SHEATGROUPOFINSTITUTIONS,
BABATPUR,VARANASI
BUSINESS
MANAGEMENT
UNIT-4
BYMS.AAYUSHEEKESHARI
(SCHOOLOFBUSINESS)
ASSISTANTPROFESSOR
UNIT-4(NOTES)
CONTROLLING
Controlling in management is the process of ensuring that actual
performance aligns with planned standards, taking corrective actions
when necessary. It involves setting standards, measuring performance,
comparing actual results with standards, analyzing deviations, and
taking corrective actions. This function helps organizations achieve their
goals by ensuring efficiency, effectiveness, and the efficient use of
resources.
Key aspects of the controlling concept:
● Setting Standards: Establish clear benchmarks or targets for
performance.
● Measuring Performance: Monitor and track actual results against
the established standards.
● Comparison: Compare the actual performance with the
pre-determined standards to identify any deviations.
● Analysis: Analyze the causes of any deviations to understand the
reasons behind them.
● Corrective Action: Take necessary steps to address any identified
deviations and ensure that the organization stays on track to achieve its
goals.
Importance of Controlling:
Achieving Organizational Goals:
Ensures that activities align with planned objectives, leading to
successful goal attainment.
Improving Efficiency and Effectiveness:
Helps in optimizing resource utilization and ensuring that operations are
carried out efficiently.
Motivation and Discipline:
Creates a sense of order and discipline, potentially leading to increased
employee motivation and commitment.
Identifying and Addressing Problems:
Allows for early identification and correction of deviations, preventing
potential issues from escalating.
Evaluation of Standards:
Provides a mechanism for evaluating the accuracy and effectiveness of
the established standards.
CHARACTERISTICSOFCONTROLLING
Nature of Controlling
1. Controlling is a goal-oriented function of management. It aims at
ensuring that the resources of the organisation are used effectively and
efficiently for the achievement of pre-determined organisational goals.
2. Controlling is a continuous process. It means that once the actual
performance and standard performance of a business are compared
and corrective actions are taken, the controlling process does not end.
Instead, the firms have to continuously review the performance and
revise the standards.
3. Controlling is all-pervasive. It means that the controlling function is
exercised by the firms at all levels of management. The extent of
control and nature of the function may vary at every level. Also,
a controlling process is required in both non-business and business
organisations.
4. Controlling process is both
a forward-looking and backward-looking function. As a
forward-looking function, it aims at improving the future performance
of an organisation on the basis of its past experiences. However, as a
backward-looking function, it measures and compares the actual
performance and planned performance (fixed in past) of the
organisation.
Importance of Controlling
Controlling function is important for every organisation due to the
following reasons:
1. Accomplishing Organisational Goals
Controlling is a goal-oriented process as it aims at determining whether
the pre-determined plans are being performed accordingly and whether
required progress is made towards the achievement of the objectives.
With the help of controlling, an organisation can keep the business
activities on the right track and can achieve the organisational goals
effectively and efficiently, and take the necessary corrective actions if
required.
2. Judging Accuracy of Standards
An effective controlling process can help an organisation in verifying
whether or not the firm has set the standards accurate. It also helps in
keeping a check on the changes taking place in the business
environment and making required changes in the standards whenever it
is necessary.
3. Making Efficient Use of Resources
Controlling helps an organisation in reducing wastage of resources, as
it aims at ensuring that every activity of the firm is performed according
to the pre-determined goals.
4. Improving Employee
As controlling process includes comparing the pre-determined goals of
an organisation with its actual performance, it properly communicates
the role of employees in advance. It means that the employees know in
advance on what standards their performance will be measured,
compared, and appraised. This set of pre-determined goals motivates
them to give a better performance.
5. Ensuring Order and Discipline
An efficient control system in an organisation can help its managers in
creating an atmosphere of discipline and order in the firm. Besides,
controlling also helps in keeping a continuous check on the employees
so they can minimise undesirable activities, such as theft, corruption,
fraud, etc.
6. Facilitating Coordination in Action
Controlling process also helps an organisation in facilitating
coordination between different divisions and departments by providing
the employees with unity of direction. In other words, every employee
and department of the organisation is governed by a pre-determined
set of goals. It also motivates employees in achieving these common
goals through coordination to avoid duplication of efforts.
PROCESS OF CONTROLLING
Controlling means comparing the actual performance of an
organisation with the planned performance and taking corrective
actions if the actual performance does not match the planned
performance. Controlling cannot prevent the deviation in actual and
planned performance; however, it can minimise the deviations by taking
corrective actions and decisions that can reduce their recurrence.
Process of Controlling
Different steps involved in the process of controlling are as follows:
1. Setting Performance Standards
The first step of the process of controlling is to establish standards of
performance against which the actual performance of the organisation
is measured. An organisation should clearly define its standards to the
employees and must establish attainable, understandable, and realistic
standards to be achieved. Standards can be set in quantitative terms as
well as qualitative terms. Under quantitative terms, the standards of an
organisation are expressed in quantitative terms like units of the
product to be produced and sold, revenue to be earned, the cost to be
incurred, etc. While setting the quantitative standards an organisation
should keep them precise so as to easily compare the actual
performance with the standards.
2. Measurement of Actual Performance
Once the organisation has established the standards, the second step
of the process of controlling is to measure the actual performance in a
reliable and objective manner. The actual performance of an
organisation can be measured through different techniques such as
sample checking, personal observation, etc., and should be measured
in the same units in which the standards are fixed to make the
comparison easy. Usually, the actual performance is measured at the
end of the performance. However, in some cases, organisations
measure performance throughout the performance.
3. Comparison of Actual Performance with Standards
The third step of the process of controlling is to compare the actual
performance of the organisation with the established standards (in the
first step). By comparing the actual performance with the standards, an
organisation can determine the deviation between them. When the
standards are expressed in quantitative terms, it becomes easy for the
organisation to make comparisons as there is no subjective evaluation
required. For example, it is easy for an organisation to compare the
number of units sold in a month against the set standard. However, the
comparison between the set standard for the motivation of employees
with its actual performance is difficult.
4. Analysing Deviations
The actual performance and set standards of an organisation rarely
match with each other. Usually, there is always some variation between
the expected and actual performance. Therefore, the fourth step of the
process of controlling is to analyse the deviations. To do so, an
organisation must fix an acceptable range of deviation in performance.
Besides, an organisation should focus more on the significant deviation
and less on the minor deviations. For this, managers of an organisation
usually take the help of Critical Point Control and Management by
Exception.
EFFECTIVE CONTROL SYSTEM
An effective control system helps ensure an organization achieves its
goals by setting standards, measuring performance, and taking
corrective action when deviations are detected. It should be tailored to
the organization, focus on critical areas, be objective and flexible, and
foster continuous improvement.
Here's a more detailed look at the key aspects of an effective control
system:
Key Characteristics:
Clear Objectives and Standards:
Establish specific, measurable, achievable, relevant, and time-bound
(SMART) goals and standards.
Measurable and Quantifiable Metrics:
Define how performance will be measured against the set standards.
Timely and Relevant Information:
Provide managers with the information they need to make timely
decisions and take corrective action.
Feedback Mechanism:
Establish a system for providing feedback on performance, highlighting
deviations, and identifying areas for improvement.
Flexibility and Adaptability:
Ensure the control system can be adjusted to accommodate changes in
the environment or organizational goals.
Objective and Impartial Evaluation:
Maintain objectivity and avoid biases in the evaluation process.
Clearly Defined Responsibility:
Assign responsibility for setting standards, measuring performance, and
taking corrective action.
Effective Communication:
Ensure that all relevant stakeholders are informed about the control
system and their responsibilities.
Strategic Alignment:
Ensure that the control system supports the organization's overall
strategy and goals.
Appropriate Corrective Action:
Implement corrective actions that address deviations from standards
and improve performance.
TECHNIQUES OF CONTROL
Techniques of controlling in business involve using various methods to
ensure activities align with planned objectives and to take corrective
actions when necessary. These techniques can be broadly categorized
as traditional and modern, each offering unique approaches to
monitoring and adjusting performance.
Traditional Techniques:
Budgetary Control:
Establishing budgets for different aspects of the business and
comparing actual performance against budgeted figures.
Standard Costing:
Setting standard costs for various activities and comparing actual costs
to these standards.
Break-Even Analysis:
Determining the point at which total revenue equals total costs.
Financial Ratio Analysis:
Analyzing financial statements to assess performance and identify
areas of concern.
Internal Audit:
Regularly evaluating financial and operational processes to ensure
efficiency and compliance.
Direct Supervision and Observation:
Managers directly observing employees and their work to identify areas
for improvement.
Modern Techniques:
Return on Investment (ROI):
Measuring the profitability of investments and using it as a benchmark
for performance.
Responsibility Accounting:
Assigning responsibility for specific costs and revenues to individuals
or departments.
Management Audit:
Evaluating the overall performance of the management team and their
use of resources.
PERT and CPM:
Using project management techniques to plan, monitor, and control
project timelines and resources.
Management Information Systems (MIS):
Utilizing technology to collect, analyze, and report data for informed
decision-making.
Quality Control:
Implementing processes to ensure that products or services meet
predetermined quality standards.
Self-Control:
Encouraging individuals to take responsibility for their actions and make
decisions aligned with organizational goals.
MOTIVATION
The term motivation is derived from the Latin word movere,
meaning “ to move” . Motivation can be referred as a
combination of motive and action. Motivation is an action word
that influences every aspect of our daily lives. Motivation is
fundamental in the level of success an individual attains.
Motivation is the driving force behind our actions, the internal or external
factors that initiate, direct, and sustain our behavior towards a goal. It's
the reason why we do what we do and can be influenced by various
internal needs, desires, and external factors like rewards or societal
expectations. Essentially, motivation is the "push" that gets us started
and keeps us going until we achieve our objectives.
Key aspects of motivation:
Internal vs. External:
Motivation can arise from within (intrinsic) or be influenced by external
factors (extrinsic). Intrinsic motivation stems from the enjoyment of the
activity itself, while extrinsic motivation is driven by rewards or
punishments.
Needs and Desires:
Our underlying needs and desires, such as the need for food, safety, or
belonging, can fuel our motivation to pursue specific behaviors.
Goal-Directed Behavior:
Motivation is often directed towards achieving a specific goal, and the
strength of our motivation can influence how we approach and persist
in working towards that goal.
Direction, Intensity, and Persistence:
Motivation can be viewed as having three main components: the
direction we choose (the specific goal), the intensity of our effort, and
the persistence we maintain over time.
TYPES OF MOTIVATION
Motivation, the driving force behind our actions, can be broadly
categorized into two main types: intrinsic and extrinsic. Intrinsic
motivation comes from within, like enjoying a task or feeling a sense of
accomplishment. Extrinsic motivation comes from external factors, such
as rewards or praise. Within these broader categories, there are several
specific types of motivation, including achievement, power, affiliation,
and fear-based motivation.
Here's a more detailed look at the different types of motivation:
1. Intrinsic Motivation:
● Definition: Driven by internal satisfaction, enjoyment, or a sense of
accomplishment.
● Examples: Engaging in a hobby for personal enjoyment, working on
a project because you find it challenging and stimulating, or learning
something new because you are curious.
● Key Characteristics: Internal, pleasure-driven, and focused on the
activity itself.
● Benefits: Stronger commitment, increased persistence, and higher
levels of satisfaction.
●
2. Extrinsic Motivation:
Definition:
Driven by external rewards or consequences, such as praise, money, or
recognition.
Examples:
Working on a project to earn a bonus, studying for a test to get a good
grade, or attending a social event to meet new people.
Key Characteristics:
External, reward-driven, and focused on the outcome of the activity.
Considerations:
Can sometimes decrease intrinsic motivation if the reward is perceived
as controlling or if it's only given for minimal effort.
Specific Types of Motivation:
● Achievement Motivation: The drive to excel, achieve goals, and set
high standards for oneself.
● Power Motivation: The desire to influence others, create change,
and exert control.
● Affiliation Motivation: The need to belong, form relationships, and
connect with others.
● Fear-Based Motivation: Driven by the avoidance of negative
consequences or punishment.
● Reward-Based Motivation: Driven by the desire to earn external
rewards.
● Competence Motivation: The desire to feel capable and proficient
in a specific skill or area.
● Creative Motivation: The drive to express oneself creatively and
express new ideas.
● Attitude Motivation: Driven by a desire to change one's attitude or
beliefs.
● Incentive Motivation: Driven by the promise of a reward or incentive
for achieving a goal.
IMPORTANCE OF MOTIVATION
Importance of Motivation
The importance of Motivation are as follows:
● Motivation helps to improve performance level: Motivation helps
in satisfying needs of the employees and providing them
satisfaction. Performance of the employees is improved with the
help of motivation as it bridges the gap between the capacity to
work and willingness to work. As a result, employees work with full
dedication and make full use of their abilities to raise the existing
level of efficiency.
● Motivation helps in changing negative attitude to positive attitude:
Positive attitude towards the organisation helps to achieve
organisational goals easily. Sometimes, employees have a negative
attitude towards the organisation or work. Motivation helps to
change this negative attitude to a positive attitude through
suitable rewards, positive encouragement and praise for good work.
When the workers are motivated they work positively towards
the organisational goals.
● Motivation helps to reduce employee turnover: Lack of motivation
is the main cause behind employee turnover. Employees do not think
of leaving the job when they are motivated by financial and
non-financial incentives. Reduction in employee turnover saves a lot
of money as direct expenses(recruitment and selection costs) and
indirect expenses(labour dissatisfaction) are reduced. The
organisations also benefit because the skill and competence of
employees continue to be available to the organisation.
● Motivation helps to reduce absenteeism: Some of the reasons
behind absenteeism are improper work environment, inadequate
rewards, lack of recognition, etc., and these can be overcome or
reduced if the employees are motivated properly. Proper motivation
makes the work a source of pleasure, and workers do not refrain
from work unless it is unavoidable.
● Motivation helps to introduce changes smoothly: An organisation
can survive and grow only when it adapts itself to the dynamic
environment. Changes are generally resisted by the employees
because of fear of adverse effects on their employment. This
resistance can be overcome by proper motivation. Motivation helps
to convince employees that proposed changes will bring additional
rewards to them. As a result, they readily accept these changes.
MASLOW THEORIES
● HERZBERG THEORY
● McGREGOR THEORY
● OUCHI THEORY
HERZBERG THEORY OF MOTIVATION
Herzberg's Two-Factor Theory of Motivation, also known as the
Motivation-Hygiene Theory, posits that job satisfaction and
dissatisfaction are influenced by different factors. It suggests that while
hygiene factors (like salary and working conditions) can prevent
dissatisfaction, they don't necessarily lead to satisfaction, and it's
motivational factors (like achievement and recognition) that truly drive
job satisfaction.
Key Concepts:
Hygiene Factors:
These are external factors that, if absent, can cause dissatisfaction but
don't necessarily motivate employees if present.
Examples include:
Salary and compensation
Working conditions
Supervision
Company policies and administration
Interpersonal relations
Job security
● Motivational Factors:
●
These are intrinsic factors that, when present, lead to job satisfaction
and motivation.
Examples include:
Achievement
Recognition
The nature of the work itself
Responsibility
Advancement and growth
McGREGOR THEORY OF MOTIVATION
McGregor's theory of motivation, primarily known as Theory X and
Theory Y, outlines two contrasting perspectives on how managers view
employee motivation. Theory X assumes employees dislike work and
need close supervision and control, while Theory Y believes employees
are motivated by their own desire for growth and responsibility.
Theory X:
Assumptions:
Employees are inherently lazy and dislike work, require constant
supervision and control, prefer security over responsibility, and resist
change.
Management Style:
Authoritarian, with a focus on coercion, external rewards, and penalties
to ensure productivity.
Example:
A manager who micromanages, uses threats, and relies on strict rules to
ensure employees meet their goals.
Theory Y:
● Assumptions: Employees enjoy work, are capable of self-direction
and creativity, seek responsibility, and are motivated by their own internal
satisfaction.
● Management Style: Participative, encouraging employee
involvement, autonomy, and delegation.
● Example: A manager who empowers employees, provides them
with opportunities for growth, and trusts them to manage their own work.
OUCHI THEORY OF MOTIVATION
William Ouchi's Theory Z proposes that increased employee loyalty and
productivity can be achieved by focusing on employee well-being and
fostering strong, cooperative relationships within the organization. It
blends aspects of Japanese and American management styles,
emphasizing long-term employment, consensus-based decision-making,
and a strong company culture.
Here's a more detailed look at Theory Z:
Key Features of Theory Z:
● Long-term Staff Development: Organizations should invest in
employee development and offer long-term employment opportunities.
● Consensus-Based Decision-Making: Encourage collaborative
decision-making processes involving employees.
● "Generalist" Employees: Focus on developing employees with broad
skills and knowledge rather than specializing in narrow roles.
● Concern for Employee Well-being: Prioritize employee happiness
and well-being both on and off the job.
● Informal Control with Formalized Measures: Use a combination of
informal, trust-based control and formal metrics for performance
evaluation.
How Theory Z Addresses Motivation:
Fosters Employee Loyalty:
By investing in employee development and well-being, Theory Z aims to
create a sense of loyalty and commitment to the organization.
Enhances Motivation through Cooperation:
The emphasis on teamwork and consensus-based decision-making
fosters a cooperative environment, which can be a strong motivator for
employees.
Individual Responsibility:
While promoting teamwork, Theory Z also encourages individual
responsibility, allowing employees to take ownership of their work and
contribute to the organization's success.
Comparison to McGregor's Theory X and Y:
Theory Z builds upon Douglas McGregor's theories, Theory X and Theory
Y.
Theory X
assumes that employees dislike work and require close supervision and
control.
Theory Y
suggests that employees are self-motivated and can be trusted to take
initiative and responsibility.
Theory Z
goes beyond both, proposing that employees are motivated by a
combination of factors, including loyalty, a sense of belonging, and
opportunities for growth and development.
In essence, Theory Z advocates for a management style that recognizes
the importance of human needs and fosters a supportive, cooperative
work environment to achieve both individual and organizational goals.
FINANCIAL AND NON-FINANCIAL INCENTIVES
Financial and non-financial incentives are used to motivate employees
and improve their performance. Financial incentives involve monetary
rewards like salary increases, bonuses, and commissions, while
non-financial incentives focus on intangible rewards such as recognition,
career development opportunities, and a positive work environment.
Financial Incentives:
Monetary rewards:
These are tangible rewards that can be measured in terms of money,
such as salary increases, bonuses, commissions, and profit-sharing
programs.
Examples:
Salary and allowances: Basic pay, house rent allowance, dearness
allowance, etc.
Performance-based incentives: Monetary rewards for meeting or
exceeding performance targets.
Bonuses: Extra rewards given above and beyond the basic salary.
Stock options: Giving employees shares of the company at a lower
price than the market price.
Sharing of profit: Distributing a portion of the company's profits
among employees.
Retirement benefits: Pensions, gratuity, and provident fund.
Fringe benefits: Additional advantages like housing allowance and
medical allowance.
Non-Financial Incentives:
Intangible rewards:
These are not directly monetary and focus on satisfying employee
needs beyond financial compensation.
Examples:
Recognition and praise: Public acknowledgement of
accomplishments and contributions.
Opportunities for growth and development: Training programs,
mentorship, and career advancement.
Flexible work arrangements: Flexible hours, remote work options,
and compressed workweeks.
Positive work environment: Supportive leadership, open
communication, and a sense of belonging.
Employee autonomy and responsibility: Giving employees more
control over their work and decisions.
Social and psychological needs: Fulfilling employees' needs for
recognition, belonging, and self-esteem.
Work-life balance: Offering extra time off, flexible hours, and a
supportive work environment.
Social and emotional rewards: Appreciation, constructive feedback,
and opportunities for collaboration.
LEADERSHIP
Leadership is the ability to influence a group of individuals to
achieve set goals or objectives. Leadership concepts are
principles and ideas about the nature of leadership and theories
underlying its various styles and approaches. Learning about
these concepts can help you be more effective in a managerial
position.
Leadership is the process of influencing others to work towards a
common goal. It involves motivating, inspiring, and guiding individuals or
groups to achieve specific objectives. Effective leadership goes beyond
simple guidance and direction, encompassing the ability to create a
vision, inspire others to believe in it, and provide the tools and support
necessary for success.
Here's a more detailed breakdown of the concept:
Key Aspects of Leadership:
Influence:
Leaders use various methods to influence others, including persuasion,
authority, and charisma.
Motivation:
Leaders inspire and motivate followers to take action and achieve
common goals.
Direction:
Leaders provide direction and guidance, helping individuals understand
what needs to be done and how to do it.
Vision:
Leaders articulate a clear vision for the future, inspiring others to strive
for a shared outcome.
Decision-Making:
Leaders make informed decisions that shape the direction and success
of the team or organization.
Communication:
Leaders effectively communicate their vision, plans, and expectations to
others.
FUNCTIONS OF LEADERSHIP
Key Functions of Leadership:
Setting Goals and Policies:
Leaders establish clear objectives and guidelines to direct team efforts
and ensure alignment with organizational vision.
Organizing:
Leaders structure the team, assign roles, and allocate resources to
facilitate efficient work.
Taking Initiative:
Leaders proactively identify opportunities, address challenges, and drive
forward progress.
Cooperation and Collaboration:
Leaders foster a positive work environment where team members
collaborate effectively and share knowledge.
Motivation and Direction:
Leaders inspire and motivate team members to perform their best,
providing direction and guidance toward shared goals.
Liaison between Management and Workers:
Leaders act as a bridge between management and the workforce,
ensuring effective communication and understanding.
Policy Making:
Leaders contribute to the development of policies and procedures that
guide organizational operations and promote ethical behavior.
Conflict Resolution:
Leaders handle disagreements and conflicts constructively, creating a
harmonious work environment.
Resource Management:
Leaders effectively allocate and manage resources, including financial,
human, and technological resources.
Change Management:
Leaders navigate organizational changes effectively, ensuring that
employees adapt to new situations and embrace innovation.
LEADERSHIP STYLE
A leadership style is a leader's approach to providing direction,
implementing plans, and motivating people. It involves a leader's
methods, characteristics, and behaviors when directing, motivating, and
managing their teams. There are various styles, including autocratic,
democratic, laissez-faire, and transformational, each with its own
strengths and weaknesses. The most effective style often depends on
the specific situation and the characteristics of the team.
Key Leadership Styles:
● Autocratic (Authoritarian): Leaders make all decisions
independently, with little input from team members.
● Democratic (Participative): Leaders involve team members in
decision-making, fostering collaboration and inclusion.
● Laissez-faire (Delegative): Leaders provide autonomy to team
members, with less direct supervision.
● Transformational: Leaders inspire and motivate teams to exceed
expectations by focusing on vision and innovation.
● Transactional: Leaders focus on rewards and punishments to
motivate performance, often in the short term.
● Servant: Leaders prioritize the needs of their team members and
put them first.
● Coaching: Leaders help team members develop their skills and
abilities.
● Visionary: Leaders create a clear vision for the future and inspire
others to achieve it.
● Commanding: Leaders take charge and make decisions without
consulting team members.
● Affiliative: Leaders prioritize the well-being and relationships within
their team.
LIKERT’ S FOUR SYSTEM OF
LEADERSHIP
Likert's four systems of management, also known as Likert's four
leadership styles, are a framework for understanding different
approaches to leadership and management. These systems range from
highly centralized and authoritarian to highly decentralized and
participative. The four systems are: Exploitative Authoritative, Benevolent
Authoritative, Consultative, and Participative.
Here's a breakdown of each system:
. 1. Exploitative Authoritative (System I):
This system is characterized by strong control, a hierarchical structure,
and a lack of trust in subordinates. Top management makes all
decisions, and communication is primarily downward, with little or no
input from lower levels.
. 2. Benevolent Authoritative (System II):
In this system, management still maintains control, but they tend to be
more benevolent and focus on rewards rather than threats. While
decisions are still primarily made at the top, there's a bit more emphasis
on employee morale and motivation.
. 3. Consultative (System III):
This system involves managers consulting with their subordinates
before making decisions. Subordinates are given a voice in the process,
but the final decision-making power remains with management.
. 4. Participative (System IV):
This system is the most democratic and participatory. Decision-making
is shared among all levels of the organization, and employees are
actively involved in goal-setting, planning, and problem-solving. This
system fosters a sense of ownership and responsibility among all
employees.
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