LEADERSHIP
Leadership defined:
Leadership is a dynamic process at work in a group where one individual on a particular period of time
and in a particular organizational context “influences” the other group members to commit themselves
freely to achievement of group tasks.
It is a person’s ability to secure through personal charisma, drive, example, experience and other means,
the enthusiastic support of the persons under his or her command towards achievement of common
goals.
Feature of leadership:
1. Leadership is a dynamic process:
2. It is influenced by changing requirement of the task group its and the individual members. The
implication of this is that there is no one best ways of leading, leaders need to exercise a range
of behaviour to maintain their role effectively.
3. Leadership is not necessarily confined to one person: - Leadership may be shared with
members.
4. The principle role is to influence a group towards achieving the group goals.
5. Leadership is exercised in, and influenced by a particular set of variables. These are: Leaders attributes
 Nature of the tasks
 Nature of work group
 The climate and culture of the organization
The Purpose of Leadership:
i. To provide a sense of unity and direction to an organization or some part of it.
ii. To raise the level of employee motivation
iii. Increase their readiness to accept change
iv. Improve the quality of decision making
v. Develop and sustain teamwork
vi. Encourage personal employee development.
NB: Leadership depends very much on inter-personal influence and involves attempts on the part of a
leader to guide or otherwise affect the behaviour of followers in a given situation.
The leader may be said to be an organiser, initiator, arbitrator, expert, task setter, exampler, escapegoat, etC.
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More Specifically, the Leaders Functions Include:
1. Encouraging group members to perform their roles and contribute towards group effectiveness
and goal achievement.
2. Mediating or conciliation in the event of interpersonal disputes.
3. Planning employee activities and modifying employee roles.
4. Formulation and modifying policies.
5. Evaluation the performance of individuals and the group.
6. Being an expert in principal activities.
7. Co-ordination and controlling activities
8. Maintaining and promoting external relationships.
9. Administering rewards and punishments
10. Setting an example
11. Seeking and giving information
12. Accepting blame for group failures.
Formal Versus Informal Leadership:
 A formal leader is the one who has been appointed by the organisational hierarchy to plan,
organize, control and co-ordinate the work of the others e.g. a foreman or a supervisor – has
hierarchical authority.
 An informal leader is one who emerges spontaneously in response to various personal needs of
a group of employees.
- An informal leader needs no hierarchical authority but his/her influence is mainly determined by
his/her charisma.
LEADERSHIP THEORIES:
The theories of leadership are put in to three basic categories.
1. Trait theories
2. Behavioural theories/models
3. Situational/contingency models/theories
1. Trait Theories:
The earliest approaches to the study or leadership focussed on personal characteristics of the leaders
themselves.
The thinking behind this approach was that the secret of leadership lies in some innate qualities of
leadership which are possessed by selected member of the society.
The approach has not fully died out, but the focus has shifted more to what leaders do to be successful
rather than what kind of personalities they might have.
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Some of these traits which are said to influence leadership include:
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Originality
Adaptability
Integrity
Popularity
Expertise
Intelligence
Self-confidence
Emotional maturity
Initiative
Energetic
Tolerance of stress
Charismatic ability
Achievement motives
Ambitious
Assertive
Co-operation
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2. Behavioural Theories/Models:
 As the trait theory waned and its failure to provide an adequate explanation of
the leadership phenomenon, reserves began trying to identify behaviours that
distinguish effective from less effective leaders.
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Two major dimensions of leader behaviour emerged from this body of
research.
One deals with how leaders get the job done and the other deals with how
leaders treat and interact with to other subordinates.
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Three models developed from this research include:
1. Ohio state studies
2. University of Michigan studies
3. The leadership grid – Blake and Martin
I. The Ohio State Studies
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In an effort to describe what leaders actually do, researchers at Ohio State
University analysed the results of questionnaires they administered to a
sample of leaders and followers.
From this, they concluded that leadership behaviour consists of two broadly
defined dimensions they termed to as consideration and initiating structure.
Consideration behaviours involve being friendly, supportive by listening to
their problems, supporting their actions, mutual respect and dependence trust
and warmth in the leader flower relationship.
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Initiating structure behaviours involve defining and structuring leader –
subordinate’s roles through activities such as scheduling, defining work tasks,
setting deadlines, criticizing poor work etc.
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The two dimensions are independent and a leader can be scored both under
consideration and initiating structure (as given by the matrix below)
The Ohio researchers found that the employees satisfaction was greatest under leaders
who were rated high on consideration.
II. The University of Michigan Studies
At about some time, the Ohio Studies were being conducted, researchers at the
University of Michigan were also studying leadership effectiveness from a
behavioural perspective.
They compared effective leaders and came up with two dimensions.
They found that leaders in high producing groups paid considerable attention to
relationship within the group, exercised less direct supervision and encouraged
participation in decision making. They termed these as employee centred leaders.
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Consideration leaders in the low producing groups tended to be more directive in their
behaviour and appeared to be more concerned with the demand of the task thus, these
were termed as task-centred leaders.
It appeared to the researchers that the two different approaches represented two
alternative orientations along a single continuum.
Thus, the leaders were either employee centred or task centred.
i.e.
High Producing groups
Low Producing groups
employee -centred leaders.
Task -centred leaders
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III. The Leadership Grid:
The leadership grid grew out of the tow dimensional behavioural approach to
leadership. Developed originally as a managerial grid by consultants Robert Blake
and Jane Morton, this models builds on the Ohio and Michigan studies and depicts a
management style as a position on a 9x9 grid as shown in the table below.
Concern for production which parallel task centred behaviour and initiating structure
is a continuum on the horizontal axis, while concern for people is shown as a
continuum on the vertical axis.
Blake and Morton emphasize five major styles reflected by deafening levels of the
two behaviours and different position on the grid.
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1.1. Improvised Management:
-This style is represented with minimum concern for the people and minimum
concern for production.
-These are managers who are just handing on their jobs but have already retired.
-They are managers who have succumbed to pressures and resultant mental fatigue of
their jobs or who have let over indulgence in alcohol impair their normal work
capacity.
-They are the do nothing fellows who see no evil, hear no evil or do no evil.
1.9. Country club management:
-Here, the manager has little concern for output but great concern for people. He or
she wants to be sure that his or her subordinates are well and happy even though they
may be performing badly in their jobs.
9.1
Task Management:
-There is high concentration on task accomplishment but with very little regard for the
people. As long as the production line keeps rolling, he or she doesn’t worry too
much about the workers.
9.9. Team Management
This is perhaps the ideal management style, with high concern for both output and the
people who produce it.
5.5. Middle of the Road Management
Here, the leader has moderate concern for people and also a moderate concern for
production. Most managers are found on this slot.
III. Contingency Theories of Leadership:
Neither the trait nor the behavioural approaches to leadership were able to identify
conclusively a single best style of management.
Whether to be task or employee centred, or even how much employees should be
allowed to participate in decision – making is contingent on certain situational
characteristics.
The models of concern here are:
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Situational leadership theory
ii.
Fieldler’s contingency theory
iii.
Path-goal theory.
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a) Situational Leadership Theory:
Leadership under this theory is considered to be a function of the situation in which a
leader emerges and wages.
It is based on the assumption that leadership is basically situational. In other words,
the traits and behaviour of the leader are governed by the demands of the situation.
b) Fieldlers Contingency Model of Leadership:
According to Fieldler, effectiveness of group performance and group leadership are
contingent span:a) Leaders use motivational pattern which is determined by his LPC (Least
preferred co-worker) scoring. The high or low LPC scoring reflects the
leaders attitude towards or tolerance for workers he would least prefer to work
with.
b) The situation and its favourableness
 Leader – member relations
 Task structure
 Position power – how much power the leader has.
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The Path Goal Model of Leadership;
According to House & Mitchel, a leader’s effectiveness depends upon the degree to
which he or she becomes instrumental in providing subordinates with paths to the
attainment of their goals.
The manager influences the subordinates with related behaviour including attitudes,
perception of work goals, personal goals, and choice of paths leading to goals.
The degree of a leader’s influence corresponds with the degree to which he or she is
able to clarify the paths to a subordinates goals and help him or her to attain these
goals.
Leadership is thus a function of shaving paths to goad achievement and the leaders
position is affected by one’s ability to do.
In the path goal theory, there are 3 basic variables: Leader behaviour (directive, supportive, participative and achievement
oriental leadership)
 Situational factors (task, personality, etc)
 Subordinate satisfaction.
ADDITIONAL THEORIES / MODELS OF LEADERSHIP
Reddins 3 – D Model
Douglas MC Gregor theory X, theory Y
Reddins 3-D Model of Leadership:
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Uses the contingency approach.
Developed by W.Reddin, a Canadian Professor and management consultant.
He stresses the aspect of “leadership effectiveness”/
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He accepts the view that leaders are concerned with tow major dimensions,
namely; task orientation – work accomplishment, and relationship orientation
- concern for people.
However, he does not subscribe to the belief that leadership effectiveness is
derived simply from a manager’s ability to deal with both these aspects
simultaneously.
Rather, the important consideration, in his view is a manager’s ability to
adopt his/her style to the demands of given situations. Thus, he adds
“effectiveness” as the third dimension in his model.
Leadership effectiveness therefore is a matter of choice of a managerial style
that is appropriate for the situation rather than some mystical combination of
concern for task and concern for people.
According to Reddins, situational differences are determined by five factors:
1) Organisation: hierarchy, structure, responsibility, process of influence,
etc.
2) Technology – task related activities
3) Superior – to whom one reports
4) Co-workers and colleagues
5) One’s subordinates.
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A leader’s effectiveness is determined by the extent to which
his style and the situational elements listed above in harmony.
Douglas MC Gregory’s Theory X and Theory Y:
In 1957, D. MC Gregory stated his view that the task of managing people should be
based on a more positive theory about human nature and human motivations that
hitherto been the case.
He labelled the conventional approach with regard to leadership and management of
employees as theory X and the more positive approach as theory Y.
Theory X:
This approach according to Mc Gregory makes the following assumptions about the
average person.
1) He or she is idolent in nature.
2) Inherently dislikes work.
3) Lacks ambition
4) Dislikes responsibility and prefers to be led, incapable of directing his own
behaviour.
5) Self centred and indifferent to organisational goals or needs.
6) By nature, resistant to change
7) Gullible and not very bright, must be coerced, closely controlled, directed and
even threatened with punishment enforce adequate effort toward the
achievement of organisational goals.
Theory Y:
A more positive approach to leadership/management based on the following
assumptions:
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1) The expenditure of physical and mental effort in work is as natural as play or
rest.
2) External control and the threat of punishment are not the only means for
bringing about effort toward organisational objectives; people will exercise
self-direction and self-control.
3) People are achievement oriented, creative, imaginative and are ambitious.
4) People not only accept responsibility but seek responsibility.
5) People focus on high level needs; actualisation and satisfaction.
Types of Leadership Styles:
1) Bureaucratic leadership style
2) Autocratic or authoritarian style
3) Democratic leadership style
4) Laissez Fare or free reign leadership
5) Charismatic leadership style
6) Benevolent autocratic style
I.
Bureaucratic Leadership Style:
Is a style based on formal authority as is depicted by the organisation structure in a
hierarchical manner.
The leaders influence is based on the authority that is vested on the position.
II. Autocratic / Authoritarian Leadership style:
All authority is centred on the leader and decisions are enforced by the use of rewards
and the fear of punishment.
Communication tends to be primarily in one direction, from the leader to the
followers.
Relationship between the leader and subordinates is highly formal and instructions are
given without comments.
Advantages:
1) Decision making process is fast.
2) High employee discipline
3) Close supervision means that all tasks are carried out.
4) Some employees cannot work without close supervision.
Disadvantages:
1) Inhuman and reduces employee morale.
2) Members may recent to the decisions and thus give them very little support.
3) Employees’ skills and experiences are not fully utilised.
4) It suppresses the workers’ initiative.
5) The staff cannot develop their maximum potential.
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Application of Autocracy:
 Where working conditions are miserable.
 Where employees hate their work
 Where the work/tasks are irritative and boring.
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Where employees lack motivation.
Where wages/salaries are poor.
III.
Democratic Leadership Style:
The leader suggests the objective and then leaves the employees free to achieve them
in the best way they think possible.
It takes in to consideration the wishes and suggestions of the members as well as
those of the leader.
It is a human relations approach, in which all members of the group are seen to be
important contributors to the final decision.
Advantages
1. Employee skills and experiences are fully utilised.
2. Decisions are not resisted by members.
3. Increases employee’s morale and satisfaction.
4. Provides for a cordial relationship between the leader and the followers.
5. Only achievable targets are set.
Disadvantages
1. Employees may make concrete decision which are important to the
organisational objectives.
2. Some employees may not work without close supervision
3. Decision making process is slow
4. Possible compromises that are designed to please everyone and not the best
solution
5. Democracy is representative and not realistic
IV.
Laissez-Faire Leadership Style:
This is a style of extreme democracy where the leader completely leaves alone the
employees to decide on the way to do and how.
The goal is given but complete freedom given in work performance.
Advantage – There is great opportunity for personal development.
Disadvantage – without a leader, the group may have little direction and lack of
control.
V:
Charismatic Leadership Style:
The leader uses his personal qualities (charisma) to influence and inspire loyalty and
enthusiasm from the followers.
No formal authority is used here.
VI:
Benevolent Autocratic Leadership Style:
Is a type of autocracy that allows consultation by the leader from the members.
Members are allowed to give their comments in decision-making.
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RENSIS LIKERTS’S FOUR SYSTEMS OF MANAGEMENT/LEADEASHIP:
Another model of leadership/managerial behaviour has been devised by Rensis Likert
on the basis of his researches and readings.
This distinguishes four categories of management/leadership styles.
1) System 1 – Exploitative Authoritative:
Power and directions come from the top downwards, threats and punishments are
employed, the leader is dictatorial, i.e. gives instructions even without comments,
communication is poor and team work is rare.
The leader doesn’t consult, and is very task oriented and uses close control.
2) System 2 – Benevolent Authoritative:
Similar to system 1 but allows opportunities for consultation and delegation.
Productivity is fair compared to exploitative authoritative.
3) System 3 – Consultative Style:
Goals are set or orders issued after discussion with subordinates.
Communication is both downward and upward and some teamwork is encouraged
Rewards are preferred to threats.
4) System 4 – Participative Style:
This is the ideal system. The key note is participation, leading to commitment to
organisation goals. Communication is good. There is participative decision making
and productivity is excellent.
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THE CONTROLLING FUNCTION
Definition
It is an element of management process or comparison and verification that ensures
the accomplishment of the expected performance.
Control guides activities towards some pre-determined goals. It ensures hat events
conform to plans as closely as possible.
It ensures that what ought to be done is being done in terms of quantity, quality, time
and cost.
CHARACTERISTICS OF CONTROL
1. It is an essential function of management.
It is a follow-up function to other management functions where even managers
irrespective of rank and nature of job must be involved.
2. It is based on planning
Measurement of performance requires certain standards laid down in planning.
Without plans, control will not be possible. Planning sets the course and
control ensures action to follow the course.
3. It is a continuous process
Control involves review of performance and standards of operation.
involves regular measurement, comparison and verification.
It
4. It is action-oriented
The essence of control lies in action taken. An effective control system
facilitates timely action to adjust performance to pre-determined standards.
5. It is delegation Friendly
A person only has authority to control what he is acceptable for. One cannot
control what he has not delegated. Control is therefore based on delegation.
6. Heavily reliant on information
Information and feedback enable a manager to determine how far the actual
operations have gone and whether remedial action is needed.
This information must be timely. It is no use to call a fire brigade when the
fire has already consumed everything.
The information must also be relevant and accurate.
7. It aims at the future
It is both backward looking and forward looking. It involves a post-mortem of
what has happened and seeks to regulate events in the future as the past is
uncontrollable.
CONTROL VERSUS PLANNING:
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There is a close inter-relationship between planning and control, though the two are
different.
Planning serves as a basis for control. Plans are standards for evaluating actual
performance.
Control cannot e effective unless there are clear goals laid down.
Planning will achieve nothing without the control of actual operations.
Control can reveal efficiency or weaknesses in planning and can call for some
revision.
There is therefore a sense of strong inter-relationship between control and planning –
where Planning is meaningless without control and control is blind without planning.
IMPORTANCE OF CONTROL
1. Facilitating decision -making.
Corrective measures involve right decisions as to what and how deviations are
to be rectified.
Though control, management can verify the quality of various policies.
2. Control is associated and facilitates decentralisation.
Control is associated with delegation and decentralisation. Without control,
managers’ will not be willing and able to delegate. They need to check on
subordinate’s progress and take corrective action.
3. Control stimulates action
A control system enables management to spot mistakes before they become
very serious. It guides and directs action towards goads.
4. Enhancing staff morale
Workers hate a situation that is out of control for it may not e easy to predict
their future. A good control system identifies changes that my affect the
organisation in advance and takes action to cope with any threats. This may
increase workers sense of security and morale.
5. Promotes co-ordination
Control provides a unity of direction between different units and activities. It
stresses the intimate responsibilities of each manger and how thy can work in
harmony with each other.
6. Promoting efficiency of operations
Control brings efficiency in an organisation by measuring progress and
detecting deviations and adjusting operations.
8. Exerting psychological pressure
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Workers become cautious while performing their duties because they know
that they are being observed and their performance will be measured against
standards.
TYPES OF CONTROL:
Control can be categorised depending on the step in work performance
reached i.e.
a) Preliminary control
b) Concurrent control
c) Feedback control
Preliminary Control:
This is control which is done before the operations start. It simply involves setting of
standards. The expected performance levels are determined and given as instruction
to the employees.
Concurrent Control:
This is control exercised during the action i.e. when the operations are in progress.
It involves fine- tuning of activities and correcting deviations, errors and mistake as
they occur, rather than waiting until the end.
Feedback Control:
It is a kind of control done after the operations performance is over.
The results are compared with the set standards, deviations identified and the
corrective actions taken.
It is based on corrective actions on deviations after performance.
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STEPS IN THE PROCESS OF CONTROL
Establishing
standards
Operations
action
Measuring actual
performance
Analysing variances
Taking corrective
yes
Establishing Standards
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Standards by themselves my not bring control but they become a criteria
against which results can be measured. They should also be accurate,
acceptable, and practical.
Standards may be expressed in physical terms, man-hours, monetary terms or
even qualitatively e.g. company image.
Control limits expected should be indicated (bases the management by
exception principle)
Measuring Actual Performance
Results of operations are measured and evaluated against the set standards. This
measurement should be able to detect any deviations in advance. Measurement is
easy in quantitative work but difficult where work is not quantifiable.
Analysis of Variances
Comparing actual performance with standards reveals deviations. There should be a
criterion that will determine which deviations are critical and need rectification. The
critical deviations should also be analysed to find out their cause and impact. It is
then that remedial action can be taken.
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Taking Corrective Action
Control is action based on measurement and appraisal of results. Remedial action
may involve revision of standards or steps to stop deviations. The importance of
control lies in the initiation and follow-up of corrective action.
Essentials of a Good Control System:
1. Suitability
A good control system must suit the nature and requirements of the activity being
controlled.
It must be geared to the objectives of the organisation and must be consistent with the
company’s total operating system.
2. Forward looking
It should enable the manger to think ahead and plan for the future. It should take into
account the possibilities of the recurrence for the future.
3. Promptness
Deviations should be detected and reported as soon as possible if not before their
occurrence. Timely reporting is possible where reporting is done adequately. Ideally,
control should anticipate problems even before they occur.
4. Objectivity
The standards, measurement, and correction of deviations should be objective,
verifiable and specific.
5. Control by exception
A control system should focus attention on only the strategic points or key areas
where control action is most urgent.
6. Economy
Control must be worth their cost. The cost of installation and maintenance of the
control system should be justified by its benefits. (cost / benefits)
7. Flexibility
The cost system should be capable of adjustment according to changes in need and
circumstances of the organisation. e.g. flexible budgeting.
8. Suggestive
They system should easily suggest the necessary remedial action. It should not only
detect failures but should also disclose where they are occurring, who is responsible
for them and the possible remedial actions.
9. Organisational pattern
It should conform to the organisation structure requirements and policies.
10. Simplicity
It should be simple to understand, apply and adjust.
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MAIN TECHNIQUES OF MANAGERIAL CONTROL
I.
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Traditional Techniques
Budgeting and budgetary control
Cost control
Production control
Inventory control
BEP analysis
Profit and Loss control
Auditing.
II.
Modern Techniques
Return on investment control
Programme evaluation and review technique
Management audit
Responsibility accounting
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I.
BUDGETARY CONTROL
Nature of Budgets
A budget is a financial and/or a quantitative statement, prepared and approved prior to
a definite period of time, of the policy to be pursued during that period for the purpose
of attaining a given objective.
Features of a budget
i.
ii.
iii.
iv.
v.
vi.
Always prepared for a definite period of time in future.
A budget indicates expected results and the resources required to achieve
those results.
A budget is expressed in physical and financial terms
A budget provides a standard for the evaluation of actual performance and
therefore it is a control technique.
It reflects the policy of the management and it is prepared in advance and
approved by the designated authority.
It is based upon a forecast or scientific estimates for the future.
Types of Budgets
a) Functional Budgets
 Sales budget
 Production budget
 Materials –Purchase budget
 Materials – usage budget
 Materials – labour budget
 Capital expenditure budget
 Fixed overheads budget
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Variable overhead budgets
b) Master Budgets
 Profit and Loss account (budgeted)
 Budgeted balance sheet
 Cash budget
Meaning of Budgetary Control
Refers to the establishment of budgets relating to the responsibilities of executives to
the requirements of a policy and the continuous comparison of actuals with budgeted
results either to secure by individual action the objective of that policy or provide a
basis for revision.
Advantages of Budgetary Control
1. It makes planning definite and practical. It forces through investigations and
careful considerations so as to avoid snap judgement and hasty decisions.
2. It makes unified and co-ordinated individual efforts through participation or a
large number of people in preparation of budgets.
3. It helps management in delegating authority more freely over specified
functions. It is easy giving responsibility through budgeting.
4. Permits control by exception thereby solving executive time and attention.
5. It provides or serves as a yardstick with which performance of employees can
be evaluated.
6. It promotes efficiency and minimises waste. It is the most economical course
of action taken in budgeting.
7. It provide useful data for decision making
8. It improves communication in the organisation.
9. It is Important in evaluation and determination of business performance
10. It motivates employees in attainment of their performance.
Limitations of Budgetary Control
1. It is based on estimates which are not 100% accurate.
2. It is just a tool for efficient management and not a substitute for it.
3. It may provide a danger of inflexibility. Employees may stick to the budget
and fail to make adjustments.
4. Budgets may be mis-used to find faults and restrict performance rather than
improve it.
5. It is time consuming and expensive.
6. Budgeting goals may supersede organisation’s goals if care is not taken.
Essential of Sound Budgetary Control
1. Clear definition of responsibility and authority for the prepaid administration
of budgets
2. Accurate and adequate system of accounting, forecasting and recording
3. Timely and regular reporting of ********* events should be developed
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4. Full support of top management
5. Co-operation and participation of all employees
6. Human factor in budgeting – incentives and penalties should be established
and used.
7. Periodic review and revision of budgets
8. Allow enough time to gain sound judgement and experience in budgeting
II.
COST CONTROL
It is a control of all the costs of an undertaking, both direct and indirect, in order to
achieve cost effectiveness in business operations.
Measures to be taken are: Clear determination of all the activities where costs are incurred.
 Clear definition on the systems used to determine product or sample costs.
 Use of a clear and carefully designed elaborate system to record information
relating to costs at various points.
 Proper allocation of costs to specific activities
 Constant reporting on costs incurred under specific areas.
 Constant checking and comparison by each manager of the actual costs
incurred and standards set in the department.
 Investigation of any variances
 Correcting the deviations immediately
NB: Cost control is done by use of the standard costing technique.
III.
PRODUCTION CONTROL
It is the process of planning production in advance of operations, establishing the
exact route of each individual items, paint or assembling, setting starting and finishing
dates for each important item, assembly of the necessary orders as well as initiating
the required follow-up to effectuate the smooth functions of the enterprise.
It is summarised as: Planning
 R************
 Scheduling
 Dispatching
 Follow-up
IV.
INVENTORY CONTROL
Inventory control/ stock control/Inventory management refer to controlling the kind,
amount, location, movement and **ning of the various commodities/materials used in
and produced by the industrial enterprise.
Objectives of Inventory Control
 Ensure availability of materials when required
 Avoid over and under stocking
 Ensure purchase of the right quantity and the right time and place
 Reduce storage, stock handling, ordering and stock movement costs.
 Eliminate/reduce waste
 Prevent deterioration
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 Prevent theft and pilferage
 Ensure that proper records are kept for material issue, receipts and balances.
Techniques of Inventory Control
ROL System
Stock levels (minimum stock level, maximum stock levels and re-order level) are
determined and entered in a stock card then comparisons are made between the actual
stock level and the control levels each time an entry is made on the card.
Previously calculated EOQ is used for replenishment.
Periodic Review System
A constant cycle system which stock levels are reviewed at fixed intervals e.g. every
fortnight
The quantity of replenishment is not a previously calculated EOQ, but is based upon
the likely demand until the next review, the present stock levels and the lead time.
V.
BREAK-EVEN ANALYSIS
It is an important control device which shows relationship between different volumes,
costs, profits, prices or sales.
It is useful in planning and control because it emphasizes the marginal concept which
is important in decision making. Decisions made in marginal costing include: Sales at break-even point
 Sales to earn a target price
 Setting the C/S ratio
 Make or buy decisions
 Acceptance of a special order
 Ch**e of alternative/s
 Dropping a product or not
VI.
PROFIT AND LOSS ACCOUNT CONTROL
It is a comparison of sales, expenses, incomes and ***** profits of a product branch
or divisions or historical trends as a way of measuring performance and deviations
and aid in taking necessary corrective action.
A comparison of the income statement or the ratios calculated is used.
VII. AUDITING
It is a control technique based on examination of the final accounts, books of account
and other relevant documents in order to certify that:i.
The profit and loss account gives a true and fair picture of the organisation
ii.
The balance sheet gives a true and fair picture of the state of financial
affairs of the company
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VIII. PROJECT EVALUATION AND REVIEW
TECHNIQUE
PERT is concerned with planning and control of complex projects consisting of many
inter-related activities and events, some of which are performed simultaneously in
parallel, and others are performed sequentially one after the other.
It is important for
- time analysis
cost scheduling
resource scheduling
IX.
MANAGEMENT AUDIT
It is a method of evaluating the efficiency of management at all evels throughout the
organisation.
It comprises the investigation of a business by an independent body form the highest
executive level downwards, in order to report as to the efficiency of the management.
Objectives of Management Audit
Find out:1. Whether the basic aims and objectives of the enterprise are being fulfilled
2. Whether the enterprise is successful in adapting to technological changes.
3. Whether the organisation structure if suitable
4. Whether management is efficient at all levels and to what extent it is efficient.
5. Whether the organisation policies are satisfactory at all levels
6. Whether the communication systems are proper
7. Whether there is good relationship between the organisation and the outside
world
8. Whether the organisation rules and procedures are adequate and up to date.
X.
RESPONSIBILITY ACCOUNTING
Is a system of accounting which is tailored to an organisation so that costs are
accumulated and reported by levels of responsibility within the organisation.
Each supervisory area in the organisation is charged only with the cost for which it is
responsible and over which is has control.
This result in preparation of accounting systems for all levels of management
designed to act as control tools in controlling their operations and cost.
XI.
ROI
=
RETURN ON INVESTMENT CONTROL
Net Profit
Capital employed
x 100
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Return on investment control is used as a control technique to see whether the
return/profit is satisfying the shareholders wealth.
The higher the rate, the more the satisfaction of shareholders wealth and vice versa.
A target of ROI can be set to act as a control unit.
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ORGANISATIONAL DEVELOPMENT ( OD)
Meaning
Organisational development provides n overall framework of change focussing on the
improvement of human relations. The OD effort strives to make change itself a
natural occurrence in the organisation in the sense that members are comfortable with
change and are willing to seek improvements in their working environment.
Definition
Organisational Development has been defined as an “effort”,
“planned”,
“organisation wide”, and “managed from the top”, to increase “organisational
effectiveness” and health through planned interventions in the organisation’s process
using behavioural science knowledge.
MAIN FEATURE OF THE OD PROCESS
a) A problem solving Process:
It scans and diagnoses the opportunities and challenges of the firm’s environment and
the various methods of solving the problems.
b) A renewal Process
i.e. making the changes required to make the organisation viable and adaptable. It
involves, revitalizing, energizing and activating the performance of the firm and its
employees.
c) Collaborative management
It involves sharing of ideas, problems, goads and decision making by all organisation
members.
d) The Organisational Culture
OD involves changing the organisational culture, i.e. patterns or activities, norms,
values and technology so as to improve organisational performance.
e) Use of a Change Agent or Catalyst
OD requires a consultant for its implementation. The consultant may or may not be a
member of the organisation, but more preferably an external person.
f) Action Research
This is a technique that has been suggested for all OD programs.
The main Purpose of OD
1. To bring about changes in the values systems of organization members based
on the philosophy of “team work” as the real determinant of organisational
effectiveness.
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2. Overcoming weaknesses in the firms organisational structure
3. Improving human skills of managers and other employees
4. Improving each employees understanding of, and commitment to the
organisations purpose
5. Improving the way in which members of an organisation interact with each
other
6. Improving organisational culture
STEPS IN THE OD PROCESS
These steps have together been referred to as the action research.
The steps are explained below:a) Problem Recognition
The first step is problem recognition and identification of the organisation’s need roe
change.
Study the organisation’s environment and see whether there is need for a change e.g.,
 a dysfunctional organisation structure
 Need for updating managers knowledge of new management theory
 Need for improving group planning capability
 Need for channels of communication
 Need for interpersonal relationships between members
 Need for solving conflicts
 Need for changing styles of management
 Need for changing peoples behaviour
 Need for changing norms, values and levels of motivation
b) Organisational diagnosis
This is a further analysis of the problem/s already identified or recognised to know the
“what”, “where” and “why” of each problem.
Study the communication channels, structures including: roles, relationships, task
related integration patterns, people’s behaviour etc.
Find out the kind or problem it is; new or a manifestation of an existing problem
c) Development of Strategies
Solicit top management. The top management participates by developing strategies or
the kind of action to be taken, who is responsible for what, what timing will be and
who will be affected.
In deed, the success of the program will depend on acceptance of employees at all
levels and thus other employees can be called in to participate.
d) Intervention
Intervention is a measure taken to correct on observed problem.
Such interventions can be technical, structure, administrative or social (HR)
The commonly used intervention technique include:
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i.
Team Building
It consists of a series of activities designed to assist individuals who work in groups to
develop a sense of teamwork.
They provide a solution of a workgroup’s problems, particularly interpersonal
obstacles, differences, personality clashes, educational and social differences.
These can be achieved by improving communication skills and patterns, a better
understanding and acceptance of each other by team members, greater trust, respect
and openness
ii. Education
Education techniques usually consist of classroom training. This can be used for both
skill development in regard t relating to others and the exploration of material on
specific topics. More emphasis is on human skills rather than technical skills.
iii.
Confrontation meetings
The OD specialist collects data on disagreements concerning objectives or on
personal conflicts between people or departments. He confronts these persons with
the data and ***** them in resolving the conflict objectively. The groups involved in
the conflict reflect on their own roles as well as on the roles of those with whom they
are in conflict. They then discuss the discrepancies and establish level ground rules
for proper behaviour.
iv.
Third Party Peace Making
This is use of a skilled third person to help in the diagnosis, understanding and
resolution of difficult human problems. The change agent provides a mediation or
organisation between two parties engaged in a conflict.
v.
Force Field Analysis
Here is a situation where a group which requires change is analysed by identifying the
driving forces (positive) and the restraining forces (negative) that influence the
situation at the time. Reductions in the restraining forces will make a person’s actions
and communications more production
vi.
Transaction Analysis
This is used to help people who have difficulty in forming and maintaining personal
relationships. Behaviour of employees and transactions between them are analysed
and categorised in to three stages:- parent, adult and child.
Communication and understanding is received if the sender and receiver are in the
same ego state, otherwise, misunderstanding will occur.
Life positions are also established in terms of:
 I am okay, you are not okay
 I am okay, you are okay
 I am not okay, you are okay
 I am not okay, you are not okay
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An understanding of the implications of complementary as well as noncomplementary transactions is made.
vii.
Inter-group Problem Solving
Groups are brought together for various purposes:
reducing unhealthy
competitiveness between them, resolving intergroup conflicts or enhancing group
enhancing group inter-dependence.
viii.
Participative Goal Setting & Planning
These are made together with a mutual commitment and review.
ix.
Social Technical Activities
These refer to the way members relate to the organisation technology. The change
agent may examine the technology of the organisation to see if it is compatible with
the existing structures. If not, a structural change such as a move towards
decentralisation, may be necessary or a change in the number of composition of tasks
that an employee has responsibility for.
Conditions Necessary for OD Success
1.
2.
3.
4.
5.
Understanding on the part of key people
Use of external consultant
Top management support
Openness within the organisation about OD programs.
A sincere approach and a high degree of belief in the possibilities that OD can
offer.
6. Monitoring and measuring responsibilities.
7. Appreciation of the crucial role of personnel specialists in the OD programme
8. Involvement of work group leaders in the process.
9. Education and communication of the change process and its goals
10. Inclusion of the personnel managers in the OD programs.
MAIN QUALITIES OF AN OD CONSULTANT
1. Experience based on formal training, practical experience and knowledge of
behavioural science.
2. Interpersonal competence, particularly ability to communicate, empathise, and
interact with people at all levels of the organisation
3. Emotional maturity, a high degree of tolerance, a positive frame of mind and a
suitable attitude
4. Objective orientation, combining a fresh perspective and a high energy level
5. Power equalizer i.e. ability to negotiate, mediate and maintain a balance in
critical situations, particularly when there are confrontations
6. Ability to establish a rapport with and be acceptable to users of an OD
program
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