Introduction: Motivation
The
word motivation is derived from ‘motive', which means an active form of a
desire, craving or need that must be satisfied. Motivation is the key to organisational
effectiveness. The manager in general has to get the work done through others.
These 'others' are human resources who need to be motivated to attain organisational
objectives.
According
to George R. Terry, "Motivation is the desire within an individual that
stimulates him or her to action."
According to Berelson and Steiner “A motive
is an inner state that energizes activates, or moves and directs or channels
behavior goals".
According to Lills "It is the stimulation of any
emotion or desire operating upon one's will and promoting or driving it to
action".
According
to Encyclopedia of Management
"Motivation refers to the degree of readiness of an organism to
pursue some designated goals and implies the determination of the nature and
locus of force inducing a degree of readiness."
Nature/Characteristics
of Motivation
Motivation is a psychological
phenomenon which generates within an individual. A person feels the lack of
certain needs, to satisfy which he feels working more. The need satisfying ego
motivates a person to do better than he normally does. From definitions given
earlier the following inferences can be derived:
a) Motivation
is an inner psychological force, which activates and compels the person to
behave in a particular manner.
c) A highly
motivated employee works more efficiently and his level of production tends to
be higher than others.
d) Motivation
originates from the-needs and wants of an individual. It is a tension of
lacking something in his mind, which forces him to work more efficiently.
e) Motivation
is also a process of stimulating and channelizing the energy of an individual
for achieving set goals.
f) Motivation
also plays a crucial role in determining the level of performance. Highly
motivated employees get higher satisfaction, which may lead to higher
efficiency.
g) Motivating
force an^ its degree, may differ from individual to individual depending on his
personality, needs, competence and other factors.
h) The
process of Motivation helps the manager in analyzing and understanding human
behavior and finding but how an individual can be inspired to produce desirable
working behavior.
i)
Motivation may be positive as well as
negative. Positive motivation includes incentives, rewards and other benefits
while negative motivation implies some punishment, fear, use of force etc.
j)
The motivation procedure contributes to and
boosts up the morale of the employees. A high degree of motivation may lead to
high morale.
Importance of Motivation
a) High
Performance: - Motivated
employee’s writ put maximum efforts for achieving organisational goals. The
untapped reservoirs of physical and mental abilities are taped to the maximum.
Better performance will also result in higher productivity. The cost of
production can also be brought down if productivity is raised.
b) Low
employee Turnover and Absenteeism: -When the employees are not satisfied with
their job then they will leave it whenever they get an alternative offer. The
dissatisfaction among employees also increases absenteeism. The employment
training of new employees costs dearly to the organisation.
c) Better
Organisational Images: -Those
enterprises which offer better monetary and non-monetary facilities to their
employees have a better image among them. Such concerns are successful in
attracting better qualified and experienced persons. Since there is a better
man-power to development programme, the employees will like to join such organisations.
Motivational efforts will simplify personnel functions also.
d) Better
Industrial Relations: -A good
motivational system will create job satisfaction among employees. The
employment will offer them better service conditions and various other
incentives. There will be an atmosphere of confidence among employers and
employees. There will be no reason for conflict and cordial relations among
both sides will create a healthy atmosphere. So motivation among employees will
lead to better industrial relations.
e) Acceptability
to Change: -The
changing social an industrial situations will require changes and improvements
in the working of enterprises. There will be a need to introduce new and better
methods of work from time to time. Generally employees resist changes for fear
of an adverse effect on their employment.
MOTIVATION THEORIES
a) Maslow's Hierarchy of Needs
Maslow
Abraham proposed his theory in the 1940s. This theory, popularly known as the
Hierarchy of Needs assumes that people are motivated to satisfy five levels of
needs: physiological, security, belongingness, esteem and self-actualization
needs. The figure 9.1 shows Maslow's hierarchy of needs
Maslow
suggested that the five levels of needs are arranged in accordance with their
importance, starting from the bottom of the hierarchy. An individual is
motivated first and foremost to satisfy physiological needs. When these needs
are satisfied, he is motivated and 'moves up' the hierarchy to satisfy security
needs. This 'moving up process continues until the individual reaches the
self-actualization level.
a) Physiological needs:
Physiological needs represent the basic issues of survival such as food, sex,
water and air. In organisational settings, most physiological needs are
satisfied by adequate wages and by the work environment itself, which provides
employees with rest rooms, adequate lighting, comfortable temperatures and
ventilation.
b) Security or safety needs: Security
or safety needs refer to the requirements for a secure physical and emotional
environment. Examples include the desire for adequate housing and clothing, the
need to be free from worry about money and job security and the desire for safe
working conditions. Security needs are satisfied for people in the work place
by job continuity, a grievance resolving system and an adequate insurance and
retirement benefit package.
c) Social needs: Belonging
or social needs are related to the, social aspect of human life. They include
the need for love and affection and the need to be accepted by one's peers. For
most people these needs are satisfied by a combination of family and community
relationships and friendships on the job. Managers can help ensure the
'satisfaction of these important needs by allowing social interaction and by
making employees feel like part of a team or work group.
d) Esteem needs: Esteem
needs actually comprise of two different sets of needs:
i.
The need for a positive self-image and
self-respect.
ii.
The need for recognition and respect from
others.
Organisations can help address esteem needs by
providing a variety of external symbols of accomplishment such as job titles
and spacious offices. At a more fundamental level, organisations can also help
satisfy esteem needs by providing employees with challenging job assignments
that can induce a sense of accomplishment.
e)
Self-actualization
needs: At the top of the hierarchy are those needs, which Maslow defines
the self-actualization needs. These needs involve realizing one's potential for
continued: growth and individual development. Since these needs are highly
individualized and personal, self-actualization needs are perhaps the most
difficult for managers to address. Therefore, an employee should try to meet
these needs on his own end.
However, an organisation can help his employee by creating a
climate for fulfillment of self-actualization needs. For instance, an organisation
can help in fulfillment of these needs by encouraging employee’s participation
in decision-making process and by providing them with an opportunity to learn
new things about their jobs and organisation. This process of contributing to
actual organisational performance helps employees experience personal growth
and development associated with self-actualizing.
Critical Analysis of Maslow’s Theory
A
number of research studies have been undertaken to see the validity of
hierarchy of needs. Lawler and Suttle collected data on 187 Managers in two
different organisations for a period of six months to one year. No evidence was
found to support Maslow's theory. They found there were two levels of
needs-biological and other needs- and that other needs would emerge only when
biological needs were reasonably satisfied. A survey conducted in India of 200
factory worker revealed that they give top priority to job security, earnings
and personal benefits-all lower other needs.
It
is generally seen that needs do not follow Maslow's hierarchy. The hierarchy is
determined by individuals differently. They proceed to follow their own pattern
of needs satisfaction. Some people may try for self-actuating needs rather than
lower needs. For some persons esteem needs are more important than social
needs.
There
is no cause effect relation between and need and behavior. A particular need
may cause behavior in different ways in different person. Similarly, one
particular behavior may result due to different needs. It is said that higher
needs motivate a person when lower needs are reasonably satisfied. The word
'reasonably satisfied' is a subjective matter. The level of satisfaction may be
different for persons.
b) Herzberg theory of Motivation
Another
popular need-based approach to motivation is the dual-structure approach
developed by Frederick Herzberg. This is also known as Two-factor Theory.
Herzberg developed this approach after interviewing 200 accountants and
engineers in Pittsburg. He asked them to recall such occasions when they had
been dissatisfied and less motivated. He found that entirely different sets of
factors were associated with satisfaction and dissatisfaction. For instance, an
individual who identified 'low pay' as causing dissatisfaction did not
necessarily mention 'high pay' as a cause of satisfaction. Instead, several
other factors, such as recognition or accomplishment, were cited as causing
satisfaction.
This
finding suggests that satisfaction and dissatisfaction are at opposite ends of
a single scale. Employees would, therefore, be satisfied, dissatisfied or
somewhere in between. Herzberg argued that attitudes and motivation consists of
a dual structure. One structure involves a set of factors that result in
feelings ranging from satisfaction to no satisfaction. The other structure
involves a set of factors that result in feelings ranging from dissatisfaction
to no satisfaction.
Herzberg
identified two sets of factors responsible for causing either satisfaction or
dissatisfaction. The factors influencing satisfaction are called motivation
factors or motivators, which are related specifically to the job itself and the
factors causing dissatisfaction, are called hygiene factors, which are related
to the work environment in which the job is performed.
Motivators
a) Achievement
b) Recognition
c) Advancement
d) The work
itself
e) The
possibility of personal growth
f) Responsibility
Hygiene or Maintenance Factors
a) Company
policies
b) Technical
supervision
c) Interpersonal
relations with supervisor
d) Interpersonal
relations with peers
e) Interpersonal
relations with subordinates
f) Salary
g) Job
security
h) Personal
life
i)
Work conditions
j)
Status
Based
on these findings, Herzberg recommended that managers seeking to motivate
employees should first make sure that hygiene factors are taken care of and
that employees are not dissatisfied with pay, security and working conditions.
Once a manager has eliminated employee dissatisfaction, Hertzberg recommends
focusing on a different set of factors to increase motivation, by improving
opportunities for advancement, recognition, advancement and growth.
Specifically, he recommends job enrichment as a means of enhancing the
availability of motivation factors.
Criticism
Although widely accepted by
managers, Hertzberg’s dual structure approach however suffers from certain
drawbacks. Other researchers who measured satisfaction and dissatisfaction
based on different aspects reached very different conclusions. They have also
criticized Herzberg's theory for its inability to define the relationship
between satisfaction and motivation and to pay enough attention to differences
between individuals. Hence, at present Herzberg's theory is not held in high
esteem by researchers in the field of motivation. The theory, however, had a
major impact on managers and has played a key role in increasing their
awareness of motivation and its importance in type work place.
Difference between Maslow’s
Need Hierarchy theory and Herzberg’s motivation Hygiene Theory
1. Meaning:
Maslow's theory is based on the concept of human needs
and their satisfaction.
Hertzberg's
theory is based
on the use of motivators which include achievement, recognition and opportunity
for growth.
2.
Basis of Theory:
Maslow's
theory is based on the hierarchy of human needs. He identified five sets of
human needs (on priority basis) and their satisfaction in motivating employees.
Hertzberg
refers to hygiene factors and motivating factors in his theory. Hygiene factors
are dissatisfies while motivating factors motivate subordinates. Hierarchical
arrangement of needs is not given.
3.
Nature of Theory:
Maslow's
theory is rather simple and descriptive. The theory is based long experience
about human needs.
Hertzberg's
theory is more prescriptive. It suggests the motivating factors which can be
used effectively. This theory is based on actual information collected by
Hertzberg by interviewing 200 engineers and accountants.
4.
Applicability of Theory:
Maslow's
theory is most popular and widely cited theory of motivation and has wide
applicability. It is mostly applicable to poor and developing countries where
money is still a big motivating factor.
Herzberg's
theory is an extension of Maslow's theory of motivation. Its applicability is
narrow. It is applicable to rich and developed countries where money is less
important motivating factor.
5.
Descriptive or Prescriptive
Maslow's
theory or model is descriptive in nature.
Herzberg's
theory or model is prescriptive in nature.
6.
Motivators
According
to Maslow's model, any need can act as motivator provided it is not satisfied
or relatively less satisfied.
In
the dual factor model of Hertzberg, hygiene factors (lower level needs) do not
act as motivators. Only the higher order needs (achievement, recognition,
challenging work) act as motivators.
c) McGregor’s Theory X and Y
Doughlas
McGregor introduced these two theories i.e., Theory X and Theory Y, based on
two distinct views of human beings. He proposed, at opposite extremes, two
pairs of assumptions about human beings which he thought were implied by the
actions of the mangers. Theory X deals with one extreme, based on one set of
assumptions and Theory y deals with another extreme based on another set of
assumptions. These theories are not based on any research, but according to McGregor,
these are intuitive deduction.
Theory X:
-This theory is based on the traditional approach to human
behavior. The assumptions generally, held by the managers in their theory are:
-
a)
The average human beings inherently dislike
work and will try to avoid it, whenever possible
b)
A the employee are lazy, they must be
controlled, coerced, threatened with punishment to achieve goals, to which they
are indifferent
c)
Average employee will try to avoid
responsibility and seek formal directions whenever possible, because they have
relatively little ambition.
Theory y:
-This approach assumes that management by direction and control is
questionable method for motivating such people whose physiological and social
needs have been satisfied and whose social; esteem and self actualization needs
are becoming more important. For such people, Theory Y seems to be applicable,
which is the contrast of Theory X. This theory makes the following assumptions
about people:
a) The average human being does not inherently dislike work. He can view
work as natural or enjoyable as rest or play
b) Employees will exercise self direction and self control in the attainment
of the objectives to which they are committed
c) Given proper working conditions, average person can learn to accept and
even to seek responsibility
d) Commitment to objectives is a function of the rewards associated with
their achievement
e) All the people are capable of making innovative and creative decision and
the decision making is not the sole province of the people in management position.
d) Vroom’s Expectancy
theory
Victor Vroom made an important contribution to the
understanding of the concept of motivation and the decision process that people
use to determine how much effort they will expend on their jobs. He said that a
person’s motivation towards an action at any time would be determined by an
individual’s perception that a certain type of action would lead to a specific
outcome and his personal preference for this outcome. This model is based on
the belief that motivation is determined by the nature of the reward expect to
get an a result of their job performance. There are three variable in Vroom’s
model given in the form of an equation. Since the model is a multiplier, all
the three variable must have high positive value to imply motivated performance
choices. If any of the variable is zero the probability of motivated
performance tends to be zero.
MOTIVATION =
VALENCE X EXPECTANCY X INSTRUMENTALITY
All these three variable are explained as follows:
1) Valence: Valence means the attraction
(or repulsion) of an outcome to the individual. Whenever an individual has
preference for a reward valence is the strength of that preference.
2) Expectancy: Expectancy is also referred
to as the Effort-Performance Probability. It refers to the extent to which the
person believes his efforts will lead to the first level outcome i.e.
completion of the task.
3) Instrumentality (Performance-Reward
Probability): Instrumentality refers to the probabilities attached by the
individual to each possible performance-outcome alternative just as the
individual previously assigned probabilities to various levels of effort
leading to different levels of performance (expectancy).
The plus points of this theory are:
a) The
expectancy model is highly useful in understanding organizational behaviour. It
can improve the relationship between the individual and the organizational
goals. This model explains how individuals’ goals influence his efforts and
like need-based models reveal that individual behaviour is goal oriented.
b) The
expectancy theory is a cognitive theory, which values human dignity.
Individuals are considered rational human beings who can anticipate their
future on the basis of their beliefs and expectations.
c) This
theory helps the managers in looking beyond what Maslow and Herzberg implied.
According to him motivation does not mean satisfying the unsatisfied needs. The
managers must make it possible for an employee to see that effort can result in
appropriate need satisfying rewards.
Despite these plus points, there are some drawbacks of
Vroom’s expectancy model as given below:
a) Vroom’s
theory is difficult to research and apply in practice. This is evident by the
fact that there have been a very few research studies designed specifically to
test Vroom’s theory.
b) This
theory assumes man to be a rational human being who makes all the decisions
consciously. But there are numerous instances where decision are taken with no
conscious thought. This is particularly true for routine jobs.
c) Although,
it is an important theory of motivation but it is quite complex. Many managers,
in actual organizational situations, do not have the time or sources to use a
complex system on the job.
Techniques of Motivation
Every management tries to spacing certain motivational
techniques which can be employed for improving performance of its employees.
Motivational techniques may be classified into two categories i.e. financial
and non-financial. Both the categories of motivators are discussed as under:
A. Financial Motivators: Financial
motivators may be in the form of more wages and salaries, bonuses,
profit-sharing, leave with pay, medical reimbursements, company paid insurance
of any of the other things that may be given to employees for performance. The
economists and most managers consider money and financial incentives as
important motivators. Behavioural scientists, on the other hand, tend to place
them low. Neither view is probably right.
B. Non-financial Motivators: These
motivators are in the nature of better status, recognition, participation, job
security etc. Some of those motivators are discussed here:
1) Recognition:
Every person wants his work to be recognizes by his superiors. When he knows
that his performance is known to his boss then he will try to improve it more
and more.
2) Participation:
Participation has been considered a good technique for motivation. It implies
physical and mental involvement of people in decision-making process.
3) Statue:
It refers to a social statue of a person and it satisfies egoistic needs. A
management may create some statue symbols in the organization.
4) Competition:
In some organizations competitions is used as a motivator. Various persons are
given certain objectives and everybody tries to achieve them ahead of others.
5) Job
Enrichment: Job enrichment has been recognized as an important motivator by
various researches. The job is made more important and challenging for the
workers, may be given wide latitude in deciding about their work methods.
Introduction to Leadership
Leadership
is the ability to build up confidence and deal among people and to create an
urge in them to be led. To be a successful leader, a manager must possess the
qualities of foresight, drive, initiative, self-confidence and personal
integrity. Different situations may demand different types of leadership.
Leadership
means influencing the behaviour of the people at work towards realizing the
specified goals. It is the ability to use non-coercive (no force) influence on
the motivation, activities and goals (MAG) of others in order to achieve the
objectives of the organisation.
Koontz and 0' Donnel “Leadership is the ability of a manager to induce
subordinates to work with confidence and zeal”.
George
R Terry “Leadership is the activity of influencing people to strive willingly
for group objectives”.
Nature
and Characteristics of Leadership:
An analysis of the definitions
cited above reveals the following important characteristics of leadership.
a)
Leadership is a personal quality.
b)
It exists only with followers. If there are no
followers, there is no leadership?
c)
It is the willingness of people to follow that
makes a person a leader.
d)
Leadership is a process of influence. A leader
must be able to influence the behaviour, attitude and beliefs of his
subordinates.
e)
It exists only for the realization of common
goals.
f)
It involves readiness to accept complete responsibility
in all situations.
g)
Leadership is the function of stimulating the
followers to strive willingly to attain organisational objectives.
h)
Leadership styles do change under different
circumstances.
i)
Leadership is neither bossism nor synonymous
with management.
Leadership
Styles or Types of Leaders
1.
Autocratic
or Authoritarian Style leader: An
autocratic also known as authoritarian style of leadership implies wielding
absolute power. Under this style, the leader expects complete obedience from
his subordinates and all decision-making power is centralized in the leader. No
suggestions or initiative from subordinates is entertained. The leader forces
the subordinates to obey him without questioning. An autocratic leader is, in
fact, no leader. He is merely the formal head of the organisation and is
generally disliked by the subordinates who feel comfortable to depend
completely on the leader.
Advantages:
a)
Reduced stress due to increased control
b)
A more productive group ‘while the leader is
watching’
c)
Improved logistics of operations
d)
Faster decision making
Disadvantages:
a)
Short-termistic approach to management.
b)
Manager perceived as having poor leadership
skills
c)
Increased workload for the manager
d)
People dislike being ordered around
e)
Teams become dependent upon their leader
2.
Laissez-faire
or Free-rein Style Leader: Under this
type of leadership, maximum freedom is allowed to subordinates. They are given
free hand in deciding their own policies and methods and to make independent
decisions. The leader provides help only when required by his subordinates
otherwise he does not interfere in their work. The style of leadership creates
self-confidence in the workers and provides them an opportunity to develop
their talents. But it may not work under all situations with all the workers,
may bring problems of indiscipline. Such leadership can be employed with
success where workers are competent, sincere and self-disciplined.
Advantages:
a) No work
for the leader
b) Frustration
may force others into leadership roles
c) Allows the
visionary worker the opportunity to do what they want, free from interference
d) Empowers
the group
Disadvantages:
a)
It makes employees feel insecure at the
unavailability of a manager.
b)
The manager cannot provide regular feedback to
let employees know how well they are doing.
c)
Managers are unable to thank employees for
their good work.
d)
The manager doesn’t understand his or her
responsibilities and is hoping the employees can cover for him or her.
3.
Democratic
or Participative Style leader: The
democratic or participative style of leadership implies compromise between the
two extremes of autocratic and laissez-fair style of leadership. Under this
style, the supervisor acts according to the mutual consent and the decisions
reached after consulting the subordinates. Subordinates are encouraged to make
suggestions and take initiative. It provides necessary motivation to the
workers by ensuring their participation and acceptance of work methods. Mutual
trust and confidence is also created resulting in job satisfaction and improved
morale of workers. It reduces the number of complaints, employee's grievances,
industrial unrest and strikes. But this style of leadership may sometimes cause
delay in decisions and lead to indiscipline in workers.
Advantages
a)
Positive work environment
b)
Successful initiatives
c)
Creative thinking
d)
Reduction of friction and office politics
e)
Reduced employee turnover
Disadvantages:
a)
Takes long time to take decisions
b)
Danger of pseudo participation
c)
Like the other styles, the democratic style is
not always appropriate. It is most successful
d)
when used with highly skilled or experienced
employees or when implementing operational changes or resolving individual or
group problems.
4.
Paternalistic Style leader: This
style of leadership is based upon sentiments and emotions of people. A
paternalistic leader is like a father to these subordinates. He looks after the
subordinates like a father looks after his family. He helps guides and protects
all of his subordinates but under him no one grows. The subordinates become
dependent upon the leader.
Qualities
of a Good Leader
1.
Patience: Patience
is the capacity to face difficult situations, hardships or inconvenience
without making a single complaint. A good leader must show patience while
waiting for expected results, facing difficult situations and taking important
decisions. He must avoid taking hasty decisions and actions.
2.
Good
Personality: A good
personality is a combination of physical, mental and social qualities. Good
personality helps a leader to influence his followers. Attractive physique and
good manners add an advantage to the leader's personality.
3.
Self-confidence: A good leader must have self confidence. This
quality is necessary for facing challenging situations and for solving problems
easily and effectively.
4.
Human
Skills: A good leader must have essential
social and human skills. That is, he must understand people. This quality is
necessary for dealing with different types of persons and social groups.
5. Judgment
skills: A good leader should be able to examine problems in right perspective.
His judgment and decision making abilities should be superior to others. He
should be able to form opinions and judge based on facts and not be prejudiced
6. Communication
skills: A good leader should be able to communicate the goals and procedures of
the organisation clearly, precisely and effectively to the subordinates. Only
then will it be possible for him to convince, persuade and stimulate
subordinates to action.
7. Listening
skills: People tend to avoid a leader who does not listen. Hence a good leader
in one who can listen to other peoples problems. He should be able to create a
culture whereby people can be frank with him and give him information and also
give him feedback about himself, which can help him to improve himself.
8.
Inspiring skills: A good leader should be able to inspire
people to deal with the “why” question. He should not just command and control
but be able to lead the people and get them involved to work together as a
team.
9.
Administrative
Skills: A good leader must have an
administrative ability. This means, he must be able to get the work done
through his followers. He must know how to plan, organize and control the work
of his followers.
10.
Discipline: A good leader must be a disciplined person.
This means he must have respect for the rule and regulations of the
organisation. This is because his followers will follow his example.
11.
Initiative: A good leader must always take an initiative.
This means he should do the right thing at the right time without being told by
others. He must be able to construct and implement his own plan.
12.
Intelligence: A good leader must be smart and intelligent.
That is, he should have a good educational background and sound technical
knowledge. He should be more intelligent than his followers. If not, his
followers will not respect him. This will have a bad effect on his performance.
13.
Innovative: A good
leader must have an art of innovation. That is, he must have a good imagination
and visualization skills. He must develop new ideas and tactics to solve
problems. He must combine the new ideas with the old ideas.
Significance of Leadership
The importance of leadership are as follows:
1. It improves motivation and morale:
Through dynamic leadership managers can improve motivation and morale of their
subordinates. A good leader influences the behaviour of an individual in such a
manner that he voluntarily works towards the achievement of enterprise goals.
2. It acts as a motive power to group efforts:
Leadership serves as a motive power to group efforts. It leads the group to a
higher level of performance through its persistent efforts and impact. On human
relations.
3. It acts as an aid of authority: The use
of authority alone cannot always bring the desired results. Leadership acts as
an aid to authority by influencing, inspiring, and initiating action.
4. It is needed at all levels of management:
Leadership plays a pivotal role at all levels of management because in the
absence of effective leadership no management can achieve the desired results.
5. It rectifies the imperfectness of the
formal organizational relationships: No organizational structure can
provide all types of relationships and people with common interest may work beyond
the confines of formal relationships. Such informal relationships are more
effective in controlling and regulating the behaviour of the subordinates.
Effective leadership uses these informal relationships to accomplish the
enterprise goals.
6. It provides the basis of co-operations:
Effective leadership increases the understanding between the subordinates and
the management and promotes co-operation among them.
Introduction to Management Control
Control
is one of the managerial functions. These functions start with planning and end
at controlling. The other functions like organising, staffing, directing act as
the connecting like between planning and controlling. Planning will be
successful only if the progress planning and controlled, Planning involves
setting up of goals and objectives while controlling seeks to ensure.
In
the words of Koontz and O'Donnel, “The measurement and correction of the
performance of activities of subordinates in order to make sure that enterprise
objectives and plan devised to attain them are being accomplished." The
accomplishment of organisational goals is the main aim of every management. The
performance of subordinates should be constantly watched to ensure proper
implementation of plans. Co-ordination is the channel through which goals can
be achieved and necessary.
According
to Henry Fayol, “In an undertaking, control consists in verifying whether
everything occurs in conformity with the plan adopted, the instructions issued
and principles established. It has to point out weakness and errors in order to
rectify them and prevent recurrence”.
Thus,
controlling implies determining and stating specifically what is to be
accomplished, then checking performance against such standards prescribed with
a view to supplying the corrective action required to achieve the planned
objectives. The end objective of controlling is, therefore, to ensure that the
people’s effort in
the organisation is
continuously directed towards
the attainment of the predetermined objectives.
Nature
or Characteristics of Control
1) Control is a function of
management: It is, in fact, a follow-up action to the other functions of
management. All the managers in the organisation to control the activities
assigned to them perform this function.
2) Control is a dynamic process: It
involves continuous review of standards of performance and results in
corrective action, which may lead to changes in other functions of management.
3) Control is a continuous
activity: It does not stop anywhere. According to : Koontz and O’Donnell,
“Just as the navigator continually takes reading to a planned action, so should
so should be the business s manager continually take reading to assure himself
that his enterprise or : department is on course”.
4) Control is forward looking: It is
related to future, as past cannot be controlled. It is usually preventive as
the presence of control systems leads to minimize wastages, losses, and
deviations from standards. It should be noted that control does not curtail the
rights of the individuals. It simply keeps a check on the performance of
individuals.
5) Planning and Controlling are
closely related with each other: Managerial planning seeks consistent
and integrated while managerial control seeks to compel events to conform to
plans. As a matter of fact, planning is based on control and control is based
on planning. The process of control uses certain standards for measuring
performance, which are laid down by planning. The control process, in turn, may
reveal the deficiency of planning and may lead to the revision of planning. It
may also lead to setting of new goals, changing the organisational structure,
improving staffing and making major changes in the techniques of directing.
Advantages (Importance) of
Controlling:
(i)
Accomplishing organisational goals: The controlling function measures progress
towards the organisational goals and brings to light the deviations, if any,
and indicates corrective action.
(ii)
Judging accuracy of standards: A good control system enables management to
verify whether the standards set are accurate or not. An efficient control
system keeps a careful check on the changes taking place in the organisation
and in the environment and helps to review and revise the standards in light of
such changes.
(iii)
Making efficient use of resources: By exercising control, a manager seeks to
reduce wastage and spoilage of resources. This ensures that resources are used
in the most effective and efficient manner.
(iv)
Improving employee motivation: A good control system ensures that employees
know well in advance what they are expected to do and what are the standards of
performance on the basis of which they will be appreciated.
(v)
Ensuring order and discipline: Controlling creates an atmosphere of order and
discipline in the organisation. It helps to minimize dishonest behaviors on the
part of the employees by keeping a close check on their activities.
(vi)
Facilitating coordination in action: Controlling provides direction to all
activities and efforts for achieving organisational goals.
Limitations
of Controlling:
(i)
Difficulty in setting quantitative standards: Control system loses some of its
effectiveness when standards cannot be defined in quantitative terms. Employee
morale, job satisfaction and human behaviors are such areas where this problem
might arise.
(ii)
Little control on external factors: Generally an enterprise cannot control
external factors such as government policies, technological changes,
competition etc.
(iii)
Resistance from employees: Control is often resisted by employees. They see it
as restriction on their freedom.
(iv)
Costly affairs: Control is a costly affair as it involves a lot of expenditure,
time and efforts.
Steps in Controlling Process
In
order to perform his control functions, a manager follows three basic steps.
First of all, he establishes the standards of performance to ensure that
performance is in accordance with me plan. After this, the manager will appraise
the performance and compare it with predetermined standards. This step will
lead the manager to know whether the performance has come up to the expected
standard or if there is any deviation. If the standards are not being met, the
manager will take corrective actions, which is the final step in controlling.
1) Establishing standards: A
standard acts as a reference line or basic of comparison of actual performance.
Standards should be set precisely and preferably in quantitative terms. It
should be noted that setting standards is also closely linked with and is an
integral part of the planning process. Different standards of performance are
set up for various operations at the planning stage, which serve as the basis
of any control system. Establishment of standards in terms of quantity, quality
or time is necessary for effective control. Standards should be accurate,
precise, acceptable and workable. Standards should be flexible, i.e., capable
of being changed when the circumstances require so.
2) Measurement of performance: This step
involves measuring of actual performance of various individuals, groups or
units and then comparing it with the standards, which have already been set up
at the planning stage. The quantitative measurement should be done in cases
where standards have been set in quantitative terms. In other cases,
performance should be measured in terms of quantitative factors as in case of
performance of industrial relations manager. Comparison of performance with
standards is comparatively easier when the standards are expressed in
quantitative terms.
3) Comparison: This is
the core of the control process. This phase of control process involves
checking to determine whether the actual performance meets the predetermined or
planned performance. Manager must constantly seek to answer, “How well are we
doing?” When a production supervisor checks the actual output or performance of
his department with the production schedule, he is performing comparison aspect
of control. When-an executive calculates the performance of his subordinates
once in six months or annuity, he is
performing comparison aspect of control. Checking return on in investment is a
comparison phase of control.
4) Taking corrective action: The final
step in the control process is taking corrective actions so that deviations may
not occur again and the objectives of the organisation are achieved. This will
involve taking certain decision by the management like re-planning or redrawing
of goals or standards, assignment of clarification of duties. It may also
necessitate reforming the process of selection and the training of workers.
Thus, control function may require change in all other managerial functions. If
the standards are found to be defective, they will be modified in the light of
the observations.
Techniques of Control or Methods of Establishing Control
A
number of techniques or tools are used for the purpose of managerial control.
Some of the techniques are used for the control of the overall performance of
the organisation, and some are used for controlling specific areas or aspects
like costs, sales, etc. The various techniques of control can be classified
into categories, viz.,
(1)
Traditional or Conventional techniques and
(2)
Modern or Contemporary techniques.
Traditional Techniques
a.
Budgetary
Control: According to J.A. Scott, “Budgetary control is the system of
management control and accounting in which all operations are forecasted and so
far as possible planned ahead, and the actual results compared with the
forecasted and planned ones”.
b.
Standard
Costing: According to the ICMA, England, “Standard cost is a
pre-determined cost which is calculated from management’s standards of
efficient operation and the relevant necessary expenditure”.
c.
Break-even
Analysis or Cost-Volume-Profit Analysis: Cost-Volume-Profit Analysis or
Break-even Analysis is the study of the interrelationship between the cost
(i.e., cost of production), volume (i.e., the volume of production and sales),
the prices and the sales value, and the profits. In other words, it is the
study of the inter-relationship between the cost (i.e., cost of production),
volume (i.e., volume of production and sales), prices (i.e., selling prices)
and profits.
d.
Inventory
Control: Inventory is the stock of raw materials, work-in-progress,
finished goods, consumable stores and spare parts and components at any given
point to time. So, inventory control means control over different items of
inventory or stock. “It is defined as physical control of stock items and
implementing the principles and policies relating thereto”.
e.
Internal
Audit: Internal audit is a continuous and systematic review of the
accounting, financial and other operations of a concern by the staff specially
appointed by the management for the purpose. In other words, it is the auditing
for the management conducted by the staff specially appointed for the purpose
to ensure that the work of the concern is going on smoothly, efficiently and
economically.
f.
Statistical
Data Analysis: It is a technique under which statistical data of the past and
the present relating to the important aspects of the business are used for
managerial control. The statistical data are collected from books and registers
of the concern and presented to the management in a systematic manner in the
form of tables, charts, graphs, etc.,
g.
Personal
Observation: Under the technique of personal observation, the managers keep a
close personal observation of the employees. In other words, the manager
observes whether the workers are doing what they are expected to do.
h.
Production
Planning and Control: According to S. Elon, “Production planning
and control may be defined as the direction and co-ordination of the firm’s
material and physical facilities towards the attainment of pre-specified
production goals in the most efficient and valuable way”.
Modern Techniques
a.
Financial
Statement Analysis: Financial statements are a means of
managerial control. They can be used by the management for measuring and
controlling the profitability, liquidity and the financial position of the
business. By comparing the financial statement of the current year with those
of the previous years and also by comparing the financial statement of their
concern with those of other concerns engaged in the same industry.
b.
Return
on Investment Control: Profits are the measure of overall efficiency
of business. Profit earned in relation to the capital employed in a business is
an important control device. ROI is used to measure the overall efficiency of a
concern. It reveals how well the resources of a concern are used, higher the
return better are the results.
c.
Management
Information System (MIS): Management Information System (MIS) is an
approach of providing timely, adequate and accurate information to the right
person in the organisation which helps in taking right decisions.
d.
Management
Audit: Management audit is an investigation by an independent
organisation to find out whether the management is carried out most effectively
or not. In case there are drawbacks at any level then recommendations should be
given to improve managerial efficiency.
e.
Zero-Base
Budgeting (ZBB): In the words of Peter A Pyher, “Zero-base
budgeting is a planning and budgeting process which requires each manager to
justify his entire budget request in detail from scratch and shifts the burden
of proof to each manager to justify why he should spend money at all. The
approach requires that all activities be analysed in ‘decision packages’ which
are evaluated by systematic analysis and ranked in order of importance”. From
his definition, it is clear that Zero-base budgeting is a technique of
preparing the budget in which the previous year is not taken as the base, and
every year is taken as a new year for preparing the current year’s budget.
f.
Human
Resources Accounting: The American Accounting Association has
defined human resources accounting as “the process of identifying and measuring
data about human resources and communicating this information to interested
parties”.
g.
Responsibility
Accounting: Responsibility Accounting is defined as “a system designed to
accumulate and report costs by individual levels of responsibility. Each
supervisory area is charged only with the cost for which it is responsible and
over which it has control.”
Essentials of an Effective control system:
The
following are the essentials or basic requirements of an effectively control
system:
1)
Suitable: The control system must be suitable
for the kind of activity intended to serve. Apart from differences in the
systems of control in different business, they also vary from department to
department and from one level in the organisation to the other. The manager
must be sure that he is using the technique appropriate for control of the
specific activity involved.
2)
Understandable: The system must be
understandable, i.e., the control information supplied should be capable of
being understood by those who use it. A control system that a manager cannot
understand is bound to remain ineffective. The control information supplied
should be such as will be used by the managers concerned. It is, therefore, the
duty of the manager concerned to make sure that the control information
supplied to him is of a nature that will serve his purpose.
3)
Economical: The system must be economical in
operation, i.e., the cost of a control system should not exceed the possible
savings from its use. The extent of control necessary should be decided by the
standard of accuracy or quality required. A very high degree or standard of
accuracy or quality may not really be-necessary.
4)
Flexible: The system of control must be
flexible, i.e. workable even if the plans have to be changed. In case the
control systems can work only on the basis of one specific plan, it becomes
useless if the plan breaks down and another has to be substituted. A good
control system would be sufficiently flexible to permit the changes so
necessitated.
5)
Expeditious: Nothing can be done to correct
deviations, which have already occurred. It is, therefore, important that the
control system should report deviations from plans expeditious. The objective
of the control system should be to correct deviations in the immediate future.
6)
Forward Looking: The control system must be
forward looking, as the manager cannot control the past. In fact, the control system
should be so designed so as to anticipate possible deviations, or problems.
Thus deviations can be forecast so that corrections can be incorporated even
before the problem occurs.
7)
Organisational Conformity: Since people carry
on activities, and events must be controlled through people, it is necessary
that the control data and system must conform to the organisational pattern.
The control data must be so prepared that it is possible to fix responsibility
for the deviations within the areas of accountability.
8)
Indicative of Exceptions at Critical Points:
The management principle of exception should be used to show up not only
deviations but the critical areas must also be fixed for most effective
control.
9) Objectivity:
As far as possible the measurements used must have objectivity, particularly
while appraising a subordinate's performance, the subjective element cannot be
entirely removed.
10) Suggestive
Of Corrective Action: Finally, an adequate control system should not only
detect failures must also disclose where they are occurring, who is responsible
for them and what should be done to correct them. Overall summary information
can cover up certain fault areas.
Relationship between Planning and
Controlling
The
relationship between planning and controlling can be divided into the following
two parts.
(i)
Interdependence between Planning and Controlling.
(ii)
Difference between Planning and Controlling.
(i)
Interdependence between Planning and Controlling. Planning is meaningless
without controlling and controlling is blind without Planning. Both the aspects
of the interdependence of planning and control have been discussed below:
(a)
Planning is meaningless without Controlling: if the process of controlling is
taken away from management no person working in the enterprise will take it
seriously to work according to the plans and consequently, the plans will fail.
(b)
Controlling is blind without Planning: Under the system of controlling actual
work performance is compared with the standards. Hence, if the standards are
not determined there is no justification left for control and the standards are
determined under planning.
(ii)
Difference between Planning and Controlling: Yes, planning and controlling are
incomplete and ineffective without each other but it doesn’t mean that both are
not independent. Reasons are:
(a)
Planning is looking Ahead whereas Controlling is Looking Back: Plans are always
formulated for future and determined the future course of action for the
achievement of objectives laid down. On the contrary, controlling is looking
back because under it a manager tries to find out, after the work is completed,
whether it has been done according to the standards or not.
(b)
Planning is the first function and Controlling is the last function of
Managerial Process: the managerial process moves in a definite sequence- like
planning, organising, staffing, directing and controlling happens to be the
last step.
Meaning of Budget
A budget is the monetary or/and quantitative expansion
of business plans and policies to be pursued in the future period of time. The
term budgeting is used for preparing budgets and other procedures for planning,
co-ordination and control of business enterprise. So a budget is a
pre-determined statement of management policy during a given period which
provides a standard for comparison with the results actually achieved.
Significance
of Budget: Budgets act as a tool in the hands of management. They
help in improving the efficiency of the business. The following are some of the
advantages of budgeting:
1. Improves Efficiency: Budgeting helps in
improving efficiency in the organization. Every person gets a target for
achievement.
2. Co-ordination: The working of different
departments and sectors is properly co-ordinated with the help of budgeting.
3. Economy: The planning of expenditure
will be systematic and there will be an economy in spending.
4. Consciousness
among Employees: Budgeting creates consciousness among employees. By fixing
targets for the employees they are made conscious of their responsibility.
5. Time Bound: The budgets are prepared
for specific periods and the performance is judged at the end of these periods.
The results of employees working can be known after a specified time.
Classification of Budgets: The
budgets are usually classified according to their nature. The following are the
types of budgets which are commonly used:
a)
BASED ON TIME PERIOD:
(i)
Long Term Budget: Budgets which are prepared for periods longer than a year are
called LongTerm Budgets. Such Budgets are helpful in business forecasting and
forward planning. E.g: Capital Expenditure Budget and R&D Budget.
(ii)
Short Term Budget: Budgets which are prepared for periods less than a year are
known as ShortTerm Budgets. Such Budgets are prepared in cases where a specific
action has to be immediately taken to bring any variation under control. E.g:
Cash Budget.
b)
BASED ON CONDITION:
(i)
Basic Budget: A Budget, which remains unaltered over a long period of time, is
called Basic Budget.
(ii)
Current Budget: A Budget, which is established for use over a short period of
time and is related to the current conditions, is called Current Budget.
c)
BASED ON CAPACITY:
(i)
Fixed Budget: It is a Budget designed to remain unchanged irrespective of the
level of activity actually attained. It operates on one level of activity and
less than one set of conditions. It assumes that there will be no change in the
prevailing conditions, which is unrealistic.
(ii)
Flexible Budget: It is a Budget, which by recognizing the difference between
fixed, semi variable and variable costs is designed to change in relation to
level of activity attained. It consists of various budgets for different levels
of activity.
d)
BASED ON COVERAGE:
(i)
Functional Budget: Budgets, which relate to the individual functions in an
organization, are known as Functional Budgets, e.g. purchase Budget, Sales Budget,
Production Budget, plant Utilization Budget and Cash Budget.
(ii)
Master Budget: It is a consolidated summary of the various functional budgets.
It serves as the basis upon which budgeted Profit & Loss Account and forecasted
Balance Sheet are built up.
Concept of Budgetary Control
Budgetary control is the process of determining various
budgeted figures for the enterprise for the future period and them comparing
the budgeted figures with the actual performance for calculating variances, if
any.
According to Brown and Howard, “Budgetary control is a
system of controlling costs which includes the preparation of budgets,
coordinating the departments and establishing responsibilities, comparing
actual performance with the budgeted and acting upon results to achieve maximum
profitability.”
Objectives of
Budgetary Control: The main objectives of budgetary control are as follows:
a) To
ensure planning for future by setting up various budgets, the requirements and
expected performance of the enterprise are anticipated.
b) To
co-ordinate the activities of different departments.
c) To
operate various cost centres and departments with efficiency and economy.
d) Elimination
of wastes and increase in profitability.
e) To
anticipate capital expenditure for future.
f) To
centralize the control system.
g) Correction
of deviations from the established standards.
h) Fixation
of responsibility of various individuals in the organization.
Essentials of
Budgetary Control: There are certain steps which are necessary for the
successful implementation of a budgetary control system. These are as follows:
a) Organization
for Budgetary Control.
b) Budget
Centres.
c) Budget
Manual.
d) Budget
Officer.
e) Budget
Committee.
f) Budget
Period.
g) Determination
of Key Factor.
Advantages of
Budgetary Control
a) Co-ordination: the working of different
departments and sectors is properly co-ordinated. The budgets of different
departments have a bearing on one another. The co-ordination of various
executive and subordinates is necessary for achieving budgeted targets.
b) Determining Weaknesses: the deviation
in budgeted and actual performance will enable the determination of weak spots.
Efforts are concentrated on those aspects where performance is less than the
stipulated.
c) Corrective Action: The management will
be able to take corrective measures whenever there is a discrepancy in
performance. The deviations will be regularly reported so that necessary action
is taken at the earliest. In the absence of a budgetary control system the
deviations can be determined only at the end of the financial period.
d) Consciousness: It creates budget
consciousness among the employees. By fixing targets for the employees, they
are made conscious of their responsibility. Everybody knows what he is expected
to do and he continues with his work uninterrupted.
e) Reduces Costs: In the present day
competitive world budgetary control has a significant role to play. Every
businessman tries to reduce the cost of production for increasing sales. He
tries to have those combinations of products where profitability is more.
Limitations of
Budgetary Control
a) Budgetary Revision Required: Budgets
are prepared on the assumptions that certain conditions will prevail. Because
of future uncertainties, assumed conditions may not prevail necessitating the
revision of budgetary targets.
b) Discourage Efficient Persons: Under
budgetary control system the targets are given to every person in the
organization. The common tendency of people is to achieve the targets only.
c) Problem of Co-ordination: the success
of budgetary control depends upon the co-ordination among different
departments. The performance of one department affects the results of other
departments. To overcome the problem of co-ordination a Budgetary Officers is
needed.
d) Conflict among Different Departments:
Budgetary control may lead to conflicts among functional departments. Every
departmental head worries for his departmental goals without thinking of
business goals.
e) Depends upon Support of Top Management:
Budgetary control system depends upon the support of top management. The
management should be enthusiastic for the success of this system and should
give full support for it.
Zero base-budgeting
Zero-base budgeting is the latest technique of budgeting
and it has an increased use as managerial tool. This technique was first used
in America in 1962. The former President of America, Jimmy Carter used this
technique when he was the Governor of Georgia for controlling state
expenditure. In Zero-base budgeting a manager is to justify why he wants to
spend. The preference of spending on various activities will depend upon their
justification and priority for spending will be drawn. It will have to be
proved that an activity is essential and the amounts asked for are really
reasonable taking into account the volume of activity.