Directing

Unit 5

Definition
Direction is telling people what to do and seeing that they do it to the best of their ability. It consists of
Communication Leadership Motivation Supervision

Features of direction
Deals with people Seeks performance Provides a link Pervasive by all managers at all levels of an organisation Dynamic and continuous

Importance of direction
Initiates action Achieves integration Motivates people Facilitates change Attains balance and stability

Principles of Direction
Principle of unity of command Principle of harmony of objectives Principle of direct supervision Appropriate techniques / style Two way communication Support of informal organisation Principle of maximum individual contribution Use of motivation techniques Principle of followup

Elements of direction
Good instruction Follow up of instruction Standard practice and indoctrination Explanations Consultative direction

Controlling

Control
Control: It is making something happen the way it was planned to happen. Controlling: the process of regulating organisational activities so that actual performance conforms to expected organisational standards and goals.

Importance of control
Achievement of goals Execution and revision of plans Brings order and discipline Facilitates decentralisation of authority Promotes coordination Cope with uncertainty and change

Limitations of control
Its difficult and challenging Resistance Compounds problems

Stages in controlling the control process

1. Establishment of standards Quantitative standards Time standards Cost standards Productivity standards Revenue standards Qualitative standards

How to set standards?

Study the characteristics of work Consider acceptable levels of work

2. Measurement of actual performance

Completeness Objectivity Responsiveness

When to measure?
End Mid term

3. Comparison of actual performance with standards

The degree of variation Communication to the top management

4. Taking corrective actions

Depends on the results

Essentials of control
Objective Suitable Simple Selective Sound and economical Flexible Forward looking Reasonable Responsibility of failure Acceptable

Techniques of Controlling
Break even alanysis / CVP Analysis cost volume profit analysis
Advantages
Determines all types of cost Helps understanding the relationship between costs and profits

Disadvantages
Difficult to segregate costs Difficult in a multi product firm Limited application in long range planning

Techniques of Controlling
Budgetary control the establishment of budgets, relating to responsibilities of executive to the requirements of a policy
Provides detailed plan of action Comparing actuals with budgeted Involvement of all the concerned

Techniques of Controlling
Budgetary control
Advantages
Planning
Thinking ahead Pooled judgement and experience Realistic goals and policies

Coordination
Establishes coordination Relates business activity with general economic trends

Control
Indicates weakness Prevents waste Facilitates standard costing

Disadvantages
Accuracy is a doubt Constant review needed Costs may be prohibitive cost involved in maintenance

Techniques of Controlling
Zero-Based Budgeting
In zero-based budgeting, every line item of the budget must be approved, rather than only changes from the past budget
Decision package all activities in a particular project Ranking each decision is ranked against other packages Resource allocation preferential and objective resource allocation

Techniques of Controlling
Programme or Performance Budgeting
Emphasis in on output or performance Time Extends over years overall performance Cost effectiveness costs versus benefits

Techniques of Controlling
Responsibility accounting
Each department is treated like a semi autonomous unit Headed by a responsible person
Cost centres Profit centres Investment centres

Techniques of Controlling
Human Resource Accounting
Accounting for people as an organisational resource. It involves measuring the costs incurred by organisations to recruit, select, hire, train and develop human assets and the measuring of economic value of people to the organisation.
Enables effective monitoring Finds whether human resource appreciating or depreciating Assists in development of management practices

Advantages
Throws light on strengths and weakness of workforce Feedback to managers Helps potential investors make decision

Disadvantages
Not easy No agreement on measurement process No empirical evidence to support the idea of HRA

Techniques of Controlling
Standard costing
Standards are determined in advance and actual costs are compared with the standards Advantages
Easier and straight Forward looking Assists in formulating price

Disadvantages
Unsuitable for small firms Difficult for non standardised products May create adverse effect, if standard is not real

Techniques of Controlling
Management Audit
Systematic appraisal of overall performance of management by outside consultants
Advantages
Identification of major areas of concern Check on new policies and practices Effectives of current managerial practices

Disadvantages
Does not focus on individual performance Qualified auditors may not be available Subjective process

Techniques of Controlling
Social audit
Deals with social performance of the organisation, including total CSR expenditure, value of productivity of the organisations human resource Advantages
Develops goodwill of the organisation CSR

Disadvantages
Not easy Scope is not clearly defined intangible social activities go ignored

Techniques of Controlling
PERT - Programme Evaluation and Review Technique
Sophisticated mathematical and schematic network technique Used for problems that occurs once or few times, which has a definite starting and end point Activity, event and path

 PERT
Each activity must have a predecessor and successor, an event may have more than one succeeding or preceding activity No activity can start until its predecessor even in completed No event is considered completed until all the activities leading to it have been completed Time estimates to be associated with completion of every activity
Optimistic Most likely time pessimistic
Te = O + 4m + P 6

Techniques of Controlling
CPM - Critical Path Method
Similar to PERT Critical path is the path with more number of events and activities Has two time estimates
Normal time (N) Expedited time (E) /crash time

Crash time can be accomplished only through crash expenditure

Techniques of Controlling
Management Information System
It provides information needed to manage organizations efficiently and effectively. It involves three primary resources:
technology, information, and people

It is a subset of the overall internal controls procedures in a business, which cover the application of people, documents, technologies, and procedures It is used by management accountants to solve business problems such as costing a product, service or a businesswide strategy.

Techniques of Controlling
TQM Total Quality Management
Is a way of creating an organisational culture, committed to the continuous improvement of skills, teamwork, processes, product and service quality and customer satisfaction Main ideas of TQM
Do it right the first time Be customer cantered Make continuous improvement a way of life Build teamwork and empowerment Benchmarking Quality circle Empowerment Outsourcing Reduced cycle time

TQM tools

Techniques of Controlling
Kaizen
Japanese word meaning continuous and never ending improvement involving everyone in the organisation Not a single day shall pass without any improvement Includes
Improving labour management relationship Marketing practices Supplier relations In-house systems and procedures

Programme can be broadly divided into 3 parts

Management oriented kaizen Group oriented kaizen Individual oriented kaizen