Managerial Functions

MANAGERIAL FUNCITIONS
Introduction:
We are living in an economic, technological, political, social era. In which planning is pre-
requisite for the growth of organization. In simple words, Planning is deciding in advance
what is to be done for the future period of time. In this sense, planning is basic activity.
Almost everyone involve in planning to some extent. E.g.: - A student plans his studies for
coming examinations. College authority plans for smooth conduct of examinations. Political
leader plans for his elections. Government plans too proper utilization of resources to achieve
a desire economic growth.

Planning – who is to do it. Planning is a bridge between present & future. It is an intellectual
process & thinking before doing. Planning bridges the gaps from where we are to & where
we want to go. Planning involves the selection was the course of action to achieve desired
result. In this change planning is projected course of action.

Definitions: -

1) According to ‘Koontz and O’Donell’:-

“Planning is an intellectual process, the conscious determinatory of courses of action, the

basing of decisions on purpose, facts and considered estimates.”

2) According to ‘James Lundy’:

“Planning is determination of what is to be done, how and where it is to done , who is to do it

& how results are to be evaluated.”

3) According to ‘George Terry’:-

“The selection & relating of facts & the making & using of assumptions regarding

the future in the visualization & formulation of proposed activities believed necessary to
achieve the desired results.”
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3.3 NATURE AND OBJECTIVES

1. Objectives oriented:

The main purpose of a plan is to accomplish the objectives of the organization.

2. Basic function of management:

Planning is the foundation of organization. No planning, no organization. The manager

decides upon the policies, procedures, programmes and projects before proceeding with his
work.

3. Directed towards efficiency:

The plan is said to be efficient, when the objectives are accomplished.

4. It is flexible and dynamic:

Planning leads to the adoption of a specific course of action and the rejection of other
possibilities. Management is dynamic as well as flexible because future is unpredictable, and
when future cannot be moulded to confirm to the course of action, flexibility has to be
ingrained.

Objectives of planning:

1) Planning & Objectives

Planning is object oriented. Every plan must contribute for accomplishment of group
objectives. If objectives are not decided planning will be of no use.

2) Efficiency of Plan: -

Efficiency is the ability to minimize the use of resources in achieving organizational

objectives. Efficiency of plan is measured by its contribution to objective as economical as
possible. Planning should be done in such a way that maximum results will be obtained at
minimum cost.
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3) Planning & Forecasting: -

The essence of planning is forecasting. Forecasting means looking ahead &\making

assumptions about the future. Forecasting is not speculation. It involves logical & intelligent
guess work. Forecasting provides basis for planning. It helps management to make
assumptions about future. It forms the basis for development. Planning in various areas like
purchase of raw material, production, marketing is based on forecasting. Forecasting
describes what will happen in future.

4) Planning & Decision Making: -

Decision making is a process of selecting a better course of action from available alternatives.
Decisions are taken about the use of organizational resources. It is an important part of
planning. Decision making is wider term. It includes organizing, directing, controlling & co-
ordination

6) Formulation of Derivative Plans:

-Once the overall plan is selected it becomes essential to fix the detail sequence & timing of
the plan. Then subsidiary or derivative plan is to be considered. Primary plan of action is
decided by preparing separate derivative plans for each

section or division of the enterprise.

7) Provision for Follow-up: -

Planning is always followed by action. Some modifications may be required for achieving
pre-determined objective Once the overall plan is selected it becomes essential to fix the
detail sequence & timing of the plan. Then subsidiary or derivative plan is to be considered.

Types of plans:

A plan is a commitment to a particular course of action for achieving specific results. From
this it follows that there are a number of plans for achieving different goals. Managers,
normally, commit the mistake of taking major programmes only as plans. But a number of
future courses of action are also plans. For example, starting the production of a new product
or settings up a new factory is considered plans. The plans may be classified according to
origin, use, purpose, kind etc.
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Following diagram illustrates various plans:Hierarchy of Plans

Planning is a commitment to a particular course of action undertaken to achieve specific

results. It consists of several components or derivative plans that are generally bound
together. These components are known as plans. There can be several types of plans. It is
easy to see a major plan such as establishing a new enterprise but some future courses of
actions are also plans. Any course of future action is a plan.

Various plans may be classified into:

(1) Standing plans and

(2) Single-use plans.

1. Standing Plans:

Standing plans are made to be used time and again. These plans are formulated to guide
managerial decisions and actions on problems which are recurring in nature. Standing plans
are also called ‘repeated use’ plans because these provide guidelines for actions to be taken in
future. These plans provide unity and uniformity of efforts in meeting repetitive situations
arising at various levels of the enterprise. These plans provide ready guidelines for tackling
situations of recurring nature. These plans not only help in co-ordination but in effective
management also. Standing plans include objectives policies, procedures, methods, rules and
strategies.

Standing plans help an enterprise in the following ways:

(i) Standing plans help in achieving co-ordination in the enterprise. These plans bring
consistency, uniformity and unity in efforts.

(ii) Senior executives are able to delegate their work to subordinates since procedures, rules,
regulations etc. have been laid down for taking necessary decisions.

(iii) These plans help in achieving goals even if these are vague, complex or multi-
dimensional. The policies, methods, rules, procedures etc. provide ready frames of reference
whenever some difficulty arises in taking decisions.
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(iv) Standing plans are formed after a lot of thinking, discussions and arguments. Whenever
decisions are needed to be taken, these plans help in quick decision making. These plans are
great labour saving devices as they provide frames of references for tackling recurring
situations.

(v) These plans help in better administrative control. They provide rational bases for
evaluating the results of various efforts put by different persons working at various levels of
the enterprise.

2. Single-Use Plans:

These plans are made for handling non-recurring problems. Single-use plans are also referred
to as ‘specific plans’ since these are meant to solve a particular problem. These plans are
formulated to handle non-repetitive and unique problem. These plans cannot be used again
and again; these become obsolete after achieving their purpose. The examples of these plans
are: projects, budgets, programmes.

Purpose or Mission:

The mission or purpose identifies the basic function or task of an enterprise. Every
organization has or should have a purpose so that its working becomes meaningful. The
purpose or mission is assigned to every organization by the society. The purpose of a
business is to produce and distribute goods or services, the purpose of public works
department is to construct and maintain roads, the purpose of courts is to interpret and apply
laws and so on. The purpose is a standing plan in a business organization which defines its
basic purpose in the light of which other actions are designed.

An organization’s purpose consists of a long term vision of what it seeks to do and the
reasons why it exists. The organization’s mission indicates exactly what activities the
organization intends to engage in now and in future.

The basic questions to be answered by an organization are:

(i) What business we are in?

(ii) What wall our business be?

(iii) Who are our customers?

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(iv) What are our values and beliefs?

(v) What will be our utility to the society? and so on.

Objectives:

Objectives or goals are the ends towards which every activity is aimed-they are the results to
be achieved. Objectives are a prerequisite for planning. No planning is possible without
setting up of objectives. While enterprise objectives are the basic plan of the firm, a
department may also have its own objectives. Though departmental objectives will contribute
to the attainment of enterprise objectives but the two sets of goals may entirely be different.
For example, the objective of the enterprise may be to earn a certain amount of profit, while
selling its products.

Enterprise objectives influence the management philosophy and practice. Objectives have
greater influence on the working of an organization. All other types of plans such as policies,
strategies, procedures, rules, budgets etc. assist in the attainment of stated enterprise
objectives in an economical and efficient manner. Objectives are related to the future and are
an essential part of the planning process.

Policies:

Policies are general statements or understandings which provide guidance in decision-making

to various managers. These are standing plans providing guidance to management in the
conduct of managerial operations. Policies define boundaries within which decisions can be
made and decisions are directed towards the achievement of objectives. Policies also help in
deciding issues before they become problems and making it unnecessary to analyze the same
situation every time it comes up. Managers can delegate authority within the given
parameters and can still retain control over what their subordinates do. In the words of
Koontz and Weihrich. “Policy is a means of encouraging discretion and initiative, but within
limits.”

Strategies:

The word ‘strategy’ has long been used in the content of military action plans. It was used to
state the grand plans made in the light of what it is believed an adversely might or might not
do. Managers now use strategies in the broader areas of business operations.
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A strategy is a comprehensive and integrated plan designed to assure that business objectives
are accomplished. The long term objectives of the enterprise are determined and requisite
resources are allocated and deployed to achieve the desired results. The purpose of strategies
is to determine a picture of the kind of enterprise that is envisaged. Strategies do not attempt
to outline the programmes for achieving objectives but they furnish a framework for guiding
thinking and action.

Procedures:

Procedures are details of action or the guidelines for the achievement of business objectives.
Procedures give details of how things are to be done. No room is left for judgment. These
should help in implementation of policies. Procedures also determine the policy of
responsibility and accountability. According to Terry, “A procedure is a series of related
tasks that make up the chronological sequence and the established way of performing the
work to be accomplished.”

Procedures should be distinguished from policies. A procedure is a guide to action whereas a

policy is a guide to thinking. Policies are guidelines for taking decisions and procedures
consist of various methods to accomplish each phase of work. Policies offer scope for
interpretation in order to see that they fit in a particular situation whereas procedures are
tailor made and do not offer any scope for interpretation.

A procedure is explained with the help of taking the case of purchasing raw materials for a
concern:

(i) Every department needing raw materials will send a purchase requisition to the purchase
department giving quantity specifications, type and quality materials required.

(ii) The purchase department will consolidate the requirements of various departments. A
combined order is prepared and sent to the suppliers. The purchase department maintains the
list of suppliers and regularly collects quotations from them. The copy of the purchase order
is also sent to the receiving and inspecting department.
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(iii) The receiving department compares the goods received with the order placed. Any
discrepancy in quantity, quality, etc. is reported to the purchase department.

If the goods are proper and according to the order then a report about it is submitted to the
purchase department.

(iv) After receiving a satisfactory report from receiving and inspecting department, purchase
department forwards the bill to accounting department for payment.

(v) Accounting department checks the bill and then makes the payment to the supplier.

Whenever a material purchase is needed then the same procedure is followed. Different tasks
require different procedures and they are followed in the same way.

Advantages of Procedures:

1. Basis of Control:

Procedures give a detail of sequences to be followed for completing a task. It can be seen
whether the work is proceeding according to the plan or not. Procedures are used as a control
mechanism because any discrepancy in completing the work can be determined at once.

2. Consistency:

Procedures help to ensure consistency and uniformity of performance. Once the procedures
are established, they can be similarly used again and again.

3. Standardization:

The standardization of procedures reduces the need for decision-making in similar situation.
Wherever a task is to be performed, the same procedure will be followed for doing it. This
increases efficiency in doing a work.

4. Co-ordination:

Procedures establish a sequence to be followed for each work. This helps in coordinating the
activities of different departments or sections because same procedures will be followed by
all of them.
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Limitations:

1. Rigidity:

Rigidity is followed in following procedures. They are continuously used over and over
again. This discourages initiative and discoveries.

2. Constant Review:

The same procedures cannot be followed for long terms. The changing situations necessitate
the review of procedures. To keep them effective they should be constantly updated. They
should be suitably adjusted to suit the present situation.

Rules:

A rule is a plan that lays down a required course of action with regard to a situation. A rule is
in the nature of a decision made by management regarding what is to be done and what is not
to be done in a particular situation. A rule is definite and rigid and allows no deviation or
discretion to the subordinates. Like procedures, rules do not prescribe a chronological
sequence of steps to be taken to achieve a given objective. A rule may or may not be a part of
the procedure. A rule such as ‘No smoking in the factory’ will not form a part of the
procedure. On the other, a rule to make payment within 21 days will be the part of a
procedure.

“Rules prescribe the limits of acceptable behaviour of the members of the organization. Rules
will enable managers to predict the behaviour of their subordinates, how will they act in a
given situation. Rules channel the behaviour of workers in a desired direction. Workers
sometimes resent rules for stifling their actions. The problem does not lie with the rules, but
the manner in which they are put to the workers. Management should try to frame only those
rules which are necessary and those too should also be explained properly to the employees.

Programmes:

A programme is a sequence of activities designed to implement policies and accomplish

objectives. It is devised to meet a particular situation. Programme may be taken as a
combination of policies, procedures, rules, budgets, task assignments, etc. developed for the
specific purpose of carrying out a particular course of action. Separate programmes are
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prepared for accomplishing different tasks. The same programme may not be used for
achieving other goals. It is a single use plan laid down for new and non-repetitive activities.

In the words of Koontz and O’Donnell, “Programmes are complexes of goals, policies,
procedures, rules, task assignment, steps to be taken, resources to be employed and other
elements necessary to carry out a given course of action.” To quote George Terry, “A
programme can be defined as a comprehensive plan that includes future use of different
resources in an integrated pattern and establishes a sequence of required actions and time
schedules for each in order to achieve the standard objectives.”

Characteristics of Programmes:

The following are the characteristics of programmes:

1. A programme is a single use comprehensive plan. It is formed to achieve a particular

purpose only. Once the goal is achieved the programme will not be used again.

2. A number of small plans are prepared to formulate a programme. The programme for
increasing sales by 20 per cent may require a number of small plans to be formed.

3. A programme is prepared to achieve organisational goals.

4. It gives a time limit up to which the programme is to be implemented. A strict time table is
fixed for doing a particular task.

5. A programme should ensure coordinated planning efforts.

Advantages of Programmes:

Following are the advantages of programmes:

1. Programmes lay down a course of action to be followed for achieving organisational goals.
The details of actions to be taken and time schedule to be followed are all decided in advance.
This enables smooth implementation of plans.

2. Programmes are helpful in creating better co-ordination in the organisation. The policies,
procedures, rules, budgets, etc. are in order to provide proper coordination.

3. The programmes are action-oriented plans and provide motivation to employees.

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Limitations of Programmes:

1. If the programmes are not carefully framed, there is a danger of their being failing. The
actions to be taken and the procedures to be followed may be properly selected. Such lapses
at the initial stage will make the programmes ineffective.

2. There is always a risk of inadequate co-ordination. In case various elements of

programmes like policies, procedures, rules, etc. are not balanced properly then the
programmes will not be properly coordinated.

3. The major programmes have a number of sub- programmes. All the sub-programmes
should be successfully carried out for completing the main programme. Any lapse in
implementing a small programme can endanger the whole exercise.

Budgets:

A budget is the monetary or/and quantitative expression of business plans and policies to be
pursued in the future period of time. The term budgeting is used for preparing budgets and
other procedures for planning, co-ordination and control of business enterprise.

According to Institute of Cost and Works Accountants, London, “A budget is a financial

statement and /or quantitative statement prepared prior to a defined period of time, of the
policy to be pursued during that period for the purpose of attaining a given objective.” In the
words of George R. Terry, “A budget is an estimate of future needs, arranged according to an
orderly bases, covering some or all of the activities of an enterprise for a definite period of
time.” In the words of Crown and Howard a budget has been defined as, “A pre-determined
statement of management policy during a given period which provides a standard for
comparison with the results actually achieved.”

Characteristics of Budget:

1. A budget should be based on past figures. The possibilities in future should also be taken
into account2. A budget be flexible so that it is modified according to the requirements of the
situation. Rigidity in budgets sometimes creates difficulties.

3. The persons at various levels should be involved in preparing a budget. This will help in
getting willing cooperation of everybody while implementing budgets.
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4. A budget should be a specific statement. The quantities or monetary information should be

clearly mentioned in a budget.

5. There should be an active involvement of top management while preparing a budget.

Need for Preparing Budgets:

Budgeting is essential for policy planning and control. The budgets are essential due to
following reasons:

1. Budgets are required for formulating future policies.

2. They are needed for ensuring co-ordination among various departments or segments of an
enterprise.

3. Budgets act as a tool of control in the hands of management. Budgets fixed for various
persons will be the criterion fixed for assessing performance.

4. Budgets act as motivation for various employees. When targets for performance are fixed
then persons will try to achieve them at the earliest. They have been given a goal for which
they should work.

Classification and Types of Budgets:

The budgets are usually classified according to their nature. The following are the types of
budgets which are commonly used.

A. Classification on the Basis of Time:

1. Long-term budgets.

2. Short-term budgets.

3. Current budgets.

B. Classification on the Basis of Functions:

1. Functional or Subsidiary Budget.

2. Master Budget.
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C. Classification on the Basis of Flexibility:

1. Fixed budget.

2. Flexible budget.

A. Classification According to Time:

1. Long-term Budgets:

The budgets are prepared to depict a long-term planning of the business. The period of long-
term budgets varies between five to ten years. The long-term planning is done by the top
level management; it is not generally known to lower level of management. Long-term
budgets are prepared for some sectors of the concern such as capital expenditure, research
and development, long-term finances, etc. These budgets are useful for those industries where
gestation period is long i.e. machinery, electricity, engineering, etc.

2. Short-term Budgets:

These budgets are generally for one or two years and are in the form of monetary terms. The
consumers goods industries like sugar, cotton, textile, etc. use short-term budgets.

3. Current Budgets:

The period of current budgets is generally of months and weeks. These budgets relate to the
current activities of the business. According to I.C.W.A., London. “Current budget is a
budget which is established for use over a short period of time and is related to current
conditions.”

B. Classification on the Basis of Functions:

1. Functional Budgets:

These budgets are related to different functions, the number of these budgets depends upon
the size and nature of the business.

The commonly used functional budgets are:

(a) Sales Budget.

(b) Production Budget including:

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(i) Raw material Budget

(ii) Labour Budget

(iii) Plant utilisation Budget.

(c) Purchase Budget.

(d) Cash Budget.

(e) Finance Budget.

2. Master Budget:

Various functional budgets are integrated into master budget. This budget is prepared by the
ultimate integration of separate functional budgets. According to I.C.W.A., London, “The
Master Budget is the summary budget incorporating its functional budget.” Master budget is
prepared by the budget office and it remains with the top level management. This budget is
used to co-ordinate the activities of various functional departments and is also helping as a
control device.

C. Classification on the Basis of Flexibility:

1. Fixed Budget:

The fixed budgets are prepared for a given level of activity, the budget is prepared before the
beginning of the financial year. If the financial year starts in January then the budget will be
prepared a month or two earlier i.e. November or December. The changes in expenditure
arising out of the anticipated changes will not be adjusted in the budget. There is a difference
of about twelve months in the budgeted and actual figures.

According to I.C.W.A., London, “Fixed budget is a budget which is designed to remain

unchanged irrespective of the level of activity actually attained.” Fixed budgets are suitable
under static conditions. If sales, expenses and costs can be forecasted with greater accuracy
then this budget can be advantageously used.
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2. Flexible Budget:

A flexible budget consists of a series of budgets for different levels of activity. It, therefore,
varies with the levels of activity attained. A flexible budget is prepared after taking into
consideration unforeseen changes in the conditions of the business. A fixed budget is defined
as a budget which by recognizing the difference between fixed, semi- fixed and variable cost
is designed to change in relation to the level of activity.

The flexible budgets will be useful where level of activity changes from time to time. When
the forecasting of demand is uncertain and the undertaking operates under conditions of
shortage of materials, labour, etc., then the budget will be more suited.

Advantages of Budgeting:

Budgets act as a tool in the hands of management. They help in improving the efficiency of
the business.

The following are some of the advantages of budgeting:

1. Improves Efficiency:

Budgeting helps in improving efficiency in the organization. Every person gets a target for
achievement. Since performance is evaluated against the targets given, employees try to
improve their efficiency.

2. Coordination:

The working of different departments and sectors is properly coordinated with the help of
budgeting. The budgets of different departments have a bearing on one another. The co-
operation of various executives and subordinates is necessary for achieving budgeted targets.

3. Economy:

The planning of expenditure will be systematic and there will be an economy in spending.
The finances will be put to optimum use. The benefits derived for the concern will ultimately
extended to industry and then to national economy.
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4. Consciousness among Employees:

Budgeting creates consciousness among employees. By fixing targets for the employees, they
are made conscious of their responsibility. Everybody knows what he is expected to do and
he continues with the work uninterrupted.

5. Time Bound:

The budgets are prepared for specific periods and the performance is judged at the end of
these periods. The results of employees’ working can be known after a specified time.

Primary plan of action is decided by preparing separate derivative plans for each

section or division of the enterprise.

Process of planning:

Following steps are taken in planning process:

1. Recognizing Need for Action:

The first step in planning process is the awareness of business opportunity and the need for
taking action. Present and future opportunities must be found so that planning may be
undertaken for them. The trend of economic situation should also be visualized. For example,
if thinking of the government is to develop rural areas as industrial centres, a farsighted
businessman will think of setting up units suitable to that environment and will avail the
facilities offered for this purpose. Before venturing into new areas the pros and cons of such
projects should be evaluated. A beginning should be made only after going through a detailed
analysis of the new opportunity.

2. Gathering Necessary Information:

Before actual planning is initiated relevant facts and figures are collected. All information
relating to operations of the business should be collected in detail. The type of customers to
be dealt with, the circumstances under which goods are to be provided, value of products to
the customers, etc. should be studied in detail. The facts and figures collected will help in
framing realistic plans.
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3. Laying Down Objectives:

Objectives are the goals which the management tries to achieve. The objectives are the end
products and all energies are diverted to achieve these goals. Goals are a thread which bind
the whole company. Planning starts with the determination of objectives. The tie between
planning and objectives helps employees to understand their duties. Objectives are the guides
of employees. It is essential that objectives should be properly formulated and communicated
to all members of the organization.

4. Determining Planning Premises:

Planning is always for uncertain future. Though nothing may be certain in the coming period
but still certain assumptions will have to be made for formulating plans. Forecasts are
essential for planning even if all may not prove correct. A forecast means the assumption of
future events. The behaviour of certain variables is forecasted for constituting planning
premises.

Forecasts will generally be made for the following:

(a) The expectation of demand for the products.

(b) The likely volume of production.

(c) The anticipation of costs and the likely prices at which products will be marketed.

(d) The supply of labour raw materials etc.

(e) The economic policies of the government.

(f) The changing pattern of consumer preferences.

(g) The impact of technological changes on production processes.

(h) The sources for supply of funds.

It is on the basis of these forecasts that planning is undertaken. The success or failure of
planning will depend upon the forecasts for various factors mentioned above. If the forecasts
are accurate then planning will also be reliable. The effect of various factors should be
carefully weighed.
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5. Examining Alternative Course of Action:

The next step in planning will be choosing the best course of action. There are a number of
ways of doing a thing. The planner should study all the alternatives and then a final selection
should be made. Best results will be achieved only when best way of doing a work is
selected. According to Koontz and O’Donnell, “There is seldom a plan made for which
reasonable alternatives do not exist.” All the pros and cons of methods should be weighed
before a final selection.

6. Evaluation of Action Patterns:

After choosing a course of action, the next step will be to make an evaluation of those courses
of actions. Evaluation will involve the study of performance of various actions. Various
factors will be weighed against each other. A course of action may be suitable but it may
involve huge investments and the other may involve less amount but it may not be very
profitable. The evaluation of various action patterns is essential for proper planning.

7. Determining Secondary Plans:

Once a main plan is formulated then a number of supportive plans are required. In fact
secondary plans are meant for the implementation of principal plan. For example, once
production plan is decided then a number of plans for procurement of raw materials, purchase
of plant and equipment, recruitment of personnel will be required. All secondary plans will be
a part of the main plan.

8. Implementation of Plans:

The last step in planning process is the implementation part. The planning should be put into
action so that business objectives may be achieved. The implementation will require
establishment of policies, procedures, standards and budgets. These tools will enable a better
implementation of plans.

Organising:

Organizing is a process of co-coordinating employee’s activities in an orderly manner. It is a

managerial job. It specifies how work or duties shall be divided among the departments in the
company, the policies to be followed while accomplishing the objectives, the scope and limits
of responsibilities and the relationship of one job to another etc.
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Organization defines the relationship between person to person, position to position, job to
job and so on. It specifies orderly communication between various levels of responsibilities.
It defines their authority and responsibility in a formal manner.

Definitions:

It is often define as, “A collective entity of people who continuously engaged in same activity
on a sustained basis to achieve an objective or objectives.”

According to Oliver Sheldon, “A person of so combining the work which individuals or

groups have to perform with facilities necessary for its execution that the duties to so perform
provide the best channel for the efficient, systematic, positive & co-ordinate application of
the available efforts.”

According to Chester Bernard, “Organization is a system of consciously coordinate

activity of two or more persons.”

Nature of Organising:

As a structure it established the relationship between various positions & jobs. This
relationship builds to attain common goals. It is a blue print of how management will link
functions & activities to be assigned & connected.

Elements of Organization

The organization structure has under gone changes according to the changes in the business.
However business recognizes the need for best organizational structure. So that they can
function smoothly & from that the elements of organization are established.

Three elements or primary task of organization.

1) Division of Work: -

Objectives of organization are determined then total efforts & necessary must be classified &
grouped. There should not be over lapping or duplication of work. Every one in the
organization will do a purposeful work for attainment of objectives for that manager has to
visualize the objectives. Division of total work is necessary so that these should not be extra
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burden on a single person. The enterprise can be divide according to function such as
production, selling, finance, advertisement, etc.

2) Authority: -

In organization there is superior subordinate relationship. Every superior needs authority. In

absence of authority directing becomes difficult. The subordinates have several
responsibilities in organisation. There is authority and responsibility structure so that various
positions are created.

3) Establishment of Relationship: -

In every organization structure there are different types of relationships. Such relationship
may be administrative or operative, vertical, horizontal, formal & informal. Some will be
working on the same authority level but most often at different levels of authority. This
relationship is established for carrying the work smoothly. Relationship denotes the rules for
team work in orderly sequence for attainment of objectives.

Features of Organising:

1. Organisation is man made. It consists of people, who have their own needs,

goals & values.

2. It is goal oriented & purposeful. Its goals or objectives may be different.

3. It has its owned identity, distinct from people associated with it. It has its own

form & function.

4. It is harmonized & managed by a specific group of people.

5. It is characterized by co-operative human nature. It involves skills in using of

resources & technology.

Three Organisation Theories: Classical, Neo-Classical and Modern Organisation Theory!

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1. Classical Organisation Theory:

The classical writers viewed organisation as a machine and human beings as components of
that machine. They were of the view that efficiency of the organisation can be increased by
making human beings efficient. Their emphasis was on specialisation and co-ordination of
activities. Most of the writers gave emphasis on efficiency at the top level and few at lower
levels of organisation. That is why this theory has given streams; scientific management and
administrative management. The scientific management group was mainly concerned with
the tasks to be performed at operative levels.

Henry Fayol studied for the first time the principles and functions of management. Some
authors like Gullick, Oliver Sheldon, Urwick viewed the problem where identification of
activities is necessary for achieving organisation goals. Grouping or departmentation was also
considered essential for making the functions effective. Since this theory revolves around
structure it is also called ‘structural theory of organisation.”

Pillars of Organisation Theory:

According to classical writers, the organisation theory is built around four key pillars division
of work, scalar and functional processes, structure and span of control.

(i) Division of Labour:

Division of labour implies that work must be divided to obtain specialisation with a view to
improve the performance of workers. The classical theory rests on the assumption that more a
particular job is broken into its simplest component parts, the more specialised a worker can
become in carrying out his part of the job.

The specialisation in workers will make the organisation efficient. Various activities of a job
are specified and subdivided into different components so that these may be assigned to
different persons. The workers will go on repeating their work under division of labour. The
performance of same work will help workers to improve their efficiency and the organisation
as a whole is benefitted by this exercise.

(ii) Scalar and Functional Process:

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The scalar process refers to the growth of chain of command, delegation of authority, unity of
command and obligation to report. It is called scalar process because it provides a scale or
grading of duties according to the degree of authority and responsibility. It generates
superior- subordinate relationship in the organisation. The functional process deals with the
division of organisation into specialised parts or departments and regrouping of the parts into
compatible units.

(ii) Structure:

It is the framework of formal relationships among various tasks, activities and people in the
organisation. The basic structural element in the classical theory is position. Each position is
assigned a specific task and authority is delegated for its accomplishment. The efficiency
with which these tasks will be accomplished will determine the effectiveness of the
organisation. The classical writers emphasised line and staff organisations.

(iv) Span of Control:

Te span of control means the number of subordinates a manager can control. Classical
thinkers specified numbers at different levels which can be effectively supervised by a
superior. A manager cannot exercise proper control if the number of subordinates increases
beyond a certain figure, on the other hand if the number is less then his capacity and
knowledge cannot be fully utilised.

Appraisal of Classical Theory:

The classical theory suffers from some restraints. Some of its drawbacks are given as follows:

1. Classical thinkers concentrated only on line and staff structures. They did not try to find
out the reasons if a particular structure is more effective than others.

2. This theory did not lay emphasis on decision-making processes.

3. Human behaviour was ignored in this theory. Classical thinkers did not realize the
complexity of human nature. They take human beings as inert instrument of organisation
performing the assigned task.
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4. The assumption that organisation in a closed system is unrealistic. Organisation is greatly

influenced by environment and vice-versa. A modern organisation is an open system which
has interaction with the environment.

2. Neo-Classical Organisation Theory:

The classical theory of organisation focussed main attention on physiological and mechanical
variables of organisational functioning. The testing of these variables did not show positive
results. The Hawthorne Studies conducted by George Elton Mayo and associates discovered
that real cause of human behaviour was somewhat more than mere physiological variables.
These studies focussed attention on human beings in the organisation.

New-classical approach is contained in two points:

(i) Organisational situation should be viewed in social, economic and technical terms, and

(ii) the social process of group behaviour can be understood in terms of clinical method
analogous to the doctor’s diagnosis of human organism.

This theory views formal and informal forms of organisation as important. The behavioural
approach followed in this theory is the other contribution of new-classical thinkers. The
pillars of classical theory viz. division of work, departmentation, co-ordination and human
behaviour were taken as given but these postulates were regarded as modified by people
acting independently or within the context of the informal organisation.

The main propositions of neo-classical theory are given as follows:

1. The organisation in general is a social system composed of numerous interacting parts.

2. Informal organisations exist within the formal organisation. Both are affected by and affect
each other.

3. Human being is independent and his behaviour can be predicted in terms of social factors
at work.

4. Motivation is a complex process. Many socio- psychological factors operate to motivate

human beings at work.
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5. A conflict between organisational and individual goals often exists. There is a need to
reconcile the goals of the individual with those of the organisation.

6. Team-work is essential for higher productivity.

7. Man’s approach is not always rational. Often, he behaves non- logically in terms of
rewards which he seeks from his work.

8. Communication is necessary as it carries information for the functioning of the

organisation and the feelings of the people at work.

Improvements over Classical Theory:

Neo-classical theory offers modifications and improvements over classical theory in some
aspects such as:

(i) Flat structure,

(ii) Decentralisation,

(iii) Informal organisations.

(i) Flat Structure:

The classical theory suggested tall structure whereas neo-classical theory suggested flat
structure. In tall structure there is a problem of communication because of differentiation
between decision makers and implementers, the levels of management are too many and
motivation of people is difficult. In case of flat structure the wide span of control helps in
motivation, chain of communication is shorter and it is free from hierarchical control.

(ii) Decentralisation:

Neo-classical theory advocates decentralised organisation which is close to flat structure

because of wider span of control. It allows autonomy and initiative at the lower level. It also
develops people to occupy higher positions in future.
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(iii) Informal Organisation:

The neo-classical theorists advocated the need for both formal and informal organisations.
Formal organisation represents the intentions of top management for the purpose of
interactions among the people. Informal organisation is necessary to plug the loop holes of
formal organisation and to satisfy the social and psychological needs of people.
Managements use informal organisation for overcoming resistance to change on the part of
workers and also for fast communication process. Both formal and informal organisations are
interdependent upon each other.

Appraisal of Neo-classical Organisation Theory:

This theory tries to overcome the shortcomings of classical organisation theory. It introduced
the concept of informal organisation and human behaviour approach in the study of
organisational functioning. However, it is also not free from various shortcomings. Scott
observes that, “like classical theory, neo-classical theory suffers from incompetency, a short-
sighted perspective and lack of integration among many facts of human behaviour studied by
it.”

The main criticism of this theory is as follows:

1. The assumptions on which this theory is based are sometimes not true. A thinking that
there is always a possibility of finding a solution acceptable to all is not true. There are
conflicting interests among various groups that are structural in character and not merely
psychological. This aspect has not been discussed in the theory.

2. No particular organisational structure can be suitable for all the organisations. Various
organisational formats given by neo- classists are not applicable in all situations.

3. Neo-classical theory is only a modification of classical organisation theory. It suffers from

nearly same drawbacks from which classical theory suffered. It lacks unified approach of
organisation. This theory has also been criticised on the ground that it is nothing more than “a
trifling body of empirical and descriptive information as it was mainly based on Hawthorne
Studies.”

3. Modern Organisation Theory:

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Modern organisation theory is of recent origin, having developed in early 1960’s. This theory
has tried to overcome the drawbacks of earlier theories. In the words of W.G. Scott, ‘The
distinctive qualities of modern organisation theory are its conceptual analytical base, its
reliance on empirical research data and, above all, its integrating nature. These qualities are
framed in a philosophy which accepts the premise that the only meaningful way to study
organisation is to study it as a system.” This theory may be understood in two approaches:
systems approach and contingency approach.

Systems Approach:

This approach studies the organisation in its totality. The mutually dependent variables are
properly analysed. Both internal and external variables are studied in analysing the nature of
organisation. Though this theory passes a much higher conceptual level as compared to
earlier theories but different writers have given varied views of the system.

Organisation as a system can well be understood by identifying various sub-systems within it.
Each sub-system may be identified by certain processes, roles, structures and norms of
conduct. Seiler has classified four components in an organisation, human inputs,
technological inputs, organisational inputs, and social structure and norms.

Katz and Kahu have identified five sub-systems of organisation:

(i) Technical sub-system concerned with the work that gets done;

(ii) Supportive sub-system of procurement, disposal and institutional relations;

(iii) Maintenance of sub-systems for tying people into their functional roles;

(iv) Adaptive sub-systems concerned with organisational change; and

(v) Managerial sub-systems for direction, adjudication and control of the many sub-systems
and the activities of the structure.

Contingency Approach:

Even though systems approach presents a better understanding of organisational and

managerial functioning but it does not provide solution for all types of organisational
structures. Systems approach offers models which may not suit every type of organisation. A
structure suitable for one unit may not be suitable for another.
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Contingency approach suggests an organisational design which suits a particular unit. A

structure will be suitable only if it is tailor made for an enterprise.

The influence of both internal and external factors should be considered while framing a
suitable organisational structure. This approach suggests that needs, requirements, situations
of a particular concern should be considered while designing an organisational structure.

The factors which influence an organisation may be described as:

(i) Environment

(ii) Technology

(iii) Size of operations

(iv) People.

These factors greatly influence a decision for the selection of an appropriate organisation for
an enterprise

TYPES OF ORGANIZATION

Internally every organization has to be divided into smaller groups called ‘Department or
Section’. Proper co-ordination has to be maintained between all of them. This makes possible
to attain organizational objectives by dividing the work among several individuals. For
smooth functioning formal organization plays an important role. It shows responsibility and
authority of each individual. For the convenience organization is designed in any of the
following way:

Line organization: -

This is the oldest & simplest type of formal organization in which authority flows downward
from highest level to the lowest level of the management. In the business, general manager
issues all instructions to various departmental heads. They pass these instructions to
supervisors & supervisors passed to the workers. Thus each member clearly knows from
whom he has to receive orders and to whom he can give orders. Joint Stock Company is the
best example of line organization.
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Advantages:

1) It is very simple to understand & easy to follow up: -

Every one working in this type is well aware of his own position. He knows his relationship
with his supervisor as well as his subordinate. It helps in maintaining good discipline.

2) Quick decision & prompt actions: -

Since every one knows the extent & limit of his authority as well as his responsibility, it helps
to take decision in time.

3) Fixed responsibility: -

The area of responsibility is fixed with each individual. This makes a person to alert in
performing his responsibilities & help in higher efficiency.

4) Flexibility: -

Line organization can be easily expanded as per the changes in the external environment or
internal conditions. Line structure helps the management either to add or delete from the
existing organization staff.

5) Less expensive: -

This type of organization requires persons of reasonable qualification & reasonable

experience with reasonable remuneration.

6) High moral: -

Line type helps in bushing moral of the employees in the organization. Their achievement &
success can be easily recognized. This helps to improve efficiency.

Limitations of Line Organization: -

1) Lack of service function: -

Line organisation does not get any help from staff. Large organizations have to face complex
problems. It is necessary to have expert advises from staff which has no scope in line
organisation.
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2) Rigidity: -

There is no scope for any change in the organisation structure for expansion or contraction.

3) Heavy burden on line executives: -

There are no separation of authority and responsibility and therefore line executives have to
perform all kinds of activities. It makes heavy burden on line staff.

4) Lack of communication: -

When line organisation expands beyond level it will lead to lack of communication within the
organisation, inefficiency, lack of co-ordination & difficulties in attainment of plans &
policies.

Functional organisation:-

In the functional organisation work is divided according to specific function. Every specialist
has authority to issue orders relating to specific functions of his\ department. Identical
function of various departments are grouped together & headed by specialist.

1) Routine Clerk: -

He is the person who determines the method of work. He is expert technician.

He determines complete lay out of work. E.g.: How raw material should be processed & in
what stages.

2) Instruction Card Clerk: -

This person implements work according to the plan prepared by routine clerk instructions are
prepaid in writing in advance. These instructions are prepaid for each job. This person has
close contacts with workers.

3) Time & Cost Clerk: -

This clerk has contact with routine clerk & instruction card clerk. He determines the schedule
for different types of jobs. He determines requirement of material for each job.

4) Disciplinarian: -
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This person is responsible for the maintenance of piece orders & discipline. His main job is to
see that workers attend work on time and that they complete their job within the scheduled
time.

5) Gang Boss: -

It is the person who comes directly in to contact with the workers. He is responsible for
implementation of the work i.e. making the workers work according to pre-determined
standards. He looks after the lay-out of machines. He arranges for machinery & tools.

6) Speed Boss: -

The main function of speed boss is to see how quickly & skilfully the work can be done. He
provides necessary instructions. He also gives demonstration on the machines. Speed boss is
regarded as instructor teacher for the workers.

7) Repair Boss: -

Repair boss is responsible for maintenance for machinery tools & equipment. There are
damages, depreciations, wear& tear of mechanical equipments. The main job of Repair Boss
is to keep all machineries & tools in working condition.

8) Inspector: -

This inspector carefully analyses & examines actual performance and compares it with
standard. He prepares report about performance of different workers on different jobs. He
rejects those jobs which are not up to standard.

Advantages of Functional Organisation: -

1) Benefits of minute specialization: -

When the area of operation of each foreman is decided on the basis of technical\ division of
labour all the advantages of specialization can be acquired, skill efficiency & knowledge in
specific job increases. It plays as motivating factor.

2) Benefits of expert’s knowledge: -

While preparing & determining policies expert services are taken. The plan becomes more
efficient. In this process expert’s knowledge talent and skill is utilized.
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3) Reduce pressure of duties: -

The work of superior & foreman is reduced because of specialization. There is not strain the
quality of supervision & control improved.

4) Staff Specialization: -

The advisory & executor staff specialized in the function of consultancy, staff officers,
specialize in specific person are appointed. Hence adequate training is provided. They can
share more responsibilities.

5) Large production possible: -

In the functional system there is high degree of flexibility. Thus specialization &
standardization can be brought.

6) Availability of supervisory staff: -

Depending upon the nature of functional specialization the organization can employ the
services of expert. The skill of employees can be increased by providing necessary training.

Disadvantages:

1) Over-lapping of Authority: -

Due to specialization these are disorders in the organisation. The authority of two expert
offices may be clash with each other.

2) Difficult in assigning responsibility: -

When many experts are responsible for doing job , responsibility can not be assigned to a
particular individual. This reduces efficiency.

3) Increasing cost: -

In this type there are many experts and specialists are involved, results into increase in cost
due to high salary. Such increase in cost is not favorable.

4) Useful only for big organisation: -

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Only big manufacturing unit can adopt functional organisation system. Only such
organisation can bear heavy cost of specialization.

5) Indiscipline due to lack of unity of command: -

Workers are instructed by many experts & they get confused. They can not decide as to what
priority is to be given. This creates many problems. So there is lack of co-operation.

Line & Staff Organisation: -

Line & staff organisation is combination of line organisation & staff organisation. In this type
the term line refers to ‘doors’. Staff refers to ‘thinkers’ these are parallel authorities. The line
authority is required to carry on day today function. The staff authority has advisory capacity.
They are specialist who undertake research & suggest the ways & means of improving the
performance of line executive. It is necessary to have co-operation & co-ordination between
these personnel. Line personnel are related to production & staff carries on research planning,

establishment of standards, recording of performance, legal advisor, etc. In this way not only
everyday work can be smoothly perform but by side improvement can also takes place.
However line & staff organisation becomes expensive. It involves high administrative cost.
Therefore it should be ensured that benefits derived from such authority should be more than
cost involved.

Characteristics of Line & Staff Organisation: -

When a business grows in size, it becomes necessary that the line officer should take the help
of expert for the investigation. It has following characteristics: -

1. Unity of command with specialization: -

Though these are expert line officer exercise, authority to bring on unity in decision and
action is essential.

2. Co-operation of line & staff officer: -

Staff officer helps line officer in making decision by providing help in the form of accurate
information. It will help in proper decision making to bring unity, coordination & effective
control.
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3. Expert services from administrator: -

In the modern complex world expert advice is essential which is not possible by line officer.
Staff officer help them in decision making. Line & staff meets the need of modern business.

Advantages: -

1) It reduces the burden of higher executives. The personal assistance relieve their superior &
save valuable time. This helps them to concentrate on most important function.

2) It makes available expert knowledge from various concerns.

3) It provides opportunity for training for specialist position. A person, who is allowed to
perform a particular task under the guidance of an expert in the field, will himself become an
expert after adequate experience

4) It makes possible unity of control. Line officers are responsible for end results and staff
activities are connected with their department. Unity of control and responsibility is
maintained at all levels.

5) It provides solutions to line problems. The staff specialist can undertake a problem arising
in the line organisation. They devote full skill and knowledge for analysis. Staff managers are
more important. They have current knowledge of market situation.

Limitations of line & staff organisation: -

1) It delays in decision making: -

A general rule is that the line manager must consult with staff specialist before finalizing
decision. It delays in decision making.

2) It allows shifting of responsibilities: -

When a line executive acting on the advice of an expert fails to achieve desired result, he will
blame to expert for wrong advice.

3) It creates conflict between line manager & staff specialist.

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4) There is no unity of command: -

In this organisation structure workers may receive commands from both [line &

staff]. It will lead to confusion.

5) Expensive: -

Experts generally have to be paid with high remuneration. This adds to the overhead
expansion.

6) The staff will be ineffective due to lack of authority.

7) Useful for big manufacturing units: - As cost of organization is more, it is suitable for
large scale organisation.

8) Extra importance given to advice by staff: - Line officers depend upon staff officer’s
advice. They loose their confidence & take advice from staff officer even in routine matters.

Matrix Organisation -

Matrix organisation is hybrid structure. It is the combination of two structure i.e. functional
department & project structure. Project team is created for specific project with high degree
of technical skill and functional structure is permanent characteristic of matrix organisation.
Matrix organisation has two dimensional structures. It is the combination of project structure
and traditional functional department. The project manager is responsible for the success of
particular project. He has authority over the members of project staff. Such project has
definite time duration. Matrix organisation is originated in defense & aerospace industries in
U.S.A.

Matrix organisation has been defined as ‘Any organisation that employees a multiple
command system, that include not only the multiple command structure & behaviour pattern.

Sometimes matrix & project structures are considered to be same. However there is
difference between these two. In project organisation the person who is the head of the
project is completely responsible for that project. Matrix organisation is applied when
organisation has large number of small projects and resources are diverted to other project.

In matrix organization project manager is appointed to co-ordinate the activities of project

personnel. Each functional staff has two bosses.
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Administrative head 2) Project manager

Advantages / Merits: -

1) Flexible & better response: -

It is the combination of traditional & project structure. So it can be easily changed according
to changes in marketing condition, technology etc. which is helpful for the progress of the
project. Effective information system helps to response quickly.

2) Motivation: -

The project staff is motivated as the members are focuses directly for the completion of
particular project. It helps to increase communication, coordination & co-operation.

3) Avoidance of duplication: -

Each project is assigned the physical resources and personnel as per the requirement &
duplication is avoided. Functional department provides support to project manager to balance
between time, cost & performance.

4) Proper environment for professionals: -

A proper environment helps the professionals to complete the job in time & make maximum
contribution. Maximum contribution helps decision making process smoothly & helps in
better control with proper chain

Disadvantages: -

1) Problem of co-ordination: -

Conflicts may arise between team members & functional heads. Working relationship is not
clearly balanced.

2) Complex organizational relationship: -

In matrix organisation, organizational relationship becomes very complex. Apart the formal
relationship, informal relationship will also arise, that will create the problem of co-
ordination.
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3) Conflicts & problems of co-ordination: -

The problem of co-ordination violates the principle of unity of command. Each employee has
two bosses 1) Functional 2) Project manager. Multiple flow of authority create problem of
co-ordination.

4) Low moral: -

The success or failure of functional group depends upon its performance in the project. This
may lead to emphasis on own group & on own function only. Therefore it will lead to
conflicts between functional groups.

5) Time consuming process: -

Matrix organization is time consuming it requires major organizational changes which may
give rise to number of problems. Re-organisation may lead to harm to the status and security
of he employee. It will lead to delay in decision.

6) Lack of clarity: -

In matrix organisation there is multiplicity of vertical and horizontal relationship. This will
lead to decrease in efficiency and increase in the cost of project.

7) Violation of scalar principle: -

The scalar principle is also violated as there is no proper balance between functional and
project manager. Working relationship is not clearly defined.

Committee organization:

A committee is a group of people who work collectively, discuss, decide and recommend
solutions to the problem (of a concern) which possibly cannot be solved by an individual. A
committee consists of a group of men conversant with a subject, naturally their advice will be
much superior to that of one man.

Principles :

1) The number of persons in a committee should depend upon the need and the optimum size
is about 5 to 10 person.
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2) Responsibility, authority, objectives and duties of the committee should be clear defined.

3) Agenda of the committee should be prepared and communicated to the committee

members at least a week before they meet for discussion.

4) Problems, which can be taken care of by an individual, should not be included in the
agenda of committee.

5) Committee meetings should begin and end on prefixed timing.

6) Problem not related to the subject matter at hand should not be discussed because it will
simply waste time.

7) The operation of the committee should be a co-operative development.

8) The recommendations made by the committee should be published and circulated to

interested and concern persons. The committee should take actions based upon its
recommendations.

9) A committee must be dissolved after its purpose is over.

Types of Committee :

1) A standing or permanent committee: It is needed in a complex organization experiencing

multifaceted problems almost all the times.

2) A temporary committee: It is formed to face and solve the problems arising occasionally.

3) The committee in control: It has full power to act and may assume a position that could be
managed by one individual.

4) The Co-ordination and discussion committee: It discusses problems and gives its advice. It
has no power to act.

5) The advisory committee: It explores various aspects of a problem and suggests courses of
actions to the concerned executive, there by helping him to reach the decisions for which he
is held responsible. The committee does not have power to act. Advisory committee is used
extensively in a business.
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6) The educational committee: It aids in getting information about company problems,

policies and projects to major individual concerned. It also gives an insight in to the ultimate
company.

Advantages :

1) A committee co-ordinate the efforts of the departments which are represented in

development of new products.

2) A committee often performs worth-while-tasks since two experts are better than one.

3) Committee is of special value in broad policy determination and rounding out plans.

4) A committee reduces the work load of management.

5) Committers are especially good at innovation or brain storming.

6) A committee helps securing co-operation of various persons.

7) A committee is effectively used to appoint persons to fill vacant positions in the enterprise.

8) Committee meetings may be called to train younger executives and to give them

an insight in to the operation of the business.

Disadvantages :

1) Sometimes it turns out to be true that what a committee finishes in a week, a good
individual complete in a day.

2) It may be said that committee operations are slow and committees tend to hang on for a
considerable time.

3) In a committee, no individual can be held responsible for anything.

4) Committee decisions represent generally a compromise positions and do not truly reflect
the real feelings of the individual committee or group members.

DEPARTMENTATION

Departmentation means grouping of activities into sections, departments, and higher

administrative units. Departmentation is the process of analyzing, diving and arranging work
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or activities into manageable portions for individuals, sections and departments.

Departmentation is an integral part of the overall process of organizing. It involves the
horizontal expansion of the organization. It creates smaller units of administration being
called as departments. A department is a work group combined together for performing
certain functions of similar nature. These departments may be called as sections, units,
branches and divisions.

Process of departmentation:

1) Identification of task: -

When scope of function is determine division into different department is easy.

2) Analysis of task: -

It helps in assessment of responsibility.

3) Description of function: -

Under this process, the different functions are to be performed by different individuals and
the groups.

4) To appoint head section: -

The head of the department is expert in the specific field. He supervises the work done by
groups.

5) Responsibility and authority -

The ultimate responsibility for the performance of whole department is with the departmental
head.

Bases of departmentation:

1. Departmentation by function: -

Every industrial undertaking is concerned with manufacturing and selling of commodities to

earn profit in every business. Primary function such as manufacturing, selling, finance,
remain same. Most of the big organizational units has department such as – sales, purchase,
finance, production, marketing, personnel etc. This is known as departmentation by function.
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Advantages: -

1) It helps in full utilization of available manpower it helps to reduce cost.

2) It helps in better control and fixing responsibilities of individual.

3) There can not be any overlapping between executor and advisory functions.

4) There is proper segregation of work in respect of each function.

5) This system does not set any limit on the path of the business.

2. Departmentation by location or territory: -

As the business enterprise grows & spread over the country, it becomes desirable to divide
some activities among branches away from main centre of operation. Manager take charge of
the activities & local factors ignored while taking decision. The territory means district, city
or state.

Advantages: -

1) Over cost of operation due to economy in transferred cost & favorable raw material prices.

2) Knowledge of local circumstances helps decision making.

3) It provides a good training for managers.

4) It assists in creation of customers’ goodwill by satisfy the needs of the local people.

Disadvantages:

Less of control and co-ordination by head office & duplication of activities.

3. Departmentation by product or service: -

Departmentation by product or service is setup for goods & services. It is adopted by large
scale organisation but can work efficiently in smaller one also. Top management can delegate
wide authority to a division or plant. This type of department has following advantages: -

1) It helps in specialization of man & machine.

2) Better co-ordination becomes possible & better services are given to customer.
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3) Management is given a wide responsibility.

4) Responsibility of profit may be fixed by setting standard.

4. Departmentation by customer: -

In these type of activities the group according to various type of customer. In sales
department, department may dealing with large and small customer or whole seller &
industrial buyer. The advantage of this method is satisfies various needs of customer & it
brings the benefit of customer. These disadvantages arise in co-ordination under utilization of
duplication of facility.

5. Departmentation by process: - In this type activities are grouped around the process for
type of equipment which can’t be made in economical, small units must therefore be costly &
specialized.

Process department has advantages: -

1) Similar type of equipment & labour are brought together & their use can be made
efficiently.

2) It is suitable for organisation manufacturing product which involved number of process.

3) Principle of specialization is followed with help of technical consideration.

Disadvantages: -

1) It does not give any opportunity for overall development of managerial talent as it does not
provide good training for manager.

2) It is difficult to compare performance of different processes.

3) It one department’s product is of inferior quality then the final product will be inferior.

6. Department by time: -

Here the activities are grouped on the basis of timing of their performance. E.g. Hospital
works in shifts.

Advantages: -
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1) Services can be rendered through out the day that is 24 hours.

2) The use of process can’t be interrupted & required of continuing cycle become possible.

3) Expensive capital equipment can be used for more than 8 hours.

Disadvantages: -

1) Supervision during a night shift may not be effective.

2) It is difficult for most people to switch from day shift to night shift.

3) Having several shift may creates problems in co-ordination & communication.

4) Payment of overtime rate will increase the cost of product.

SPAN OF MANAGEMENT

There is a limit to the number of persons or activities that a manager can effectively manage.
Span of management indicates the number of people who can be effectively managed by one
executive.

Span of management

Span of management refers to the number of subordinates for whose activities an executive
should be held responsible.

Definitions:

Manager’s span of control is a statement or expression or the limitation of the

number of subordinates or activities that he can manage properly.

Factors influencing the span of management:

1. time devoted to supervision

2. variety and importance of activities

3. repetitiveness of activities

4. capacity and experience of manager

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5. ability of subordinates

6. centralization

It is clear that there is a limit to the number of persons that can be supervised by one boss.
The span of control should be minimum as far as possible. The number of subordinates
depends upon manager’s ability, his job, the complexity of the duties of subordinates, the
nature and importance of the work to be supervised etc.

DELEGATION OF AUTHORITY

Meaning: -

Delegation of Authority means assigning the work to other & giving them authority. In
simple word delegation of authority is the process of dividing the job & trust on others.
Within the organisation delegation of authority become simple with the help of
departmentation & grouping of similar activities.

Definition: -

According to Luis Allen delegation is the instrument of responsibility & authority to another
and creation of accountability for performance.

Importance: -

As a business enterprise grows, a manager has to delegate part of his work to others in the
process of delegation. It helps the manager to free from routine work. It helps to develop the
ability of subordinate when the volume of work to be done

increases beyond the capacity of an individual with the help of delegation, duties are assigned
to individuals and authority can be passed forward. Without delegation existence of
organisation can not have any sense. It is a\ key to organisation. A manager after delegation
can not remain silent person. He still ultimately is liable to supervise the performance. That is
why he delegates authority along with duty but not whole responsibility.
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Elements of delegation :

1) Assignment of duties: -

There is a delegation of duties & responsibility, in the sense that superior indicates what he
wants from the sub-ordinates to do. The most important thing for the manager is to know
what to delegate & what not to delegate. The duties assigned to sub-ordinates can be
expressed in the term of functions or goals.

2) Granting authority: -

The subordinates must in addition to give the permission to do the work which is delegated to
him. In other words the subordinates must get certain rights, powers and responsibility which
is necessary for him to perform the job. He must be given proper and adequate authority in
relation to responsibility. E.g. Authority of withdrawal of cash.

3) Executing responsibility: -

The sub-ordinate to whom a particular task has been delegated must be made accountable for
the performance of his work. The sub-ordinates must be made accountable for success &
failure. When sub-ordinate accepts the work delegated to him must give promise to perform
this work according to the duty assigned to him.

Advantages: -

1) Delegation is effective function of an organisation. With effective delegation proper

relationships are establish in the organisation. It will lead to better cooperation and co-
ordination.

2) Delegation helps the enterprise to grow, expand and diversify activities.

3) Delegation helps the executive to concentrate on managerial function and relieving them
from routine work.

4) With proper delegation not only co-ordination is possible but control is made easier as
authority & responsibility is clearly defined.

5) This helps sub-ordinates to get confidence and develop their capability to undertake
change.
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Difficulties in delegation of authority: -

Delegation of authority involves transferring some responsibility to subordinates. It requires

proper skill and it involved granting of rights & authorities.

A] Reluctant / Refusal on the part of managers: -

1) Non better than ‘I’: -

I can do better myself; some executives feel that if they delegate their work, the subordinates
will not do it in a proper manner and ultimate responsibility rest on them.

2) The company can not do without me: -

The executive feels that he knows everything in fact he want other to know only about
routine work. He makes him sure that he can never be replaced.

3) Lack of ability to direct: -

This refers to incompetent superior. Some superiors do not have skill to direct properly.

4) Slave of old habits: -

It may be that a person has to be promoted to managerial position, such person as an old habit
making all the work by him.

5) Absence of control: -

The executive must have skill to control in difficulties in absence of this he hesitate to
delegate authority.

6) Reluctant to accept risk: -

Delegation involves decision making by subordinates. Delegation means a risk. Wrong

decisions may lead to non-attempt of goals. That is why only few executives are ready to
accept risk.

7) Conservative: -

Some executives are very conservative and they dislike the task of risk.

8) Lack of confidence in subordinates: -

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Executives feel that the subordinates are untrained, inefficient, uneducated & incapable of
doing the job.

9) Fear of subordinates: -

No supervisor wants his subordinate better than him. If the subordinate proves better than
him, may improve his own performance and will be replaced by subordinates.

B] Reluctant on the part of subordinate: -

It is not always the fact that superior alone is reluctant to delegate. But some times,
subordinates are not ready to accept the work delegated to them.

1) Spoon feeding habit: -

The subordinate usually depend on the boss for decisions. They do not want to make any
decision with out the help of the superior.

2) Fear of criticism: -

Subordinate may have superior who will always criticized him, abuse him whether he is good
or bad. This is the main obstacle in delegation.

3) Lack of self competition: -

The executive may be willing to delegate but subordinate do not have self confidence. This
will always try to avoid accepting any authority.

4) Lack of positive incentive: -

The delegated work may be over & above the routine work. This will lead to over burdening
for that sub-ordinate must be given positive incentive. This is not necessary that incentives
are always in the monetary term.

Remedies suggested for better delegation:

Delegation creates healthy relationship between superior & sub-ordinate. It depends upon the
capacity of superior & willingness of sub-ordinates.

In order to secure better and effective delegation following steps are

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suggested: -

1) Establishment of definite goals: -

The establishment of clear & definite goals helps sub-ordinates to know what exactly to
delegate. So this concept is very important.

2) Establishment of definite responsibility & authority: -

After the objectives are delegated & defined it is necessary to define authority &
responsibility clearly. This helps sub-ordinates to know what his job is and what is his
responsibility & authority.

3) Proper motivation: -

For effective delegation incentives must be given to the subordinates. Such incentives may be
monetary [higher wages, bonus etc.] or non-monetary incentives [appreciation, increment, job
satisfaction, participation in decision making.

4) Provide proper training: -

A sub-ordinate is expected to handle delegation of job as required by the superior. A superior

must properly train the sub-ordinates in this direction.

5) Providing proper guidance: -

Adequate information, records, facilities and equipments acts as guiding tools for the sub-
ordinate to do the delegated task.

6) Effective control: -

When superior delegates a part of his work he is not escaped from the responsibility. A
superior still remains answerable to his sub-ordinate. He must constantly follow up the job, if
any deviation in the standard, should be properly controlled.

7) Confidence in sub-ordinate: -

It is pre-requisite of effective delegation. A superior should never have any fear in his mind
that the sub-ordinate will replace by him. So that he must encourage the sub-ordinate means
he must have trust in sub-ordinate.
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8) Competent superior: -

A superior delegating a work must be competent in his job. Then only he will get respect
from his sub-ordinate. Under such a leader sub-ordinate will willingly accept the work to be
delegated.

CENTRALIZATION AND DECENTRALIZATION

Centralization and decentralization are the terms concerned with the authority or degree of
power withhold. Centralization and decentralization refer to the degree of delegation of

authority to lower level of management.

Centralization:

Centralization indicates minimum delegation. It indicates limited delegation and leads to

narrow span of control and tall structure of organization. It may be described as the tendency
to withhold the decision making power at higher levels of management.

In the centralization, decision making authority is concentrated in a few hands at the top
which results in better integration and co-ordination. More centralization is desirable when
top management wishes to exercise more direct control over organizational activities. In this,
communication channels are longer and are suitable when organization is small.

Decentralization:

Decentralization means extensive delegation. It means the delegation and distribution of

authority from the superior to lower levels. There is a dispersal of decision making authority.
It indicates flat organization structure. Decentralization is the systematic effort to delegate to
the lower levels, all authority except that which can be exercises at central points. In
decentralization, communication lines are shorter and span of control is wider. As
management levels are few, top executives are less burdened and so employees’ morale is
high.

When an organization is large and complex and where the work is not standardized or routine
decentralization is suitable. Complete decentralization is not possible because a manager
cannot delegate all his authority without surrendering his position as a manager whereas,
complete centralization is also not possible except in one man enterprise.
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Staffing: It’s Meaning, Nature and Importance!

Meaning of Staffing:

The term ‘Staffing’ relates to the recruitment, selection, development, training and
compensation of the managerial personnel. Staffing, like all other managerial functions, is the
duty which the apex management performs at all times. In a newly created enterprise, the
staffing would come as a. third step—next to planning and organizing—but in a going
enterprise the staffing process is continuous.

In order to define and clarify the group of employees included in the staffing concept, it must
be stated that the staffing function is concerned with the placement, growth and development
of all of those members of the organization whose function it is to get things done through
one effort of other individuals

This definition includes all levels of management because those who will occupy positions in
the top two or three levels of management fifteen or twenty years from now are likely to be
found in the lower levels today.

“The managerial function of staffing involves manning the organisational structure through
effective and proper selection, appraisal, and development of personnel to fill the roles
designed into the structure.” — Koontz and O’Donnell

Nature of Staffing:

Staffing is an integral part of human resource management. It facilitates procurement and

placement of right people on the right jobs.

The nature of staffing function is discussed below:

1. People Centred:

Staffing is people centred and is relevant in all types of organisations. It is concerned with all
categories of personnel from top to bottom of the organisation

The broad classification of personnel may be as follows:

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(i) Blue collar workers (i.e., those working on the machines and engaged in loading,
unloading etc.) and white collar workers (i.e., clerical employees).

(ii) Managerial and non-managerial personnel.

(iii) Professionals (such as Chartered Accountant, Company Secretary, Lawyer, etc.).

2. Responsibility of Every Manager

Staffing is a basic function of management. Every manager is continuously engaged in

performing the staffing function. He is actively associated with recruitment, selection,
training and appraisal of his subordinates. These activities are performed by the chief
executive, departmental managers and foremen in relation to their subordinates. Thus,
staffing is a pervasive function of management and is performed by the managers at all
levels.

It is the duty of every manager to perform the staffing activities such as selection, training,
performance appraisal and counseling of employees. In many enterprises. Personnel
Department is created to perform these activities.

But it does not mean that the managers at different levels are relieved of the responsibility
concerned with staffing. The Personnel Department is established to provide assistance to the
managers in performing their staffing function. Thus, every manager has to share the
responsibility of staffing.

3. Human Skills:

Staffing function is concerned with training and development of human resources. Every
manager should use human relations skill in providing guidance and training to the
subordinates. Human relations skills are also required in performance appraisal, transfer and
promotion of subordinates. If the staffing function is performed properly, the human relations
in the organisation will be cordial.

4. Continuous Function:

Staffing function is to be performed continuously. It is equally important in the established

organisations and the new organisations. In a new organisation, there has to be recruitment,
selection and training of personnel. In a running organisation, every manager is engaged in
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various staffing activities. He is to guide and train the workers and also evaluate their
performance on a continuous basis.

Importance of Staffing:

It is of utmost importance for the organisation that right kinds of people are employed. They
should be given adequate training so that wastage is minimum. They must also be induced to
show higher productivity and quality by offering them incentives

In fact, effective performance of the staff function is necessary to realize the following
benefits:

1. Efficient Performance of Other Functions:

Staffing is the key to the efficient performance of other functions of management. If an

organisation does not have competent personnel, it can’t perform planning, organisation and
control functions properly.

2. Effective Use of Technology and Other Resources:

It is the human factor that is instrumental in the effective utilisation of latest technology,
capital, material, etc. the management can ensure right kinds of personnel by performing the
staffing function.

3. Optimum Utilisation of Human Resources:

The wage bill of big concerns is quite high. They also spend money on recruitment, selection,
training and development of employees. In order to get the optimum output from the
personnel, the staffing function should be performed in an efficient manner.

4. Development of Human Capital:

The management is required to determine the manpower requirements well in advance. It has
also to train and develop the existing personnel for career advancement. This will meet the
requirements of the company in future.
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5. Motivation of Human Resources:

The behaviour of individuals is shaped by many factors such as education level, needs, socio-
cultural factors, etc. that is why, the human aspect of organisation has become very
important. The workers can be motivated through financial and non-financial incentives.

6. Building Higher Morale:

Right type of climate should be created for the workers to contribute to the achievement of
the organisational objectives. By performing the staffing function effectively, management
can show the significance it attaches to the personnel working in the enterprise. This will
increase the morale of the employees.

Directing:

Management is the art of getting things done through others. One of the main functions of a
manager is to direct subordinates effectively. Directing is concerned with carrying out the
desired plans. It initiates organized and planned action and ensures effective performance by
subordinates towards the accomplishment of group activities.

Direction is called management in action. In the words of Theo Haimann, “In order to make
any managerial decision really meaningful, it is necessary to convert it into effective action,
which the manager accomplishes by directing. Without this managerial function nothing or at
best very little is likely to come about.

Planning, organizing and staffing can be considered preparatory managerial functions the
purpose of controlling is to find out whether or not the goals are being achieved. The
connecting and actuating link between these functions is the managerial function of directing,
which means the issuance of directives and the guidance and overseeing of subordinates.”

“Just as starting the motor of a car does not make it move unless put into gear and the
accelerator pressed, in the same way organized actions are initiated in the enterprise only
through the directing function of management.

In order to clearly understand the meaning of directing function of management, a few

definitions are given as follows:
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Definitions:

“Directing concerns the total manner in which a manager influences the action of
subordinates. It is the final action of manager in getting others to act after all preparations
have been completed.” Massie

“Directing is the interpersonal aspect of managing by which subordinates are led to

understand and contribute effectively and efficiently to the attainment of enterprise’s
objectives.” Koontz and O’Donnel

“Directing is the guidance, the inspiration, the leadership of those men and women that
constitute the real core of the responsibilities of management.”

Urwick and Breach “Telling people what to do and seeing that they do it to the best of their
ability. It includes making assignment, explaining procedures, seeing that mistakes are
corrected, providing on the job instruction, and of course, issuing order.” Earnest Dale

“The heart of administration is the directing function which involves determining the course,
giving order and instructions, providing the dynamic leadership.”

Marshall E. Dimock “Directing consists of the process and techniques utilizing in issuing
instructions and making certain that operations are carried out as originally planned.”

Haimann remarks from the above definitions, we can conclude that the directing function of
management is the heart of management process as it is concerned with initiating action. It
consists of all those activities which are concerned with influencing, guiding or supervising
the subordinates in their job.

Nature or Characteristics of Direction:

The following features of direction bring out the nature of directing function of management:

1. It is a Dynamic Function:

Directing is a dynamic and continuing function. A manager has to continuously direct, guide,
motivate and lead his subordinates. With change in plans and organizational relationships, he
will have to change the methods and techniques to direction.

2. It Initiates Action:
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Directing initiates organized and planned action and ensures effective performance by
subordinates towards the accomplishment of group activities. It is regarded as the essence of
management-in-action.

3. It Provides Necessary Link between Various Managerial Functions:

Directing links the various managerial functions of planning, organizing, staffing and
controlling. Without directing the function of controlling will never arise and the other
preparatory functions of management will become meaningless. In the words of Haimann,
“nothing happens unless and until the business automobile is put into gear and the accelerator
pressed.”

4. It is a Universal Function:

Directing is a universal function that is performed in all organizations and at all the levels of
management. All managers have to guide, motivate, lead, supervise and communicate with
their subordinates, although more time is spent on directing at higher levels of management.

5. It is Concerned with Human Relationships:

The direction function of management deals with relationship between people working in an
organization. It creates cooperation and harmony among the members of the group. It seeks
to achieve orderly arrangement of group effort to provide unity of action in the pursuit of
common objectives

Principles of Effective Direction:

Effective direction leads to greater contribution of subordinates to organization goals. The

directing function of management can be effective only when certain well accepted principles
are followed.

The following are the basic principles of effective direction:

1. Harmony of Objectives:

It is an essential function of management to make the people realize the objectives of the
group and direct their efforts towards the achievement of their objectives. The interest of the
group must always prevail over individual interest. The principle implies harmony of
personal interest and common interest. Effective direction fosters the sense of belongingness
Managerial Functions

among all subordinates in such a way that they always identify themselves with the enterprise
and tune their goals with those of the enterprise.

2. Unity of Command:

This principle states that one person should receive orders from only one superior, in other
words, one person should be accountable to only one boss. If one person is under more than
one boss then there can be contradictory orders and the subordinate fails to understand whose
order to be followed. In the absence of unity of command, the authority is undermined,
discipline weakened, loyalty divided and confusion and delays are caused.

3. Unity of Direction:

To have effective direction, there should be one head and one plan for a group of activities
having the same objectives. In other words, each group of activities having the same
objectives must have one plan of action and must be under the control of one supervisor.

4. Direct Supervision:

The directing function of management becomes more effective if the superior maintains
direct personal contact with his subordinates. Direct supervision infuses a sense of
participation among subordinates that encourages them to put in their best to achieve the
organizational goals and develop an effective system of feed-back of information.

5. Participative or Democratic Management:

The function of directing becomes more effective if participative or democratic style of

management is followed. According to this principle, the superior must act according to the
mutual consent and the decisions reached after consulting the subordinates. It provides
necessary motivation to the workers by ensuring their participation and acceptance of work
methods.

6. Effective Communication:

To have effective direction, it is very essential to have an effective communication system

which provides for free flow of ideas, information, suggestions, complaints and grievances.

7. Follow-up:
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In order to make direction effective, a manager has to continuously direct, guide, motivate
and lead his subordinates. A manager has not only to issue orders and instructions but also to
follow-up the performance so as to ensure that work is being performed as desired. He should
intelligently oversee his subordinates at work and correct them whenever they go wrong.

Aspects or Elements of Direction:

Directing is a very important function of management. It is rightly called the heart of

management process as it is concerned with initiating action. It consists of all those activities
which are concerned with influencing, guiding or supervising the subordinates in their job.

The main aspects or elements of direction are as follows:

1. Issuing Orders and Instructions;

2. Leadership;

3. Communication;

4. Motivation;

5. Supervision; and

6. Co-ordination.

1. Issuing Orders and Instructions:

A manager is required to issue a number of orders to his subordinates to initiate, modify or

halt any action. He is also required to guide and instruct workers in performance of their task
towards the achievement of desired goals. Instructions are important in directing
subordinates. Orders and instructions reflect the decisions of managers.

A good order or instruction should have the following characteristics:

(a) It should be simple, unambiguous and clear.
(b) It should be brief but complete.
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(c) It should be reasonable and enforceable.

(d) It should be convincing and acceptable.
(e) It should invoke co-operation.
(f) It should be compatible with the objectives of the organization.
(g) It should “be in written form as far as possible.
(h) It should be backed up by follow-up action.
2. Leadership:
Leadership is “the process by which an executive or manager imaginatively directs/guides
and influences the work of others in choosing and attaining specified goals by mediating
between the individual and organization in such a manner that both will get maximum
satisfaction.” It is the ability to build up confidence and zeal among people and to create an
urge in them to be led. To be a successful leader a manager must process the qualities of
foresight, drive, initiative, self-confidence and personal integrity. Different situations may
demand different types of leadership viz., autocratic leadership, democratic leadership and
free-rein leadership.

Elements of Direction —The Management in Action:Elements of Direction

3. Communication:

Communication constitutes a very important element of directing. It is said to be the number

one problem of management today. Communication is the means by which the behaviour of
the subordinates is modified and change is effected in their action.

The word communication has been derived from the Latin word ‘Communis’ which means
‘common’. Thus, communication means sharing of ideas in common. The essence of
communication is getting the receiver and the sender tuned together for a particular message.
Communication refers to the exchange of ideas, feelings, emotions, knowledge and
information between two or more persons.

In management ideas, objectives, orders, appeals, observations, instructions, suggestions etc.

have to be exchanged among the managerial personnel and their subordinates operating at
different levels of the organization for the purpose of planning and executing the business
policies. Directing will mainly depend upon the effectiveness of communication. In case the
orders and instructions are not properly conveyed then these may not be properly
implemented.
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4. Motivation:

It is an important element of directing function. Motivation encourages persons to give their

best performance and help in reaching enterprise goals. It is the degree of readiness for
undertaking assigned task and doing it in the best possible way. Directing function tries to
make best use of various factors of production available in the organization. This can be
achieved only when employees cooperate in this task. Efforts should be made to make
employees contribute their maximum.

5. Supervision:

It consists of the process and technique involved in issuing instructions and confirming that
operations are carried as originally planned. Supervision is a continuing activity and
performed at every level of activity. It is inevitable at every level of management for putting
the managerial plans and policies into action. In a way supervision is a sort of control as the
supervisor is supposed to take corrective measures if the work is not in line with the plan.

6. Co-ordination:

Co-ordination is an orderly arrangement of group effort to provide unity of action in pursuit

of common purpose. The purpose of directing is to get various activities coordinated for
achieving common goals. Co-ordination involves the integration of various parts of the
organization. In order to achieve goals of an enterprise, both physical as well as mental co-
ordination should be secured. Co-ordination is a part of directing exercise and helps in
synchronization of various efforts.

Importance of Direction:

Directing various employees in an organization is an important managerial task. It is

indispensable for achieving enterprise objectives.

Effective direction provides the following advantages:

1. Initiates Action:

Direction is required to initiate action. The functions of planning, organizing, staffing etc.,
will be taken up only when direction is given to initiate them. Direction starts the actual work
for achieving enterprise objectives.
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2. Improves Efficiency:

A manager tries to get maximum work from his subordinates. This will be possible only
through motivation and leadership and these techniques are a part of direction.

3. Ensures Co-ordination:

Direction helps in ensuring mutual understanding and team work. The individual efforts are
directed in such a way that personal performances help in achieving enterprise objectives.
The integration of various activities is possible through direction.

4. Helpful in Implementing Changes:

A business operates in a changing environment. New situations develop every now and then.
A proper system of motivation will help employees in taking up new challenges.

5. Provides Stability:

Effective leadership, supervision and motivation will help in the smooth growth of an
enterprise. A growing concern will provide stability to its activities.

6. Motivation:

Motivation is an important element of direction. Motivation is a factor which encourages

persons to give their best performance and help in achieving enterprise goals. A strong
positive motivation will enable the increased output of employees. A key element in direction
is motivation. It helps in getting willing co-operation of employees. Every organisation
makes efforts that its employees contribute maximum for achieving enterprise goals.

7. Supervision:

Direction involves giving instructions to employees for undertaking some work. In order to
see whether employees are doing the things as per targets or not there is a need for
supervision. In supervision all the activities of the employees are controlled and efforts are
made to ensure proper achievement of targets. In case the performance is less than the targets
then remedial steps are taken for improving the performance. So supervision is an integral
part of direction.
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8. Co-ordination:

Direction will be effective only when there is a proper co-ordination. In direction, different
persons are asked to perform specific tasks. In order to see that efforts of every employee are
in the direction of achieving organizational goals there is a need to co-ordinate various
activities. In the absence of co-ordination every person will go in his own direction without
bothering for the enterprise target. When various activities are co-originated then overall
enterprise objectives will be easily achieved.

Techniques of Directing:

Directing is an important function carried out by top management. It is the order or

instruction to subordinate staff to perform a work or not to perform in a specific way. The
techniques of directing are: delegation, supervision, orders and instructions.

(i) Delegation:

Delegation is an important mean of directing. The subordinates are assigned tasks and given
powers to recruit them. In delegation, a superior assigns some of his work to the subordinates
and gives them rights or powers. The subordinates are authorized to undertake the assigned
work. Delegation is a means of sharing authority with the subordinates and providing them
with an opportunity to learn. Delegation as a means of directing may bring out some
problems.

(a) It may be difficult to spell out exact tasks and assignments of the subordinates. There may
be some overlapping and uncertainties in job descript ions. The subordinates should learn to
adjust them in such situations.

(b) There may be some contradiction in assignment of task and delegation of authority.

(c) The subordinates may sometimes act beyond the assigned authority taking it as implied
from the superiors. The superiors will have to bear with such situations.

(d) An indiscriminate delegation may create an imbalance in the organization since every
subordinate may not have the same capacity and maturity.

(e) If the delegation of authority is too rigid then it kills initiative and creativity.
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(ii) Supervision:

Supervision is a means to oversee the work performed by subordinates. It should be ensured

that work is performed as per the plans and guidelines. Every superior has to supervise the
work of his subordinates. At operative level supervision is the job of a manager. A supervisor
at the lower level remains in touch with the workers. He guides them for doing the work,
maintains discipline and work standards and solves the grievances of workers. Supervision at
different levels acts as a directing activity.

(iii) Issuing Orders and Instructions:

The issuing of orders and instructions is essential to undertake the work for achieving the
organizational goals. No manager can get a work done without issuing orders and instructions
to subordinates. An order, instruction, directing or command is a means of initiating,
modifying or stopping an activity. In the words of Koontz and O’Donnel has a directional
technique, an instruction is understood to be a charge (command) by a superior requiring a
subordinate to act or refrain from acting in a given circumstance.

According to this definition an instruction is always given by a superior to a subordinate

directing to undertake a work in a specified manner or prohibit him from some activity. The
orders and instructions are the primary tools of directing by means of which the activities are
started, altered, guided and terminated. While issuing an order a manager should be clear in
his mind what he wants the subordinates to do or not to do. The clarity of orders will
determine the level of performance of subordinates.

A good order has the following characteristics:

(a) The order should be clear and easily understood.

(b) The order should be complete in all respects. It should not create doubts in the minds of
subordinates.

(c) It should be compatible with the objectives of the organisation.

(d) There should be specific instructions as to the time by which the order should be executed
or completed.
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(e) The order should be so conveyed that it stimulates ready acceptance.

(f) The order should preferably be in writing.

(g) The order should be conveyed through proper chain of command and it should also
contain the reasons for issuing it.

Coordinating:

Meaning of Co-ordination:

Co-ordination is very essential in management. Business has various functions. These

functions are performed by different individuals.

Moreover, performance of these functions requires division of work and grouping of

activities and making decisions at different levels.

In an organisation, a number of persons work and every individual work is related with
others. Since all persons in the organisation contribute to the same end result, their
contributions should be maximum. Therefore, it is the task of the manager to put together all
the group efforts of the enterprise, and harmonies them carefully so as to give them
commonness of purpose.

This managerial function is known as ‘co-ordination’. He is to ensure that everybody in the

organisation understands the main objectives of the enterprise and works towards their
fulfillment in active co-operation with others. Co-ordination is like the team spirit of a
football match or the harmonious symphony of an orchestra.

In a football match, the individual players may be good at games and may put forth their best
efforts to win the match. But unless there is team spirit and co-operative efforts, the game
may not be won. Similarly, in an orchestra, everyone may be excellent instrumentalists, but
their individual work may take the turn of a disorder, if they are allowed to play on their
instruments independently.

It is the duty of the captain of the team and the conductor of the orchestra group to maintain
team spirit and unity of action for perfect harmony. So the function of co-ordination is also to
maintain this unity of action among the workers in order to realise the business objectives.
Managerial Functions

Co-ordination eliminates conflict between the head office and branches as well as between
departments of an organisation and removes difficulty in communication. Instead of
regarding co-ordination as a separate function of management, it must be considered as the
essence of management.

Features of Co-ordination:

The principal features of co-ordination may be stated as follows:

1. Co-ordination is concerned with the integration of group efforts and not individual
effort:

It involves the orderly arrangement of the activities of a group of people. However,

individual performance is related to the group performance. Co-ordination makes the
individual efforts integrated with the total process.

2. Co-ordination is the concerted efforts of requisite quality and quantity given at the
proper time:

In other words, co-ordination denotes co-operation i.e. collective efforts, plus time element
and direction element. According to Haimann : “Co-ordination is the orderly synchronization
of efforts of the subordinates to provide the proper amount, timing and quality of execution
so that their unified efforts lead to the stated objective, namely the common purpose of the
enterprise.”

3. Co-ordination is a continuous and dynamic process:

It is a continuous concept in the sense that it is achieved through the performance of

functions. And it is dynamic in nature because the functions themselves are dynamic and may
change over the period of time.

4. Co-ordination has three important elements, namely, balancing, timing and

integrating:

Co-ordination of different activities becomes possible only when different duties are
performed in the right time and in the right quantity. As for example, if the purchase
department of an enterprise buys the required raw material in right time and in right quantity
and supplies them to the production department, the production department produces the
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commodities in right time and in proper quantity; and the sales department of the enterprise
can execute the order placed by a customer within the specified time.

5. The task of co-ordination and co-operation do not mean the same thing:

Cooperation simply means that two or more persons are associated voluntarily in the
performance of some work through collective efforts. But it has no bearing with time, amount
and direction-dimensions in group efforts. In contrast, co-ordination implies application of
requisite amount of group efforts in the right time at the right direction through deliberate
executive action.

6. Co-ordination is the responsibility of every manager:

Co-ordination is the responsibility of every manager in the organisation, because he tries to

synchronize the efforts of his subordinates with others.

7. Co-ordination may be internal or external:

Co-ordination, as a blending factor of all activities and efforts, is to be exercised both within
and outside the enterprise. That is to say, co-ordination may be internal and external. Internal
co-ordination means the co-ordination of activities between the employees, between the
departments and managers at different levels inside the enterprise.

8. Co-ordination may be horizontal and vertical:

Horizontal co-ordination refers to co-ordination between the horizontal departments of the

same level in the managerial hierarchy. For example, co-ordination is necessary between the
sales manager, works manager, finance manager and the buyer, so that when the sales
department is ready to sell the new product, the production department will be in a position to
fill the orders; and the financial arrangements have been made so that the necessary funds are
available to have the suitable raw material and other factors.

On the other hand, vertical co-ordination takes place between the various links of the
different levels of the organisation. For example, take the case of production department
where we have the works manager and under him the superintendent and then the foreman,
and, lastly, the workmen.

Importance or Necessity of Co-ordination:

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Co-ordination is regarded nowadays as the essence of management function. Need for co-
ordination arises out of the fact that different elements and efforts of an organisation are to be
harmonized and unified to achieve the common objectives. Without proper coordination
among all the members of a group, management cannot bring together the diverse elements
into one harmonious whole.

Its significance can be indicated by pointing out its importance or necessity in the following
points:

1. Co-ordination is necessary to ensure harmonious and smooth working of an

enterprise with its several departments, divisions or subdivisions:

For example, to ensure harmonious functioning of an organisation, it is essential that the

functions of purchasing, production and sales departments are co-ordinated. If the sales
manager procures a huge order to be executed within a specified time, without reference to
the production manager and the purchasing manager, it may turn out that the goods cannot be
produced in quantities ordered within the specified time.

2. Co-ordination ensures unity in direction in the midst of diversified activities:

By bringing together the different divisions and parts into oneness of the enterprise, co-
ordination enables the management authority to see the enterprise as one unified whole from
its different segments. So, co-ordination is necessary to link the functions of different
departments, divisions, sections and the like together and assure their contribution to total
result.

3. Co-ordination removes the conflict between personal interest of the employees and
general interest of the organization:

Individuals join the organisation to fulfill their needs. Many times, these needs may be
different from the group needs and goals. In such situations, organisational and individual
goals are not fully achieved. More the number of individuals in an organisation, the higher
will be the degree of such incompatibility.

It is essential for the organisational efficiency that both these goals are brought to a level of
conformity and the managers tries to integrate the individual and group goals through co-
ordination.
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4. Co-ordination can produce something greater out of the collective efforts of the
individuals:

Properly co-ordinated group efforts achieve a greater result than what is possible from the
isolated efforts of the individuals.

5. Co-ordination provides a balance between the people of different capacities and

abilities:

It compensates the shortcomings of one by the strength of the other.

6. Co-ordination reconciles the impact of internal and external forces in the

organisation and ensures smooth running of affairs:

Internally, it combines the various resources of the business—money, materials, machinery

and methods—for the attainment of common goals of the organisation. Externally, the
environment is made more favourable to the business by giving due consideration to
customers, employees, financiers and the government. In this manner, co-ordination helps in
producing better results and becomes the essence of management.

7. Co-ordination ensures voluntary co-operation of the different members of the group:

Besides simplification of the organisation process, co-ordination harmonizes and integrates

the different programmes and policies of the business. Well-planned methods of co-
ordination not only strengthen supervision but ensures voluntary co-operation of the different
members of the group.

8. Co-ordination is a basic element in all effective organisations and is said to be the first
principle in organization:

It makes planning more purposeful, organisation more well-knit and control more regulated.

Principles of Co-ordination:

For achieving effective co-ordination, the following fundamental principles are to be

followed:

1. Direct Contact:
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Co-ordination should be attained by direct contact with the parties concerned. Direct personal
communications bring about agreement on methods, actions and ultimate achievement. It also
eliminates red-tapeism and ensures prompt action. Direct contact is an effective means of co-
ordination.

2. Early Beginning:

Co-ordination can be achieved more readily at the initial stages of planning and policy-
making. Therefore, direct contact must begin in the very early stages of the process. If an
order for the supply of a particular goods has been booked and the raw materials to produce
them are not available, there will be trouble.

Contact among the purchasing manager, production manager and sales manager at art early
Stage would have made it possible to know whether the order could be executed.

3. Continuity:

Co-ordination must be maintained as a continuous process. It starts from planning and ends
when the objective is accomplished. Whenever there is division and distribution of functions
among the managers and departments, co-ordination is necessary. Every time a new situation
arises, a fresh effort of co-ordination is needed. So, the manager must constantly work at it
until the purpose is served.

4. Reciprocal Relationship:

Co-ordination should be regarded as a reciprocal relating to all factors in a situation, viz.

production, sales, finance, men, and management. For example, when ‘P’ works with ‘Q’ and
‘Q’ in turn, works with ‘R’ and ‘S’ each of the four finds himself influenced by the others.

5. Pervasiveness:

Co-ordination is an all-embracing activity in every management function. It is required in all

the activities at every level of the organisation. It is to be exercised both within and outside
the organisation.

6. Leadership:
Managerial Functions

Leadership is the most effective instrument of co-ordination. A leader in a group is the

coordinator of the group activities. He harmonizes all efforts of persons in the group. A
manager does not himself produce anything nor does he sell anything in the market.

He gets the commodities produced by the workers and gets them sold in the market by the
salesmen. In fact, he provides leadership and co-ordinates various functions.

7. Timing:

Timing is an important element of co-ordination. This principle points out that all functions
in the enterprise are to be done at the same time and at the same speed. If the purchase
department purchases and supplies materials timely to the production department, and if the
production is done timely, then the sales department can deliver the commodities to the
customers within the scheduled time.

8. Balancing:

This principle refers to the quantitative element of co-ordination. It means that all works are
to be done in right quantity. For instance, if a department produces half, another one-third and
the third the full quantity, their activities cannot be balanced. They have to perform their job
in right quantity for achieving co-ordination of their jobs.

9. Integrating:

All activities, decisions and opinions are to be integrated to achieve the enterprise objective.

For integration what is necessary is that all men and departments must perform their jobs at
the right time. For example, if all the parts of a machine are manufactured by the different
departments at the right time, they can be assembled within the specific time. Assembling the
parts of the machine is a coordinating function.

Techniques of Effective Co-ordination:

The following measures or techniques have to be adopted in practice as tools for securing
better co-ordination in the working of an organisation:

1. Simplified Organisation:
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In large organisations, there is a tendency towards over- specialisation. The organisation gets
divided into a whole series of units each one of which concentrates just on its own task. In
fact, each unit tends to be bureaucratic and its activities become ends in themselves instead of
being means to the overall ends of the organisation.

2. Harmonized Programmes and Policies:

The ideal time to bring about co-ordination is at the planning stage. The plans prepared by
different individuals or divisions should be checked up to ensure that they all fit together into
an integrated and balanced whole. The coordinating executive must ensure that all the plans
add up to a unified programme.

3. Well-designed Methods of Communication:

Good communication brings about proper co-ordination and helps the members of a business
organisation to work together. Flow of communication in all directions will facilitate co-
ordination and smooth working of the enterprise. The use of formal tools like orders, reports
and working papers, and informal devices like the grapevine will provide adequate
information to all concerned.

4. Special Coordinators:

Generally, in big organisations, special coordinators are appointed. They normally work in
staff capacity to facilitate the working of the main managers. A co-ordination cell may also
be created. The basic responsibility of the cell is to collect the relevant information and to
send this to various heads of sections or departments so that inter-departmental work and
relationship are co-ordinated.

5. Co-ordination by Committees:

Co-ordination in management by committees is achieved through meetings and conferences.

Sometimes different committees are appointed to look after different areas of management,
namely, Purchase Committee, Production Committee, Sales Committee, Finance Committee,
etc. These committees take the group decision by exchanging their views and ideas and so it
has coordinating elements.

6. Group Discussion:
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Group discussion is the other tool for co-ordination. It provides opportunities for free and
opens exchange of views and inter-change of ideas, problems, proposals and solutions. Face-
to-face communication enables the members to attain improved understanding of
organisation-wide matters and leads to better co-ordination.

7. Voluntary Co-ordination:

In ideal conditions, co-ordination should take place through voluntary co-operation of the
members. The basic principle of voluntary coordination is the modification of functioning of
a department in such a way that each department co-ordinates with other departments.

Each department or section or individual affects others and is also affected by others.
Therefore, if those departments, sections or individuals apply a method of working which
facilitates others, voluntary co-ordination is achieved. This can be done by horizontal
communication.

8. Co-ordination through Supervision:

The supervising executives have an important part to play in coordinating the work of their
subordinates. Where the work-load of an executive is so heavy that he cannot find adequate
time for co-ordination, staff assistants may be employed. They may recommend to the senior
official the action that he may take for ensuring co-ordination.

Control:
Definition:

George R. Terry:

“Controlling is determining what is being accomplished that is evaluating the performance

and, if necessary, applying corrected measures so that the performance takes place according
to plans.” In Terry’s view, controlling helps in proper implementing of plans. If the plans are
not progressing at a proper pace than necessary measures are taken to set the things right.
Controlling is a channel through which plans may be properly implemented.

Robert N. Anthony:
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“Management Control is the process by which managers assure that resources are obtained
and used effectively and efficiently in the accomplishment of an organization’s objectives.”
Control is a tool in the hands of management for ensuring better utilization of resources.
Anthony even goes to the extent of saying that control even ensures the arrangement of
required resources.

Earnest Dale:

“The modern concept of control envisages a system that not only provides a historical record
of what has happened to the business as a whole but pin-points the reason why it has
happened and provides data that enables the chief executive or the departmental head to take
corrective steps if he finds he is on the wrong track.” Dale has enlarged the scope of control
by saying that it helps in finding out the reasons for low performance and then suggesting the
ways of improving it. It also gives information to the top executives to assess their
performance and then take corrective measures if necessary.

Characteristics of Control:

From the discussion of above given definitions, following inferences may be drawn:

1. Managerial Function:

Control is one of the managerial functions. It is not only the function of chief
executive but is the duty of every manager. A manager is responsible for whatever work is
assigned to him. He will control the performance of his subordinates for ensuring the
accomplishment of goals. Control is mainly the function of line organization but manager
may ask for data from staff personnel.

2. Forward Looking:

Control is forward looking. Past is already gone thus, cannot be controlled. Measures can be
devised to control future activities only. Past provides a base for determining controls for
future. The manager will study the past performance in order to find out the reasons for low
results. A corrective action will be taken to ensure that work in future is not adversely
affected. Take for example, production for a particular month is low than the standard.
Manager will not be able to do anything about the past performance. However, he may study
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the reasons for low production. He should take appropriate steps so that the same mistakes
are not repeated and production will not suffer in future.

3. Continuous Activity:

Control is regularly exercised. It is not an activity in isolation. The manager will have to see
that his subordinates perform according to plans at all the time. Once the control is withdrawn
it will adversely affect the work. So control will have to be exercised continuously.

4. Control is Related to Planning:

Planning is the first function of management while control is the last. Control cannot be
exercised without planning. First the objectives are set and then efforts are made to see
whether these are accomplished or not. Whenever there is a laxity in performance or things
are not happening as per the plans then corrective measures are taken immediately. So
planning provides a base for controlling.

5. Essence of Control is Action:

Whenever performance is not as per the standards the immediate action is needed to correct
the things. The purpose of control will be defeated if corrective action is not taken
immediately. If the sales are less than the standard set for marketing department then steps
will be taken to ensure that performance is not low in future. If no such steps are taken then
there will be a lack of control. In practice, immediate action is the essence of control.

Importance of Control:

The control function helps management in various ways. It guides the ‘management in
achieving pre-determined goals. The efficiency of various functions is also ensured by the
control process. The shortcomings in various fields are also reported for taking corrective
measures.

The following are some of the advantages of control system:

1. Basis for Future Action:

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Control provides basis for future action. The continuous flow of information about projects
keeps the long range planning on the right track. It helps in taking corrective action in future
if the performance is not up to the mark. It also enables management to avoid repetition of
past mistakes.

2. Facilitates Decision-making:

Whenever there is deviation between standard and actual performance the controls will help
in deciding the future course of action. A decision about follow up action is also facilitated.

3. Facilitates Decentralization:

Decentralization of authority is necessary in big enterprise. The management cannot delegate

authority without ensuring proper controls. The targets or goals of various departments are
used as a control technique. If the work is going on satisfactorily then top management
should not worry. The ‘management by exception’ enables top management to concentrate on
policy formulation. Various control techniques like budgeting, cost control, pre action
approvals allow decentralization without losing control over activities.

4. Facilitates Co-ordination:

Control helps in coordination of activities through unity of action. Every manager will try to
co-ordinate the activities of his subordinates in order to achieve departmental goals.
Similarly, chief executive will co-ordinate the functioning of various departments. The
controls will act as checks on the performance and proper results will be achieved only when
activities are coordinated.

5. Helps in Improving Efficiency:

The control system helps in improving organizational efficiency. Various control devices act
as motivators to managers. The performance of every person is regularly monitored and any
deficiency is corrected at the earliest.

6. Psychological Pressure:

Controls put psychological pressure on persons in the organization. Everybody knows that his
performance is regularly evaluated and he will try to improve upon his previous work. The
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rewards and punishments are also linked with performance. The employees will always be
under pressure to improve upon their work. Since performance measurement is one of the
important tools of control it ensures that every person tries to maximize his contribution.

Limitations of Control:

Though control is essential for better performance and maintenance of good standards, there
are certain limitations also.

Some of the limitations are discussed as such:

1. Influence of External Factors:

There may be an effective control system but external factors which are not in the ambit of
management may have adverse effect on the working. These factors may be government
policy, technological changes, change in fashion, etc. The influence of these factors cannot be
checked by the control system in the organization.

2. Expensive:

The control system involves huge expenditure on its exercise. The performance of each and
every person in the organization will have to be measured and reported to higher authorities.
This requires a number of persons to be employed for this purpose. If the performance cannot
be quantitatively measured then it will be observed by the superiors. The exercise of control
requires both time and effort.

3. Lack of Satisfactory Standards:

The performance of certain activities involving human behaviour cannot be fixed in terms of
quantities. It is difficult to fix standards for activities like public relations, management
development, human relations, research, etc. The evaluation of work of persons engaged in
these activities will be difficult.

4. Opposition from Subordinates:

The effectiveness of control process will depend upon its acceptability by subordinates. Since
control interferes with the individual actions and thinking of subordinates they will oppose it.
It may also increase the pressure of work on subordinates because their performance is
Managerial Functions

regularly monitored and evaluated. These factors are responsible for the opposition of
controls by subordinates.

Concept of Control:

The term control has different connotations depending upon the context of the use of the
term. In manufacturing it refers to a Device or mechanism installed or instituted to guide or
regulates the activities or operation of an apparatus, machine, person, or system; in law it
refers to controlling interest and in management as an authority to order and manage the
workings and management of an entity.

Control is a management process to aim at achieving defined goals within an established

timetable, and comprises of three components: (1) setting standards, (2) measuring actual
performance, and (3) taking corrective action.

Characteristics of Control:

Following characteristics of control can be identified:

1. Control is a Managerial Process:

Management process comprises of five functions, viz., planning, organizing, staffing,

directing and controlling. Thus, control is part of the process of management.

2. Control is forward looking:

Whatever has happened has happened, and the manager can take corrective action only of the
future operations. Past is relevant to suggest what has gone wrong and how to correct the
future.

3. Control exists at each level of Organization:

Anyone who is a manager, has to involve into control – may be Chairman, Managing
Director, CEO, Departmental head, or first line manager. However, at every level the control
will differ – top management would be involved in strategic control, middle management into
tactical control and lower level into operational control.

4. Control is a Continuous Process:

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Controlling is not the last function of management but it is a continuous process. Control is
not a one-time activity, but a continuous process. The process of setting the standards needs
constant analysis and revision depending upon external forces, plans, and internal
performance.

5. Control is closely linked with Planning:

Planning and controlling are closely linked. The two are rightly called as ‘Siamese twins’ of
management. “Every objective, every goal, every policy, every procedure and every budget
become standard against which actual performance is compared.

Planning sets the ship’s course and controlling keeps it on course. When the ship begins to
veer off the course, the navigator notices it and recommends a new heading designed to
return the ship to its proper course. Once control process is over its findings are integrated
into planning to prescribe new standards for control

6. Purpose of Controlling is Goal Oriented and hence Positive:

Control is there because without it the business may go off the track. The controlling has
positive purpose both for the organization (to make things happen) and individuals (to give
up a part of their independence for the attainment of organizational goals).

Process of Control:

Following are the steps involved into the process of control:

1. Establish the Standards:

Within an organization’s overall strategic plan, managers define goals for organizational
departments in specific, precise, operational terms that include standards of performance to
compare with organizational activities. However, for some of the activities the standards
cannot be specific and precise.

Standards, against which actual performance will be compared, may be derived from past
experience, statistical methods and benchmarking (based upon best industry practices). As far
as possible, the standards are developed bilaterally rather than top management deciding
unilaterally, keeping in view the organization’s goals.
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Standards may be tangible (clear, concrete, specific, and generally measurable) – numerical
standards, monetary, physical, and time standards; and intangible (relating to human
characteristics) – desirable attitudes, high morale, ethics, and cooperation.

2. Measure Actual Performance:

Most organizations prepare formal reports of performance measurements both quantitative

and qualitative (where quantification is not possible) that the managers review regularly.
These measurements should be related to the standards set in the first step of the control
process.

For example, if sales growth is a target, the organization should have a means of gathering
and reporting sales data. Data can be collected through personal observation (through
management by walking around the place where things are happening), statistical reports
(made possible by computers), oral reporting (through conferencing, one-to-one meeting, or
telephone calls), written reporting (comprehensive and concise, accounting information –
normally a combination of all. To be of use, the information flow should be regular and
timely.

3. Compare Performance with the Standards:

This step compares actual activities to performance standards. When managers read computer
reports or walk through their plants, they identify whether actual performance meets,
exceeds, or falls short of standards.

Typically, performance reports simplify such comparison by placing the performance

standards for the reporting period alongside the actual performance for the same period and
by computing the variance—that is, the difference between each actual amount and the
associated standard.

The manager must know of the standard permitted variation (both positive and negative).
Management by exception is most appropriate and practical to keep insignificant deviations
away. Timetable for the comparison depends upon many factors including importance and
complexity attached with importance and complexity.

4. Take Corrective Action and Reinforcement of Successes:

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When performance deviates from standards, managers must determine what changes, if any,
are necessary and how to apply them. In the productivity and quality-centered environment,
workers and managers are often empowered to evaluate their own work. After the evaluator
determines the cause or causes of deviation, he or she can take the fourth step— corrective
action.

The corrective action may be to maintain status quo (reinforcing successes), correcting the
deviation, or changing standards. The most effective course may be prescribed by policies or
may be best left up to employees’ judgment and initiative. The corrective action may be
immediate or basic (modifying the standards themselves).

Importance of Control:

1. Guides the Management in Achieving Pre-determined Goals:

The continuous flow of information about projects keeps the long range of planning on the
right track. It helps in taking corrective actions in future if the performance is not up to the
mark.

2. Ensures Effective Use of Scarce and Valuable Resources:

The control system helps in improving organizational efficiency. Various control devices act
as motivators to managers. The performance of every person is regularly monitored and any
deficiency if present is corrected at the earliest.

Controls put psychological pressure on persons in the organization. On the other hand control
also enables management to decide whether employees are doing right things.

3. Facilitates Coordination:

Control helps in coordination of activities through unity of action. Every manager will try to
coordinate the activities of his subordinates in order to achieve departmental goals.

Similarly the chief executive also coordinates the functioning of various departments. The
control acts as a check on the performance and proper results are achieved only when
activities are coordinated.

4. Leads to Delegation and Decentralization of Authority:

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A decision about follow-up action is also facilitated. Control makes delegation easier/better.
Decentralization of authority is necessary in big enterprises. The management cannot
delegate authority without ensuring proper control.

The targets or goals of various departments are used as a control technique. Various control
techniques like budgeting, cost control; pre action approvals etc. allow decentralization
without losing control over activities.

5. Spares Top Management to Concentrate on Policy Making:

For control processes management’s attention is not required every now and then. The
management by exception enables top management to concentrate on policy formulation.

Why do people Oppose Control?

Many people are averse to the concept of control for the following reasons:

(i) New, more “organic” forms of organizations (self-organizing organizations, self- managed
teams, network organizations, etc.) allow organizations to be more responsive and adaptable
in today’s rapidly changing world. These forms also cultivate empowerment among
employees, much more than the hierarchical, rigidly structured organizations of the past.

(ii) Many people assert that as the nature of organizations has changed so must the nature of
management control. Some people go so far as to claim that management shouldn’t exercise
any form of control whatsoever.

They claim that management should exist to support employee’s efforts to be fully productive
members of organizations and communities – therefore, any form of control is completely
counterproductive to management and employees.

(iii) Some people even react strongly against the phrase “management control”. The word
itself has a negative connotation, e.g., it can sound dominating, coercive and heavy-handed. It
seems that writers of management literature now prefer use of the term “coordinating” rather
than “controlling”.

(iv) People also oppose controls as they are thought of decreasing autonomy, stifling
creativity, threatening security, and perpetuating oppression. This may lead to change in
expertise and power structure, and social structure in the organisation.
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Types of Control:

Controls can be numerous in kind. These may be classified on the basis of (a) timing, (b)
designing systems, (c) management levels, and (d) Responsibility

On the basis of timing:

Control can focus on events before, during, or after a process. For example, a local
automobile dealer can focus on activities before, during, or after sales of new cars. Such
controls may be respectively called as Preventive, Detective, and Corrective.

On this basis the control may be:

(i) Feed forward Control

(ii) Concurrent Control

(iii) Feedback Control

1. Feed forward Control:

The objective of feed forward control or preliminary control is to anticipate the likely
problems and to exercise control even before the activity has started or problem has occurred
or been reported. It is future directed. This kind of control is very popular in airlines. They go
in for preventive maintenance activities to detect and prevent structural damage, which may
result in disaster. These controls are evident in the selection and hiring of new employees. It
helps in taking action beforehand.

In case of feedback control, one relies on historical data, which will come after the activity
has been performed. This means information is late and the rectification is not possible. One
can make correction only for future activities.

That means whatever wrong has been done is done, and it cannot be undone. Though, future-
directed control is largely disregarded in practice, because managers have been excessively
dependent on accounting and statistical data for the purpose of control. In the absence of any
means of looking forward, reference to history is considered better than no reference at all.

However, the concept of feed forwarding has been applied now and then. One common way
managers have practised it is through careful and repeated forecasts using the latest available
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information, comparing what is desired with the forecasts, and introducing program changes
so that forecasts can be made more promising.

2. Concurrent Control:

Concurrent control monitors ongoing employee activity to ensure consistency with quality
standards takes place while an activity is on or in progress. It involves the regulation of
ongoing activities that are part of transformation process to ensure that they conform to
organizational standards.

The technique of direct supervision is the best-known form of concurrent control. Concurrent
control is designed to ensure that employees’ activities produce the correct results and to
correct the problems, if any, before they become costly.

In case of computer typing, if the spelling is wrong or construction is incorrect, the

programme immediately alerts the user. Many manufacturing operations include devices that
measure whether the items being produced meet quality standards.

Since concurrent control involves regulating ongoing tasks, it requires a complete

understanding of the specific tasks involved and their relationship to the desired and product.

Concurrent control sometimes is called steering, screening or yes-no control, because it often
involves checkpoints at which decisions are made about whether to continue progress, take
corrective action, or stop work altogether on products or services.

3. Feedback Control:

The control takes place after the job is over. Corrective action is taken after analysing
variances with the planned standards at the end of the activity. It is also known as ‘post action
control’, because feedback control is exercised after the event has taken place.

Such control is used when feed forward or concurrent is not possible or very costly; or when
exact processes involved in performing a work is difficult to specify in advance.

The twin advantages of feedback control are that meaningful information is received with
regard to planning efforts, and feedback control enhances employee motivation.
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On the basis of designing Control Systems:

Three approaches may be followed while designing control systems, viz., Market Control,
Bureaucratic Control, and Clan Control. However, most organisations do not depend only on
just one of them.

1. Market Control:

Control is based upon market mechanisms of competitive activities in terms of price and
market share. Different divisions are converted into profit centres and their performance is
evaluated by segmental top line (turnover), bottom line (profit) and the market share.

Using market control will mean that the managers in future will allocate resources or create
departments or other activities in line with the market forces.

2. Bureaucratic Control:

Bureaucratic control focuses on authority, rule and regulations, procedures and policies. Most
of the public sector units in India go in for bureaucratic control.

If they do not go by the rulebook, the legislative committees and the ministries under whom
they work will reprimand them. In a hospital no medicine can be used unless the prescription
is there and it is recorded in the issue register, even if the patient may die in between.

3. Clan Control:

The control systems are designed in a way that give way to shared vision, shared values,
norms, traditions and beliefs, etc., part of the organisational culture.

It is not based upon hierarchical mechanisms, but work-related and performance measures.
This kind of control is most suitable for the organisations which use team style of work
groups and where technology changes very fast.

On the basis of Levels:

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People at different level have different planning responsibilities, so do they undertake

controlling. On the basis of levels controls, can be categorised as Operational, Structural,
Tactical, and Strategic.

1. Operational Control:

Its focus remains upon the processes used by the organisation for transforming the inputs
(resources) into outputs (products/services). Operational controls are used at the lower
management. It is exercised almost every day. Quality control, financial controls are part of
operational controls.

2. Structural Control:

Are the different elements of organisation structure serving their intended aims? Is there
overstaffing? Is the ratio of staff to line increasing? Necessary action is to be undertaken.

Two important forms of structural control can be bureaucratic control and clan control, about
which we have already talked. Structural control is exercised by top and middle management.

3. Tactical Control:

Since tactical control deals with the departmental objectives, the controls are largely
exercised by middle management levels.

4. Strategic Control:

Strategic controls are early warning systems. Strategic control is the process to determine
whether the effectiveness of a corporate, business and functional strategies are successful in
helping organisations to meet its goals. Strategic controls are exercised by top level
management.

On the basis of Responsibility:

Who has the responsibility of controlling? The responsibility may rest with the person
executing the things or with the supervisor or manager. This way control may be internal and
external. Internal control permits highly motivated people to exercise self-discipline. External
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control means that the thread of control is in the hands of supervisor or manager and control
is exercised through formal systems.

Requirements of Effective Control System:

A control system is not an automatic phenomenon but deliberately created. Though different
organisations may design their control systems according to their unique and special
characteristics or conditions, yet in designing a good and effective control system the
following basic requirements must be kept in view:

1. Focus on Objectives and Needs:

The effective control system should emphasise on attainment of organizational objectives. It

should function in harmony with the needs of the enterprise. For example, the personnel
department may use feed forward control for recruiting a new employee, and concurrent
control for training.At the shop level, control has to be easy, but more sophisticated and broad
ranging controls may be developed for higher level managers. Thus, controls should be
tailored to plans and positions.

2. Immediate Warning and Timely Action:

Rapid reporting of variations is at the core of control. An ideal control system could detect,
not create bottlenecks and report significant deviation as promptly as possible so that
necessary corrective action may be taken well in time. This needs an efficient system of
appraisal and timely flow of information.

3. Indicative, Suggestive as well as corrective:

Controls should not only be able to point to the deviations, but they should also suggest
corrective action that is supposed to check the recurrence of variations or problems in future.
ontrol is justified only if indicated or experienced deviations from plans are corrected through
appropriate planning, organizing, staffing and directing. Control should also lead to making
valuable forecasts to the managers so that they become aware of the problems likely to
confront them in the future.

4. Understandable, Objective, and Economical:

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Controls should be simple and easy to understand, standards of performance are quantified to
appear unbiased, and specific tools and techniques should be comprehensive, understandable,
and economical for the managers. They must know all the details and critical points in the
control device as well as its usefulness. If developed and complex statistical and
mathematical techniques are adopted, then proper training has to be imparted to managers.

Standards should be determined based on facts and participation. Effective control systems
must answer questions such as, “How much does it cost?” “What will it save?” or “What are
the returns on the investment?”

The benefits of controls should outweigh the costs. Expensive and elaborate control systems
will not suit, for example to small enterprise.

5. Focus on Functions and Factors:

Control should emphasise the functions, such as production, marketing, finance, human
resources, etc and focus on four factors – quality, quantity, timely use and costs. Not one, but
multiple controls should be adopted.

6. Strategic Points Control:

Control should be selective and concentrate on key result areas of the company. Every detail
or thing cannot and is not to be controlled in order to save time, cost and effort.

Certain strategic, critical or vital points must be identified along with the expectations at
those points where failures cannot be tolerated and appropriate control devices should be
designed and imposed at those stages.

Controls are applied where failure cannot be tolerated or where costs cannot exceed a certain
amount. The critical points include all the areas of an organization’s operations that directly
affect the success of its key operations.

7. Flexibility:

Control must not become ends in themselves. It must be environment friendly and be able to
make modifications or revisions necessitated by the rapidly changing and complex business
environment. Flexibility in control system is generally achieved by the use of alternative
plans or flexible budgets.
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8. Attention to Human Factor:

Excess control causes corruption. It should not arouse negative reactions but positive feelings
among people through focus on work, not on people. The aim of control should be to create
self-control and creativity among members through enmeshing it in the organisational
culture. Employee involvement in the design of controls can increase acceptance.

9. Suitability:

Controls have to be consistent with the organization structure, where the responsibility for
action lies, position, competence, and needs of the individuals who have to interpret the
control measures and exercise control. The higher the quality of managers and their
subordinates, the less will be the need for indirect controls.

Control Techniques:

Many techniques have been developed to control the activities in management. The list is
very long, and it is difficult to describe them all.

Some of the important techniques are:

Financial Control:

Finance is related with mobilization of funds and their utilization and the return on them.
Financial control is exercised through the following:

1. Financial Statements:

Income statement (telling about expenses, segmental incomes, overall income and expenses,
and the net profit/loss), and Balance Sheet (shows the net worth at a single point of time and
the extent to which the debt or equity finance the assets)

2. Financial Audits:

Financial audits, either internal or external are conducted to ensure that the financial
management is done in line with the generally accepted policies, procedures, laws, and
ethical guidelines. Audits may be internal (by Organisation’s own staff), external (statutory
audit by chartered accountants), and management audit (by experts).

3. Ratio Analysis:
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Ratio analysis monitors liquidity, profitability, debt, and activity related aspects.

4. Budgetary Controls:

Budgetary control is the process of constructing budgets, comparing actual performance with
the budget one and revising budgets or activities in the light of changed conditions.

Budgetary control is as such not related only to finance area, but all functional areas do take
help of budgetary control. Budgets help not only in planning but also help to keep a tab on
overall spending.Budgeting may be top-down (managers prepare the budget and ask
subordinates to use); bottom-up (figures come from lower levels and adjusted at upper
levels); zero-based (justifying allocation of funds on the basis of activities or goals); and
flexible budgeting (varying standards and varying allocations).

5. Break-even Analysis:

It is a tool of profit planning and deals with cost-volume-profit relationships.

6. Accounting:

Accounting includes responsibility accounting, cost accounting, standard cost approach,

direct costing, and marginal costing.

Marketing Control:

In the field of marketing, to see that customer gets right product at the right price at the right
place and through right communication, the control is exercised through the following:

Market Research:

It is to assess customers’ needs, expectations and the delivery; and the competitive scenario.

Test Marketing:

To assess consumer acceptance of a new product, a small-scale marketing is done. HUL uses
Chennai for most of its test marketing.

Marketing Statistics:

Marketing managers control through marketing ratios and other statistics.

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Human resource control:

Human resource control is required to have a check on the quality of new personnel and also
to monitor performances of existing employees so as to determine firm’s overall
effectiveness.

Goal setting, instituting policies and procedures to guide them are to help them. Common
controls include performance appraisals, disciplinary programmes, observations, and
development assessments.

Information Control:

All organizations have confidential and sensitive information to be kept secret. How to
control access to computer databases is very important. This has become a key contemporary
issue in control. Organizations keep a watch on employee’s computer usage in general and
internet in particular.

Production Control:

To ensure quality production in right quantity at right time economically production controls
are required. Two of the important techniques include: Inventory control (ABC Analysis,
Economic Order Quantity, Just-in time inventory control), and quality control (through
inspection, statistical quality control).

Project Control:

Network analysis is most suitable for the projects which are not routine in minimizing cost
and completing project well in time. Network analysis makes use of two techniques –
Programme Evaluation and Review Technique (PERT), and Critical Path Method (CPM).