Unit IV

Definition of Leadership
Leaders and their leadership skills play an important
role in the growth of any organization. Leadership
refers to the process of influencing the behaviour of
people in a manner that they strive willingly and
enthusiastically towards the achievement of group
objectives.

A leader should have the ability to maintain good

interpersonal relations with the followers or
subordinates and motivate them to help in achieving
the organizational objectives.

Various authors have given different definitions on

leadership. Let us learn few of them: -
According to Robert Tannenbaum “Leadership is
the inter-personal influence exercised in a situation
and directed through communication process
through the attainment of specified goals.
Rauch & Behling defined Leadership is defined as
the process of influencing the activities of an
organized group toward goal achievement.
Hemphill has defined Leadership is the behaviour of
an individual when he is directing the activities of a
group toward a shared goal.

Characteristics of Leadership
 Leadership is an interpersonal process where
a manager influences and guides workers for
achieving the organization’s goals.
 A good leader needs to be intelligent, mature, and
have a strong personality.
 Leadership is a group process and needs at least
two (or more) people interacting with each other.
 A leader can shape and mold the behaviour of a
group in the direction he wants.
 There are no best leadership styles. A good leader
understands that he needs to tackle the situations
as they arise.
Importance of Leadership:
 Initiating Action: Leadership starts from the very
beginning, even before the work actually starts. A
leader is a person who communicates the policies
and plans to the subordinates to start the work.
 Providing Motivation: A leader motivates the
employees by giving them financial and non-
financial incentives and gets the work done
efficiently. Motivation is the driving force in an
individual’s life.
 Providing guidance: A leader not only supervises
the employees but also guides them in their work.
He instructs the subordinates on how to perform
their work effectively so that their efforts don’t get
wasted.
 Creating confidence: A leader acknowledges the
efforts of the employees, explains to them their
role clearly and guides them to achieve their goals.
He also resolves the complaints and problems of
the employees, thereby building confidence in
them regarding the organization.
 Building work environment: A good leader should
maintain personal contacts with the employees
and should hear their problems and solve them. He
always listens to the point of view of the
employees and in case of disagreement persuades
them to agree with him by giving suitable
clarifications. In case of conflicts, he handles them
carefully and does not allow it to adversely affect
the entity. A positive and efficient
work environment helps in stable growth of the
organization.
 Co-ordination: A leader reconciles the personal
interests of the employees with the organizational
goals and achieves co-ordination in the entity.
 Creating Successors: A leader trains his
subordinates in such a manner that they can
succeed him in future easily in his absence. He
creates more leaders.
 Induces change: A leader persuades, clarifies and
inspires employees to accept any change in the
organization without much resistance and
discontentment. He makes sure that employees
don’t feel insecure about the changes.
Often, the success of an organization is attributed to
its leaders. But, one must not forget that it’s the
followers who make a leader successful by accepting
his leadership. Thus, leaders and followers
collectively play a key role to make leadership
successful.

Directing
Directing is the heart of management function. All
other functions of management such as planning,
organizing, and staffing have no importance without
directing. Leadership, motivation, supervision,
communication are various aspects of directing. Let
us study the importance and principles of directing.

Directing
Directing refers to a process or technique of
instructing, guiding, inspiring, counselling,
overseeing and leading people towards the
accomplishment of organizational goals. It is a
continuous managerial process that goes on
throughout the life of the organization.
DIRECTING is said to be a process in which the
managers instruct, guide and oversee the
performance of the workers to achieve
predetermined goals. Directing is said to be the heart
of management process. Planning, organizing,
staffing have got no importance if direction function
does not take place.

Main characteristics of Directing are as follows:

1. Initiates Action
A directing function is performed by the managers
along with planning, staffing, organizing and
controlling in order to discharge their duties in the
organization. While other functions prepare a
platform for action, directing initiates action.

2. Pervasive Function
Directing takes place at every level of the
organization. Wherever there is a superior-
subordinate relationship, directing exists as every
manager provides guidance and inspiration to his
subordinates.
4. Continuous Activity
It is a continuous function as it continues throughout
the life of organization irrespective of the changes in
the managers or employees.

5. Descending Order of Hierarchy

Directing flows from a top level of management to
the bottom level. Every manager exercises this
function on his immediate subordinate.

6. Human Factor
Since all employees are different and behave
differently in different situations, it becomes
important for the managers to tackle the situations
appropriately. Thus, directing is a significant function
that gets the work done by the employees and
increases the growth of the organization.

Role of supervisor:
Supervisor has got an important role to play in
factory management. Supervision means overseeing
the subordinates at work at the factory level. The
supervisor is a part of the management team and he
holds the designation of first line managers. He is a
person who has to perform many functions which
helps in achieving productivity. Therefore,
supervisor can be called as the only manager who
has an important role at execution level. There are
certain philosophers who call supervisors as
workers. There are yet some more philosophers who
call them as managers. But actually he should be
called as a manager or operative manager. His
primary job is to manage the workers at operative
level of management.
A supervisor plays multiplinary role at one time like
-As a Planner - A supervisor has to plan the daily
work schedules in the factory. At the same time he
has to divide the work to various workers according
to their abilities.
As a Manager - It is righty said that a supervisor is
a part of the management team of an enterprise. He
is, in fact, an operative manager.
As a Guide and Leader - A factory supervisor leads
the workers by guiding them the way of perform
their daily tasks. In fact, he plays a role of an
inspirer by telling them.
As a Mediator - A Supervisor is called a linking pin
between management and workers. He is the
spokesperson of management as well as worker.
As an Inspector - An important role of supervisor is
to enforce discipline in the factory. For this, the
work includes checking progress of work against the
time schedule, recording the work performances at
regular intervals and reporting the deviations if any
from those. He can also frame rules and regulations
which have to be followed by workers during their
work.
As a Counselor - A supervisor plays the role of a
counselor to the worker’s problem. He has to
perform this role in order to build good relations and
co-operation from workers. This can be done not
only by listening to the grievances but also handling
the grievances and satisfying the workers.
Therefore, we can say that effective and efficient
supervision helps in serving better work
performance, building good human relations,
creating a congenial and co-operative environment.
This all helps in increasing productivity.
Direction has following elements:
• Supervision
• Motivation
• Leadership
• Communication
(i) Supervision– implies overseeing the work of
subordinates by their superiors. It is the act of
watching & directing work & workers.
(ii) Motivation– means inspiring, stimulating or
encouraging the sub-ordinates with zeal to work.
Positive motivation, negative motivation, monetary,
non-monetary incentives may be used for this
purpose.
(iii) Leadership– may be defined as a process by
which manager guides and influences the work of
subordinates in desired direction.
(iv) Communications– is the process of passing
information, experience, opinion etc from one
person to another. It is a bridge of understanding.
CO-ORDINATION –The Essence of Management

1. Introduction:
Coordination is the very important aspect in any
Organization. It brings unity of action and
integrates different activities of organization.
Coordination is the most important function of an
organization. It refers to bringing together the
activities of an organization to achieve the objectives
and goals of the business. Coordination is the
essence of management because of the following
reasons:
2. Co-ordination is needed to perform all the
functions of management:
a. In Planning, coordination is required between
main plan and supportive plans of different
departments.
b. In Organizing, coordination is required between
different resources of an organization and also
between authority, responsibility and accountability.
c. In Staffing, coordination is required between skill
of a person and job assigned to him, between
efficiency and compensation etc.
d. In Directing, coordination is required between
superior and subordinates, between orders,
instructions, guidelines and suggestions etc.
e. In Controlling, coordination is required between
standards and the actual performance of the
organization.

3. Co-ordination is required at all levels of

Management:
a. Top Level: It requires coordination to integrate all
the activities of organization and lead the efforts of
all the individuals in one common direction
b. Middle Level: It requires coordination to balance
the activities of different departments so that these
can work as a part of one organization only.
c. Lower Level: It requires coordination to integrate
the activities of workers towards achievement of
organizational objectives.
4. Co-ordination is the most important function
of an Organization:
Any company which fails to coordinate its activities
cannot survive and run successfully for a long period
of time.
For example: Allwyn Company established in 1942,
was the first company to produce a double-decker
bus. It was running successfully as a leading
electronic industry, especially in refrigeration
industry. By the end of 1980 the company faced the
problem of coordination. There was lack of balance
and integration of different activities; as a result the
company started facing huge losses and by 1993
company had an accumulated loss of Rs.168 crores.
Company failed to balance its departmental
activities and product folios.
So, in short we can say without coordination no
company can work efficiently and earn profit.
Conclusion:
After analyzing the above features we can say that
coordination is not a simple function of management
but it is the “essence of management” or in other
words we can say that all the functions are flowers
and coordination is a thread that ties these flowers to
form the garland of organization.
Controlling Function of Management: Meaning,
Importance, Process and Need
What is Controlling?
Controlling consists of verifying whether everything
occurs in confirmities with the plans adopted,
instructions issued and principles established.
Controlling ensures that there is effective and
efficient utilization of organizational resources so as
to achieve the planned goals. Controlling measures
the deviation of actual performance from the
standard performance, discovers the causes of such
deviations and helps in taking corrective actions
According to Brech, “Controlling is a systematic
exercise which is called as a process of checking
actual performance against the standards or plans
with a view to ensure adequate progress and also
recording such experience as is gained as a
contribution to possible future needs.”
According to Donnell, “Just as a navigator
continually takes reading to ensure whether he is
relative to a planned action, so should a business
manager continually take reading to assure himself
that his enterprise is on right course.”
Controlling has got two basic purposes
1.It facilitates co-ordination
2.It helps in planning
Features of Controlling Function
Following are the characteristics of controlling
function of management-
1.Controlling is an end function- A function
which comes once the performances are made in
confirmities with plans.
2.Controlling is a pervasive function- which
means it is performed by managers at all levels
and in all type of concerns.
3.Controlling is forward looking- because
effective control is not possible without past
being controlled. Controlling always look to
future so that follow-up can be made whenever
required.
4.Controlling is a dynamic process- since
controlling requires taking reviewal methods,
changes have to be made wherever possible.
5.Controlling is related with planning- Planning
and Controlling are two inseperable functions of
management. Without planning, controlling is a
 meaningless exercise and without controlling,
planning is useless. Planning presupposes
controlling and controlling succeeds planning.
Process of Controlling
Controlling as a management function involves
following steps:
1.Establishment of standards- Standards are the
plans or the targets which have to be achieved in
the course of business function. They can also be
called as the criterions for judging the
performance. Standards generally are classified
into two-
a. Measurable or tangible - Those standards
which can be measured and expressed are
called as measurable standards. They can be
in form of cost, output, expenditure, time,
profit, etc.
b.Non-measurable or intangible- There are
standards which cannot be measured
monetarily. For example- performance of a
manager, deviation of workers, their
attitudes towards a concern. These are called
as intangible standards.
 Controlling becomes easy through establishment
of these standards because controlling is
exercised on the basis of these standards.
2.Measurement of performance- The second
major step in controlling is to measure the
performance. Finding out deviations becomes
easy through measuring the actual performance.
Performance levels are sometimes easy to
measure and sometimes difficult. Measurement
of tangible standards is easy as it can be
expressed in units, cost, money terms, etc.
Quantitative measurement becomes difficult
when performance of manager has to be
measured. Performance of a manager cannot be
measured in quantities. It can be measured only
by-
a. Attitude of the workers,
b.Their morale to work,
c. The development in the attitudes regarding
the physical environment, and
d.Their communication with the superiors.
It is also sometimes done through various
reports like weekly, monthly, quarterly, yearly
reports.
3.Comparison of actual performance and
standard performance- Comparison of actual
performance with the planned targets is very
important. Deviation can be defined as the gap
between actual performance and the planned
targets. The manager has to find out two things
here- extent of deviation and cause of deviation.
Extent of deviation means that the manager has
to find out whether the deviation is positive or
negative or whether the actual performance is in
conformity with the planned performance. The
managers have to exercise control by exception.
He has to find out those deviations which are
critical and important for business. Minor
deviations have to be ignored. Major deviations
like replacement of machinery, appointment of
workers, quality of raw material, rate of profits,
etc. should be looked upon consciously.
Therefore it is said, “ If a manager controls
everything, he ends up controlling nothing.” For
example, if stationery charges increase by a
minor 5 to 10%, it can be called as a minor
deviation. On the other hand, if monthly
production decreases continuously, it is called as
major deviation.
 Once the deviation is identified, a manager has
to think about various cause which has led to
deviation. The causes can be-
a. Erroneous planning,
b.Co-ordination loosens,
c. Implementation of plans is defective, and
d.Supervision and communication is
ineffective, etc.

4.Taking remedial actions- Once the causes and

extent of deviations are known, the manager has
to detect those errors and take remedial
measures for it. There are two alternatives here-
a. Taking corrective measures for deviations
which have occurred; and
b.After taking the corrective measures, if the
actual performance is not in conformity with
plans, the manager can revise the targets. It
is here the controlling process comes to an
end. Follow up is an important step because
it is only through taking corrective
measures, a manager can exercise
controlling.
Relationship between planning and controlling
Planning and controlling are two separate fuctions of
management, yet they are closely related. The scope
of activities if both are overlapping to each other.
Without the basis of planning, controlling activities
becomes baseless and without controlling, planning
becomes a meaningless exercise. In absense of
controlling, no purpose can be served by. Therefore,
planning and controlling reinforce each other.
According to Billy Goetz, " Relationship between
the two can be summarized in the following points
1.Planning preceeds controlling and controlling
succeeds planning.
2.Planning and controlling are inseperable
functions of management.
3.Activities are put on rails by planning and they
are kept at right place through controlling.
4.The process of planning and controlling works
on Systems Approach which is as follows :
 Planning → Results → Corrective
Action
5.Planning and controlling are integral parts of an
organization as both are important for smooth
running of an enterprise.
6.Planning and controlling reinforce each other.
Each drives the other function of management.
In the present dynamic environment which affects
the organization, the strong relationship between the
two is very critical and important. In the present day
environment, it is quite likely that planning fails due
to some unforeseen events. There controlling comes
to the rescue. Once controlling is done effectively, it
give us stimulus to make better plans. Therfore,
planning and controlling are inseperate functions of
a business enterprise.
Types of Control Techniques in Management
Management theorists and experts have devised
several techniques over the years. They often divide
these techniques into two categories: traditional and
modern. Traditional types of techniques generally
focus on non-scientific methods. On the other
hand, modern techniques find their sources in
scientific methods which can be more accurate.

Traditional Types of Control Techniques in

Management
 Budgetary Control
 Standard Costing
 Financial Ratio Analysis
 Internal Audit
 Break-Even Analysis
 Statistical Control

Despite the emergence of modern techniques,

traditional practices are still widely in use these days.
Let us discuss them one by one.

Budgetary Control
Budgeting simply means showcasing plans and
expected results using numerical information. As a
corollary to this, budgetary control means controlling
regular operations of an organization for executing
budgets.

A budget basically helps in understanding and

expressing expected results of projects and tasks in
numerical form. For example, the amounts of sales,
production output, machine hours, etc. can be seen in
budgets.

There can be several types of budgets depending on

the kind of data they aim to project. For example, a
sale budget explains selling and distribution targets.
Similarly, there can also be budgets for
purchase, production, capital expenditure, cash, etc.

The main aim of budgetary control is to regulate the

activity of an organization using budgeting. This
process firstly requires managers to determine what
objectives they wish to achieve from a particular
activity. After that, they have to lay down the exact
course of action that they will follow for weeks and
months.

Next, they will translate these expected results into

monetary and numerical terms, i.e. under a budget.
Finally, managers will compare actual performances
with their budgets and take corrective measures if
necessary. This is exactly how the process of
budgetary control works.

Standard Costing
Standard costing is similar to budgeting in the way
that it relies on numerical figures. The difference
between the two, however, is that standard costing
relies on standard and regular/recurring costs.

Under this technique, managers record their costs and

expenses for every activity and compare them with
standard costs. This controlling technique basically
helps in realizing which activity is profitable and
which one is not.

Financial Ratio Analysis

Every business organization has to depict its financial
performances using reports like balance sheets and
profit & loss statements. Financial ratio analysis
basically compares these financial reports to show the
financial performance of a business in numerical
terms.
Comparative studies of financial statements
showcase standards like changes in assets, liabilities,
capital, profits, etc. Financial ratio analysis also helps
in understanding the liquidity and solvency status of a
business.

Internal Audit
Another popular traditional type of control technique
is internal auditing. This process requires internal
auditors to appraise themselves of the operations of
an organization.

Generally, the scope of an internal audit is narrow

and it relates to financial and accounting activities. In
modern times, however, managers use it to regulate
several other tasks.

For example, it can also cover policies, procedures,

methods, and management of an organization.
Results of such audits can, consequently, help
managers take corrective action for controlling.

Break-Even Analysis
Break-even analysis shows the point at which a
business neither earns profits nor incurs losses. This
can be in the form of sale output, production volume,
the price of products, etc.

Managers often use break-even analysis to determine

the minimum level of results they must achieve for an
activity. Any number that goes below the break-even
point triggers corrective measures for control.

Statistical Control
The use of statistical tools is a great way to
understand an organization’s tasks effectively and
efficiently. They help in showing averages,
percentages, and ratios using comprehensible graphs
and charts.

Managers often use pie charts and graphs to depict

their sales, production, profits, productivity, etc. Such
tools have always been popular traditional control
techniques.

Modern Control Techniques

Controlling is one of the most important functions of
management. It helps managers bridge the gap
between their organization’s actual performance and
targets. This, in turn, reduces losses and risks
for businesses. Management experts and strategists
have developed several traditional and modern
control techniques for this purpose.

Modern Control Techniques

There are several tools which managers can employ
for facilitating control over their organization’s
activities. These techniques may be either traditional
or modern. Traditional techniques generally rely on
non-scientific methods.

Modern techniques, on the other hand, are more

scientific in nature. They are also more accurate and
logical than traditional techniques. The following
modern control techniques exist widely in use these
days.

Zero-Base Budgeting
American business executive and management expert
Peter Phyrr first introduced zero-base budgeting in
the 1970s. This process requires a manager to prepare
and justify his budget from scratch (hence the name
zero-base). The burden of proving the importance of
each facet of budgeting lies on managers here.

Under this process, managers first have to define

the objectives of each activity they propose to
supervise. Next, they should prepare alternative
spending plans relating to smaller facets of each
activity. These plans relate to
minimum expenditure levels, the requirement
of resources, targets achievable with additional
expenditure, etc.

After preparing these alternative plans, managers

have to rank them in priorities. Furthermore, they
need to keep evaluating these plans routinely after
implementing them. This technique of controlling
allows effective budgeting as well as sound planning.

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Network Analysis
A network is basically a system of interconnected
things and plans. Network analysis, thus, is a
technique of planning and controlling complex
relationships between business activities. These
network techniques may be of the following two
types:
1. Critical path method CPM
Under this technique, managers break down tasks
into smaller factions and define the relationships
between them. Next, they mark these relationships on
a “network diagram” using flowcharts and mapping
techniques.

Changes in one faction, in turn, helps them

determine how other factions will change as well.
This process, thus, makes controlling and
planning easier and effective.

2. Programme evaluation and review technique

PERT
Managers generally deploy this technique for
planning and controlling individual projects. It
basically includes tasks like planning schedules,
budgeting, forecasting requirement of resources and
developing alternative plans.

Furthermore, this technique uses probability and

linear programming to assist in control management.
Probability estimates the chances of success and
failure of each part of a project. On the other
hand, linear programming helps in maximizing the
objectives of each individual action.

Management Audit
A management audit is nothing but a systematic
evaluation of an organization’s management and its
overall performances. It comprises of a systematic
and comprehensive appraisal of each individual
managerial function.

Management audit differs from a statutory or

financial audit in terms of its scope and objectives.
While accounting audits study financial
performances, management audits deal with
managerial activities.

This can be very difficult because such functions do

not depend on numerical and scientific metrics.
Hence, a management audit often relies on subjective
factors like ethics, integrity, skills, etc.

A typical management audit appraises the

performances of managers and their organization on
various standards.
These include their corporate structure, corporate
earnings, treatment of shareholders, production
efficiency and fiscal policies.

Even executive evaluation, appraisal of top-level

management, research & development, and economic
functions are important standards.