CHAPTER I: MANAGEMENT AN OVERVIEW

1.1. Definition of Management and managers

 Management is the process of coordinating all resources through the five major functions of
planning, organizing, staffing, directing/leading and controlling to achieve organizational
goals/desired objectives.
 Management is the art of getting things done through other people by making the atmosphere
conducive for others. It is the process of getting things done through others, and their process puts
emphasis on both the objectives to be attained and the people who will be pursuing them.

 Managers: are those persons in the position of authority who make decisions to commit (use)
their resources and the resources of others towards the achievement of organizational objectives.

1.2. Managerial Functions

Regardless of the type of firm and the organizational level, all managers perform certain basic
functions.

 PLANNING is making decisions today about future actions. It involves selecting missions and
objectives and the actions to achieve them; it requires decision making. That is, choosing future
courses of action from among alternatives.
 ORGANIZING: is concerned with assembling the resources necessary to achieve organizations’
objectives and establishing the activity authority relationship.
 It focuses on allocating and arranging human and non-human resources so that plans can be carried
out successfully.

 STAFFING: involves filling and keeping filled the positions in the organization structure. It is
concerned with locating prospective employees to fill the jobs created by the organizing process.

 DIRECTING/LEADING: is motivating, influencing, guiding, stimulating, actuating or directing.

It is aimed at getting the members of an organization move in the direction that will achieve its
objectives. It is influencing people so that they will contribute to organization and group goals; it
has to do predominantly with the human/interpersonal aspect of management.

 CONTROLLING: is the measuring and correcting of activities of subordinates to ensure that

events conform to plans. It deals with establishing standards, measuring performances against
established standards and dealing with deviations from established standards.

1.3. Levels of Management

Managers all perform the same management functions but with different emphases because of their
position in the organization. Managers can be divided based on two criteria. These are:

 Levels of management (vertical difference)

 Scope of responsibilities (horizontal difference)

Types of Managers based on levels of management

1
 Levels refer to hierarchical arrangement of managerial positions or persons in an organization. Based
on levels of management or hierarchy we do have three types of managers. A manager’s assigned
duties and the authority needed to fulfill those duties are what determine management level.

Top Level Managers:

 Top-level managers are managers who are at the top of the organizational hierarchy and are
responsible for the entire organization.
 They are responsible for the overall management of the organization, particularly they:
 establish companywide objectives or goals and organizational policies
 Develop overall structure of the organization.
 Direct the organization in accordance with the environment.
 Develop policy in areas of equal employment opportunity and employee development.
 Represent the organization in community affairs, business deals, and government negotiations.
 Spent much of their time in planning and dealing with middle level managers and other
subordinates.
 Top-level managers take the credit or blame for organizational success and failures
respectively.

Middle Level Managers

 Middle level managers occupy a position in an organization that is above first-line management and
below top management.
Responsibilities of middle managers:
 They interpret and implement top management directives and forward messages to and from
first-line management.
 Receive broad/overall strategies from top managers and translate it into specific objectives and
plans for first-line mangers/operating managers.
 Often coordinate and supervise the activities of lower level managers.
 Are responsible for the proper implementation of policies and strategies defined by top level
managers.
 They direct the activities that implement the policies of the organization.
First Level Supervisory Level managers
o They are responsible for overseeing and coordinating the work of operating employees.
o Assign operating employees to specific tasks.
o Are directly responsible for the production of goods and services.
o Motivate subordinates to change or improve their performance.
o Serve as a bridge between managers and non-managers.
o Spent much of their time in leading and little in planning.
o Are in charge of carrying out the day to day activities within the various departments to ensure
that short term goals are met.

Types of Managers based on scope of responsibility

Based on the scope of responsibility/activities they manage, managers are divided into two:
 Functional Managers: Supervise employees (managers + workers) with specialized skills in
specific areas of operations such as accounting, payroll, finance, marketing, production, or sales etc.
2
 They are responsible for only one organizational activity; i.e. their responsibility is limited to their
specialization/specification.
 General Managers: are responsible for several departments that perform different functions. They
are responsible for the entire operations of the organization without being specific.

1.4. Managerial Roles

Henry Mintzberg identified 10 managerial roles which are in turn grouped into three categories:
Interpersonal, Informational and Decisional Roles.
1. Interpersonal Roles: involve developing and maintaining positive relationships with significant
others in the organization. It is communication oriented. It includes:
1.1. Figurehead Role: managers perform symbolic duties of a legal or social nature. The
manager represents her work unit at ceremonial or symbolic functions.
1.2. Leadership Role: The leader builds relationship and communicates with employees,
motivates and coaches them. As a leader, the manager is responsible for hiring, training,
motivating and encouraging employees/subordinates.
1.3. Liaison Role: The liaison maintains a network of contacts outside the work unit to obtain
information. The manager serves as a link between the organization and the informants who
provide favors and information.
2. Informational Roles -focuses on the transmission of important information to and from internal
and external sources. It involves the following activities
2.1. Monitor role /information gathering role/-. This role refers to seeking, receiving, screening
and getting information what is going on. The monitor seeks internal and external information
about issues that can affect the organization.
2.2. Disseminator Role: As the disseminator, the manager passes on to superiors, subordinates,
peers and other concerned clients some of the information that would not ordinarily be
accessible to them.
2.3. Spokesperson/representative Role: the spokesperson transmits information about the
organization to outsiders. The manager is the person who speaks for her work unit to people
outside the work unit.
3. .Decisional Roles: involve making significant decisions that affect the organization.
3.1. Entrepreneur Role (initiator of change)- the manager acting as an entrepreneur recognizes
problems and opportunities and initiates actions that will move the organization in the desired
direction.
3.2. Disturbance Handler Role: solution seeking role. The disturbance handler is responsible for
taking corrective action when the organization faces important, unexpected difficulties.
3.3. Resource Allocator Role: deciding on the allocation of the organization’s physical, financial
and human resources. As a resource allocator, the manager is responsible for deciding how
and to whom the resources of the organization and the manager’s own time will be allocated.
3.4. The Negotiator Role: representing the organization in all important/major negotiations.

1.5. Managerial Skills and Their Relative Importance

A manager’s job is diverse and complex and it requires a range of skills. Skills are specific abilities
that result from knowledge, information, practice, and aptitude. The skills managers need can be
classified as technical skill, human Relations skill, and conceptual skill

3
 1.5.1. Technical Skills – involve process or technique, knowledge and proficiency. It is the ability to
use the tools, procedures, or techniques of a specialized field.
 Technical skills are specialized knowledge and ability that can be applied to specific tasks.
 Technical skills are most important at the lower levels of management. It becomes less important as
we move up the chain of command because when they supervise the others (workers), they have to
show how to do the work.

1.5.2. Human Relations or Interpersonal Skill – the ability to interact effectively with people. It is
the ability to work with, understand and motivate other people, either as individuals or as groups.
 This skill is a reflection of the manager’s leadership ability.
 Because all work is done when people work together, human relation skills are equally important at
all levels of management.

1.5.2. Conceptual skills – involve the formulation of ideas. It refers to the ability to see the big
picture, to view the organization from a broad perspective and to see the interrelations among its
components.
 Conceptual skills are more important in strategic (long range) planning; therefore, they are more
important to top-executives than middle managers and supervisors.
 The importance of conceptual skill increases as we rise in the rank of management.

 Important: Technical skill deals with things, human skill concerns people and conceptual skill has
to do with ideas.

1.6. Management: Science or Art?

 Science is characterized by making conclusions based on actual facts and verifies knowledge
through cause-effect relationship. It can be generally learnt, thought, and researched to know the
universal truth.
 Art is characterized by using common sense, personal feeling, beliefs, impulses, etc.
Management/Managing, like all other practices-music composition, engineering, accountancy or
baseball- is an art.
 Thus, management as a practice is an art; the organized knowledge underlying the practice may
be referred to as a science. In this sense/context science and art are not mutually exclusive but are
complementary. Therefore, management in actual sense is neither an art nor science, but it requires
both to be successful,.

1.7. Universality of Management

Management is universal for the following reasons.
 All managers perform the five managerial functions even if with different emphasis.
 It is applicable for all human efforts; be it business, non-business, governmental, private. It is
useful from individual to institutional efforts.
 Management utilizes scientifically derived operational principles.
 All managers operate in organizations with specific objectives.
 Management, in all organizations, helps to achieve organizational objectives.

4
 CHAPTER TWO

THE PLANNING FUNCTION

2.1. MEANING, NATURE AND IMPORTANCE OF PLANNING

2.3.1 The Meaning of Planning

Planning is the activity that allows managers to determine what they want and how to get it, that is
planning focuses on the future: what is to be accomplished and how.
 Planning Answers six basic questions in regard to any intended activity:
 What (the goal or goals).
 When (the time frame in which it will be accomplished)
 Where (the place or places where the plans or planning will reach its conclusion).
 Who (which people will perform the tasks).
 How (the specific steps or methods to reach the goals).
 What resources (resources necessary to reach the goals).

2.3.2 Nature of Planning

Discussing the following points can highlight the nature of planning.
1. Planning contributes to purpose and objectives - every organization is established (exists) for the
accomplishment of group purpose or objective.
2. Planning is the primacy of functions management - planning precedes the execution of all other
managerial functions, because all other managerial functions must be planned if they are to be
effective. This does not mean that planning is the most important of all other managerial functions,
because to be important or useful all other functions have to accompany it.
3. Planning has pervasiveness/universality nature- planning is a function of all managers, although
the character and breadth of planning varies with each manager’s authority and with the nature of
policies and plans outlined by superiors.
4. Planning is based on information - basically no plan exists without information. To plan
managers have to gather relevant information from around the environment. Information is one of
the valuable resources for planning to exist.
5. Planning is a continuous process - planning deals with the uncertain future. Hence it needs
frequent revision in response to changes in the internal and external environments of the
organization. Therefore, so far as the organization is in operation, planning is in continuous process.
6. Planning is a means to an end- planning is not an end by itself. It is a means to an end (meeting
objectives). Planning is an instrument that pushes people towards the achievement of objectives.
7. Plans are arranged in a hierarchy - plans are first set for the entire organization. The corporate
plan then provides the framework for the formulation of divisional, departmental, and sectional
goals.

2.3.3. The Importance of Planning

1. It provides direction and sense of purpose - It is through planning that we can establish our
objectives. It focuses attention on specific targets and direct employees effort toward important
outcomes.

5
2. It reduces uncertainties and anticipates the future/ preparing for change - Planning is based on
systematic and careful forecasts of future states of the economy, markets, technology, etc., to reduce
uncertainties to the extent they occur according to expectation.
3. It provides basis for controlling - standards/controlling mechanisms/ are developed during
planning. It specifies what is to be accomplished and provides a standard for measuring progress.
4. It forces managers to see the organization as a system - while planning managers have to
consider parts because the plan of one part (department) affects the operation of the whole
organization so far as parts of an organization are interdependent.
5. It promotes efficiency - Planning provides the opportunity for a greater utilization of the available
organizational resources.
6. It provides the base for cooperative and coordinated efforts - planning provides the basis for
organized and coordinated effort by defining the objectives of the organization and the means for
their achievement.
7. It provides guideline for decision making - decisions in an organization will be made in
alignment with the plans and in accordance with desired outcomes. Managers make decisions on
problems of recurring nature based on strategies and policies of the organization.

2.3.4. Limitations of Planning

a. Planning is risky - This is because of uncertainties in the future and absence of accurate and
adequate data.
b. It is a difficult and complicated task - planning involves complex and interdependent decisions.
In addition to this, rapid changes in technology and customers’ tastes and preferences will also
make planning difficult and exceptionally complex.
c. It is expensive and time consuming - Planning requires financial, physical, human, and time
resources.
d. It is affected by external factors - these factors could be external impositions, government
intervention, natural calamities, import-export policies, taxation and labor laws that can limit the
success of planning.

2.2. The Planning Process

The planning steps are interrelated and there is no rigid boundary between or among these steps, and
one is the base for the other.
1. Establishing objectives
 Objectives provide the direction for all other managerial functions especially for planning.
Objective setting is a three steps process, which involves assessing the present situation,
anticipating future conditions, and then setting the objectives.
 Objectives developed by organizational levels and peer managers should be compatible with one
another.
2. Developing premises
 Planning premises are assumptions about the environment within which the plan is to be carried
out. This involves examining the external and internal factors which affect the performance of the
organization: the external environment and internal environment.
 Because the future is so complex, it would not be profitable or realistic to make assumptions about
every detail of the future environment of a plan. Therefore, premises are, as a practical matter,

6
 limited to assumptions that are critical, or strategic, to a plan, that is, those that most influence its
operation.
3. Determining alternative courses of actions
Alternatives are courses of actions that are available to a manager to reach a goal. In developing
alternatives, a manager should try to create as many roads to the objective as possible and reduce
number of alternatives so that the most promising may be analyzed.
4. Evaluating alternative courses of action - Having sought out alternative courses, managers
evaluate the benefits, costs and effects of alternative courses in light of their weight to goals and
premises.
5. Selecting a course of action - this is the point at which the plan to be adopted is chosen or selected.
It is the real point of decision-making.
6. Formulating derivative plans - At step 5 planning is ended. Formulating derivative plans means
formulating other plans based on one major plan.

7. Numberizing plans by budgeting - numberizing plans is converting them into budgets.

8. Implementing the plan - this is a step where by the entire organization will be in motion or real
operation. Implementation involves determining who will be involved, what resources will be
assigned, how the plan will be evaluated, and the reporting procedure.
9. Controlling and evaluating the results - Once the plan is implemented, the manager must monitor
the progress that is being made, evaluate the reported results, and make any modifications
necessary.

2.3. Types of Plans

Plans can be classified on different bases or dimensions. These are: scope/breadth dimension, time
dimension, and use/repetitiveness

2.3.1. Scope/Breadth Dimension

Scope refers to the comprehensiveness of the plan, or it refers to the level of management where plans
are formulated. This dimension creates hierarchy of plans. Based on scope we can classify plans into:
Strategic, Tactical and Operational.
 Strategic Plan: is organization wide plan that is formulated/developed by top-level management in
consultation with the board of directors and middle level management. It applies to the entire
organization.
 Tactical Plan: refers to the implementation of activities and the allocation of resources necessary
for the achievement of the organization’s objectives.
- It is an intermediate plan that helps to reduce long range planning into intermediate one by
increasing the amount of specificity and making the actions goal oriented
- Tactical plans are the means charted to support the implementation of the strategic plans and
achievement of tactical goals.
- Structures a firm’s resources to achieve maximum performance.
- Tactical plans make premises for operational plans.
- is narrower in scope than strategic plan and wider than operation plan;

7
 Operational Plan: is concerned with the day to day activities of the organization and is made at
the lower level management in consultation with middle level management. It is concerned with the
efficient, day-to-day use of resources allocated to a department manager’s area of responsibility.

2.3.2. Time Dimension

Time dimension refers to the time periods for which the planning is intended. Based on the length of
time a plan covers, we do have three types of plans: Long-range (five years or more), medium-range
(between one and five years) and short-range plans (one year or less).

2.3.3. Use Dimension

Use dimension refers to the extent to which plans will be used on a recurring basis, i.e. based on
how repeatedly/frequently a given plan is used. Based on this dimension we do have two types of
plans: standing plans and single use plans.

Standing Plans: are plans that provide an ongoing guidance for performing recurring activities. They
are plans which are formulated to be used again and again for the day-to-day operation of the
organization.
Policies: is a general guide that specifies the broad parameters within which organization members
are expected to operate in pursuit of organizational goals.

2.4. Characteristics of a Good Plan

Every sound business plan must have these characteristics:
 Objectivity - Planning should, first all, be based on objective thinking. It should be factual,
logical and realistic. It should be directed to achieving organizational goals rather than personal
objectives.
 Futurity - since a plan is a forecast of some future action, it must have the quality of futurity;
otherwise, it has little value as a basis for future action..
 Flexibility - Because no one can foresee the future, plans must have flexibility. They must
adjust smoothly and quickly to changing conditions without seriously losing their effectiveness.
 Stability - is related to flexibility. A stable plan will not have to be abandoned because of long-
term changes in the company’s situation.
 Comprehensive - A plan must be comprehensive enough to provide adequate guidance. It
should cover everything required of people, but not in such detail that it inhibits initiative.
 Simplicity and clarity - A simple plan seeks to attain its objective with the fewest
components, forces, effects and relationships. A plan should not be ambiguous. Lack of clarity
makes understanding and implementation difficult.
 Contingency planning is the development of alternative plans for use in the event that
environmental conditions evolve differently than anticipated, rendering original plans unwise or
unfeasible.
 Planning staff- is a small group of individuals who assist top-level managers in developing the
various components of the planning process

2.5. Managerial Decision-Making

What is decision making? Decision-making is a rational choice or selection of one alternative from
among a set of alternatives; i.e. it is the act of choosing one alternative from among a set of
alternatives.
8
 2.5.1. The Decision-Making Process
Decisions are organizational responses to problems. Decision-making has its own processes/series of
steps. The process is a sequential process rather than a series of steps.
1. Identifying problems - A necessary condition for a decision to exist is a problem - the discrepancy
between an actual and desired state; a gap between where one is and where one wants to be. If
problems do not exist, there will be no need for decisions; i.e. problems are prerequisites for
decisions.
2. Developing Alternatives - Before a decision is made feasible alternatives should be developed. No
major decision should be made until several alternative solutions have been developed.. At this point
it is necessary to list as many possible alternatives solutions to the problem as you can.
3. Evaluating Alternatives - Each alternative must be judged in light of the goals and resources of the
organization, how well the alternative will help solve the problem and in terms of its consequences
for the organization.
4. Choosing an Alternative - based on the evaluation made managers select the best alternative, this is
the stage where a decision is made. The purpose of selecting an alternative is to solve the problem so
as to achieve a predetermined objective.
 A decision is not an end by itself but only a means to an end. This means the factors that lead to
implementation and follow –up should follow solution selection.
5. Implementing and Monitoring the Chosen Solution
 Implementing the Solution:- A decision that is not implemented is little more than an
abstraction. In other words, any decision must be effectively implemented to achieve the
objectives for which it was made. Implementing a decision involves more than giving orders.
Resources must be acquired and allocated.
 Monitoring the solution: Monitoring is necessary to ensure that things are progressing as planned
and that the problem that triggered the decision process has been resolved. Effective management
involves periodic measurements of results. Actual results are compared with planned results (the
objective); if deviations exist, changes must be made.

2.5.2. Decision-Making Conditions

Managers made decisions under three basic conditions:-
1. Decision-making under Certainty
 The information is available and is considered to be reliable, and managers know the cause and
effect relationships, there is no ambiguity in making decisions
 managers know with certainty what their alternatives are and what conditions are associated
with each alternative
 the external conditions are identified and very predictable; i.e. we are reasonably sure what will
happen when we make a decision
2. Decision-making under Risk: In a risk situation:
 managers may have factual information, but it may be incomplete
 here is moderate ambiguity and moderate chance of making bad decision
 the availability of each alternative, the likelihood of its occurrence and its potential payoffs and
costs are associated with probability estimates; i.e. decisions under risk are those in which
probabilities can be assigned to the expected outcomes of each alternative
3. Decision-making under Uncertainty:-

9
  Under this condition the decision maker does not know what all the alternatives are, what the
probability of each will occur is or what consequence each is likely to have.
 Decision-making under uncertainty is the most ambiguous and there is high chance of making
poor decisions.
 In decision-making under uncertainty, probabilities cannot be assigned to surrounding conditions
such as competition, government regulations, technological advances, the overall economy, etc.
 Uncertainty is associated with the consequences of alternatives, not the alternatives themselves.
 Reliance on experience, judgment, and other people's experiences can assist the manager is
assessing the value of alternatives.
E.g. Innovation of new machine, journey of discoverers

2.5.3. Types of Decisions

Decisions can be classified in to: programmed and non-programmed.
1. Programmed Decisions - are those made in routine, repetitive, well-structured situations through
the use of predetermined decision rules. The decision rules may be based on habit, computational
techniques, or established policies and procedures. E.g. Establishing a re-order point, Decide if
students meet graduation requirements, Determination of employee pay rates
2. Non-programmed Decisions - are used to solve non-recurring, novel, and unstructured problems.
No well-established procedure exists for handling them, because it has not occurred before
managers do not have experience to draw up on, or problems are complex or completely new.
E.g. To add a product to the existing product line, to reorganize a company, to acquire another
firm

2.5.4. Why Do Managers Make Poor Decisions?

 Lack of adequate time - Waiting until the last minute to make a decision often prevents
considering all alternatives. It also hampers thorough analyses of the alternatives.
 Failure to define goals - Objectives cannot be attained unless they are clearly defined. They should
be explicitly stated so that the manager can see the relationship between a decision and a desired
result.
 Using unreliable sources of information - A decision is only as good as the information on which
it is based. Poor sources of information always result in poor decisions.
 Fear of consequences - Managers often is reluctant to make bold, comprehensive decisions
because they fear disastrous results. “Play it safe” attitude sometimes limits a manager’s
effectiveness.
 Focusing on symptoms rather than causes - Addressing the symptoms of a problem will not solve
it. Business managers too often foul /obscene, vulgar/ on the results of problems instead of the
causes.
 Reliance on Hunch and Intuition - Intuition, judgment and ‘feel’ are important assets to the
decision maker. But a manager who permits intuition to outweigh scientific evidence is likely to
make a poor decision.

CHAPTER THREE: THE ORGANIZING FUNCTION

4.1. An Overview of Organizing

Organizing - is a management function that involves arranging human and non-human (physical)
resources to help attain organizational objectives. It is the management function that establishes
10
relationship between activity and authority. The end result of an organizing process is an
organization.

4.2. The Organizing Process

The organizing process has the following steps.
1. Identification of objectives: This is to understand clearly the objectives of the organization, i.e. to
reconsider the objectives established during planning and identify the specific objectives to be
pursued.
2. Identification of the specific activities needed to accomplish objectives: Here we ask what work
activities are necessary to accomplish the identified organizational objectives. This identification of
specific activities needed is called division of labor.
3. Grouping of activities necessary to attain objectives: this involves grouping together of
activities in accordance with similarities (homogeneity) of the activities, interdependence, job
characteristics or any other grouping criteria, and this result in departments and the process is
called departmentation. Grouping of similar activities is based on the concept of division of labor
and specialization.
4. Assigning group of activities (work) and delegate the appropriate authority: The activities
now must be assigned to individuals who are simultaneously given the appropriate authority to
accomplish task.
5. Design a hierarchy of relationships/Provision for coordination: This step requires the
determination of both vertical and horizontal operating relationships of the organization as a whole.

4.3. Importance of Organizing

 promotes collaboration and coordination among individuals in a group, thus, it improves
communication within the organization
 Sets clear-cut lines of authority and responsibility for each individuals or departments. It helps
employees to know their responsibilities and concentrate on the key tasks at hand. It specifies who
is responsible for what.
 Organizing improves the directing and controlling functions of managers. It enables management
to effectively control the work and workers.
 Develops maximum use of time, human, and material resources.
 Enables for proper work assignment for individuals in pursuit of common goal.
 Enables the organization to maintain its activities coordinated so that the efforts of managers and
employees can be well integrated and directed towards an end.

4.4. Types of Organizations

These are two types of organizations: Formal and informal

4.4.1 Formal organization

 It is the intentional, deliberate or rational structure of roles in a formally organized enterprise.
Formal organization has consciously designed durable and inflexible structure.
 Formal organization may have legal personality.
 It is characterized by well-defined authority, reporting relationships, job titles, policies,
procedures, specific job duties and a host of other factors necessary to accomplish its respective
goals.

11
  It is represented by a printed chart that appears in organizational manuals and other formal
company documents called organization chart. Organization chart is a diagram of formal
relationship which shows how departments are tied together along the principal lines of authority.

4.4.2. Informal organization

 It is a network of personal and social relationships that arises spontaneously as people
associate with one another in a work environment.
 It is an unofficial network of personal and social relations developed as a result of association or
working together
 It operates outside formal authority relationships although it develops within the formal
organization
 It doesn’t have legal personality.
 It is composed of all the informal groupings of people within a formal organization (it is not only
the domain of workers; managers form informal groups that cut across departmental lines).
 Informal organization has a structure which is loosely designed, highly flexible and spontaneous.
In such an organization, the pattern of information flow, the exact nature of relationships among
the members, and the goals of the organization are unspecified.

# Why people form informal groups?

1. Need for satisfaction: it offers the opportunity to fulfill security, affiliation, esteem, and
sometimes self-actualization needs can encourage people to look out and join others in an informal
group.
2. Proximity and interaction: This can be either through working in close proximity physically or
because of frequent interaction.
3. Similarity: Several persons with the same attitudes or beliefs may join one group. Other factors or
similarity can be personality, race, sex, economic position, age, educational background etc.

4.5. Major Elements of the Organizing Function

4.5.1. Division of Labor

 The degree to which the grand task of the organization is broken down and divided into smaller
component parts is referred to as division of labor. Division of labor is performed in light of
organizational objectives.
 It begins by determining (sub tasks) called jobs that are necessary to accomplish the identified
objectives. These sub tasks could include such as hiring and record keeping, assembling,
machining, storing, inspecting, selling, advertising, computer programming.
 After determining the sub-tasks, job description is determined. Job description is an account of
activities what the sub-task performer is expected to perform and the associated authority and
responsibility relationships among jobs. The sub-task assigned to the sub task performer is called
job.
 Thus by doing so individuals specialize in doing part of the task rather than the entire task, i.e.
division of labor in effect is the assignment of various portion of a particular task among
organizational members.

In short, division of labor involves

 Breaking down a task into its most basic elements
12
 Training workers in performing specific duties
 Sequencing activities so that one person's efforts build on another's

4.5.2. Departmentation: Meaning and Bases

 Departmentation: All organizations, regardless of their size or mission, divide their overall
operations into sub-activities and then combine these sub-activities into working groups. This
process of grouping specialized activities in a logical manner is called Departmentation.
 Department - is a distinct area, division, or branch of an organization over which a manager has
authority for the performance of specified activities. It is a unit formulated as a result of the
departmentation process.

4.5.2.1. Bases for Departmentation

Since organizations are different in their activities, objectives and areas in which they operate, there
are different bases for departmentation. The most common bases are function, territory, product,
customer, and process.

1. Departmentation by Function - is the grouping together of activities in accordance with the

functions of an enterprise - on the basis of similarity of expertise, skills or work activities. E.g.
Human resources, production, marketing, finance, etc.
2. Departmentation by Territory/ Geography - Groups activities on the basis of geographic region
or territory. Is common in enterprises that operate over wide geographic areas i.e. it is attractive to
large-scale firms or other enterprises whose activities are physically or geographically dispersed.
3. Departmentation by Product (Line)- is the grouping and arrangement of activities around
products or product groups. E.g. Textile products, Nylon products, woolen products, silk products,
cotton products
4. Departmentation by Customer - It is a grouping of activities around customers. This grouping
reflects a primary interest in customers. It can be used in medical institutions such as hospitals and
clinics - emergency services, outpatient services, inpatient services, x-rays; retail stores- men's
clothing, women's clothing, children's clothing.
5. Departmentation by Process - manufacturing firms often group activities around a process or type
of equipment. This is when special skill is needed to operate different machines. Making plywood,
for example, involves several sequential processes: poling (removing bark from logs); sawing logs
in to 8’ lengths, heating; veneer stripping and stamping veneer sheets in to 4' segments; drying and
grading according to quality; gluing plies together; finishing and bundling.
6. Departmentation on Combined Base - is a base in which multiple bases are used at different
organizational levels of a particular organization.

4.5.3. Delegation of Authority

What is Authority?
 it is the right to commit resources (that is, to make decisions that commit an organization’s
resources), or the legal (legitimate) right to give orders (to tell someone to do or not to do
something)
 is the right to make decisions, carry out actions, and direct others in matters related to the duties
and goals of a position
13
 is the formal right of a superior to command and compel his subordinates to perform a certain act.
All managers in an organization have authority. It provides the means of command.

 Generally, level of authority varies with levels of management. Higher-level managers have
greater authority, with ultimate power resting at the top. Authority decreases all the way to the
bottom of the chart, where positions have little or none.

Delegation of Authority - is the downward pushing of authority from superiors to subordinates to

make decision within their area of responsibilities. It is the process of allocating tasks to
subordinates, giving them adequate authority to carry out those assignments, and making them
obligated to complete the tasks satisfactory.

4.5.3.1. The Process of Delegation

Delegation of authority has the following steps:
1. Assignments of tasks - specific tasks or duties that are to be undertaken are identified by the
manager for assignment to the subordinate. The subordinate is then approached with the
assignment (task).
2. Delegation of authority - In order for the subordinate to complete the duties or tasks, the authority
necessary to do them should be delegated by the manager to the subordinate.
3. Acceptance of responsibility – responsibility is the obligation created when someone accepts task
assignments together with the appropriate authority. Responsibility is not delegated by a manager to
an employee, but the employee becomes obligated when the assignment is accepted.
4. Creation of accountability - Accountability is to answer to someone for your results or actions. It
means taking the consequences - either credit or blame.

4.5.3.2. Importance of Delegation

 It relieves the manager from his/her heavy workload: Delegation frees a manager from some
time consuming duties
 It leads to better decisions: Since subordinates are closer to real “firing line” activities and
problems than superiors, they have more realistic information and better understanding.
 It speedup decision-making: Decisions made by lower level managers usually are timelier than
those that go through several layers of management.
 It helps subordinates to train and builds moral: Subordinate managers can reach their full
potential only if given the chance to make decisions and to assume responsibility for them.
 It encourages the development of professional managers: Had there not been any delegation,
professional managers wouldn’t have been produced.
 It helps to create the organization structure: If there were no delegation of authority is an
organization, there would exist only the president/CEO/ top-level manager. And an individual
cannot create an organization.

4.5.4. Centralization and Decentralization

Centralization or decentralization is a relative concept when applied to organizations. They are
tendencies of delegation of authority.
 Centralization - is the extent to which power and authority are systematically retained by top
managers. If an organization is centralized:

14
  Decision-making power remains at the top
 The participation of lower-level managers in decision-making is very low
 Decentralization - is the tendency to disperse decision-making authority in an organized structure.
In a decentralized organization decision-making power is pushed downwards and lower-level
managers actively participate in decision-making process. That is, they are not only called for
implementation but also for decision-making.

 Centralization and decentralization are not opposites rather they are tendencies/proportions in
delegation of authority.
 Centralization and decentralization form a continuum with many possible degrees of delegation of
power and authority in between.

4.5.5. Span of Management

 Meaning: The term span of management is also referred to as a span of control, span of
supervision, span of authority or span of responsibility.
Span of management - refers to the number of subordinates who report directly to a manger, or the
number of subordinates who will be directly supervised by a manager. There is no magical number for
the span of control.
Based on the number of subordinates who should report to a manager or the number of subordinates
that a superior should supervise, we can have Wide span of management and Narrow span of
management.

i. Narrow Span of Management - this means superior controls few numbers of subordinates or few
subordinates report to a superior. When there is narrow span of management in an organization, we
get:
 Tall organization structure with many levels of supervision between top management and the
lowest organizational level.
 More communication between superiors and subordinates.
 Managers are underutilized and their subordinates are over controlled.
 More trained managerial personnel and centralized authority.

ii. Wide Span of Management

This means many subordinates report to a superior or a superior supervises many subordinates.
If the span of management is wide, we get:
 A flat organization structure with fewer management levels between top and lower level
 Many number of subordinates and decentralized authority
 Managers are overstrained and their subordinates receive too little guidance and control
 Fewer hierarchal level

4.6. Organizational Structure

Meaning
 Organization structure is the formal pattern of interactions and coordination designed by a manager
to link the tasks of individuals and groups in achieving organizational goals.
 Organization structure is the arrangement and interrelationship of the component parts, and
positions of an organization.
15
 The process of developing an organization structure is sometimes referred to as organization
design.
 The formal structure of an organization is of two-dimensional: the horizontal dimension and
vertical dimension.
 The horizontal dimension identifies departments, units, and divisions on the same level of a
management.
 Whereas the vertical dimension refers to the authority relationships between superiors and
subordinates and it also identifies who is responsible and accountable for whom.

Organizational Chart
Organization chart is a line diagram that depicts the broad outlines of an organization’s structure. It
shows the flow of authority, responsibility, and communication among the various departments which
are located at different levels of the hierarchy. An organization chart is a visual representation of the
way in which an entire organization and each of its components fit together

The organization chart can tell us:

- Who reports to whom (chain of command)
- The number of managerial levels
- How many subordinates work for each manager (the span of control)
- Channel of official communication through the solid lines that connect each job (box)
- How the organization is structured-by function, territory, customer, etc.
- The work being done in each job- the labels on the boxes
- The hierarchy of decision making- where a decision maker for a problem is located
- How current the present organization is (if a date is on the chart)
- Type of authority relationships- line authority, staff authority, and functional authority

16
CHAPTER FOUR: DIRECTING FUNCTION

5.1. Meaning and the Need for Leadership

 Leadership is the process of influencing others toward the achievement of organizational objectives.
This definition recognizes that leadership is typically an ongoing activity, is oriented toward having
an impact on the behaviors of others, and is ultimately focused on realizing the specific aims of the
organization.
 Ingredients of leadership- it has three ingredients: leader, led (follower) and goal (situation) –
organizational Environment.
 Leader- the one with the ability to understand others’ motivation and to inspire them with the
ability to create a climate for motivation.
 Follower (led) - the individuals being led or influenced
 Environment- the working environment in which the leader interacts with the followers.

5.2. The Need for Leadership

The importance of the directing function in the organization can be presented as follows:
 Directing initiates actions by giving directives and guidance to employees.
 Directing integrates employees’ effort by coordinating actions of the members and leading toward
the objectives.
 Directing attempts to get the maximum output of individuals by providing ways to fully utilize the
potentials and capabilities of employees.
 Directing facilitates changes by incorporating (adopting) environmental and internal changes into
the organization
 Directing provides stability by balancing the different parts of the organization so that it exists for
a long period and its parts work in a harmonious ways.

5.3. How leaders influence others?

 Why do people accept the influence of a leader? One major reason is that leaders have power.
 Power is the capacity to affect the behavior of others, in other words, power is the ability of
individuals or groups to induce or influence the beliefs or actions of other persons or groups.
 Leaders in organizations typically rely on some or all of five major types of power: legitimate,
reward, coercive, expert and referent.

1. Legitimate power/position power refers to the power a leader possesses as a result of occupying
a particular position or role in the organization, i.e. it is a power that stems from a position’s
placement in the managerial hierarchy. It corresponds to authority. Legitimate power exists when
a subordinate or the influenced acknowledges that the influencer has a “right” or is lawfully
entitled to influence within certain bounds.
2. Reward Power refers to the leader's capacity to give or withhold rewards for followers. It is
based on the capacity to control and provide valued rewards such as salary increases /pay raises,
bonus, interesting projects, promotion recommendations, a better office, support for training
programs, assignments with high responsibility in the organization, recognition, positive feedback
etc.
3. Coercive Power is a power based on fear. Coercive power is the ability to coerce or punish the
followers when they do not engage in desired behaviors. Forms of coercion or punishment include
17
 criticisms, terminations, reprimands, suspensions, warning letters that go into an individual’s
personnel file, negative performance appraisals, demotions and withheld pay raises; (punishment
may range from loss of a minor privilege to loss of one's job).
4. Expert Power refers to power that a leader possesses as a result of his or her knowledge and
expertise regarding the tasks to be performed by subordinates. It is power based on the possession
of expertise, knowledge, skill or information.
5. Referent Power/Charismatic Power is power that results from being admired, personally
identified with or liked by others. When we admire people, want to be like them, or feel friendship
toward them, we more willingly follow their directions and exhibit loyalty toward them. For
example, a Movie Star, a Great Athlete, a Great Football Player, a Musician or a Military Hero
might possess considerable referent power.

5.4. Leadership Theories

5.4.1. Trait Theory

Traits are distinctive internal or personal qualities or characteristics of an individual, and it can be:
 Physical: like height, weight, appearance, health, etc
 Personal: like self-confidence, dominance, adaptable, extroversion/sociability, originality etc
 Mental: like intelligence, creativity, knowledge, technical competence etc.
 A leader trait is a physical or personality characteristic that can be used to differentiate leaders
from followers.
 Trait theory attempts to find traits that make a leader. That is, it is a theory, which focused on
identifying the personal traits that differentiated leaders from followers.
 Generally, the efforts to identify universal leadership traits ran into difficulties for the following
reasons:
o Not all leaders possess all the traits and many non-leaders may possess most of the traits.
o It gives no guidance as to the magnitude of each trait for a person to be a leader.
o No agreement has been reached as to what their relationships are to the actual instances of
leadership.

5.4.2. Behavioral Theories

 In this theory hold that rather than try to figure out what effective leaders were, researchers tried to
determine what effective leaders did, how they delegated tasks, how they communicated with and
tried to motivate their subordinates, how they carried out their tasks, and so no.
 This tries to answer the questions “What do effective leaders do? What ineffective leaders don't
do?
 Two major dimensions of leader behavior emerged from this body of research; one deals with how
leaders get the job done and the other deals with how leaders treat and interact with their
subordinates.

i.The University of Michigan Studies

Researchers at the University of Michigan identified two distinct styles of leadership, referred to as
.job-centered and employee - centered.

18
 The job-centered leader practices close supervision on the subordinates’ performance. This
leader relies on coercion, reward, and legitimate power to influence the behavior and
performance of followers.
 The employee-centered leader believes in delegating authority and supporting followers in
satisfying their needs by creating a supportive work environment. The employee centered leader
is concerned with followers', their personal advancement, growth and achievement.

ii. The Ohio State Studies

These studies isolated two leadership factors, referred to as initiating structure and consideration.
 Initiating structure involves behavior in which the leader organizes and defines the relationship
in the group, tends to establish well-defined patterns and channels of communication, and spells
out ways of getting the job done.
 Consideration involves behavior indicating sensitiveness to subordinates, respect their ideas and
feelings, and establishes mutual trust and friendship between the leader and the followers.
 In short, the behavioral theory attempted to identify effective leader behaviors that would work in
every situation.

5.4.3. The Contingency/Situational Leadership Theory

 Situational theory proposes that the effectiveness of a particular style of leader behavior depends
on the situation. As situations change, different styles become appropriate.
 This directly changes the idea of one best style of leadership. In other words, the
contingency/situational theory holds that appropriate leader traits or behaviors are contingent or
dependent on relevant situational characteristics.

5.4.4. Theory X and Theory Y Assumptions about People

Douglas McGregor has hypothesized two sets of assumptions about people that serve as a
philosophical base for leadership action. These are Theory X and Theory Y Assumptions.

Theory X Assumptions of People

 Has pessimistic and negative:
 A manager basing an operating philosophy on Theory X would
 Impose a directive leadership style on the individual or work group s/he is supervising.
 Coercion, negative motivation, and refusal to allow employee participate in decision-making
would probably be the actions of the manager.

Why? Because the manager assumes:

 The average human being has an inherent dislike of work and will avoid it if s/he can-workers are
lazy.
 Because of this dislike, most people must be coerced, controlled, directed, and threatened with
punishment to get them to put forth adequate effort toward the achievement of organizational
objectives.
 The average human being prefers to be directed, wishes to avoid responsibility, has relatively little
ambition and wants security above all.

Theory Y

19
  adopts a developmental approach/ modern + positive set of assumptions
 A manager with Theory Y assumption will prepare him/herself to work with people as individuals,
to involve people in the process of decision-making, to openly encourage people to seek
responsibility and to work with people achieve their goals.

Why? Because the manager assumes:

 The average human being does not inherently dislike work; the physical and mental effort
involved is as natural as play or rest.
 External control and threat of punishment are not the only means for bringing about effort toward
organizational objectives. A person will exercise self-direction and self-control in the service of
objectives to which s/he is committed.
 People generally become committed to organizational objectives if they are rewarded for doing so.
 The average human being learns, under proper conditions, not only to accept, but also they seek
responsibility.
 Many people have a relatively high degree of imagination, ingenuity, and creativity in the solution
of organizational problems.
 The average person’s intellectual potential is only partially utilized under the conditions of
modern industrial life.

5.5. Leadership Styles

There are three types of leadership styles: Autocratic, Democratic, and Laissez-faire.

I. Authoritarian (Autocratic) Leadership Style:

 Autocratic leader leads by the ability to withhold or give rewards and punishment, i.e. motivation is
through incentives and fear.
 In this style, decision-making is solely by the manager, in other words, the leader retains all authority
and responsibility.
 There is no opportunity for input into the decision-making process by the subordinates and
communication is primarily downward.

II. Democratic/Participative Leadership Style:

 Subordinates take part in the decision-making process through consultation.
 The leader delegates a great deal of authority while retaining ultimate responsibility.
 Active two-way communication (upward and downward) exists.
 The democrat leader uses Theory Y assumption as his/her philosophical base for leadership.

III. Laissez-Faire/Free-Rein Leadership Style:

 The leaders generally give the group complete freedom, provide the necessary materials,
participate only to answer questions, and avoid decision-making whenever possible.
 leaders depend largely on subordinates to set their own goals and the means of achieving them, and
they see their role as one of aiding the operations of followers by furnishing them information
 The leader denies responsibility and abdicates authority to the group.

20
5.6. Motivation
The Concept of Motivation
 Motivation represents “those psychological processes that cause arousal, direction, and persistence
of voluntary actions that are goal oriented.
 Motivation is an internal force that energizes behavior, gives direction to behavior, and underlies
the tendency to persist.
 In order to achieve goals, individuals must be sufficiently stimulated and energetic, must have a
clear focus or end in mind, and must be willing and able to commit their energy for a long enough
period of time to realize their aim.
 Motivated individuals work hard, persist and are goal oriented.

Motivation vs Motivators
 Motivators are things, which induce an individual to perform. While motivation reflects wants,
motivators are the identified rewards, or incentives that sharpen the derive to satisfy these wants.

The Motivation Cycle (Process)

The Motivation Process is indicated with the following figure:

1
Need
deficiency

3 Need 2 Goal Directed

behavior
satisfaction

 The starting point in this cycle is a need or a deficiency or a state of felt deprivation an individual
experiences at a particular time.
 This deficiency causes tension (physiological or psychological in balance), which will be modified
by one’s culture and personality to cause certain wants leading/motivating the individual to some
kind of goal directed behavior.
 This leads to satisfaction and one cycle of motivation will be completed.
 From this we can understand that deficiency triggers a drive for need satisfaction, which causes an
individual to take a certain course of action that will alleviate a need and reduce a drive.

Motivation Vs Satisfaction
 Motivation refers to the drive and effort to satisfy a want or a goal. Satisfaction refers to the
contentment experienced when a want is satisfied. In other words, motivation implies a drive
toward an outcome, and satisfaction is the outcome already experienced.

Motivation and Performance

Performance = Ability x Motivation x Environmental conditions
 Motivation is a necessary but insufficient contributor to job performance.
 The above relationship between performance and motivation clearly shows us that managers
should hire individuals who have the ability to do what is required. After that, the management

21
 challenge is providing environmental conditions that nurture and support individual motivation to
work toward organizational goals.
 Keeping other variables constant, motivation and performance have neither positive nor negative
relationship. As motivation increases, job performance increases, reaches its maximum and the
decreases.

5.6.1. Theories of Motivation

 Carrot and Stick Approach
This metaphor relates the use of rewards and penalties in order to induce desired human behavior. It
comes from the old story that to make a donkey move one must put a carrot in front of it and if it
does not move beat it with stick from behind.
Carrot - money in the form of pay or bonuses.
Stick – fear such as fear of loss of job, loss of income, reduction of bonuses demotion or some other
penalty.

Failures of carrot and stick approach

1. Carrot can be obtained by any member of the organization without differentiation in performance
2. Stick in the form of fear is not the best kind of motivating factor.

 Money as a Motivator
Money can be used as a motivator under the following conditions.
For people who have low-level standards of living and who badly need it for their life.
When the amount is so significant that the organization uses it for competitive purposes.
When the payment is so differentiated that even at equal position discriminatory payment is
made for people with different levels of performance.

 Maslow’s Need Hierarchy

Maslow proposed that motivation is a function of needs, and he also proposed that human needs are
arranged hierarchically (in a form of hierarchy). Maslow proposed that human needs form a five-
level hierarchy.

1. Physiological Needs - These are the basic needs for sustaining human life itself, such as food,
water, air, shelter, sleep, etc. Maslow took the position that until these needs are satisfied to the
degree necessary to maintain life, other needs will not motivate people.
2. Safety /Security Needs - When physiological needs are satisfied, safety needs become a priority as
a motivator. Safety needs include freedom from fear and anxiety, job security, desires for retirement
and insurance programs and so on.
3. Social/Love/ Affiliation Needs - Once we feel reasonably safe and secure, we turn our attention to
relationships with others in order to fulfill our belongingness needs, which involve the desire to
affiliate with and be accepted by others i.e. the need for friendship, companionship, and a place in a
group. Love needs include both giving and receiving.
4. Esteem Needs - Esteem needs include the desire for both self-esteem (self-respect) and public
esteem, and recognition by others. These needs take two different forms. First, we have a need for
competency, confidence and independence. We also want the prestige, status, recognition and
appreciation that others bestow on us.

22
 5. Self-Actualization/Realization Needs - refers to the need for fulfillment, the desire to become
what one is capable of becoming-to maximize one’s potential and to accomplish something..

 Maslow’s theory suggested that people must satisfy lower-level (physiological needs) before
working toward higher-level needs.
 Maslow’s hierarchy, although intuitively appealing and frequently used in management training,
has not found widespread support from management researchers.
 People vary in their need emphasis. Some may seek social-need satisfaction, while others may
emphasize esteem needs or self-actualization needs. Thus, each individual may respond
differently to organizational characteristics.
 The steps in Maslow’s hierarchy may not be necessarily experienced in a sequential manner.
People may have more than one need at the same time. Situations detect which needs are most
important at a given point in time.

 Herzberg’s Two Factor Theory

 Herzberg developed a theory known as the two-factor theory of motivation. Traditionally,
managers viewed job satisfaction and job dissatisfaction as opposite ends. In contrast, Herzberg's
findings suggested the opposite of satisfaction is not dissatisfaction, but rather ‘no satisfaction’.

 Herzberg believed that two entirely separate sets of factors contribute to an employee’s behavior at
work.
 Herzberg labeled the factors that produced job satisfaction as motivators. His analysis indicated
these factors are directly related to job content. The absence of motivational factors may not result
in dissatisfaction, but their presence is likely to motivate employees to excel. When motivators are
absent, workers are neutral toward work, but when motivators are present, workers are highly
motivated and satisfied.
 Herzberg labeled the factors that led to job dissatisfaction as hygienes and found they are related
more to the work setting, or job context, than to job content. These factors do not necessarily
motivate employees to excel, but their absence may be a potential source of dissatisfaction, low
morale, and high turnover. When hygiene factors are poor, work is dissatisfying. However, good
hygiene factors simply remove the dissatisfaction; they do not by themselves cause people to
become highly satisfied and motivated in their work.

Herzberg's Motivators and Hygiene's

Motivators Leading to Job Hygienes Leading to
satisfaction Dissatisfaction
• Achievement • Policies and administration
• Recognition • Supervision
• Work it self • Relations with peers
• Responsibility • Working Condition
• Advancement • Pay
• Personal growth • Job Security

23
5.7. Communication in Organizations
Communication is the process of transmitting information among two or more people. It is the glue
that holds organizations together. Communication assists organizational member to accomplish both
individual and organizational goals, implement and respond to organizational change, coordinate
organizational activities, and engage in virtually all organizational relevant behaviors.

5.7.1. Formal and Informal Communications

Formal communication - this is a communication, which is intentionally designed by the
organization. Information flows through the formally established channel and is concerned with
work related matters. Formal communication includes; downward communications, upward
communication, horizontal communication, and diagonal communication.
 Vertical communication is communication that involves a message exchange between two or more
levels of the organization hierarchy.
 Downward communication occurs when information is transmitted from higher to lower levels in
an organization. Downward communication starts with top management and flows down through
the management levels to line workers and non-supervisory personnel.
 Upward communication –information flows from the subordinates to the superior. The main
function of upward communication is to supply information to the upper levels about what is
happening at lower levels.
 Horizontal communication is lateral message exchange either within work unit boundaries,
involving peers who report to the same supervisor, or across work unit boundaries, involving
individuals who report to different supervisors. It takes place among departments or people on the
same level of hierarchy.
 Diagonal communication involves the flow of information among departments or individuals on
different levels of the hierarchy. This occurs often in the case of line and staff departments, in
which the staff has functional authority. It is also common to find diagonal communication among
line departments, again in which one of them has functional authority.

Informal Communication
 It is a communication, which is not deliberately designed by the organization. It is rather created
by informal groups in order to satisfy their need to interact and share information among
themselves.
 In the informal communication, information flows in unstructured and unpredictable ways
 Informal communication channel is commonly termed as grapevine because of its structure less
direction of flow. Normally the information which flow in grave vine is considered to be secret or
confidential.

CHAPTER SIX: CONTROLLING FUNCTION

6.1. Definition of controlling

o Controlling is the process through which managers assure that actual activities conform to planned
activities.
o Controlling is the process of regulating organizational activities so that actual performance
conforms to expected organizational standards and goals.
24
 o It is checking current performance against predetermined standards contained in the plans.

6.2. Importance of Controlling

o Adapting to changing conditions: A properly designed control system allows managers to

effectively anticipate, monitor, and respond to often constantly changing conditions.
o Limiting the magnification of errors: a small error/mistake left uncorrected (perhaps one
undetected as a result of a lack of control) may be magnified with the progress of time, eventually
harming the whole organization.
o To prevent failure:. Controlling attempts to prevent failure (and to promote success) by
providing the means to monitor the performances of individuals, departments, divisions, and the
entire organization.

6.3. The Controlling Process

Although control systems must be tailored to specific situations, such systems generally follow the
same basic process. The controlling process has five major steps.

1. Determine Areas to Control: The first major step in the control process is determining the major
areas to control, i.e. identify critical control points.
 Critical control points include all the areas of an organization's operations that directly affect the
success of its key operations, areas where failures cannot be tolerated, and costs in time and
money are greatest..
2. Establishing Standards: Standards are units of measurements established by management to
serve as benchmarks for comparing performance levels. They spell out specific criteria for
evaluating performance and related employee behaviors. The exact nature of the standards to be
used depends on what is being monitored.
3. Measuring Actual Performance: Once standards are determined, the next step is measuring
performance. For a given standard, a manager must decide both how to measure actual
performance and how often to do so.
4. Comparing Performance against Standards: This is a step where comparison is made between
the “what is” and the “what should be.” The purpose of comparing actual performance against
intended performance is to determine if corrective action is needed.
 Consequently, the comparison result may show that the actual performance exceeds (positive
deviation), meets (zero deviation), or falls below (negative deviation) expectations (standards).
Accordingly, if performance fulfills expectations (meets standards), no control problem exists.
 However, if performance exceeds or fails to meet expectations, further investigation is required
to determine the cause.
 Performance that exceeds expectations may mean either superior talent or inappropriately set
standards.
 Performance that fails to meet expectation may likely mean inappropriately set standards, poor
talent or improper use of resources.
5. Taking Corrective Action (on time): The corrective action to be taken depends up on the type of
deviation that exists. When performance exactly meets (deviation of zero) or exceeds (positive
deviation) the standards set, usually no corrective action is necessary.

25
 6.4. Types of Controlling
In addition to determining the areas they want to control, managers need to consider the types of
controls that they wish to use. Based on the time period in which control is applied in relation to the
operation being performed, or the stage of productive cycle in which controlling is carried out, there
are three basic types of controls: preventive, concurrent, and feedback. Thus, an organization’s
performance can be monitored and controlled at three points: before, during, or after an activity is
completed.

I. Preventive/Steering/ preliminary/ input Control: Preventive control focuses on the regulation of

inputs to ensure that they meet the standards necessary for the transformation process. It attempts to
monitor the quality and/or quantity of resources (financial, physical, human and information) before
they become part of the system. Preventive control is future oriented and takes place before the
operation begins. It focuses on prevention in order to preclude later serious difficulties in the
production process - its aim is to prevent problems before they arise. Nevertheless, since preventive
control can’t cover every possible contingency, other type of controls may also be needed.

E.g. Entrance exams for colleges and universities, policies, rules, procedures, proper selection and
training of employees, inspecting raw materials, the implementation of induction and orientation
programs-save trial and error cost, frustration of employee. Preventive control comes from an old
saying “A gram of prevention is worth a kg of cure.”

II. Concurrent/Screening/ Yes-No/Checking Control: Concurrent control involves the regulation of

ongoing activities that are part of the transformational process to ensure that they conform to
organizational standards. It is designed to detect and anticipate deviations from standards at various
points throughout the processes, i.e. the controlling is carried out during the actual transformation
process. The emphasis here is on identifying difficulties in the productive process that could result
in faulty outputs. Because concurrent controls involve the monitoring of ongoing activities, they are
the only controls that can cope with contingencies (unexpected events) that cannot be anticipated.
When contingencies arise involving activities in a transformation process, a yes/no decision is
required. That is, decision must be made whether to continue as before or follow an alternative
course, or take corrective action, or stop work altogether. In this way, concurrent controls allow
adjustments to be made while work is being done.

E.g. On the job training, on the spot observation, mid term exams, tests, quizzes

III. Feedback/Post-Action/ Output Control: As the name indicates post action control focuses on the
end results of the process. It is regulation exercised after the product (goods or services) has been
completed in order to ensure that the final output meets organizational goals and standards. The
information derived is not used for corrective action on a project because it has been completed.

The feedback control provides information for a manager to examine and apply to future activities
that are similar to the present one. That is why it is called “historical results guide future actions.”
The purpose of feedback control is to help prevent mistakes in the future and also it can be used as a
base for reward; and in cases where other (preliminary & concurrent) controls are too costly.

26
E.g. Performance evaluation, financial statement analysis, final exams

Cybernetic and Non-cybernetic Controls

A basic control process can be either cybernetic or non-cybernetic, depending on the degree to which
human discretion is part of the system. A cybernetic control system is a self-regulating control
system that, once it is put into operation, can automatically monitor the situation and take corrective
action when necessary. E.g. computerized inventory system, a heating system controlled by a
thermostat. A non-cybernetic control system is a control system that relies on human discretion as
a basic part of its process.

Characteristics of Effective Control System

Controls may have many different characteristics, but some of the most important are:

o Future–Oriented: To be effective, control systems need to help regulate future events, rather than
fix blame for past events. A well designed control system focuses on letting managers know how
work is progressing toward unit objectives, pinpointing unforeseen opportunities that might be
developed – all aids to future action
o Multidimensional: In most cases, control systems need to be multidimensional in order to capture
the major relevant performance factors, such as, quality, quantity, overhead, etc.
o Economically Realistic (Cost Effective): The cost of implementing a control system should be
less, or at most, equal to the benefits derived from the control system. The benefits received from
controls should off-set their expenses.
o Accurate: Since control systems provide the basis for future actions, accuracy is vital. Control data
that are inaccurate may be worse than no control at all, since managers may make poor decisions on
the basis of faulty data they believe to be accurate. An inaccurate data from a control system can
cause the organization to take action that will either fail to correct a problem or create a problem
when none existent. Evaluating the accuracy of the information they receive is one of the most
important control tasks that managers face.

o Acceptable to Organization Members: Control systems operate best when they are accepted by
the organization members who are affected by them. Otherwise, members may take actions to
override and undermine controls; i.e. controls will not work unless people want them to. Too many,
arbitrary, too few and too rigid controls often cause the satisfaction and motivation of employees to
decline.

o Timely: Control systems are designed to provide data on the state of a given production cycle or
process as of a specific time. In order for managers and employees to respond promptly to
irregularities, control systems must provide relevant information soon enough to allow corrective
action before there are serious consequences.
o Reliability and Validity: Controls not only must be dependable (reliable), but also must measure
what they intend to measure (must be valid). When controls can’t be relied on and are invalid, they
are unlikely to be trusted and can lead to very bad consequences.

27
o Monitor-able: Another desirable characteristic of control system is that they can be monitored to
ensure that they are performing as expected. One way of checking a control system is to
deliberately insert an imperfection, such as a defective part, and then observe how long it takes the
system to detect and report it to the correct individual.

o Organizationally Realistic: The control system has to be compatible with organizational realities.
All standards for performance must be realistic. Status differences between individuals have to be
recognized. Individuals have to be able to see a relationship between performance levels they are
asked to achieve and rewards that will follow.

o Flexible: Just as organizations must be flexible to respond rapidly to changing environments,

control systems need to be flexible enough to meet new or revised requirements. Accordingly, they
should be designed so that they can be changed quickly to measure and report new information and
track new endeavors.

o Focus on Critical Control Points: Critical control points include all the areas of an organization’s
operations that directly affect the success of its key operations. The focus should be on those areas
where failures cannot be tolerated and where that costs in time and money are the greatest.

o Easy to Understand: Complexity often means lack of understanding. The simpler the control, the
easier it will be to understand and apply. Controls often become complex because more than one
person is responsible for creating, implementing or interpreting them.

o Emphasis on Exception: A good system of control should work on the exception principle, so that
only important deviations are brought to the attention of management. In other words management
does not have to bother with activities that are running smoothly. This will ensure that managerial
attention is directed towards error and not towards conformity. This would eliminate unnecessary
and uneconomic supervision, marginally beneficial reporting and waste of managerial time.

Over-control Vs Under-control
Since excessive amount of control can make the occurrence of dysfunctional aspects of control
systems more likely, managers need to avoid over control. Over-control is the limiting of
individual job autonomy to such a point that it seriously inhibits effective job performance. At the
same time, managers need to avoid going too far in the other direction, which results in a situation
of under-control. Under-control is the granting of autonomy to an employee to such a point that the
organization loses its ability to direct the individual's efforts toward achieving organizational goals.

Determining the appropriate amount of control that should exist in organizations is a significant
management decision. With the appropriate amount of control, a manager can be reasonably certain
that no major unpleasant surprises will occur and that employees will achieve organizational goals.

28