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Directing

• Directing is the management function that involves giving

instructions and guiding people to do their work.
• In the context of management of an organisation, directing
refers to the process of instructing, guiding, counselling,
motivating and leading people in the organisation to achieve
its objectives.
Characteristics of Directing
• Initiates Action: Directing is the managerial function that
puts plans into action by starting the actual work in an
organization, while other functions only prepare the
groundwork.
• Directing takes place at every level of management: It
happens at every level of management, from top-level
executives to frontline supervisors.
• Continuous Process: Directing is an ongoing process
throughout the life of the organization.

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 • Directing flows from top to bottom: It moves from a
superior to a subordinate, from the top of the hierarchy to the
bottom.
Importance of Directing
• Initiates Action: Directing encourages employees to take
action towards achieving organizational goals.
• Integrates Efforts: Directing ensures that everyone's work is
aligned and contributes to overall performance.
• Guides and Motivates: It helps employees use their full skills
through motivation and effective leadership.
• Facilitates Change: It reduces resistance to change by
encouraging cooperation through communication and
motivation.
• Ensures Stability: Directing promotes teamwork,
commitment, and balance among different groups and
departments.

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Principles of Directing
• Maximum Individual Contribution: Directing should help
every employee give their best for achieving organizational
goals. Motivation plans, rewards, and recognition can
encourage employees to use their full potential.
• Harmony of Objectives: Harmony of Objectives in directing
means that a manager should guide employees in such a way
that their personal goals (like earning salary, promotions,
benefits) match with the organization’s goals (like higher
productivity, growth, profit).
• Unity of Command: Each employee should receive
instructions from only one superior to avoid confusion and
conflict.
• Appropriateness of Techniques: The method of motivation
and leadership should match employees’ needs, abilities, and
situations (e.g., some may value money, others promotion).

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 • Managerial Communication: Clear and effective
communication at all levels ensures that instructions are
properly understood and feedback is received, making
direction successful.
• Use of Informal Organization: Managers should recognize
and use informal groups within the organization to make
directing more effective.
• Leadership: Managers should provide strong and positive
leadership to guide and influence employees without causing
dissatisfaction.
• Follow Through: Giving instructions is not enough—
managers must review implementation, solve problems, and
adjust directions if required
Elements of Directing
• The process of directing involves guiding, coaching, instructing,
motivating, leading the people in an organisation to achieve
organisational objectives.

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• Activities related to directing may broadly be grouped into four
categories which are the elements of directing. These are:

Supervision

Motivation

Leadership

Communication

1. Supervision
Supervision can be understood in two ways:
• As an Element of Directing: Every manager supervises their
subordinates. In this sense, supervision means guiding
employees’ efforts, overseeing their work, and giving

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 instructions to ensure proper use of resources and
achievement of targets
• As a Function of Supervisors:
• Supervision is also the duty of supervisors, who work at the
operative level (just above workers).
• The functions and performance
Top Management
of the supervisor are vital to any
Middle Management
organisation because he is
directly related with workers Supervisors

whereas other mangers have no operative Employees

direct touch with bottom level
workers.
Importance of Supervision:
• Maintains Contact with Workers: Supervisor maintains
day-to-day contact and maintains friendly relations with
workers. A good supervisor acts as a guide, friend and
philosopher to the workers

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• Link Between Workers and Management: He conveys
management ideas to the workers on one hand and workers
problems to the management on the other. This role played by
supervisor helps to avoid misunderstandings and conflicts
between management and workers/employees.
• Maintains Group Unity: Supervisors resolve internal issues
and promote harmony among workers. He sorts out internal
differences and maintains harmony among workers.
• Ensures Work Performance: Supervisor ensures
performance of work according to the targets set. He takes
responsibility for task achievement and motivates his
workers effectively
• On-the-Job Training: Supervisor provides good onthe-job
training to the workers and employees. A skilled and
knowledgeable supervisor can build efficient team of workers
• Leadership Role: Supervisory leadership plays a key role in
influencing the workers in the organisation. A supervisor with

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 good leadership qualities can build up high morale among
workers.
• Feedback and Improvement: A good supervisor analyses
the work performed and gives feedback to the workers. He
suggests ways and means of developing work skills.
2. Motivation
Motivation refers to the incitement or inducement to act or move.
In the context of an organisation, it is the process of encouraging
subordinates to act in a desired way in order to achieve specific
organisational goals.
Motive, Motivation, and Motivators:
• Motive: A motive is an internal state that energises, activates,
or directs behaviour towards achieving specific goals. Motives
arise from the needs of individuals.
• The awareness of a motive creates a sense of restlessness,
which drives the individual to take action in order to reduce
that restlessness. Eg: Hunger, Thirst, Need for recognition etc.

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 • Motivation: it is the process of stimulating people to action
to accomplish desired goals. Motivation depends upon
satisfying needs of people
• Motivators: The techniques used to motivate people (e.g., pay,
promotion, praise).
Features of Motivation:
• Motivation is an internal feeling that arises from urges,
drives, desires, aspirations, strivings, or needs of a human
being. These internal forces influence and direct human
behaviour towards achieving certain goals. Eg: A student’s
desire to excel in exams motivates him to study hard.
• Motivation produces goal directed behaviour: eg: An
employee motivated by promotion works harder to improve
performance.
• Motivation can be positive or negative: Positive motivation:
Providing rewards such as higher pay, promotion, recognition,

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 etc. Negative motivation: Using penalties like punishment,
withholding increments, or threats to influence behaviour.
• Motivation is a complex process: People differ in their
needs, expectations, and responses. Hence, the same
incentive may not motivate all individuals equally
Motivation Process:
• Unsatisfied Need: A person feels a deficiency or lack of
something (e.g., need for recognition, money, security).
• Tension: The unmet need creates tension or inner urge.
• Drive: That tension energises the individual.
• Search behaviour: The individual engages in actions to satisfy
the need.
• Satisfied need: If the behaviour leads to satisfaction of the need,
the tension is reduced.
• An Unsatisfied Need creates Tension, which leads to a Drive to
take action (Search Behavior). When the need is satisfied, the
tension is reduced.
Unsatisfied Search Satisfied Reduction
Tension Drives
Need Behaviour Need of Tension

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Importance of Motivation:
• Improves Performance: Motivation satisfies employee
needs, encouraging them to devote energy for optimum
performance.
• A motivated employee contributes maximum effort, leading
to higher individual and organisational productivity.
• Develops Positive Attitude: Proper motivation transforms
negative or indifferent attitudes into positive ones.
• Example: A worker not rewarded properly may dislike his
work, but recognition, praise, or rewards can build
enthusiasm and commitment
• Reduces Employee Turnover: Lack of motivation is a major
cause of high employee turnover.
• Motivated employees are less likely to leave, reducing costs of
recruitment, training, and adjustment.
• Helps in retaining talented employees.

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 • Reduces Absenteeism: Absenteeism often arises due to poor
working conditions, lack of recognition, or inadequate
rewards.
• A sound motivational system makes work enjoyable, reducing
absenteeism and increasing regularity.
• Facilitates Change: Employees usually resist change.
• If managers link changes with additional rewards or benefits,
employees accept them more willingly.
• Motivation thus ensures smoother transitions in policies,
technology, or processes.
Maslow's Need Hierarchy Theory of Motivation
This theory states that people's behavior is based on a hierarchy
of needs, and they are motivated to satisfy the lowest-level
unsatisfied need first.
1. Physiological Needs: Basic needs like food, water, and shelter.
2. Safety Needs: Security and stability.

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 3. Affiliation/Belonging Needs: The need for social connection.
4. Esteem Needs: The need for recognition, respect, and status.
5. Self-Actualization Needs: The need to realize one's full
potential.
Basic assumptions of Maslow’s theory
• Maslow’s theory is based on the following assumptions:
o People’s behaviour is based on their needs. Satisfaction of
such needs influences their behaviour.
o People’s needs are in hierarchical order, starting from
basic needs to other higher level needs.
o A satisfied need can no longer motivate a person; only
next higher level need can motivate him.
o A person moves to the next higher level of the hierarchy
only when the lower need is satisfied.
• A key assumption is that a satisfied need no longer motivates
a person; they will move on to the next higher-level need.

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 Financial and Non-Financial Incentives
Incentives are measures used to motivate people to improve
performance.
Financial Incentives refer to incentives which are in direct
monetary form or measurable in monetary term and serve to
motivate people for better performance. These incentives may be
provided on individual or group basis.
These are direct monetary benefits given to employees.

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• Pay and allowances: It includes basic pay, dearness
allowance and other allowances.
• Productivity-linked wage incentives: Several wage
incentive plans aims at linking payment of wages to increase
in productivity at individual or group level.
• Bonus : Bonus is an incentive offered over and above the
wages/ salary to the employees.
• Profit Sharing : Profit sharing is meant to provide a share to
employees in the profits of the organisation.
• Stock options/co-partnership: Under these incentive
schemes, employees are offered company shares at a set price
which is lower than market price
• Retirement Benefits : Several retirement benefits such as
provident fund, pension, and gratuity provide financial
security to employees after their retirement.
• Perquisites: In many companies perquisites and fringe
benefits are offered such as car allowance, housing, medical

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 aid, and education to the children etc., over and above the
salary. (e.g., company car)
Non-Financial Incentives
• Non- financial incentives mainly focuses on Psychological, social
and emotional factors.
• Some of the important non-financial incentives are :
o Status: Status refers to the ranking of positions within an
organisation.
o It reflects the relative standing of a job compared to others.
o Indicators of Status: Authority & Responsibility attached to
the role, Rewards and Recognition given for performance,
Perquisites & Privileges (e.g., office facilities, car, assistants),
Prestige & Respect associated with the position. Status fulfils
an individual’s psychological, social, and esteem needs.
o It motivates employees to perform better by linking work
with respect, recognition, and self-worth.

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o Organizational Climate: Organisational climate refers to the
set of characteristics and atmosphere that describe an
organisation and distinguish it from others. It reflects the
overall environment in which employees work. These
characteristics influence the behaviour of individuals in the
organisation. Some of these characteristics are– individual
autonomy, reward orientation, consideration to employees,
risk-tasking etc.
o Career Advancement Opportunities: Every employee
aspires to grow and progress within the organisation.
Managers should create avenues for skill enhancement and
promotions. Effective training programmes and a well-
defined promotion policy encourage employees to perform
better, as promotion acts as a strong motivator.
o Job Enrichment: Job enrichment involves designing roles
that:
o Provide a greater variety of tasks.

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 o Demand higher levels of knowledge and skills.
o Offer more autonomy and responsibility.
o Allow personal growth and meaningful work
experiences. When jobs are enriched, the work itself
becomes a motivating factor
o Employee Recognition Programs: Employees value
appreciation and acknowledgment for their contributions.
Recognition motivates them to perform at higher levels.
o Job Security: reduces anxiety and encourages greater
commitment at work. In India, where job opportunities are
limited, this factor is particularly significant. However,
excessive job security may sometimes lead to complacency.
o Employee Participation: Delegating greater authority and
decision-making power to employees. It means involving
employees in decision making of the issues related to them.

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 o Employee Empowerment: Delegating greater authority and
decision-making power to employees. Empowerment means
giving more autonomy and powers to subordinates.
Leadership
Leadership is the process of influencing others to achieve a
common goal.
Leadership indicates the ability of an individual to maintain good
interpersonal relations with followers and motivate them to
contribute for achieving organisational objectives.
Leadership Elements
• Meaning
• Features
• Importance
• Qualities
• Styles
Communication

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Communication is the process of sharing information. Directing
abilities of a manager mainly depend upon his communication
skills.
Elements of Communication

(i) Sender: Sender means person who conveys his thoughts or

ideas to the receiver. The sender represents source of
communication.
(ii) Message: It is the content of ideas, feelings, suggestions, order
etc., intended to be communicated.
(iii) Encoding: It is the process of converting the message into
communication symbols such as words, pictures, gestures etc

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 (iv) Media: It is the path through which encoded message is
transmitted to receiver. The channel may be in written form,
face to face, phone call, internet etc
(v) Decoding: It is the process of converting encoded symbols of
the sender.
(vi) Receiver: The person who receives communication of the
sender.
(vii) Feedback: It includes all those actions of receiver indicating
that he has received and understood message of sender.
(viii) Noise: Noise means some obstruction or hindrance to
communication.
Importance of Communication
• Basis of Coordination: It helps different parts of an
organization work together. Communication acts as basis of
coordination.
• Smooth Functioning: It ensures an enterprise operates
without friction.

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 • Basis of Decision-Making: All decisions require information,
which is shared through communication.
• Promotes Cooperation: It helps build teamwork and trust.
• Establishes Leadership: Effective leaders are good
communicators.
• Boosts Morale: It provides a way for managers to motivate
and encourage employees.
Types of Communication
• Formal Communication: Follows the official chain of command.
Examples include:
o Single Chain: Communication flows from a superior to a
subordinate.
o Wheel: All communication goes through a central person.
o Circular: Each person communicates with the two people
next to them.

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o Free Flow: Fast communication where anyone can
communicate with anyone else.
o Inverted V: A subordinate can communicate with their
superior and their superior's superior.

Informal Communication: The "grapevine" that exists outside

the official channels. Networks include:
• Single Strand Network: Information is passed from one
person to the next in a linear, one-to-one chain. For example,
person A tells B, who tells C, and so on.
• Gossip Network: One person acts as a central hub, spreading
information to a large number of other people

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 indiscriminately. This network is a one-to-many
communication model.
• Probability Network: Communication occurs randomly. An
individual shares information with a few others selected at
random, who then also share it randomly.
• Cluster Network: This is the most common type of grapevine
network. An individual shares information with a selected
group of people they trust. These individuals, in turn, share
the information with their own trusted clusters, and the
process continues.

Barriers to Communication:

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• The barriers to communication in the organisations can be
broadly grouped as: (as per NCERT)
o semantic barriers
o psychological barriers
o organisational barriers
o personal barriers
• Semantic Barriers arise when problems in language or
meaning obstruct communication. They occur during
encoding or decoding of messages and may lead to
misunderstanding. Major causes include:
o Badly expressed messages – Poor vocabulary, wrong
words, or omissions.
o Symbols with different meanings – Same word having
multiple interpretations (e.g., “value”).
o Faulty translations – Mistakes while converting one
language to another.
o Unclarified assumptions – Instructions based on
assumptions leading to confusion.

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 o Technical jargon – Use of specialized terms not understood
by everyone.
o Body language mismatches – Gestures contradicting
spoken words.
Psychological Barriers arise due to emotional or mental states
of the sender or receiver, which reduce the effectiveness of
communication.
Main causes include:
1. Premature evaluation – Judging the message before it is
fully communicated, often due to prejudice.
2. Lack of attention – Receiver is distracted or preoccupied,
leading to poor listening.
3. Loss in transmission & poor retention – Message gets
distorted as it passes through levels, or forgotten due to
inattentiveness.
4. Distrust – Lack of trust between parties prevents proper
understanding of messages

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Organisational Barriers are obstacles caused by the structure,
policies, or practices of an organisation that restrict smooth
communication.
Key causes include:
1. Organisational policy – Centralised or restrictive policies
discourage free communication.
2. Rules and regulations – Rigid procedures and formal
channels delay communication.
3. Status differences – Superiors’ authority or status-conscious
attitude creates distance from subordinates.
4. Complex structure – Multiple managerial levels distort and
delay messages.
5. Lack of facilities – Absence of meetings, suggestion boxes,
complaint boxes, or transparency reduces communication
effectiveness.
Personal Barriers arise due to individual attitudes, perceptions,
or behavior of superiors and subordinates that obstruct effective
communication.

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Main causes include:
1. Fear of challenge to authority – Superiors may suppress
communication that threatens their power.
2. Lack of confidence in subordinates – Superiors avoid
seeking opinions if they doubt subordinates’ competence.
3. Unwillingness to communicate – Subordinates may hold
back messages if they feel it could harm their interests.
4. Lack of incentives – Without rewards, appreciation, or
motivation, employees may not share ideas or suggestions.
Extended forms of Barriers :
Intra-personal Barriers: These barriers are caused by a person's
individual way of thinking and perceiving information.
• Wrong assumptions: Making incorrect guesses or
expectations about the message.
• Varied perceptions: Differences in how individuals perceive
or interpret the same information.
• Differing backgrounds: Personal experiences, education, or
culture influencing understanding.

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 • Wrong inferences: Drawing incorrect conclusions due to
faulty reasoning.
• Blocked categories: Mental blocks that prevent processing
certain types of information.
• Categorical thinking: Rigid thinking that oversimplifies or
labels information into fixed categories.
Inter-personal Barriers: These are caused by the limited
communication abilities of either the person sending or receiving
the message, or both.
• Limited vocabulary - Lack of proper words restricts
expression and understanding.
• Incompatibility of verbal and non-verbal messages -
Words say one thing, but gestures/facial expressions say
another
• Emotional outbursts – Excessive anger, excitement, or
frustration distorts communication.
• Communication selectivity: Choosing only what we want to
hear or convey, ignoring the rest.
• Cultural variations: Different cultural backgrounds may
interpret the same message differently.

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• Poor listening skills: Not paying attention or interrupting
leads to incomplete understanding.
• Noise in the channel: External disturbances (physical noise,
technical issues) disrupt clear exchange.
Characteristics of Directing
1. Beginning of Action – Initiates actual work after planning,
organizing, and staffing.
2. Universal Function – Present at all levels and in every
superior–subordinate relationship.
3. Continuous Process – Ongoing throughout the life of the
organization.
4. Top to Bottom Flow – Orders and guidance move downward
in hierarchy.
5. Human Element – Considers individual differences,
motivating employees effectively.
6. Efficient Use of Resources – Clarifies roles, avoids duplication,
reduces cost, and boosts profit.

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 Principles of Directing
1. Maximum Contribution – Directing should motivate
employees to give their best, helping achieve organizational
goals.
2. Agreement of Objectives – Ensures harmony between
employee and organizational goals to avoid conflicts.
3. Unity of Command – A subordinate should receive
instructions from only one supervisor to prevent confusion.
4. Relevant Techniques – Direction methods should suit
employees’ attitudes, skills, and situations.
5. Clear Communication – Managers must ensure instructions
are clearly understood as intended.
6. Use of Informal Organization – Informal groups should be
utilized for better communication and information flow.
7. Follow-up – Monitoring and corrective action ensure proper
implementation of policies and instructions.
Controlling
• Controlling is a managerial function that ensures activities are
carried out as planned, resources are used efficiently, and
deviations are corrected to achieve organizational goals.

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• Controlling means ensuring that activities in an organisation are
performed as per the plans.
• Controlling also ensures that an organisation’s resources are
being used effectively and efficiently for the achievement of
predetermined goals. Controlling is, thus, a goal oriented
function
• Controlling is the function that connects the management cycle
back to planning. It involves measuring actual performance,
comparing it with the predetermined standards, identifying
deviations, analyzing their causes, and taking corrective
measures.
• By doing so, controlling not only ensures that organisational
activities remain aligned with goals but also provides valuable
insights for the formulation of future plans. The problems and
deviations identified during controlling help managers improve
future planning.
• Thus, controlling completes one cycle of the management
process and strengthens planning for the next cycle

Importance of Controlling

Control is an indispensable function of management .

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 1. Accomplishes Goals – Measures progress, identifies
deviations, and takes corrective action to keep the
organization on track.
2. Checks Accuracy of Standards – Ensures standards are
realistic and updated according to organizational or
environmental changes.
3. Efficient Use of Resources – Reduces wastage and ensures
activities follow set norms, leading to cost-effectiveness.
4. Motivates Employees – Clear expectations and performance
standards encourage employees to perform better.
5. Maintains Discipline – Keeps a check on employee activities,
reducing dishonesty and promoting order.
6. Facilitates Coordination – Aligns departmental and
individual efforts with overall organizational objectives.
Limitations of Controlling
1. Difficulty in Setting Standards – Some areas like morale, job
satisfaction, and human behavior cannot be measured
quantitatively, making control less effective.

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 2. Little control External Factors – Factors like government
policies, technology changes, and competition are beyond the
organization’s control.
3. Employee Resistance – Workers may view control as a
restriction on freedom (e.g., CCTV monitoring).
4. Costly Affair – Control requires time, money, and effort; may
not be affordable for small enterprises.
Relationship between Planning and Controlling
• A system of control presupposes the existence of certain
standards, which are established through planning.
• These performance standards provide the foundation for
control.
• Once a plan is put into action, controlling becomes necessary to
track progress, measure outcomes, identify deviations, and take
corrective steps to ensure that actual performance aligns with
planned objectives.
• Hence, planning without controlling is meaningless, and
controlling without planning is directionless.
• Without predefined standards, managers have nothing to
measure against, and without plans, there can be no control.

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• While planning involves developing consistent and integrated
programmes for achieving objectives, controlling ensures that
actual events conform to those plans.
• In essence, planning is prescriptive, whereas controlling is
evaluative.
• It is often said that planning is “looking ahead” while controlling
is “looking back.”
• However, in reality, both functions are interdependent and
operate in both directions. Planning is influenced by past
experiences, while control not only analyzes past actions but
also provides corrective measures to improve future
performance.
• Therefore, planning and controlling are best understood as both
forward-looking and backward-looking functions,
complementing each other in the management process.
Controlling Process
Controlling is a systematic process involving the following steps:
Comparison of
Setting Measurement Taking
actual Analysing
performance of actual corrective
performance deviations
standards performance action
with standards

Step 1: Setting Performance Standards:

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 • The first step in controlling is fixing standards or
benchmarks against which actual performance is measured.
• Standards can be quantitative (cost, revenue, units
produced/sold, time taken) or qualitative (employee morale,
goodwill, customer satisfaction).
• Quantitative standards are preferred because they allow
easier comparison. Example: reducing defects from 10 per
1,000 pieces to 5 per 1,000 pieces.
• Qualitative standards should be defined clearly to allow
measurement. Example: in a fast-food chain, customer
satisfaction can be measured by wait time for a table, time to
place an order, and delivery time.
• Standards must be flexible so they can be modified according
to internal and external business environment changes.
Step 2: Measurement of Actual Performance
• After setting standards, the next step is to measure actual
performance in an objective and reliable way.

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• Techniques include: personal observation, sample
checking, performance reports, etc.
• Performance should be measured in the same units as
standards (e.g., cost, time, output) for easier comparison.
• Measurement can be done after completion of work, but
wherever possible, it should be done during the process (e.g.,
checking each part before assembling, monitoring gas levels
in a plant).
• Examples:
o Employee performance → reports by supervisors
o Company performance → financial ratios like gross profit,
net profit, ROI
o Marketing performance → units sold, market share
increase
o Production performance → number of pieces produced vs.
defective pieces

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 • In small firms, every piece may be checked; in large firms,
sample checking is used instead.
Step 3: Comparing Actual Performance with Standards
• In this step, actual performance is compared with the
standards set in Step 1.
• The comparison helps in finding deviations (differences
between actual and desired results).
• When standards are quantitative, comparison becomes
easier.
• Example: If a worker produces fewer or more units in a week
than the set target, the deviation is clear.
Step 4: Analysing Deviations
• Some deviation is natural in all activities, but managers must
decide the acceptable range.
• Greater focus is given to key areas where deviations affect the
organisation most.
Techniques Used:

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1. Critical Point Control – Focus only on Key Result Areas
(KRAs) crucial to success.
o Example: A 5% rise in labour cost is more serious than a
15% rise in postal charges.
2. Management by Exception – Only significant deviations
beyond the permissible limit need management’s attention.
o Example: If 2% rise in labour cost is acceptable, only
beyond 2% should be reported (e.g., 5% deviation).
• After identifying deviations, managers must find their root
causes, which may include:
o Unrealistic standards
o Defective processes
o Inadequate resources
o Structural or organisational issues
o External environmental factors
• Corrective action is possible only when the true cause of
deviation is identified.

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Step 5: Taking Corrective Action
• This is the final step in the controlling process.
• If deviations are within acceptable limits, no action is
needed.
• If deviations exceed the limit, especially in key areas,
immediate managerial action is required to ensure standards
are met.
• Examples :
o Training employees if production targets are not
achieved.
o Adding workers/equipment or allowing overtime if a
project is running late.
o Revising standards if deviations cannot be corrected
through managerial action (e.g., unrealistic targets).

• Corrective action ensures that deviations are removed and

future performance aligns with the set standards.

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 Techniques of Managerial Control
o The various techniques of managerial control may be classified
into two broad categories:
1. traditional techniques
2. modern techniques.
Traditional Techniques
o Traditional techniques are those which have been used by the
companies for a long time now.
o these techniques have not become obsolete and are still being
used by companies.
o These include:

Personal observation

Statistical reports

Breakeven analysis

Budgetary control

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Personal Observation:
o This is the most traditional method of control.
o Personal observation enables the manager to collect first
hand information.
o It also creates a psychological pressure on the employees to
perform well as they are aware that they are being observed
personally on their job.
o it is a very time-consuming exercise and cannot effectively
be used in all kinds of jobs.
Statistical Reports
o Statistical analysis in the form of averages, percentages, ratios,
correlation, etc., present useful information to the managers
regarding performance of the organisation in various areas.
o Such information when presented in the form of charts,
graphs, tables, etc., enables the managers to read them more
easily and allow a comparison to be made with performance
in previous periods and also with the benchmarks.

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Breakeven Analysis
o Breakeven analysis is a technique used by managers to study
the relationship between costs, volume and profits.
o It determines the probable profit and losses at different levels
of activity.
o The sales volume at which here is no profit, no loss is known
as breakeven point.
o It is a useful technique for the managers as it helps in
estimating profits at different levels of activities.
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡𝑠
o Breakeven Point =
𝑆𝑒𝑙𝑙𝑖𝑛𝑔 𝑝𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡−𝑉𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡

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 o Breakeven point is determined by the intersection of Total
Revenue and Total Cost curves
o Breakeven analysis helps a firm in keeping a close check over
its variable costs and determines the level of activity at which
the firm can earn its target profit.
Budgetary Control
o Budgetary control is a technique of managerial control in
which all operations are planned in advance in the form of
budgets and actual results are compared with budgetary
standards.
o A budget is A quantitative statement prepared for a definite
future period, reflecting objectives, policies, and forecasts
(time & quantities).
o Budgeting offers the following advantages:
1. Budgeting focuses on specific and time-bound targets and
thus, helps in attainment of organisational objectives.

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2. Budgeting is a source of motivation to the employees who
know the standards against which their performance will be
appraised and thus, enables them to perform better.
3. Budgeting helps in optimum utilisation of resources by
allocating them according to the requirements of different
departments.
4. Budgeting is also used for achieving coordination among
departments and highlights the interdependence between
them. A quantitative statement prepared for a definite future
period, reflecting objectives, policies, and forecasts (time &
quantities).
5. It facilitates man agement by exception by focusing on
significant deviations.
Modern Techniques
o Modern techniques of controlling are those which are of
recent origin and are comparatively new in management
literature.

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 o These techniques provide a refreshingly new thinking on the
ways in which various aspects of an organisation can be
controlled.
o These include:
(a) Return on investment
(b) Ratio analysis
(c) Responsibility accounting
(d) Management audit
(e) PERT and CPM
(f) Management information system
Return on Investment
• Return on Investment (RoI) is a useful technique which
provides the basic yardstick for measuring whether or not
invested capital has been used effectively for generating
reasonable amount of return.
• RoI can be used to measure overall performance of an
organisation or of its individual departments or divisions.
• It can be calculated as under ,
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒 𝑆𝑎𝑙𝑒𝑠
• 𝑅𝑂𝐼 = ×
𝑆𝑎𝑙𝑒𝑠 𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

47
 • Net Income can be taken before or after tax .
• Total investment includes both working and fixed capital .
• RoI can be increased either by increasing sales volume
proportionately more than total investment or by reducing
total investment without having any reductions in sales
volume.
• RoI provides top management an effective means of control
for measuring and comparing performance of different
departments.
• It also permits departmental managers to find out the
problem which affects RoI in an adverse manner
Ratio Analysis
• Ratio Analysis refers to analysis of financial statements through
computation of ratios.
• The most commonly used ratios used by organisations can be
classified into the following categories:
1. Liquidity Ratios: calculated to determine short-term
solvency of business. Analysis of current position of liquid
funds determines the ability of the business to pay the amount
due to its stakeholders. Example: Current Ratio, Quick Ratio.

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2. Solvency Ratios: calculated to determine the long-term
solvency of business are known as solvency ratios. Thus, these
ratios determine the ability of a business to service its
indebtedness. Example: Debt-Equity Ratio, Interest Coverage
Ratio.
3. Profitability Ratios: calculated to analyse the profitability
position of a business. Such ratios involve analysis of profits
in relation to sales or funds or capital employed. Example:
Gross Profit Ratio, Net Profit Ratio, Return on Capital
Employed
4. Turnover Ratios: Turnover ratios are calculated to
determine the efficiency of operations based on effective
utilisation of resources. Example: Inventory Turnover,
Debtors Turnover, Assets Turnover.Higher turnover means
better utilisation of resources.
Responsibility Accounting
Responsibility accounting is a system where an organization is
divided into responsibility centres, and each centre’s head is
accountable for meeting its targets.
Different types of responsibility centres:
1. Cost Centre or expense centre: A segment of an organisation
in which managers are held responsible for the cost incurred in

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 the centre but not for the revenues. For example, in a
manufacturing organisation, production department is
classified as cost centre.
2. Revenue Centre: A part of an organization responsible mainly
for generating revenue, such as the marketing department.
3. Profit Centre: A part of an organization whose manager is
responsible for both revenues and costs, like a repair and
maintenance department that bills other departments.
4. Investment Centre: A part of an organization responsible for
profits and the investments made in its assets, evaluated based
on return on investment.
Management Audit
Management Audit is the systematic evaluation of an
organization’s management performance to assess efficiency,
effectiveness, and identify deficiencies, aiming to improve future
performance.
Advantages:
1. Identifies current and potential deficiencies in management
functions.

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 2. Enhances the control system by monitoring management
performance.
3. Improves coordination among departments to achieve
organizational objectives.
4. Updates managerial policies and strategies in response to
environmental changes.
Limitations:
• No standard techniques exist for conducting management
audits.
• It is not legally compulsory, though useful for improving
overall performance.
PERT and CPM
PERT - Programme Evaluation and Review Technique
CPM – Critical Path Methode
PERT and CPM are network techniques used for planning,
scheduling, and controlling time-bound projects with complex,
interrelated activities. They focus on time scheduling, resource
allocation, and cost-effective execution of projects.

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 Steps in PERT/CPM:
1. Divide the project into identifiable activities arranged in a
logical sequence.
2. Prepare a network diagram showing the sequence, start, and
end points.
3. Estimate time for each activity:
o PERT: Three time estimates – optimistic(or shortest
time), pessimistic(or longest time), and most likely time.
o CPM: Single time estimate plus cost estimates.
4. Identify the critical path, the longest sequence of activities
where delays would delay the project.
5. Modify the plan if needed to ensure timely completion.
• PERT and CPM are Widely used in shipbuilding, construction,
aircraft manufacturing, and other complex projects.
Management Information System : Management Information
System are modern techniques of managerial control.

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