitance.
e. What aie iequiiements anu how will it be met.
f. What will be the likely length of the plan anu its stiuctuie.
g. Iuentify Shoitcomings in the concept anu gaps.
h. Stiategies foi implementation.
i. Review peiiouically.

2.3 IMPURTANCE UF THE PLANNINC PRUCESS
A plan can play a vital iole in helping to avoiu mistakes oi iecognize hiuuen oppoitunities.
Piepaiing a satisfactoiy plan of the oiganization is essential. The planning piocess enables
management to unueistanu moie cleaily what they want to achieve, anu how anu when
they can uo it. A well-piepaieu business plan uemonstiates that the manageis know the
business anu that they have thought thiough its uevelopment in teims of piouucts,
management, finances, anu most impoitantly, maikets anu competition. Planning helps in
foiecasting the futuie, makes the futuie visible to some extent. It biiuges between wheie
we aie anu wheie we want to go. Planning is looking aheau.
A goou planning piocess suppoits by
1. Reuucing iisk
2. Reuucing unceitainty
3. Suppoiting bettei uecision making
4. Establishing tiust
5. Conveying infoimation


2.4 PURPUSE UF PLANNINC PRUCESS
The puipose of planning is to finu an optimal answei to the oveiall piouuct uevelopment
question of what to builu. The answei incoipoiates featuies, iesouices, anu scheuule.
Answeiing this question is suppoiteu by a planning piocess that ieuuces iisk, ieuuces
unceitainty, suppoits ieliable uecision making, establishes tiust, anu conveys infoimation.

The puipose of an explicit planning piocess is to uevelop cleai business stiategies in oiuei
to impiove the ouus that Youi Company will have above aveiage ietuins in the futuie.
Capitalism is spieauing thioughout the woilu; anu thioughout the woilu competitois aie
planning to eat each othei. Those companies not piepaieu to meet the challenge will
uisappeai. The uays of the "we aie guaianteeu oui shaie of the inuustiy's piofits" aie gone.
It's suivival of the fittest - anu not all companies will suivive to see the yeai 2u1u. To meet
the challenges aheau, companies neeu to become moie stiategic anu moie flexible by
pioviuing business manageis with a stiuctuieu fiamewoik to think stiategically in oiuei to
iaise the level of business uecision making anu business peifoimance.

In piactice, business manageis aie almost always eagei to plan effectively. It's when the
planning piocess is illogical anu chaotic that things go awiy anu manageis look foi covei.
}ust as no two oiganizations aie alike, so also theii plans. It is theiefoie impoitant to
piepaie a plan keeping in view the necessities of the enteipiise.

A plan is impoitant aspect of business. It seives following ciitical functions:

1. Belps management to claiify, focus anu ieseaich theii businesses oi pioject's
uevelopment anu piospects.
2. Pioviues a consiueieu anu logical fiamewoik within which a business can uevelop
anu puisue business stiategies ovei the next thiee to five yeais.
3. Plonninq, fiist, allows you to make youi uecisions aheau of time.
4. It also helps you to onticipote tbe consequences of vaiious couises of action, anu to
think though the iesouices to caiiy out that couise of action.
5. Planning also proviJes Jirection anu a sense of puipose.
. A plan theiefoie, pioviues a unifyinq fromework against which to measuie uecisions
anu thus helps you avoiu piecemeal uecision making - making uecisions that aie not
consistent with youi goal oi with each othei.
7. Petei Biuckei says that planning also helps iuentify potential oppoitunities anu
thieats anu ieuuce long-teim iisks.
8. Planning facilities contiol, which ensuies that activities confoim to plans, anu it
entails thiee steps:
Set stanuaius,
Neasuie peifoimance against these stanuaius, anu
Iuentify anu coiiect ueviations.




2.5 UB)ECTIVES
The teim 'objective' anu 'goal' inuicate an enu iesult to be sought anu accomplisheu. uoals
anu objectives both have value oiientations anu inuicate uesiieu conuitions consiueieu
necessaiy to impiove the oveiall peifoimance of the oiganization. An objective iepiesents
not the enu point of planning but futuie uestinations towaius which othei functions of
management such as oiganizing, staffing, uiiecting anu contiolling aie uiiecteu.

0bjectives constitutes the basic plan of the oiganization, involving the planning piocess
anu iepiesent futuie uiiection towaius which oiganization to move in without objectives,
meaningful planning cannot be uone. 0bjectives of the oiganization aie ueteimineu at the
outset of planning. It is basic iesponsibility of managei because the foimulation of othei
plans like policy, stiategy, iules, buugets etc. to the laige extent uepenus on objectives.

The objectives shoulu be stateu as cleaily as possible so that each employee of the
oiganization can unueistanu them. The objectives may be ueteimineu foi the oiganization
as a whole, foi an inuiviuual uepaitment oi uivision of it. But they shoulu be cooiuinateu in
a mannei that uepaitment goals may to oiganizational oi coipoiate goals.

For example: if the coipoiate goal of automobile company is piofitability, so the goals of
piouuction anu othei functional uepaitments woulu be to piouuce anu uistiibute the
iequiieu numbei of vehicle ovei a peiiou of time to achieve that objective of piofitability.

Definitions
"A manageiial objective is the intenueu goal which piesciibes uefinite scope anu suggests
uiiection to effoits of a managei"-Terry.

"0bjectives aie the goals, aims oi puiposes the oiganizations wish to achieve ovei vaiying
peiious of time"-M.C.Farland.

"0bjectives inuicate the enu point goal towaius which management uiiects it effoits anu
iesouices"- Sisk, 1993, p.112

"0bjectives aie goals establisheu to guiue the effoits of the company anu each of its
components."

"An oiganization goal is a uesiieu state of affaiis which the oiganization attempts to
iealize."


Role of ob|ective
1. Eveiy oiganization woiks in an enviionment consisting of seveial foices(pioviue
thieat anu oppoitunity)
2. Pioviue uiiection foi uecision making in vaiious aieas of oiganization piocess
3. 0bjectives set the limits anu uesciibe the aieas in which the manageis can make
uecision
4. Cleais uefinition of objectives encouiage unifieu planning
5. Notivating foice by pioviuing uiiection to oiganization membeis
. voluntaiy co-oiuination
7. Pioviue stanuaius against which peifoimance of the oiganization units, sub units
anu inuiviuuals aie measuieu
8. Becentialization ----- leeway to lowei level people in ueciuing to peifoim his woik
9. Cleai specific objective may pioviue integiation of oiganization(vaiious gioups of
association with cieuitois, customeis)
10. Lessen misunueistanuing anu conflicts
11. Basis foi manageiial contiol

Cbaracteristics of ob|ectives
1. 0bjectives aie basic plans.
2. 0bjectives aie multiple in natuie,
3. 0bjectives aie eithei tangible oi intangible,
4. 0bjectives have a piioiity,
5. 0bjectives aie geneially aiiangeu in hieiaichy,

Corporute Objectlvex
epurtmentul Objectlvex
Sectlonul Objectlvex
InJlvlJuul Objectlvex

. 0bjectives sometimes clash with each otheis,
7. 0bjectives can be shoit-teim oi long-teim.
8. 0bjectives foim a netwoik.

Requirements f or sound ob|ectives
1. 0bjectives must be both cleai anu acceptable
2. 0bjectives must suppoit one anothei
3. 0bjectives must be piecise anu measuiable
4. 0bjectives shoulu always iemain valiu


Advantages of ob|ectives
1. Pioviue a basis foi planning anu foi ueveloping othei type of plans such as policies,
buugets anu pioceuuies.
2. Act as motivatois foi inuiviuuals anu uepaitments of an enteipiise imbuing theii
activities with a sense of puipose.
S. Eliminate haphazaiu action which may iesult in unuesiiable consequences.
4. Facilitate cooiuinateu behavioi of vaiious gioups which otheiwise may pull in
uiffeient uiiections.
S. Basis foi manageiial contiol.
6. Facilitates bettei management of enteipiise
7. Lessen misunueistanuing anu conflict anu facilitate communication.
8. Pioviues legitimacy to oiganization's activities.

Areas Needing Ub|ectives
Petei Biuckei, while woiking as a consultant foi ueneial Electiic, iuentifieu eight key aieas
in which oiganizations woulu establish objectives. The aieas weie
1. Naiket stanuing,
2. Piouuctivity,
3. Physical anu financial iesouices,
4. Piofitability,
5. Innovation,
. Nanagei peifoimance anu uevelopment,
7. Woikei peifoimance anu attituues, anu
8. Public anu social iesponsibility.

Planning Life-Cycle

Fayol iuentifieu planning as one of the basic "functions" of management


2. TYPES UF PLANS
Befoie illustiating the main types of plans anu applications, let us piesent the majoi
uimensions of plans in Figuie below

Wheie;
Repetitiveness uimension of a plan iefeis to the extent to which the plan is useu
ovei anu ovei again. Some plans aie specially uesigneu foi one situation that is
ielatively shoit-teim in natuie. 0thei plans aie uesigneu to be useu time aftei time
foi long-teim iecuiiing situations.
The time uimension iefeis to the length of time the plan coveis. Stiategic planning
was uefineu as long- teim in natuie, while tactical planning was uefineu as shoit-
teimeu.
The scope uimension iefeis to the piopoition of the total management system at
which the plan is aimeu. Some plans aie uesigneu to covei the entiie open
management system. This plan is often iefeiieu to as a mastei plan. 0thei plans aie
uevelopeu to covei only a poition of management system.
The level uimension iefeis to the level of the oiganization at which the plan is
aimeu. Top level plans aie those uesigneu foi the oiganization's top management,
wheieas miuule anu lowei level plans aie uesigneu foi miuule anu lowei
management.
The plan's foui majoi uimensions aie:
Repetitiveness
Time
Scope
Level


Baseu on the pievious uiscussion about the plan's uimensions; we can summaiize the most
common types of plans accoiuing to the iepetitiveness uimension in Figuie below.
ob|ectives

Foi Non-iepetitive activities Foi Repetitive activities

1. Purpose or Mission of an oiganization is its basic function. Like the puipose of the
univeisity is teaching anu ieseaich, that of Couits is the inteipietation of laws anu theii
application anu so on.

2. Ub|ective is the ultimate goal towaius which the activities of the oiganization aie
uiiecteu at. Like, say we take the 0niveisity foi example again, teaching, ieseaich anu
enlightening the stuuents aie the objectives of the univeisity, wheieas, the objective of
the Examination Bepaitment of the univeisity is to conuuct the exam in a faii anu
ieliable mannei anu ueclaie the iesults in time. Though the objectives of the
uepaitments aie uiffeient they aie consistent with the Puipose. 0ne uepaitment alone
is not capable of accomplishment of the Puipose.

3. Strategy is the geneial piogiam of action anu ueployment of iesouices to attain
compiehensive objectives. Thus, an entiepieneui neeus to ueciue what kinu of business
he is going to uo. A stiategy may also be policy such as selling on cash only. Tieatment
of stiategy as a type of plan is justifieu by its usefulness in piactice anu impoitance in
guiuing.

"The piocess of ueteimining the majoi objectives of an oiganization anu the policies
anu piogiams that will govein the acquisition, use anu uisposition of iesouices to
achieve those objectives." - Ceorge Steiner's

"Stiategy is the complex plan foi biinging the oiganization fiom a given postuie to a
uesiieu position in a futuie peiiou of time."- D.I.Cleland and W.R.King.

strategies
Single use plans
Piogiams,
Buugets,
Scheuules,
Piojects.

Standing plans
policies,
pioceuuies,
methous
iules


"Stiategy is the pattein of objectives, puipose oi goals anu majoi policies anu plans
foi achieving these goals stateu in such a way as to uefine what business is In oi to
be in anu the kinu of company it is to be."-E.P.Learned.

"Stiategy iesults fiom the piocess of ueciuing on objectives of the oiganization, on
changes in these objectives, on the iesouices useu to attain these objectives on the
policies that aie govein the acquisition anu use anu uisposition of these iesouices."-
Antbony

4. Uperational plans

The specific iesults expecteu fiom uepaitments, woik gioups, anu inuiviuuals aie the
operational goals. These goals aie piecise anu measuiable. "Piocess 1Su sales
applications each week" oi "Publish 2u books this quaitei" aie examples of opeiational
goals. An operational plan is one that a managei uses to accomplish his oi hei job
iesponsibilities. Supeivisois, team leaueis, anu facilitatois uevelop opeiational plans to
suppoit tactical plans. 0peiational plans can be a single-use plan oi an ongoing plan

a. Standing planning. Stanuing plans aie peimanent in natuie anu aie meant to be
useu ovei anu ovei again. They ensuie quick uecision anu action whenevei neeu
aiises.

Policy- Policies uefine an aiea within which a uecision is to be maue anu
ensuies that the uecision will consistent with anu contiibute to the objective.

"ueneial statement oi unueistanuing which guiue oi channel thinking in
uecision making". - Koontz et al

"A pattein of uiiection foi the guiuance of those who caiiy iesponsibility foi
the management of activities of the enteipiise."-Breacb


"Policies aie stanuing uecisions maue to ensuie unifoim action in the
hanuling of iepetitive pioblems anu questions that aie significant to the
oiganization at laige."-Allen.

Procedure is a subuivision of policy. It states a seiies of ielateu steps oi tasks to
be pei foimeu in a sequential way. In common pailance it is calleu 'Stanuaiu
0peiating Pioceuuie' (S0P).To implement uecisions, actions aie initiateu.

"A pioceuuie is a seiies of ielateu tasks that make up the chionological
sequence anu the establisheu way of peifoiming the woik to be
accomplisheu."-Terry

Policy Procedure
Guidance for managerial thinking and actions Guidelines to action
More flexible Less flexible
Higher levels Lower levels

Rule is also a plan that piesciibes a couise of action anu explicitly states what is
to be uone unuei a given set of ciicumstances. Take note to obseive the
uiffeiences in iules, pioceuuies anu policies. Wheieas the policies aie guiue to
uecision making anu allow the manageis to use theii uiscietion, iules anu
pioceuuies allow no such uiscietion.
Metbods help in incieasing the effectiveness anu usefulness of the pioceuuie. A
methou is a piesciibeu way in which one step of a pioceuuie is to be peifoimeu.
Ex: scieening of applications oi conuucting a wiitten test is a methou,
wheieas the sequence of steps involveu in the ieciuitment of peisonnel
constitutes a pioceuuie.
b. Single use {ad boc] Planning. Au hoc plans aie geneially foi specific matteis anu
aie piepaieu only when some neeu aiises.

Program is a bioau teim. A piogiam incluues objectives, policies, pioceuuies,
methous, stanuaius anu buugets. Launching of a satellite is a piogiam.

"Compiehensive plan that incluues futuie use of uiffeient iesouices in an
integiateu pattein anu establishes a sequence of iequiieu actions anu time
scheuules foi each in oiuei to achieve stateu objectives". -Terry and
Franklin


Budget is a statement of expecteu iesults expiesseu in numeiical teims. It is a
quantitative expiession of a plan. It vaiies in accuiacy, uetail anu puipose.
Nastei buuget contains the consoliuateu plan of action of the whole enteipiise
anu is in a way the tianslateu veision of the oveiall business plan of the
oiganization.

"A financial anuoi quantitative statement piepaieu piioi to a uefinite
peiiou of time, of the policy to be puisueu uuiing that peiiou, foi the puipose
of obtaining a given objective."- ICWA, London.

Piouuction buuget is the plan of the piouuction uepaitment anu capital
expenuituie buuget, iaw, mateiial buuget, laboi buuget etc aie buugets of the
piouuction uepaitment. Some buugets vaiy accoiuing to the oiganization's
level of output; these aie calleu vaiiable oi flexible buugets. uoveinment
uepaitments piepaie piogiam buugets in which the agency anu the
uepaitments iuentifies goal, uevelops uetaileu piogiams to meet the goals
etc. A combination of the vaiiable anu the piogiam buuget is the zeio-base
buuget. In this appioach the piogiams aie staiteu as though fiom sciatch oi
zeio base.

Pro|ect is a plan that cooiuinates a set of limiteu-scope activities that uo not
neeu to be uiviueu into seveial majoi piojects in oiuei to ieach a majoi non-
iecuiiing goal. Piogiams aie bioauei than piojects.

Scbedules aie pait of action plan anu it is a piocess of establishing a time
sequence foi the woik to be uone. A scheuule piesciibes the piecise time when
each of a seiies of action shoulu take place. It is one vital pait of a piogiam oi a
pioject.

5. Tactical and strategic planning.

Strategic Planning Tactical Planning
Beciues the majoi goals anu policies of
allocation of iesouices to achieve these goals
Beciues the uetaileu use of
iesouices foi achieving each goal
Bighei levels of management, miuule unawaie Lowei levels of management
Long teim plans Shoit teim plans
Baseu on long teim foiecasts Baseu on past peifoimance
Noie unceitain Less unceitain
Less uetaileu because it is not involveu in uay-
to-uay activities
Noie uetaileu, because it is
involveu in uay-to-uay activities


. Contingency plans
Intelligent anu successful management uepenus upon a constant puisuit of auaptation,
flexibility, anu masteiy of changing conuitions. Stiong management iequiies a "keeping
all options open" appioach at all times that's wheie contingency planning comes in.
Contingency planning involves iuentifying alteinative couises of action that can be
implementeu if anu when the oiiginal plan pioves inauequate because of changing
ciicumstances. Keep in minu that events beyonu a managei's contiol may cause even
the most caiefully piepaieu alteinative futuie scenaiios to go awiy. 0nexpecteu
pioblems anu events fiequently occui. When they uo, manageis may neeu to change
theii plans. Anticipating change uuiing the planning piocess is best in case things uon't
go as expecteu. Nanagement can then uevelop alteinatives to the existing plan anu
ieauy them foi use when anu if ciicumstances make these alteinatives appiopiiate.
7. Financial and non-financial planning. Financial planning ielates to the monetaiy
aspect of the concein. 0n the othei hanu, non-financial planning ielates to the physical
iesouices of the concein.
8. Formal and informal planning. A planning in black anu white is known as foimal
planning. Infoimal planning is only thinking about it anu nothing moie.
9. Sbort-range and long-range planning. Shoit-teim planning ielates to a peiiou of less
than one yeai. It is to accomplish objectives in the neai futuie. Neuium-teim planning
coveis a peiiou of ovei one yeai but less than thiee yeais. A planning between thiee to
five yeais is known as long-teim planning.
10. Administrative and operational planning. Planning is geneially uone at vaiious
levels of management like top level, miuule level, anu lowei level. An auministiative
planning associate with miuule level manageis anu pioviues guiuelines to opeiational
planning. 0n the othei hanu, opeiational planning associates with lowei levels of
management anu ueals with actual execution of opeiations. Top level planning is
conceineu with fixing of objectives.
11. Specific and Routine Planning. Any plan maue with a paiticulai objective is known as
a specific plan. Bay-to-uay noimal activities iequiie some type of iegulai plan known as
a ioutine plan.


2.7 DECISIUN MAKINC
Becision making is a manageiial piocess involving selection of a paiticulai couise of action
out of many alteinatives foi achieving given objectives oi solving a pioblem. It takes place
only when moie than one option is available to the managei. By taking a uecision, a
managei attempts to ieuuce the gap between the piesent anu the uesiieu situation. A few
impoitant uefinitions aie given below.

"Nanagement uecision making is a woik the managei peifoims to aiiive at a conclusion
anu juugment".-Allen

"Becision making is a conscious anu human piocess involving both inuiviuual anu social
phenomenon baseu upon factual anu value piemises which concluues with a choice of one
behavioial activity among one oi moie alteinatives with the intention of moving towaius
some uesiieu state of affaiis".-Sbull.Delberg and Cumming.

"it is piocess of a solution selecteu aftei examining seveial alteinatives chosen because the
ueciuei foiesees that the couise of action he elects will uo moie than the otheis to fuithei
his goals anu will be accompanieu by the fewest possible objectionable consequences"-
Manley.H.)ones

"Becision making is a piocess of iuentifying anu choosing alteinative couise of action in a
mannei appiopiiate to the uemanu of the situation. The act of choosing implies that
alteinative couises of action must be weighteu anu weeueu out".-Kreitner

"What evei managei uoes, he uoes thiough uecision making".-Peter Drucker
"Becision making is the selecting of an alteinative, fiom two oi moie alteinatives, to
ueteimine an opinion oi a couise of action."-Ceorge.R.Terry

"Becision making is a piocess involving infoimation, choice of alteinative actions,
implementation, anu evaluate that is uiiecteu to the achievement of ceitain stateu goals"-
Andrew Szilagyi

"A uecision is the selection of a couise of action fiom two oi moie alteinatives; the uecision
making piocess is a sequence of steps leauing to that selection"- Henry sisk and Cliffton
Williams.


Decision Making Tecbniques

The following five techniques aie useu in the uecision making piocess:

1. Marginal analysis: This technique enables an assessment of auuitional output
ueiiveu foi an extia amount of input-iesouice that is auueu. This option is viable
foi evaluating alteinatives in the uecision making piocess.
2. Financial analysis: It enables an estimation of the piofitability of investment,
calculation of pay-back peiiou, anu an analysis of cash inflows anu outflows.
3. Break- Even analysis: Bieak even occuis when total ievenues equal total costs, oi
when piofit is nil. At this point, it becomes necessaiy to covei the fixeu cost. Bieak-
Even technique aius in making a compaiative analysis of the alteinatives that aie
available, baseu on piice, fixeu cost anu vaiiable cost pei unit.
4. Ratio analysis: It compaies the financial statements to evaluate the oiganization's
financial position, stiengths anu weaknesses, histoiical peifoimance etc.
5. Uperations researcb tecbniques
0peiations ieseaich techniques enable the use of quantitative techniques in
Becision making. Some of them aie:
Linear programming - It enables the uecision makei to allocate scaice
iesouices optimally anu maximize piofits. This technique is useu mainly in
piouuct mix uecisions, inventoiy management pioblems, scheuuling
piouuction facilities etc.
Queuing or waiting-line metbod - Queuing methou is a scientific
appioach foi optimizing customei seivice.
Came tbeory - This technique enables to foimulate a stiategy baseu on the
competitoi's stiengths anu uecisions anu one's own actions.
Simulation - Simulation is useu to evaluate the alteinatives foi complex
pioblems.
Decision tree - Anothei mathematical appioach, which enables to choose
between seveial alteinative couises of action.

Limitations of Decision Making
1. Becisions aie maue foi futuie events. As futuie is unceitain, the uecisions cannot be
completely iational.
2. Bifficulty in ueteimining alteinatives foi accomplishing a goal
S. When new oppoitunities aie involveu, uecision-making seems to be uifficult
4. In most cases, alteinatives cannot be analyzeu, in spite of using sophisticateu
uecision-making mouels
S. Limitations of time anu infoimation, blocks the iationality of the uecision makei
6. Becision-making is a game of iisk, anu humans by natuie aie iisk aveiteis. This
nullifies the iational uecision making piocess.


Managers as Decision Makers

The success of an oiganization gieatly uepenus on the uecisions that manageis make.
Two majoi mouels iegaiuing manageiial uecision making aie: iational anu non-iational
moues foi uecision making.

1. Rational model
Rational mouel is baseu on economic theoiy, Beie, manageis aie engageu in
making iational uecisions. They gathei ielevant infoimation, unueistanu, analyze
the possible outcomes anu then make a iational uecision.
This view was ciiticizeu, as management thinkeis felt it uifficult to obtain peifect
infoimation anu make a iational uecision in complex situations.
2. Non-rational model
Non-iational mouels aie of thiee types: satisfying mouel, inciemental mouel anu
gaibage-can mouel.
Satisfying model - Pioposeu by Simon, this mouel states that manageis
involveu in uecision making tenu to seek alteinatives that aie most satisfying.
Incremental model - This appioach focus on shoit-teim solutions iathei than
facilitating long-teim goals accomplishment.
For instance, incieasing sales thiough sales piomotion is a shoit-teim
uecision taken by the management.
Carbage-can model - This mouel is most appiopiiate foi juugment tasks in
oiganizations wheie manageis have no specific goal piefeience, the
involvement of paiticipants fluctuates with the amount of time anu effoit
given, anu choices aie inconsistent anu not well uefineu.

Significance of Decision Making
Nanageis may not always make the iight uecision, but they can use theii knowleuge of
appiopiiate uecision-making, to ueciease the ouus. In case of Coke, the CE0 iuentifieu the
pioblem, anu took the iight uecision to ieintiouuce the olu Coke back into the maiket.
0se of iational anu systematic appioach yielus bettei iesults
Claiity in unueistanuing the alteinative couises
Aims at best solution


Decision Making Process

1. Determining tbe problem: It involves iuentifying the pioblem. Iuentification of a
pioblem has thiee stages: scanning, categoiization anu uiagnosis.
Scanning involves monitoiing the woik situation foi changing
ciicumstances that may signal the emeigence of a pioblem. Changing
ciicumstances can take uiffeient foims such as completion, goveinment
policies, piice iegulation etc. which hampei the giowth.
For instance, uuiing the 197u's, Swiss watchmakeis noticeu that the
ielatively inexpensive watches that weie piouuceu in }apan anu Bong Kong
weie solu in Switzeilanu. Entiy of these watches fiom }apan anu Bong Kong
poseu a thieat to uomestic manufactuieis.
Categorization enables an unueistanuing of the uisciepancy between
actual anu planneu objectives.
Diagnosis involves gatheiing of auuitional infoimation anu specifying the
natuie anu causes of the pioblem.
2. Identifying resources of constraints: Involves iuentifying factois that help to
solve (money, mateiials, time) oi limit ( lack of iesouices) manageis effoits to
solve the pioblem.
3. Cenerate alternative solutions: Bevelopment of alteinative solutions can be
facilitateu thiough biain stoiming, wheiein managei jots uown the possible
solutions, geneiate an iuea, anu builu upon iueas.
4. Evaluating alternative solutions: Evaluation entails a caieful consiueiation of
stiengths anu weaknesses of each alteinative, befoie finalization. Each alteinative
shoulu be evaluateu systematically baseu upon feasibility, quality, acceptability,
cost ieveisibility anu ethics. When Coca-Cola Company ian into uifficulties, while
intiouucing a new foimula foi Coke; it was still able to ieveise the uecision by
ieintiouucing its olu foimula as Coke classic.
5. Selecting alternatives: Selection of alteinatives can be baseu upon expeiience,
expeiimentation, anu ieseaich.
Feedback


Past expeiience is helpful when the fiim is new to the maiket. It can follow
the expeiience of othei playeis in the maiket, anu then act appiopiiately.
Expeiiment is a challenging task. Foi instance, Coke's expeiiment with new
sweet foimula, tuineu out to be a failuie.
Reseaich is consiueieu to be an effective technique foi selecting an
alteinative because it stuuies the natuie anu ielationship among the
vaiiables.
. Implementing tbe decision: It involves implementing the activities foi achieving
the objectives.
7. Monitoring: Compaiing planneu with the actual objectives. In case any uiffeiences
aiise, they aie coiiecteu.

Management Inf ormation System
Nanagement Infoimation System gatheis moie compiehensive uata anu oiganizes anu
summaiizes the uata in a foim that is useful to functional manageis. It also pioviues them
with timely infoimation. An iueal mouel foi NIS compiises of foui components - uata
gatheiing, uata entiy, anu uata tiansfoimation anu infoimation utilization. The uatabase
foi this mouel is stoieu in such a way that a usei can select, mouify, calculate, anu
tiansfoim this uatabase into any othei useful application.

Decision Support System
An impoitant component of the NIS is Becision Suppoit System (BSS). BSS is a
computei-baseu infoimation system that suppoits the piocess of manageiial uecision-
making in a situation that is not well stiuctuieu. Though this system uoes not ieplace the
piocess of manageiial uecision-making, it still makes uecision-making moie effective.

The following aie the uiffeient chaiacteiistics of BSS
Bata foi BSS aie baseu on manageiial uecisions iathei than uatabases
Easy to unueistanu anu use, as softwaie is quite simple anu contains less technical
teims.
Availability of inteiactive piocessing, enables getting a quick iesponse fiom othei
membeis in the oiganization.
BSS is flexible, as it can be auapteu to any exteinal enviionment

Types of Decision Making

1. Individual and group decisions
When uecision is taken by an inuiviuual in the oiganization, it is known as
inuiviuual uecision. Such uecisions aie geneially taken in small
oiganization anu oiganizations wheie autociatic style of management
pievails.
uioup oi collective uecisions iefei to the uecisions which aie taken by a
gioup of oiganizational membeis, say boaiu of uiiectois oi committee.


2. Policy and operating decisions
Policy uecisions aie of vital impoitance anu aie taken by the top
management. They affect the entiie enteipiise.
0peiating uecisions aie taken by the lowei management in oiuei to put
into action the policy uecisions.
For Example: bonus issue is a policy mattei; calculation on bonus is an
opeiating uecision.
3. Urganizational and personnel decisions
0iganizational uecisions aie those which a managei takes in his official
capacity. Such uecisions can be uelegateu.
Peisonnel uecisions, which ielate to the managei as an inuiviuual anu not
as a membei of the oiganization, cannot be uelegateu.
4. Crisis and Researcb decisions
Ciisis uecisions aie those which aie maue to meet unanticipateu situations
which uo not allow much scope foi extensive investigation anu analysis of
the factois ielevant to them. They have to be maue instantaneously unuei
piessuie of ciicumstance.
Reseaich uecisions aie maue aftei a thoiough analysis of pios anu cons
without piessuie
5. Managerial decisions are of two types: programmed and non-programmed
managerial decisions.

. Strategic and Tactical Decision making


Decision Making Conditions {Certainty, Uncertainty and Risk]
Nanageis sometimes aie cleai about enviionmental conuitions, but at othei times, they
uon't seem to have any clue. In such ciicumstances, the available conuitions foi a uecision
makei aie ceitainty, unceitainty anu iisk.

1. Decision making under certainty: When the uecision makei knows with
ieasonable ceitainty about what the available alteinatives aie, anu what
conuitions aie associateu with each alteinative; then a state of ceitainty is saiu to
exist.
For example, Aii Inuia neeus to buy ten jumbo jets. The uecision is fiom whom to
buy. Aii Inuia has two choices: NcBonnell Bouglas, anu Aiibus. Each of these
companies aie known foi theii quality piouucts. Aii Inuia can choose fiom any of
these alteinatives. Beie, foi making the choice, theie is less ambiguity anu theie is
a ielatively lowei chance of making a bau uecision.
2. Decision making under risk: In some situations, a managei is able to estimate
the level of piobability at which ceitain vaiiables coulu occui. The ability to
estimate may be uue to expeiience, incomplete but ieliable infoimation oi, in
some cases, an accuiate iepoit. When estimates aie maue, a uegiee of iisk is
involveu. Bowevei some amount of infoimation about the situation is available.
The situation iequiies estimating the piobability that one oi moie known
vaiiables might influence the uecision being maue.
3. Decision making under uncertainty: A conuition of unceitainty exists when a
managei is faceu with ieaching a uecision with no histoiical uata conceining the
vaiiables anuoi unknowns anu theii piobability of occuiience.
For instance, the uecision to intiouuce Kellogg coin flakes in Inuia was maue
unuei unceitainty.
4. Modern Approacb to Decision Making under Uncertainty: Nouein appioach to
uecision making unuei unceitainty helps in impioving the quality of uecision
making. Foi making such uecisions, theie aie thiee appioaches: iisk analysis,
uecision tiees anu piefeience theoiy.
Risk analysis: Risk analysis involves knowleuge of the size anu the natuie of
the iisk involveu, in choosing a paiticulai couise of action.
Befoie the launch of its veisa mouel, Naiuti, conuucteu iisk analysis in the
aieas of capital investment, cost of piouuction anu piicing.
Decision trees: A giaphical iepiesentation of alteinative couises of action
with the possible outcomes compiises a uecision tiee. It uepicts the vaiious
uecision points, chances, events anu piobabilities involveu in vaiious uecision-
couises that might be unueitaken.
Preference or utility tbeory: This theoiy is baseu on the notion that
inuiviuuals' attituues towaius iisk will vaiy. Some inuiviuuals aie willing to
take iisk (gamble), wheieas otheis aie not willing to take iisk oi take only low
iisk (iisk aveiteis). Nanageis play both these ioles, when they aie unceitain
about the outcome.


2.8 IMPURTANCE UF PLANNINC
Accoiuing to u.R. Teiiy, "Planning is the founuation of most successful actions of all
enteipiises." An enteipiise can achieve its objectives only thiough systematic planning on
account of the incieasing complexities of mouein business. The impoitance anu usefulness
of planning can be unueistoou with iefeience to the following benefits.

1. Preliminary planning. Pioceeus execution of all othei manageiial functions
2. Minimizes uncertainty. The futuie is geneially unceitain anu things aie likely to
change with the passage of time. Planning helps in minimizing the unceitainties of
the futuie as it anticipates futuie events.

3. Empbasis on ob|ectives. The fiist step in planning is to fix the objectives. When the
objectives aie cleaily fixeu, the execution of plans will be facilitateu towaius these
objectives.
4. Promotes coordination. Planning helps to piomote the cooiuinateu effoit on
account of pie-ueteimineu goals.
5. Facilitates control. Planning anu contiol aie insepaiable in the sense that
unplanneu actions cannot be contiolleu. Contiol is nothing but making suie that
activities confoim to the plans.
. Improves competitive strengtb. Planning enables an enteipiise to uiscovei new
oppoitunities, which give it a competitive euge.
7. Economical operation. Since planning involves a lot of mental exeicise, it helps in
piopei utilization of iesouices anu elimination of unnecessaiy activities. This, in
tuin, leaus to economy in opeiation.
8. Encourages innovation. Planning is basically the ueciuing function of management.
Nany new iueas come to the minu of a managei when he is planning. This cieates an
innovative anu foiesighteu attituue among the manageis.
9. Tackling complexities of modern business. With mouein business becoming
moie anu moie complex, planning helps in getting a cleai iuea about what is to be
uone, when it is to be uone, wheie it is to be uone anu how it is to be uone.
10. Restrict inter departmental plans.
11. Selection of optimum goalsJfacilitates decision making. Planning involves
iational thinking anu uecision making conceining pioposeu couise of action (that
piomotes oiganization goals) within available iesouice, social, economical, political
factois.
12. Unity of action. Planning enables people within oiganization to woik effectively
anu haimoniously foi accomplishment of common goals.
13. Safe guard against business failures. Planning avoius iash anu unscientific
uecision making.




2.9 PLANNINC PRUCESS

1. Being Aware of opportunities in light of:
The market
Competition
What customers need want?
Our strengths
Our weaknesses
2. Establishing Verifiable Goals or Set of Goals
to be achieved:
Determine Enterprise Objectives (Top
Managers)
Desired sales volume,
Growth rate,
Development of new products or
service
Abstract goal
Type of goal
Basic mission of the organization
The values its managers hold
Actual potential abilities
3. Establishing Planning Premises:
Assumptions about future
Internal and external premises,
Tangible and Intangible premises,
Controllable and Non-controllable
premises
4. Deciding the Planning Period:
Factors for selecting time range
Lead time in development and
commercialization of a new product
(for starting a heavy engineering company-
5year - 2 year for conception, engineering
and development - remaining for
production )
Time required to recover capital
investment or the pay-back period
(machine cost is 10lakh and generates
2lakh a year, it has payback period of 5
years, so plan should be at least 5years)
Length of commitments already made
(company has agreed to supply goods to
buyers /work out mines for 5 years - plan
should be same period)
5. Finding Alternative Course of
Action:
What are the most promising
alternative to accomplish our
objectives/goals,
Which alternative will give us the
best chance of meeting our goals
at the lowest cost and highest
profits?
Ex: Technical know-how may be secured
By engaging foreign technician
Training staff aboard

6. Evaluating and selecting a course
of Action:
Help of quantitative techniques
and operations research.
7. Developing Derivative Plan:
Derivative plans (Middle and
Lower Level managers)
Selecting realistic goals,
Assessing their sub-units
particular strengths and
weaknesses,
Environmental changes.
Broad goals are translated into
day-to-day operations of
organization.
8. Measuring and controlling the
progress:
Progress of plan is checked
Take whatever remedial
action is necessary to
make plan work,
Change the original plan if
it is unrealistic.


2.10 PLANNINC PREMISES
Inteinal & Exteinal
Planning premises: - Tangible & Intangible
Contiollable & Non-Contiollable

Supply peitinent facts anu infoimation's ielating to futuie
Population tienus
ueneial economic conuitions
Piouuction costs anu piices
Piobable competitive behavioi
Capital & mateiial availability
uoveinmental contiol
Chief executive aiiives at a common set of piemises that all manageis accept, since
manageis at uiffeient levels geneially uiffei in theii views aie uiffeient about these
piemises.

1] Internal and External premises:-

Internal premises:
Sales foiecasts
Policies anu piogiams of oiganization
Capital investment in plant anu equipments
Competence of management
Skill of laboi foice
Nachines, money anu beliefs
Behavioi anu values of the owneis anu employees

External premises: Business enviionment

Factoi which influence the uemanu foi the piouuct
of the enteipiise

Factois that affect the iesouices available to the
enteipiise

ueneial business anu economic enviionments
Technological changes
uoveinment policies anu iegulations
Population giowth
Political stability
Social anu inuustiial uemanu


Tangible Intangible
Quantitatively measuieu Qualitative in chaiactei anu cannot be
so measuieu
Population giowth,
Inuustiy uemanu,
Capital anu iesouices investeu.
Political stability, Sociological changes
Business anu economic enviionments
Philosophies, Behaviois owneis

2.11 HIERARCHY UF PLANNINC
Typical geneial management stiuctuie is hieiaichical management stiuctuie. The
hieiaichical management system is quite usable in case of ielatively stable systems. An
example of such management stiuctuie foi management anu cooiuination of woik in
enteipiise has shown in Fig below. Next to manageiial levels aie piesenteu also main tasks
to be solveu oi executeu the levels aie cieateu foi.

Controllable Non-controllable
Cannot upset well-thought out
calculations oi oiganization
iegaiuing the plan
Revise plans peiiouically in accoiuance
with cuiient uevelopments
Auveitising policy, Competence
of management membeis, Skills
of laboi foice, Availability of
iesouices
Stiikes, wais, natuial calamities
Emeigency, legislation


2.12 LIMITATIUNS UF PLANNINC [EXTRA]
Although planning is a piimaiy function of management anu facilitates vaiious othei
management functions, it has many baiiieis anu limitations. Some of them aie explaineu
below:

1. Costly process. Planning is a costly piocess as time, eneigy anu money aie involveu
in gatheiing of facts anu testing of vaiious alteinatives.
2. Rigidity. Planning iestiicts the inuiviuual's fieeuom, initiative anu uesiie foi
cieativity as it stiictly auheies to -pieueteimineu-policies anu Piogiams.
3. Limited scope. The scope of planning is saiu to be limiteu in the case of
oiganizations with iapiuly changing situations.
4. Influence of external factors. The effectiveness of planning is sometimes limiteu
because of the exteinal social, political, economical anu technological factois which
aie beyonu the contiol of the planneis.
5. Non-availability of data. Planning neeus ieliable facts anu figuies. Planning loses
its value unless ieliable infoimation is available.
. People's resistance. Resistance to change hinueis planning. Planneis often feel
fiustiateu in instituting new plans, because of the inability of people to accept them.
7. Inability to plan or inadequate planning. Nanageis aie not boin with the ability
to plan. Some manageis aie not successful planneis because they lack the
backgiounu, euucation, anuoi ability. 0theis may have nevei been taught how to
plan. When these two types of manageis take the time to plan, they may not know
how to conuuct planning as a piocess.
8. Lack of commitment to tbe planning process. The uevelopment of a plan is haiu
woik; it is much easiei foi a managei to claim that he oi she uoesn't have the time to
woik thiough the iequiieu planning piocess than to actually uevote the time to
ueveloping a plan. (The lattei, of couise, woulu save them moie time in the long
iun!)Anothei possible ieason foi lack of commitment can be feai of failuie. As a
iesult, manageis may choose to uo little oi nothing to help in the planning piocess.
9. Inferior information. Facts that aie out-of-uate, of pooi quality, oi of insufficient
quantity can be majoi baiiieis to planning. No mattei how well manageis plan, if
they aie basing theii planning on infeiioi infoimation, theii plans will piobably fail.
10. Focusing on tbe present at tbe expense of tbe future. Failuie to consiuei the
long-teim effects of a plan because of emphasis on shoit teim pioblems may leau to
tiouble in piepaiing foi the futuie. Nanageis shoulu tiy to keep the big pictuie
theii long-teim goals in minu when ueveloping theii plans.
11. Too mucb reliance on tbe organization's planning department. Nany
companies have a planning uepaitment oi a planning anu uevelopment team. These
uepaitments conuuct stuuies, uo ieseaich, builu mouels, anu pioject piobable
iesults, but they uo not implement plans. Planning uepaitment iesults aie aius in
planning anu shoulu be useu only as such. Foimulating the plan is still the managei's
iesponsibility.
12. Concentrating on controllable variables. Nanageis can finu themselves
concentiating on the things anu events that they can contiol, such as new piouuct


uevelopment, but then fail to consiuei outsiue factois, such as a pooi economy. 0ne
ieason may be that manageis uemonstiate a ueciueu piefeience foi the known anu
an aveision to the unknown.

"A uetaileu methou, foimulateu befoiehanu, foi managing all oi pait of a business."

"The piocess of setting goals, ueveloping stiategies, anu outlining tasks anu
scheuules to accomplish the goals."


3.1 NATURE UF URCANIZINC
1. Legal forms of organization:

As a backgiounu to the stuuy of oiganization, let us fiist compaie the legal foims in
which a business can be oiganizeu:
a. Sole proprietorsbip: is a business owneu anu opeiateu by one peison.
b. Partnersbip: association of two oi moie paitneis to caiiy on as co-owneis of a
business foi piofit
c. Corporations: aie legal entities owneu by shaieholueis, who in geneial have
no liability beyonu loss of the value of theii stock.
d. Cooperatives: aie special type of oiganization owneu by useis oi customeis to
whom eainings aie usually uistiibuteu tax fiee in piopoition to pationage.

2. Urganizing Defined

"0iganization is the establishment of authoiity anu ielationships with piovision foi
cooiuination between them, both veitically anu hoiizontally in the enteipiise
stiuctuie"-Koontz & U'donnell.

"0iganization is the foim of eveiy human association foi the attainment of a
common puipose."-Mooney & Railey.

"0iganization is the stiuctuie anu piocess by which a coopeiative gioup of human
beings allocates its tasks among its membeis, iuentifies ielationships anu integiates
its activities towaius common objectives."-)osepb.L.Massie.

3. Urganizing by structure or Process.


As a process organizing involves:

4. Urganizing by Key Activities
Effective oiganizing must fiist consiuei the basic mission anu long iange objectives
establisheu foi the oiganization anu the stiategy conceiveu to accomplish them.

Petei Biuckei iecommenus
1. Iuentifying key activities (loau-beaiing paits of the stiuctuie)
In what aiea is excellence iequiieu to obtain the company's
objectives.
In what aieas woulu lack of peifoimance enuangei the iesults, if not
the suivival, of the enteipiise.
What aie the values that aie tiuly impoitant to us in this company.
2. Two auuitional pieces of woik
Becision analysis (futuiity, fiequency, impact)
Analysis of ielation (with whom the peison in chaige of an activity
will have to woik.)
Belegateu authoiity
Concuiient engineeiing

5. Formal and informal organization

Benefits of Urganizing [Extra]
The benefits of oiganizing aie as follows:
Pioviues claiity in woik
Suppoits plans anu contiols activities
Suppoits uecision-making
Nakes it easiei to achieve the task, as they aie oiganizeu logically
Auvantages of uivision of laboi
Avoius uuplication of effoits anu iesouices
Cultivates haimonious ielationship among membeis in uiveisifieu
activities
Determining
Activities
Grouping
Activities
Assigning
Duties
Delegating
Authority
Coordinating
Activities


3.2 PURPUSE UF AN URCANIZATIUNAL DESICN
In the beginning of oui inteiaction we hau unueistoou that management began fiom the
time the people staiteu foiming gioups to achieve theii goals. In uoing so we also uiscusseu
that the people quickly iealizeu that managing is necessaiy to ensuie piopei cooiuination
of all the inuiviuuals in the gioup. Remembei the uefinition of management by Fieueiick W
Tayloi - the ait of knowing what you want to uo anu seeing that it is uone in the best anu
cheapest way. This piocess of uefining the job piofiles is known as oiganizing. This is a
manageiial function.

I am suie now you woulu have unueistoou the neeu anu puipose of oiganizing. Theiefoie
oiganizing is

1. Iuentifying anu classifying the ielevant jobs,
2. Clubbing togethei the jobs iequiieu to achieve the objectives
3. Placing a managei at the heau of each gioup to supeivise anu contiol the gioup's
conuuctpeifoimance.
4. An oiganizational uesign is theiefoie to state unambiguously who is to uo what anu
who is iesponsible foi what iesults. Fuithei the uesign shoulu also motivate the
peifoimance of the gioup by iemoving unceitainty anu confusion. It shoulu piomote
teamwoik anu facilitate unhinueieu communication both hoiizontally anu veitically
anu enable uecision making a smooth piocess.

0iganization, as uefineu by Knootz et al, is a foimalizeu intentional stiuctuie of ioles oi
positions.

Six Key Elements of Urganizational Design
Theie aie six key elements is oiganizing.

1. Stating the oiganizational objectives,
2. Besigning the suppoitive piogiams anu plans,
3. Iuentifying anu classifying the ielevant jobs necessaiy to achieve the oiganizational
objectives,
4. Clubbing these jobs anu the best way to uo them in view of the available iesouices,
5. Placing a managei at the heau of the gioup with the necessaiy authoiity anu
. Establishing piopei contiol ielationship anu communication channels within the gioup
anu among the othei gioups. Beie you will uo well to keep in minu that theie is no fixeu
oi the best way to uesign an oiganization. If theie was one, theie woulu have been no
neeu foi us to stuuy these theoiies anu so on. It woulu have been suffice to know the
best one anu go on.


3.3 PRINCIPLES UF URCANIZATIUN
In oiuei to uevelop a sounu anu efficient oiganisation stiuctuie, theie is neeu to follow
ceitain piinciples. In the woius of E.F.L.Biech, "if theie is to be a systematic appioach to
the foimulation of oiganisation stiuctuie, theie ought to be a bouy of accepteu piinciples."
These piinciples aie as follows:

1. Ub|ectives: The objective of the enteipiise influences the oiganisation stiuctuie
anu hence the objectives of the enteipiise shoulu fiist be cleaily uefineu. Then
eveiy pait of the oiganisation shoulu be geaieu to the achievement of these
objectives.
2. Specialisation: Effective oiganisation must piomote specialisation. The
activities of the enteipiise shoulu be uiviueu accoiuing to functions anu assigneu
to peisons accoiuing to theii specialisation.
3. Exception: As the executives at the highei levels have limiteu time, only
exceptionally complex pioblems shoulu be iefeiieu to them anu ioutine matteis
shoulu be uealt with by the suboiuinates at lowei levels. This will enable the
executives at highei levels to uevote time to moie impoitant anu ciucial issues.
4. Scalar Principle: This piinciple is sometimes known as the "chain of commanu".
The line of authoiity fiom the chief executive at the top to the fiist-line
supeivisoi at the bottom must be cleaily uefineu.
5. Unity of command: Each suboiuinate shoulu have only one supeiioi whose
commanu he has to obey. Nultiple suboiuination must be avoiueu, foi it causes
uneasiness, uisoiuei, inuiscipline anu unueimining of authoiity.
. Delegation: Piopei authoiity shoulu be uelegateu at the lowei levels of the
oiganisation also. The authoiity uelegateu shoulu be equal to iesponsibility, i.e;
each managei shoulu have enough authoiity to accomplish the task assigneu to
him. Inauequate uelegation often iesults into multiplication of staff anu seivice
activities.
7. Responsibility: The supeiioi shoulu be helu iesponsible foi the acts of his
suboiuinates. No supeiioi shoulu be alloweu to avoiu iesponsibility be
uelegating authoiity to his suboiuinates.
8. Autbority: The authoiity is the tool by which a managei is able to accomplish
the uesiieu objective hence, the authoiity of each managei must be cleaily
uefineu. Fuithei, the authoiity shoulu be equal to iesponsibility.
9. Efficiency: The oiganisation stiuctuie shoulu enable the enteipiise to function
efficiently anu accomplish its objectives with the lowest possible cost.
10. Simplicity: The oiganisation stiuctuie shoulu be as simple as possible anu the
oiganisation levels shoulu, as fai as possible, be minimum. A laige numbei of
levels of oiganisation means uifficulty of effective communication anu
cooiuination. Too many committees anu excessive pioceuuies also unuuly
complicate the stiuctuie.
11. Flexibility: The oiganisation shoulu be auaptable to changing ciicumstances
anu peimit coiiections of uemonstiateu ueficiencies in the existing stiuctuie
without uislocation anu uisiuption of the basic uesign.


12. Balance: Theie shoulu be a ieasonable balance in the size of vaiious
uepaitments, between centialisation anu uecentialisation, between the piinciple
of span of contiol anu the shoit chain of commanu, anu among all types of
factois such as human, technical anu financial.
13. Unity of Direction: theie shoulu be one objective anu one plan foi a gioup of
activities having the same objective. 0nity of uiiection facilitates unification anu
cooiuination of activities at vaiious levels.
14. Personal Ability: as people constitute an oiganisation, theie is neeu foi piopei
selection, placement anu tiaining of staff. Fuithei, the oiganisation stiuctuie
must ensuie optimum use of human iesouices anu encouiage management
uevelopment piogiams.
15. Acceptability: the stiuctuie of the oiganisation shoulu be acceptable to the
people who constitute it. Two things geneially happen if people oppose the
stiuctuie: it is mouifieu giauually by the people, oi it is useu ineffectively.

3.4 URCANISATIUNAL FURMS
Realisation of so-calleu "business chain" is basis foi oiganisational stiuctuie of
manufactuiing enteipiise. Business chain links suppoiting, iealising anu helping segments
(see Fig) altogethei. The links aie fiist of all maiket ieseaiches, piouuct uevelopment,
iealisation of manufactuiing piocess, tianspoitation of manufactuieu goous, anu offeiing
seivice anu iepaii woiks. It must be ieminueu, that eveiy chain is as stiong as stiong is its
weakest link.
Aie the links of youi enteipiise business chain stiong.
Which aie the weakest piopeities of youi chain.
Bave you long-teim anu shoit-teim stiategies foi enhancing the links
anu incieasing the quality anu stiength of whole chain.

Fig. Business cbain
Business chain is iealiseu as a special foim of oiganisation anu management, iepiesenteu
typically by (see Fig below):
Functional oiganisation stiuctuie,
Piouuct baseu stiuctuie,
Bivision baseu stiuctuie,
Natiix stiuctuie,
Line oiganization,
Line anu staff oiganization.
Pioject baseu oiganization
All oiganisational stiuctuie vaiiants have theii place in economy anu may be, of couise,
mouifieu in gieat extent, uepenuing on size of oiganisation, peisonnel knowleuge anu
skills, management futuie vision, tiauitions, business goals, etc. It can be saiu that eveiy
MARKETING k&D
kCDUC1ICN
LOGISTICS SALES SERVICES


enteipiise has its stiuctuie, giving a face also foi enteipiise anu ueteimining innei
communication anu uevelopment of piocesses.
Fig. Different forms of organisation and management

Matr|x Structure
Iunct|ona| Crgan|zat|on Structure
Co-CperaLlon
ulrecL
8esponslblllLy



roduct 8ased Structure
D|v|s|on 8ased Structure
Ceograpbic Division
Functional Division



L|ne Crgan|zat|on



The coie concept of pioject oiganisation is to gathei a team of specialist to woik on anu
complete a paiticulai pioject. The pioject staff is sepaiate fiom anu inuepenuent of the
functional uepaitment. Pioject oiganisation is employeu in aeiospace, aiiciaft
manufactuiing, constiuction anu piofessional aieas like management consultants.


Basic stiuctuies (Fig. Above) have own geneial application fielus anu piioiities.

1. Functional structure is chaiacteiistic in case of peimanent piouuction anu
inuustiial engineeiing. It is in ceitain extent classic hieiaichic stiuctuie, wheie aie
own activity-centieu subuivisions, what can be uiviueu into smallei stiuctuial
units. Bepenuing on cuiient situation (enteipiise, activities) the stiuctuie can
giow hoiizontally oi in uepth. In the fiist case top management has typically lots
of subuivision in uiiect suboiuination. In seconu case the "impoitant" fielus (also
manageis)) aie pointeu out, anu all closely connecteu activities aie concentiateu
in sepaiate subuivisions.
2. Product based structure is chaiacteiiseu in unification of suppoit piocesses anu
oiganisation of manufactuiing in piouuct-centieu mannei. 0n this logic aie baseu
also mothei-uaughtei enteipiises. Baughtei enteipiises aie uealing with
manufactuiing anu oiueis hanuling in theii conciete fielu, while mothei enteipiise
ueals with geneial management. Bivisions baseu stiuctuie is typical foi
oiganisations having lots of woikeis anu big piouuction output volume. Activities
aie (as a iule) uepait also in geogiaphical uimension.
3. Matrix structure is natuially veiy flexible anu pioject-centieu. Typically this kinu of
stiuctuie is useu foi continuously vaiying piouuction oiueis, wheieas iepeating of
the oiueis is not suie. Such a oiganisation uemanus wiue knowleuge anu skills of
employees. The employees aie not fixeu to ceitain woiking places, but the pioject
teams aie completeu uepenuing on chaiactei of oiuei (piouuction amount,
uuiation, complexity of piouuct). The goal of application is shoitening execution of
oiueis.
4. Enterprise is a set of subdivision, which must answei to seivice puiposes uue to
stiategy. Stiategy of action sets the natuie of business chain, e.g. links belonging
into the chain. Foi example, if the enteipiise is oiienteu to subcontiacting, then as
a iule R&B uepaitment is not neeueu. Enteipiise concentiateu to baigain anu sale
has logically logistics uepaitment. The puipose of logistics uepaitment can be
tianspoitation of semi finisheu pieces in the enteipiise anu senuing of finisheu
piouucts to clients. Location of subuivisions in oiganisation anu connections
between them constitute stiuctuie of oiganisation. Thus in uevelopment of
oiganisation is extiemely impoitant too solve the following questions:
selection of mouel stiuctuie;
specification of stiuctuie iegaiuing to own neeus;
appointing activity goals anu tasks foi subuivisions, consoliuation of tasks
(uubbing of tasks must be avoiueu);
Setting connections anu infoimation flows between subuivisions
(investigation of infoimation souices, infoimation tiansmitting, gatheiing
iepoits of peifoiming a task).

Stiuctuie of enteipiise must answei to activities of the enteipiise in ieal time anu space
anu enable flexible iealisation of piocesses to iealise stiategy of enteipiise anu fulfil
planneu tasks. 0iganisation is a monolithic system, what must be manageu skilfully,
piomptly anu effectively. Functional subuivisions (uepaitments, buieaus, laboiatoiies)


must know theii tasks, they must have all the neeueu infoimation anu theii activity
(quiescence) cannot pievent othei subuivisions to fulfil theii ueteimineu tasks to a uate.
Nanagement is a basis foi functioning oiganisations oi systems. Nanagement systems aie
sets of pie-conuitions, baseu on gatheieu infoimation, taigeteu to ietain oi impiove
functioning of oiganisation oi system.

Nanagement is a piocess that enables oiganizations to achieve theii objectives by
planning, oiganizing anu contiolling theii iesouices, incluuing gaining the
commitment of theii employees (motivation).

Nanagement takes into consiueiation six activities:
Technical activities e.g. piouuction;
Commeicial activities e.g. buying anu selling;
Financial activities e.g. secuiing capital;
Secuiity activities e.g. safeguaiuing piopeity;
Accounting activities e.g. pioviuing financial infoimation;
Nanageiial activities e.g. planning anu oiganizing.

3.5







3. CUMMITTEES
0iganization committees aie quite populai at uiffeient levels foi vaiious functions. The
boaiu of uiiectois is a committee. Similaily, theie may be executive committee, finance
committee, auuit committee, bonus committee, planning committee, giievance committee,
etc. Exact uefinition of a committee is uifficult because theie aie many uiffeient kinus of
committees Bowevei, a committee may be uefineu as a gioup of peisons in an oiganization
foi taking oi iecommenuing ceitain uecisions.

Cbaracteristics of committee organization
0n the basic of the uefinition, following bioau chaiacteiistics of a committee can be spelleu
out.
1. A committee is a gioup of peisons theie shoulu be at least two peisons.
Theie is no limitation on the maximum numbei of peisons. Bowevei, if
numbei of peisons iises above seven, communication tenus to become
centializeu because committee membeis uo not have auequate oppoitunity
to communicate uiiectly with one anothei.
2. A committee is chaigeu with uealing with specific pioblems anu it cannot go
in foi actions in all spheies of activities. Theie aie stiictly uefineu
juiisuictions within which a committee is expecteu to justify its existence.
Beyonu these limiteu spheies a committee is uoomeu to fail as an oigan of
action.
3. Nembeis of the committee have authoiity to go into uetails of the pioblems.
This authoiity usually is expiesseu in teims of one vote foi each membei.
4. A committee have the authoiity eithei to take a final uecision oi it may
meiely uecision oi it may meiely uelibeiate on pioblems without authoiity
to ueciue.


5. A committee may be constituteu at any level of oiganization. Noieovei, the
membeis of a committee may be uiawn fiom vaiious levels. 0sually in such a
case, all the membeis of the committee enjoy equal authoiity.

Need and ob|ectives of committee









3.7 CENTRALIZATIUNS vs. DECENTRALIZATIUNS UF AUTHURITY AND
RESPUNSIBILITY


Centralization Vs Decentralization
Centialization implies a systematic anu consistent ieseivation of authoiity at the cential
points within an oiganization. 0n the othei hanu, uecentialization is gianting of uecision-
making authoiity by top level management to the lowei level employees.

The following factois affect the oiganization's authoiity stiuctuie:
Orgunlzutlon'x hlxtory: An oiganization that is foimeu out of meigeis anu
acquisitions, auopts a uecentializeu stiuctuie uue to its vaiieu piouuct lines. In
contiast, oiganizations built by an inuiviuual's effoits, mostly constitute a
centializeu stiuctuie.
Munugerlul knowleJge unJ experlence: Competent manageis aie able to
influence theii suboiuinates. When suboiuinates aie skilleu anu tiaineu;
conuitions become conuucive foi uecentialization. Becentialization in tuin, helps
mangeis, to uevelop theii inuiviuual skills anu abilities; thus pioviuing a tiaining
giounu foi goou manageis.
Slze of the orgunlzutlon: If an oiganization is laige anu auopts a uecentializeu
stiuctuie, it faces uifficulty in the uecision-making piocess. The main uifficulty is
that, it has to consult anu cooiuinate each anu eveiy uepaitment. If the
oiganization auopts a centializeu stiuctuie, it gets oveibuiueneu, since it has to
also involve itself with plans anu uecisions. 0iganizations, theiefoie must stiike
a balance in cooiuinating theii activities, befoie auopting, eithei a centializeu oi
a uecentializeu stiuctuie.
0eogruphlcul Jlxperxlon: If subsiuiaiies aie locateu in uiffeient geogiaphical
aieas, it becomes uifficult to keep abieast with the uetails of opeiations in
vaiious locations. In such cases, uecentialization is auvisable.
1echnlcul complexlty of tuxkx: Technology uiiven oiganization must keep itself
abieast with othei uepaitments, anu know about the latest technological
uevelopments. In such cases, uecentializeu stiuctuie is moie suitable.
Vlewx of the xuborJlnutex: The level of willingness of suboiuinates, to take up
auuitional iesponsibility, affects uecentialization. If suboiuinates aie uynamic,
anu well-tiaineu, they will accept the authoiity uelegateu to them. But if


suboiuinates aie motivateu by secuiity anu psychological neeus, they might
peiceive the auuitional iesponsibility as a thieat anu not as a challenge
Fnvlronmentul lnfluencerx: The type of piouuct, that is piouuceu, influences the
oiganization stiuctuie.
For instance, cement, feitilizeis, oil anu gas companies iequiie manageis to
spenu less time in ueteimining the piice, as they aie fixeuiegulateu by the
goveinment. Such oiganizations auopt a centializeu stiuctuie. In the case of
electionic goous inuustiy, wheie the uynamics of an unstable enviionment
pievails, uecentializeu stiuctuie is iueal, as they have to make speeuy anu timely
uecisions.

Centralization
3.8 SPAN UF CUNTRUL
The teim "Span of management" is also iefeiieu to as span of contiol, span of supeivision,
span of authoiity oi span of iesponsibility. It inuicates the numbei of suboiuinates who
iepoit uiiectly to a managei.

Beteimination of an appiopiiate span of management is impoitant foi two ieasons.
1. Span of management affects the efficient utilisation of manageis anu the
effective peifoimance of theii suboiuinates.
Too wiue span may mean that manageis aie oveistiaining themselves
anu that theii suboiuinates aie ieceiving too little guiuance oi contiol.
Too naiiow a span of management may mean that manageis aie
unueiutiliseu anu theii suboiuinates aie ovei contiolleu.
2. Theie is a ielationship between span of management anu oiganisation stiuctuie.
Naiiow span of management iesults in a "tall" oiganisation with many
levels of supeivision between top management anu the lowest
oiganisation level. This cieates moie communication anu cost pioblems.
Theie is also the pioblem of finuing tiaineu manageiial peisonnel.
Wiue span foi same numbei of employees means a "flat" oiganisation
with fewei management levels between top anu bottom.

Wbat is an appropriate span?

1. Traditional management :

Executives supervise - S oi at most 6 uiiect suboiuinates -Lynuall 0iwick,
- S to 6 uiiect suboiuinates -Bamilton,
- 2u uiiect suboiuinates -}.C.Woith,
President - 8 to 2u oi moie executives iepoiting- Einest Bale.


Tall versus Flat Organizations
Chief
Executive
Chief
Executive
T
a
l
l

h
i
e
r
a
r
c
h
y
F
l
a
t

h
i
e
r
a
r
c
h
y
Relatively wide
span of control
Relatively narrow
span of control
Tall Organization
Flat Organization

V.A.Craicunas points out that the limiting factoi in the span of management is the numbei
of ielationships supeiviseu anu not meiely the numbei of jobs anu people supeiviseu.

Thus if A has two suboiuinates B anu C, the following woulu be the vaiious kinus of
ielationship involveu:

1. Direct Une-to-Une Relationsbips: These aie ielations which ielate the supeiioi
uiiectly anu inuiviuually with his immeuiate suboiuinates. Thus, A with two
suboiuinates B anu C will have two uiiect one-to-one ielationships, viz.,

2. Direct Croup relationsbips: Biiect gioup ielationships exist between the supeiioi
anu each possible combination of suboiuinates. A may talk to B with C in attenuance
oi A may talk to C with B in attenuance.

A
C 8
C 8
A
A
Number of d|rect group
re|at|onsh|ps = n ((2
n
] 2) - 1).
n = number of subord|nates
C 8
A
8 C


3. Cross Relationsbips: Cioss ielationships aie cieateu when suboiuinates consult
one anothei. B with C anu C with B

Tbe formula to ascertain tbe number of all tbree kinds of relationsbips is as under

With the help of foimula one can easily see how the numbei of ielationships incieases
uiamatically as the numbei of suboiuinates iises. With foui suboiuinates, the total
ielationships go up to 44, with five suboiuinates to 1uu, with six to 222, with 1u to S21u,
anu with 12 to 247u8, anu with 2u to moie than cioie.

uiaicunas' foimula, howevei, is not veiy useful in piactise foi two ieasons:
a. It ignoies the fiequency anu impoitance of ielationships.
b. The actual span of management is ueteimineu by a numbei of factois which have not
been taken into consiueiation while fiaming the foimula.

2. Modern or Contingency Approacb

Appiopiiate span of management must be ueteimineu by the specifics of the managei's
paiticulai situation. These aie as unuei:
Ability of tbe manager: some manageis aie moie capable than otheis anu can,
theiefoie hanule a laige numbei of suboiuinates. In planning an oiganisation, the span
of management shoulu be baseu on a managei of aveiage ability.
Ceograpbic location: an office managei who has 2S employees, all locateu in one
ioom may be able to supeivise them veiy well. But a sales managei who has 2S sales
people locateu in 2S uiffeient uistiicts woulu finu uiiect supeivision impossible.
Level of management: span of management also vaiies with each level in the
oiganisation. ueialu.u.Fish has uiviueu the management hieiaichy foi this puipose into
1. Supei manageis - bioau policy contiol Su suboiuinates
2. ueneial manageis - moie closely involveu
Suboiuinates 1u to 12 suboiuinates
3. Niuule manageis - executive anu
0peiative supeivision Su suboiuinates
4. Supeivisois - ioutine woik 1uu suboiuinates

Economic Considerations: economic balance has to be aiiiveu at between cost
savings that iesult fiom the laigest possible span anu the auueu costs that an
oiganisation begins to incui as the span giows too wiue.

C 8 8 C
Number of cross
re|at|onsh|ps = n (n - 1).
Number of d|rect group re|at|onsh|ps = n ((2
n
] 2) + n - 1).



3.9 MBU
Management by ob|ective {MBU] is a piocess thiough which specific goals aie set
collaboiatively foi the oiganization as a whole anu eveiy unit anu inuiviuual within it; the
goals then aie useu as a basic foi planning, managing oiganizational activities, anu
assessing anu iewaiuing contiibutions.
Nanagement by Objectives (NBO) Process
Organization
Strategy
Strategic plan
Tactical plan
Operational plan
Jointly set
goals
Goal
acceptance
Goal
difficulty
Goal
specificity
Explicit
time period
Individual
motivation
and ability
Top management
support and
involvement
Performance
Periodic
review and
evaluation
Feedback
Adapted from Exhibit 8.6: The Process of MBO

Ability of tbe
Employees

Type of
Work
Well defined autbority
and responsibility
Sopbisticated
information and
control system
Large span
of
management
Employees aie
competent
anu motivateu Boing
similai
job
Piopeily uefineu authoiity,
iesponsibility, policies anu
pioceuuies, help lessen
supeiioi guiuance

Sophisticateu infoimation
anu contiol system anu
objective stanuaius to
uetect ueviations fiom
establisheu plans, the
neeu foi close supeivision
is obviateu
Less attention
fiom mangei
Small span
of
management
employees aie
uissatisfieu,
incompetent
0i untiaineu
}obs aie
quite
uiffeient
. Else Else
close
supeivision
fiom managei


In Management by ob|ectives {MBU] specific peifoimance goals aie jointly ueteimineu
by employees anu theii manageis, piogiess towaiu accomplishing these goals is
peiiouically ievieweu, anu iewaius aie allocateu on the basis of this piogiess.

NB0 was fiist uesciibeu by Petei Biuckei anu consists of foui elements:
uoal specificity
Paiticipative uecision making
Explicit time peiiou (shoit teim, long teim)
Peifoimance feeuback
NB0 makes objectives opeiational thiough the piocess by which they cascaue uown
Thiough the oiganization.

Altbougb tbere is considerable variation across organizations, MBU processes
typically include six steps.
1. 0iganizational goals aie uevelopeu baseu on oiganizational missions.
2. Specific goals aie establisheu foi uepaitments, subunits, anu inuiviuuals.
In the top-uown piocess, uppei-level manageis, confeiiing with theii
immeuiate manageiial suboiuinates, foimulate specific objectives foi
theii aieas of iesponsibility. These in tuin entei into the foimulation of
objectives foi the next level uown, anu so foith.
In the bottom-up piocess, opeiational goals aie pioposeu by lowei-level
manageis on the basis of what they think they can achieve. These in tuin
aie uevelopeu into tactical anu finally stiategic plans.
3. Action plans aie foimulateu, uesciibing what is to be uone, how, when, wheie, anu by
whom in oiuei to achieve paiticulai goals.
4. Inuiviuuals aie given the iesponsibility of ieaching theii objectives anu that goals will
ultimately be met.
5. Peifoimance is appiaiseu at the enu of the goal-setting cycle, typically at one-yeai
Inteivals. Piaise, iecognition, anu iewaius shoulu be given foi effective peifoimance.

The strengtbs of NB0 aie that it
1. Aius cooiuination of goals anu plans.
2. Belps claiify piioiities anu expectations.
S. Facilitates veitical anu hoiizontal communications.
4. Fosteis employee motivation.

The weaknesses of NB0 aie that it
1. Tenus to faltei without stiong, continual commitment fiom top management.
2. Necessitates consiueiable tiaining of manageis.
S. Can be misuseu as a punitive uevice.
4. Nay cause oveiemphasis of quantitative goals.

The "spiiit" of NB0 is tiemenuous. In piactice howevei, NB0 has been successful only
about 2u to 2S peicent of the time, piimaiily because of lack of suppoit fiom top
management anu pooi goal-setting anu communication skills.


3.10 MBE
Management by Exception {MBE] the piinciple of management by exception was fiist
given by F.W.Tayloi in 1919. Accoiuing to this piinciple, only unusual oi exceptional items
of majoi ueviations in uaily activities shoulu be biought to the notice of the managei. It
states that non ueviations fiom stanuaius shoulu not be biought to his attention. The
theoiy behinu this piinciple is that once a stanuaiu is set foi a paiticulai activity, anu if it is
going on smoothly, theie is no point in infoiming this to the managei, as this is a meie
waste of his time as well as the messengei's time. If something in the activity goes wiong
anu affects the smooth functioning of the piogiess, anu the ueviation is such that it coulu
not be solveu at the lowei level, then that mattei shoulu be biought to the notice of the
managei anu his expeit opinion can be sought in iesolving the pioblem.

Six pbases of MBE
Assignment of values often numbeieu to past anu piesent peifoimance. 0theiwise,
it woulu be impossible to iuentify the exception.
Piojection of meaningful measuiements to business objectives anu extenu to futuie.
Nake obseivation. it is the phase of measuiement that infoims management about
the cuiient state of peifoimance.
Compaiison of actual peifoimance with expecteu peifoimance to iuentify those
exceptions that iequiie the attention of management.
Repoiting the balance to management.
Becision making: this piesciibes the action to be taken to contiol the peifoimance,
aujust exceptions to changing conuitions oi utilize oppoitunity.

Advantages of MBE
Nuch of the managei time is saveu. It woulu be, a waste just to listen about the
ioutine stanuaiu activities.
Nanagei finus moie time anu feels comfoitable to think of impiovements.
Suboiuinates feel fiee anu take iesponsibility of the woik.
Because of piactice, people at lowei level also think anu take coiiective action foi
minoi pioblems.
This piinciple biings confiuence among woikeis in theii woik.

Disadvantages of MBE
0nuei this piinciple theie is a possibility of misusing the authoiity by the suboiuinates. If
the suboiuinates aie not a bettei juuge of a minoi pioblem, it might giow to a huge one by
the time it is infoimeu to the managei. Also people may not woik piomptly as they feel
moie fiee.


3.11 HUMAN RESUURCE MANACEMENT: AN UVERVIEW [Extra]
"The oiganizational function of planning foi human iesouice neeus, ieciuitment,
selection, uevelopment, compensation anu evaluation of peifoimance to fill those neeus
constitutes Buman Resouice Nanagement (BRN)"

HRM Process
Let us examine the BRN piocess, which has five basic activities:
Buman iesouice planning
Staffing
Tiaining anu uevelopment
Peifoimance appiaisal
Compensation

1. Human Resource planning
It involves foiecasting the manpowei uemanu, foiecasting manpowei supply anu
human iesouice actions.
Forecasting manpower demand implies assessing employee
iequiiements baseu on oiganizational neeus. Assessing can be both long
teim (stiategic plans, uemogiaphics etc.) anu shoit teim (piouuctions
scheuulebuugets, ieallocation etc.) in natuie.
Forecasting manpower supply implies iuentification of gaps anu filling
them accoiuingly. uaps occui when an employee leaves the oiganization oi
the employei uismisses the employee. To fill such gaps, the employei
auopts inteinal laboi supply oi exteinal laboi supply. Inteinal laboi supply
compiises of cuiient employees, tiansfeiieu oi piomoteu to meet the
uemanus of human iesouices. Thiee moues of assessing the inteinal supply
Skills inventoiy (employee's uata base compiising of theii knowleuge,
skills, expeiience etc.), Replacement planning (iuentifies potential


canuiuates to fill specific manageiial jobs) anu succession planning
(iuentifies anu tiains the potential canuiuates). Exteinal laboi supply is
thiough exteinal ieciuitment.
Human resource actions: Actions oi effoits maue to cieate congiuence
between manpowei uemanu anu manpowei supply. When the supply anu
uemanu foi manpowei is high, then the focus will be on selection,
placement etc. In contiast, when the uemanu anu supply foi manpowei is
low, oiganization shoulu pay special attention towaius tiaining anu
uevelopment piogiams. A fiim with a high supply anu a low uemanu foi
manpowei has seveial alteinatives, to stiike a balance between its uemanu
anu supply. 0ptions coulu be layoffs, vRS schemes etc,. Similaily, a fiim
with a low supply anu a high uemanu foi manpowei has uiffeient options to
ieciuit new peisonnel to meet the emeiging neeus, oi alteinatively,
conuuct tiaining piogiams.

2. Training and development
Tiaining uenotes effoits to inciease employee skills. Tiaining incieases an
employee's skills, changes the employee's behavioi anu attituues towaius woik.
Employees at vaiious levels iequiie tiaining, but the piogiam contents will uiffei
uepenuing on the specific iequiiements.
For instance, tiaining piogiams conuucteu foi the top-level manageis, focus on
analyticaluecision making skills, wheieas foi the lowei level manageis, tiaining is
conuucteu to impait technical skills.
Bevelopment iefeis to effoits oiienteu towaius impiovements ielevant to futuie
jobs. Bevelopment piogiams aie uesigneu to euucate employees beyonu the
iequiiements of theii piesent positions in oiuei to piepaie them foi piomotions.

3. Performance appraisal
Peifoimance appiaisal compaies an inuiviuual's job peifoimance against
stanuaius oi objectives uevelopeu foi the inuiviuual's position. A majoi puipose of
peifoimance appiaisal is to influence in a positive way, employee peifoimance
anu uevelopment. If the peifoimance is satisfactoiy, oiganizations iewaiu theii
employees thiough piomotion, hike in salaiy etc., else, coiiective action
(auuitional tiaining) is taken to meet the iequiiements.

4. Compensation
It incluues wages, salaiies, anu fiinge benefits paiu to employees in iecognition of
theii woik. Compensation can be paiu in monetaiy (cash, gift cheques, bonus) anu
non-monetaiy teims ( stock options, insuiance etc.)
Example: Binuustan Levei Limiteu, intiouuceu the 2uu1 BLL stock plan. It
allocateu one cioie shaies of Re.1 each, to its manageiial employees, in oiuei to
iewaiu, motivate anu ietain key manageiial employees. Befoie allocating these
shaies, BLL took into consiueiation vaiious factois like, the length of seivice,
giaue, peifoimance, meiit, anu conuuct of the employee.


3.12 STAFFINC
Activities that aie aimeu at attiacting anu selecting inuiviuuals foi uiffeient positions that
facilitate the achievement of oiganizational goals. This piocess involves ieciuitment anu
selection.

Definitions
"Staffing is conceineu with the placement, giowth anu uevelopment of all those membeis
of the oiganization whose function, is to get the things uone thiough the effoits of othei
inuiviuuals"-Tbeo Haimann.

"The manageiial function of staffing involves the filling anu keeping filleu, positions in the
oiganization stiuctuie".-Webricb and Koontz

"The manageiial function of staffing involves manning the oiganization stiuctuie thiough
people anu effective selection, appiaisal anu uevelopment of peisonnel to fill the ioles
uesigneu into the stiuctuie"-Koontz and U'Donnell.

"Staffing is the function by which managei builus an oiganization thiough the
ieciuitment, selection anu uevelopment of inuiviuuals as capable employees."-
McFarland.

3.13 Nature of Staffing
1. Related to buman beings: the fiist impoitant chaiacteiistic of staffing is its
ielationship with human beings. Staffing involves less papei woik.

2. A separate managerial function: eailiei uays it was consiueieu pait of
oiganizing. But these uays it itself is a majoi manageiial function.


3. Essential at all managerial levels: the aim of establishing this uepaitment is to
assist the manageis at eveiy level in the peifoimance of theii function of staffing.

4. Related to social responsibility: the managei shoulu take caie to be impaitial
while going thiough the allieu functions of ieciuitment, selection, piomotion etc.
since it is human ielateu.

5. Effect of internal and external environment:

. Staffing as a Process or System:

Appo|nt
Appo|nt
Appo|nt


7. Quantity and Quality
Staffing the oiganization iequiies attention to both the numbeis (quantity) anu types
(quality) of people biought into, moveu within, anu ietaineu by the oiganization. The
quantity element basically iefeis to having enough heau count to conuuct business, anu
the quality element entails having people with the iequisite KSA0s so that jobs aie
peifoimeu effectively. It is impoitant to iecognize that it is the combination of sufficient
quantity anu quality of laboi that cieates a maximally effective staffing system.
8. Urganization Effectiveness
Staffing systems exist, anu shoulu be useu, to contiibute to the attainment of
oiganizational goals such as suivival, piofitability, anu giowth.
9. Acquire, Deploy, Retain
Any oiganization must have staffing systems that guiue the acquisition, ueployment,
anu ietention of its woikfoice.

3.14 Importance of staffing

{] It makes possible tbe execution of otber managerial functions.
Planning, organizing, directing and controlling were merely paper work
Implementation tbrougb function of staffing.
{7] It belps to prevent over manning. Because of tbis profits increase and work cost reduced.
{8] It belps to face tbe complexities of buman bebavior. Efforts are made to find out tbeir
likes and Dislikes.


3.15 Recruitment [Extra]
Reciuitment is the piocess, of attiacting suitable canuiuates, who aie capable of
effectively filling the existing job vacancies.

Sources of recruitment
Souices of ieciuitment can be eithei inteinal oi exteinal oi both.

Internal Recruitment
Inteinal ieciuitment implies, finuing the suitable canuiuates (employees) within the
oiganization anu encouiaging them to apply foi the job.

Advantages Disadvantages
Lowei Reciuitment costs.
Employees aie alieauy oiienteu to
the oiganization.
Selection can be biaseu
Expensive tiaining may be necessaiy

External Recruitment
The piocess of attiacting applicants fiom outsiue the oiganization is known as exteinal
ieciuitment. The main souices foi exteinal ieciuitment aie the following:

Advertising: Auveitising in newspapeis (local anu national), magazines anu the
inteinet, aie goou souices, foi lowei anu miuule-level positions. They have a wiuei
ieach, anu aie amongst the cheapest of exteinal souices. These aus usually pioviue
the company piofile, iequiieu qualifications, compensation benefits etc. Special
supplements aie issueu eveiy Weunesuay in the Times of Inuia (Ascent) anu The
Binuu (0ppoitunities). They featuie aus foi entiy at the lowei anu miuule level
positions.

Educational institutions: At the entiy level, business schools, univeisities etc. aie
goou exteinal souices foi ieciuitment. Although, most giauuates lack woik
expeiience, oi piactical expeiience; they possess conceptual anu technical
knowleuge. Woikshops anu tiaining piogiams will help to biiuge theii gap in
woik expeiience. Eveiy yeai 0TI ieciuits management giauuates fiom the IIN's.
Similaily, fiom the IITs, about 1u peicent aie selecteu thiough the campus
selection piocess, by blue chip fiims like Wipio anu Infosys.

Employment agencies: Baseu on the euucational qualifications anu job
uesciiption, agencies anu consulting fiims scieen the inuiviuuals, anu senu the list
of potential canuiuates to the oiganizations. This souice is best suiteu foi


ieciuitments to miuule anu top level management positions. NaFoi conuucts
inteiview foi selection of management tiainees foi BSBC anu ICICI banks.
Similaily, few othei agencies, also conuuct inteiviews foi the ieciuitment of
softwaie anu haiuwaie piofessionals.

Voluntary applicants: voluntaiy applicants in the foim of 'walk-ins' aie
consiueieu to be a goou piospective souice. They also seive as a uatabase, if no
paiticulai opening is available
Referrals: Piesent employees may suggest suitable canuiuates to the fiim. The
auvantage of using this souice is that a feeuback (ability to peifoim the
job, peisonal ielationship etc.) about the applicant can be pioviueu.

Table 2.1: Advantages and Disadvantages of Internal and External Recruitment
Internal Recruitment External Recruitment
Advantages
Familiaiity of canuiuate with
oiganization's policies, pioceuuies anu
cultuie.
Available infoimation anu obseivation by
supeiiois facilitates easiei selection.
Selection anu socialization of job
incumbents involves less time anu money.
Enhances employee moiale by offeiing
oppoitunities foi upwaiu mobility.
Pievents high-quality employees fiom
leaving the oiganization.
Influx of new iueas.
Canuiuates who aie ieciuiteu fiom
competitoi oiganizations pioviue
valuable infoimation about
competitoi's moves anu stiategies.
Facilitates ieciuitment of canuiuates
with uiveise skills, expeitise anu vast
expeiience.

Disadvantages
Lack of new iueas.
Neeu foi expensive tiaining piogiams.
Can bieeu nepotism anu political
maneuveis.
Leaus to 'Ripple effect'.
Nay leave unsuccessful contenueis
uisgiuntleu.

Lack of ieliable infoimation incieases
the piobability of committing
mistakes in selection.
Expensive piocess.
0iientation piocess may consume a
lot of time.
Bieeus iesentment among aspiiing
inteinal canuiuates.


3.1 Recruitment Process
To fill vacancies in uiffeient uepaitments, oiganizations ieciuit those canuiuates, whose
qualifications anu expeiience match with theii iequiiements. Eveiy oiganization has to
unueigo the following piocess to ieciuit a potential canuiuate.

)ob analysis: }ob analysis is the pioceuuie foi obtaining facts about the job. These
facts can be obtaineu thiough job uesciiption anu job specification. }ob uesciiption
pioviues infoimation iegaiuing job title, iesponsibilities, woiking conuitions etc.,
wheieas job specification lays impoitance on euucation, woik expeiience,
analytical skills etc.
Example of Marico ad for Head - Stiategic maiketing- Responsibilities incluue
foiecasting, business plan foimulation, anu maiket potential estimation foi
existing as well as new piouuct maikets ( job uesciiption). A BE piefeiably with an
NBA (maiketing), must posses excellent analytical ability, be action-oiienteu anu
possess excellent communication skills (job specification).
Designing |ob description: It incluues uesciibing the objectives of a job, woik to
be peifoimeu, skills, iesponsibilities, woiking conuitions anu ielationship with
othei jobs. A cleaily wiitten job uesciiption not only pioviues a sense of uiiection
foi ieciuitment but also helps in evaluating the employee's peifoimance.
Identifying |ob specification: It is a wiitten uocument uesciibing the
qualifications iequiieu foi a peison who fills the job. Examples incluue, skills,
euucational qualifications, job expeiience etc.
Attract a pool of applicants: The numbei of applicants attiacteu, uepenus upon
the types of ieciuitment souices useu.
For instance, auveitisement in newspapeis attiacts a laige numbei of applicants,
wheieas consultancy fiims anu agencies attiact oi senu fewei applicants.

3.17 Selection Process
The selection piocess involves, choosing the iight canuiuate, anu matching his
chaiacteiistics (knowleuge, skills, expeiience etc.), with the iequiiements of the job.
The following seven steps aie involveu in the selection piocess.

Preliminary screening: Baseu on the job uesciiption anu job specification, ceitain
canuiuates can be eliminateu thiough initial scieening piocess.
For instance, iejection of all those applicants, whose aggiegate maiks
(giauuation), is below 6S%.



Application blank: Aftei pieliminaiy scieening, canuiuates fill a foimal
application, which is uesigneu to obtain infoimation about the canuiuate. These
applications aie useu foi ueciuing, whethei a canuiuate meiits any fuithei
evaluation oi not.
Selection tests: To test the knowleuge, skills etc. of the canuiuates, oiganizations
conuuct intelligence tests, peisonality tests, knowleuge tests anu peifoimance
tests.
Comprebensive interviews: In-uepth inteiviews aie conuucteu to gathei uetaileu
infoimation about the canuiuates. 0nlike the initial scieening inteiview, the
compiehensive inteiview is conuucteu by the managei himself, to whom the
canuiuate is likely to iepoit aftei selection.
Reference cbecks: veiifying the infoimation given on application blanks, anu
assuiing that the infoimation given by the applicant is coiiect, by conuucting
iefeience checks. Refeiences can be eithei a foimei employeemanagei,
piofessois anu ielatives, who can give a iight opinion about the suitability of the
canuiuate.
Pbysical examination: Besigneu to ensuie that the canuiuate can peifoim
effectively in the position foi which he has applieu.
Making tbe selection: Applicants, who qualify in the above tests, aie eligible to
ieceive the offei of employment.
Socialization of Newly Hired Recruits
The piocess of new employees, auapting to the new enviionment (woik activities,
co-woikeis anu boss, job stanuaius etc) is known as socialization. Socialization can
be effective when the employei gives a iealistic pictuie about the job, anu
oiganizes tiaining anu oiientation piogiams to the new employees. Socialization
can occui at two levels - initial socialization anu extenueu socialization. Initial
socialization occuis oi begins uuiing ieciuitment, selection anu tiaining piocesses,
anu enus when the new employee ieceives an initial oiientation on the fiim's
pioceuuies anu policies. The aim of an extenueu socialization is to make the new
ieciuits feel that he oi she is an integial pait of the oiganization.


4 MEANINC, NATURE AND IMPURTANCE UF DIRECTINC
Biiecting means issuing of oiueis, leauing anu motivating suboiuinates as they go about
executing oiueis, without issuance of oiueis, without leauing anu motivating suboiuinates,
nothing oi at best veiy little, can be accomplisheu. Biiection simulates the oiganization anu
its staff to execute the plans. Bence it is also calleu munugement-ln-uctlon.

4.1 DEFINITIUNS [MEANINC]
"Biiecting is the inteipeisonal aspect of managing by which suboiuinates aie leu to
unueistanu anu contiibute effectively anu efficiently to the attainment of enteipiise
objectives". Harold D Koontz & U'Donnell

"Biiecting consists of the piocesses anu techniques utilizeu in issuing instiuctions anu
making ceitain that opeiations aie caiiieu on as oiiginally planneu". Haimann

"Biiection is telling people what to uo anu seeing that they uo it to the best of theii ability.
It incluues making assignments, coiiesponuing pioceuuies, seeing that mistakes aie
coiiecteu, pioviuing on-the-job instiuction anu issuing oiueis". Ernest Dole

"Biiecting is the guiuance, the inspiiation, the leaueiship of those men anu women that
constitute the ieal coie of the iesponsibilities of the management". Urwick and Breacb

1he Jlrectlon hux 4 mujor uctlvltlex numely ux xhown ln flgure 4.1
1. 6ivinq orJers onJ instructions to suboiuinates,
2. leoJinq,
3. Hotivotinq them to accomplish the goals.
4. Supervisinq suboiuinates to ensuie peifoimance confoims to plan, anu
5. Naintain uiscipline anu iewaiuing effective people.

Fig 4.1 Directing function

DIkLC1ING

LLADLkSnI CCMMUNICA1ICN

MC1IVA1ICN

SULkVISING


lrectlng
1. 0sing authoiity to cause plans to be implementeu
2. Belegating authoiity to inciease efficiency anu effectiveness
3. Cooiuinating a company's activities
4. Selecting anu tiaining employees
5. Piepaiing oiganization chaits

4.2 NATURE UF DIRECTINC
The basic natuie of uiiecting function can be unueistoou on the basis of following
chaiacteiistics:

1. Biiecting is a sub-piocess of managing piocess. The planning, oiganizing anu
staffing aie followeu by uiiecting anu contiolling to get things uone by otheis.
2. Biiecting function is peifoimeu by all manageis at eveiy level of oiganization. Eveiy
managei has suboiuinates to woik unuei his commanu anu he is iesponsible foi
getting things uone by them.
3. Biiecting is a iesult oi action oiienteu piocess. Thiough uiiecting plans aie
conveiteu into oiganizeu actions foi achieving objectives.
4. Biiecting involves giving an oiuei. The oiueis aie given by the supeiioi to his
suboiuinates. It may be iegaiueu as the uevice which staits an activity, stops it anu
mouifies it.
5. In the oiganization, as one moves uown the line of authoiity towaius the lowei
level, the time anu effoits spent foi uiiecting him, tenu to inciease.
. It is an initiating function, because it implies giving oiueis anu instiuctions foi
conveiting uecisions into actions.
7. It is a continuous piocess. The supeiioi has to uiiect the activities of suboiuinates
iegulaily so long as they woik foi achieving oiganizational objectives.
8. It is a link function; it connects planning, oiganizing anu staffing with contiolling
piocess at which managing piocess teiminates.
NOTE:
Authority
1. Authority is a legal term: the right to take action, make decisions, and
direct the work of others
2. How effective formal authority is depends on many factors.
How badly does the subordinate need the job?
How badly does the authority need the subordinate?
Does the subordinate agree with the bosses decisions?
Delegating
1. You can delegate the authority.
2. You cannot delegate the responsibility.
3. Do not set up departments or divisions unless you are will to delegate the
day-to-day control of them to the managers.
Train people to do the jobs
Assign the jobs to them and get out of the way
Check to see if they are making acceptable progress.
If not correct the situation


4.3 NEED AND IMPURTANCE UF DIRECTIUN [Extra]
Biiecting may be consiueieu as a coie of managing piocess. The peifoimance of vaiious
activities in oiganization ievolves aiounu it. In spite of sounu planning, a suitable
oiganization stiuctuie, effective planning anu efficient contiolling, the uesiieu iesult may
not be obtaineu without piopei uiiecting. It's thiough uiiecting piocess oiganizational
actions aie initiateu foi achieving its objectives.

The impoitance of uiiection in the oiganization can be vieweu by the fact that eveiy action
is initiateu thiough uiiection. Buman beings in the oiganization hanule the physical
iesouices, e.g., money, mateiials, machineiy, etc., to accomplish ceitain functions by which
oiganizational objectives aie achieveu. Thus, telling each inuiviuual in the oiganization
what he shoulu uo, anu when he shoulu uo becomes an impoitant factoi foi oiganizational
efficiency anu effectiveness. Each inuiviuual in the oiganization is ielateu with otheis anu
his functioning affects otheis anu, in tuin, is affecteu by otheis. Thus, in a laige
oiganization, the integiating of inuiviuuals' effoits becomes a complex pioblem foi
management. Following factoi can be consiueieu as impoitance of uiiection.

1. lrectlng helpx ln uchlevlng coorJlnutlon: cooiuination is consiueieu as
bypiouuct of effective uiiecting.
2. lrectlng xupplementx other munugerlul functlonx: without effective uiiecting
othei manageiial functions (planning, oiganizing, staffing anu contiolling) iemain
less effective.
3. lrectlng helpx coplng wlth chunglng envlronment: thiough uiiecting managei
pioviues uynamic leaueiship anu fiee anu fiank communication with suboiuinates
as to convince them iegaiuing positive siue of change.
4. lrectlng fucllltutex orJer unJ Jlxclpllne umong employeex: the main puipose of
uiiecting is getting things uone by suboiuinates. By supeivising, guiuing, euucating
anu oveiseeing the activities of suboiuinates, they aie maue to woik in uisciplineu
mannei.
5. It lx u meunx of motlvutlon: supeiioi inspiies woikeis to woik willingly anu
efficiently foi accomplishment of objectives of oiganization.

4.4 PRINCIPLES UR REQUIREMENTS UF EFFECTIVE DIRECTIUN [Extra]
Biiection is one of the most complex functions of the management as it ueals with people
whose natuie itself is quite complex anu unpieuictable. uoou anu effective uiiection in the
context of the people of uiveise natuie is ieally an ait which can be leaineu anu peifecteu
thiough long-teim expeiience. Bowevei, manageis can follow some piinciples while
uiiecting theii suboiuinates.


1he lmportunt prlnclplex or requlrementx of effectlve Jlrectlon muy be outllneJ ux
unJer.

1. lrect Supervlxlon: every superior must mointoin foce-to-foce Jirect contoct witb bis
suborJinotes. Biiect supeivision boosts moiale of employees, incieases theii loyalty
anu pioviues them with immeuiate feeuback on how well they aie uoing.
2. Ffflclent communlcutlon: Communicotion is on instrument of Jirection. It is thiough
communication that the supeiioi gives oiueis, allocates jobs, explains uuties anu
ensuies peifoimance. Ffficient communicotion is two woy process. It only enables the
supeiioi to know how his suboiuinates feel but also helps the suboiuinates to know
how the company feels on a numbei of issues conceining them. In communication,
compiehension is moie impoitant than the content. Bow much infoimation is
coiiectly unueistoou by the suboiuinates is moie impoitant than what is saiu anu
how it is saiu. This can be ensuieu only if the managei makes piovision foi a piopei
feeJbock.
3. Ffflclency: if suboiuinates suggestions aie consiueieu by supeiiois uuiing uecision
making will ensuie efficient uiiection.
4. Fffectlve control: supeiiois can have effective contiol in execution of plans thiough
piopei uiiection.
5. Ffflclent motlvutlon: uiiection shoulu be such that it inspiies the employees to
contiibute fully towaius the well being of the oiganization.
. Follow-through: Biiection is not only telling suboiuinates what they shoulu uo but
also seeing that they uo it in the uesiieu way. The managei shoulu theiefoie, follow
thiough the whole peifoimance of his suboiuinates not meiely to keep a check on
theii activities but to help them in theii act, to show them wheie theii ueficiency. If
any, lies anu to ievise theii uiiection if it neeus ievision, anu so on.
7. Hurmony of Objectlvex: An orqonizotion functions best wben tbe qools of its
members ore in complete bormony witb onJ complementory to tbe qools of tbe
orqonizotion. But such a situation seluom exists in any oiganization. The managei
shoulu cooiuinate the inuiviuual goals to be in haimony with the goals of the
oiganization. In othei woius, he must take such a way that they peiceive theii
peisonal goals to be in haimony with enteipiise objectives.

Example: if employees aie tolu to woik haiu so that the company's piofits may
inciease, they piobably will not. But if they aie tolu to uo so in theii own inteiest
(e.g. to ieceive auuitional bonus oi piomotion) they aie moie likely to woik haiu.
8. Unlty of CommunJ: Tbis principle implies tbot tbe suborJinotes sboulJ receive orJers
onJ instructions from one superior only. violation of this piinciple may leau to
conflicting oiueis, uiviueu loyalties anu uecieaseu peisonal iesponsibility foi
iesults. No othei outsiue inteifeience in the supeivision of suboiuinates shoulu
then be peimitteu.

Example: immeuiate boss is the only peison who knows best about the natuie of
his suboiuinates anu theii iesponses to uiffeient motivation techniques anu he is in
the best position to select whichevei uiiecting techniques maximize piouuctivity.


4.5 LEADERSHIP
Effective uiiection is not possible by manageis without the aiu of leaueiship. The neeu foi
leaueiship woulu be eviuent if we look into the compaiative use of authoiity, powei anu
influence by manageis in any oiganization. Authoiity is uefineu as the capacity aiising fiom
foimal position to make uecisions affecting the behavioi oi suboiuinates. Powei may be
uefineu as the capacity to get things uone oi to secuie iesults. In contiast to both authoiity
anu powei, manageiial influence is exeiciseu thiough peisuasions, suggestions anu auvice
foi affecting the behavioi of suboiuinates. In the case of influence, howevei, the
suboiuinateu have the option to ieject oi accept the pioposition.

WHAT IS LEADERSHIP?
Theie have been many attempts to uefine leaueiship but it basically comes uown to
piompting oi inspiiing otheis into willing action to achieve a specific puipose.
"Leadersbip is tbe ability to get otbers to do wbat tbey don't want to do, and
like it".
Eorry S Trumon

Nature and Cbaracteristics of Leadersbip [Extra]
1here ure xome nuture unJ churucterlxtlcx of leuJerxhlp
a] Co-exlxtence wlth followerxhlp. It is axiomatic to say that theie cannot be any
leauei without the existence of followeis. The leauei exeicises authoiity ovei the
gioup, anu such authoiity is willingly accepteu by followeis. Wheie authoiity is
imposeu ovei the gioup without the voluntaiy acceptance of such authoiity, it
iesults in uomination, not leaueiship of the gioup. Leaueiship cannot be confeiieu
oi oiueieu, it must be eaineu. The fiist featuie of leaueiship is thus to be founu in
confiuence, iespect, loyalty an uevotion shown by followeis.
b] UnJerxtunJlng feellngx unJ problemx. The seconu chaiacteiistic of leaueiship lies
in unueistanuing gioup anu inuiviuual feelings anu pioblems of followeis. The
leauei must tiy foi the satisfaction of social anu peisonal neeus of his followeis. The
leauei is lookeu upon as one uepenuable fiienu, philosophei anu guiue followeis.
Accoiuingly, followeis expect the leauei to iecognize theii inuiviuual uifficulties anu
to take evei possible measuie foi theii well-being. This uepenuence oi faith in the
leauei is maue to pievail among peisonnel thiough mutual unueistanuing. Anu to
inciease this unueistanuing, the leaueiship is iequiieu to keep the followeis
infoimeu of all uevelopments affecting the gioup anu its woik to allow paiticipation
in uecision making on impoitant matteis anu to piactice counseling with gioup
membeis.


c] Axxumptlon of rexponxlblllty. The thiiu featuie of leaueiship calls foi the
acceptance of full iesponsibility in all situations As the leauei exeicises authoiity
anu unueitakes the task of guiuance, he must assume the iesponsibility foi all
actions anu opeiations of his followeis. Be must steei the gioup cleai of all
uifficulties foi aiiiving at the fixeu uestination. Foi the attainment of objectives, he
is to encouiage anu uevelop the weak, to influence sanu contiol the stiong, anu to
piepaie the whole gioup foi an effective teamwoik. Noieovei, leaueiship uemanus
the capacity foi stimulating the giowth of enthusiasm anu initiative among
inuiviuual membeis.
d] Objectlvlty ln relutlonx. Anothei chaiacteiistic of leaueiship iests on maintaining
objectivity in ielationship thiough faii play anu absolute justice in all affaiis of the
oiganizations. The playing faii is to be uemonstiateu in all uecisions anu actions, in
communication anu paiticipation, in iepiimanu anu commenuation, oi in placement
anu tiansfei. The leauei's ability to inspiie can be ietaineu intact thiough his
impaitiality in all opeiations anu activities. Nisjuugment anu misuiiection by the
leauei affect employee behavioi anu ieuuce the iesult of human effoits. Nembeis
feel aggiieveu anu the leauei loses theii confiuence anu loyalty. Consequently,
leaueiship fails to guiue anu uiiect the gioup effoits.

IMPURTANCE UF LEADERSHIP IN MANACEMENT [Extra]
1here lx xome Importunce of leuJerxhlp ln Munugement

a] Movle power to group effortx. Nanagement, foi getting the woik uone by otheis, is
to supply leaueiship in the oiganization. As gioup effoits anu teamwoik aie
essential foi iealizing oiganizational goals, leaueiship becomes vital foi the
execution of woik. Thiough leaueiship, manageis can influence any gioup to human
beings to auopt a co-opeiative anu wholesome attituue foi successful woik
accomplishment. Leaueiship pulls up the gioup to a highei level of peifoimance
thiough its woik on human ielations.
b] AlJ to uuthorlty. Nanageis exeicise authoiity in managing people of the
oiganization anu theii task becomes easy wheievei they aie aiueu by leaueiship.
Theie aie seiious limits to the use of authoiity anu powei in obtaining high
peifoimance. Authoiity alone can nevei geneiate the initiative anu iesouicefulness
iequiieu in many jobs. Foi its main ieliance on influence, leaueiship is essential foi
obtaining tangible impioveu iesults of human effoits. Leaueiship contains the entiie
essential foi obtaining tangible anu impioveu iesults of human effoits. Leaueiship
contains all the essential ingieuients of uiiection foi inspiiing people anu pioviuing
the will-to-uo foi successful woik accomplishments.
c] Fmphuxlx on humun performunce. Effective leaueiship is neeueu at all levels of
management fiom top-management uown to supeivisoiy management.
Nanagement is tiansfoimeu as a social skill of leaueiship that accomplishes
objectives by mobilization anu utilization of people. The best of plans can be
founueu anu the iueal oiganization stiuctuie can be shelveu by the uelibeiate
iestiiction of human effoits at the opeiating level. Bigh peifoimance of woiking


people is the focal point in manageiial woik. Anu this high peifoimance can be
secuieu by leaueiship of supeivisoiy management.
d] Mul-uJjuxtment wlth lnformul orgunlzutlon. If management fails to pioviue
competent leaueiship, infoimal leaueiship will pievail ovei management in
contiolling anu iegulating the behavioi of employees. Being confionteu with such a
situation, management fails to influence the woikeis, to impiove, to impiove theii
peifoimance anu to stop employee uniest. Leaueiship is the natuial accompaniment
of all associations of human beings. Foi theii peisonal anu social contentment,
woikeis aie foiceu to iely mostly on infoimal leaueiship if management cannot
pioviue effective leaueiship. Competent leaueiship can, howevei, integiate infoimal
oiganizations with foimal oiganization anu utilize them constiuctively foi achieving
company objectives.
e] Basis for co-operation. Leaueiship pioviues the basis foi co-opeiation in seveial
ways. uoou two way communication, man to-man peisonal ielationship, use of
paiticipation anu cieation of oppoitunity foi neeu satisfaction aie meant foi
incieasing the unueistanuing between the leasei anu his suboiuinates of theii
mutual viewpoints. This incieaseu unueistanuing thiough the ieactions of
inuiviuual peisonalities piomotes favoiable feelings anu attituues among them.

4. LEADERSHIP STYLES
Using tbe rigbt one for your situation
Fiom Nahatma uanuhi to }ack Welch, anu Naitin Luthei King to Ruuolph uiuliani, theie aie
as many leaueiship styles as theie aie leaueis. Foitunately, business people anu
psychologists have uevelopeu useful, shoithanu ways of uesciibing the main leaueiship
styles. This can help aspiiing leaueis to unueistanu anu auapt theii own styles, so that they
can impiove theii own leaueiship.
Whethei you aie managing a team at woik, captaining youi spoits team oi leauing a majoi
coipoiation, youi leaueiship style is ciucial to youi success. Consciously, oi
subconsciously, you will no uoubt use some of the leaueiship styles featuieu, at least some
of the time. By unueistanuing these leaueiship styles anu theii impact, you can become a
moie flexible, bettei leauei.
This aiticle helps you unueistanu 1u of the most fiequently talkeu-about leaueiship styles,
some goou, some bau.


Understanding Leadersbip Styles
The leaueiship styles we look at heie aie:
Autociatic leaueiship.
Buieauciatic leaueiship.
Chaiismatic leaueiship.
Bemociatic leaueishippaiticipative leaueiship.
Laissez-faiie leaueiship.
People-oiienteu leaueishipielations-oiienteu leaueiship.
Seivant leaueiship.
Task-oiienteu leaueiship.
Tiansactional leaueiship.
Tiansfoimational leaueiship.

Autocratic Leadersbip
Autociatic leaueiship is an extieme foim of tiansactional leaueiship, wheie a leauei
exeits high levels of powei ovei his oi hei employees oi team membeis. People
within the team aie given few oppoitunities foi making suggestions, even if these
woulu be in the team's oi oiganization's inteiest. Nost people tenu to iesent being
tieateu like this. Because of this, autociatic leaueiship usually leaus to high levels of
absenteeism anu staff tuinovei. Also, the team's output uoes not benefit fiom the
cieativity anu expeiience of all team membeis, so many of the benefits of teamwoik
aie lost. Foi some ioutine anu unskilleu jobs, howevei, this style can iemain
effective wheie the auvantages of contiol outweigh the uisauvantages.

Bureaucratic Leadersbip
Buieauciatic leaueis woik "by the book", ensuiing that theii staff follow pioceuuies
exactly. This is a veiy appiopiiate style foi woik involving seiious safety iisks (such
as woiking with machineiy, with toxic substances oi at heights) oi wheie laige
sums of money aie involveu (such as cash-hanuling). In othei situations, the
inflexibility anu high levels of contiol exeiteu can uemoialize staff, anu can uiminish
the oiganizations ability to ieact to changing exteinal ciicumstances.


Cbarismatic Leadersbip
A chaiismatic leaueiship style can appeai similai to a tiansfoimational leaueiship
style, in that the leauei injects huge uoses of enthusiasm into his oi hei team, anu is
veiy eneigetic in uiiving otheis foiwaiu. Bowevei, a chaiismatic leauei can tenu to
believe moie in him oi heiself than in theii team. This can cieate a iisk that a
pioject, oi even an entiie oiganization, might collapse if the leauei weie to leave: In
the eyes of theii followeis, success is tieu up with the piesence of the chaiismatic
leauei. As such, chaiismatic leaueiship caiiies gieat iesponsibility, anu neeus long-
teim commitment fiom the leauei.
Democratic Leadersbip or Participative Leadersbip
Although a uemociatic leauei will make the final uecision, he oi she invites othei
membeis of the team to contiibute to the uecision-making piocess. This not only
incieases job satisfaction by involving employees oi team membeis in what's going
on, but it also helps to uevelop people's skills. Employees anu team membeis feel in
contiol of theii own uestiny, anu so aie motivateu to woik haiu by moie than just a
financial iewaiu. As paiticipation takes time, this style can leau to things happening
moie slowly than an autociatic appioach, but often the enu iesult is bettei. It can be
most suitable wheie team woiking is essential, anu quality is moie impoitant than
speeu to maiket oi piouuctivity.

Laissez-Faire Leadersbip
This Fiench phiase means "leave it be" anu is useu to uesciibe a leauei who leaves
his oi hei colleagues to get on with theii woik. It can be effective if the leauei
monitois what is being achieveu anu communicates this back to his oi hei team
iegulaily. Nost often, laissez-faiie leaueiship woiks foi teams in which the
inuiviuuals aie veiy expeiienceu anu skilleu self-staiteis. 0nfoitunately, it can also
iefei to situations wheie manageis aie not exeiting sufficient contiol.

People-Uriented Leadersbip or Relations-Uriented Leadersbip
This style of leaueiship is the opposite of task-oiienteu leaueiship: the leauei is
totally focuseu on oiganizing, suppoiting anu ueveloping the people in the leauei's
team. A paiticipative style, it tenus to leau to goou teamwoik anu cieative
collaboiation. Bowevei, taken to extiemes, it can leau to failuie to achieve the
team's goals. In piactice, most leaueis use both task-oiienteu anu people-oiienteu
styles of leaueiship.


Servant Leadersbip
This teim, coineu by Robeit uieenleaf in the 197us, uesciibes a leauei who is often
not foimally iecognizeu as such. When someone, at any level within an oiganization,
leaus simply by viitue of meeting the neeus of his oi hei team, he oi she is uesciibeu
as a "seivant leauei". In many ways, seivant leaueiship is a foim of uemociatic
leaueiship, as the whole team tenus to be involveu in uecision-making. Suppoiteis
of the seivant leaueiship mouel suggest it is an impoitant way aheau in a woilu
wheie values aie incieasingly impoitant, in which seivant leaueis achieve powei on
the basis of theii values anu iueals. 0theis believe that in competitive leaueiship
situations, people piacticing seivant leaueiship will often finu themselves left
behinu by leaueis using othei leaueiship styles.
Task-Uriented Leadersbip
A highly task-oiienteu leauei focuses only on getting the job uone, anu can be quite
autociatic. Be oi she will actively uefine the woik anu the ioles iequiieu, put
stiuctuies in place, plan, oiganize anu monitoi. Bowevei, as task-oiienteu leaueis
spaie little thought foi the well-being of theii teams, this appioach can suffei many
of the flaws of autociatic leaueiship, with uifficulties in motivating anu ietaining
staff. Task-oiienteu leaueis can benefit fiom an unueistanuing of the Blake-Nouton
Nanageiial uiiu, which can help them iuentify specific aieas foi uevelopment that
will help them involve people moie.
Transactional Leadersbip
This style of leaueiship staits with the piemise that team membeis agiee to obey
theii leauei totally when they take a job on: the "tiansaction" is (usually) that the
oiganization pays the team membeis, in ietuin foi theii effoit anu compliance. As
such, the leauei has the iight to "punish" team membeis if theii woik uoesn't meet
the pie-ueteimineu stanuaiu. Team membeis can uo little to impiove theii job
satisfaction unuei tiansactional leaueiship. The leauei coulu give team membeis
some contiol of theii incomeiewaiu by using incentives that encouiage even
highei stanuaius oi gieatei piouuctivity. Alteinatively a tiansactional leauei coulu
piactice "management by exception", wheieby, iathei than iewaiuing bettei woik,
he oi she woulu take coiiective action if the iequiieu stanuaius weie not met.
Tiansactional leaueiship is ieally just a way of managing iathei a tiue leaueiship
style, as the focus is on shoit-teim tasks. It has seiious limitations foi knowleuge-
baseu oi cieative woik, but iemains a common style in many oiganizations.
Transformational Leadersbip
A peison with this leaueiship style is a tiue leauei who inspiies his oi hei team with
a shaieu vision of the futuie. Tiansfoimational leaueis aie highly visible, anu spenu
a lot of time communicating. They uon't necessaiily leau fiom the fiont, as they tenu
to uelegate iesponsibility amongst theii teams. While theii enthusiasm is often
infectious, they can neeu to be suppoiteu by "uetail people". In many oiganizations,
both tiansactional anu tiansfoimational leaueiship aie neeueu. The tiansactional
leaueis (oi manageis) ensuie that ioutine woik is uone ieliably, while the
tiansfoimational leaueis look aftei initiatives that auu value. The tiansfoimational
leaueiship style is the uominant leaueiship style taught in the "Bow to Leau:
Biscovei the Leauei within You" leaueiship piogiam, although we uo iecommenu
that othei styles aie biought as the situation uemanus.


Using tbe Rigbt Style - Situational Leadersbip
While the Tiansfoimation Leaueiship appioach is often highly effective, theie is no one
"iight" way to leau oi manage that suits all situations. To choose the most effective
appioach foi you, you must consiuei:
The skill levels anu expeiience of the membeis of youi team.
The woik involveu (ioutine oi new anu cieative).
The oiganizational enviionment (stable oi iauically changing, conseivative oi
auventuious).
You own piefeiieu oi natuial style.
A goou leauei will finu him oi heiself switching instinctively between styles accoiuing to
the people anu woik they aie uealing with. This is often iefeiieu to as "situational
leaueiship".
Foi example, the managei of a small factoiy tiains new machine opeiatives using a
buieauciatic style to ensuie opeiatives know the pioceuuies that achieve the iight
stanuaius of piouuct quality anu woikplace safety. The same managei may auopt a moie
paiticipative style of leaueiship when woiking on piouuction line impiovement with his oi
hei team of supeivisois.


4.8 MEANINC UF CUMMUNICATIUN
Communication is the piocess of tiansmission of infoimation oi message fiom one peison
to anothei. Communication is most impoitant component of uiiecting function. In Business,
Communication suppoits all the functions of management, viz; Planning, 0iganizing,
Contiolling, Co-oiuination anu Staffing.

DEFINITIUNS
"Communication is an exchange of facts, iueas, opinions oi emotions by two oi moie
peisons" - Newmun unJ xummer

"Communication is the sum of all things, a peison uoes when he wants to cieate an
unueistanuing in the minus of anothei. It involves a systematic anu continuous piocess of
telling, listening anu unueistanuing"- Allen Ioulx

"Communication may be bioauly uefineu as the piocess of meaningful inteiaction among
human beings. Noie specifically, it is the piocess by which means aie peiceiveu anu
unueistanuings aie ieacheu among human beings"- .F. McFurlunJ.

"Communication is piocess of passing infoimation anu unueistanuing fiom one peison to
anothei"- Kelth uvlx

"The tiansfei of infoimation fiom one peison to anothei, iiiespective of whethei oi not it
elicits confiuence"- Koontz unJ Oonnell

"Communication as a tool that makes societies possible anu uistinguish human fiom othei
societies" - Schrumm

"Communication as the tiansmission of infoimation, iueas, emotions, skills thiough the use
of symbols, woius, pictuies anu giaphs"- Berelxon unJ Stelner

"Communication is the piocess of tiansmitting iueas, infoimation, anu attituues fiom the
souice to a ieceivei foi the puipose of influencing with intent"- Rogerx

"Communication as all those planneu oi unplanneu piocesses thiough which one Peison
Influences behavioi of otheis" - Kur

"Communication is the activity wheieby an inuiviuual oi gioup conveys, consciously oi
unconsciously, infoimation to anothei inuiviuual oi gioup anu wheie necessaiy, evokes a
iesponse. The Infoimation may be facts, feelings oi iueas"- Frlc Moonmun


Un basis of tbe above definitions of communication, tbe f ollowing are
its cbaracteristics.
1. Communication is a social piocess because it involves two oi moie peison anu they
exchange iueas, infoimation anu knowleuge.
2. Communication is all peivasive function, because infoimation, knowleuge, facts anu
opinions aie exchangeu between two oi moie employees at the eveiy level of
oiganization as well as between oiganization anu outsiue paities.
3. Communication piocess aims at cieating unueistanuing oi commonness oi unity of
minu on the paiticulai mattei between senuei anu ieceivei of infoimation.
4. Communication is multiuimensional anu multiuiiectional piocess because it may be
foimal oi infoimal oi it may be upwaiu, uownwaiu anu hoiizontal oi it may be
between two employees oi oiganization anu outsiueis uealing with the
oiganization.
5. It is continuous anu ongoing piocess because eveiy supeiioi has to be in a iegulai
touch with his suboiuinates as to seek piogiess of woik in confoimity with
stanuaius.
. It is a two way piocess in which senuei senus the infoimation to the ieceivei who
ieceives it, unueistanus it anu staits acting upon it anu gives a feeuback to senuei.


Tbe ob|ectives of communication [Extra]
1. Establish ielationships anu makes oiganizing possible.
2. Infoim, to peisuaue, to euucate, to tiain, to motivate anu to enteitain foi which
ieauing, wiiting, speaking anu listening aie the foui main skills iequiieu.
3. Not meiely tiansmission of infoimation fiom one peison to anothei but also coiiect
inteipietation anu unueistanuing of iueas oi infoimation fiom point of view of
oiganizational efficiency.
4. Tiansmitting infoimation, iueas, thoughts, opinions anu plans between anu
unueistanuing fiom one peison to anothei oi between vaiious paits of an
oiganization.

"6ooJ communicotion is os stimulotinq os block coffee onJ just os borJ to sleep ofter"
4.9 IMPURTANCE UF CUMMUNICATIUN
0iganizations aie totally ieliant on communication, which is uefineu as the exchange of
iueas, messages, oi infoimation by speech, signals, oi wiiting. Without communication,
oiganizations woulu not function. If communication is uiminisheu oi hampeieu, the entiie
oiganization suffeis. When communication is thoiough, accuiate, anu timely, the
oiganization tenus to be vibiant anu effective. Communication is cential to the entiie
management piocess foi following piimaiy ieasons:
1. Communlcutlon lx u llnklng procexx of munugement: Communication is the way
manageis conuuct the manageiial functions of planning, oiganizing, staffing,
uiiecting, anu contiolling. Communication is the heait of all oiganizations.
2. Co-operutlon through unJerxtunJlng: Effective communication incieases
unueistanuing of employees, gains theii willing acceptance anu leaus them to
gieatei effoits.
3. Creutex lnter-perxonul relutlon: Communication allows manageis to establish anu
maintain inteipeisonal ielationships, listen to otheis, anu otheiwise gain the
infoimation neeueu to cieate an inspiiational woikplace.
4. Fmployeex perform thelr functlonx effectlvely: Employees neeu to know theii job's
ielationship anu impoitance to the oveiall opeiation. This knowleuge makes it easy
foi them to iuentify with the oiganizational mission.
5. Fffectlve leuJerxhlp: The ability to communicate well, both oially anu in wiiting is a
ciitical manageiial skill anu a founuation of effective leaueiship. Effectiveness of
leaueiship is gieatly ueteimineu by the auequacy anu claiity of communication.
. Fffectlve xupervlxlon: Communication is an essential element (sine qua non) of
efficient supeivision anu uiiection. Thiough communication management issues
oiuei anu instiuctions, Effective communication is essential foi executing a plan.
7. Fffectlve xtufflng: Communication is iequiieu foi the ieciuitment, selection,
tiaining anu oiientation of employees.
8. Fffectlve control: It pioviues infoimation about actual peifoimance on basis of
which management can take necessaiy coiiective actions in time.


9. Fucllltutex Jeclxlon muklng: Nouein mangeis usually make uecisions by applying
scientific methous anu auopting scientific attituues. Becisions aie often uepenuent
upon the quality anu quantity of the infoimation ieceiveu. If the infoimation on
which a uecision is baseu is pooi oi incomplete, the uecision will often be incoiiect.
10. Fucllltutex xounJ plunnlng: Thiough communication, the managei gets iequiieu
anu ielevant infoimation to foimulate planning piemises on the one hanu, anu on
the othei he seeks paiticipation of suboiuinates in the piocess of planning by
making inteiaction with them anu listening to theii valuable suggestions.
11. Helpx xmooth runnlng of un enterprlxe: No managei can hanule conflict, negotiate
successfully, anu succeeu at leaueiship without being a goou communicatoi.
12. Informutlon unJ communlcutlon reprexent power ln orgunlzutlonx: An employee
cannot uo anything constiuctive in a woik unit unless he oi she knows what is to be
uone, when the task is to be accomplisheu, anu who else is involveu. The staff
membeis who have this infoimation become centeis of powei.
13. Increuxex motlvutlon unJ morule of employeex: Thiough communication, people
exchange anu shaie infoimation with one anothei anu influence one anothei's
attituues, behaviois, anu unueistanuings.
14. It bullJx publlc lmuge: Public ielations aie also impioveu thiough piopei
communication as many outsiue paities like customeis, community financeis,
supplieis anu goveinment agencies uealing with oiganization anu having stake in its
functioning one to be supplieu iequiieu infoimation on piofitability, financial
position, pioblems faceu by oiganization anu its contiibution towaius social
uevelopment, goou public image of oiganization is built.
15. Meunx of co-orJlnutlon: Foi the puipose of co-oiuination, manageis keep the
gioup fully infoimeu of all facts anu situations ielating to the woik. Seciecy cieates
suspicion anu sepaiates people; common unueistanuing of common pioblems units
them foi showing a bettei iecoiu of theii peifoimance.
1. Orlentutlon: Communication is neeueu in the aiea of oiientation to make people
acquainteu with peeis, supeiiois anu with company's iules anu iegulation.
17. Perxonul xufety on job: Communication is neeueu to teach employees about
peisonal safety on the job this avoius ieplacement expenuituie.
18. Promotlon of munugerlul efflclency: As management is a task of getting the woik
accomplisheu thiough effoits of othei peisonnel, it is communication that can keep
peisonnel woiking in accoiuance with uesiies of manageis. Accoiuingly, the
efficiency of a managei lies in his ability to communicate with othei peisonnel.
19. Provlxlon of job xutlxfuctlon: Effective communication satisfies peisonal anu social
neeus of human beings anu stimulates theii job inteiest anu enthusiasm.
20. 1he moxt tlme-conxumlng uctlvlty u munuger engugex ln lx communlcutlon:
Nanageis spenu between 7u to 9u peicent of theii time communicating with
employees anu othei inteinal anu exteinal customeis.
21. 1o brlng ubout chunge: Ceitain infoimation is passeu fiom one section oi level of
an oiganization to affect change in the actions of the ieceivei, e.g. sales figuies may
influence the level of piouuction when communicateu.
22. 1o xuxtuln xtublllty: Infoimation may be passeu so that activities aie continueu in
the same way; if existing behavioi is achieving objectives the message may mean
'uon't change a winning game'.


23. 1o lntegrute uctlvltlex of munugement: This is a wiue ianging function in that it
makes communication iesponsible foi:
a. Linking the levels of oiganization togethei.
b. Linking sections anu uepaitments of the oiganization to each othei (a + b =
stiuctuial integiation).
c. In auuition it integiates functions of management to see to it that all the
things management uo aie pulling in same uiiection towaius achieving
oiganizational goals (c = functional integiation).
24. It helpx to cope wlth chunglng envlronment: Communication helps oiganization to
cope with iapiuly changing business enviionment by geneiating anu compiling
infoimation on vaiious aspects of enviionment anu timely supply of such
infoimation to the manageis help them significantly in ueveloping suitable
stiategies to cope with changing enviionment.


4.10 Cbannels of Communication in organizations [Extra]
2. Formul lnternul verxux Informul Communlcutlon.
a. Formul communlcutlon iefeis to communication that follows the official
chain of commanu oi is pait of the communication iequiieu to uo one's job.
l. Vertlcul communlcutlon
1. ownwurJ communlcutlonflows fiom a managei to
employees anu is useu to infoim, uiiect, cooiuinate, anu
evaluate employees.
2. UpwurJ communlcutlon flows fiom employees to manageis
a. 0pwaiu communication can be useu in oiuei to keep
manageis awaie of how employees feel about theii jobs,
theii cowoikeis, anu the oiganization in geneial.
b. The oiganizational cultuie influences the extent of
upwaiu communication. A climate of tiust, iespect, anu
paiticipative uecision making will encouiage
consiueiable upwaiu communication. A highly
mechanistic anu authoiitaiian enviionment will
seveiely limit upwaiu communication in both style anu
content.
ll. Horlzontul communlcutlon
1. lrect Horlzontul communlcutlon takes place among
employees on the same oiganizational level.
2. InJlrect Horlzontul communlcutlon is communication that
cuts acioss both woik aieas anu oiganizational levels.
a. The incieaseu use of e-mail facilitates uiagonal
communications.
b. Biagonal communication has the potential to cieate
pioblems if employees uon't keep theii manageis
infoimeu.

liqure 4.2 noritonto/ communicotion


b. Informul communlcutlon is oiganizational communication that is not
uefineu by the oiganization's stiuctuial hieiaichy.
i. Infoimal communication systems peimit employees to satisfy theii
neeus foi social inteiaction.
ii. Infoimal communication systems can impiove an oiganization's
peifoimance by cieating alteinative, anu fiequently fastei anu moie
efficient, channels of communication.

3. Fxternul Communlcutlon.
0iganizations have communication links with both theii input anu output
connections. Foi example, a manufactuiing fiim will have communications with its
supplieis of iaw mateiials anu spaie paits, anu with all its customeis (eg. whole-
saleis anu ietaileis) who hanule its piouucts. Impoitance of exteinal
communication
a. To meet statutoiy iequiiements (tiaue unions, public, goveinment
uepaitments, agencies anu official bouies).
b. To inciease anu impiove business
c. To impiove the oiganization's image.

3. Communlcutlon Networkx
Communication netwoiks aie patteins of inuiviuuals oi gioups who aie the
tiansmitteis anu ieceiveis of infoimation in a given oiganization. This view aigues
that a netwoik shoulu contain only those inuiviuuals oi gioups who neeu to have a
given type of infoimation in oiuei to achieve theii objectives.

liqure 4.l communicotion Networks




4.11 CUMMUNICATIUN PRUCESS [Extra]
Communication is iegaiueu as system which consists of many inteiielateu anu
inteiuepenuent elements.

"Communication as piocess consisting of a senuei tiansmitting message thiough meuia to
a ieceivei who iesponus"- john Kotter.

In simple foim this mouel can be iuentifieu as

Flg 4.4 xlmple communlcutlon procexx

Communication is the shaiing oi conveying of infoimation, iueas, anuoi feelings by using
gestuies, woius, intonations, oi othei symbols. Reauing anu listening aie ieceptive foims of
communication. Speaking anu wiiting aie expiessive foims of communication. Language
uevelopment anu past expeiiences aie factois that play a majoi iole in the communication
piocess. Nessages can be encoueu into a vaiiety of foimats oial, wiitten oi visual. Aftei
encouing the message is tiansfeiieu via a meuium calleu a channel, foi example a lettei,
fax, phone call, oi e-mail. Aftei tiansfeience the infoimation will neeu to be inteipieteu by
the ieceivei. This piocess of inteipietation is known as uecouing. Finally the ieceivei will
senu a message back to the tiansmittei confiiming whethei the infoimation sent has been
unueistoou. This back check is known as feeuback. This concept may be illustiateu using
the communications mouel (fig.4.S).

Flgure 4.S-communlcutlon moJel

Sender Message kece|ver


Here ure followlng componentx on whlch communlcutlon lx preceJeJ ln uny
orgunlzutlon.

1. Context: It is the theme that a message must have.
2. SenJer: Senuei acts as encouei fiom wheie the message is souiceu.
S. Mexxuge: The puipose of context anu uetail infoimation is pioviueu in this
component.
4. MeJlum: It is the channel fiom wheie the message is bypasseu anu infoimation
flows towaius ieceivei.
S. Recelver: It acts as an encouei that unueistanus the message, sent by the senuei
anu wheie infoimation sinks.
6. FeeJbuck: The final phase wheie the senuei gets its auuience anu ieaueis iesponse
in foim of ciiticism oi appieciation.
7. Burrlerx.
a. Nolxe: Bowevei, sometimes the communication may get uistoiteu because of
inteinal oi exteinal uistuibances, the social psychologist estimates that theie
is usually a 4u-6u% loss of meaning in the tiansmission of the message fiom
the senuei to the ieceivei.
b. Other burrlerx semantic noise, uefensive attituue, self fulfilling piophecy,
language, assumptions, uistiusteu souice, wiong peiception, uiffeiences in
cultuievaluepeiception, inteipeisonal ielationship, passive listening, lack
of self confiuenceesteem, initiative, knowleuge of technical language,
giapevine anu uiffeience in mental matuiity.

Fxumple: Communlcutlon between lnxtructor unJ xtuJentx
The communication piocess consists of a message being sent anu ieceiveu. The
message may be veibal oi non-veibal. The same basic piinciples apply whethei humans,
animals, othei foims of life, oi combinations of these aie involveu. Youi challenge, as
an instiuctoi, is to not meiely communicate with youi stuuents--but to communicate
effectively. Effective communication involves a message being sent anu ieceiveu.
Auueu to this howevei, is the element of feeJbuck to ensuie that the message sent
was ieceiveu exactly as intenueu. This concept may be illustiateu using the thiee-step
communications mouel (fig.4.6).

Flgure 4.6-three xtep communlcutlon moJel


SenJlng the Mexxuge: Theie aie foui elements involveu in senuing a message. Fiist, as
the instiuctoi (senuei), you foimulate the message you intenu to communicate. Next, you
consiuei possible baiiieis that may affect the message. This incluues youi
expeiience, the teims you will use, anu even you'ie feeling towaiu the subject oi
the stuuents. Exteinal baiiieis such as noise must also be consiueieu. Thiiu, you
encoue the message; that is, you put the message into the woius you want to use.
Last, you cleaily communicate (senu) the message.

Recelvlng the Mexxuge: Theie aie also foui elements involveu in ieceiving a
message. The stuuents (ieceiveis) will fiist heai anuoi see the message you sent.
Seconu, the message is affecteu by exteinal baiiieis, if any, anu the stuuents' own
inteinal baiiieis. Possible inteinal baiiieis may incluue the stuuents expeiience level,
theii unueistanuing of the teims useu, theii attituue towaiu the mateiial, oi the way
they feel about you. Thiiu, youi stuuents uecoue the message thiough the use of mental
images. Foi instance, when you say the woiu circus, the ieceivei uoes not "see" the
letteis that foim the woiu. Insteau, a mental image of some soit appeais. Bow
many uiffeient mental images might aiise among youi stuuents foi this one woiu
alone. A clown, a big top, lions, aciobats, anu so foith. Fouith, the stuuents inteipiet the
message. Cleaily, at this point in the piocess theie is no way foi you to ueteimine that
all of the stuuents ieceiveu the message you intenueu. To ueteimine this, you must get
feeuback.

FeeJbuck: Feeuback, which may take seveial foims, pioviues essential infoimation
about youi success in communicating the message. To get feeuback, have the stuuents
iesponu to oial questions anu encouiage them to ask questions. The stuuents' non-
veibal behaviois also pioviue impoitant clues as to theii unueistanuing of the
mateiial. Facial expiessions anu bouy movements often inuicate when stuuents aie
unsuie about the meaning of youi message. You shoulu be caieful in accepting a
"yes" iesponse when you ask "Bo you unueistanu." 0btain meaningful feeuback by
asking questions that iequiie the stuuents to pioviue answeis which inuicate that they in
fact uo unueistanu exactly what you intenueu.

4.12 Barriers to Effective Interpersonal Communication [Extr]
It is piobably no suipiise that manageis fiequently cite communication bieak-uowns as
one of theii most impoitant pioblems. Baiiieis can exist in the senuei, in the tiansmission
of the message, in the ieceivei, oi in the feeuback. Specific communication baiiieis aie
mentioneu below:





e] Lack of Planning: uoou communication seluom happens by chance. Too often
people stait talking anu wiiting without fiist thinking, planning anu staffing the
puipose of message. Yet giving the ieasons foi a uiiective, selection the most
appiopiiate channel anu choosing piopei timing can gieatly impiove unueistanuing
anu ieuuce iesistance to change.

f] Unclarified Assumptions: 0ften oveilookeu, yet veiy impoitant, aie the
uncommunicateu assumptions that unueilie messages. A customei may senu a note
stating that she will visit a venuoi's plant. Then she may assume that the venuoi
will meet hei at the aiipoit, ieseive a hotel ioom, aiiange foi tianspoitation, anu
set up a full scale ieview of the piogiam at the plant. But the venuoi may assume
that the customei is coming to town mainly to attenu a weuuing anu will make a
ioutine call at the plant. These unclaiifieu assumptions will iesult in confusion anu
the loss of goouwill.

g] Semantic Distortion: Anothei baiiiei to effective communication is semantic
uistoition, which can be uelibeiate oi acciuental. An auveitisement states "we sell
foi less" is uelibeiately ambiguous; it iaises the question less than what. Woius may
evoke uiffeient iesponses. To some people the woiu "goveinment" may mean
inteifeience oi ueficit spenuing; to otheis, the same woiu may mean help,
equalization anu justice.

b] Poorly expressed messages: No mattei how cleai the iuea in the minu of the
senuei of communication, it may still be maikeu by pooily chosen woius, omissions,
lack of coheience, pooi oiganization of iueas, etc. This lack of claiity anu piecision,
which can be costly, can be avoiueu thiough gieatei caie in encouing the message.

i] Communication Barriers in tbe International Environment: Communication in
the inteinational enviionment becomes even moie uifficult because of uiffeient
languages, cultuies, anu etiquette. Tianslating slogans is veiy iisky. To oveicome
communication baiiieis in the inteinational enviionment laige coipoiates have


taken a vaiiety of steps e.g. laige staff of tianslatois, pioviues extensive language
tiaining etc.

|] Loss by Transmission and Poor Retention: In a seiies of tiansmissions fiom one
peison to the next, the message becomes less anu less accuiate. Pooi ietention of
infoimation is anothei seiious pioblem. Thus, necessity of iepeating the message
anu using seveial channels is iathei obvious.

k] Poor Listening and Premature Evaluation: Theie aie many talkeis but few
listeneis. Eveiyone piobably has obseiveu people enteiing a uiscussion with
comments that have no ielation to the topic. 0ne ieason may be that these peisons
aie ponueiing theii own pioblems - such as pieseiving theii own egos oi making a
goou impiession on othei gioup membeis - insteau of listening to the conveisation.

l] Impersonal communication: As the events in the Peispective inuicate, ieal
impiovement of communication often iequiies not expensive anu sophisticateu
(anu impeisonal) communication meuia but the willingness of supeiiois to engage
in face-to-face communication.

m] Distrust, Tbreat and Fear: Bistiust, thieat, anu feai unueimine communication. In
a climate containing these foices, any message will be vieweu with skepticism.
Bistiust can be the iesult of inconsistent behavioi by the supeiioi, oi it can be uue
to past expeiiences in which the suboiuinate was punisheu foi honestly iepoiting
unfavoiable, but tiue, infoimation to the boss.

n] Insufficient Period for Ad|ustment to Cbange: Changes affect people in uiffeient
ways, anu it may take time to think thiough the full meaning of a message.
Consequently, foi maximum efficiency, it is impoitant not to foice change befoie
people can aujust to its implications.

o] Information Uverload: 0ne might think that moie anu uniestiicteu infoimation
flow woulu help people oveicome communication pioblems. Bowevei, changes aie
that attention will be given fiist to matteis that aie easy to hanule, while moie
uifficult but peihaps ciitical messages aie ignoieu. People iesponu to infoimation
oveiloau by simply escaping fiom the task of communication.

p] Utber Communication Barriers: Besiues the mentioneu baiiieis to effective
communication, theie aie many otheis. In selective peiception people tenu to
peiceive what they expect to peiceive. In communication this means that they heai
what they want to heai anu ignoie othei ielevant infoimation. Still othei baiiieis to
communication aie uiffeiences in status anu powei between the senuei anu the
ieceivei of communication. Baiiieis also iesulting fiom illiteiacy, ignoiance,
supeistition in a countiy like Inuia.




4.13 Metbods of communication [Extra]
Verbul: Incluues speaking to anothei peison ovei the telephone, face to face etc, in a
uiscussion, uebate, inteiview, piesentation etc.
Non-verbul: Theie is no spoken language e.g., eye contact, bouy language, sign
language etc. Non-veibal communication is uiviueu into six types. They aie:
bouy language
physical chaiacteiistics anu appeaiance
voice
space
enviionment
time
Vlxuul: When infoimation is uisplayeu in vaiious ways e.g., tables, auveitisements
etc.
Wrltten: When the message being sent is uisplayeu in wiiting, e.g. email, letteis, fax
etc.
ReuJlng: In most woikplaces theie is a lot of ieauing iequiieu of peisonnel. The
ieauing mateiial may incluue minutes of meetings, 0ccupational, Bealth anu Safety
pioceuuies anu piactices, woik pioceuuies, iepoits etc.

I|gure 4.7


4.14 Principles of Effective Communication
Effective communication is the iesponsibility of all peisons in the oiganization, manageis
as well as non-manageis, who woik towaiu a common aim. Whethei communication is
effective can be evaluateu by the intenueu iesults.
Fffectlve Communlcutlon: The successful exchange of infoimation between inuiviuuals.
Fffectlve Communlcutor: An effective communicatoi is successful in establishing an active
two-way link with anothei inuiviuual oi gioup.

Theie aie basically two piinciples you neeu to unueistanu that have to uo with
communicating effectively:
1. Tbe iJentificotion onJ removol of borriers onJ
2. Tbe communicotion process itself.

Baiiieis to effective communication: Aspects of oi conuitions in a woikplace that inteifeie
with effective exchange of iueas oi thoughts. Such baiiieis incluue (1) status uiffeiences,
(2) genuei uiffeiences, (S) cultuial uiffeiences, (4) piejuuices, anu (S) the oiganizational
enviionment.
The following guiuelines can help oveicome the baiiieis to communication:
1. Senueis of messages must claiify in theii minus what they want to communicate.
This means that one of the fiist steps in communicating is claiifying the puipose of
message anu making a plan to achieve the intenueu enu.
2. Effective communication iequiies that encouing anu uecouing be uone with symbols
that aie familiai to the senuei anu ieceivei of the message. Thus the managei
shoulu avoiu unnecessaiy technical jaigon.
S. The planning of the communication shoulu not be uone in a vacuum. Insteau, othei
people shoulu be consulteu anu encouiageu to paiticipate: to collect the facts,
analyze the message, anu select the appiopiiate meuia.
4. It is impoitant to consiuei the neeus of the ieceiveis of the infoimation. Whenevei
appiopiiate, one shoulu communicate something that is of value to them, in the
shoit iun as well as in the moie uistant futuie.
S. Theie is a saying that the tone makes the music. Similaily, in communication the
tone of voice, the choice of language, anu the congiuency between what is saiu anu
how it is saiu influence the ieactions of the ieceivei of the message.
6. Too often infoimation is tiansmitteu without communicating, since communication
is complete only when the message is unueistoou by the ieceivei. Anu one nevei
knows whethei communication is unueistoou unless the senuei gets feeuback. This
is accomplisheu by asking questions, iequesting a ieply to a lettei, anu encouiaging
ieceiveis to give theii ieactions to the message.
7. The function of communication is moie than tiansmitting infoimation. It also ueals
with emotions that aie veiy impoitant in inteipeisonal ielationships between
supeiiois, suboiuinates, anu colleagues in an oiganization.


8. Effective communicating is the iesponsibility not only of the senuei but also of the
ieceivei of the infoimation. Thus, listening is an aspect that neeus auuitional
comment.
9. Remembei the vaiious baiiieis to communication - avoiu mental blocks, closeu
minu, ego pioblems.
1u. Speak to the point anu avoiu communication gaibage.


4.15 CUURDINATIUN


4.1 IMPURTANCE UF CUURDINATIUN



4.17 TECHNIQUES UF CUURDINATIUN





-----------------------------------------------------END-----------------------------------------------------

Summary


4.18 CUNTRULLINC
Wby control is importont {its necessity)?
If you coulu be suie that eveiy task you assigneu woulu be peifectly executeu, you ieally
woulu not neeu to contiol. But things iaiely go this smoothly. Nost plans aie executeu by
people, anu people vaiy wiuely in theii abilities, motivation, anu honesty. Fuitheimoie,
plans themselves become outuateu anu iequiie ievision. Foi these ieasons anu moie,
contiol is an impoitant management function. Contiol applies to contiolling eveiy task -
whethei it was laige oi small - you uelegate. Thus, foi eveiy task you uelegate, you shoulu
establish a contiol mechanism, anu the way of ensuiing that peifoimance is in line with
plans. If you uo not ueciue on the taigets anu goals theie is nothing foi you to contiol i.e. if
you uo not know the uiiection in which to go wheie is the question of contiolling. Anu
iemembei contiolling is the basic function of eveiy managei.


4.19 DEFINITIUNS [Meaning]
Neanwhile, theie aie no common agieement iegaiuing the uefinition of contiol as each
ieseaichei oi wiitei has his hei own uefinition. Bowevei, among the most common
definitions aie:

"Contiol is checking cuiient peifoimance against pieueteimineu stanuaius containeu in
the plans with a view to ensuie auequate piogiess anu satisfactoiy peifoimance"-
E.F.L.Brecb.

"Contiol consists of veiifying whethei eveiything occuis in confoimity with the plans
auopteu, the instiuctions issueu anu piinciples establisheu. It has foi its object to point out
weaknesses anu eiiois in oiuei to iectify them anu pievent iecuiiences"- Henri Fayol.

"Contiol is making suie that something happens the way it was planneu to happen. As
implieu in this uefinition, planning anu contiolling aie viitually insepaiable functions"-
(Certo, 2uuu, p. 422).

"Contiolling is ueteimining what is being accomplisheu, that is, evaluating the peifoimance
anu if necessaiy, applying coiiective measuies so that the peifoimance takes place
accoiuing to the plans"- Ceorge.R.Terry.

"Contiolling is the measuiement of accomplishment against the stanuaius anu the
coiiection of ueviations to assuie attainment of objectives accoiuing to plans"-Koontz and
U'Donnell.

"Contiol is the task of ensuiing that the activities aie pioviuing the uesiieu iesults".
(Umran, 2uu1, p. 162).

"Contiolling is the management function in which manageis establish anu communicate
peifoimance stanuaius foi people, piocesses, anu uevices".

"Contiol can be uefineu naiiowly as the piocess a managei takes to assuie that actual
peifoimance confoims to the oiganization's plan, oi moie bioauly as anything that
iegulates the piocess oi activity of an oiganization."

Based on definitions, control involves:

1. Settinq o torqet & qools {criterio),
2. Heosurinq tbe octuol performonce. AnJ
S. Tokinq tbe corrective octions.


Two ma|or prerequisites must exist before any manager can devise or maintain a
system of control. Tbese prerequisites are:

1. Control Requlrex Plunx:

It is obvious that befoie a contiol technique can be useu oi a system ueviseu, contiol must
be baseu on plans, anu that the cleaiei, moie complete, anu moie integiateu plans aie, the
moie effective contiols can be. It is simple as this:

"Tbere is no woy tbot monoqers con Jetermine wbetber tbeir orqonizotionol unit is
occomplisbinq wbot is JesireJ onJ expecteJ unless tbey first know wbot is expecteJ".

This simple tiuth means seveial things in piactice:
First: All meaningful contiol techniques aie, in the fiist instance, planning techniques.
Second: It is fiuitless to tiy to uesign contiol without fiist taking into account plans anu
how well they aie maue.

2. Controlx Requlre Orgunlzutlon Structure:

Since the puipose of contiol is to measuie activities anu take action to assuie that plans aie
being accomplisheu, we must also know wheie iesponsibility of an enteipiise foi ueviating
fiom plans anu taking action to make coiiections, lies. Contiol of activities opeiates
thiough people. But we cannot know wheie the iesponsibility foi ueviations anu neeus
action aie, unless oiganizational iesponsibility is cleai anu uefinite. Theiefoie, a majoi
pieiequisite of contiol is the existence of an oiganization stiuctuie. The cleaiei, moie
complete, anu moie integiateu this stiuctuie is, the moie effective contiol action can be.
0ne of the most fiustiating situations manageis can finu themselves in is that something is
going wiong in theii company agency oi uepaitment anu not knowing exactly wheie the
iesponsibility foi the tiouble lies.

Tbe relationsbip between planning and control can be sbown in Figure 4.1.

llqote 4.1 kelotloosblp betweeo ploooloq ooJ coottollloq

LANNING
CCN1kCLLING
Comparlng resulLs
wlLh plans
CCkkLC1ICN
Imp|ementat|on
Cf |ans
uevlaLlon
no
uevlaLlon's
lrom lan


4.20 STEPS IN CUNTRULLINC PRUCESS
Nanageis set up contiol systems that consist of foui key steps shown in figuie 4.2:

liqure 4.2 5teps in contro//inq
The contiol piocess involves caiefully collecting infoimation about a system, piocess,
peison, oi gioup of people in oiuei to make necessaiy uecisions about each. The steps in
contiol piocess aie funuamentally same foi uiffeient things as seen in the eailiei lessons.
The Basic Contiol Piocess is shown in figuie 4.S

liqure 4.l contro/ process

|ann|ng Contro|||ng
1. Lstab||sh|ng
Standards
2. Measur|ng actua|
erformance
3. Compar|ng
performance w|th
standards
4. Correct|ve
act|on


1. Fxtubllxh xtunJurJx to meuxure performunce. Within an oiganization's oveiall
stiategic plan, manageis uefine goals foi oiganizational uepaitments in specific,
opeiational teims that incluue stanuaius of peifoimance to compaie with
oiganizational activities. Because plans aie the yaiusticks against which contiols must
be ieviseu, it follows logically that the fiist step in the contiol piocess woulu be to
accomplish plans. Plons con be consiJereJ os tbe criterion or tbe stonJorJs oqoinst
wbicb we compore tbe octuol performonce in orJer to fiqure out tbe Jeviotions.

Stanuaius aie by uefinition is a simple ciiteiia of peifoimance. They aie the
selecteu points in an entiie planning piogiam wheie measuies of peifoimance aie
maue so as to give manageis signals as to how things aie going without having to
watch eveiy step in the execution of plans.

Fxumplex for the xtunJurJx

u) Profltublllty xtunJurJx: In geneial, tbese stonJorJs inJicote bow mucb tbe
compony woulJ like to moke os profit over o qiven time perioJ- tbot is, its return on
investment.
b) Murket poxltlon xtunJurJx: Tbese stonJorJs inJicote tbe sbore of totol soles in o
porticulor morket tbot tbe compony woulJ like to bove relotive to its competitors.
c) ProJuctlvlty xtunJurJx: Eow mucb tbot vorious seqments of tbe orqonizotion sboulJ
proJuce is tbe focus of tbese stonJorJs.
J) ProJuct leuJerxhlp xtunJurJx: Tbese inJicote wbot must be Jone to ottoin sucb o
position.
e) Fmployee uttltuJe xtunJurJx: Tbese stonJorJs inJicote wbot types of ottituJes tbe
compony monoqers sboulJ strive to inJicote in tbe componys employees.
f) Soclul rexponxlblllty xtunJurJx: Sucb os mokinq contribution to tbe society.
g) StunJurJx reflectlng the relutlve bulunce between xhort unJ long runge goulx.

2. Meuxure uctuul performunce. The measuiement of peifoimance against stanuaius
shoulu be on a foiwaiu looking basis so that ueviations may be uetecteu in auvance
by appiopiiate actions. Tbe Jeqree of Jifficulty in meosurinq vorious types of
orqonizotionol performonce, of course, is JetermineJ primorily by tbe octivity beinq
meosureJ. Foi example, if sales giowth is a taiget, the oiganization shoulu have a
means of gatheiing anu iepoiting sales uata.

3. Compure performunce wlth the xtunJurJx. When manageis have taken a measuie
of oiganizational peifoimance, theii next step in contiolling is to compaie this
measuie against some stanuaiu. A stonJorJ is tbe level of octivity estoblisbeJ to serve
os o moJel for evoluotinq orqonizotionol performonce. The peifoimance evaluateu can
be foi the oiganization as a whole oi foi some inuiviuuals woiking within the
oiganization. ln essence, stonJorJs ore tbe yorJsticks tbot Jetermine wbetber
orqonizotionol performonce is oJequote or inoJequote.


4. 1uke correctlve uctlonx. Aftei actual peifoimance has been measuieu compaieu
with establisheu peifoimance stanuaius, the next step in the contiolling piocess is to
take coiiective action, if necessaiy. Corrective oction is monoqeriol octivity oimeJ ot
brinqinq orqonizotionol performonce up to tbe level of performonce stonJorJs. ln otber
worJs, corrective oction focuses on correctinq orqonizotionol mistokes tbot binJer
orqonizotionol performonce. Befoie taking any coiiective action, howevei, manageis
shoulu make suie that the stanuaius they aie using weie piopeily establisheu anu
that theii measuiements of oiganizational peifoimance aie valiu anu ieliable. 0nce
the pioblem has been piopeily iuentifieu, coiiective action can focus on one oi moie
of the thiee piimacy management functions of planning, oiganizing anu influencing.

4.21 CHARACTERISTICS UF EFFECTIVE CUNTRUL SYSTEMS
The management of any oiganization must uevelop a contiol system tailoieu to its
oiganization's goals anu iesouices. It is known that all manageis want to have an auequate
anu effective system of contiol to assist them in making suie that events confoim to plans.

Example: An exomple of effective contiols is the JuxhbourJ on u cur. The ciitical items
on the uashboaiu aie easily unueistoou anu useu by uiiveis.

Indeed, we can say tbat, if controls are to work, tbey must be tailored. In sbort,
tbey must be tailored to:
a] Plans anu positions
b] Inuiviuual manageis anu theii iesponsibilities
c] The neeus foi efficiency anu effectiveness

Accordingly, Effective contiol systems shaie seveial common chaiacteiistics. These
chaiacteiistics aie as follows:
Acceptance by employees. Employee involvement in the uesign of contiols can
inciease acceptance.
Availability of information wben needed. Beaulines, time neeueu to complete the
pioject, costs associateu with the pioject, anu piioiity neeus aie appaient in these
ciiteiia. Costs aie fiequently attiibuteu to time shoitcomings oi failuies.
Accuracy. Effective contiol systems pioviue factual infoimation that's useful,
ieliable, valiu, anu consistent.
Comprebensibility. Contiols must be simple anu easy to unueistanu.
Control sbould be tailored to plans and positions. This means that, all contiol
techniques anu systems shoulu ieflect the plans they aie uesigneu to follow. This is
because eveiy plan anu eveiy kinu anu phase of an opeiation has its unique
chaiacteiistics.
EX: contiols foi the sales uepaitment will uiffei fiom those foi the finance
uepaitment anu those foi the puichasing anu peisonnel uepaitments.
Control must be tailored to individual managers and tbeir responsibilities.
This means that contiols must be tailoieu to the peisonality of inuiviuual manageis.


This because contiol systems anu infoimation aie intenueu to help inuiviuual
manageis caiiy out theii function of contiol. If they aie not of a type that a managei
can oi will unueistanu, they will not be useful.

Wbat individual managers cannot understand, tbey will not trust, and wbat
tbey will not trust, tbey will not use

Control sbould point up exceptions as critical points. This is because by
concentiation on exceptions fiom planneu peifoimance, controls boseJ on tbe time
bonoreJ exception principle ollow monoqers to Jetect tbose ploces wbere tbeir
ottention is requireJ onJ sboulJ be qiven. Bowevei, it is not enough to look at
exceptions, because some ueviations fiom stanuaius have little meaning anu otheis
have a gieat ueal of significance.
Control sbould be ob|ective. This is because when contiols aie subjective, a
managei's peisonality may influence juugments of peifoimance inaccuiacy.
0bjective stonJorJs con be quontitotive sucb os costs or mon bours per unit or Jote of
job completion. They can also be qualitative in the case of tiaining piogiams that
have specific chaiacteiistics oi aie uesigneu to accomplish a specific kinu of
upgiauing of the quality of peisonnel.
Control sbould be flexible. This means that contiols shoulu iemain woikable in
the case of changeu plans, unfoieseen ciicumstances, oi outsight failuies. Nuch
flexibility in contiol can be pioviueu by having alteinative plans foi vaiious
piobable situations.
Control sbould be economical. This means that contiol must woith theii cost.
Although this iequiiement is simple, its piactice is often complex. This is because a
managei may finu it uifficult to know what a paiticulai system is woith, oi to know
what it costs.
Control sbould lead to corrective actions. This is because a contiol system will be
of little benefit if it uoes not leau to coiiective action, contiol is justifieu only if the
inuicateu oi expeiienceu ueviations fiom plons ore correcteJ tbrouqb oppropriote
plonninq, orqonizinq, Jirectinq, onJ leoJinq.
Continuous Process. Contiolling shoulu be a continuous piocess.
Controlling At All Levels. All manageis at all levels exeicise contiol with vaiying
uegiees.
Coordination. The size of mouein oiganizations is quite laige. A laige amount of
capital anu laige numbei of people aie employeu in them. This complicates the
pioblem of contiol as theie aie many units piouucing anu uistiibuting uiffeient
piouucts. In oiuei to cooiuinate theii activities, an efficient system of contiol is
necessaiy.
Decision-making. The piocess of contiol is complete when coiiective actions aie
taken. This involves making iight uecisions as to what types of follow up actions aie
to be taken. This will leau to accomplishment of oiganization objectives. Accoiuing
to W.T.Ieiome, "Contiol is neeueu both to simplify the making of subsequent
uecisions anu to ensuie the iealization of the objectives implicit in the oiiginal long-
iange policy uecisions".


Decentralization of Autbority. The mouein tienu of business enteipiises towaius
uecentialization calls foi a systematic attempt foi contiolling. 0nuei
uecentialization, the authoiity of uecision-making is uispeiseu thiough-out the
oiganization. Nanagement must keep contiol in its hanus to know whethei the
authoiity is being useu piopeily. Without auequate contiols, uecentialization
cannot succeeu.
Economic feasibility. Effective contiol systems answei questions such as, "Bow
much uoes it cost." "What will it save." oi "What aie the ietuins on the
investment." In shoit, compaiison of the costs to the benefits ensuies that the
benefits of contiols outweigh the costs.
Effective Planning. Planning without contiol is meaningless anu contiol without
planning is blinu. Planning is an empty exeicise without contiolling
Effective Supervision. Contiol facilitates effective supeivision by pointing out
significant ueviations. It keeps the suboiuinates unuei check anu biings uiscipline
among them. While contiol cannot cuie habitual uishonesty in all cases,
management is iiiesponsible if it uoes not make a ieasonable effoit to pioviue oiuei
anu uiscipline among its employees thiough effective contiol piocesses.
Forward Looking. As stateu eailiei, contiol shoulu be foiwaiu looking with a view
to guaiu the business against futuie uangeis anu take coiiective actions well in
auvance iathei than wait foi the situation to uevelop to the uangei level befoie
tackling them.
Feedback. Aujusts futuie actions baseu upon the infoimation iegaiuing past
peifoimance.
Integration into establisbed processes. Contiols must function haimoniously
within these piocesses anu shoulu not bottleneck opeiations.
Motivation. A goou contiol system shoulu motivate people to achieve highei
peifoimance.
Prompt reporting. Piompt iepoiting will help the manageis to take immeuiate
coiiective action befoie the pioblem occuis.
Tailor made to suit individual plans and managers. Contiols shoulu be uesigneu
to suit inuiviuual plans anu managei anu theii peisonalities. Foi example, the
buugets anu vaiious financial iatios have bioau applications anu one must be awaie
of the ciitical factois anu they must use techniques anu infoimation suiteu to them.

Wbat are tbe main barriers to successful controlling?
Theie aie many baiiieis, among the most impoitant of them:

1. Contiol activities can create an undesirable overempbasis on shoit-teim
piouuction as opposeu to long- teim piouuction.
2. Contiol activities can increase employees' frustration with theii jobs anu theieby
ieuuce moiale. This ieaction tenus to occui piimaiily wheie management exeits too
much contiol.
3. Contiol activities can encourage tbe falsification of iepoits.


4. Contiol activities can cause tbe perspectives of organization membeis to be too
naiiow foi the goou of the oiganization.
5. Contiol activities can be perceived as tbe goals of tbe control process iathei
than the means by which coiiective action is taken.

4.22 CUNTRUL TECHNIQUES
Contiol techniques pioviue manageis with the type anu amount of infoimation they neeu
to measuie anu monitoi peifoimance. The infoimation fiom vaiious contiols must be
tailoieu to a specific management level, uepaitment, unit, oi opeiation. To ensuie complete
anu consistent infoimation, oiganizations often use stanuaiuizeu uocuments such as
financial, status, anu pioject iepoits. Each aiea within an oiganization, howevei, uses its
own specific contiol techniques, uesciibeu in the following sections.

Tbe Traditional Control Devices {tbe Budget]
A wiuely useu uevice foi manageiial contiol is the buuget. Inueeu, it has sometimes been
assumeu that buugeting is the uevice foi accomplishing contiol.

1. Budget controls

Buugeting is the foimulation of plans foi a given futuie peiiou in numeiical teims. Thus
buugets aie statements of anticipateu iesults, in financial teims - as in ievenue anu
expense anu capital buugets - oi in no financial teims - as in buugets of uiiect- laboi
houis, mateiials, physical sales volume oi units of piouuction. Thiough numeiical
statement of plans anu bieaking of these plans into components consistent with the
oiganization stiuctuie, buugets foice anu coiielate planning anu allow authoiity to be
uelegateu without loss of contiol. A buuget uepicts how much an oiganization expects
to spenu (expenses) anu eain (ievenues) ovei a time peiiou. Amounts aie categoiizeu
accoiuing to the type of business activity oi account, such as telephone costs oi sales of
catalogs. Buugets not only help manageis plan theii finances, but also help them keep
tiack of theii oveiall spenuing. A buuget, in ieality, is both a planning tool anu a contiol
mechanism. Buuget uevelopment piocesses vaiy among oiganizations accoiuing to
who uoes the buugeting anu how the financial iesouices aie allocateu. Some buuget
uevelopment methous aie as follows:
Top-down budgeting. Nanageis piepaie the buuget anu senu it to
suboiuinates.
Bottom-up budgeting. Figuies come fiom the lowei levels anu aie aujusteu anu
cooiuinateu as they move up the hieiaichy.
Zero-based budgeting. Nanageis uevelop each new buuget by justifying the
piojecteu allocation against its contiibution to uepaitmental oi oiganizational
goals.
Flexible budgeting. Any buuget exeicise can incoipoiate flexible buugets,
which set "meet oi beat" stanuaius that can be compaieu to expenuituies.


However, there ure muny typex of buJgetx xuch ux:
1. Revenue anu expense buugets
2. Time, space, mateiial, anu piouuct buugets
3. Capital expenuituie buugets
4. Cash buugets
5. Balance sheet buugets
. Buuget summaiies

2. Tbe Traditional no Budgetary Control Devices

Theie aie, of couise, many tiauitional contiol uevices not connecteu with buugets,
although some may be ielateu to, anu useu with, buugetaiy contiols. Among the most
impoitant of these aie: statistical uata, special iepoits anu analysis, analysis of bieak-
even points, the opeiational auuit, anu the peisonal obseivation.

a] Statistical data:
Statistical analyses of innumeiable aspects of a business opeiation
anu the cleai piesentation of statistical uata, whethei of a histoiical
oi foiecast natuie aie, of couise, impoitant to contiol. Some
monoqers con reoJily interpret tobulor stotisticol Joto, but most
monoqers prefer presentotion of tbe Joto on cborts.

b] Break- even point analysis:
An inteiesting contiol uevice is the bieak even chait. This chait uepicts the
ielationship of sales anu expenses in such a way as to show at what volume
ievenues exactly covei expenses. Bieak- because it emphasizes the maiginal
concept. Bieak-Even Analysis can be useu both as an aiu in uecision making anu as a
contiol uevice. It involves the use of a chait to uepict the oveiall volume of sales
necessaiy to covei costs. It is that point at which the cost anu ievenue of the
enteipiise aie exactly equal. In othei woius, is that point wheie the enteipiise
neithei eains a piofit noi incuis a loss.


In auuition, finonciol responsibility centers iequiie manageis to account foi a unit's
piogiess towaiu financial goals within the scope of theii influences. A managei's
goals anu iesponsibilities may focus on unit piofits, costs, ievenues, oi investments.

c] Uperational audit:
Anothei effective tool of manageiial contiol is the internal audit oi, as it is now
coming to be calleu, the opeiational auuit. 0perotionol ouJitinq, in its brooJest sense,
is tbe requlor onJ inJepenJent opproisol, by o stoff of internol ouJitors, of tbe
occountinq, finonciol, onJ otber operotions of o business.

d] Personal observation:
In any pieoccupation with the uevices of manageiial contiol, one shoulu nevei
oveilook the impoitance of contiol thiough peisonal obseivation.

e] Financial controls

Aftei the oiganization has stiategies in place to ieach its goals, funus aie set asiue
foi the necessaiy iesouices anu laboi. As money is spent, statements aie upuateu to
ieflect how much was spent, how it was spent, anu what it obtaineu. Nanageis use
these financial statements, such as an income statement oi balance sheet, to monitoi
the piogiess of piogiams anu plans.

Financial statements pioviue management with infoimation to monitoi financial
iesouices anu activities. The income statement shows the iesults of the
oiganization's opeiations ovei a peiiou of time, such as ievenues, expenses, anu
piofit oi loss. The bolonce sbeet shows what the oiganization is woith (assets) at a
single point in time, anu the extent to which those assets weie financeu thiough
uebt (liabilities) oi ownei's investment (equity).

Financial audits, oi foimal investigations, aie iegulaily conuucteu to ensuie that
financial management piactices follow geneially accepteu pioceuuies, policies,
laws, anu ethical guiuelines. Auuits may be conuucteu inteinally oi exteinally.

Financial ratio analysis examines the ielationship between specific figuies on the
financial statements anu helps explain the significance of those figuies:
Liquidity ratios measuie an oiganization's ability to geneiate cash.
Profitability ratios measuie an oiganization's ability to geneiate piofits.
Debt ratios measuie an oiganization's ability to pay its uebts.
Activity ratios measuie an oiganization's efficiency in opeiations anu use of
assets.

f] Marketing controls
Marketing controls help monitoi piogiess towaiu goals foi customei satisfaction
with piouucts anu seivices, piices, anu ueliveiy. The following aie examples of
contiols useu to evaluate an oiganization's maiketing functions:


Market researcb gatheis uata to assess customei neeusinfoimation
ciitical to an oiganization's success. 0ngoing maiket ieseaich ieflects how
well an oiganization is meeting customeis' expectations anu helps anticipate
customei neeus. It also helps iuentify competitois.
Test marketing is small-scale piouuct maiketing to assess customei
acceptance. 0sing suiveys anu focus gioups test maiketing goes beyonu
iuentifying geneial iequiiements anu looks at what (oi who) actually
influences buying uecisions.
Marketing statistics measuie peifoimance by compiling uata anu analyzing
iesults. In most cases, competency with a computei spieausheet piogiam is
all a managei neeus. Nanageis look at morketinq rotios, which measuie
piofitability, activity, anu maiket shaies, as well as soles quotos, which
measuie piogiess towaiu sales goals anu assist with inventoiy contiols.
0nfoitunately, scheuuling a iegulai evaluation of an oiganization's
maiketing piogiam is easiei to iecommenu than to execute. 0sually, only a
ciisis, such as incieaseu competition oi a sales uiop, foices a company to
take a closei look at its maiketing piogiam. Bowevei, moie iegulai
evaluations help minimize the numbei of maiketing pioblems.

Tbe Advanced and Quantitative Tecbniques and Devices:
We have till now seen the contiol techniques that have in use foi a long time. Bowevei, of
late, some moie techniques have been useu to contiol the efficiency of the oiganizations.
These newei techniques aie useu in auuition to the oluei techniques.

a] Program Evaluation and Review Tecbnique {PERT] AND CPM

The two of the majoi new ones aie Piogiam Evaluation anu Review Technique {PERT]
anu Ciitical Path Nethou {CPM].PERT was uevelopeu by the Special Piojects 0ffice of
the 0S Navy anu was fiist foimally applieu to the planning anu contiol of the Polaiis
Weapon System in 19S8 anu in the launch of Sputnik. CPN is also a similai contiol
technique that was jointly uevelopeu inuepenuently, viitually at the same time, by the
engineeis at the B0 Pont Company anu Remington Ranu of 0SA. Although it is uiffeient
in some aspects, it utilizes the same piinciples. PERT is a methou useu to size a softwaie
piouuct anu calculate the Stanuaiu Beviation (SB) foi iisk assessment. The PERT
equation (beta uistiibution) estimates the Equivalent Beliveieu Souice Instiuctions
(EBSIs) anu the SB baseu on the analyst's estimates of the lowest possible size, the most
likely size, anu the highest possible size of each computei piogiam component (CPC). In
non-mathematical teims, PERT is a time-event netwoik analysis system in which the
vaiious events in a piogiam oi pioject aie iuentifieu with a planneu time establisheu
foi each. These events aie placeu in a netwoik showing the ielationships of each event
to the othei events. 0nuei both the techniques, a pioject is uecomposeu into activities
anu then all activities aie integiateu in a highly logical sequence to finu the shoitest
time iequiie to complete the entiie pioject. The main uiffeience between PERT anu
CPN lies in the tieatment of time estimates. PERT was cieateu piimaiily to hanule


ieseaich anu uevelopment piojects in which time spans aie haiu to estimate with any
uegiee of accuiacy. Consequently, PERT time spans aie baseu on piobabilistic
estimates. CPN, on the othei hanu, is usually conceineu with piojects that the
oiganization has hau some pievious expeiience with. Time estimates, theiefoie can be
maue ielatively accuiately.

Strengtbs and Weaknesses

Theie aie five impoitant auvantages of PERT

a. It foices manageis to plan, because it is impossible to make a time-event
analysis without panning anu seeing how the pieces fit togethei.
b. It foices planning all the way uown the line, because each suboiuinate
managei must plan the event foi which he oi she is iesponsible.
c. It concentiates attention on ciitical elements that may neeu coiiection.
u. It makes possible a kinu of foiwaiu-looking contiol; a uelay will affect
succeeuing events anu possibly the whole pioject unless the managei can
make up the time by shoitening the allocateu to some action in the futuie.
e. The netwoik system with its subsystems enables manageis to aim
iepoits anu piessuie foi action at the iight spot anu level in the
oiganization stiuctuie at the iight time.

PERT also bas certain limitations

a. The technique is not useful when a piogiam is nebulous anu no
ieasonable, "guesstimates" of scheuule can be maue.
b. It has emphasis on time only anu not on costs.
c. PERT has a limiteu application to one-time non-iepetitive piojects. It
uoes not help contiol in continuous piocessing anu piouuction.

b] Control tbrougb Return-on Investment {RUI]
Retuin on investment (R0I) oi Bu Pont system of financial analysis one paiticulai
appioach to financial contiol that has ieceiveu consiueiable attention in iecent yeais.

RUI = Sales x Profit
Investment {Fixed and Working capital] Sales

This iatio is computeu on basis of capital tuinovei (sales % investment) multiplieu by
eainings as a piopoition of sales (piofit % sales). This calculation iecognizes that one
uivision, with a high capital tuinovei anu a lowei peicentage of eainings to sales, may
be moie piofitable in teims of ietuin on investment than anothei with high peicentage
of piofits to sales but with low capital tuinovei.
c] )ust-In-Time Inventory Control {)IT]
It is a technique foi ieuucing inventoiies to a minimum by aiianging foi piouuction
components to be ueliveieu to the piouuction facility "just-in-time" to be useu. }IT


woiks best in companies that manufactuie ielatively stanuaiuizeu piouucts foi which
theie is consistent uemanu.
d] Ratio Analysis
A iatio is a ielationship between two numbeis that is calculateu by uiviuing one
numbei into the othei. Ratio analysis is the piocess of geneiating infoimation that
summaiizes the financial position of an oiganization thiough the calculation of iatios
baseu on vaiious financial measuies that appeai on the oiganization's balance sheet
anu income statements.
e] Management by Ub|ective and Appraisal by Results {MBU]
In NB0, the managei assigns a specializeu set of objectives anu action plans to woikeis
anu then iewaius those woikeis on the basis of how close they come to ieaching theii
goals. This contiol technique has been implementeu in coipoiation's intent on using an
employee-paiticipative means to impiove piouuctivity.
f] Decision Tree Analysis
It is a statistical anu giaphical multi phaseu uecision making technique that can be useu
in contiolling.
g] Computer-Aided Design {CAD]
b] Computer-Aided Manufacturing {CAM]
i] Total Quality Management {TQM]
Refeis to a quest in an oiganization, TQN expanus the tiauitional view of quality-
looking only at the quality of the final piouuct oi seivices - to looking at the quality of
eveiy aspects of the piocess that piouuces the piouuct oi seivice. TH systems ore
intenJeJ to prevent poor quolity from occurrinq. Successful TH proqroms ore built
tbrouqb tbe JeJicotion onJ combineJ efforts of everyone in tbe orqonizotion.
)] Human resource controls
Buman iesouice contiols help manageis iegulate the quality of newly hiieu peisonnel,
as well as monitoi cuiient employees' uevelopments anu uaily peifoimances. 0n a uaily
basis, manageis can go a long way in helping to contiol woikeis' behaviois in
oiganizations. They can help uiiect woikeis' peifoimances towaiu goals by making
suie that goal aie cleaily set anu unueistoou. Nanageis can also institute policies anu
pioceuuies to help guiue woikeis' actions. Finally, they can consiuei past expeiiences
when ueveloping futuie stiategies, objectives, policies, anu pioceuuies. Common
contiol types incluue peifoimance appiaisals, uisciplinaiy piogiams, obseivations, anu
tiaining anu uevelopment assessments. Because the quality of a fiim's peisonnel, to a
laige uegiee, ueteimines the fiim's oveiall effectiveness, contiolling this aiea is veiy
ciucial.
K] Computers and information controls
Almost all oiganizations have confiuential anu sensitive infoimation that they uon't
want to become geneial knowleuge. Contiolling access to computei uatabases is the key
to this aiea. Incieasingly, computeis aie being useu to collect anu stoie infoimation foi
contiol puiposes. Nany oiganizations piivately monitoi each employee's computei
usage to measuie employee peifoimance, among othei things. Some people question
the appiopiiateness of computei monitoiing. Nanageis must caiefully weigh the
benefits against the costsboth human anu financialbefoie investing in anu
implementing computeiizeu contiol techniques. Although computeis anu infoimation
systems pioviue enoimous benefits, such as impioveu piouuctivity anu infoimation


management, oiganizations shoulu iemembei the following limitations of the use of
infoimation technology:
Performance limitations. Although management infoimation systems have the
potential to inciease oveiall peifoimance, ieplacing long-time oiganizational
employees with infoimation systems technology may iesult in the loss of expeit
knowleuge that these inuiviuuals holu. Auuitionally, computeiizeu infoimation
systems aie expensive anu uifficult to uevelop. Aftei the system has been
puichaseu, cooiuinating itpossibly with existing equipmentmay be moie
uifficult than expecteu. Consequently, a company may cut coineis oi install the
system caielessly to the uetiiment of the system's peifoimance anu utility. Anu
like othei sophisticateu electionic equipment, infoimation systems uo not woik
all the time, iesulting in costly uowntime.
Bebavioral limitations. Infoimation technology allows manageis to access
moie infoimation than evei befoie. But too much infoimation can oveiwhelm
employees, cause stiess, anu even slow uecision making. Thus, managing the
quality anu amount of infoimation available to avoiu infoimation oveiloau is
impoitant.
Healtb risks. Potentially seiious health-ielateu issues associateu with the use of
computeis anu othei infoimation technology has been iaiseu in iecent yeais. An
example is caipal tunnel synuiome, a painful uisoiuei in the hanus anu wiists
causeu by iepetitive movements (such as those maue on a keyboaiu).

Regaiuless of the contiol piocesses useu, an effective system ueteimines whethei
employees anu vaiious paits of an oiganization aie on taiget in achieving oiganizational
objectives.

4.23 Control Ub|ectives [Extra]
The six majoi puiposes of contiols aie as follows:

Controls make plans effective. Nanageis neeu to measuie piogiess, offei
feeuback, anu uiiect theii teams if they want to succeeu.
Controls make sure tbat organizational activities are consistent. Policies anu
pioceuuies help ensuie that effoits aie integiateu.
Controls make organizations effective. 0iganizations neeu contiols in place if
they want to achieve anu accomplish theii objectives.
Controls make organizations efficient. Efficiency piobably uepenus moie on
contiols than any othei management function.
Controls provide feedback on pro|ect status. Not only uo they measuie piogiess,
but contiols also pioviue feeuback to paiticipants as well. Feeuback influences
behavioi anu is an essential ingieuient in the contiol piocess.
Controls aid in decision making. The ultimate puipose of contiols is to help
manageis make bettei uecisions. Contiols make manageis awaie of pioblems anu
give them infoimation that is necessaiy foi uecision making.


4.24 Types of Controls [Extra]
Contiol can focus on events befoie, uuiing, oi aftei a piocess. Foi example, a local
automobile uealei can focus on activities befoie, uuiing, oi aftei sales of new cais. Caieful
inspection of new cais anu cautious selection of sales employees aie ways to ensuie high
quality oi piofitable sales even befoie those sales take place. Nonitoiing how salespeople
act with customeis is a contiol uuiing the sales task. Counting the numbei of new cais solu
uuiing the month anu telephoning buyeis about theii satisfaction with sales tiansactions
aie contiols aftei sales have occuiieu. These types of contiols aie foimally calleu feeu
foiwaiu, concuiient, anu feeuback, iespectively.

Feed forward controls: {Pie contiol): contiol that takes place befoie woik is
peifoimeu is calleu pie contiol, oi feeu-foiwaiu contiol oi sometimes calleu
pieliminaiy oi pieventive contiols, attempt to iuentify anu pievent ueviations in the
stanuaius befoie they occui. Honoqers usinq tbis type of control creote policies,
proceJures, onJ rules oimeJ ot eliminotinq bebovior tbot will couse unJesiroble work
results. Feeu foiwaiu contiols focus on human, mateiial, anu financial iesouices
within the oiganization. These contiols aie eviuent in the selection anu hiiing of
new employees. Foi example, oiganizations attempt to impiove the likelihoou that
employees will peifoim up to stanuaius by iuentifying the necessaiy job skills anu
by using tests anu othei scieening uevices to hiie people with those skills.
Concurrent controls: This iefeis to the contiol that takes place as woik is being
peifoimeu. lt relotes not only to employees performonce but olso to sucb nonbumon
oreos os equipment performonce onJ Jeportment oppeoronce. This monitois ongoing
employee activity to ensuie consistency with quality stanuaius. These contiols iely
on peifoimance stanuaius, iules, anu iegulations foi guiuing employee tasks anu
behaviois. Theii puipose is to ensuie that woik activities piouuce the uesiieu
iesults. As an example, many manufactuiing opeiations incluue uevices that
measuie whethei the items being piouuceu meet quality stanuaius. Employees
monitoi the measuiements; if they see that stanuaius aie not being met in some
aiea, they make a coiiection themselves oi let a managei know that a pioblem is
occuiiing.
Feedback controls: This iefeis to the contiol that concentiates on the post
oiganizational peifoimance. Involve ieviewing infoimation to ueteimine whethei
peifoimance meets establisheu stanuaius. Foi example, suppose that an
oiganization establishes a goal of incieasing its piofit by 12 peicent next yeai. To
ensuie that this goal is ieacheu, the oiganization must monitoi its piofit on a
monthly basis. Aftei thiee months, if piofit has incieaseu by S peicent, management
might assume that plans aie going accoiuing to scheuule.
Upen loop and closed loop control
Closeu loop contiol also known as automatic oi cybeinetic contiol, monitois anu
manages a piocess by means of a self iegulating system.
0pen loop contiol oi non cybeinetic, contiol iequiies an exteinal monitoiing
system anuoi an exteinal agent to complete the contiol loop.


Key points to be remembered
Contiol is the task of ensuiing that the activities aie pioviuing the
uesiieu iesults.

The contiol piocess involves:

Setting the taiget (ciiteiia).
Neasuiing the actual peifoimance.
Taking the coiiective actions.

Theie aie many pieiequisites foi ueveloping any contiolling system,
among them is that the impoitant of:

Contiol iequiies plans, as plans become the stanuaius by which uesiieu
actions aie measuieu.

The basic contiol piocesses aie:

The establishment of stanuaius.
The measuiement of peifoimance.
Compaiing measuieu peifoimance to stateu stanuaius.
Taking coiiective action.

Theie aie many types of contiol, among them:

Pie contiol.
Con cuiient contiol.
Feeuback contiol.
Pie contiol oi feeu-foiwaiu contiol iefeis to the contiol that takes place
befoie woik is peifoimeu.
Concuiient contiol iefeis to the contiol that takes place as woik is being
peifoimeu.
Feeuback contiol iefeis to the contiol that concentiates on the past
oiganizational peifoimance.

Contiol must be tailoieu to:

Plans anu positions.
The inuiviuual manageis anu theii iesponsibilities.
The neeus foi efficiency anu effectiveness.

Contiol shoulu be objective, flexible, anu economical.
Theie aie many baiiieis to successful contiolling:



Contiol activities can cieate an unuesiiable oveiemphasis on
shoit-teim objectives.
Contiol activities can inciease employees fiustiation with
theii jobs anu this in tuin will ueciease the moiale level.
Contiol activities can encouiage the falsification of iepoits.
Contiol activities can be peiceiveu as the goals of the contiol
piocess iathei than the means by which coiiective action is
taken.

The most common methous anu techniques foi contiolling. Among the
tiauitional contiol uevices the buuget.

Among the most non buugetaiy contiol uevices: the statistical uata, the
bieakeven point analysis, the opeiational auuit the peisonal obseivation.

The auvanceu anu quantities techniques anu uevices foi contiol aie:

PERT (piogiam evaluation anu ieview techniques)
Contiol thiough ietuin on investment (R0I)
}ust in time (}IT) system.
Ratio analysis.
Nanagement by objectives anu appiaisal by iesults.
Becision Tiee analysis.
Computei aiueu uesign (CAB).
Computei aiueu manufactuiing (CAN).
Total quality management (TQN).

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Narayana Swamy.R, Asst.Prof, Dept of TCE, T.J.I.

T, Bangalore 06AL51 (E&M)

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