Unit 2 –Management Functions

UNIT 2
MANAGEMENT FUNCTIONS

Functions of Management

Management is an activity consisting of process which is mainly concerned with important

task of goal achievement. No business enterprise can achieve its objective until all the
members of the organization work in planned and integrated way. Therefore the process of
management involves the determination of objectives and putting them in action.

According to G.R. Terry ‘Management is a distinct process consisting of planning, organizing,

actuating and controlling, performed to determine and accomplish stated objectives by the use
of human beings and other resources’’

Management is considered a continuing activity made up of basic management functions

which are Planning , Organizing, Staffing, Directing and Controlling. The managers have to
perform all these functions in order to achieve the desired organizational goals.

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1. Planning
The first and the most important function of management is Planning. Planning involves
setting objectives in advance, a goal which is to be achieved within a stipulated time. Various
alternatives are formulated in order to achieve the goals.
The best alternative courses of action is then selected which will help the organization to
achieve its objectives.
Planning is the most basic function of management. It is deciding in advance what to do and
how to do when to do and by whom it is to be done. It bridges the gap between where we are
and where we want to go.
All the other functions of management like organising, staffing, directing, controlling are
dependent on planning. Planning is related to future and is a continuous process. All the
organisation have to make a concrete plan before they start business or execute any project.

1.1 Definition of Planning

▪ According to Theo Haiimann: “Planning is deciding in advance what is to be done.

When a manager plans, he projects a course of action for the future, attempting to
achieving a consistent, coordinated structure of operation aimed at desired result ”.

▪ According to Henri Fayol, planning is the process of forecasting the future and
determining the best course of action to achieve organizational goals. It involves setting
objectives, analyzing the current situation, predicting future trends, and developing
strategies to meet those objectives. Essentially, planning is about deciding what to do,
how to do it, when to do it, and who will do it.

▪ HART: The determination in advance of a line of action by which certain results are to
be achieved.

1.2 Importance of Planning

Planning increases the efficiency of an organisation. All business organizations would like to
be successful, have a goodwill in the market, have higher profits. For attaining these attributes
the thinking process has to be very effective. Now let’s understand why planning is important
for the organization.

1. Planning helps to achieve objectives- Without Planning each and every activity will be
based on trial and error which will give rise to confusion Every organization has certain
targets. Planning helps an organization to achieve their aims by avoiding overlapping,
confusion and misunderstanding.

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2. Planning increase efficiency –Planning makes optimum utilization of all available

resources. It helps to reduce wastage and avoids duplication of work.

3. Planning reduces business related risks- Planning helps to forecast the business related
risk and also helps to take necessary precautions to avoid these risks and prepare for future
uncertainties

4. Planning provides direction for action – Direction means to give proper information,
accurate instructions and guidance to the subordinates. Planning tells us what to do, how
to do and when to do. It help the organization to achieve the goals through systematic
coordination of the employees.

5. Planning encourages creativity and innovation- Planning helps the managers to

express their creativity and innovation. It brings satisfaction to the managers and
eventually success to the organization.

6. Planning helps in motivation- A good plan provides various financial and non-financial
incentives to both managers and employees. These incentives motivate them to work hard
and achieve the objectives of the organisaition.

7. Planning helps in decision making – A manager makes many different plans. Then they
evaluate every course of action and choose the best strategy. So decision making is
facilitated by planning.

8. Planning provides basis of control-Planning is the first function of management. The

other functions like organising, staffing, directing and controlling etc. are organized for
implementing plans. Controlling records the actual performance and compares it with
standards set. In case the performance is less than the standards set then deviations are
ascertained and proper corrective measures are taken to improve the performance in
future. Planning and controlling both are dependent on each other. Planning establishes
standards for controlling.

Therefore, Planning is necessary for effective and efficient functioning of every

organisation irrespective of its size, type and objectives.

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1.3 Steps in Planning Process

1. Establishment of objectives and goals- The first step in planning is to determine the
enterprise objectives. These are more often set by upper level managers. The objective may
vary from a desired sales volume or growth rate to development of a new product.

2. Establishing Planning Premises- Plans are made to operate in the future. The second step
in planning is to establish planning premises i.e. assumption on the basis of which plans will
be ultimately formulated. Planning premises are vital to the success of planning as they supply
important facts and information related to future like population trends, economic condition,
production cost, government control etc.

3. Deciding the Planning Period –The next task is to decide the period of the plan whether
it’s a yearly plan or a plan which is spread over for longer span of time. Choice of planning
period is decided based on time required in development of new product, time required to
recover capital investment and length of commitments already made.

4. Finding alternative course of action – The next in planning is to search for and examine
alternative course of action. For Ex-Products may be sold directly to the consumers by the
company’s salesman or through exclusive agencies.

5. Evaluating and selecting a course of action- Having searched the alternative courses, the
next step is to evaluate and analyze them in the light of premises and goals and select the best
alternative. This is done with the help of quantitative techniques and operations research.

6. Implementing the Plan- The best possible course of action has now to be implemented
i.e. putting the plan into action. For this the managers have to develop derivative plans for
each department. A draft version of the action plan should be communicated to inform those
directly affected and gain their cooperation.

7. Follow Up –The process of controlling is a critical part of any plan. Managers need to
check the progress of their plans i.e. follow up, so that they can take remedial action if the plan
is not working as per schedule or change the original plan if it is unrealistic.

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1.4 Types of Plans

1. Strategic Planning:

This type of planning involves setting long-term goals and objectives for an organization,
typically over a period of 3-5 years or more. It focuses on the overall direction and vision of
the organization, considering factors like the competitive landscape and market
trends. Strategic plans are usually developed by top-level management.

2. Tactical Planning:

Tactical planning translates the broad goals of strategic planning into specific, actionable plans
for different departments or teams. It outlines how to achieve those goals in the short-term,
typically within a year or less. Middle managers are usually responsible for developing and
implementing tactical plans.

3. Operational Planning:

This type of planning focuses on the day-to-day operations and activities of an organization. It
involves creating detailed procedures and processes for achieving specific tasks and goals,
often on a daily or weekly basis. Frontline managers are typically involved in operational
planning.

4. Contingency Planning:

Contingency planning is a backup plan that outlines alternative courses of action if the original
plan fails to produce the desired results or if unexpected events occur. It helps organizations
prepare for potential disruptions and minimize negative impacts.

These four types of planning are interconnected, with strategic planning providing the overall
direction, tactical planning outlining how to achieve those goals, and operational planning
detailing the day-to-day activities.

Contingency planning serves as a backup in case any of the other plans encounter difficulties.

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2. Organising
After planning the next function of management is organising. Organising involves division
of work among people whose efforts must be coordinated to achieve specific objectives and to
implement pre-determined strategies. It is the backbone of management. After the objectives
of an enterprise are determined and the plan is prepared, the next step in the management
process is to organize the activities of the enterprise.

Definition:

According to Koontz and O'Donnell, planning is deciding in advance what to do, how to do
it, when to do it, and who is to do it. It's a process that bridges the gap between the present
situation and the desired future, making things happen that wouldn't otherwise occur,
according to a document on planning. Essentially, it's a conscious determination of courses of
action based on purpose, facts, and considered estimates according to a document on planning.

According to Louis Allen "Organising is the process of identifying and grouping the work to
be performed defining and delegating responsibility and authority, and establishing
relationships for the purpose of enabling people to work most effectively together in
accomplishing objectives."

According to the Haiimann "Orgainising is the process of defining and growing the activities
of the enterprise and establishing authority relationships among them. "

2.2 Features of Organisation

1. Hierarchy: Most organizations have a hierarchical structure, with levels of authority and
responsibility. This structure typically includes top management, middle management, and
frontline staff, each with their own roles and decision-making powers.

2. Division of Labor: Organizations divide work among members based on their skills,
expertise, and roles. This division of labor helps improve efficiency and specialization, as
individuals focus on tasks they are best suited for.

3. Coordination: Effective organizations coordinate activities among their members to ensure

that work progresses smoothly towards common goals. This coordination may
involve communication, planning, and resource allocation.

4. Formalization: Organizations often have formal rules, procedures, and policies that govern
their operations. These formalized systems help provide clarity, consistency, and
accountability within the organization.

5. Goal Orientation: Organizations are driven by specific objectives or goals that guide their

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activities and decision-making. Whether it's maximizing profits, achieving social impact, or
delivering services, goals provide a sense of direction and purpose.

6. Specialization: Organizations often specialize in particular products, services, or areas of

expertise. This specialization allows them to focus their resources and efforts more effectively,
leading to greater efficiency and competitiveness.

7. Centralization vs. Decentralization: Organizations vary in the degree of centralization or

decentralization of decision-making authority. Some may centralize decision-making power
at the top, while others may decentralize it to lower levels of the organization.

8. Culture: Organizational culture refers to the shared values, beliefs, norms, and behaviors
that define the organization's identity. A strong organizational culture can foster cohesion,
teamwork, and employee engagement.

9. Adaptability: Successful organizations are often adaptable and able to respond to changes
in their internal and external environments. This may involve innovation, flexibility, and the
ability to learn from past experiences.

10. Size and Complexity: Organizations vary in size and complexity, ranging from small
startups to large multinational corporations. Larger organizations tend to be more complex,
with more layers of management, specialized functions, and diverse stakeholder relationships.

2.3 Principles of Organising

The success or failure of an organisation would be revealed by its results. If it can achieve the
desired objectives, it is sound and efficient – if it fails to do so, there is something wrong
somewhere in the organizational structure. However, the success of a business organisation
can perhaps be ensured better if the following basic principles are observed:

1) Unity of Objective

Every part of the organisation and the organisation as a whole should be geared to the basic
objective determined for the enterprise.

2) Efficiency

The organisation should be able to attain the predetermined goals and objectives at the
minimum cost. If it does so, it will satisfy the test of efficiency. From the point of view of an
individual, a good organisation should provide maximum work satisfaction. Similarly, from
the social point of view. an organisation will be efficient when it contributes the maximum
towards the welfare of society.

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3) Span of Management

It is widely recognised that a manager can directly supervise only a limited number of
executives, It is necessary to have a proper number of executives, answerable to the top
manager. Most of the authorities define a maximum of six for this.

4) Division of Work

A good organisation should consist of departments established to reflect the most efficient
breakdown of enterprise activities. Proper departmentalisation is an important principle of
sound organisation.

5) Functional Definition

The duties and the authority relationships in a good organisation must be properly and clearly
defined so that there is no confusion or overlapping.

6) Scalar Principle (Chain of Command)

The chain of command or the line of authority must be clearly defined for building sound
organisation. Every employee must know who is superior and to whom policy matters beyond
his authority must be referred for decision.

7) Exception Principle

A good organisation is so arranged that only exceptionally complex problems are referred to
the higher levels of management and the routine matters are dealt with by executives at lower
levels. This is called the exception principle.

8) Unity of Command

In a good organisation, each subordinate should have one superior whose command he has to
obey. This will avoid conflict of commands and help in setting responsibility.

9) Unity of Direction

There must be only one objective for a group of activities directed towards the same end. If
each individual in a department begins to work under a different plan or programme of action,
nothing but confusion will follow.

10) Responsibility

In a good organisation, the superior is responsible for the activities of his subordinates and the
subordinates must be held responsible to their superiors for the performance of the tasks
assigned to them.

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11) Authority and Responsibility

These must be co-existing in an organisation. If it is not so, the subordinates cannot discharge
their responsibility for want of the necessary power to proceed with the task assigned.

12) Balance

Some matters may be left to be disposed of by the subordinates at the lower or the lowest level
while some others (say, control over capital expenditure) must be centralised and a balance
between centralisation and decentralisation should thus be achieved.

13) Flexibility

The organisation must avoid complicated procedures, red-tapism and excessive complication
of control so that it can adapt itself easily and economically to business and technical changes.

14) Continuity

The organisation must be so arranged as to provide for the continuity of the enterprise. For
this, there must be proper provision for executive training or development.

15) Facilitation of Leadership

The organisation structure should be so devised that there is enough opportunity for
the management to give an effective lead to the enterprise.

2.4 Importance of Organising

The importance of organising for an organisation is discussed as follows:

1) Increases the Efficiency of Management

There is the maximum utilisation of workers’ ability and productive capacity of the material
resources under good organisation. Good organisation avoids confusion, duplication and delay
of work.

2) Ensures Optimum Utilisation of Human Efforts

‘Right man at the right job’ is fundamental to the organisation. A good organisation brings
harmony to the efforts of the employees and the working conditions which add to the
total productivity of the enterprise.

3) Helps in the Growth of Enterprise

Good organisation contributes to the growth, diversification and expansion of all enterprises.
Big and giant enterprises are the direct result of the success of the organising functions of

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management.

4) Places Proportionate Importance to the Various Activities of the Enterprise

The organisation classifies the entire business activities into departments. Each department
receives attention according to the importance it has in the achievement of business objectives.
Money and effort are spent in proportion to the contribution made by every department. It does
not mean that less important department activities are neglected. It means that due importance
is given to each department according to its contribution towards the achievement of the goals.

5) Facilitates Coordination

Functions and activities of the various departments are welded together to accomplish the
enterprise goals. Different departments perform their functions in a closely related manner and
not as competitors.

6) Provides Facilities for Testing, Training and Development of Managerial Personnel

By placing the persons in different departments, training can be imparted, as well as their
abilities tested. This will be followed by their placement in the places to which they are best
suited.

7) Prevents Growth of Intrigues and Corruption

The unsound organisation becomes a breeding ground of intrigues and corruption. A good
pharmaceutical organisation develops morale, honesty, devotion to duty and the feeling of
oneness with the enterprise.

8) Consolidates Growth and Expansion

Organising practices have encouraged business enterprises to expand their size to an ever-
increasing level. With hundreds of employees and extensive ramifications of operations, giant
companies are the direct outcome of the organising function of management.

9) Stimulates Creativity

Sound organisation stimulates independent, creative thinking and initiative by providing well-
defined areas of work with broad latitude for the development of new and improved ways of
doing things.

10) Adoption of New Technology

The effectiveness of an enterprise is measured by the reaction of staff members to the adoption
of new technology. In the scientific world, there are a lot of innovations and inventions

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identified in the fields of marketing, production, distribution and personnel management. If

the new technology is adopted by the company, the maximum benefits can be obtained in any
field or activity. A flexible organisational structure is needed to adopt new technology.

2.5 Types of Organisation

1. Formal organization – Formal organization refers to a structure which is consciously
designed to enable people of the organization to the work together in accomplishing the
common objectives. It is predetermined by top management to facilitate smooth
functioning of the [Link] authority responsibility relationship created by the
organization structure are to be followed by all the employees in the organisation. It is
created as result of Company’s. rules and policies.

2. Informal Organisation – Informal Organisation refers to the relationship between the

people in the organization based on personal likes, dislikes, emotions, attitude etc. These
relationship are not in terms of procedure and regulation laid down in the formal
organisation. These groups are not preplanned, they develop automatically within the
organization. The membership in informal organization is voluntary. It originates as a result
of social interaction.

2.6 Process of Organising

The process of organising may be described as the managerial function of organising. It consists
of making a rational division of work into groups of activities and tying together the position
representing the grouping of activities to achieve a rational, well-coordinated and orderly
structure for the achievement of work.

Important steps involved in this process are:

1) Determination of Objectives
It is the first step in creating an organisation. It assists in deciding why the
proposed organization is to be set up and therefore, what will be the nature of the work to be
accomplished through the organisation.

2) Enumeration of Activities
Then the total job is sub-divided into important activities, e.g., the work of an industrial concern
may be divided into the following main functions:
1. Purchasing,
2. Production,
3. Financing,
4. Personnel,

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5. Sales,
6. Export promotion, etc.

3) Grouping Activities
Then closely related and similar activities are grouped into departments and divisions and the
departmental activities are further divided into sections. Different bases are adopted to divide
the activities into groups. Functions like sales, production, finance, etc., are made the basis of
primary grouping. Secondary grouping is made based on geographical areas, types of customers,
equipment used, processes adopted or constituent parts of major enterprise functions.

4) Allocation of Fixed Responsibility to Definite Persons

Here specific job assignments are made to different subordinates for ensuring certainty of work
performance.

5) Delegation of Authority
Authority without responsibility is a destructive thing and similarly, responsibility without
authority is an empty vessel. Hence, corresponding to the responsible authority is delegated to
the subordinates to enable them to show work performance.

6) Coordination
This is necessary for optimum performance. It is an integrating function. The performance of
departments and sections is to be integrated to achieve objectives.

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3 Staffing
After planning and organizing the next function of management is ‘Staffing’. It is important
to have a good organization structure, but it is even more important to fill the jobs with the
right people.

Filling and keeping the position provided for by the organization structure with right people
at the right place is the staffing phase of the management function. All the managers have
a responsibility for staffing. The staffing function deals with the human elements of
management. The staffing function has assumed great importance these days because of
rapid advancement of technology, increasing size of organizations and complex behavior
of human beings.

Definition:

According to Koontz and O’Donnell, “Staffing involves manning the organization

structure through proper and effective selection appraisal and development of personal to
fill the roles designed into the structure.”

3.1 Importance of Staffing

Staffing is people centered. Success in dealing with people will depend upon the degree to
which they are perceived as making realistic contribution to the solution of management’s
problems. It should be remembered that every manager is expected to perform this function
because he is engaged in getting things done through and with the help of people. There
are various benefits of proper and efficient staffing. These are as under:

A. Helps in Human resource planning - Staffing helps in discovering talented and

competent workers and develops them to work more efficiently for achievement of
organizational goals.

B. Helps in increased Productivity – Staffing ensures greater production by putting

right man at the right job. It helps in improved organisational productivity through
proper selection according to requirement

C. Maintains Harmony- Staffing maintains harmony in the organisation. Through

proper staffing, individuals are not just recruited and selected but their performance is
regularly appraised and promotions are [Link] gives everyone an equal opportunity
for getting better compensation which finally results in peace and harmony.

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D. Helps in Job satisfaction a- Job satisfaction keeps the morale high of the employees.
Through training and development programmers their efficiency improves and they
feel assured of their career advancement.

E. Helps in Optimum utilization of human resources- Staffing helps in proper

utilization of the available personnel .Manpower forecasting provides a basis for
recruitment, transfer and training of employees. Shortage or surplus of manpower will
be revealed by proper manpower planning.

3.2 Staffing process

Staffing function is performed by all managers at all levels. However, its scope is
different in small and large organization. In large organization there is a separate
department called Human Resources Department (HRD), with specialists to manage the
people. Staffing is an inherent part of Human Resources Management as it is the practice
of finding evaluating and establishing a working relationship with people.

Following are the steps involved in staffing process

1. Manpower planning- Estimation of manpower requirements in the future is the first

stage in the staffing process. It is known as manpower or human resources planning. Its
purpose is to make right kind of personnel available so that there is no surplus or
shortage of people in any department. To determine the qualifications needed to meet
the requirements of jobs, the organisation first of all has to analyse the jobs, write the
jobs description and prepare job specifications.

2. Recruitment - Once the requirement of manpower is known, the process of recruitment

starts. It is the process of identifying the sources for prospective candidates and to
stimulate them to apply for the jobs. It is a positive process as it attracts suitable
candidates to apply for available jobs. The process of recruitment and the cost involved
in it depends on the size of the undertaking and the type of persons to be recruited. The
sources of recruitment can be
a) Internal sources (recruitment from within the enterprise)
b) External Sources(recruitment from outside )

3. Selection -The process of selection leads to employment of persons who possess the

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ability and qualifications to perform the jobs which have fallen vacant in the
organisation. Selection is frequently described as a negative process as it eliminates all
the candidates those who do not match up to the requirements of the job offered. The
candidates have to go through the whole selection process of an organization i.e.
interviews, tests, medical examination etc.

4. Placement- The candidate selected for appointment are to be offered specific jobs. A
personnel should be placed on a position where there is full use of his strength and
capabilities. Proper placement reduces absenteeism and turnover.

5. Induction and Orientation-Induction is the process of familiarizing a new employee

to the new workplace, surroundings, company’s rule and regulations. Induction
programme is generally informal in case of small organization. But in large
organization the orientation or induction is carried on formally so that the new
employee develops a favorable attitude towards the company.

6. Training and Development- Training is an organized activity for increasing the

knowledge and skills of people for a definite purpose .Its purpose is to achieve a change
in the behavior of the employees and to enable them to do their jobs better.
Development emphasizes on growth of an individual. It’s a continuous process
Development helps in overall growth of the employee.

7. Performance Appraisal- It refers to all the formal procedures used in an organization

to evaluate the employees and their contributions. It also reveals as to how efficiently
the subordinate is performing his job and to know his aptitudes and other qualities
necessary for performing the job assigned to him.

8. Promotion and Transfers- Promotion refers to being placed at a higher job position
with more salary, job satisfaction and responsibility. On the basis of feedback report of
employees performance they are given promotion and other opportunities Transfer
means shifting of an employees from one job to another or one department to other.
Transfer may take place due to change in organization structure or changes in the
volume of work.

9. Compensation- Compensation of employees for their services is an important

responsibility of any organization. Every organization must offer good wages, pay,
salary and other rewards to attract and retain talented employees.

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4. Directing
Directing is concerned with the initiation of organized action and stimulating people to work.
It involves issuance of orders, instructions and leading and motivating the employees to
execute them. Directing is the inter-personal aspect of management which deals directly with
influencing, guiding, supervising and motivating the subordinates for the accomplishment of
pre-determined objectives. Planning, organizing, staffing are merely preparations for doing the
work but the work actually initiates through directing function.

Definition:

According to Koontz and O’donnell “Direction is the interpersonal aspect of managing by

which subordinates are led to understand and contribute effectively and efficiently to the
attainment of enterprise objectives.”

The manager must stimulate action by giving direction to his subordinates through orders and
also supervise their work to ensure that the plans and policies achieve the desired actions and
results.

4.1 Importance of Directing

Direction is one of the most complex functions of management which can be learned and
perfected only through long experience. It provides many benefits to an organisation which
are as under –

1) Initiates action:
Direction initiates action that motivates people to convert the resources into productive
outputs. It gives substance to managerial function of planning, Organising, Staffing and
controlling. People learn to manage the resources in the most effective way that results
in their optimum utilization.

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2) Creates a Sound work environment:

If direction are issued in consultation with employees, it creates an environment of
understanding where people work to their maximum potential, willingly and
enthusiastically to contribute towards organizational goals.

3) Develops managers:
Managers who are personally motivated to work can also direct others to work.
Managers develop their skills and competence. Motivation, leadership and
communication help in bringing people together. This is beneficial for both the
employees and organisation. Direction, thus, prepares future managers.

4) Behavioral satisfaction:
Since direction involves human behavior and psychology, employees feel behaviorally
satisfied and personally inspired to achieve organizational goals.

5) Increase in productivity:
Personally satisfied employees contribute towards output and efficiency of the
organisation. Direction gets maximum out of subordinates by exploiting their potential
and increasing their capabilities to work.

6) Achieves coordination:
Directing aims at continuous supervision of activities. It achieves coordination by
ensuring that people work towards planned activities in a coordinated manner. It
integrates the action of employees that increase their understanding of mutual
interdependence and their collective effort to achieve the organisational goals.

7) Facilitates control:
Coordination brings actual performance in conformity with planned performance. The
controlling function is, thus, facilitated through effective direction.

4.2 Elements of Directing

Directing deals with inter-personal relations. It is the doing or implementing phase of

management. Hence it is also called management-in-action. All the activities related to
directing can be categorized into 4 different elements of directing. They are
Supervision, Communication, Motivation and Leadership.

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1) Supervision – Supervision is an important element of directing. It implies overseeing

the work of subordinates in order to guide and regulate their efforts. Supervision is very
important at the operating level of management. The Supervision is in direct contact
with the workers and acts as the link between workers and management. The purpose
of supervision is to ensure that subordinates perform their tasks according to prescribed
procedures and as efficiently as possible.

2) Communication- It is the process of passing information view point, facts, ideas ,

opinion and understanding from one person to another .It is a two way process and is
complete when there is some response from the receiver of information.
Communication may take several forms like order, instructions, report, suggestion etc.

3) Leadership- Leadership may be defined as the process by which a manager guides and
influences the work of his subordinates. The success of every enterprise is dependent
upon the quality of its leadership. For example Reliance would not have attained their
present success but for the able leadership of Dhiru Bhai Ambani. A leader exercises
his influence over the followers through the use of informal authority or power.

4) Motivation- Motivation means inspiring the subordinates with a zeal to do work for
accomplishment of organizational objectives. A manager should make appropriate use
of motivational tools to actuate the subordinates to work harmoniously towards
achievement of organisational goals. Different people are motivated by different type
of rewards, which can be financial incentives or non-financial incentives.

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5. Controlling
Controlling is seeing that actual performance is guided towards expected performance .All
other functions of management cannot be completed effectively without performance of the
control function. It implies measurement of accomplishment against the standards and
correction of deviation, if any, to ensure achievement of organizational goals. The efficient
system of control helps to predict deviation before they actually occur.

Defintion:

According to Theo Haimann "Controlling is the process of checking whether or not proper
progress is being made towards the objectives and goals and acting if necessary, to correct any
deviation.”

5.1Importance of Controlling

A Good control system provides timely information to the manager which is very much useful
for taking various operations. The road signals at a road crossing illustrates the
significance of control. Road signals are necessary to ensure accident free and smooth
traffic management controls are essential in any organisation for its smooth functioning.

Significance of good control system are as follows-

1) Basis of future action- Control provides the basis for future actions. It will reduce the
chances of mistakes being repeated in future by suggesting preventive steps.

2) Facilitates decision making- The process of control is complete only when corrective
measures have been taken. This requires taking a right decision as to what type of follow
up action is to be taken.

3) Facilitates discipline and order – The existence of control system has a positive impact
on the behavior of the employees. They are cautious while performing their duties as
they know they are being observed by their superiors.

4) Facilitates Coordination- Control helps in Coordination of the activities of various

departments of the enterprise. It provides them unity of direction.

5) Facilitates motivation – A control system is most effective when it motivates people

to high performance. Since most people respond to a challenge, successfully meeting a
tough standard may provide a greater sense of accomplishment.

6) Effective plan Implementation-Controlling and planning are interdependent. Control

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is the only means to ensure that the plans are being implemented control points out short
comings of not only planning but also other functions of management. Comparison can
be done through various Performance report, Personal Observation.

5.2 Controlling Process or Steps in Controling Process:

Controlling as a management function involves following steps-

1) Establishment of standards- Standards are the plans or the targets which have to be
achieved in the course of business function. It acts as a basis of evaluations of actual
performance. Standards can be set in quantitative or qualitative terms. Quantitative or
measurable standards can be inform of cost, output, time, profit etc. Qualitative or non-
measurable standards can be in form of performance of a manager, attitude of worker
improving motivational level of employees. Standards should be flexible i.e. capable of
being changed according to the circumstances.

2) Measurement of Performance –This step involves measuring of actual performance

of various individuals, group or units. Measurement of tangible standards is easy as it
can be expressed in quantitative terms. Frequency of measurement depends on the
nature of task being controlled Qualitative.

3) Comparison of Actual and Standard Performance-Comparison of actual

performance with the planned targets is very important. Deviations can be defined as
the gap between actual performance and the standards laid down. The manager has to
find out extent of deviation and cause of deviation. The manager has to exercise control
by exception. He has to target those deviation which are critical and important for
business.

4) Taking remedial action-Once the causes and extent of deviation are known, the

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manager has to detect those errors and take remedial measures so that these deviations
don’t occur again. Remedial or corrective actions can be replanning of standards,
classification of duties, training of workers etc.

5.3 Relation between Planning and Controlling

Planning and Controlling are closely related to each other. After a plan becomes operational,
control is necessary to measure progress, to uncover deviation and to take corrective steps. It
is also not possible to think of an effective control system without existence of good plans.
Relationship between planning and Controlling is discussed below-

1. Control is always based on Planning- Every manager uses certain Standards for
measuring the performance which are laid down by planning. So planning is a pre-
requisite for controlling

2. Planning without Controlling is meaningless and control without Planning is

blind- A good plan will not bring any concrete result if the management is lacking in
controlling Planning identifies the goals and determines the ways to achieve them
whereas control ensures attainment of goals by evaluating performance and taking
corrective action.

3. Planning and controlling are both forward looking and backward looking -
Planning is looking ahead because plans are prepared for future Controlling is looking
forward because it aims to improve future performance and helps in better planning in
future. Planning is looking backwards because new planning is guided by past
experiences. Controlling is looking backwards as it compare actual performance with
standards fixed in the past.

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6. Coordination
The management of a modern enterprise is based on the principle of specialization or
division of labour. Jobs are broken down into single repetitive tasks and are entrusted to
individual either working in the same department or in different departments. To attain the
desired results with so much diversification, coordination becomes necessary.
So, Coordination is the management of interdependence in work situations. Coordination
leads to blending the activities of different individuals and group of individuals for the
achievement of certain objectives.

According to Henri Fayol “Coordination harmonizes synchronizes and unifies

individual efforts for better action and for the achievement of the business objectives.”
6.1 Features of Coordination
Coordination consist of the following features:
• Coordination assimilates group efforts: Coordination combines diverse business
activities into a purposeful group activity, ensuring that all people work in one direction
to achieve organizational goals. It provides a common focus to
group effort so that the performance is as it was planned and scheduled.

• Coordination assures unity of action: Coordination directs the activities of different

departments and employees towards achievements of common goals and brings unity in
individual efforts. It performs as the binding force between
departments and assures that all action is aimed at achieving the organizational goals.

• Coordination is a continuous process: Coordination is essential in every stage of

managerial functions. Stating right from the stage of planning, it continues till controlling.
It is a continuous process that is required at all levels, in all the departments till the
organization continues its operation. In an enterprise, which makes shoes, first they need
to come up with a good plan.

• Coordination is an all-pervasive function: Coordination is in nature. It integrates the

activities of all levels and departments as they are dependent on each other to maintain
balance in the organization. To achieve organizational objectives harmoniously, the
purchase, production, and sales departmental efforts have to be coordinated properly.

• Coordination is the responsibility of all managers: In an organization, every manager

needs to perform the function of coordination. It is equally important at all the three levels
of management, i.e. top, middle and lower levels. Top-level managers need to coordinate
with their subordinates to make sure that all the policies for the organization are carried
out properly. Middle-level management is the one that coordinates with both the top level

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as well as the lower-level managers. The operational level or the lower level management
coordinates the activities of its workers to ensure that work proceeds according to plans.

• Coordination is a deliberate function: Coordination is never by itself, rather it is a

conscious effort on the part of every manager. Even where members of a department
willingly cooperate and work, coordination gives direction to that willing spirit. Compete
ration is a voluntary effort of employees to help one another. Effective coordination
cannot be achieved without the cooperation of group members.

6.2 Importance of Coordination

• Growth in size: When there is an increase in the size of the organization, the number of
employees also rises. Sometimes, it becomes tough to assimilate the efforts and activities
of the worker. As we know, every individual is different in their way, be it their habit of
working, background, approaches to situations, and relationships with others, etc. It
becomes very important to make sure that all individuals are working for a common goal
of the organization. Some employees have individual goals also. Therefore, it becomes
very important to harmonize individual goals and work for organizational goals through
coordination to achieve organizational efficiency.

• Functional differentiation: In an organization, activities and functions are frequently

divided into departments, divisions, or sections. In an organization, there may be separate
departments of finance, production, marketing, or human resources. All these
departments have their objectives and working style. But all these departments and
sections depend on each other. All the activities of all these departments should focus on
attaining the common goal of the organization. Coordination helps to accumulate
activities of this department, so that they can proceed together in a single direction instead
of working as independent units.

• Specialization: Specialization is the result of the complexities of modern technology and

a variety of operations performed. Thus, there is a need for the organization to recruit a
plentiful of specialists. The specialists qualify in a particular area and work accordingly.
They analyze and take decisions related to their specialization for the advancement of the
organization. Different specialists working in the same organization might sometimes
result in conflicts among one another. Therefore, coordination is required to harmonize
the conflicts and differences in way of thinking, interests, and beliefs of the specialists.

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7. Reporting
Reporting refers to the process of systematically presenting information or data about a
particular subject or activity. It involves collecting relevant data, analyzing it, and then
communicating the findings in a clear and organized manner.
Reporting refers to the process of collecting, analyzing, and presenting information to
management to aid in decision-making and performance evaluation.

7.1 Role of Reporting in Management

1. Informed Decision Making: Reports provide accurate, timely, and relevant information
that managers can use to make effective decisions.

2. Performance Monitoring: Regular reporting enables tracking of performance against

set goals, budgets, or benchmarks.

3. Accountability: Reports assign responsibility by documenting who is in charge of

specific tasks and their outcomes.

4. Communication: Reporting serves as a channel for conveying information between

different levels and departments in an organization.

5. Strategic Planning: Reports provide data trends and analysis that guide long-term
strategic decisions.
6. Compliance and Governance: Reports ensure adherence to legal requirements,
regulations, and internal policies.

7. Feedback Mechanism: Reports act as a feedback tool, helping management evaluate the
effectiveness of decisions and policies.

8. Motivation and Recognition: Reports highlight achievements and good performance,

which can boost employee morale and motivation.

7.2Applicability of Reporting in Organizational Efficiency

1. Financial Management: Reports provide essential financial data such as income
statements, balance sheets, and cash flow statements to manage an organization’s
financial health.

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2. Operational Management: Operational reports track day-to-day activities, resource

utilization, and workflow efficiency.

3. Sales and Marketing: Reports monitor sales performance, market trends, and customer
behavior, enabling data-driven marketing strategies.

4. Human Resources: HR reports track employee performance, attendance, training, and

turnover rates.
• Example: A recruitment report highlighting the number of hires, vacancies, and hiring
timelines.

5. Project Management: Project status reports track progress, timelines, budgets, and
resource allocation for ongoing projects.

6. Strategic Management: Reports provide long-term performance analysis to guide

strategic planning and decision-making.

7. Compliance and Risk Management: Reports ensure that the organization follows
regulations and helps identify and mitigate risks.

8. Stakeholder Communication: Reports communicate the organization’s performance

and plans to shareholders, investors, and other stakeholders.

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8. Budgeting
Budgeting refers to the process of creating a detailed financial plan that outlines expected
income and expenditures over a specific period, typically a year. It involves estimating
revenues, allocating funds to various expenses, and setting financial goals. The primary
purpose of budgeting is to ensure that resources are used effectively and efficiently, helping
individuals or organizations maintain control over their finances and make informed
decisions.

8.1 Roles of Budgeting

1. Financial Planning: Budgeting enables organizations to predict future financial
requirements, identify sources of income, and plan expenditures.
Without financial planning, organizations risk running out of funds or missing
investment opportunities.
Example: A manufacturing company projects sales revenue for the next year and plans
raw material purchases accordingly to avoid production delays.

2. Resource Allocation: Resources such as money, manpower, and materials are limited.
Budgeting ensures that these resources are distributed based on priorities and strategic
needs. It Prevents wastage and ensures that critical projects receive adequate funding.
Example: A hospital allocating more funds to emergency care during a pandemic.

3. Performance Management: Budgets act as performance benchmarks. By comparing

actual results with budgeted figures, management can measure efficiency and
effectiveness. It Identifies whether targets are being met and where corrective action is
needed.
Example: A retail store planned ₹50 lakh in sales for a quarter but achieved only ₹45
lakh — prompting investigation into sales strategies.

4. Cost Control: Budgeting sets limits on expenditure and prevents overspending. It acts
as a discipline mechanism for all departments. It Keeps operations efficient and helps
avoid financial strain.
Example: An IT department limiting software subscriptions to stay within the ₹10 lakh
annual software budget.

5. Risk Management: Budgeting forecasts potential risks, prepares contingency plans,

and allocates emergency reserves. Reduces uncertainty and ensures quick response

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to financial shocks.
Example: A travel agency creating a reserve fund in case of sudden drops in bookings
due to global events.

6. Strategic Alignment: Budgets ensure financial plans support long-term strategic

objectives and organizational vision. It keeps all departments moving toward
common goals.
Example: A renewable energy company increasing its R&D budget to align with its
mission of promoting green technology.

7. Decision-Making Support: Budget data provides a factual basis for decisions about
expansion, cost-cutting, and investments.
Example: A startup deciding to delay office expansion based on budget projections
showing tight cash flow.

8. Communication and Coordination: Budgets serve as a communication tool

between departments, ensuring everyone knows the financial targets and available
resources.

8.2Applicability of Budgeting to Organizational Effectiveness

1. Enhanced Financial Control: Budgets provide a framework for monitoring and
regulating financial activities. They help track actual income and expenditure against
planned figures.

2. Improved Resource Utilization: Budgeting ensures that limited resources such as funds,
manpower, and materials are used optimally without wastage.

3. Goal Achievement: Budgets link financial plans with organizational objectives, ensuring
that every activity is directed toward achieving specific goals.

4. Informed Decision Making: Budgets provide factual data and forecasts, helping
managers make well-informed choices.

5. Enhanced Accountability: Budgeting assigns financial responsibility to specific

departments or managers, making them accountable for results.

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6. Strategic Planning: Budgets support long-term planning by aligning financial resources

with strategic initiatives.

7. Financial Forecasting: Budgeting predicts future revenues, costs, and cash flows,
enabling better preparedness for challenges and opportunities.

8. Risk Management: Budgets help identify potential risks, create contingency funds, and
prepare mitigation strategies.

9. Performance Improvement: Comparing budgeted and actual results reveals gaps, which
can be addressed to improve overall efficiency.

[Link] and Focus: Budget targets motivate employees to work toward specific
objectives, fostering a sense of purpose.

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