Principles Of Management

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: First Semester
Name of the Subject:
PRINCIPLES OF MANAGEMENT
UNIT- I

Definition of Management
Management
The process of getting things done, effectively and
efficiently, through and with other people
Efficiency
Means doing the thing correctly; refers to the
relationship between inputs and outputs; seeks to
minimize resource costs
Effectiveness
Means doing the right things; goal attainment

The Functions of Management
Managers
Planning
activities to
achieve the
organization's
objectives
Organizing
resources and
activities to
achieve the
organization’s
objectives
Staffing
the
organization
with qualified
people
Directing
employees’
activities
toward
achievement
of objectives
Controlling
the
organization’s
activities
to keep it
on course

Management Process
Planning
Includes defining goals, establishing
strategy, and developing plans to
coordinate activities
Organizing
Includes determining what tasks
to be done, who is to do them,
how the tasks are to be
grouped, who reports to
whom, and where
decisions are to be made

Management Process (Contd)
Leading
Includes motivating employees,
directing the activities of others,
selecting the most effective
communication channel, and
resolving conflicts
Controlling
The process of monitoring
performance,
comparing it with goals, and
correcting any significant
deviations

Characteristics / Features
• Universal
• Purposeful / Goal oriented
• Integrative force: integrates human and
physical resources
• Social process
• Multidisciplinary
• Continuous process
• Intangible
• Art as well as science

Objectives
• Facilitates achievement of objectives
• Optimum utilisation of resources
• Promotes effectiveness
• Development of analytical and conceptual ability of
managers
• Adequate return on capital
• Satisfied workforce
• Economic and social development

Levels Of Management: The
pyramid to the top
• Top level
• Middle level
• Front line supervision
• Non-managerial work force

Organizational Levels

Mintzberg’s Managerial Roles
• Interpersonal
 Figurehead
 Leader
Liaison
• Informational
 Monitor
 Disseminator
 Spokesperson
• Decisional
 Entrepreneur
 Disturbance hander
 Resource allocator
 Negotiator

Development of Management Thought
• Management thought refers to the theories that guide
management of people in the organisations
• Initially, these theories developed out of practical
experience of managers in the industrial enterprises.
Later on, they borrowed ideas from other fields of study
like science, anthropology, sociology etc.

Management Theories
 Pre-scientific theories
 Classical theories
a. Taylor’s scientific management theory
b. Fayol’s administrative theory
c. Weber’s bureaucracy theory
 Behavioral theories
a. Human relations theory
b. Behavioral science theory
 Modern management theories
a. Quantitative theory
b. Systems theory
c. Contingency theory
d. Operational theory

Pre-scientific Management Theories
Important contributions are made by
-Charles Babbage
-James Montgomery
-Robert Owen
-Andrew Ure
-Charles Dupin
-Henry Robinson Towne
-James Watt and Mathew Robinson Boulton Watt
-Captain Henry Metcafe
These theories solved specific organizational problems but
these are not universally accepted theories that can be
applied to all organisations

Classical Theories
They represent early works on management and focus on
increasing industrial output by providing financial
incentives to employees. The classical approach was
developed through three main streams: Scientific
management, Administrative theory and Bureaucracy

Taylor’s scientific theory
Taylor developed his theory on the basis of his work
experience in three companies: Midvale Steel works,
Simond Rolling mills and Bethlehem Steel company. He is
regarded as Father of Scientific Management.
He focused on finding the best way to do the job by
eliminating wastage of men and material. He developed
time and motion studies to find optimum time and nature of
operations for successful completion of tasks.
He also introduced differential wage rate system to pay
more to productive workers.

Principles of Taylor’s theory
• Rule of thumb should be replaced with science
• There should be harmony, not discord in group actions.
• Cooperation, not individualism
• Maximum output, not restricted output
• Development of workers to their fullest capacity.

Fayol’s Administrative theory
Fayol focused on managing the organisation as a whole
rather than lower levels of organisation only
His theory revolves around
-Activities of a business: Technical, commercial, financial,
security, accounting and managerial
-Functions of a manager : Planning / organizing /
commanding /coordinating/ controlling.
-Abilities of managers: Physical, Mental, Moral, General
education, special knowledge and Experience
-Principles of management

Principles of management
• Division of work
• Authority and responsibility
• Unity of command
• Unity of direction
• Discipline
• Subordination of individual interest to general interest
• Remuneration
• Centralization
• Scaler chain
• Order
• Equity
• Stability of tenure of personnel
• Initiative
• Espirit-de-corps

Max Weber’s Bureaucracy theory
Max Weber(1864-1920), a German sociologist introduced
the rational-legal authority system/model to manage the
business organizations. His model is characterized by
-Division of work
-Rules and regulations
-Hierarchy of authority
-Technical competence
-Record keeping
-Impersonal relations

Behavioural Theories
• These theories focus on organisational goals along
with satisfaction of human needs.
• Shift in focus from workplace conditions to human
side of the organisation
• People- oriented approach substituted the
production- oriented approach
• Two important theories:
- Human relations theory
- Behavioural science theory

Human relations theory
Elton Mayo, the father of Human relation approach
focuses on increasing organizational productivity by
increasing the morale of workers
Results were obtained through experiments:
- Test room studies
(a) Illumination experiment
(b) Relay assembly room experiment
- Interviewing studies
- Observation studies

Results of the experiment
 Informal groups are important complements to
formal groups
 Social groups are more important than financial
incentives to motivate the workers
 Worker is a social man rather than rational man
motivated by financial incentives
 Work is considered as a group activity and not as
operations performed by individuals.
 Social and psychological factors influence
employee behaviour and productivity more than
physical work conditions

Behavioural Science Theory
• It applies scientific vision to human relations theory
Concepts from Psychology, Sociology and Anthropology
are applied to study human behaviour
 Psychology – Study of individual behaviour
 Sociology – Study of human behaviour in groups
 Anthropology - Study of human behaviour as
individuals and members of groups
Concepts from various disciplines are tested before
applying them in business organisations.

Modern Management Theories
• These theories are responsive to environment changes
• They view organisations as dynamic open systems
having multiple objectives
• Management is multi-disciplinary and draws knowledge
from various fields to solve complex business problems
• They forecast environment changes through scientific
techniques and discount them to the present business
situations
• These theories include:
- Quantitative theory
- Systems theory
- Contingency theory
- Operational theory

Quantitative theory
• It uses the services of quantitative specialists to apply inter-
disciplinary techniques to solve business problems
It includes:
- Management science: it uses mathematical models like PERT,
CPM, games theory etc. to solve business problems
- Operations management: It applies quantitative techniques of
inventory management, stastistical quality control etc. to
manage the production and delivery of goods and services

System Theory
• It takes a broad view of the organisation and views it as
an entity composed of different parts
• The parts are the sub-systems of the organisation and
help to achieve goals of the larger system
• It considers the impact of near and future environment on
organisational activities
• It deals with different fields of study to deal with
different components of society

Components of a System
• Sub-system : each part of the bigger whole is a sub-system
• Synergy : the sum total of parts is less than that of a whole
• Open and Closed system : An open system actively
interacts with the environment ant the closed system has
very little interaction with the environment. Practically all
organisations are open systems
• System boundary : it is the boundary that seperates it
from the environment. It is flexible in case of open system
and non-flexible in case of closed system
• Flow : it represents movement of inputs from the
environment to the system and outputs from the system to
the environment
• Feedback : it helps in knowing the response of the
environment to the organisational outputs

Contingency Theory
• It is not an independent theory of management
• It applies management principles depending on the
situation as there is no single solution to all kinds of
problems
• If workers are skilled, participative style or behavioural
management theory is adopted
• If workers are unskilled, classical management
principles are more appropriate
• Management is situational in nature and applies ‘if’ and
‘then’ approach to management

Operational Theory
• It does not apply a single theory of management
• It takes the best from different theories and unifies
them in a single theory
• Knowledge from different schools of thought can be
applied to different variables of the organisation

Planning
Deciding in advance what to do, how to do it, when to
do it and who is to do it.
Planning is an intellectually demanding process that
requires the conscious determination of courses of action
and the basing of decisions on purpose, knowledge and
considered estimates.
Koontz & O’Donnell
Planning is a process and a plan is the outcome of this
process.

Features of Planning
• Primary function of management
• Adaptive to environment
• Future oriented
• Goal oriented
• Pervasive
• Intellectual process
• Efficient
• Flexible
• Feedback

Process of Planning
• Need for planning
• Identification of goals
• Analysis of present situation
• Identify barriers to planning
• Development of Planning premises
• Developing alternatives
• Evaluation of alternatives
• Selection of best alternatives
• Formulation of derivative plans
• Appraisal of plans

Importance of Planning
•Reduction of uncertainity
•Concentration on objectives
•Coordination
•Economy in operation
•Facilitation of control
•Encouragement to innovation
•Increase in competitive strength

Types of Plans
On the basis of duration of plans
Short range: 2 to 3 years
Medium range : upto 5 years
Long range: more than 5 years
On the basis of levels
Strategic
Tactical
Operational
On the basis of use
Standing plans: objectives, policies, procedures,
methods, rules and regulation
Specific plans: strategies, programmes, projects
and budgets

Limitations of Planning
• Costly
• Curbs the initiative of managers
• Planning in advance is not always the right
course of action
• Rigidities
• Multiple goals
• Too much focus on future
• Delay in action
• False sense of security
• Coordination of other managerial functions

MBO
A process through which specific goals are set
collaboratively for the organisation as a whole and
every unit and individual within it; the goals are
then used as a basis for planning, managing
organisational activities and assessing and
rewarding contributions

Features of MBO
• Participation
• Integration
• Links objectives to performance
• Continuity

Process of MBO
• Develop organizational goals
• Establish specific goals
• Devise action plans
• Maintain self control
• Review the progress
• Appraisal of performance

Advantages of MBO
• Helps in setting realistic goals
• Helps in making planning effective
• Helps in creating an effective communication network
• Facillitates employees involvement
• Improves employer employee relationship
• Promotes the system of self appraisal
• Facillitates control
• Personality development
• Basis of change

Limitations of MBO
• Time, money and effort
• Illusionary approach
• Improper use
• Lack of knowledge to set goals
• Ignorance of long run perspective
• Conflict of opinion
• Lack of top management support
• Flexibility to change

Organisation structure
An organisation structure is a set of planned relationships
between groups of related functions and between physical
factors and personnel required for the performance of the
functions

• Line organization is the most oldest and simplest method of
administrative organization. According to this type of
organization, the authority flows from top to bottom in a
concern.
• The line of command is carried out from top to bottom. This is
the reason for calling this organization as scalar organization
which means scalar chain of command is a part and parcel of
this type of administrative organization. In this type of
organization, the line of command flows on an even basis
without any gaps in communication and coordination taking
place.
Line organisation structure

Line Organisation Structure

Features of Line Organization
• It is the most simplest form of organization.
• Line of authority flows from top to bottom.
• Specialized and supportive services do not take place in
these organization.
• Unified control by the line officers can be maintained
since they can independently take decisions in their areas
and spheres.
• This kind of organization always helps in bringing
efficiency in communication and bringing stability to a
concern.

Line and staff organization
• Line and staff organization is a modification of line
organization and it is more complex than line organization.
According to this administrative organization, specialized
and supportive activities are attached to the line of
command by appointing staff supervisors and staff
specialists who are attached to the line authority.
• The power of command always remains with the line
executives and staff supervisors guide, advice and council
the line executives. Personal Secretary to the Managing
Director is a staff official.

Line and Staff Organisation Structure

Features of Line and Staff Organization
•Line and Staff Organization is a compromise of line organization. It is more
complex than line concern.
•Division of work and specialization takes place in line and staff organization.
•The whole organization is divided into different functional areas to which
staff specialists are attached.
•Efficiency can be achieved through the features of specialization.
•There are two lines of authority which flow at one time in a concern :
Line Authority
Staff Authority
•Power of command remains with the line executive and staff serves only as
counselors.

Functional Organization
• Functional organization has been divided to put the specialists in the
top position throughout the enterprise. This is an organization in which we
can define as a system in which functional department are created to deal
with the problems of business at various levels. Functional authority
remains confined to functional guidance to different departments. This
helps in maintaining quality and uniformity of performance of different
functions throughout the enterprise.
• The concept of Functional organization was suggested by F.W. Taylor
who recommended the appointment of specialists at important positions.
For example, the functional head and Marketing Director directs the
subordinates throughout the organization in his particular area. This means
that subordinates receives orders from several specialists, managers
working above them.

Functional Organisation Structure

Features of Functional Organization
The entire organizational activities are divided into specific
functions such as operations, finance, marketing and personal
relations.
Complex form of administrative organization compared to the
other two.
Three authorities exist- Line, staff and function.
Each functional area is put under the charge of functional
specialists and he has got the authority to give all decisions
regarding the function whenever the function is performed
throughout the enterprise.
Principle of unity of command does not apply to such
organization as it is present in line organization.

Departmentation by Type
• Functional
•Product
•Geographic
•Process
•Customer

Functional Departmentation
Advantages
• Efficiencies from putting together
similar specialties and people
with common skills, knowledge, and
orientations
• Coordination within functional
area
• In-depth specialization
Disadvantages
• Poor communication across functional
areas
• Limited view of organisational goals

Geographic Departmentation
Advantages
• More effective and efficient
handling of specific
regional issues that arise
• Serve needs of unique
geographic markets better
Disadvantages
• Duplication of functions
• Can feel isolated from other
organisational areas

Product Departmenation
Allows specialisation in particular products and services
+ Managers can become experts in their industry
+ Closer to customers
– Duplication of functions

Process Departmentation
+ More efficient flow of work activities
– Can only be used with certain types of products

Customer Departmentation
+ Customers’ needs and problems can be met by specialists
- Duplication of functions
- Limited view of organisational goals

Project Organisation structure
Project organisation is structured to accomplish specific
projects within specified constraints of time, money and
quality.

Matrix Organisational Structure
Matrix organisation is hybrid structure which is a combination
of functional and project structure. Group members of a project
are attached with the project and are also accountable to their
functional heads.

Contemporary Organisational Designs
• Boundaryless organisation
A flexible and unstructured organisational design that is
intended to break down external barriers between the
organisation and its customers and suppliers.
- Removes internal (horizontal) boundaries:
- Eliminates the chain of command
- Has limitless spans of control
- Uses empowered teams rather than departments
- Eliminates external boundaries:
- Uses virtual, network, and modular organisational
structures to get closer to stakeholders.

• Virtual organisation
An organisation that consists of a small core of full-time
employees and that temporarily hires specialists to work on
opportunities that arise.
• Network organisation
A small core organisation that outsources its major business
functions (e.g., manufacturing) in order to concentrate what it
does best.
• Modular organisation
A manufacturing organisation that uses outside suppliers
to provide product components for its final assembly
operations.

UNIT- III

Motivation has been defined as a desire or need which directs
and energizes behavior that is oriented towards a goal. It’s a
process of stimulating people to action to accomplish desired
goals
The process that arouses, directs and maintains behaviour
towards attaining some goal
Components of Motivation:
Arousal (intensity) – how hard a person tries
Direction (focus) – towards a goal
Maintenance (persistence) – how long a person tries
Motivation

Motivation theories
Content theories
focus on ‘what’
motivates people, i.e.,
identifying the specific
motives that people
have
-Hierarchy of Needs
-ERG theory
-Motivation-Hygiene
-Theory X-Y
-McClelland’s theory of
Needs
-Murray’s manifest need
Process theories
focus on ‘how’ a motive
translates into behaviour,
i.e., identifying underlying
cognitive processes that
people engage in
-Goal Setting theory
-Self Efficacy theory
-Equity theory
-Expectancy theory
-Porter and lawler -
Expectancy model

Maslow need Hierarchy theory(cont..)
Hierarchy of Needs
Theory
There is a hierarchy of five
needs— physiological,
safety, social, esteem, and
self-actualization; as each
need is substantially
satisfied, the next need
becomes dominant

Hierarchy of Needs (Maslow,1954)

ERG Theory (Clayton Alderfer)
ERG Theory
There are three groups of core needs: existence, relatedness,
and growth.
Core Needs
Existence: Provision of basic
material requirements
Relatedness: Desire for
relationships
Growth: Desire for personal
development
Concepts:
More than one need can be
operative at the same time
If a higher level need cannot
be fulfilled, the desire to
satisfy a lower level need
increases.

Hygiene factors
(job dissatisfaction)
Factors associated with
conditions surrounding work
•Policy and administration
•Quality of Supervision
•Interpersonal Relations
•Working conditions
•Salary
•Job Security
Two-Factor Theory (Herzberg, 1966)
Motivation factors
(job satisfaction)
Factors associated with the
work itself
•Achievement at work
•Recognition
•Nature of the job
•Responsibility
•Promotion opportunities
•Personal growth

Theory of Needs (McClelland,1961, 1975)
• Focuses on three needs lying behind human behaviour
• Need for Achievement (nAch): the need to excel or
succeed in areas of significance to the person – desire to
do things better or more efficiently
• Need for Power (nPow): the need to control the
activities of other people – desire to have impact, to be
influential, to be “in charge”
• Need for Affiliation (nAff): the need to interact with
and be liked by other people – desire friendly and
cooperative situations

Theory X and Theory Y (Douglas McGregor)
Theory X
Assumes that employees dislike work, lack ambition,
avoid responsibility, and must be directed and coerced to
perform.
Theory Y
Assumes that employees like work, seek responsibility, are
capable of making decisions, and exercise self-direction and
self-control when committed to a goal.

MC Gregor’s theory X and Y(cont…)
X- traditional theory
Man by nature are
sluggish, shirker and are
afraid of taking
responsibility. They lack
creativity and resist
change.
Strict control, threat and
punishment are used in
order to get work.
Focus on lower level
(physiological and safety)
needs to motivate
workers.
Y-modern theory
Man by nature is
ambitious, self motivated,
creative, responsible and
are capable of directing
their own behavior.
Self-direction and self-
control. Democratic
leadership style is used.
Both lower level and
higher order needs like
social, esteem and self-
actualisation are sources
of motivation.

Murray’s Manifest needs theory
Identified two set of needs
1 Psychogenic Needs : Abasement, Achievement, Affiliation
2 Viscerogenic Needs: Food, Water
Every need has two principal components: Direction and
Intensity. Direction deals with the person that is expected to
satisfy the need. Intensity represents the relative importance
of the need.

Goal Setting Theory Edwin Locke (1968, 1975)
• Basic Premise: That specific and difficult goals, with self-
generated feedback, lead to higher performance
• Goal: a performance target that a group or an individual
seeks to accomplish at work
• Goal Setting: the process of motivating employees by
establishing effective and meaningful performance targets
• Other factors influencing goal-performance relationship
are goal acceptance, goal commitment, nature of task and
national culture

Self-Efficacy Theory (Bandura, 1997)
Individual’s belief that he/she is capable of performing a
task
Can be increased through
• Enactive mastery: gaining experience with task
• Vicarious modelling: observing someone else doing the
task
• Verbal persuasion: gaining confidence through others’
faith/confidence in oneself
• Arousal: energising the self towards the goal

Equity Theory (Stacy Adams,1965)
Rooted in Cognitive Dissonance theory of Festinger and
Exchange theory of Homans
Equity: the fairness of treatment of a person compared to
the way that another person is treated
Since there are no absolute criteria of fairness, people
normally evaluate how fairly they are treated by making
comparisons with others in similar circumstances
Equity theory: holds that an individual’s motivation to
put effort into a task will be influenced by perceptions of
whether the rewards obtained are fair in comparison to
those received by other people

Anchored in the works of pioneering psychologists Kurt Lewin
and Edward Tolman and in the choice behaviour and utility
concepts of classical economic theory
- Common assumptions
In choosing different courses of action, people are influenced
by:
• Expectations of whether the action will result in a
favourable outcome for themselves and
On the attractiveness of the outcome
Other things being equal people will try to behave in a way that
gives the maximum return to themselves
Expectancy Theory

Expectancy Theory
The strength of a tendency to act in a certain way depends on the strength of an
expectation that the act will be followed by a given outcome and on the
attractiveness of that outcome to the individual
• Individuals must feel that if they try, they can perform and
• If they perform, they will be rewarded and
• When they are rewarded, the reward will be something they care
about.

Porter & Lawler Expectancy Model (1968)
A development of Vroom’s idea
Includes additional features that enhance the explanatory
power of the expectancy concept
• Personal abilities and traits
• Degree of fit between perceptions of role and demands
of performance
• Intrinsic and Extrinsic rewards
• Perceptions of the equitability of rewards

Leadership
The ability to influence a group toward the achievement of goals.
Leadership

Nature of leadership
• Leadership is a process of influence.
• Style of leadership depends upon the nature of the
followers or subordinates.
• Leadership is related to situation.
• Leadership is the personal quality of manager.

Importance of leadership
•Motivating employees
•Creating confidence
•Provides inspiration to employees—creates a strong
urge in employees for higher performance.
•Securing cooperation
•Building higher morale
•Facilitation of change

Charismatic Leadership Theory
• Followers make attributions of heroic or extraordinary
leadership abilities when they observe certain behaviors
People working for charismatic leaders are motivated to
exert extra work effort and, because they like and respect
their leaders, express greater satisfaction
• Charisma leadership appears to be most appropriate
when the followers’ task has a ideological component or
when the environment involves a high degree of stress and
uncertainty

Following traits should be there in a leader to become
successful:
• Physical features—height, weight, health, physique and
appearance
• Intelligence—ability to think scientifically, analyze accurately
& interpret clearly & precisely the problems before them.
• Emotional stability
•Technical skills
Trait Theory

•Communicative skills
•Inner motivation drive—intense achievement type
motivational drives.
•Fairness and objectivity in dealing with subordinates
•Human relations attitude—develop social understanding with
other people.
•Vision and foresight
•Empathy

Behavioural Theory
Emphasizes that strong leadership is the result of effective
role behaviour—success in leadership depends more on what
the leader does than on his traits.
Assumes people can be trained to lead
Provides the basis of design for training programs

Styles of Leadership
• Autocratic leadership
-Exploitative autocrat
-Benevolent autocrat
-Consultative autocrat
• Democratic leadership
• Laissez faire or free rein leader

Communication
The process through which transference and the understanding of
meaning is being done.
Communication Functions
1.Control member behavior.
2.Foster (development) motivation for what is to be done.
3.Provide a release for emotional expression.
4.Provide information needed to make decisions.
5.Foundation of success of any manager. (Mintzberg’s all role
needs good communication eg. Interpersonal role, informational
and decisional role).
Communication

Elements of the Communication Process
1. The sender 2. Encoding 3. The message
4. The channel 5. Decoding 6. The receiver
7. Noise 8. Feedback

Direction of Communication
Upward Downward Lateral

Interpersonal Communication
• Oral Communication
Advantages: Speed and feedback.
Disadvantage: Distortion of the message.
• Written Communication
Advantages: Tangible and verifiable.
Disadvantages: Time consuming and lacks/delay feedback.
• Nonverbal Communication (body language, facial expression,
gesture = motion of body, hand, head to emphasize their ideas)
Advantages: Supports other communications and provides
observable expression of emotions and feelings.
Disadvantage: Misperception of body language or gestures can
influence receiver’s interpretation of message.

Barriers to Effective Communication
Filtering
A sender’s manipulation of information so that it will be
seen more favorably by the receiver.
Selective Perception
People selectively interpret what they see on the basis of
their interests, background, experience, and attitudes.
Information Overload
A condition in which information inflow exceeds an
individual’s processing capacity.

Barriers to Effective Communication (cont’d)
Emotions
How a receiver feels at the time a message is received will
influence how the message is interpreted.
Language
Words have different meanings to different people.
Communication Apprehension
Undue tension and anxiety about oral communication, written
communication, or both.

UNIT- IV

Controlling
Organizational control is the process of assigning,
evaluating, and regulating resources on an ongoing basis
to accomplish an organization's goals.
“Control is the process of checking actual performance
against the agreed standards of plans with a view to
ensuring adequate and satisfactory performance.” – E.F.L.
Brech

Characteristics of Control
•End function
•Pervasive function
•Forward looking
•Dynamic process
•Related with planning
•Review of past events
•Action oriented
•Continuous process

Significance
• Guide to operations
• Managerial accountability
• Psychological pressure
• Co-ordination
• Corrective action
• Decision making
• Better planning
• Effective supervision

Limitations
• External factors viz. technological change, govt. policies,
changes in fashion, etc. cannot be controlled
• Employees often resist control, thus reducing its
effectiveness
•Expensive process requiring lot of time and effort
•Ineffective if standards cannot be quantified

Controlling Process

Controlling Process
• Establish standards to measure performance
-Quantitative standards
-Cost standards
-Revenue standards
-Time standards
-Qualitative standards: for goodwill, employee
morale, industrial relations: intangible
•Measure actual performance
•Compare performance with the standards
•Take corrective actions
•Follow-up / feedback

• To measure progress
• To uncover deviations
• Make plans effective
• Make sure that organizational activities are consistent
• Make organizations effective & efficient
• Provide feedback on project status
• Aid in decision making
Purpose of Controlling

Planning vs Controlling
Interdependence
Planning is meaningless without control and
control is blind without planning
Difference
1. Planning is looking ahead whereas controlling is
looking back: partially correct
2. Planning is the first function and controlling is the
last function of management

Effective Control Systems
•Focus on critical points
•Integration into established processes
•Acceptance by employees
•Availability of information when needed
•Economic feasibility
•Accuracy
•Comprehensibility

• Historical or feedback control: traditional, post action
control, results are measured after performance
• Concurrent control: real time or steering control, involves
monitoring and adjusting ongoing activities and processes to
ensure compliance
• Feedforward control: predictive control, pre-control, control
system anticipates problems that management is likely to
encounter in future and identifies the steps to be taken to
overcome them
Types of Control

Feedback control Concurrent
control
Feedforward
control
Focus on end
results
Monitors ongoing
operations to
ensure that
objectives are
pursued
Focus on
preventing
deviations in the
quantity and
quality of
resources used
Focus of corrective
action is on results
Focus of corrective
action is on
activities
Focus of corrective
action is on
resources
Corrects problems
after they occur
Correct problems
as they occur
Anticipate
problems

Techniques
Traditional aids
• Personal observation
• Unity of objectives, policies, procedures & methods
• Statistical reports and analysis: averages, percentages,
ratios, correlation, etc. for control of production,
quality, inventory, etc.
• Break even analysis
• Budgetary control
Modern Aids
• Management audit
• Return on investment
• Responsibility accounting
• PERT & CPM

Breakeven Analysis
•It is a technique used by managers to study the
relationship between costs, volume and profits.
•Breakeven point can be calculated with the help of the
following formula:
• Breakeven Point = Fixed Costs/(Selling price per unit –
Variable cost per unit)

Budgetary control is a technique of managerial control in
which all operations are planned in advance in the form of
budgets.
Budgetary Control
Benefits of Budgetary Control
 Focuses on specific targets
 A source of motivation
 Optimum utilisation of resources
 Coordination

Types of Budgets
•Sales budget
•Production budget
•Raw material budget
•Expenses budget
•Cash budget
•Capital expenditure budget
•Master budget
•Flexible budgeting
•Zero based budgeting

Control Through Costing
- Costing indicates what is the approximate cost of a
process or a product under existing conditions
- Control through costing involves the control over costs
in the light of certain pre-determined costs usually known
as standard costs.

Responsibility Accounting
Responsibility centers are of the following types:
 Cost Centre: targets are laid down in terms of costs. The
performance of the centre is evaluated by comparing the actual
expenses with the budgeted costs
 Revenue Centre
 Profit Centre: targets are laid down in terms of profits.
Performance is appraised by comparing by comparing the profits
actually earned with the target profit.
 Investment Centre: responsible not only for costs and profits
but also for the assets used. The investment made in each centre is
ascertained and return on investment is used as the basis for judging the
performance of the centre.

• Programme Evaluation and Review Technique
• Visual network for planning, monitoring and controlling
complex and unique projects
PERT

CPM
• Critical path method
• Assume that the duration of every activity is
constant and only one time estimate is made for
every activity
• Focus on cost

Inventory Control
- supervision of supply, storage and accessibility of items in
order to insure an adequate supply without excessive
oversupply
A.B.C. Analysis
 ‘A’- high value and small in numbers
 ‘B’- moderate value and moderate in number
 ‘C’- small in value and large in number

Overall Controlling Techniques
 Financial Ratio Analysis: for better understanding
of firm’s position and performance
4 groups of ratios
 Liquidity Ratios
- Current Ratio
- Liquid Ratio
 Activity Ratios
- Inventory Turnover Ratio
- Fixed Assets Turnover Ratio

Overall Controlling Techniques (Contd)
 Leverage Ratios
- Debt-equity Ratio
- Capital Gearing Ratio
 Profitability Ratios
- Profit on Sales Ratio
Limitations
 Do not provide standards
 Different firms adopt different ways

 Return On Investment : rate of return that firms are able
to earn on their capital employed.
 ROI measures the earnings of firm as a percentage of its
capital.
Advantages
Provides a step towards optimum utilization of capital
resources
Measures overall efficiency of the firm
Disadvantages
Do not tell what the optimum rate of return should be
Inflationary economy, so the problem of price adjustment
becomes more acute

 Management Audit
Management audit is an evaluation of management as a
whole.
 Management audit can be conducted by external agency
such as management consultants or by internal agency in
the form of management audit cell(MAC).
 Problems in management audit :
 Its scope and procedures
 People who should conduct it
 The person to whom the audit report should be
submitted

Inspite of various difficulties involved in its operations,
provides the way to measure the effectiveness of
management as a whole. It works as an important and
effective control tool.
 Human Resource Accounting :
- Provides tools for valuation of human resources and
measures
to take appropriate actions.
- Objective is to provide information to monitor the
effectiveness of human resource utilization.

 Problems
 Attempts to measure intangibles
 No well set standards are there to value
 Based on assumption that employees remain with the organization
for certain specific period
 Information System
An information system can be any organized combination of people,
hardware, software, communication networks and data resources that
collects, transform and disseminates information in an organization.
 Types of information system
 Transaction Processing System
 Management Information System

 Decision Support System
 Executive Information System
 Expert System
 Limitation is it’s a very costly affair to develop an
information system and also a quite complex
procedure to develop

Quality Circle
Quality circle is basically a small group of employees –
who volunteer to meet regularly to undertake work related
projects- quality, productivity, safety, efficiency, cost,
working conditions etc & evolve recommendations to
improve effectiveness in the selected functional area.
The size of the quality circle is important-both too big and
too small should be avoided. In big group everybody will
not get enough opportunities to participate & in too small
group someone may dominate.

Basic Principles Of Quality Circle
• Every job is capable of being improved.
• People do not resist change, they resist being externally changed.
• Every employee is capable of attaining excellence in his work & the basic
ability to improve the job.
• People like to improve their job and derive satisfaction out of it provided
they are involved through human touch, recognition & reward for work.
• People like to participate in groups and crave for attention.
• People have integrity and can be highly creative.
• A man who does the job knows best about the job at least they know the
problems of the job.

Operation Of Quality Circle
1. Formation of the circle.
2. training of the members.
3. Problem identification & problem selection.
4. Problem analysis.
5. Recommendation.
6. Management presentation.
7. Review & decision by the management.
8. Implementation.
9. Monitoring the effect.

Total Quality Management
• Meeting the requirements of the customers consistently by
continuous improvement in the quality of work of all
employees
• TQM is a management philosophy that seeks to integrate all
organizational functions (marketing, finance, design,
engineering, and production, customer service, etc.) to focus
on meeting customer needs and organizational objectives.
•The simple objective of TQM is "Do the right things, right
the first time, every time".

QUALITY SYSTEM
Management commitment
Team work,Quality tools &
techniques
Participation
TQM Model

TQM Activities
• Commitment by senior management and all employees
• Meeting customer requirements
• Reducing development cycle times
• Just In Time/Demand Flow Manufacturing
• Improvement teams
• Reducing product and service costs
• Systems to facilitate improvement
• Line Management ownership
• Employee involvement and empowerment
• Recognition and celebration
• Challenging quantified goals and benchmarking
• Focus on processes / improvement plans
• Specific incorporation in strategic planning

Principles Of Management

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Principles Of Management

Similar to Principles Of Management (20)

More from cpjcollege

More from cpjcollege (20)

Recently uploaded

Recently uploaded (20)

Principles Of Management