Principle and practice of management third lecture

IIBM Institute Of Business Management
Principles And Practice Of Management
Third Lecture By “Dhawal Malot”

Introduction
 It is an important function of management.
 It is the process that measures current performance and guides it towards
some predetermined objectives.
 Under primitive management, control was undertaken only when something
went wrong and the objectives of control was to reprimand the person
responsible for those events and take action against him.
 The modern concept of control aims at finding out deviations between the
actual performance and the standard performance and to take steps to
prevent such variances in future.
 Control and freedom are not opposite but chaos and anarchy is at
loggerheads with control.
 Control is fully consistent with freedom. In fact, they are interdependent.
 Without control, freedom cannot be sustained for long. Without freedom,
control becomes ineffective. Both freedom and accountability are embedded
in the concept of control.

Concept Of Control
 Control is the process through which managers assure that actual activities
conform to planned activities.
 According to Breach, "Control is checking current performance against
predetermined standards contained in the plans, with a view to ensuring
adequate progress and satisfactory performance.“
 According to Billy E. Goetz, "Management control seeks to compel events to
conform plans".
 In the words of Koontz and O'Donnell, "Managerial control implies
measurement of accomplishment against the standard and the correction of
deviations to assure attainment of objectives according to plans.“
 In the words of Henry Fayol, "Control consists in verifying whether
everything occurs in conformity with the plan adopted, the instructions
issued and the principles established. Its object is to find out the weakness
and errors in order to rectify them and prevent recurrence. It operates on
everything, i.e., things, people and actions".
 Controlling is the nature of follow-up to the other three fundamental functions
of management.
 There can, in fact, be not controlling without previous planning, organizing
and directing. Controlling cannot take place in a vacuum.

Characteristic Of Control
Managerial control has certain characteristic feature.They are:
 Control is the function of every manager.
 Control leads to appraisal of past activities.
 Control is linked with future, as past cannot be controlled. It should anticipate possible
deviations and to think of corrective action for the control of such deviations in the future.
It is usually preventive as presence of control system tends to minimize wastages, losses
and deviations from standards.
 Control is concerned with setting standards,measurement of actual
performance,comparison of actual performance with predetermined standards and
bringing to light the variations between the actual performance and the standard
performance.
 Control can be exercised only with reference to and or the basis of plans. To quote Mary
Cushing Niles - "Whereas planning sets the course, control observes deviations from the
course or to an appropriately changed one".
 Control aims at results and not at persons. It is for correcting a situation, and not for
reprimanding persons.
 Information or feedback is the guide to control.
 Control is a continuous activity.It involves constant analysis of validity of
standards,policies,procedures etc.
 Control is a dynamic activity.

Relationship Between Planning And Control
o Planning and control are two crucial aspects of management of any project.
o The successful manager must always ensure that projects are based on
excellent plans and followed by good control during implementation.
o 'Planning' is the setting of realistic goals and choosing effective ways to achieve
these goals. The successful manager must ensure that a project's plan is clearly
defined and realistic.
o 'Control' is the systematic effort of comparing performance to plans.
o "Planning is required at the very outset of management whereas control is
required at the last stages. If planning is looking ahead, control is looking back.“
o It is often said that planning is the basis, action is the essence, delegation is the
key, information is the guide and control is the lifeblood of the success of any
business enterprise.
o Control ensures that there is no kind of indiscipline and incompetence in the
organization and employees are not able to put undue pressure on the
management.
o Control should be engrained in the basic policies of any type of business
organization.
o Control is the key to keep any business entity on the track.

Steps In Control Process
There are three basic steps in a control process:
1. Establishing standards.
2. Measuring and comparing actual results against
standards.
3.Taking corrective action.

Establishing Standards
The first step in the control process is to establish standards against which
results can be measured.
While setting the standards, the following points have to be borne in mind:
1.The standards must be clear and intelligible. If the standards are clear and
are understood by the persons concerned, they themselves will be able to
check their performance.
2. Standards should be accurate, precise, acceptable and workable.
3. Standards are used as the criteria or benchmarks by which performance is
measured in the control process. It should not be either too high or too low.
They should be realistic and attainable.
4. Standards should be flexible i.e., capable of being changed when the
Circumstances require so.

Measuring And Comparing Actual Results Against Standards
The second step in the control process is to measure the performance and
compare it with the predetermined standards.
Measurement of performance can be done by personal observation, by reports,
charts and statements. If the control system is well organized, quick
comparison of these with the standard figure is quite possible. This will reveal
variations.
While comparing the actual performance with the standards fixed, the manager
has to find out not only the extent of variations but also the causes of
variations.
This is necessary, because some of the variations may be unimportant, while
others may be important and need immediate corrective action by the manager.

Taking Corrective Action
After comparing the actual performance with the prescribed standards and
finding the deviations, the next step that should be taken by the manager is to
correct these deviations.
Corrective action should be taken without wasting of time so that the normal
position can be restored quickly. The manager should also determine the
correct cause for deviation.
Taking corrective action can be achieved in the following way:
1.The manager should try to influence environmental conditions and external
situations in such a way as to facilitate the achievement of goals.
2. He should review with his subordinates the instructions given earlier so that
he may be able to give clear, complete and reasonable instructions in future.
3. There are many external forces which cannot be adjusted by the manager.
They have to be accepted as the facts of the situation, and the executives
should revise their plans in the light of these changing forces.

Type Of Control
Most control methods can be grouped into one of the two basic types:
1. Past-oriented controls.
2. Future-oriented controls.
Past-oriented Controls
These are also known as post-action controls and measure results after the
Process. They examine what has happened in a particular period in the past.
These controls can be used to plan future behavior in the light of past errors
or successes.
Future-oriented Controls
These are also known as steering controls or feed-forward controls and are
designed to measure results during the process so that action can be taken
before the job is done or the period is over. They serve as warning-posts
principally to direct attention rather than to evaluate, e.g., Cash flow analysis,
funds flow analysis, network planning etc.

Control Techniques
A variety of tools and techniques have been used over the years to help
managers control the activities in their organizations. Various techniques of control
require varied control aids such as:
1.Budgeting: A budget is a statement of anticipated results during a designated
time period expressed in financial and non-financial terms. Budgets cover a
designated time period – usually a year. At stated intervals during that time period,
actual performance is compared directly with the budget targets and deviations are
quickly detected and acted upon. E.g. of Budgets: Sales budget, production budget,
capital expenditure budget, cash budget, master budget etc.
2.Standard Costing: The cost of production determines the profit earned by an
enterprise. The system involves a comparison of the actual with the standards and the
discrepancy is called variance. The various steps involved in standard costing are:
(a) Setting of cost standards for various components of cost e.g.: raw materials, labor etc.
(b) Measurement of actual performance.
(c) Comparison of actual cost with the standard cost.
(d) Finding the variance of actual from the standard cost.
(e) Findings the causes of variance.
(f) Taking necessary action to prevent the occurrence of variance in future.

Continued…..
3. Responsibility Accounting: Responsibility accounting can be defined as a system of
accounting under which each departmental head is made responsible for the performance of his
department.
4. Reports: A major part of control consists of preparing reports to provide information to the
management for purpose of control and planning.
5. Standing Orders, Rules and Limitations: Standing orders, rules and limitations are also
control techniques used by the management. They are issued by the management and they are to
be observed by the subordinates.
6. Personal Observation: A manager can also exercise fruitful control over his subordinates by
observing them while they are engaged in work.
1. Self-control: Each employee must exercise self-control and do what is expected at work
most of the time on most work related matters, as no enterprise can exist self control. Self-control
stems from the employee's ego, orientation, training and work attitudes.
2. Group control: It affects individuals both in output and behavior. Group norms of doing a
good job exert pressures on the individual to perform and to follow work rules.
3. Policies and procedures: They are guides to action for managers to use in controlling
behavior and output of employees. They can, for example, protect the firm's resources and
equipment and require employee's presence for appropriate work times.

Other Scientific Methods Of Control
 Critical Path Method(CPM)
 Gantt Chart
Project Evaluation And Review Technique(PERT)

Cybernetic & Non-Cybernetic Control
Cybernetics, control theory as it is applied to complex systems. Cybernetics is
associated with models in which a monitor compares what is happening to a system at
various sampling times with some standard of what should be happening, and a controller
adjusts the system's behavior accordingly.
Non-cybernetic Control System: A control system that relies on human discretion as a
basic part of its process.
Cybernetic controls include
 Routine
 Expert
 Trial-and-error
 Learning takes place here through feedback and feed forward
Non-cybernetic controls include
 Intuition
 Judgment
 Power and politics

E.G: Self perspiration of body for cooling effect,
Release of Steam through steam valve.

Introduction
Have you ever wondered, what makes people work?
Why do some people perform better than others?
Why does the same person act differently at different times?
The answer is motivation by a leader in the organization. A leader must stimulate people
to action to accomplish the desired goals; he must fuse the varied individual human
capacities and powers of the many people employed into a smoothly working team with
high productivity.
How do we get people to perform at a higher than “normal” percent of their physical and
mental capacities and also maintain satisfaction. This is the challenge of motivation.
Motivation is the process of rousing and sustaining goal-directed behavior.
Motivation is one of the more complex topics in organizational behavior.
Leadership is a process of influence on a group.
Leadership is the ability of a manager to induce subordinates to work with confidence and
zeal.

What Is Motivation?
Some of the widely quoted definitions are given below:
According to Gray Starke, "Motivation is the result of processes, internal or
external to the individual, that arouse enthusiasm and persistence to pursue a
certain course of action.“
According to S.W Gellerman, "(Motivation is) steering one's actions toward
certain goals and committing a certain part of one's energies to reach them."
According to M.R. Jones, "(Motivation is) how behavior gets started, is
energized, is sustained, is directed, is stopped and what kind of subjective
reaction is present in the organism while all these are going on.“
All these definitions contain three common aspects of the motivation process:
1. What energizes human behavior?
2. What directs or channels such behavior?
3. How is this behavior maintained or sustained?

Continued…..
Motivation has certain underlying properties:
1.It is an individual phenomenon – Each individual is unique, and this fact must be
recognized in motivation research.
2.Motivation is intentional – When an employee does something, it is because he or
she has chosen to do it.
3.Motivation has many facets – Researchers have analyzed various aspects of
motivation, including how it is aroused, how it is directed, what influences its
persistence, and how it is stopped.
4.The purpose of motivation theories is to predict behavior – The distinction must
be made between motivation, behavior and performance. Motivation is what causes
behavior; if the behavior is effective, high performance will result.
Motivation is the underlying process that initiates, directs and sustains behavior in order
to satisfy physiological and psychological needs. At any given time, one might explain
behavior as a combination of motives – needs or desires that energize and direct
behavior toward a goal.

Continued…..
There are two types of motivation in nature namely intrinsic and extrinsic.

Human Factor and Motivation
The study of motivation can be traced back to the writings of the ancient Greek
philosophers. They presented hedonism as an explanation of human motivation. The
concept of hedonism says that a person seeks out comfort and pleasure and avoids
discomfort and pain. Many centuries later, hedonism was still a basic assumption in the
prevailing economic and social philosophies of economists like Adam Smith and J.S. Mill.
They explained motivation in terms of people trying to maximize pleasure and avoid
pain.
The 1950s were a fruitful period in the development of motivation concepts. Three specific
theories were formulated during this time, which, although heavily attacked and now
questionable in terms of validity, are probably still the best-known explanations for
employee motivation. These theories are:
1.'Hierarchy of Needs' Theory,
2. Theories X and Y, and
3. Motivation-Hygiene Theory.

'Hierarchy of Needs' Theory
Abraham Maslow was a psychologist who proposed a theory of human motivation for understanding
behavior based primarily upon a hierarchy of five need categories. He recognized that there were
factors other than one's needs (for example, culture) that were determinants of behavior. However,
he focused his theoretical attention on specifying people's internal needs.
Maslow labeled the five hierarchical categories as physiological needs, safety and security needs,
love (social) needs, esteem needs and the need for self-actualization.
While scientific support
fails to reinforce
Maslow's hierarchy, his
theory is very popular,
being the introductory
motivation theory for
many students and
managers, worldwide.

Theory X and Theory Y
One important organizational implication of the hierarchy of needs concerns the philosophies and
techniques that have a bearing on how to manage people at work. Douglas McGregor, taking a cue on
motivation from Maslow's need-based theory, grouped the physiological and safety needs as "lower
order" needs and the social, esteem and self-actualization needs as "upper order "needs. McGregor
proposed two alternative sets of assumptions about people at work, based upon which set of needs
were the active motivators. He labeled these sets of assumptions – one basically negative as –
Theory X and the other basically positive – as Theory Y.

Continued…..
According to McGregor, people should be treated differently according
to whether they are motivated by lower-order or higher order needs.
Specifically, McGregor believed that Theory X assumptions are
appropriate for employees motivated by lower order needs. Theory Y
assumptions, in contrast, are appropriate for employees motivated by
higher order needs, and Theory X assumptions are then inappropriate.
Unfortunately, no evidence confirms that either set of assumptions is
valid or that accepting Theory Y assumptions and altering one's actions
accordingly will lead to more motivated workers.

Motivation Hygiene TheoryFredrick Herzberg departed from the need hierarchy approach to motivation and examined the experiences that satisfied
or dissatisfied people's needs at work. This need motivation theory became known as the 'two-factor theory'. Herzberg's
original study included 200 engineers and accountants in Western Pennsylvania during the 1950s. Prior to that time, it
was common for those researching work motivation to view the concept of job satisfaction as one-dimensional,
that is, job satisfaction and job dissatisfaction were viewed as opposite ends of the same continuum.
This meant that something that caused job satisfaction, would cause job dissatisfaction if it were removed; similarly,
something that caused job dissatisfaction, if removed, would result in job satisfaction. Based upon unstructured interviews
with 200 engineers and accountants, Herzberg concluded that this view of job satisfaction was incorrect, and that
satisfaction and dissatisfaction were actually conceptually different factors caused by different phenomena in the work
environment.

Concept Of Group Dynamics
It was founded by Kurt Lewin to study group decision, group productivity, group
interaction, group cohesiveness and group communication. The underlying
assumption was that the laws of the group behavior can be established
Independently of the goals or specific activities of group irrespective of the
structure of the group.
Group dynamics contains two terms: group and dynamics.
Group is basically a collectivity of two or more persons. Dynamics comes from
Greek word meaning FORCE.
Thus, “Group dynamics is concerned with the interactions of forces among
group members in a social situation.”

What Is Group?
Two or more people
Shared Goals
People see themselves
As members.
There is interaction
Among members
Group

Types Of Group
Group
Formal
Command
Task
Informal
Interest
Friendship

Why Do People Join Group?
The people often join groups since the groups
give the members a stability and enhances
their achievement capacity.
The main reasons to join a group are:
 Have a sense of security
 Have a status
 Develop Self-esteem
 Power
 Goal achievement

Group Structure
Four different aspects of group structure are:
 Norms
 Roles
Status
Cohesiveness

Group Norms
Set of beliefs, feelings, and attitudes commonly shared by group
members. These are also referred to as rules or standards of behavior
that apply to group members. Norms serve three functions namely
Predictive- basis for
understanding the behavior
of others
Control- regulate the
behavior of others
Relational- some
norms define
relationships

Group Norms Characteristics
 Represents characteristics of group
 Basis for predicting and controlling behavior of
others
 Related to behaviors considered important for
their group
 They are applied to all members.

Role
-various parts played by group members.
There are two elements that define this role identity-
o Role Perception-An individual is expected to behave
according to his own perception in the group.
o Role Expectation-It is defined as how others believe
one should behave in a given situation.

Status
Status is “ a socially defined position or rank given to groups
or group members by others.” Group members get high status
or low status in the group based on their authority and
performance.
High status members of the group have more freedom to
deviate from the norms. This facility enables them to have
the discriminatory powers in decision making. Low status
members of the group should not have freedom to deviate
from the norms as it leads to status inequality.

Group Cohesiveness
Social Task
the bonds of interpersonal
attraction that link
group members
the way in which skills and
abilities of the group
members mesh to allow
optimal performance
Cohesion

Results
Who Won & Why?
Did your group act like this? Or like this?
Groups with High Cohesiveness Get Better Results!

Importance Of High Cohesiveness
High Cohesiveness
-Unity
- Interactive
- Positive Feelings
- Ability to Cope with Problems
- More Productive
Low Cohesiveness
-Negative Feelings
- More Problems
- Less Productive

Theories Of Group Formation
Balance Theory:
Propounded by “ Theodore New-Comb” which states
that- “Persons are attracted with one another on the
basis of similar attitudes towards commonly relevant
objectives and goals.”

Principle and practice of management third lecture

Exchange Theory
Propounded by “Thaibaunt and Kelly". This theory
is based on reward-cost outcomes of interaction
between employees.
 The interaction between people is reward.

Principles Of The Group Dynamics
1.The members of the group must have a strong sense of
belonging to the group .The barrier between the leaders and
to be led must be broken down.
2.The more attraction a group is to its members, the greater
influence it would exercise on its members.
3.The grater the prestige of the group member in the eyes of
the member, the grater influence he or she would exercise on
the theme.

Continued…..
4.The successful efforts to change individuals sub parts
of the group would result in making them confirm to the
norms of the group.
5.The pressures for change when strong can be
established in the group by creating a shared perception
by the members for the need for the change.

Features Of Group Dynamics
Concerned with group
Changes
Rigidity or flexibility
Continuous process

Conclusion
The groups operate on a common task and common attitudes. The
group dynamics is concerned with the interaction between the group
members in a social situation. This is concerned with the gaining in the
knowledge of the group, how they develop and their effect on the
individual members and the organization in which they function.
The group dynamics is essential to study since it helps to find
how the relationships are made within a group and how the forces act
within the group members in a social setting. This helps to recognize
the formation of group and how a group should be organized, lead
and promoted.

Case Study
 In 1980,Richard Semler joined SEMCO , founded by his father 27 years
earlier, having 100 employees and manufacturing hydraulic pumps for ships,
producing about $4million in revenue and tottered on the edge of bankruptcy.
 For the next 2 years, top managers constantly sought bank loans and fought
off rumors that the company was about to sink.
 They also travelled 4 continents that enabled the company to reduce its
cyclical marine business to 60% of total sales.
 Today SEMCO has many factories producing range of products like marine
pumps, digital scanners, commercial dishwashers, truck filters and mixing
equipment for substances ranging from bubble gum to rocket fuel.
 Customers include Alcoa,saab,general motors and SEMCO is regarded as
one of the best company in Brazil to work for by press.

Continued…..
 The company’s survival and ultimate success is due largely to a major change in its
management approach.
 SEMCO emphasized on 3 fundamental values- democracy , information , profit
sharing. These values helped in gaining confidence on work groups as a primary
mechanism for managing the company.
 After some experimentations SEMCO found that they need 150 employees per factory
and all are divided into 10 member group given a major responsibilities for outcomes
associated with their areas.
 Costs rose up because of duplication of effort and lost economies of scale. within a
year sales got doubled ,inventory dropped from126 to 46 days,8 new products
appeared that had been tied up in R&D for 2 years and the product rejection rate at
inspection dropped from 33 to 1% and increased productivity enabled the company to
reduce the workforce by 32& through attrition and early retirement.
 At SEMCO once the members of a group agree on a monthly production schedule,
they meet it . At end of the month every body has done their work allotted except for
motors that had not yet arrived, despite repeated phone calls to the supplier.
 Finally 2 employees went to the supplier’s plant and got delivery on the last day of the
month and every one sat for the whole night till morning 4.45 and completed the
assignment ( meat slicers)

Factor’s Contributed To The Success Of SEMCO's
 Work groups have access to important information like Balance
Sheet,P&L analysis, cash flow statements for his or her division
every month.
 All workers voluntarily attend monthly classes so that they can learn
to read and understand the numbers.
 Another factor is that although top level managers are strict about
meeting the financial targets, workers have wide latitude in
determining the necessary actions and carrying them out.
 Profit sharing plan, twice a year employees receive about 25% of the
after tax profits for their division.
 Employees vote on how to disburse the funds, which are visually
distributed equally.
 A survey was conducted by college graduates by Brazilian magazine
found that 25% of men and 13% of women cited SEMCO as the
company they most wanted to work for.

Case Study 1
The president of Simplex Mills sat at his desk in the hushed atmosphere, so typical of business offices,
after the close of working hours. He was thinking about Rehman, the manager in-charge of
purchasing, and his ability to work with George, the production manager, and Vipulabh, the marketing
and sales manager in the firm.
When the purchasing department was established two years ago, both George and Vipulabh agreed
with the need to centralise this function and place a specialist in charge.George was of the view that
this would free his supervisors from detailed ordering activities. Vipulabh opined that the flow of
materials into the firm was important enough to warrant a specialised management assignment. Yet
since the purchasing department began operating it has been precisely these two managers who have
had a number of confrontations with the new purchase manager, and occasionally with one another, in
regard to the way the purchasing function in being carried out.
From George???s point of view, instead of simplifying his job as production manager by taking care of
purchasing for him, the purchasing department has developed a formal set of procedures that has
resulted in as much time commitment on his part as he had previously spent in placing his orders
directly with vendors. Further, he is specially irritated by the fact that his need for particular items or
particular specification is constantly being questioned by the purchasing department. When the
department was established, George assumed that the purchasing manager was there to fill his
needs, not to question them.

Continued……
As Vipulabh sees it, the purchasing function is an integral part of marketing function, and the two
therefore need to be jointly managed as a unified process. Purchasing function cannot be separated
from a firm???s overall marketing strategy. However, Rehman has attempted to carry out the
purchasing function without regard for this obvious relationship between his responsibilities and those
of Vipulabh, thus making a unified marketing strategy impossible.
In his previous position, Rehman had worked in the purchasing department of a firm considerably
larger than Simplex. Before being hired, he was interviewed by all the top managers, including George
and Vipulabh, but it was the president himself who negotiated the details of the job offer. As Rehman
sees it, he was hired as a professional to do a professional job. Both George and Vipulabh have been
distracting him from this goal by presuming that he is somehow subordinate to them, which he
believes is not the case.
The people in the production department, who use the purchasing function most, have complained
about the detail that he requires on their requisitions. But he has documented proof that materials are
now being purchased much more economically than they were under the former decentralised system.
He finds Vipulabh???s interests more difficult to understand, since he sees no particular relationship
between his responsibilities for efficient procurement, and Vipulabh???s responsibilities to
market the firm???s products.
The president has been aware of the continuing conflict among three managers for some time, but on
the theory that a little rivalry is healthy and stimulating, he has felt that it was nothing to be unduly
concerned about. But now that much of his time is being taken up by much of what he considers to be
petty bickering, the time has come to take some positive action.
1. Is George???s view of the situation realistic?
2. How do you evaluate Vipulabh???s position?
3. How might this conflict be associated with factors in the formal organisation?
4. What should the president of Simplex Mills do now?

Case Study 2
Bharat Engineering Works Limited is a major industrial machineries besides other engineering
products. It has enjoyed market preference for its machineries because of limited competition in the
field. Usually there have been more orders than what the company could supply. However, the
scenario changed quickly because of the entry of two new competitors in the field with foreign
technological collaboration. For the first time, the company faced problem in marketing its products
with usual profit margin. Sensing the likely problem, the chief executive appointed Mr Arvind Kumar as
general manager to direct the operations of industrial machinery division. Mr Kumar had similar
assignment abroad before coming back to India.
Mr Kumar had a discussion with the chief executive about the nature of the problem being faced by
the company so that he could fix up his priority. The chief executive advised him to consult various
heads of department to have first hand information. However, he emphasised that the company lacked
an integrated planning system while members of the Board of Directors insisted on introducing this in
several meetings both formally and informally.
After joining as General Manager, Mr Kumar got briefings from the heads of all departments. He asked
all heads to identify major problems and issues concerning them. The marketing manager indicated
that in order to achieve higher sales, he needed more sales support. Sales people had no central
organisation to provide sales support nor was there a generous budget for demonstration teams which
could be sent to customers to win business.

Continued…..
The production manager complained about the old machines and equipments
used in manufacturing. Therefore, cost of production was high but without
corresponding quality. While competitors had better equipments and machinery,
Bharat Engineering had neither replaced its age-old plant nor reconditioned it.
Therefore to reduced the cost, it was essential to automate production lines by
installing new equipment.
Director of research and development did not have specific problem and
therefore, did not indicate for any change. However, a principal scientist in R&D
indicated on one day that the director of R&D, though very nice in his approach,
did not emphasize on short-term research projects, which could easily increase
production efficiency by at least 20 per cent within a very short period without
any major capital outlay.
(a) Discuss the nature and characteristics of the problems in this case.
(b) What steps should be taken by Mr. Kumar to overcome these problems?

Principle and practice of management third lecture

More Related Content

What's hot (20)

Similar to Principle and practice of management third lecture (20)

Recently uploaded (20)

Principle and practice of management third lecture