Module - 02

“DIRECTING AND CONTROLLING”

 CONTENTS
• Meaning and nature of directing
• Leadership styles
• Motivation theories
• Meaning and importance of communication
• Meaning and importance of coordination
• Meaning of controlling
• Steps in controlling
• Methods of establishing control
 1. MEANING AND NATURE OF DIRECTING

• The word “Directing” refers to taking actions to motivate people and help them to see so
that contribution to group objectives is in their own interest.

• The most convincing example of directing is from Bhagavad-Gita, in which Lord

Krishna motivates Arjuna on the battle field before the start of the Kurukshetra war.

• Direction is that interpersonal aspect of management which deals directly with

influencing, guiding, supervising, motivating sub-ordinate for the achievement of
organizational goals.

• It is a continuous managerial process that goes on throughout the life of the organization.
PRINCIPLES OF DIRECTION

Creation of synergy of individual An effective direction would align individuals with

efforts diverse set of personal objectives towards organizational
objectives so that individuals behave like coherent team
which results in cooperation of individual efforts
Unity of command People tend to get confused when they get direction and
orders from more than one superior. Some of these
orders are different from each other which adds
confusion to the subordinates who follow them.
Therefore unity of command and direction is a useful
principle.
Close interaction with subordinates It is very important for bosses to maintain
close interaction with their subordinates to
guide them, mentor them and empathize with
them
Feedback and suggestions for Occasional feedbacks on performance,
improvement particularly positive feedback from superiors
to subordinates are encouraging them.
Negative feedback should be included with
constructive suggestions to minimize the hurt-
feeling
Motivate enthuse and enthrall Motivation lies at the heart of the direction.
People should be motivated in such a way that
they should feel motivated, enthused,
enthralled to follow the directions given to
them whole-heartedly.
Lead by example Followers understand the directions of their
leader better, when the leader follows
himself/herself what he/she preaches.
 2. LEADERSHIP STYLES

• Leadership is defined as influence, that is, the art or process of influencing people
so that they will strive willingly and enthusiastically towards achievement of
group goals.

• There are various leadership styles.

• There are several instances in which each of these styles have proved to be
effective.
AUTOCRATIC LEADERSHIP
• In Autocratic leadership, the leader takes the decision on his own without consulting the
subordinates. He expects the subordinates to simply follow the commands given by him.

• There is no scope for decision making and results in loss of creativity and loss of freedom on
the part of followers.

• The style is effective when the leader enjoys considerable authority and power in the form of
discretion to reward and punish the subordinates for compliance or non-compliance of orders.

• This style is also effective when the leader commands a lot of respect due to past achievements.
 DEMOCRATIC/PARTICIPATIVE
LEADERSHIP
• Democratic/participative leader involves subordinates, peers, superiors and stakeholders in the decision

making process rather than taking the decision on his own.

• This style is very much helpful in winning the confidence of the people who would later be involved

into the implementation of the decision.

• The people involved in decision making has the freedom to express their opinions freely for influencing

the leader.

• The negative impact is that, this style involves many people which is time consuming and requires

maturity and skills on part of the leader to ensure that the discussion don’t go out of the track and
meeting time is utilized efficiently to arrive good decisions.
 LAISSEZ-FAIRE OR FREE-REIN
LEADERSHIP
• The French phrase LAISSEZ-FAIRE means “leave it be” and is used to describe a leader who
leaves his colleagues to get on with their work.

• Intentionally, little control is exercised by the free-rein leader over his subordinates to allow them
a high degree of freedom.

• This style is helpful when the leader is fully confident about his subordinates to setting their own
goals and achieving it. However, the leader communicates regularly with his subordinates to
provide them advices and resources as and when required.

• JRD’s Decentralization and Rathan’s centralization for the Tata Empire vividly depicted the free-
rein leadership style of J R D Tata, who provided freedom to his chieftains like Darbari Seth (Tata
chemicals), Russy Mody (Tata Stell) and Ajit kerkar (Taj Group of Hotels)
BUREAUCRATIC LEADERSHIP
• Bureaucratic leaders work “by the book” and expect their subordinates to follow the
procedures strictly.
• This type of leadership is present in public sector units (PSUs) in which there are rules
and regulations prescribed by the governmental regulators like Controller and Auditor
General (CAG) and the Central Vigilance Commission (CVC).
• This leadership is laced with heavy controls leading to demotivation of the employees.
• It helps in standardization of processes and reducing corruption.
• This leadership was successfully demonstrated in Indian scenarios like [Link].
CHARISMATIC LEADERSHIP
• These leaders have the charisma and the charm to induce their followers to follow them
whole-heartedly.
• According to Musser, charismatic leaders seek to instill both commitment to ideological
goals and devotion to themselves.
• Conger and Kanungo describes five behavioural attributes of charismatic leaders
Vision and articulation
Sensitivity to the environment
Sensitivity to member needs
Personal risk taking
Performing unconventional behaviour
• They become synonymous with the organization and often corporate identities and brands

are built around them.

• For the followers, success is tied up with the presence of charismatic leader.

• Charismatic leaders carry a lot of responsibility for the future of the organization, as their

untimely exit from the organization may risk its very existence.
SERVANT LEADERSHIP

• Robert Greenleaf is considered as the father of servant leadership.

• Unlike other leadership styles with a top-down hierarchical approach, servant leadership
emphasizes collaboration, trust, empathy, ethical use of power.

• The objective is to enhance the growth of individuals in the organization and increase the
teamwork and personal involvement.

• Sri N R Narayana Murthy is a leader of this style.

QUIET LEADERSHIP

• The approach of quiet leaders is the antithesis of the charismatic leaders in that they base their

success not on ego and force of character but on their thoughts and actions.

• They don’t have publicity and spotlight on them. They think themselves modestly, they don’t

think of themselves as leaders.

• They are not the top of the organizations. They won’t make high staking decisions.

• They are acting quietly, efficiently with political smartness to make the things somewhat better.
TRANSACTIONAL LEADERSHIP
• Their focus is to get the “transactions” done smoothly and efficiently. The transactions
refers to the job assigned to the subordinates which may be a project.
• The subordinates must obey the leader’s orders about the achievement of the task.
• If the task is accomplished successfully, the leader reward the concerned subordinates
with incentives and if the performance is below expectations, an unannounced
punishment is given.
• The leader tend to follow the management by exception approach.
• This leadership is popular in my industries but has its limitations in the knowledge based
or creative organizations.
TRANSFORMATIONAL LEADERSHIP
• These leaders have the capability to “transform” or radically change organizations and individuals
for their betterment.

• They are the visionaries who inspire others and successfully “sell” their vision to the followers,
thus requiring communication skills.

• Their enthusiasm is contagious, and they create shared vision for the future.

• Transformational leaders may not lead from front and tend to delegate responsibility to the teams
of their followers.

• One of the traps in this is that the passion and confidence of such a leader may be taken as
equivalent to the truth and reality, which may not always be the case.
SITUATIONAL LEADERSHIP

• This theory is based on the premise that no single leadership style suits every possible situation.

The leader has to adapt his style to best suit the requirements of the situation on hand.

• A leader may prefer bureaucratic style to train a group of new workers for operating on a machine.

• While the same leader may follow democratic/participative style to seek improvement ideas for a

process from a group of workers having past experience with that process.
• Tannenbaum and Schmidt identified three forces which lead to leader’s action
 The forces of the situation

 The forces in the follower

 The forces in the leader

• Maier noted that leaders not only consider the probability of a follower accepting the
situation but also the overall importance of getting things done.

• In critical situations, a leader is more likely to be autocratic in nature because of the

implications of failure.
 3. MOTIVATION THEORIES
• Robbins defined motivation as “willingness to exert high levels of effort towards
organizational goals, conditioned by the effort’s ability to satisfy some individual need”.

• Some of the theories of motivation include

• Maslow’s need hierarchy theory

• McClelland’s need theory

• Theory X and Theory Y

MASLOW’S NEED HIERARCHY THEORY
• Abraham Maslow, an American psychologist is noted for his concept of five-tiered hierarchy of
human needs and is called as father of humanistic psychology.

• Needs are defined as internal states which makes certain outcomes appear attractive.

• According to Maslow, the genesis of motivation takes place through needs. Motivation is defined
as willingness to exert high levels of effort to achieve goals. Maslow saw human beings needs
arranged like a ladder.
Basic needs at the bottom = physical (Biological and Physiological)- air, water, food, sleep

Safety needs = security, stability

Psychological or social needs = belonging, love, acceptance

Esteem needs = achievement, reputation, status, responsibility

Self-actuating needs at the top = needs to fulfill oneself –includes personal growth and
fulfillment, creativity, problem-solving, morality ethics, lack of prejudice
• Maslow recommended that lower level physiological needs should be fulfilled for
individuals to get motivated for self-actualization.

• As shown in figure (slide 21), organizations can pragmatically use Maslow’s

hierarchy of needs pyramid to motivate their employees and ultimately reach the
highest level of self-actualization.
McCLELLAND'S NEED THEORY
• David McClelland was an American psychological theorist, who argued that all types of needs
may not be uniformly applicable to all individuals.

• As some needs are acquired through interaction with environment are learned or socially acquired.
These are the need for achievement, need for power, need for affiliation.

• The need for achievement was defined as the drive to excel, to achieve in relation to a set of
standards, to strive to succeed.

• The need for power was defined as the need to make others behave in a way that they would not
have behaved otherwise.

• The need for affiliation was defined as the desire for friendly and close interpersonal
relationships.
• Effective managers must positively influence others, McClelland proposes that top managers
should have a high need for power coupled with a low need for affiliation.
THEORY X AND THEORY Y
• Douglas McGregor believed that managers use either of the two theories namely Theory X and
Theory Y to motivate their employers.

• Theory X has a negative approach in the sense that, it is based on traditional approach of direction
and control in which managers place orders on their subordinates and place control mechanisms to
keep an eye on the progress made by them.

• On the other hand, Theory Y has a modern behavioural approach which treats employees as
capable, responsible and mature.

• The work should be more enjoyable for the employees who would willingly commit themselves to
sharing more responsibility for the achievement of organizational goals.
• Hygiene factors like job security, salary and fringe benefits which don’t give
positive satisfaction, although dissatisfaction results from their absence.

• Fundamentally, hygiene factors are needed to make sure an employee is not

dissatisfied and motivation factors are needed to motivate an employee to higher
performances.
 6. MEANING OF CONTROLLING

• Controlling is defined as measuring and correcting activities of people to ensure that plans
are being realized.

• There is a clear cut relationship between planning and controlling.

• Planning process sets out the objectives and standards to be achieved.

• Controlling process involves feedback mechanism whereby the actual performance of a

process is compared with the expected performance to identify any gap therein.

• Efforts are then made to minimize the gap by making corrections in the inputs or the
variables of the process.
 7. STEPS IN CONTROLLING

• We know that, there is a strong relationship between planning and controlling.

• The steps in controlling are preceded by two important steps of planning.

• Setting of objectives for managers, units and departments are important to provide them clarity
on the expectations from them.

• On the basis of objectives, standards or benchmarks are identified during the planning process.

• These standards are specific objectives against which progress can be measured for various
parameters.

• Having established the standards, we proceed with the steps in controlling

Select suitable measuring instruments for Measuring instruments has to be selected keeping in
various parameters view the characteristic of a parameter in the
standard to be measured.
Measure actual performance for a parameter Using the measuring instrument selected earlier,
measurement of the parameter is done. Care is
taken to ensure such that every time the
measurement is done with accuracy for authenticity
of the measurement data.
Compare actual performance with the In this step, the data relating to the measurements
benchmark of actual performance of a parameter is compared
with the desired levels of performance specified in
the standard or benchmarks established earlier.

Is there a gap between actual and desired? This step is a decision point where it is determined
whether a gap exists between the actual and desired
performance of the parameter in the process. If no
gap exists, the process is continued as it is.
Is the variation within acceptable limits? If a gap or variation does not exist between actual or
desired performance, it is determined if this gap is
within acceptable limits of variation. This is because
some variation is natural due to inherit characteristics
of the process.
Is the standard valid and acceptable? Before taking any action on the variation detected, it is
important to verify if standard established earlier is still
valid and acceptable or not. This is because,
expectations from the process increases as time moves
and top management like to set higher performance
standards.
Rectify the cause of variation Once the assignable causes of variation has been
identified, corrective action is taken to bring the
process back in control.

After the cause for variation has been rectified, the control loop continues at step 2, i.e.,
measurement of actual parameter, followed by further steps in the control loop.
ESSENTIALS OF A SOUND CONTROL SYSTEM
Understandable A sound control system should be easily understandable by one and all. If it is
complicated to understand in the first place, its implementation would be
obviously imperfect.
Accurate A control system needs to have acceptable levels of accuracy. It should accurately
determine the gap or variation existing between the desired and actual
performance of a parameter.
Timely The control system should be implemented in a timely manner. For example, all
organizations are required to conduct an external financial audit at the end of the
financial year. The government tells the time deadlines for the submission of
audited results of the financial year. If the deadlines are not met, severe penalties
are imposed. Therefore it is compulsory for the organization to conduct the
financial audits within the prescribed time deadlines.
Cost effective The process of control involves a lot of cost and effort. It is very important that
that it yields benefits which exceed the costs involved.
Flexible Organizations today operate in a high dynamic environment which
keeps changing. This permits the control mechanisms to be flexible
so that they can be easily modified to accommodate changes in the
business environment.
Reasonable and acceptable The control mechanisms should not set standards which are too
difficult to achieve. People feel difficult and indulge in illegal or
unethical means to justify the achievement of stiff standards. They
also feel demotivated and disheartened if standards remain
intangible to them. Thus control systems should push employees
to achieve targets and still keep motivated and interested.
Focus on strategic parameters Good control systems should not try to measure every possible
parameter related to a process. It is always good ideas to be
selective in approach and focus only upon those parameters which
are most important.
Difficult to manipulate A sound control system should be designed in such a way that it
becomes almost impossible for anybody to play around with it.
Appropriate check points should be incorporated in the control system
to verify any wrongdoings on part of any person in the process being
monitored.
Use of multiple criteria If a single criteria is used to measure the performance of single process
or person, then the people concern would attempt to “look good” on
that criteria. However, if more than one criterion is used to assess the
performance, it is more likely that the assessment would be more
objective and difficult to manipulate.
Emphasize on exception A lot of effort and cost in controlling can be saved if the control systems
are based upon the approach of Management by Exception. The
emphasis is to bring only exceptions to the notice of the manager in
which performance is exceedingly above or below the desired level.
Register deviations quickly Control systems should register deviations in the actual
performance of a process or person quickly. This will allow for
prompt action to correct the cause of deviation. A significant
delay in registering the deviation by a control system will
obviously lead to unnecessary costs of wastages.
Indicate corrective action A sound control system should not only capture the
deviations but also provide guidance to corrective action to
eliminate such deviations. The guidelines can be in the form of
if-then format.
8. METHODS OF ESTABLISHING CONTROL
• The methods of establishing control can be categorized on the basis of functional
areas. They are

Financial control

Marketing control

Operations control

Human resources control

 FINANCIAL CONTROLS-BREAK-EVEN ANALYSIS

• It helps in establishing the controls by comparing the total cost with total
revenues associated with an organization and by determining the volume of
production (called break-even volume) which would result in total revenues
completely equalizing the total costs incurred.

• Break-even volume is the number of units of a product to be produced such

that revenue generated recovers all the investment made.

• A graph shown (next slide) is made to find the break-even point where the
total revenue crosses the total cost curve.
FINANCIAL RATIOS

• They are the popular means of establishing the controls in organization. Business
enterprises have to be controlled to ensure that they are maximizing the wealth of
the shareholders.

• Some commonly used financial ratios are

Debit to equity ratio=

FINANCIAL AUDITS

• As per the government regulations, all organizations have to get their financial
accounts audited through an external auditor within a prescribed time frame.

• These financial audits serve as useful control mechanisms to ensure that all
financial transactions are done by the firm in a legal and ethical manner.

• In India, there is a need to further strengthen the control mechanisms on this front
to encourage and ensure fair accounting practises.
BUDEGETARY CONTROL

• Budgets are the plans for a given period of time. The same financial plans also
serve as a control mechanism during the later stages.

• During the planning stages, amounts of money to be spent as expenses by

departments or individuals are allocated as budgets.

• During the controlling phase, it is determined if any departments or individuals

has exceeded the budgets allocated earlier for the designated time period.
 MARKETING CONTROLS- SALES REVENUE
TARGETS

• It is customary to assign sales revenue targets for a given period to all the sales
executives in an organization.

• These targets become efficient control mechanisms in gauging their performance

in the given period.

• At any point in time during the given period, an assessment can be made if the
sales revenue achieved by the sales person till that time is in line with the target
for the period or not.
BRAND RECALL SURVEYS
• Many companies spend staggering amounts of money year after year in promoting
their brand by way of advertising through various media and other means.

• In order to gauge the effectiveness of these advertising campaigns, brand recall

surveys are conducted.

• These surveys are excellent control tools, which ask respondents by way of questions
in the survey instrument if they remember the company’s brand.

• The data collected is utilized to realign the branding strategy of the company in
future.
CUSTOMER SATISFACTION SURVEYS

• Keeping an eye over the pulse of the customer is a key to the success of an
organization in today’s competitive world.

• Customer satisfaction surveys help companies knowing the ever-changing needs

and preferences of the customers.

• The data so collected is analyzed to bring about the necessary changes in the
features of the company’s products or surveys.
OPERATIONAL CONTROLS-INVENTORY CONTROL

• Inventory is the stock of idle resources in a form for some future use.
• In some organizations, inventories are of different types
• For manufacturing industries, there are inventories for raw materials, components, sub-
assemblies, tools and equipments, semi-finished goods, finished goods.
• For service organizations like bank, financial institution, hospitals, the inventory consists
of various items to be used in various service operations.
• In hospitals, there are inventories of medical equipments like syringes, glucose bottles
and other accessories like bandages, cotton, spirit along with various types of medicines.
• In banks, there inventories of various types of forms (for various banking operations),
brochures and pamphlets (for details of various banking instruments) and also inventory
of currency notes and coins.
• Low level of inventory may result in shortages or stock-outs. High level of inventory has
its own disadvantages. High level of inventory involves more capital tied up, for which
interest has to be paid to the bank.

• Various control mechanisms are employed by organizations for inventory control like
periodic checks, the economic order quality (EOQ) model, Just-in-time (JIT)
replenishment etc.,
 STATISTICAL QUALITY CONTROL

• The ultimate aim of an organization is to deliver quality products or services to its

customers. To achieve this, quality has to be monitored at every stage from input to
output as shown in figure (next slide).

• Acceptance sampling is the procedure of ensuring that the inputs such as raw materials,
components, labour skills are all of the desired levels of quality.

• It is also used for outgoing inspection of the finished goods before distribution to the
customers.

• Acceptance sampling is applied at the output stage of the transformation process.

• If there is a defect during the production of a batch all the items will be rejected
which results in loss of the company.

• This process of ensuring the quality during the transformation process is called
statistical process control (SPC).

• Quality control mechanisms like SPC, acceptance sampling and many more
techniques using statistics to monitor and improve quality are jointly termed as
statistical quality control (SQC).
INTERNAL/EXTERNAL QUALITY AUDIT

• According to ISO 10011, “audit is defined as a systematic and independent examination to

determine whether quality activities and related results comply with planned arrangements and
whether these arrangements are implemented effectively and are suitable to achieve objectives”.

• The objective of the audit is to check whether the quality system in the organization is in
accordance with the documented standard. More importantly whether the operation of the system
is in compliance with the documented procedures.

• The organization is required to establish the Quality Management System (QMS) which looks
after quality management.
• Internal quality audits has to be conducted in the organization from time to time to
make sure that quality system is maintained in the future.

• The internal quality audits can be performed by the trained employees of the
organization who have received formal training in conducting quality audit.

• If trained employees for internal quality audit are not there, the organization can
hire external audit. Thus internal or external audits are useful to control quality in
an organization.
PROJECT TRACKING AND CONTROL

• A project is considered as the achievement of specific objective which involves a series of activities
and tasks which consume resources.

• The projects in which time duration of various activities can be determined with the help of a
technique called critical path method (CPM) and Project evaluation and review technique
(PERT). This is best suitable for research and development projects

• CPM and PERT serve as planning tools during the planning phase of a project and later used as
tools for tracking the progress of a project and for controlling them.

• Microsoft Project and Primavera are popular software used for project planning, tracking and
controlling.
 HUMAN RESOURCES CONTROLS- EMPLOYEE
TURNOVER

• It is the ratio of the number of workers that had to be replaced in a given time
period to the average number of workers.

• This simple ratio is a good control indicator about working environment of the
organization and its employee retention capability.

• No organization desires to have a high employee turnover ratio.

EMPLOYEE PERFORMANCE APPRAISAL
• Performance appraisal of employees is used to control their performance via the annual
objectives assigned to them.

• The performance appraisal should be conducted at regular intervals to ascertain if the

employees are on the right track to achieve their objectives or not.

• During the middle of the year, a review is done by the reporting manager to track the
progress made by the employee.

• The final appraisal results in the determination of the incentives, bonus, increments
etc., on the basis of whether the objectives are met or not or exceeded by the employee.
EMPLOYEE SATISFACTION SURVEYS

• Good organizations conduct employee satisfaction surveys regularly to check

whether the employees have any grievances and to know if they are happy with
the work, culture and career prospects within the organization.

• This control mechanism helps in providing the better work life to the employees
for their retention and suitable career development in the organization.