unit 5(principle of management)

UNIT V Controlling
System and process of controlling – Requirements for effective control – The Budget as control Technique – Information Technology in controlling – use of Computers in handling the Information – Productivity – Problems in Management – Control of Overall performance – Direct and Preventive Control – Reporting – The Global Environment – Globalisation and Liberalisation – International Management and Global Theory of Management.


Definition
- as the process of analyzing actual operations and seeing that actual performance is guided towards expected performance.
- Comparing operating results with plans and taking corrective action when results deviate from plans
- Def. Koontz and O’Donnell “ The managerial function of controlling is the measurement and correction of the performance of activities of subordinates in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished.

Nature & Purpose of Control
Control is an essential function of management
Control is an ongoing process
Control is forward – working because pas cannot be controlled
Control involves measurement
The essence of control is action
Control is an integrated system

Elements of Control
Planning
Information Feedback
Delegation of Authority
Remedial action

Control Process
1. Fixation of Standard
2. Measurement of Performance
3. Comparing performance with standards
4. Correction of Deviations

Problems in the Control Process
Ø Magnitude of Change
Ø Time rate of Change
Ø Erroneous standard ( Mistakes in setting standard)
Ø Workers Resistance
Ø Communication Problems

Characteristic of an ideal Control system
Ø Suitable
Ø Flexible
Ø Economical
Ø Simple
Ø Objective
Ø Prompt
Ø Forward looking
Ø Suggestive
Ø Strategic point control
Ø Motivational

Techniques of Managerial Control
Traditional Techniques
1. Personal Observation ( For Eg. A Factory manager goes around the plant, observes the performance of Employees and Machines)
2. Good Organisation Structure
3. Unity of Plans
4. Statistical Control Reports
5. Budgetary control – Statement expressed in financial terms
a. Master budget
b. Functional Budget - Sales budget, Production budget, Material budget, Labour budget, Cash budget, Administrative Overhead budget,
c. Capital & Revenue budget
d. Fixed and Flexible Budget
e. Zero base budgeting ( the budget proposals are considered from the ground up ( zero base) or from scratch

Objectives of Budgetary Control
a. Planning
b. Coordination
c. Control
d. Motivation
e. Efficiency

Merits
Ø Optimum use of resources
Ø Fixation of Responsibility
Ø Effective coordination
Ø Planned approach
6. Profit & loss control
7. External audit Control
8. Overall Control criteria ( BEP Analysis)
9. Return on Investment Control


10. Management Audit
Ø Organisation Structure
Ø Executive appraisal
Ø Functioning of the management board
Ø Soundness of Earning
Ø Economic Functioning
Ø Service to stock holders
Ø R & D
Ø Fiscal Policy
Ø Production Efficiency

11. Responsibility accounting
Ø Cost centre
Ø Profit centre
Ø Investment centre


Techniques of Management
Ø MBO
Ø MBE
Ø MBP – Management by Participation implies the mental and emotional involvement of employees, share holders, investors, consumers and other stake holders in the decision making process.

Forms
Work Committee
Joint Management Councils
Worker Directors
Co-partnership

Productivity & Operations Management
Ø Productivity which accounts for profitable operations of an enterprises and provides opportunities to an enterprise for remaining competitive and successful in an area of global competition
Ø Output – input ratio, within a given time period & with due consideration for quality of Performance

Problems in Measuring Productivity of Knowledge workers
- Measurement of the productivity of skill workers is easier but it becomes more difficult to measure the productivity of knowledge workers
- Greatest scope for increasing productivity lies in the work performed by knowledge workers Eg. Managers, Engineers, Cost accountant, etc.



Operation Management
- is the design and operation of systems. Working of Operation Management.



Input Transformation / Output
Conversion process

Information
Technology
Raw Materials
Main Power Planning, operating & Product Management Controlling production Services
Physical Factors ( like land, System
Building, Machines, etc)
Feedback External Environment


Developing Excellent Managers – The key to preventive control

a. Efforts required on the part of managers themselves
Ø Willingness to learn
Ø Planning for Innovation & Inventions
Ø Tailoring Information
b. Efforts required on the part of the Organisation
Ø Acceleration of Managerial Development programmes
Ø Measuring Managerial programmes and rewarding it
Ø Need for management R & D
Ø Need for Intellectual Leadership


Globalisation

Ø Globalisation means the internationalization of trade. Particularly product transaction and the integration of economic and capital markets throughout the world.
Ø The integration takes place when trade exists freely among the different countries, thus the world economy becomes a single market or single economy.
Ø In globalization there is no restriction of quota, license, tariff and other administrative barrier for trade.



Benefits of Globalisation
Ø Improves efficiency
Ø Improves factor Income
Ø Improves finance
Ø Gains from Migrations

Drawbacks of Globalisation
Globalisation increases the problems of unemployment
Domestic Industries finds difficulty in survival
Only group of people who participate in the process of Globalisation will be benefited, this creates income inequality within the country
Control on domestic economy becomes more difficult
Developing country suffers from the problem of brain-drain

International Business
- Involves commercial activities that cross national frontiers
- It is a process of Entrepreneur conducting business activities across national boundaries
- It consist of Exporting, Importing, licensing, opening of Sales office
- The activities necessary for ascertaining the need and want of target consumer often takes place in more than one country. When an Entrepreneur executes his or her business model in more than one country International Business Occurring.

Entry into International Business
The method of entering or engaging in International Business can be divided into three categories
1. Exporting
o Indirect Exporting
o Direct Exporting
2. Non Equity arrangement – Doing international business through an arrangement that does not involve any investments.
- Licensing - allowing someone else to use something of the company’s in return for the payment of royalty
- Turn key Projects – A foreign Entrepreneur build a factory or other facility, training the workers, train the management and then turn it over to the local owners once the operation is completed, hence the name turn key operation
- Management Contracts – Contracting management techniques and skills. The management contracts allows the purchasing country to gain foreign expertise without giving ownership of its resources to a foreigner.
3. Direct Foreign Investments – preferred mode of ownership
- Minority Interest – Having less than 50% Ownership Position
- Joint Ventures – Merger of two companies

Domestic & International Enterprises, Characteristics and Practices
S.No
Environment
Domestic
International
1
Educational Environment
Language Spoken, written

One

Multiple
Education System ( Quality level, extent)
No or little constraint
Great constraint
2
Socio-cultural Environment
Values, attitudes (towards achievement, risk taking, work scientific methods)

Homogeneous

Heterogeneous
Social organization(authority, status, roles, institutions, mobility)
Similar
Different
3
Political & Legal Environment
Political orientation ( power, ideologies)

Country centered

Transitional
Legal Envir ( Laws, codes regulations)
Fairly uniform
Different
National sovereignties
one
Many
Government Policies regulations
same
Different
4
Economic Environment
Economic Development ( under developed industrialized)

At similar stages

At different stages
Economic System ( Capitalistic, socialistic, mixed)
Similar
Different

International Management in selected countries
France – Le plan, Government Planning on national scale
Germany – Authority & Co-ordination
Australia – Moralistic stance and emphasis on political & social values, achievement and risk taking.
Italy – low tolerance for risks, competitive
Austria – Self realization & Leadership
Britain – Security, resourcefulness, adaptability & Logic.
Japanese Mgt – Lifetime Employment, Consensus Decision making












JAPANESE & US MANAGEMENT APPROACHES
S.No
Japanese Mgt Planning
US Management Planning
1
Long term Orientation
Primarily short term Orientation
2
Collective decision making with concerns
Individual decision making
3
Involvement of many people in preparing and making the decision
Involvement of a few people in making and selling the decision to person with divergent values
4
Decision flow from bottom to top and back
Decisions initiated at the top, flowing down
5
Slow decision making, fast implementation of the decision
Fast decision making . Slow implementation requiring compromise often resulting in sub optimal decisions.


S.No
Japanese Mgt Organising
US Mgt Organising
1
Collective responsibility and accountability
Individual responsibility and accountability
2
Ambiguity of decision responsibility
Clear and specific decision responsibility
3
Informal Organization Structure
Formal, bureaucratic Organization structure.
4
Well known common organization culture and philosophy, competitive spirit towards other enterprises
Lack of common organization culture, identification with professin rather than with company.

S.No
Japanese Mgt Staffing
US Mgt Staffing
1
Young people hired out of school; hardly any mobility of people among companies
People hired out of school and fro others companies; frequent company changes
2
Slow promotion through the ranks
Rapid advancement desired and demanded
3
Loyalty to the company
Loyalty to the Profession
4
Very infrequent performance evaluation for new employee
Frequent performance evaluation for new employees
5
Appraisal of long term performance
Appraisal of short term results
6
Promotion based on multiple criteria
Promotion based primarily on individual performance
7
Training & Development considered a long term investment
Training & Development undertaken with hesitation
8
Life time Employment common in large companies
Changes common


S.No
Japanese Mgt Leading
US Management Leading
1
Leader acting as a social facilitator and group member
Leader acting as decision maker and head of the group
2
Paternalistic style
Directive style
3
Common values facilitating co-operation
Often divergent values, individualism; sometimes hindered co-operation
4
Avoidance of confrontation, sometimes leading to ambiguities emphasis on harmony
Face-to-face confrontation common emphasis on clarity
5
Bottom-up communication
Communication primarily top -down

S.No
Japanese Mgt Controlling
US Mgt Controlling
1
Control by peers
Control by superior
2
Control focus on group performance
Control focus on individual performance
3
Saving face
Fixing blame
4
Extensive use of quality control circles
Limited use of quality control circles.























UNIT V
PART A
Define Control
State four essential of Effective Control
Distinguish between Management by Exception ( MBE) & Management by objectives (MBO)
Define CPM
Define PERT
Define Management audit
Define Budgetary control
Define Break Even point
Define Coordination
Differentiate Coordination and Cooperation

PART B
“ The essence of control is action” Comment
“Planning & Controlling functions are two sides of the coin” comment
Discuss the control process and types of control
“ Planning is looking ahead but controlling is looking back.” Explain
Briefly explain the Control techniques
“ Budgeting is basically an instrument of planning but it also serves as a technique of control – comment
Explain the concept of Global Environment
Explain the role of IT in present scenario