Course Content
Definition and importance of management Functions of management Managerial roles Evolution of management thought Types of management environment
Meaning and importance of planning Principles of planning Purpose of planning Types of plans Planning tools Process of planning Planning challenges Making plans effective Management by objectives
Meaning and Importance of Organizing Structure and Designs of Organizations Principles of Organizing Process of Organizing Delegation Coordination Centralization and Decentralization Informal Organizations
Meaning and Importance of Staffing Human Resource Planning Recruitment and Selection Training and Development Performance Management Reward Management Separation
Meaning and Importance of Directing Leadership Motivation Communication Group Dynamics Conflict Management
Meaning and Importance of Controlling Elements of Control Characteristics of Effective Controls Control Process Role of Control in an Organization Tools of Controlling
Overview of Strategic Management SWOT Analysis Strategy Formulation Strategy Implementation Strategy Evaluation
Organization Culture Ethics and Social Responsibility Managing Innovation and Change Diversity and Inclusion Corporate Governance Globalization
Principles and Practices of Management
About Lesson

1. Outline six factors that should be taken into account when designing an effective control system/Qualities of an effective control system.
The management of any organization must develop a control system tailored to its organization’s goals and resources. Effective control systems share several common characteristics. These characteristics-are as follows:

  1. Controls-tailored to plans and positions: Control techniques and systems should reflect the plans they are designed to follow. Every plan or -every phase of a plan will have its unique-characteristics. Controls reflect the organization pattern i.e. the roles of people in the organization. These roles show where responsibility for various activities lie. The more the controls reflect the positions where responsibility lies the easier it is to correct deviations.
  2. Controls should be tailored to individual managers and their personalities: Control system should be designed to help individual managers carry out their functions. Therefore there is need for the controls to be understood by the various managers. People in different fields will have their information in different ways e.g. statisticians will want controls expressed in complex tables. Control information must be simple enough to be understood by those who are to use it.
  3. Controls should point exceptions at critical points: If controls are to be efficient and effective they must be able to point out exceptions at critical points. Some deviations from standards have little meaning while others have serious effects on performance. The points at which deviations occur are important.
  4. Controls should be objective: Although management contains many subjective elements, good performance should ideally not be a matter for subjective determination. Objective standards can be quantitative such as costs or labour hours or even sometimes quantitative but the standard should be determined and verifiable.
  5. Controls should be flexible: Controls should be adjustable to changing plans and circumstances. For example, in production management the production manager must prepare for failures occasioned by machine breakdown or from illness of one or more workers. Flexibility in control can be provided by having alternative plans for various probable situations.
  6. Control systems should fit the organizational climate Organizational climate refers to the general mode of orientation e.g. have people been given freedom, and is there participative management and free communication. An organization which allows greater freedom would not suit tight controls. A dictatorial climate would be unsuitable for a permissive or relatively free control system.
  7. Controls should be economical: Controls must be worth their cost, but will vary with the importance of the activity, the size of the operation etc. Small companies will of course not afford the extensive control systems of large companies.
  8. Controls should lead to corrective action: The essence of controls is corrective action. Adequate controls should indicate where failures are occurring and those who are responsible. Control is justified only if indicated deviations are corrected through appropriate planning, organizing, staffing and leading.

2. List eight indicators that might suggest the existence of an inefficient control system in an organisation.

  1. Wastage of resources
  2. Customer dissatisfaction due to poor quality products and services
  3. Losses
  4. Abuse and mismanagement
  5. Errors and fraud
  6. Unreliable or inaccurate financial and management data
  7. Failure to meet deadlines
  8. Conflicts within the organisation

3. Difference between “feed-forward control” and “feed-back control”.

Feed-forward Control: Feed forward controls, sometimes called preliminary or preventive controls, attempt to identify and prevent deviations in the standards before they occur. Feed-forward controls focus on human, material, and financial resources within the organization. These controls are evident in the selection and hiring of new employees. For example, organizations attempt to improve the likelihood that employees will perform up to standards by identifying the necessary job skills and by using tests and other screening devices to hire people with those skills.

Feedback controls: Feedback controls involve reviewing information to determine whether performance meets established standards. For example, suppose that an organization establishes a goal of increasing its profit by 12 percent next year. To ensure that this goal is reached, the organization must monitor its profit on a monthly basis. After three months, if profit has increased by 3 percent, management might assume that plans are going according to schedule.

4. Importance of feedback control in an organisation.

  1. Feedback control obtains data at the process output. Because of this, the control takes into account unforeseen disturbances such as frictional and pressure losses.
  2. Feedback control architecture ensures the desired performance by altering the inputs immediately once deviations are observed regardless of what caused the disturbance.
  3. By analysing the output of a system, unstable processes may be stabilized.
  4. Feedback controls do not require detailed knowledge of the system and, in particular, do not require a mathematical model of the process.
  5. Feedback controls can be easily duplicated from one system to another. A feedback control system consists of five basic components: (1) input, (2) process being controlled, (3) output, (4) sensing elements, and (5) controller and actuating devices.
  6. A final importance of feedback control stems from the ability to track the process output and, thus, track the system’s overall performance.

5. Benefits that could be derived from the effective use of well designed controls

  1. Cost and productivity control—ensures that the firm functions effectively and efficiently.
  2. Quality control—contributes to cost control (i.e., fewer defects, less waste), customer satisfaction (i.e., fewer returns), and greater sales (i.e., repeat customers and new customers).
  3. Opportunity recognition–helps managers identify and isolate the source of positive surprises, such as a new growth inarket. Though opportunities can also be found in internal comparisons of cost control and productivity across units.
  4. Manage uncertainty and complexity—keeps the organization focused on its strategy, and helps managers anticipate and detect negative surprises and respond opportunistically to
    positive surprises.
  5. Decentralized decision making—allows the organization to be more responsive by moving decision making to those closest to customers and areas of uncertainty.

6. Steps involved in basic control system

  1. Establish Standards and methods for measuring performance: Ideally, the goals and objectives established during the planning process will already been stated in clear, measurable terms that include specific deadlines.
  2. Measure the Performance: Like all aspects of control, measurement is an ongoing, repetitive process. The frequency of measurements depends on the type of activity being measured. In a manufacturing plant, levels of gas particles in the air, for example, could be continuously monitored for safety, whereas progress on long term expansion objectives might need to be reviewed by top management only once or twice a year.
  3. Determine whether performance matches the standard: In many ways, this is the easiest step in the control process. The complexities presumably have been dealt with in the first two steps. Now it is a matter of comparing measured results with the established targets or standards previously set. If performance matches the standards, managers may assume that “everything is under control”.
  4. Take Corrective Action: This step is necessary if performance falls short of standards and the analysis indicates action is required. The corrective action could involve a change in one or more activities of the organization’s operations.

7. Types of control instituted by different organisations

  1. Accounting and arithmetical controls
  2. Controls over accounts payables and receivables
  3. Controls over receipts books
  4. Controls over banking and withdrawals
  5. Controls over petty cashbook
  6. Controls over local purchase order.
  7. Controls over fixed deposit and credit transfers
  8. Controls over safety of non-current assets.
  9. Controls over cheque payment to creditors
  10. Controls over pre-numbering of documents

8. Importance of budget to a manager

  1. It helps the manager to coordinate activities necessary to achieve the organisation objectives.
  2. Helps the manager in performance evaluation, which is a basis of comparison against actual performance especially for rewarding purpose.
  3. Assist managers in establishing a system of control or a guide.
  4. Budgets are important to managers as they provide basis of assigning responsibilities
  5. Planning tool, that is budgets are used by managers to strategies and develop future plans.

9. Requirements of an effective information system in an organisation

  1. Management-oriented: The basic objective of MIS is to provide information support to the management in the organization for decision making. So an effective MIS should start its journey from appraisal of management needs, mission and goal of the business organization. It may be individual or collective goals of an organization. The MIS is such that it serves all the levels of management in an organization i.e. top, middle and lower level.
  2. Management directed: When MIS is management-oriented, it should be directed by the management because it is the management who tells their needs and requirements more effectively than anybody else. . . Manager should guide the MN professionals not only at the stage of planning but also on development, review,and implementation stages so that effective system should be the end product of the whole exercise in making an effective MIS.
  3. Integrated: It means a comprehensive or complete view of all the sub systems in the organization of a company. Development of information must be integrated so that all the
    operational and functional information sub systems should be worked together as a single entity. This integration is necessary because it leads to retrieval of more meaningful and useful information. Heavy-planning-element: The preparation of MIS is not a one or two day exercise. It usually takes 3 to 5 years and sometimes a much longer period. So the system expert has to keep 2 things in mind one is that he has to keep future objectives as well as the firm’s information well in advance and also he has to keep in mind that his MIS will not be obsolete before it gets into action.
  4. Common databse: This is the basic feature of MIS to achieve the objective of using MIS in business organizations. It avoids duplication of files and storage which leads to reduction in costs. Common database means a “Super file or Master file” which consolidates and integrates data records formerly stored in many separate data files_ The organization of.the database allows it to be accessed by each subsystem and thus, eliminates the necessity of duplication in data storage, updating, deletion and protection.
  5. Computerized: MIS can be used without a computer. But the use of computers increases the effectiveness and the efficiency of the system. The queries can be handled more quickly and efficiently with the computerized MIS. The other benefits are accuracy, storage capacity and timely information.
  6. User friendly/Flexibility: An MIS should be flexible i.e. there should be room for further modification because the MIS takes much time in preparation and our environment is dynamic in nature. MIS should be such that it should be used independently by the end user so that they do not depend on the experts.
  7. Information as a resource: Information is the major ingredient of any MIS. So, an MIS should be treated as a resource and managed properly

10. Characteristics of an effective control system

  1. Clear-cut purpose: The task of control is to ensure that plans succeed by detecting deviations from plans and furnishing a basis for taking action to correct potential or actual undesired deviations.
  2. Future-oriented: Owing to the time lags in the total system of control, the more a control system is based on feed forward rather than simple feedback of information, the more managers have the opportunity to perceive undesirable deviations from plans before they occur and to take action in time to prevent them.
  3. Control responsibility: The primary responsibility for the exercise of control rests in the manager charged with the performance of the particular plans involved. Since delegation of authority, assignment of tasks, and responsibility for certain objectives rest in individual managers, it follows that control over this work should be exercised by each of these managers. An individual manager’s responsibility cannot be waived or rescinded without changes in the organization structure.
  4. Cost Benefits: Control techniques and approaches are efficient if they detect and illuminate the nature and causes of deviations from plans with a minimum of costs or other unsought consequences. Control techniques have a way of becoming costly, complex and burdensome. Managers may become so engrossed in control that they spend more than it is worth to detect a deviation_
  5. Preventive nature: Focus should be more on prevention rather than the correction of the negative aspects of the system. Standardized
  6. Effective control requires objective, accurate, and suitable standards. There should be a simple, specific and verifiable way to measure whether a planning program is being accomplished.
  7. Flexible: If controls are to remain effective despite failure or unforeseen changes of plans, flexibility is required in their design.
  8. Exceptional: The more that managers concentrate control efforts on significant exceptions, the more efficient will be the results of their control.

11. Reasons for employees resistance to their organisation’s control system

  1. Loss of Job: In an organizational setting, any process, technological advancement, systems, or product change will include streamlining, working smarter, cost reduction, efficiency, faster turnaround times. All these means.staff and managers will resist the changes that result in their roles being eliminated or reduced. From their perspective, your change is harmful to their position in the organization!
  2. Bad Comthunication Strategy: The way in which the change process is communicated to employees within the organization is a critical factor in determining their reactions. If you can’t communicate what, why, how, when, who and what success will look like or how success is going to be measured, then, expect resistance! If employees do not understand the need for change, why ask for a buy in?
  3. Shock and Fear of the Unknown: Employees’ responses to organizational change can range from fear and panic to enthusiastic support. During periods of Change, some eniployees may feel the need to cling to the past because it was a more secure, predictable time. If what they did in the past worked well for them, they may resist changing their behaviour out of fear that they will not achieve as much in the future.
  4. Loss of Control: Familiar routines help employees develop a sense of control over their work environment. Being asked to change the way they operate may make employees feel powerless and confused. People are more likely to understand and implement changes when they feel they have some form of control.
  5. Lack of Competence: This is a fear that is difficult for employees to admit openly. But sometimes, change in organizations necessitates changes in skills, and some people will feel that they wont be able to make the transition well: Therefore, the only way for them to try and survive is to kick against the change. Some employees are just hesitant to try new routines, so they express an unwillingness to learn anything new.
  6. Poor Timing: Change must be introduced when there are no other major initiatives going on. Sometimes it is not what a leader does, but it is how, when and why she or he does it that creates resistance to change! Undue resistance can occur because changes are introduced in an insensitive manner or at an awkward time.
  7. Lack of Reward: There is a common business saying that managers get what they reward. Organizational employees will resist change when they do not see anything in it for them in terms of rewards.
  8. Office Politics: Every organisation has its own share of in-house politics. So, some employees resist change as a political strategy to “show or prove” that the change decision is wrong.

12. Five types of quantitative standards against which performance could be measured in an organisation

  1. Graphic rating—assessing performance by a graph or a line representing the range of a personal trait or dimension of the job.
  2. Work standards approach comparing actual performance with present standards.
  3. Management by objectives–setting of future objectives and action plans jointly by subordinates and superiors and then measuring outcomes against goals
  4. Ranking method involves ranking of employees in one department or work unit ranging from the best to the worst performer based on overall contribution to the organization.

13. Factors that influence the span of control in an organisation

  1. Complexity of functions i.e. the nature of the functions or task for which a manager is responsible.
    Less complex – Wide span of control
    More complex – Narrow span of control
  2. Direction and control needed by subordinates i.e. the degree of supervision that subordinates require. Unskilled workers would require close supervision hence narrow span of control. Skilled and professional workers require less direction and control hence wide span of control.
  3. Coordination required of the supervision is the degree to which the manager must try to integrate functions or tasks within the subordinates or between the subordinates and other parts of the organization. More coordination requires narrow span of control while less coordination requires broad span of control.
  4. Planning required of the supervisor i.e. the degree to which the manager must try to program and review the activities of his subordinates.
  5. Organizational assistance received by the supervisor i.e. how much help in terms of assistants and other support personnel a manager can rely on. The more organizational assistants in terms of personnel and other resources the wider the span of control. Less organizational assistants require narrow span of control.
  6. Control standards: When control standards are clear and can be quantified – Wide span of control When control standards are not clear – Narrow span of control.
  7. Geographical dispersion of functions i.e. how closely the functions are located to managers. Greater geographical dispersion – Narrow span of control Lesser geographical dispersion – Broad span of control.

14. Advantages of a budgetary control system in an organisation

  1. Maximization of Profit: The budgetary control aims at the maximization of profits of the enterprise. To achieve this aim, a proper planning and co-ordination of different functions is undertaken. There is proper control over various capital and revenue expenditures. The resources are put to the best possible use.
  2. Co-ordination: The working of the different departments and sectors is properly coordinate. The budgets of different departments have a bearing on one another. The coordination of various executives and subordinates is necessary for achieving budgeted targets.
  3. Specific Aims: The plans, policies and goals are decided by the top management. All efforts are put together to reach the common goal of the organization. Every department is given a target to be achieved. The efforts are directed towards achieving come specific aims. If there is no definite aim then the efforts will be wasted in pursuing different aims.
  4. Tool for Measuring Performance: By providing targets to various departments, budgetary control provides a tool for measuring managerial performance. The budgeted targets are compared to actual results and deviations are determined. The performance of each department is reported to the top management. This system enables the introduction of management by exception.
  5. Economy: The planning of expenditure will be systematic and there will be economy in spending. The finances will be put to optimum use. The benefits derived for the concern will ultimately extend to industry and then to national economy. The national resources will be used economically and wastage will be eliminated.
  6. Determining Weakness: The deviations in budgeted and actual performance will enable the determination of weak spots. Efforts are concentrated on those aspects where
    performance is less than the stipulated.
  7. Corrective Action: The management will be able to take corrective measures whenever there is a discrepancy in performance. The deviations will be regularly reported so that necessary action is taken at the earliest. In the absence of a budgetary control system the deviation can determined only at the end of the financial period.
  8. Consciousness: It creates budget consciousness among the employees. By fixing targets for the employees, they are made conscious of their responsibility. Everybody knows what he is expected to do and he continues with his work uninterrupted.
  9. Reduces Costs: In the present day competitive world budgetary control has a significant role to play. Every businessman tries to reduce the cost of production for increasing sales. He tries to have those combinations of products where profitability is more.
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