Directing and Controlling

UNIT 2
 DIRECTING

Directing is said to be a process in which the managers

instruct, guide and oversee the performance of the
workers to achieve predetermined goals. 
Directing initiates action and it is from here actual
work starts. Direction is said to be consisting of human
factors. In simple words, it can be described as
providing guidance to workers is doing work.
In field of management, direction is said to be all those
activities which are designed to encourage the
subordinates to work effectively and efficiently. 
“Directing consists of process or technique by which
instruction can be issued and operations can be carried
out as originally planned”
Directing means giving instructions, guiding,
counselling, motivating and leading the staff in an
organisation in doing work to achieve Organisational
goals. 
Directing is a continuous process initiated at top level
and flows to the bottom through organisational
hierarchy.
 Characteristics of Directing

1. Pervasive Function - Directing is required at all levels of organization.

Every manager provides guidance and inspiration to his subordinates.

2. Continuous Activity - Direction is a continuous activity as it

continuous throughout the life of organization.

3. Human Factor - Directing function is related to subordinates and

therefore it is related to human factor. Since human factor is complex and
behaviour is unpredictable, direction function becomes important.

4. Creative Activity - Direction function helps in converting plans into

performance. Without this function, people become inactive and physical
resources are meaningless.
5. Executive Function - Direction function is carried out
by all managers and executives at all levels throughout the
working of an enterprise, a subordinate receives
instructions from his superior only.

6. Delegate Function - Direction is supposed to be a

function dealing with human beings. Human behaviour is
unpredictable by nature and conditioning the people’s
behaviour towards the goals of the enterprise is what the
executive does in this function. Therefore, it is termed as
having delicacy in it to tackle human behaviour.
 Principles of Directing

Harmony of objectives
Maximum individual contribution
Unity of command
Appropriate techniques
Direct supervision
Managerial communication
 Elements of Directing

Supervision
• Motivation
• Leadership
• Communication
(i) Supervision- implies overseeing the work of
subordinates by their superiors. It is the act of watching
& directing work & workers.
(ii) Motivation- means inspiring, stimulating or
encouraging the sub-ordinates with zeal to work.
Positive, negative, monetary, non-monetary incentives
may be used for this purpose.
ion
(iii) Leadership- may be defined as a process by which
manager guides and influences the work of subordinates
in desired direction.

(iv) Communications- is the process of passing

information, experience, opinion etc from one person to
another. It is a bridge of understanding.
 Coordination

Coordination is the synchronization and integration of

activities, responsibilities and command and control
structures to ensure that the resources are used most
efficiently in pursuit of the specified objectives.
In simple words, Coordination is the way through
which people can be made to work together and to
cooperate with each other to attain the final aims of the
organization.
 IMPORTANCE OF COORDINATION

1. Better accomplishment: it avoids the duplication of

efforts.
2. Economy and efficiency: by avoiding wastage of
resources and duplication of efforts.
3. High morale: in organizing and staffing it leads to job
satisfaction of employees.
4. Better human relations: because the authority
responsibility relationships are clear
5. Integration of goals: it brings unity of action.
 COORDINATION -THE ESSENCE OF MANAGING

1. Planning and coordination: various types of plans like objectives, policies,

strategies and programs serve as means of coordinating the activities of an
enterprise.
2. Organizing and coordination: when authority is delegated coordination is the
last thing which a manager looks for from different managers.
3. Staffing and coordination: coordination between the job requirement and the
personnel appointed.
4. Directing and coordination: To ensure smooth directing of subordinates,
supervision, motivation, leadership and communication require proper
coordination.
5. Controlling and coordination: a manager keeps on monitoring the performance
is it is as per the desired standards or not. If the performance does not match
the required standards, the manager will take remedial steps. By this way he
will achieve coordination.
 Difficulties In Coordination

Uncertain features such as natural phenomena like rains,

floods, droughts or abnormal changes in the behaviour of
subordinates poses a great challenge to effective coordination.
The confused and conflicting ideas of the managers act as a
constraint.
Lack of administrative skills and adequate knowledge of
necessary techniques by the managers.
Lack of orderly method of developing and adopting new ideas
and programmes act as a constraint for effective coordination.
A vast number of variables due to the incompleteness of human
knowledge limit the degree of coordination
 Effective coordination techniques

1. Well defined objectives: unity of purpose is must for achieving

proper coordination.
2. Effective chain of command: clear cut authority responsibility
relationships help in reducing the conflicts.
3. Precise programmes and policies: it brings uniformity in action.
4. Effective communication: quick communication helps in
synchronizing the other activities to be performed.
5. Effective leadership: it helps coordination both at the planning
and implementation stage.
6. Cooperation: the individuals in an organization must be willing
to help each other voluntarily.
7. Committees: it includes the advisors who try to integrate the
views of different groups in an organization.
 CONTROLLING

Control refers to a systematic process of regulating

organizational activities to make them consistent with
the expectations established in plans, targets and
standards of performance.
Effectively controlling an organization requires the
information about performance standards and actual
performance, as well as actions taken to correct any
deviations from the standards.
 FEATURES OF CONTROL
1. Managerial function: it’s a follow up action to other functions of
management.
2. Forward looking: it’s a corrective function related to future events only as
past can’t be controlled. It aims at minimizing losses, wastages and
deviations from standards.
3. Review of past events: the deviations in the past are revealed by the
control process. Its called feedback information. Thus, it facilitates the
reasons for poor performance.
4. Action oriented: It is only action which adjusts performance to
predetermined standards whenever deviations occur.
5. Continuous process: it involves constant analysis of standards, policies,
procedures etc. a manager needs to perform this function with other
functions.
6. Dynamic process: control results in corrective actions which may lead to
a change in the performance of other functions of management.
 Tools and techniques of controlling

 Control is a fundamental managerial function. Managerial control

regulates the organizational activities. It compares the
actual performance and expected organizational standards and
goals. For deviation in performance between the actual and
expected performance, it ensures that necessary corrective action
is taken.
 There are various techniques of managerial control which can be
classified into two broad categories –

Traditional techniques
Modern techniques
Traditional Techniques of Managerial
Control
Traditional techniques are those which have been
used by the companies for a long time now. These
include:
• Personal observation
• Statistical reports
• Break-even analysis
• Budgetary control
Budget and budgetary control system:
a budget is a plan or
programme of future action which is prepared on the
basis of estimates or forecasts made for coming
operating period. It anticipates income for a given
period and the costs to be incurred in order to get this
income.
A budget which is prepared for the organization as a
whole is known as master budget. Budget prepared for
certain functional areas such as sales, distribution,
production and finance is known as functional or
operating budget.
1. Personal Observation
This is the most traditional method of control. Personal
observation is one of those techniques which enables
the manager to collect the information as first-hand
information.
It also creates a phenomenon of psychological pressure
on the employees to perform in such a manner so as to
achieve well their objectives as they are aware that they
are being observed personally on their job. However, it
is a very time-consuming exercise & cannot effectively
be used for all kinds of jobs.
Statistical Reports
Statistical reports can be defined as an overall analysis
of reports and data which is used in the form of
averages, percentage, ratios, correlation, etc., present
useful information to the managers regarding the
performance of the organization in various areas.
This type of useful information when presented in the
various forms like charts, graphs, tables, etc., enables
the managers to read them more easily & allow a
comparison to be made with performance in previous
periods & also with the benchmarks.
3. Break-even Analysis
Breakeven analysis is a technique used by managers to study
the relationship between costs, volume & profits. It
determines the overall picture of probable profit & losses at
different levels of activity while analyzing the overall
position.
The sales volume at which there is no profit, no loss is known
as the breakeven point. There is no profit or no loss.
Breakeven point can be calculated with the help of the
following formula:
Breakeven point = Fixed Costs/Selling price per unit –
variable costs per unit
 Budgetary control

It is a system of controlling costs which includes the

preparation of budgets, coordinating the departments and
establishing the responsibilities, comparing actual performance
with the budgeted and acting upon results to achieve maximum
profitability. It is an intelligent consideration of future events. It
clarifies objectives, helps in the best utilization of resources
and is helpful in the control of performance and costs.
Zero base budgeting: it was introduced for the first time in
preparing the divisional budgets in 1971 in USA. Under this
each manager has to justify the entire budget in detail from
zero base.
 Some of the types of budgets prepared by an organisation are as
follows,
 Sales budget: A statement of what an organization expects to sell in
terms of quantity as well as value
 Production budget: A statement of what an organization plans to
produce in the budgeted period
 Material budget: A statement of estimated quantity & cost of materials
required for production
 Cash budget: Anticipated cash inflows & outflows for the budgeted
period
 Capital budget: Estimated spending on major long-term assets like a
new factory or major equipment
 Research & development budget: Estimated spending for the
development or refinement of products & processes
 Zero base budgeting

 In this rapidly changing environment goals continuously

keep on changing. The goals need to be redefined in a
logical manner. The past year financial allocations may
not serve any purpose. It calls for a new allocation of
resources. All the proposals are drawn from the scratch.
 Basic steps in ZBB:
1. Identification of decision units
2. Analysis of decision units
3. Evaluation and ranking of all decision units
4. Allocation of resources to each unit
 Modern Techniques of Managerial Control

Modern techniques of controlling are those which are of recent

origin & are comparatively new in management literature. These
techniques provide a refreshingly new thinking on the ways in
which various aspects of an organization can be controlled. These
include:
Return on investment
Ratio analysis
Responsibility accounting
Management audit
PERT & CPM
Total Quality management (TQM)
Six Sigma
1. Return on Investment
 Return on investment (ROI) can be defined as one of the
important and useful techniques. It provides the basics and
guides for measuring whether or not invested capital has
been used effectively for generating a reasonable amount of
return. ROI can be used to measure the overall
performance of an organization or of its individual
departments or divisions. It can be calculated as under-

 Net income before or after tax may be used for making

comparisons. Total investment includes both working as
well as fixed capital invested in the business.
Ratio Analysis
The most commonly used ratios used by
organizations can be classified into the following
categories:
Liquidity ratios
Solvency ratios
Profitability ratios
Turnover ratios
3. Responsibility Accounting
Responsibility accounting can be defined as a system of
accounting in which overall involvement of different
sections, divisions & departments of an organization are
set up as ‘Responsibility centers’. The head of the center is
responsible for achieving the target set for his center.
Responsibility centers may be of the following types:
Cost center
Revenue center
Profit center
Investment center
4. Management Audit
Management audit refers to a systematic appraisal of
the overall performance of the management of an
organization. The purpose is to review the efficiency
&n effectiveness of management & to improve its
performance in future periods.  
 PERT & CPM
 PERT (programmed evaluation & review technique) & CPM
(critical path method) are important network techniques
useful in planning & controlling. These techniques,
therefore, help in performing various functions of
management like planning; scheduling & implementing
time-bound projects involving the performance of a variety
of complex, diverse & interrelated activities.
 Therefore, these techniques are so interrelated and deal
with such factors as time scheduling & resources allocation
for these activities.
Differences between the PERT and CPM which are stated below

 (i) In the CPM it is considered that the duration of each activity is constant,
and so, only one time estimate is made for each activity. But in the PERT,
uncertainty in the duration of the activities are taken into account and
estimates are made thrice for every activity— (a) optimistic time showing the
shortest time required for an activity, (b) Pessimistic time showing the
maximum time required for an activity, and (c) most probable time which lies
in between the two.
 (ii) In the CPM, main focus is on cost; whereas in the PERT the focus is on
time.
 (iii) The CPM is more appropriate for the projects with well-known times,
while the PERT is more suitable where activity timings are relatively
unknown.
Some of the common uses of these techniques are as follows:
(i) Launching new products;
(ii) Construction of a new plant;
(iii) Installation of a computer system;
(iv) Planning and launching of a new project;
(v) Ship-building;
(vi) Building of Airport facilities;
(vii) Setting up of industry.
 Total Quality Management (TQM)

 A core definition of total quality management (TQM) describes

a management approach to long-term success through customer
satisfaction. In a TQM effort, all members of an organization
participate in improving processes, products, services, and the
culture in which they work.
 The total quality management became attractive to the US
managers as it had been successfully implemented by the
Japanese companies such as Toyota, Canon and Honda. The
TQM philosophy focuses on teamwork, increasing customer
satisfaction and lowering the costs. Major TQM techniques
involve the use of techniques like quality circles, benchmarking,
six sigma principles, reduced cycle time and continuous
improvement.
Quality circles

A quality circle or quality control circle is a group of workers

who do the same or similar work, who meet regularly to identify,
analyze and solve work-related problems. It consists of minimum
three and maximum twelve members in number. Circle members
are free to collect data and take surveys. The reason for
promoting quality circles is that these people know the day to
day tasks and problems and can easily recommendations.
Benchmarking

 Benchmarking is defined as the process of measuring products,

services, and processes  against toughest competitors or
recognizing the industry leaders in one or more aspects of their
operations, to identify the areas of improvement.
 It is the continuous process of measuring products, services and
practices against the Of course, only those companies be selected
whose methods are compatible.
 There are four main types of benchmarking: internal, external,
performance, and practice.
Six sigma

It was first introduced by Motorola in 1980s. It is based on Greek

letter ‘sigma’ which means how far something deviates from
perfection. It is a highly ambitious quality standard that
specifies not more than 3.4 defects per million parts i.e.
99.9997 percent accuracy. Now it has become a generic term
which indicates higher quality and lower costs.
Hundreds of companies like General Electric, Honda, American
Express, Ford, TCS, tata Steel, Sony, Hitachi, Motorola have
been using six sigma programs.
 Management by exception

  It is a system of identification and communication that signals

the manager as to when and where his attention is needed.
 The main object of this system is to enable the manager to
identify and isolate the problems that call for decision and action,
and avoid or ignore or pay less attention to less critical problems
which better be handled by his subordinates.
 Under this system the manager should receive only condensed,
summarized and invariable comparative reports covering all the
elements, and he should have all the exceptions to the past
averages or standards pointed out, both the specially good and the
specially bad exceptions.
Management by Exception
 System of Management by Exception:

 I Phase: Measurement Phase:

 In this phase, facts of operational situation are collected and assessed, i.e., use
of performance of its whole range inputs such as efforts contributing to the
goals of the organisation; its productivity, money flow, effectiveness of
financial resources being used to produce goods, services and profits;
availability and wastage of material and its economy from its purchase
through processing and storing to delivery for finished products utilization,
capability and productivity of the machines.

 The information about all these factors are utilized by way of quantitative
measurements like using time standards, balance sheet data, inventory data,
inspection results of finished products, inventory accumulation for sales,
current assets, equipment utilization data.
II Phase: Projection Phase

In this phase, analysis of those measurements which

are mean­ingful to the objectives of the organisation for
future outlook or expectations is carried out. Past and
present data are projected by using the statistical
concept like probability, standard devia­tion,
confidence, correlation, sample size, significance etc.
Examine the potential effect of changes expected as per
forecast. Then the projections are modified by the
forecasts to decide the ‘goals’. At this stage complete
planning is thoroughly looked at from the angle of
existing policies and procedures, organisation structure,
adequacy and capability of the existing staff and equip­
ment. If need arises necessary changes are made.
 III Phase: Selection Phase:
 In this phase, those vital and economical available measures are
selected, which will best indicate the progress towards its
objectives. Thus the criteria are selected, which the management
would like to use to follow the progress or performance to­wards
predicted objectives.
 IV Phase: Observation Phase:
 In this phase, current status of performance is periodically
observed and measured. The system should be reliable, automatic
and adequate. Adequate means of observations should neither be
too less nor too more, and only necessary information at desired
frequency is obtained.
 V Phase: Comparison Phase:
 In this phase, comparison is made between the actual and
expected performance and progress in order to identify the
exception, analyze causes and report the need for action to the
appropriate authority about the exceptions that required priority
of attention.

 VI Phase: Action Phase:

 This is the phase, where decisions are taken and implemented
with a view to bring the performance to the desired level or
adjust in anticipations to reflect changing conditions or take full
advantage of better performance or opportunity.
Thus the Management by Exception compromise as
systematic approach of handling the management
problems and free the manager from the demands of
routine work, which enables him to devote more
time for creative efforts directed towards “improving
the overall efficiency of the organisation”. This also
provides necessary information readily available, for
taking timely and qualitative decisions, which would
require lot of time.
 Advantages of Management by Exception:

1. It saves time. Manager attends to real problems at a particular point of

time.
2. Concentrated efforts are possible, as this system enables the manager
to decide when and where he should pay his attention. It identifies crisis
and critical problems.
3. Lesser number of decisions is required to be taken, which enables the
manager to go into detail.
4. This enables to increase span of control and increase the activities for
a manager.
5. Use of past trends, history and available data can be made fully.
6. It alarms the management about the good opportunities as well as
difficulties.
7. Qualitative and quantitative yardsticks are provided for judging the
current position.
 Limitations of Management by Exception:

1. It requires a comprehensive observing and reporting

system.
2. It increases paper work.
3. The system is silent till the problem becomes critical.
4. Some important factors, like human behaviour, are
difficult to measure.