UNIT-V

TWO MARK QUESTIONS AND ANSWERS:

  1. What do you mean by controlling?

It is the process of comparing of actual performance with expected performance and taking corrective action if necessary.

2. Mention the traditional techniques for controlling.

Budgetary control system

Non-budgetary control system.

3. Mention some modern techniques for controlling.

Management audit.

Operational audit.

Social audit.

Responsibility accounting etc.

4. What do you mean by information technology?

Information technology is the use of electronic equipment, especially computers for storing, analyzing and sending out information.

5. Define productivity:

It may be defined as the output=input ratio, within a given time period and with due consideration for quality of performance.

Productivity=output/input.

6. Mention some of the determination of productivity.

1)Human factors 2)Technological factors 3)Managerial factors

4) Financial factors 5)Natural factors 6)Sociological factors 7)Political factors 8)Infrastructural facilities.

7. What are the problems in measuring productivity?

Knowledge workers contribute indirectly.

Knowledge workers provide assistance to other organizational units.

It is difficult to measure the quality of the actions of the knowledge workers.

8. What do you mean by international management?

International management focuses on the operations of MNCs. Features of MNCs, huge assets and turnover, network of branches, Unity of control, mighty economic power, advanced technology etc.

9. Explain the term Globalization?

Globalization means covering or affecting the whole world. It means integration of the domestic economy of a country with the integration of the domestic economy of a country with the international economy.

10. Explain the term liberalization?

Liberalization means being less strict in the political and legal system of the economic with a view to promoting the growth of commerce trade and industry.

BIG QUESTIONS AND ANSWERS:

1. Explain the steps involved in process of controlling?

  • Determination of standards of performance

The process of controlling commences with the determination of performance, for all of the organizational activity.

  • Tangible standards

Tangible standards are those which are capable of being expressed in specific numerical terms. These are further analyzed into the following divisions.

  • Monetary standards

Standards expressed in terms of money e.g. Profits,costs,expenses,incomes or revenures etc.

  • Quantitative standards

Standards expressed in quantitative terms e.g. units of production, units of sales etc.

  • Time standards

Standards expressed in terms of time e.g. man-hours or machine hours.

  • Capital standards

Standards expressed in typically financial terms e.g. rate of return (ROI) or ratio of current assets to current liabilities (i.e. current ratio) and other similar types of standards.

2. Explain the budgetary control system?

Introduction

A budget is both-a method of planning and an instrument (or device) for controlling. It is a plan in so far as expression of the standards of performance (i.e. anticipated results) is concerned. However, when the actual operational performance is judged against these standards; the budget assumes the role of a control technique.

The concept of ‘budget’

A budget might be defined as the expression of a management plan into numerical terms (financial, quantitative or time); beings a statement of anticipated results of the working of a particular aspects of organizational operational life, for a specific period of time, say a month, a quarter, a half year, a year or so.

Types of business budgets

  • Sales budgets

A sales budgets is a statements of an expected volume ofsales, flowing to a business enterprise over a specific future period of time.

  • Production budgets

An importants budget concerning the operational life of a business enterprise, is the production budgets.

Production budgets might be expressed in terms of-

Man-hour; where most of productions work is done by manual labour.

Machine-hour; where production activities are mechanized.

  • Production-facilities budgets

Based on the need and requirements of the overall production budgets; budgets for various production facilities are prepared- as branches of the production budgets. Some of such ancillary budgets as follows:

Material budgets i.e. a budget for direct material needed for the budgets outputs.

Labour budget i.e. a budget for direct labour needed for the budget output.

Factory overheads budgets i.e. a budget for factory overheads likely to be incurred, during the production process , to produce the targeted output.

Administrative (or office) overheads budgets i.e. a budgets for office overheads likely to be incurred, during the handling of the targeted output ,at the ‘office-stage’ in the industrial enterprise.

Selling and distribution overheads budgets i.e. a budget for selling and distribution overheads likely to be incurred, at ‘the selling and delivery stage’, during the budget period.

  • Cash Budget

A cash budget is an important branch of the overall finance budget. This budget assumes great significance in the operational life of any business enterprises; as cash is needed for various purposes, quite off and on.

  • Capital Expenditure Budgets

A major aspect of financial budgeting concerns with designing capital expenditure budgets, for items like plants, machines, equipment, furniture,etc.

  • Balance-sheet Budgets

Balance-sheet budgets are statement of forecast of capital account, liabilities and assets.

The Budget Organization

For the best designing and functioning of the budgetary control system; there is the need for a separate ‘budget-organization.The’ budget-organization’ implies the formulation of a budget committee extended into various sub-committee. The main task of the budget committee is to finalize and co-ordinate the planning and implementation of the budgetary control system.

Advantages

  • Expression of planning in definite terms.
  • Comprehensive managerial technique
  • Communication of jobs through budgets.
  • Instrument of co-ordination.
  • Profit maximization through cost control.
  • Fixation of responsibility facilitated.

Limitation

  • Not comprehensive
  • Difficulty in setting rational standards
  • Danger of over – budgeting
  • Lack of departmental co-operation and co-ordination
  • Umbrella for inefficiency.

3. Discuss the use of computers in handling information?

Use of Computers in Handling Information

Managers need all kind of information about the external environment- social, economic, legal, political, technological etc. They also need information on internal operations of the organization.

The computer can, with proper programming, process data towards logical conclusion, ciassify them and makes them available for manager’s use, into usable form

Some business applications of the computers are;

  • Material requirement planning
  • Manufacturing resource planning
  • Project costing
  • Inventory control
  • Design and engineering etc.

Computers have also contributed to telecommuting, which means that persons may work at home at computer terminal which is linked to a company’s mainframe computer.

Limitation of information technology

  • There is the danger of information indigestion

Computers are turning out material at an almost frightening rate and manager complain that they are being buried under printouts reports, projections, forecasts etc, which they do not have the time to read, understand and digest.

  • Middle managers feel the danger of disappearance

As information important to them is also available to top management, under a comprehensive information system.

  • Managers over 50 are afraid of looking unskilled

If they are not able to understand the new technology, and they resist to computer application.

  • Distinction between line and staff is becoming less clear

As information formerly gathered by staff can be obtained with ease by line personnel by accessing a common database.

  • A shift of powers to lower levels in the company

Information that prerogative of top manager can also be made available at lower levels results this.

4.Explain the modern techniques of controlling?

  • Management audit

An independent, overall and scientifically critical examination of the entire managerial process.

  • Internal audit

Vouching and verification of accounting information, by a staff of internal auditors; also concerned with examining the overall operational efficiency of the enterprise.

  • Social audit

Concerned with the measurement of social performance of an organization, in contrast to its economic performance.

  • Responsibility accounting

Consist in dividing a business unit into responsibility centers where by, distinct manager is assigned responsibility for achieving the pre determined target for his center and his success is measured by his ability in controlling the ‘controllable costs’

  • Human resources accounting

Is accounting for people in an organization, which involves a measurement of costs incurred by enterprise to recruit, select, hire and train human assets and a measurement of the economic value of people to the enterprise.

  • PERT/CPM

Involves these steps, identification of component, sequencing of activities and events, determination of estimated time, determination of critical path,modification in the initial plan.

Both PERT and CPM utilize the same principles though there are differences between the two

PERT is event oriented and CPM is activity oriented. In PERT there are three times estimates in CPM only one estimates.

In PERT time is main consideration and in CPM cost is the main consideration.

  • Self-control

Delegation of authority, assignment at challenging work, highly dedicated employees.

5. Explain Non-budgetary control system.

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Non – Budgetary control techniques:

Some of the non-budgetary control techniques are described below:

  1. Direct personal observation and supervision:

Direct personal observation and supervision by a manager is, perhaps, the oldest technique of controlling. In this technique, control is exercised by a manager through a face-to-face contact with employees; by directly observing their performance e.g. by taking rounds in the plant where workers are performing or in any other manner.

However, direct personal observation and supervision technique of controlling has certain disadvantages, like the following:

  1. It is a time-consuming technique. The manager is left with little time for attending to his official duties.
  2. Direct personal supervision cannot be exercised all the time over all the employees.
  3. Due to this technique of controlling; there may be interference in the smooth flow of work of employees.
  4. This technique has a negative impact on self-motivated and enlightened workers; and they often resist to it.
  1. Written Reports:

Under this technique of controlling; each manager prepares written reports on the performance of his subordinates, and submits these to higher authorities. Lower management submits reports to middle management; middle management to top management and the top management (i.e. Board of Directors) to the body of members.

However, this technique of contolling has certain limitations, as described below:

  1. This technique carries an element of subjectivity; in that a manager may deliberately favour or disfavour particular employees while drafting reports.
  2. It is an imperfect technique of controlling; as the manager may not include all aspects of workers’ performance, in his reports.
  3. Drafting of written reports is a time-consuming process.
  4. Some managers may not to competent enough to draft reports.
  1. Statistical Reports and Analysis:

Under this technique of controlling, a special staff of specialists prepares statistical reports and presents them in form of tables, ratios, percentages, correlation analysis, graphs, charts, etc. to higher management levels. Such reports are prepared in areas like production, sales, quality, inventory etc; and these reports usually become the basis of managerial decision-making and action.

  1. Break – even analysis:

Break-even analysis is a technique of Marginal costing. It is based on a classification of costs into fixed and variable categories. The key- concept in break-even analysis is that of contribution, defined as:

Contribution = Selling price per unit – Variable cost per unit

The technique of break-even analysis is helpful in profit planning and controlling – by pre-dicting behaviour of fixed and variable costs.

  1. Ratio analysis:

Ratio – analysis is a tool of Financial Accounting and Management Accounting. Under this technique, the financial analyst financial statements (i.e. the Income Statement and the Position Statement) by computing appropriate ratios.

The useful and meaningful accounting data give important clues to management for decision-making purposes-speaking through the media of accounting ratios.

Accounting ratios are usually divided into the following categories:

Liquidity ratios

Solvency ratios

Activity or performance ratios

Profitability ratios

6. Explain the problems in measuring productivity of knowledge workers

Problems in measuring productivity of knowledge workers:

Measurement of the productivity of skill workers (like brick-layers, mechanics, butchers etc.) is easier, but it becomes more difficult to measure the productivity of knowledge workers (like managers, engineers, programmers). Skill workers mainly operate on the basis of their technical skills; whereas knowledge workers mostly use their knowledge while discharging their jobs. Technical skills of knowledge workers are subordinate to their knowledge, which is their basic asset.

Productivity of knowledge workers is more difficult to measure, because of the following reasons:

  1. Knowledge workers contribute indirectly to the final product e.g. engineers.
  2. Knowledge workers provide assistance to other organisational units. For example, it is difficult to say how much improvement in the sales is due to the efforts of the advertising manager or how much improvement is there in labour-management relations, because of the efforts of the Personnel Manager.

Despite the limitations of measuring productivity of knowledge workers, it is a fact that greatest scope for increasing productivity lies in the work performed by knowledge workers e.g. managers, engineers, cost accountants etc.

7. Mention the advantages of preventive control system.

ADVANTAGES OF PREVENTIVE CONTROL:

A preventive approach to controlling, offers the following advantages to an organisation:

  1. A basis for managerial training / development:

An evaluation of manager, under the philosophy of preventive control is likely to uncover deficiencies in managers. On the basis of the results of managerial evaluation and appraisal, top management can design programmes of managerial training / development to overcome those deficiencies.

  1. Encouragement to self-control:

Preventive control system encourages what may be called ‘control by self- control’. This is so because managers know that their mistakes will be uncovered in their evaluation process; and owning responsibility for mistakes in their hearts, will start making voluntary corrections. In fact, a feeling of self-control turns managers into more responsible personalities.

  1. Managerial burden lightened:

Preventive control lightens managerial burden caused due to efforts in correcting deviations, as a result of direct controls. Preventive control, as the name implies prevents deviations from occurring and much saves managerial time and efforts; which, otherwise, would have been wasted in correcting deviations had those occurred.

  1. Better superior-subordinate relationships:

Under preventive control system, subordinate managers know what is expected of them, understand the nature of managing; and feel a close relationship between performance and measurement. Intelligent superior managers will reciprocate this feeling by recognising what they are expected to evaluate in subordinates and develop techniques for doing so. Anyway, superior-subordinate relationships are likely to improve under the philosophy of preventive control.

8. Explain the tendencies towards developing a unified global management theory.

TENDENCIES TOWARDS DEVELOPING A UNIFIED GLOBAL MANAGEMENT THEORY:

Tendencies towards developing a unified global management theory maybe classified into the following three categories:

  1. Historical tendencies
  2. Conceptual tendencies
  3. Modern tendencies

Let us describe the major factors, comprised in each of the above stated three categories.

a. Historical tendencies:

Some of the tendencies which favour the development of a global management theory and which have a historical origin or background are described below:

  1. System’s approach to managing:

System’s approach to managing, though thought to be new, is not really new. Scholars comment that it is something like old wine is a new bottle. The core of the concept of system’s approach is the recognition of the inter-relationships existing among various parts of an enterprise; and the relationship of the enterprise with the environment (i.e. the supra system). In fact, practitioners of management in the past also appreciated this sort of relationship and provided for it while managing their enterprises but, of course, without using the word system.Again, modern practitioners of management, the world over, manage by the system’s approach; as no manager can overlook the significance of interrelationship among various parts of their organisation. Certainly then, the system’s approach to a managing is one of the building blocks, in developing an integrated global management theory.

  1. Contingency or situational approach to managing:

According to contingency or situational approach to managing, there is no universally accepted best way of managing all situations; the best system of managing depends on the realties of managerial situations. Intelligent managers in the past, always decided things, in view of the realities of the situation. Managers of to-day also, everywhere, appreciate and implement the contingency approach to Therefore, a universal belief by managers, everywhere, in the situational approach underpins the efforts involved in developing a unified global management theory.

b. Conceptual tendencies:

Some of the conceptual tendencies favouring the development of unified global management theory, are described below:

  1. Popularity and use of principles of management:

There are a large number of principles of management concerning various managerial concepts and functional areas of management. many management principles command universal recognition and implementation. Principles of management are popular and useful in that, it is easier to teach, do research and practise management; when one poceeds according to principles.

By testing the validity of existing principles, and developing new principles on the basis of empirical studies; scholars and researchers can provide a useful foundation on which to build a solid and unified global management theory. In fact, a theory of management could be built only around principles of management.

  1. Operational school of management- most popular way of structuring management knowledge:

Management textbooks based on operational school (i.e. analysing managerial jobs in terms of functions of planning, organising, staffing, directing, controlling and co-ordinating) are used around the word. Practicing managers, everywhere, concern themselves with functions of planning, directing, controlling etc; while performing their managerial jobs in real life situations. Though many schools of management have grown in the present-day-times and many more are likely to emerge in future; there is no doubt that operational school will continue to retain its dominance over other school of management thought.