Principles of Management

Lecture-15
Leading & Controlling
 Agenda

1. Leadership in general
2. Ingredients of Leadership
3. Tools Used by Leaders
 Leadership- some views
• The ability to get men and women to do
what they don’t like to do and like it
-----Harry Truman

* Leadership is the process of influencing

others so that they will strive willingly and
enthusiastically to achieve group goals
 Leading
• Leading is a function of Managing to direct, motivate
and coordinate the performance of tasks that achieve
the goal of the firm effectively and efficiently

Direct

Leadership

Motivate Co-ordinate
 Leading from the front
• A leader places himself before his
followers and facilitates progress and
inspires them to achieve the group goals.

• Eg: The Conductor of an Orchestra

- The Lieutenant of a platoon
- The Leader of a dog pack
Tactical Leadership requires leading from
the front
 Strategic Leading
• Leadership consists of providing the
resources, environment and direction to
the subordinates monitoring and
controlling their actions for effectively
achieving group goals
• Eg: The General of a Campaign
- The Shepherd of a flock
Strategic Leadership leads from the rear
 Leadership Rungs
• Strategic and Tactical Leadership cannot
be divorced from one another

• A Firm must have a good blend of both

leadership requirements

• A good tactician may not be a good

strategist but a good strategist has to be a
good tacticians
 Types of Leading
• Leading from the front- Tactical Leadership

• PM- leading the team for Nuclear deal.

• Strategic leadership: This is advisory,

guiding, enabling.
• Mr Narayanamurthy mentoring the Infosys
team
 Directing
• Showing the way defining the Goal
• Specifying the assignment clearly
• Showing how the task is linked to the Goal
• Setting standard procedures
• Periodic monitoring and correction
 Coordination
Means:
• Ensuring orderly group effort
• Unity of action : The actions of several
individual are aligned with one another
• Single aim, objective

• Classic coordinated effort: Dabbawalas

 Benefits of coordination
• Reduction of wasteful effort
• Team spirit
• High morale
• Clarity
• Minimise conflicts
 Movie making (contd)
Camera
Casting
lighting

Screenplay Finance
Director Manager
writer

Story
writer Producer Distribution
Manager

Music
Director
Publicit
Musicians y
 Examples of poor coordination
• Traffic snarls
• A crowded Railway or Bus station
• Street Parking
• Hawking and un-authorised squatting
Ingredients of Leadership
 Ingredients of Leadership
• Envision the future
• Instill values of quality, honesty, calculated risk
taking and concern for employees and
customers
• Ability to use power appropriately
• Ability to comprehend varied human motivations
• Ability to inspire
• Ability to develop a climate of responsiveness
and arouse motivations
 Principle of Leadership
• To be an effective leader the manager
must understand what motivates
subordinates and how these motivations
operate on them as individuals as well as
in a group
• People tend to follow those who in their
opinion offer them the means to satisfy
their own personal goals
Tools Used by Leaders

Authority

Leadership employs

Power Concern for

stakeholders

Organization
Goals
 Using Authority
Various Leadership Styles
- Autocratic style( No dissent, orders must be implemented,
predominantly punishment for non compliance and rewards for
compliance)
- Participative style (Consultative, seeks opinion before
commanding, ensures compliance by acceptance)
- Free rein style ( Puts complete trust and makes the
subordinate completely responsible for performance-
normally followed at very senior level)
 Using Power
• Managers use various type and sources of
Power to implement decisions in the
interest of their Organizations
 Sources of Power
Reward
Reward
Power
Power

Legitimate
Legitimate Coercive
Coercive
Power
Power Power
Power
Enable
Enablemanagers
managersto tobe
be
leaders
leaders&&influence
influence
subordinates
subordinatestoto
achieve
achievegoals
goals

Expert
Expert Referent
Power Referent
Power Power
Power
 Sources of Power
• Used to affect other’s behavior and get them
to act in given ways.
– Legitimate Power: based on manager’s
authority resulting by the management position
in the firm.
• Eg: Power to hire/fire workers, or assign work.
– Reward Power: based on the manager’s ability
to give or withhold rewards.
• Pay raises, bonuses, verbal praise.
• Effective managers use reward power to signal
employees they are doing a good job.
 Sources of Power

– Coercive Power: based in ability to punish others.

• Ranges from verbal reprimand to pay cuts to firing.

• Can have serious negative side effects.

– Expert Power: based on special skills of leader.

• First & middle managers have most expert power.

• Often found in technical ability.

– Referent Power: results from personal

characteristics of the leader which earn worker’s
respect, loyalty and admiration.
• Usually held by likable managers who are

concerned about their workers.

 Empowerment
Get workers involved in the decisions.
• Process of giving workers at all levels
authority to make decisions and the
responsibility for their outcomes.
Empowerment helps managers:
– Increase worker commitment and
motivation.
To focus on other issues. Effective
managers usually empower substantial
authority to workers.
Principles of Management

Controlling
 Hierarchy of Control
• Global Control: International Institutions
• National Control :National Institutions
• Societal Control: Political and Socio-
Cultural Institutions
• Organizational Control-Firms and
Commercial Institutions
• Group Control: Family, Teams
• Individual Control: Self discipline
 Controlling
• Definition:
The Management function of Controlling is
the measurement and correction of
performance in order to ensure that the
firm’s objectives and plans devised are
accomplished effectively and efficiently to
the fullest extent.
 Organizational Control
• Managers must monitor & evaluate:
– Are we efficiently converting inputs into outputs?
• Must accurately measure units of inputs and outputs.
– Is product quality improving?
• Are we competitive with other firms?
– Are employees responsive to customers?
• customer service is increasingly important.
– Are our managers innovative in outlook?
• Does the control system encourage risk-taking?
 Three Types of Control

Conversion
Conversion
Inputs
Inputs Outputs
Outputs
Process
Process

Feedforward Concurrent
Concurrent Feedback
Feedback
Feedforward
Control Control
Control Control
Control
Control (manage
(anticipate
(anticipate (manageproblems
problems (manage
(manageproblems
problems
problems) as
asthey
theyoccur)
occur) after
afterthey
theyoccur)
occur)
problems)
 Control Types
– Feedforward: use in the input stage of the process.
– Managers anticipate problems before they arise.
– Managers can give rigorous specifications to suppliers to
avoid quality
– Concurrent: gives immediate feedback on how
inputs are converted into outputs.
– Allows managers to correct problems as they arise.
– Managers can see that a machine is becoming out of
alignment and fix it.
– Feedback: provides after the fact information
managers can use in the future.
– Customer reaction to products are used to take corrective
action in the future.
Corrective Control Model (6 Key steps)

1. Define the 2. Identify Key 3. Set 4. Collect

System Characteristics Standards Information

If okay
continue
5. Make
Comparisons
6. Diagnose
And Correct If deviations
Problems
 The Control Process
1. Establish standards, goals, or targets against
which performance is to be evaluated.
• Standards must be consistent with strategy, for a low
cost strategy, standards should focus closely on cost.
– Managers at each level need to set their own
standards.
2. Measure actual performance: managers can
measure outputs resulting from worker behavior
or they can measure the behavior themselves.
• The more non-routine the task, the harder to
measure.
– Managers then measure the behavior (come to work
on time) not the output.
 The Control Process
3. Compare actual performance against chosen
standards.
• Managers must decide if performance actually
deviates.
– Often, several problems combine creating low
performance.
4. Evaluate result and take corrective action.
– Perhaps the standards have been set too high.
– Workers may need additional training, or equipment.
• This step is often hard since the environment is
constantly changing.
 The Goal-Setting Process
Figure 9.4
Corporate level managers set goals for
individual Divisions to allow organization
to achieve corporate goals.

Divisional managers set goals for

each function to allow the division
to achieve its goals.

Functional managers set goals for

each worker to allow the function
to achieve its goals.
 Linkage to Strategic Goals
• Controls should be linked to the strategic
goals of the organization.
• A good organizational control will be:
– Objective
– Complete
– Timely
– Acceptable
Systems & Methods of Control
Organizational Control Methods

Behavioral Control

Automation-
Organizational Market
Based
Control Control
Control

Financial and
Accounting
Controls

Hellriegel
 Market Control

Consumers
Product Price,etc
Competition
Competition
Customers

Customer feedback

Product Price,etc Firm’s Customers

Firm

Customer
feedback on Control Schemes: Profit Sharing, Customer
Prices, use, Monitoring
failures etc
 Financial Control

Cost Control Budgetary Control Comparative

Control

Over two periods

Total Costs Activity Cost
Revenue Expenses
Control Control
 Market Control
• Market control involves collecting data related to
sales, prices, costs, and profits for guiding
decisions and evaluating results.
– Marketing control requires that:
• the costs of the resources used in production are
measured monetarily,
• the value of the goods and services produced defined
clearly and priced monetarily.
• the prices of the goods and services produced be set
competitively
– Two control mechanisms that meet these requirements
are:
• Profit-Sharing Plans
• Customer Monitoring
 Financial Controls
– Financial Controls are objective and allow
comparison to other firms.
• Profit ratios--measures how efficiently managers
convert resources into profits.
– Return on Investment (ROI) is the most common.
• Liquidity ratios -- measure how well managers protect
resources to meet short term debt.
– Current & quick ratios.
• Leverage ratios -- show how much debt is used to
finance operations.
– Debt-to-asset & times-covered ratios.
• Activity ratios -- measures how managers create value
from assets.
– Inventory turnover, days sales outstanding.
 Cost Control Methods
• Total cost control includes control of
Overhead, input costs, labour/ machine
costs and its utilization

• Activity based costing: A form of control to

identify whether a group, or department is
able to sustain its operation by itself or not
 Activity-Based Costing Model
Cost View

Resources

Resource
Cost Assignment

Process Input Performance

Activities
View Information Evaluation

Activity
Cost Assignment

Goods
And Services
 Automation-Based Control
• Automation involves the use of self-
regulating devices and processes that
operate independently of people.
Eg: SAP, ERP, Intranets, Control Software
• Machine control utilizes self-regulating
instruments or devices to prevent and
correct deviations from preset standards.
Eg:Robotic Control, CAD
 Understanding Behavioral Control

Building
Direct Control Firms Culture

Supervision Founders
Values

Behavioral
Control Acceptable Organizational
Behavior Control
Rules, SOPs

Bureaucratic
Control Goal Norms
Setting Values

Clan Control
Management
By Objectives
 Linkage to Strategic Goals
• Controls should be linked to the strategic
goals of the organization.
• A good organizational control will be:
– Objective
– Complete
– Timely
– Acceptable
 Standards
• Definition: A standard is a criteria of
performance against which any
performance is measured
• Function of a standard:
- A means of doing work as per Best
Industry Practice
- Provides a feedback to managers at
various points in a plan
 Volume
Types of Standards Costs
Revenue

Weight, Physical Financial

dimensions Standards Standards
Capital
Measurement based Monetary Measures
Investments, expenses
Standards

Relative
Program Measures, Intangible
Standards Time and cost Ranking Standards
Quality

NPD, Trg, Advt, NPLaunch Staff performance, Motivation

TQM, MDP- programs Team spirit, etc
 Goals as Standards
• Goals - measurable and verifiable.
• Defining Qualitative goals has become an
important area of standards definition
• A standard for Goal setting is the
S.M.A.R.T acronym.
A well developed SMART Goal serves as a
good standard.
 Benchmarking
• A practice of comparing a goal, standard
or activity with that of a superior
performing practice in the Industry or
company.
• Steps:-Identify a factor
– Select a superior performer
– Gather Data and analyze
– Set performance goals
– Incorporate as a standard
Questions??