Essential Of Management

ESSENTIALS OF MANAGEMENT

The need / scope / meaning & definition / process of management /

managerial hierarchy

MANAGERIAL FUNCTIONS

Planning / Organizing / Staffing / Directing / Controlling

MANAGERIAL SKILLS

Technical / Conceptual / Human

TYPES OF MANAGERS

Functional / Specialists / Generalists / Line & Staff managers

DECISION MAKING ENVIRONMENT

Open & closed system / decision making under certainty,

uncertainty & risk

DECISION MAKING TYPES

Structured / unstructured decisions

Programmable / non-programmable

Classical & Administrative Models

DECISION MAKING STYLES

Autocratic / Participative / Consultative

Essentials of Management

An International Perspective

Harold Koontz & Heinz Weihrich

Lesson 1

Characteristics of the term Organization:

Social unit with a purpose

Characteristics of the term Management

Process of optimum utilization of the resources of the

Organization to accomplish its goals

Functions of Management

Planning

Organizing

Leading

Controlling

Coordination

Characteristics of the term Productivity

A ratio of Output to Input

It can be improved by

o Increasing output with same inputs

o Decreasing inputs, but maintaining the same output

Characteristics of the term Effectiveness:

Accomplishing of Objectives of the Organization

Characteristics of the term Efficiency

How Objectives are accomplished.

Is determined by process

Measured against standard time / quantity

Management: Science or Art

Practice is called Art

The Knowledge underlying the Practice is Science

Hence it is both: Science & Art

Managerial Hierarchy

The levels of management in the organization

Levels are established to accomplish the organizational goals

As the size of the organization keeps on growing, it gives rise to

levels, for all activities to accomplish the organization goals

cannot be performed by a single person.

Management Process

Process is defined as Value addition

Value addition takes place in core activities

Scope of Management:

Scope includes functions, like marketing / operations / human

resources / finance

Characteristics of excellent enterprise:

Action oriented

Learned about the needs of the customers

Promoted managerial autonomy & entrepreneurship

Achieved productivity, by meetings the needs of its people

Value driven

Focused on business they knew best

Have flexible organization structure with lean staff

Difference between Objectives, Goal & Target

All three are statements.

Objectives are open-ended system. Are set CEO & his team

Goals & Targets are closed ended system

Goals are long term, while Targets are short term. Objectives are

converted into goals by the respective Unit Heads. Goals are

converted into targets by Department Heads.

Goal is broken down into Targets

Lesson 2

Planning

Characteristics of the term Planning:

Involves:

o Selecting Objectives

o Evolving Action Plan

o To Accomplish them

o It Requires

Decision-Making i.e. choosing from alternatives

It is Rational Approach to Accomplish Objectives

Implies Managerial Innovation

Bridges the gap from where we are to where we want

to go

Planning & Control go hand in hand

Types of Plan:

Objectives / Goals

o Purpose for which the Organization exists

Strategies

o A long term objective, which gives a competitive advantage

to business

Policies

o General statements / understanding that guides thinking in

decision-making

Procedures

o Plans that establish, a required method of handling future

activities

Rules

o Spells out specific required action or nonaction allowing no

discretion

Programs

o Consists of:

Goals / Policies / Procedures / Rules / Task assignment

/ Steps to be taken / resources to be employed

o Necessary to carry out a given course of action

o They are ordinarily supported by budget

Budgets

o Statement of expected results expressed in numerical terms

Steps in Planning:

Being aware of Opportunities

o Doing SWOT Analysis

Establishing Objectives

o Specifying expected results

o Could be long / short term

o Gives direction to plans

Developing Premises

o Making assumptions about the environment in which the

plan is to be carried out

Determining Alternative Courses

o Brain storming ways of reaching the destinations

Evaluating Alternative Courses

o Weighing each alternatives pluses & minuses

Selecting a Course

o Zeroing down upon the alternative, which will be adopted

Formulating Derivative Plans

o Listing the activities to be performed

Numberizing Plans by Budgeting

o Estimate the income / expenditure for the entire activities to

be performed

Characteristics of the term Strategy:

Determining the long-term objectives of the Organization

Adoption of course of action

Allocation of resources to accomplish the long term objectives

It gives competitive advantage to business

It is based on strength of the Organization

It is based on assumptions

Strategies cannot be inconsistent with Value system of the

Organization

Used only when there is competition

Strategies are of two kinds:

o Corporate

Further classified into:

Growth

o Internal

Through introduction of new

product

Increasing market share

Marginal growth

o External

Acquisition & Mergers

Breakthrough growth

Stability

o Maintaining status quo.

o Limited opportunities in environment

Turnaround

o No growth

o Issue of survival of business

o Downsizing is the solution

o Business Unit

Further classified into

Cost leadership

o Organization attempts to increase

efficiency / cut costs

Differentiation

o Product / Services are differentiated

o Creating a niche market

o Can charge premium price

Focus

o Markets are segmented

o Only on one segment the organization

focuses

Premising & Forecasting

Forecasting is anticipating the future

Future is unknown

Hence forecasting is based on assumptions

ORGANIZING

A single individual cannot accomplish organizational goals.

Employees have to cooperate with each other & work in team

For cooperating with each other, every employee must

understand one’s role, & how it is interconnected

Designing & maintaining these systems of roles is basically the

managerial function of organizing.

For organizational role to exist, & be meaningful, employees must

know their objectives, & the activities they have to perform, &

have the discretion of defining their roles

To perform the role effectively, needed resources should be

provided, & authority with respect to resources & decision

making should be highlighted

For the above to take place the organization needs a structure

Structure are department-wise

For every role, there is a level

The structure should be aligned with external environment

STAFFING

Means Recruitment PLUS Selection

Sources of recruitment

o Internal

o External

Both the sources has its own advantages & disadvantages

In selection care should be seen to match the organization

requirement with people requirement. That is matching the

organization’s culture with that of the people’s nature.

The organization must understand the needs of its employee, &

ensure that the needs are met. If needs are not met, then the

employee will not be motivated to work towards the organization

goal

DIRECTING [LEADERSHIP

Leader is the person who influences others willingly &

enthusiastically towards accomplishing long term organization

goals.

Leadership is the style of leader

The leadership styles can be either:

o Transactional

Through external motivation influence the followers

o Transformation

Through internal motivation influence the followers

CONTROLLING

It is measurement & correction of performance in order to make

sure that enterprise objectives & plans devised to attain them are

being accomplished

Planning & Controlling are closely related

The control process involves the following steps:

o Establishing a standard

o Measuring the performance against the standard

o Correcting the variations

Control classified as:

o Feedback

Given after the execution of the plan

o Feed-forward

Taken before implementation of the plan

MANAGERIAL SKILLS

A manager requires the following skills:

o Technical

Knowledge about the job

The executives should have this skill

o Conceptual

Capability to apply knowledge

The functional heads should have this skill

o People

Understanding / predicting / motivating the people to

perform

The leaders should have this skill

TYPES OF MANAGERS

Functional

o Has a competency in one of the aspects of management

functions like HR / Finance / Marketing

Specialist

o Has core competency in one of aspects of the functional

management

Generalist

o Has a competency in running a business

Line & Staff

o Line manager is accountable for results. Example:

Production / Marketing.

o Their outcomes are measurable

o Staff manager is accountable for quality & timely resources.

Example: HR / Finance / Materials / Engineering

DECISION MAKING ENVIRONMENT

Open & closed system

In a system theory there is an active exchange between internal

environment of the organization & external environment

All open system are input-throughput-output mechanisms.

Systems take inputs from the inputs from environment in the

form of energy, information, money, people, raw materials & so

on. They do something to the inputs via throughput, conversion or

transformation processes that changes the inputs & they export

products to the environment in the form of outputs.

Each of these three system processes must work well if the system

is to be effective & survive.

Every system is delineated by a boundary. What is inside a

boundary is the system & what is outside is the boundary is the

environment. Boundaries of open system are permeable, in that

they permit exchange of information, resources & energy between

system & environment

Open systems have purposes & goals. These purposes must align

with purposes or needs in the environment. For example the

organization’s purposes will be reflected in the outputs & if the

environment does not want these outputs, the organization will

cease to exist

The law of entropy states that al systems “run down” &

disintegrates integrate unless they reverse the entropic process by

importing more energy than they use. Organizations achieve

negative entropy when they are able to exchange their outputs for

enough inputs to keep the system from running down.

Information is important to systems in several ways. Feedback is

information from the environment about system performance.

System requires two types of feedback: positive & negative.

Negative feedback is also known as deviation-correcting feedback

An open system achieves a steady state of against a disruptive

force, either internal or external. The basic principle is the

preservation of the character of the system.

Also a system tend to get more elaborated, differentiated,

specialised & complex over time.; this process is called as

“differentiation”. With increased differentiation, increased

integration & coordination are necessary.

Another characteristic of the open system is equinfinality, the

principle that there are multiple ways to arrive at a particular

outcome or state.

Subsystems exist within larger systems. These subsystems can be

arranged into a hierarchy of systems moving from less important

to more important.

The characteristics of open systems explain many phenomena, we

observe in organizations.

o Why do organizations resist change?

A desire to preserve the character of the system: the

steady state.

o Why does plan “A” fail & fail again then succeed?

Equifinality

o Why do organizations become increasingly bureaucratic &

complex?

Differentiation, with its attendant integration &

coordination.

o Why does business go bankrupt?

Inability to create negative entropy.

Decision making under

o Certainty,

People are sure about what will happen when they

make a decision.

The information available is reliable, & the cause &

effect relationships are known.

o Uncertainty

Information available is meagre.

Reliability of data is not certain.

Moreover one does not know the impact of different

variables.

o Risk

Information is incomplete.

To arrive at a decision, one may use an estimate of

objective probability example: mathematical models.

Or use subjective probability, based on judgment &

experience.

It is important to know the size & nature of the risk

involved.

DECISION MAKING TYPES

Structured / unstructured decisions

o Problems are structured or unstructured

Structured problems are routine hence decision-

making is simple. No discretion is necessary in

decision making;

Unstructured problems are complex hence decision-

making is more complex. All variables need to be

considered. Senior management team makes this type

of decisions.

Programmable / non-programmable

o Programmed decision is applied to structured or routine

problems.

o Decision-making is by precedent.

o Non-programmed decisions are used for unstructured,

novel, & ill-defined situations of non-recurring nature.

o Most decisions are neither completely programmed OR nor

completely programmed; they are a combination of both.

Classical & Administrative Models

o In administrating model, people attempting to reach the

goal do so by having a clear understanding of alternatives

courses by which goal can be reached under existing

circumstances & limitations. They must have the

information & the ability to analyze & evaluate the

alternatives in light of the goal sought. They must have a

desire to come to the best solution by selecting the

alternative that most effectively satisfies goal achievement

o In classical approach, it is difficult to rely on precedent to

operate future. Moreover it is difficult to recognize all the

alternatives that might be followed to reach a goal; this is

particularly true when decision making involves

opportunities to do something that have not been done

before. In most cases not all alternatives can be analyzed.

DECISION MAKING STYLES

Autocratic

o Decision taken by seniors. Seniors say, & subordinate obey

o No involvement of employees

o Good strategy, if subordinates are not competent, or if the

environment is highly competitive

o Employees obey the order out of fear.

o Employees will only do what they have been told.

Participative

o Decision is taken by involving all the concerned employees.

o The best alternative is selected.

o Employees do not resist, for they have taken the decision in

consensus

Consultative

o The seniors invite suggestions from the subordinates, but

there is no guarantee that the suggestion given by

subordinates will be implemented.

Decision Making

Characteristics f the term Decision-Making:

Selection of a course of action

From among alternatives

It is the core of planning

Rationality in decision-making

A decision to be effective has to be rational.

But decisions are pertaining to future, which is unpredictable

So selecting an alternative to reach the goal is difficult in terms of

rationality

Moreover all alternatives cannot be analysed

So limitations of time / information / uncertainty limit rationality

in decision-making

Rationality also get bound by likes & dislikes, playing it safe, or

picking up a course of action that is satisfactory or good enough.

Hence best decision are taken within the limits of rationality & in

the light of size & nature of risk involved.

Development of alternatives & the limiting factor:

First step in decision making is developing alternatives

Ability to develop alternatives is as important as selecting

alternatives

The constraint explained above limit the choice of selecting

decision. One must be aware of these limiting factors.

Evaluations of alternatives:

Once appropriate alternatives are found, the next step is

evaluating them, & selecting the one that will best contribute to

the goal.

Following factors should be considered in evaluating of

alternatives

o Quantitative / Qualitative factors:

In comparing alternatives sometimes numbers

become easy [quantitative]

While comparing, we cannot also forget the

qualitative aspects. Do not ignore the intangible

factors. Try & give them quantitative dimension

o Marginal analysis

It is a technique of comparing additional revenues

arising from additional costs

If our objective is maximization of profits, then this

factor cannot be ignored

o Cost effective analysis

It seeks the best ratio of benefits. It is a variation of

marginal analysis

Selecting an alternative:

There are three approaches

o Experience

Reliance on past experience. Carefully analyse the

experience, rather than blindly following it.

But this should not be the exclusive method.

o Experimentation

Taking risk, & seeing what happens.

But it is important to take calculated risk, & not blind

risk

o Research & analysis

Studying the cause & effect

Types of Decisions:

Programmed

o Decisions made by precedent

o No choice.

o Requires objective judgments

o Made at lower level

Non-programmed

o Requires subjective judgments

o Made at senior level

Decision making under Certainty, Uncertainty, & Risk taking

In certainty, outcome is predictable. Data are available. Cause &

effect relationship is known

In uncertainty, outcome is unknown. Data is limited. No help

from past experience

In risk, information is available, but it is incomplete. One

estimates the probabilities of the outcome.

All decisions are combination of the above three types. The

proportion may vary.

Creativity & Innovation:

Creativity means the capability to develop new ideas. Gives

breakthrough benefits

Innovation means continuous improvement in the same idea. It

gives marginal benefits

The process of creativity as follows:

o Unconscious scanning

Involves absorption of problem.

Problem is vague

o Intuition

Thinking through problem

Based on gut level

o Insight

Comes, when the thoughts are not focussed on

problem. Comes as lightening. Lasts for a short

period of time

o Logical formulation

Insights need to be tested through logic &

experiments.

Brainstorming

A technique for facilitating creativity.

The purpose is to find out new & unusual solution to the problem.

Multiplication of ideas is sought

Rules of brainstorming are:

o No ideas to be criticised.

o The more radical ideas are, the better

o The quantity of idea production is emphasised

o The improvement of ideas by others is encouraged.

Acceptance of idea is greater; for it is contributed by the group

Limitations of traditional group discussion:

Group members may pursue an idea to the exclusion of other

alternatives

Fear of being ridiculed

Lower level of people may be inhibited in expressing their views

Pressure to conform

Need of getting along with others, than the need for exploring

creative idea.

Pressure to take decision

Characteristics of a creative manager:

Inquisitive

Not satisfied by status quo

They see themselves as different

Do not stick to norms

It is not a substitute for judgment

THE NATURE OF ORGANIZING, ENTREPRENEURING, & RE-

ENGINEERING ORGANIZATION:

A formalized, intentional structure of roles or positions

Organizational Roles:

A role to be effective should have:

o Verifiable goals

o List of activities to be performed

o Authority associated with that role; to accomplish the

objectives

Organizing:

Identification & classification of activities

Grouping of activities necessary to attain goals

Reporting relationship

Coordination of the various activities either horizontal / vertical

Types of Organization:

Formal

o Intentional structure of roles

Informal

o Network of personal & social relations not established by

the formal organization; but arising spontaneously as

people associate with one another

Organizational Division:

The Department

o It designates a distinct area, division, or branch of an

organization over which a manager has authority for the

performance of specified activities

o It is headed by a head.

Organization Levels & the Span of Management

We have levels in an organization; for there is a limit to the

number of persons a manager can supervise effectively

Span of control means the number of employees a manager can

effectively supervise. Organization can have wide or narrow span

of control, with its own advantages & disadvantages

Organizational Environment for Entrepreneuring & Intrpreneuring

Intrapreneur is a person who focuses on innovation & creativity,

& who transforms a dream or an idea into a profitable venture by

operating WITHIN the organizational environment

Entrepreneur is a person who does similar things but OUTSIDE

the organizational setting

Creating an environment

It is the responsibility of the CEO is team to create an

environment for effective & efficient accomplishment of

organizational goals

The CEO should do the following to create an environment:

o Reward employees for taking risk

o Tolerate failures

o Provide freedom to pursue ideas

Re-engineering the Organization

Means starting over

Has the following aspects:

o Fundamental rethinking

Providing new perspective to what is being now

currently done

o Radical redesign

Radical means reinvention & not modification

o Dramatic Results

Improvement is breakthrough, & not marginal

o Process

Need for carefully analysing & questioning business

process

The process analysis must go beyond operations &

must include the analysis & integration of technical

system, human systems & the total management

process linking the enterprise to the external

environment

Downsizing is not the primary purpose

Lesson 8:

Organizational Structure: Departmentation

Departmentation by enterprise function:

Functionwise

o Grouping activities in accordance with functions of an

enterprise

o Has its own advantages / disadvantages

Territory or Geography

o Grouping activities in a given area or territory are grouped

& assigned to manager

o Useful to large scale firms or other enterprises whose

activities are physically or geographically dispersed

o However plant may be local in its activities

o For example: marketing function is split region-wise


Customer-wise

o Activities are grouped together customer-wise

o For example: if we take banking industry, then we have

Community-city banking; corporate banking,; institutional

banking, agricultural banking; etc.


Product-wise

o Grouping activities product-wise

o For example: a Company that manufactures various

products Switchgear, Rotating Machines, Transformers,

have the following divisions: like Switchgear Division,

Rotating Machine Division, & Transformer Division


Matrix Organization:

o An individual reports functionally to one person, &

administratively to another person.

o He is located where the administrative head sits.

o For example: The HR Head of a unit administratively

reports to the Manufacturing Head of the Unit, while

functionally reports to Corporate HR Head who sits at

Head Office

o This happens on the following two occasions:

When the Organization grows in size

Or the Organization manufactures more than one

product at different locations

Strategic Business Units [SBUs]

When the Organization having multiple products grows very

large, it is broken down into separate units, which operates as a

profit centre by itself

To be called an SBU, it should meet the following criteria:

o Have its own mission

o Have definable groups of competitors

o Prepare its own integrative plans

o Manage its own resources

o Have proper size, neither too large, nor too small

Each SBU is headed by a Head

Has its own advantages & disadvantages

Organization Structure for the Global Environment

Organizational structures differ greatly for enterprises operating

in the global environment.

The kind of structure depends on a variety of factors such as

degree of international orientation & commitment. A company

may begin internationalising its operation by simply creating at

its headquarters an international department, headed by an

export manager. As the company expands its international

operations, foreign subsidiaries, & later international divisions

may be established in various countries, reporting to a manager in

charge of global operation at headquarters or possibly the CEO.

With additional growth of the international operations, several

countries may be grouped into regions such as Africa, Asia,

Europe, & South America,. Furthermore, the European division

may then be divided into groups of countries for example the

European Union [EU] Countries, Non-EU countries, & Eastern

European Countries

Example: Organizational Structure at Unilever

o Unilever the Anglo-Dutch MNC has top management team

consisting of the Chairperson & two Vice Chairpersons.

The executive officers are grouped into:

Functional Areas

Finance

Commercial

R&D

HR

Product Groups

Food & Drinks

Detergents

Frozen Products

Chemicals

Personal Products

Agribusiness

Edible Fats & Dairy Products

Geographic Regions

Europe

East Asia

North America

Latin America

Central Asia

The Virtual Organization

The is rather loose concept of a group of independent firms of

people that are connected often through information technology

These firms may be suppliers, customers, & even competing

companies

The following are the aims of virtual organization:

o Gain access to another firm’s competence

o Gain flexibility

o Reduce risks

o Respond rapidly to market needs

Virtual organizations coordinates the activities through the

market where each party sells it goods & services

It has own advantages & disadvantages

It has neither organization chart nor a centralized office

Choosing the pattern of departmentation

There is no best way of department zing that is applicable to all

organizations & all situations.

Managers must determine what is best by looking at the situation

they face, the jobs to be done, & the way they should be done, the

people involved & their personalities, the technologies employed

in the department, the users being served & other internal &

external environmental factors in the situation

Departmentation is not an end in itself but is simply a method of

arranging activities to facilitate the accomplishment of objectives

Each method has its own advantages & disadvantages. Selection

of a specific departmentation pattern should be done so that

organizational & individual objectives can be achieved effectively

& efficiently. Accomplishing this goal often requires mixing the

forms of departmentation

The Lean Modular Organization:

The Company focus on what they can do best & outsource many

other tasks, such as Accounting, HR,

It requires maintaining good relationships with your suppliers.

Their cooperation must be built on trust, which in turn can be

achieved through a long standing relationship

The future organization competing in the global environment

needs to be lean & flexible. One such strategy is to leverage its

power by focussing on those functions companies can do best, &

let the specializing suppliers do the rest

Lesson 9

Line / Staff Authority, Empowerment, & Decentralization

Introduction:

Authority relationships whether vertical or horizontal are the

factors that make organization possible, facilitate departmental

activities, & bring coordination to an enterprise

Authority & Power

Authority:

o It is the right in a position, &

o Through it the right of the person occupying the position

o To exercise discretion in making decisions affecting others.

Power:

o Ability of individuals or groups to induce or influence the

beliefs or actions of other persons or groups

o The following are the types of power:

o Legitimate

Source is position

o Reward

Source is granting or withholding what other wants

o Coercive

Source is fear

o Expert

Source is knowledge

Empowerment

o Having power to make decisions without asking superiors

for permission

o Only those who have knowledge & competencies are

empowered

o Those to whom this power is delegated are responsible for

the outcome of their decision

Line & Staff Concepts

Line function outcomes are measurable. Their outcome affects the

bottom line of the Organization. They process the resources into

output

Staff function outcomes are not measurable. They enable the line

function to perform effectively. They are accountable for

procuring & maintaining the resources

Decentralization of Authority

Delegate non-core duties to your subordinates

Delegate only to those who show initiative

Delegate only to those who are knowledgeable

While delegating specify

o The limits of power,

o The time frame

o The monitoring process

State the goal to be accomplished.

Give freedom as to how the goal is to be accomplished

Provide feedback

Delegation should set chain reaction.

If mission accomplished reward the person

Lesson 10

Effective Organizing & Organizational Culture

Introduction

Organizing involves developing an intentional structure of roles

for effective performance.

Organizing is coordinating the activities of individuals towards

the common goal. The critical element in the activity is decision,

which takes you towards the goal

The following are the guidelines to make organizing effective

o Tailor make your organization structure

o Compare the present structure with the standard. This

enables the leader to know what changes should be made

when possible.

o Modify the structure to fit individual capabilities.

o Enables you to determine to future personnel needs &

training needs

o Structure should be flexible, so that it can be changed as &

when there is a change in the environment

Guidelines for making staff work effective:

Making the staff understand the authority relationships. Insist

that the staff function should sell their recommendations, & not

just give advices

Encourage line managers to consult the staff managers who are

experts in their area.

Line managers should provide feedback to staff managers the

status of the suggestions made by them

The staff managers should provide complete solution to the

problems faced by the line managers. They should assist the line

manager in implementing the same

Make the staff & line managers’ work as team. Share the credit &

blame

Guidelines for avoiding conflict by clarifications:

Have organization structure

Define managerial position. State the basic function, & the end

result, which the positions is suppose to accomplish

Ensure all the employees understand the structure.

A formal organization structure should take full advantage of the

informal organization, & the grapevine

Promoting an appropriate organization culture

The effectiveness of an organization is very much influenced by

the organization culture, which affects the way the managerial

functions are carried out in the organization

For example:

Environment A Functions Environment B

Goals are set in an

autocratic manner.

Decision making is

centralized

Planning Goals are set with a

great deal of

participation.

Decision making is

decentralized

Authority is

centralized

Authority narrowly

defined

Organizing Authority is

decentralized

Authority is broadly

defined

People are selected on

the basis friendship

Training is in a

narrowly defined

speciality

Staffing People are selected

based on their

capabilities

Training in many

functional areas

Managers exercise

directive leadership

Communication flow

is top down

Leading Managers practice

participative

leadership

Communication flow

is in all directions

Superiors exercise

strict control

Controlling Individuals exercise a

great deal of self-

Focus is on financial

criteria

control.

Focus is on multiple

criteria

Defining Culture:

General pattern of behaviour, shared beliefs, & values the

members have in common

Can be inferred from what the people say, do, & think within the

organizational setting

It is fairly stable, & does not change fast.

Seniors create the climate for the enterprise. Their values

influence the direction of the firm.

Value is a permanent belief about what is appropriate & what is

not that guides the actions & behaviours of the employees in

fulfilling the organization’s aims.

Value driven corporate leaders serve as role model., set the

standards of performance, motivate employees, make the

company special & are symbol to external environment

Changing the culture of an organization takes a long period of

time

Lesson 10

Controlling

Introduction:

The managerial function of controlling is the measurement &

correction of performance in order to male sure that the

enterprise objectives & the plans to devised to attain them are

accomplished.

Planning & control are closely related

The basic control process:

Involves three steps:

o Establish standards

Have criteria for performance

Make sure it is known to the performers

o Measure performance against these standards

Assessing performance against these standards

o Correcting variations from standards & plans

Is done through training

Critical Control Points:

The standards so selected should be critical to the process.

Benchmarking is one of the methods of setting the standards

o Performance is compared against the best practices, or

against own performance

Following could be the types of standards:

o Physical

Non-monetary standards

o Cost

Monetary standards

o Capital

Pertains to balance sheet rather than income

statement

Example: Return on investment

o Revenue

Attaching monetary values to sales

o Goals

Specific measurable standards

o Strategic plans

Managing the strategic control points to assess

whether implementation of strategy is as per the

assumptions

Control as a Feedback System

With feedback the loop is closed.

Corrective action is easy

Becomes basis for training, & determining the reward system

Real time information & control:

It is obtaining real time data on many operations, while it is

happening.

Feed forward Control

Feedback gives us the status on output

Feedforward gives the status on input.

Following are the requirements:

o Identify important input variables

o Establish relationship between input variables

o Collect data on input regularly, & put them into the system

o Regularly assess the variables of actual input data from

planned for inputs, & evaluate the impact on the expected

end result

o If any deviation take action

Requirements for effective controls

Tailor controls to plans & positions

o It should reflect the plans they are designed to follow

o Tailor it to the positions. Example: what is suitable for VP

marketing is not suitable for Salesman

o Should reflect the organization structure. It becomes easy to

pinpoint the accountability for the execution of the plans

Tailoring controls to individual managers

o The way a manager wants it, the control system should be

provided in that manner; even if it is complicated

Designing controls to point up exceptions at critical point

o It should point the exceptions as well as deviations as &

when it occurs

Seeking objectivity of controls

o Controls should not be subjective, otherwise performance

can be manipulated

Ensuring flexibility of controls

o As when the goals change, the control system should also

undergo a change

Fitting the control system to the organizational culture

o If there is participative culture do not have tight controls, &

vice-a versa.

Achieving economy of controls

o It should be worth its cost.

Establishing controls that lead to corrective action

o When deviations are pointed out. Corrective action should

be possible.

Lesson 11

Control Techniques & IT

Introduction:

A variety of tools & techniques have been used over the years to

help managers to control

Controls must reflect plans, & planning must precede control

Control techniques:

Budget:

o It is the formulation of plans for a given future period in

numerical terms.

o They are statements of anticipated results, either in

financial or non-financial terms.

o Following are the types of budgeting:

Revenue & Expense

Time, Space, Material, & Product

Capital Expenditure

Cash

o If budgetary controls are too detailed, then it can become

cumbersome, meaningless, & unduly expensive

o Zero-base budgeting is also a type of budget. It is

calculating cost afresh for each budget period. It is

generally applied in support area

Traditional Non-budgetary Control Devices:

o Use of statistical data

o Special reports

o Analysis of specific areas

o The operational audit

o Independent appraisal by internal or external auditors

o Personal observations

Information Technology

o MIS. A formal system of gathering, integrating, comparing,

analysing & dispersing information internal & external to

the enterprise in a timely, effective & efficient manner

o Internet has changed the way we conduct business. The

relationships among suppliers & customers are changing

dramatically

o There is now trend toward wireless communication & m-

commerce

Lesson 13

Productivity, Operations Management & TQM

Productivity:

Ratio of Input to Output within a time frame; without

compromising on Quality

Te output should always be higher than Input

If productivity is high, then efficiency is high

If productivity is high, then cost will be low

If productivity is high, delivery time is low

If productivity is high, that means process is efficient:

Easy to measure the Ability of a person, but difficult to measure

the capability of a person

Difference between Production & Operations Management

Production Management Operations Management

Activities necessary to

manufacture product

Activities necessary to produce, &

deliver a product / service

Includes only the conversion of

resources into a product

It is seen as System. That means,

there will be Input, Process, &

Output

Quality measurement in the Information Age:

In the past quality was applied only to product in manufacturing

activities

In the service industry, it includes measurement of expectations,

experience, & emotions of customer

In information age, the scope of quality has increased. It means

whatever we do, will speak of quality. Quality covers right from

suppliers to customers, & all those activities, which happen in

between

Tools & Techniques for Improving Productivity:

Inventory Plan & Control

o The economic order quantity [EOQ] approach is useful,

when order quantities are predictable, & fairly constant

through out the year

o EOQ approach does not work well to determine the

inventory levels of parts & materials used for production

processes. For example poor quality of parts may increase

the demand for these production inputs. Thus demand is

likely to be intermittent, resulting in inventory shortages at

sometimes & excesses at other times

o If the demand keeps on fluctuating, the organization

maintains inventory of semi-finished goods. This is called as

Work-in-Process inventory.

o Carrying inventory of any types adds to the cost of output.

But in competitive environment, cost has to be kept under

control

Just in Time

The suppliers deliver the components & parts to the production

line just-in-time to be assembled.

Also known as zero-inventory, or stockless-production

To be effective, the following requirements have to be met:

o Quality of parts must be very high

o Relationship with suppliers should be based on cooperation

o Suppliers should be very near the manufacturer

Outsourcing

To keep cost under control, Organizations are focussing only on

core activities. The non-core activities are outsourced to those, for

whom it is a core activity

It is an outcome of re-engineering activity.

Operations Research:

The application of scientific methods to the study of alternatives

in a problem situation, with a view to obtaining a quantitative

basis for arriving at the best solutions

It is use of quantitative data on goals, & on determining the best

means of reaching the goals

Value Engineering:

It consists of

o Analysing the operations of the product or service

o Estimating the value of each operation

o Attempting to improve the operation by trying to keep the

cost low at each step

Work Simplification:

It is improving work methods

Done through

o Participation of employees

o Training employees on concepts like time & motion studies,

work-flow analyses, layout of the work station

Quality Circles:

It is a group of employees from the same department who meet

regularly to solve problems they experience at work

Members are trained in applying statistical quality control, 7 to

work in teams

Total Quality Management

Organization’s long term commitment to continuous

improvement of quality through out the organization & with the

active participation of all members at all levels to meet & exceed

customer’s expectations

It is simply effective management

TQM demands free flow of information

When done effectively, it results in customer satisfaction, fewer

defects, less waste, increased productivity, reduced costs &

improved profitability

Lean Manufacturing:

The following are the characteristics:

o Continuous improvements [kaizen] with strategic

breakthrough

o Aim at zero defects

o Just-in-time inventory system

o Team performance

o Responsibility for problems rests with all

Computer-aided techniques

Computer-aided design [CAD] Computer-aided-manufacturing

[CAM] & the Manufacturing Automation Protocol [MAP] are

some of the cornerstones of the factory of future

CAD / CAM help engineers design products much more quickly

than they could with paper-&-pencil approach. This is a greatest

advantage to the organization since product life cycles are getting

shorter. Capturing markets quickly are crucial in very

competitive environment. Firms can respond rapidly to the

requests of the customers with specific requirements

Lesson 15

Overall Control & toward the future through Preventive Control

Traditional Overall Controls:

Profit & Loss Control

o Profits are a definite standard against, which firms measure

their success

o In P & L we get details of revenues & expenses

o P & L control is not applied to central staff & service

departments.

Control through Return on Investment

o It is ratio of earnings to investment of capital

o The goal is optimising returns & not profit. Make best use

of assets

Types of Control:

Direct

o Trace the cause of an unsatisfactory result back to the

persons responsible for it & get them to correct their

practices

o Standards are developed to compare the actual output with

plans

o Deviations indicates that performance is not as per plan

o The following are the causes of negative deviations from

standards:

Uncertainty

Elements affecting a given plan are grouped

into:

o Facts

o Risk

o Uncertainty about future

Lack of knowledge, experience, or judgment

Preventive

o Develop better managers who will look at problems from a

system point of view

o The principle of preventive control are based on the

following assumptions:

Qualified managers make a minimum of errors

Managerial performance can be measured by using

principles of management as standard

The application of management fundamentals can be

evaluated

o Has the following advantages:

Greater accuracy is achieved in assigning personal

responsibility

Source of training need analysis to bridge the gap in

their performance

No wastage of time. Saves on cost

Developing Excellent Managers:

Instilling a willingness to learn

Planning for innovation

Measuring & rewarding management

Tailoring information [obtaining the right information in the

right form & at the right time]

Expanding R & D in Tools & Techniques

Creating a strong intellectual leadership

Conclusions:

The operational or management process, approach is an attempt

to unify these different orientations

The practice of management & global competitiveness is driven

by the new technology. Visionary managers are needed to provide

direction to the increasingly multi-cultural workforce that

responds quickly to the customers that demand low cost quality

products & services