UNIT V

DIRECTING FUNCITON

5.1 MEANING AND ESSENTIALS OF DIRECTING

Directing may be defined broadly as the process of instating action to achieve predetermined
objective. No matter how permissive and democratic a manager wants to be, he has to indicate
what he wants done. The traditional manager includes not only what, but also how, while the
behaviorists suggest that more freedom be permitted in the manner in which a job is done.
Directing deals with influencing guiding, supervising and motivating the subordinates for the
accomplishment of pre-stated goals and objectives. Through the directing function the
manager initiates action intergrades employees efforts, attempts to get maximum out of
individuals, facilities changes as it may be appreciate and provides stability and balance in the
organization.
Directing function consists of four-sub functions or elements: leading, motivating,
communicating and supervising or overseeing the work of others.

5.2 LEADERSHIP DEFINED

There are many ways of looking at leadership and many interpretations of its meaning.
Leadership might be interpreted in simple terms, as ‘getting others to follow’ or ‘getting people
to do things willingly’, or interpreted more specifically, for example as ‘ the use of authority in
decision making’. It may be exercised as an attribute of position, or because of personal
knowledge or wisdom.

Leadership might be based on a function of personality, or it can be seen as a behavioral

category. It may also be viewed in terms of the role of the leaders and their ability to achieve
effective performance from others. Leadership is related to motivation, interpersonal behavior
and to the process of communication. Good leadership also involves the effective process of
delegation.

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It is difficult, therefore, to generalize about leadership, but essentially it is a relationship through
which one person influences the behavior of other people. This means that the process of
leadership cannot be separated from the activities of groups and with effective team building

Components/Elements of Directing
The directing function of management is a combination of its five different
components such as supervision, motivation, leadership, communication, and
coordination. Integration of all these elements makes the direction function more
effective.
Supervision
Supervision, as a vital component of directing, involves directly guiding and
overseeing subordinates to ensure the successful completion of assigned tasks.
Supervisors maintain close interaction with employees, monitoring their work and
providing timely feedback to ensure adherence to planned schedules.
Through supervision, managers establish a foundation for the controlling function
by receiving valuable feedback on performance progress. Regularly supervising
subordinates allows managers to assess whether their work aligns with
established plans, policies, and strategies, fostering a sense of accountability and
facilitating the achievement of organizational goals.
Motivation
Motivation, an essential component of directing, is both a human and
psychological factor. It operates under the belief that happy employees are more
likely to be productive workers. Motivation is intricately linked to human behavior
and needs.
As an essential management function, it involves inspiring and stimulating
employees through psychological processes, fostering a willingness to dedicate
their best efforts toward the achievement of organizational goals.
By incorporating motivation as a component of directing, managers can
effectively harness employee potential and drive overall success.
Leadership
Leadership is a crucial component of directing, involving the ability to influence
and gain acceptance for instructions and guidance. Effective managers exhibit

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strong leadership qualities like vision, confidence, empathy, and serving as role
models.
They also have the flexibility to adapt their leadership style, whether autocratic or
democratic, to suit the organization’s needs. Leadership drives employee
motivation, fosters a positive work environment, and ultimately contributes to
the accomplishment of organizational objectives.
Communication
Communication, as a component of directing, serves as the medium through
which individuals exchange various forms of information, ideas, and facts. It plays
a fundamental role in establishing and strengthening relationships within the
workplace.
The effectiveness of the organization’s internal relationships greatly relies on the
successful implementation of a robust communication system. By promoting clear
and efficient communication channels, managers facilitate better understanding,
collaboration, and coordination among employees, contributing to a more
cohesive and productive work environment.
Coordination
Coordination, as an integral component of directing, involves bringing together all
the elements of the organization, including functions, plans, strategies, resources,
and people, to create a unified and competitive force that drives the attainment
of goals.
It ensures that actions are aligned, fosters synergy among different parts of the
organization optimizes resource utilization, and facilitates efficient goal
achievement. By promoting coordination, managers enhance collaboration,
streamline processes, and create a harmonious working environment that
maximizes productivity and success.

LEADERSHIP AND MANAGEMENT

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What is the relationship between management & leadership? Sometimes management and
leadership are seen as synonymous. There is, however, a difference between the two and it
does not follow that every leader is a manager.

Management is more usually viewed as getting things done through other people in order to
achieve stated organizational objectives. The manager may react to specific situations and be
more concerned with solving short-term problems. Management is regarded as relating to
people working within a structured organization and with prescribed roles. To people outside of
the organization the manger might not necessarily be seen in a leadership role.

The emphasis of leadership is on interpersonal behavior in a broader context. It is often

associated with the willing and enthusiastic behavior of followers. Leadership does not
necessarily take place within the hierarchical structure of the organization. Many people
operate as leaders without their role ever being clearly established or defined. A leader often
has sufficient influence to bring about long-term changes in people’s attitudes and to make
change more acceptable. Leadership can be seen primarily as an inspirational process.

There are other differences between leadership and management. For example, Zalezik
explores difference in attitudes towards goals, conceptions of work, relations with others, self-
perception and development.

Managers tend to adopt impersonal or passive attitudes towards goals. Leaders adopt a more
personal and active attitude towards goals.

In order to get people to accept solutions, the manager needs continually to co-ordinate and
balance in order to compromise conflicting values. The leader creates excitement in work and
develops choices that give substance to images that excite people.

In their relationships with other people, managers maintain a low level of emotional
involvement. Leaders have empathy with other people and give attention to what events and
actions mean.

Managers see themselves more as conservators and regulators of the existing order of affairs
with which they identify, and from which they gain rewards. Leaders work in, but do not belong
to, the organization. Their sense of identity does not depend upon membership or work roles
and they search out opportunities for change.

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The differences between leadership and management have been applied by Watson to the 7-S
organizational framework of: strategy, Structure, systems, style, staff, skills and subordinate (or
shared) goals. Watson suggests that whereas mangers tend towards reliance on strategy,
structure, and systems; leaders have an inherent inclination for utilization of the “soft” Ss of
style, staff, and skills and shared goals.

The Difference between Leadership and Management

According to the dictionary, management is conducting, coordinating, being in charge of, and
having responsibility for. Managers master routines and create efficiency. In contrast, leading is
influencing: guiding in direction, course, action or opinion. Leaders acquire vision and judgment
and become effective.
According to Warren Bennis, managers are people who do things right, and leaders are people
who do the right thing.

Another way to think about it is in terms of single-loop and double-loop adaptation. Single-loop
adaptation refers to adjustments made to keep moving along a predetermined course. Like the
action of a thermostat: you set it at 68 degrees, and when the temperature goes below 68 it
turns on the heat, and when the temperature gets much above 68 it turns on the air
conditioning.
A manager has a set of goals (responsibilities), and set of tools (authority) and they use the
tools to accomplish the goals. In this sense, a manager is like a thermostat or single-loop
governor.
Double-loop adaptation refers to adjusting not the actual temperature, but the desired
temperature. Think of a smart thermostat that would notice that, in the winter, at night you
often dial the temperature down to 60 degrees, but at 7am you turn it back up to 68. Then,
when you leave the house, you turn it back down to 60, and so on. So it sees that and changes
its desired setting based on the time of day and the activity level in the house.

In organizational settings, double-loop adaptation refers to reacting to situations not by fixing

things so that everything is back to normal, but instead re-evaluating priorities -- looking
beyond the way things have always been done and asking whether more fundamental change is
needed. This is the job of a leader.

Strategies of Leadership (according to Warren Bennis)

Vision: Vision refers to the management of attention. The creation of focus, the provision of an
agenda or agendas. Vision creates commitment, interest and motivation. One kind of vision is a
new and captivating idea of what is possible.

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Communication of Meaning: Manager communicates know-how. The leader communicates
know-why. The leader provides the interpretation of events. Meaning comes from relating
events to past events, to individual lives, and from touching emotions. Symbols and symbolic
action can be used to communicate meaning.
Examples: the metaphors that Martin Luther King was fond of. Another example is provided by
Admiral Rickover of the Navy (now retired) who did not permit senior officers to have a rule
book. When he would take over a new post, he would publicly and literally throw the rule
books in the trash.

Development of Trust through Action: Leader wears his or her vision like clothing. Leader
becomes living epitome of their visions. This is another way of saying they have integrity -- they
are internally consistent and reliable with respect to key elements that they stand for.
Examples: Martin Luther King's non-violent approach to creating non-violence between races --
the message is in the method; Rickover's legendary (and very abrasive) honesty.

Deployment of self through positive self-regard: Recognize and utilize your strengths and
compensate for weaknesses. Nurturing of skills with discipline, keep developing talents. Do not
dwell on the possibility of failure. Simply trust that it will work out if you work steadily toward
that goal. People who are happy with themselves can make others happy. This is related to
Vision, and Communication of Meaning above. Part of leadership is causing others to be
touched by what Freud called the "oceanic" feeling: an almost religious feeling of being part of
something truly grand.

Empower Others. Big things cannot be done alone. You cannot achieve great things without
great help. Even if they end up getting the credit, it is better to be an unrecognized part of a
successful enterprise than lord of a failure. And by empowering others, they feel greater due to
their connection with you.

Work the Network. The social world does not consist of independent atoms or molecules, like a
truckfull of sand. Instead, people are linked together in a vast network of communication and
influence. To get things done, it is important to manage all the inputs that individuals have,
rather than just the direct connection with the leader.

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5.2.1 FORMAL VERSUS INFORMAL LEADERS

A leader may be imposed, formally appointed or elected, chosen informally, or emerge

naturally through the demands of the situation or the wishes of the group. Leadership may be
attempted, successful or effective.

Attempted leadership is when any individual in the group attempts to exert influence over
other members of the group.
Successful leadership is when the influence brings about the behavior and results that were
intended by the leader.

Effective leadership is when successful leadership results in functional behavior and the
achievement of group goals.

The leader may exercise authority as an attribute of position. In this case the manager is seen as
a leader because of a stated position in the hierarchy. Leadership, however, is more than just
adherence to a formal role prescription. It is more than eliciting mechanical behavior which
results from superior-subordinate relationship in a hierarchical structure.

Remember that you can be appointed as manager but you are not a leader until your
appointment is ratified in the hearts and minds of those who work for you. Then, what is the
source of power that will enable the leader to influence the behavior of followers? Five main
sources of power upon which the influence of the leader is based have been identified by
French and Raven.

Reward power is based on the subordinate’s perception that the leader has the ability and
resources to obtain rewards for those who comply with directives; for example, pay,
promotion, praise, recognition, increased responsibilities, allocation and arrangement of work,
granting of privileges.

Coercive power is based on fear and the subordinate’s perception that the leader has the ability
to punish or to bring about undesirable outcomes for those who do not comply with directives;
for example, withholding pay rises, promotion or privileges; allocation of undesirable duties or

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responsibilities; withdrawal of friendship or support; formal reprimands or possibly dismissal.
This is in effect the opposite of reward power.

Legitimate Power is based on the subordinate’s perception that the leader has a right to
exercise influence because of the leader’s role or position in the organization. Legitimate power
is based on authority, for example that of managers and supervisors within the hierarchical
structure of an organization. Legitimate power is therefore ‘position’ power because it is based
on the role of the leader in the organization, and not on the nature of the personal relationship
with others.

Referent power is based on the subordinate’s identification with the leader. The leader
exercises influence because of perceived attractiveness, personal characteristics, reputation or
what is called ‘charisma’. For example, a particular manager may not be in a position to reward
or punish certain subordinates, but may still exercise power over the subordinates because the
manager commands their respect or esteem.

Expert power is based on the subordinate’s perception of the leader as someone who is
competent and who has some special knowledge or expertise in a given areas. Expert power is
based on credibility and clear evidence of knowledge of expertise; for example, the expert
knowledge of ‘functional’ specialists such as the personnel manager, management accountant
or systems analyst. The expert power is usually limited to narrow, well-defined areas or
specialists.

These sources of power are based on the subordinate’s perception of the influence of the
leader, whether it is real or not. For example, if a leader has the ability to control rewards and
punishments but subordinates do not believe this, then in effect the leader has no reward or
coercive power.

Leadership is a dynamic form of behavior and there are a number of variables which affect the
leadership relationship. Four major variables are identified by McGregor as: characteristics of
the leader; the attitude, needs and other personal characteristics of the followers; the nature of
the organization, such as its purpose, its structure, the tasks to be performed; and the social,
economic and political environment. McGregor concludes that ‘leadership is not a property of
the individual, but a complex relationship among these variables

INFLUENCE TACTICS
The presence or absence of power sources does not tell the whole story of how influence
affects the behavior and attitudes of others. Simply because we have either the expertise or the

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power to adjust rewards or coerce does not mean we are obliged to use these power sources.
Depending on the situation and our own personality, we may use a variety of tactics to try to
influence others. A study of the ways in which individuals in organizations attempt to use
influence (Yukl, 1994) revealed nine tactics.

Rational persuasion: The agent uses logical arguments to persuade the target that a proposal or
request is viable and likely to result in attainment of task objectives.

Inspirational Appeals: The agent makes a request or proposal that arouses the target’s
enthusiasm by appealing to the target’s values, ideals, and aspirations, or by increasing the
target’s self-confidence.
Consultation: The agent seeks the target’s participation in planning a strategy, activity, or
change for which the target’s support and assistance are desired, or is willing to modify a
proposal to deal with the target’s concerns and suggestions.

Ingratiation: The agent uses praises, flattery, friendly behavior, or helpful behavior to get the
target in a good mood or to think favorably of his or her request for something.

Personal Appeal: The agent appeals to the target’s feelings of loyalty and friendship when
asking for something.

Exchange: The agent offers an exchange of favors, indicates a willingness to reciprocate at a

later time, or promises a share of the benefits if the target helps accomplish the task.
Coalition Tactics: The agent seeks the aid of others to persuade the target to do something, or
uses the support of others as a reason for the target to agree also.

Legitimating Tactics: The agent seeks to establish the legitimacy of a request by claiming the
authority or right to make it, or by verifying that it is consistent with the organizational policies,
rules, practices, or traditions.

Pressure: The agent uses demands, threats, frequent checking, or persistent reminders to
influence the target to do what he or she wants.

One of the most important life skills we can develop is the ability to understand our sources of
power, identify which sources to call upon a given situation, and choose appropriate influence
tactics.

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OUTCOMES OF INFLUENCE ATTEMPTS

Clearly the nature of the influence process and the sources of power combine to influence the
responses of followers. The success of any influence attempt is defined in terms of the response
of the follower, or object for the influence effort. Yukl (1994) describes three possible outcomes
of influence attempts:

Resistance: The person you are trying to influence resists your efforts to influence his or
behavior and either avoids, ignores, or actively resists your efforts at influence. This resistance
can take several forms as

Refuse outright to accede to your attempts to influence them.

Ignore your efforts at different influence.
Make excuses why they cannot do what you want.
Ask higher authorities to overrule your request.
Attempt to persuade you to withdraw your attempt at influence.
Delay acting on your influence efforts.
Make a pretense of complying while actively attempting to sabotage your efforts.

Compliance: The person you are trying to influence accedes to your influence attempt, but
apathetically or unenthusiastically. When the response to your influence attempt can be
described as compliance, it is likely you have been successful in influencing the behavior but not
the attitudes of your influence target.
Commitment: The object of your influence attempt agrees with your decision or influence effort
and makes an enthusiastic, voluntary effort to de what you have asked. The response comes
not because the person has to but because he or she wants to.

PERSONAL RESPONSES TO INAPPROPRIATE BEHAVIOR

When some one tries to influence us and we are either disinterested or mildly to moderately
opposed, we typically resist. But what about those influence attempts in which the stakes are
much higher and we are confronted with a situation that involves our dignity, safety, or
important personal values and issues? According to Verderber (1995), we typically have three
choices: to respond passively, to respond aggressively, or to respond assertively.
Passive Behavior: Even though we may care deeply about the outcome of the influence
attempt, we sometimes become passive in the face of overwhelming force or the consequences
of the influence attempt.

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Aggressive Behavior: When we lash out at the sources of the influence attempt, either
physically or verbally, we are engaging in aggressive behavior. We sometimes confuse
aggressive behavior with assertive behavior when, in fact, they are quite different. Aggressive
behavior is judgmental, fault finding, dominating, pressuring, and often involves the overt
expression of anger and hostility.

Assertive Behavior: Even though we may hurt, frightened, or profoundly angry, the ability to
respond adverse attempts to influence us is one of the most important interpersonal skills we
can develop. The ability to respond assertively in stressful or significant situations is generally
considered as characteristic of emotional maturity. Assertive behavior is simply standing up for
your own interests, but in a way that is interpersonally effective and does not require that there
be a winner or a loser. Assertive behavior usually leaves both the object and agent of the
influence attempt emotionally intact and does not create a legacy likely to leave one party
scheming about getting event for what is perceived as unfair treatment. Verderber (1995)
suggest the strategies listed below as practical ways to behave assertively.
Own your feelings: Acknowledge how you are feeling, but in a way that does not put down the
other person.

Avoid confrontational language: Refrain from using threats, putdowns, or challenges.

Use specific behaviors appropriate for the situation at hand: Make your response appropriate
to the situation; do not make unnecessary references to unrelated situations.
Maintain eye contact and a firm body position: you need to be seen as firm (even if you are
frightened or unsure), but not confrontational. These are good skills to develop and practice in
advance of the need to use them.
Maintain a firm but pleasant tone of voice; speak clearly; avoid hemming and hawing:
Aggression is accompanied by yelling; passivity by extreme quietness. To be assertive you must
remember that more of your message is transmitted in the way you deliver it than in the words
themselves.

PERSONAL STRATEGIES FOR BUILDING INFLUENCE

The degree to which we are influential with others depends to a large extent on:
Our personal or organizational sources of power.
Our awareness of our sources of power.
Our ability to select a personal influence tactic appropriate to a given situation.
our ability to respond assertively when faced with inappropriate or adverse influence attempts.

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5.2.2 Theories of Leadership

Due to its complex and variable nature there are many ways of analyzing leadership. It is
helpful, therefore, to have some framework in which to consider different approaches to
study of the subject.

[Link] Trait Theory

This theory assumes that leaders are born and not made. Leadership consists of certain
inherited characteristics, personality traits, which distinguish leaders form their followers: the
so called ‘Great person’ theory of leadership. The qualities approach focuses attention on the
man or woman in the job and not on the job itself. It suggests that attention is given to the
selection of leaders rather than to the training for leadership. For example, Drucker (1955)
makes this point: Leadership is of utmost importance. Indeed there is no substitute for it. But
leadership cannot be created or promoted. It cannot be taught or learned.

Numerous trait studies have been made of the physical, intellectual, and social characteristics
of leaders. According to George R. Terry, traits generally found associated with leadership are
mental and physical energy, emotional stability, knowledge of human relations, empathy,
objectivity, personal motivation, communication skills, teaching ability, social skills and
technical competence. According to Fayol, the leader should have good health and physical
fitness, intelligence, and mental vigour, moral qualities, knowledge and managerial ability.
Ordway Tead give a list of ten qualities necessary for leadership. These are: physical and
nervous energy, sense of purpose and direction, enthusiasm, friendliness and affection,
integrity, technical mastery, decisiveness, intelligence, teaching skills and faith.

QUALITIES OF A LEADER

Although the trait theory advocates have failed to build a comprehensive model of leadership,
their work has articulated and forced into a sharp focus on the qualities of a leader. One can
group these qualities into three broad categories: physical qualities, moral qualities and mental
qualities.

Physical Qualities That a leader must possess a high degree of physical and nervous energy is
almost axiomatic. He must have a sense of robust joy in his mission and great vigor of body and
mind to stand up to the stress and strain of his high office and responsibility.

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Moral qualities First among moral qualities is moral courage. This enables a person, on one
hand, to stick to his goal without faltering, and on the other, to own the responsibility of his
action, should the action prove blameworthy later on. Next comes, the sense of fair play and
justice. A leader must possess this quality to be able to motivate his men into action. Finally, a
leader should have integrity, that is, a consistency of motives as evidenced in the leader’s public
and private affairs. During the Second World War when the supply of meat was rationed in
England, Winston Churchill used to receive no more quota of meat than the least important
person in the country.

Qualities of the Head. First among these is social maturity and breadth. Leaders are emotionally
mature so that they are neither frustrated nor overjoyed by success. Their anti-social attitudes,
such as hostility towards others are at a minimum. Next comes knowledge. A leader’s
knowledge of a subject or technique must be greater than that of the followers. If it is not so he
has no justification to lead them. He can, therefore, never afford to stop learning. Knowledge
of a subject matter is important but what is more important is the knowledge of human nature.
A leader must possess decisiveness. Vacillation is fatal for a leader. But rigidity of decision is
equally bad. It is the way of an autocrat. As Thomas Carlyle said “ A foolish consistency is the
hob-goblin of a little mind.” A leader must also possess empathy or social sensitivity. It is the
ability to look at things objectively and understand them from another’s point of view. It is the
capacity of the individual to project himself mentally and emotionally into position of another
person. This quality enables the leader to anticipate the sentiments and reactions of others and
to prepare his own strategy accordingly. Then comes initiative. Given a sense of purpose and
direction, the success or failure of an leader very much depends on his initiative in organizing
the means to achieve his objective. Initiative simply means doing the right thing without being
told. The last one is intuition. This ability comes from the right part of an individual’s brain. It
enables a leader to take decisions under circumstances where the complete data necessary for
reaching a rational decision (by the use of the left brain) are not available or are too costly to be
gathered immediately.

Traits theory has been criticized on the following grounds:

This approach failed to identify any traits being absolutely essential for leadership.
There is the problem of measuring traits.
This approach overlooks the situational nature of leadership.
This approach implies that training cannot make a man a leader.
Even Jnnings concluded, Fifty years of study have failed to produce one personality trait or set
of qualities that can be used to discriminate between leaders and non-leaders.

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However, leaders are different from non-leaders. Stogdill discovered that the average person
occupying a position of leadership exceeded the average member of the group in
characteristics such as intelligence, scholarship, dependability in exercising responsibility,
originality, social participation and socio-economic status.

[Link] The Behavioral Styles theory

This theory to leadership focuses attention not on the personality of the leader, nor on the man
or woman in the job, per se, but on the functions of leadership. Leadership is always present in
any group engaged in a task. The functional approach views leadership in terms of how the
leader’s behavior affects, and is affected by, the group of followers. This approach concentrates
on the nature of the group, followers or subordinates. It focuses on the content of leadership.

Greater attention can be given to the successful training of leaders and to the means of
improving the leaders’ performance by concentrating on the functions which will lead to
effective performance by the work group.

The functional approach believes that the skills of leadership can be learnt, developed and
perfected. Kottter, for example, makes the point that successful companies do not wait for
leaders to come along.

They actively seek out people with leadership potential and expose them to career experiences
designed to develop that potential. Indeed, with careful selection, nurturing and
encouragement, dozens of people can play important leadership roles in a business or in any
organization.

The advantages of the functional approach to leadership have been well expressed by Miles.

The functional approach does not get bogged down (as other theories tend to) on the issue of
the appointed leaders versus the emergent leader. Both the official leader and the group
member who happens to come up with the right function at the right time are doing the same
thing: supplying functions needed by the group. The appointed leader who does not do so will
become leader in name only, even though he may retain his authority until he retires twenty
years hence. Most groups do have appointed leaders as kind of ‘safety net’ or guarantee that
someone will fill needed functions, but the approach taken here assumes that the appointed
leader and members alike may exert leadership.

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FUNCTIONS AND RESPONSIBILITIES OF LEADERSHIP

To help understand the process of leadership it is necessary to analyze the role of the leader
and the functions and responsibility of the leadership. These functions require different
emphasis in different situations according to the nature of the group. The same leadership
position may also change over a period of time. It is possible, however, to list a range of general
functions which are served by the leadership position. A useful summary is provided by Krech
who identifies fourteen functions.

The leader as executive – top coordinator of the group activities and overseer of the execution
of policies.
The leader as planner - deciding the ways and means by which the group achieves its ends. This
may involve both short-term and long-term planning.
The leader as policy maker – the establishment of group goals and policies.
The leader as expert – a source of readily available information and skills, although there will be
some reliance on technical expertise and advice from other members of the group.

The leader as external group representative – the official spokesperson for the group, the
representative of the group and the channel for both outgoing and incoming communications.

The leader as controller of internal relations – determines specific aspects of the group
structure.

The leader as purveyor of rewards and punishment – control over group members by the power
to provide rewards and apply punishments.
The leader as arbitrator and mediator – controls interpersonal conflict within the group.

The leader as example as – a model of behavior for members of the group, setting an example
of what is expected.

The leader as symbol of the group –enhancing group unit by providing some kind of cognitive
focus and establishing the group as distinct entity.
The leader as substitute for individual personality –relieves the individual member of the group
from the necessity of, and responsibility for, personal decision.

The leader as ideologist –serving as the source of beliefs, values and standards of behavior for
individual members of the group.

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The leader as father figure –serving as the focus for emotional feelings of individual members
and the object for identification and transference.
The leader as scapegoat – serving as a target for aggression and hostility of the group,
accepting blame in the case of failure

It is important to note that leadership resides in the functions and not a particular person. The
various functions of leadership can be shared among members of the group. If a member
provides a particular function which is relevant to the activities of the group, and accepted by
group members, then in those circumstances this could become a leadership function.

ACTION –CENTERED LEADERSHIP

A general theory on the functional approach is associated with the work of John Adair and his
ideas on action-centered leadership. The effectiveness of the leader is dependent upon meeting
three areas of need within the work group: The need to achieve the common task, the need for
team maintenance, and the individual needs of group members.

Task functions involve:

Achieving the objectives of the group;
Defining group tasks;
Planning the work;
Allocation of resources;
Organization of duties and responsibilities;
Controlling quality and checking performance;
Reviewing progress.

Team functions involve:

Maintaining morale and building team spirit;
The cohesiveness of the group as a working unit;
Setting standards and maintaining discipline;
Systems of communication within the group;
Training the group;
Appointment of sub-leaders.

Individual functions involve

Meeting the needs of the individual members of the group;
Attending to personal problems;

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Giving praise and status;
Reconciling conflicts between group needs and needs of the individual;
Training the individual.

The action by the leader in any one area of need will affect one or both of the other areas of
need. The ideal position is where complete integration of the three areas of need is achieved. In
any work group the most effective leader is the person who sees that the task needs, the needs
of the group and those of the individual are all adequately met. The effective leader elicits the
contribution of members of the group and draws out other leadership from the group to satisfy
the three interrelated areas of need.

To achieve integration of the three needs, Adair suggest that the leader needs:

Awareness of what is going on in groups, the group process or underlying behavior, and the
actual content of discussion;
Understanding, that knows that a particular function is required; and the skill to do it
effectively, which can usually be judged by whether the group responds or changes course.

LEADERSHIP AS A BEHAVIORAL CATEGORY

This approach draws attention to the kinds of behavior of people in leadership situations. One
of the most extensive research studies on behavioral categories of leadership was the Ohio
State Leadership Studies undertaken by the Bureau of Business Research at Ohio State
University. The focus was on the effects of leadership styles on group performance.
Questionnaires were designed which comprised a list of descriptive items each dealing with a
specific aspect of leadership behavior. The questionnaires were used repeatedly in different
kinds of organizations and in a variety of leader-group member situations.

CONSIDERATION AND STRUCTURE

Results of the Ohio State Studies indicated two major dimensions of leadership behavior,
labeled ‘consideration’ and ‘initiating structure’.

Consideration reflects the extent to which the leader establishes trust, mutual respect and
rapport with the group and shows concern, warmth, support and consideration for
subordinates. This dimension is associated with two-way communication, participation and
human relations approach to leadership.

17
Structure reflects the extent to which the leader defines and structures group interactions
towards attainment of formal goals and organizes group activities. This dimension is associated
with efforts to achieve organizational goals.

Consideration and initiating structure can be seen as the same as maintenance function
(building and maintaining the group as a working unit and relationships among group members)
and task function (accomplishment of specific tasks of the groups and achievement goals).

FOUR TYPES OF LEADERSHIP BEHAVIOR

Consideration and initiating structure were found to be uncorrelated and independent

dimensions. They are separate behavioral categories and give rise to four types of leadership
behavior. Leaders may be:

Low on consideration and low on structure;

Low on consideration and high on structure;

High on consideration and high on structure;

High on consideration and low on structure.

Leadership behavior could, therefore, be shown on two separate axes instead of along a single
continuum. As a result four quadrants were developed which illustrated the different
combination of ‘consideration’ and ‘structure.

Low consideration and High consideration and

High High structure High structure

18
 Str Low consideration and High consideration
ucture Low structure And low structure

Low

Low
High

CONSIDERATION
Figure 1 The Ohio State Quadrants of Leadership behavior

Research into the effects of these four types of leadership behavior suggests that some balance
is needed between consideration and structure in order to satisfy both the individual needs and
organizational goals. A high consideration, high structure style appears to be generally more
effective in terms of subordinate satisfaction and group performance, but the evidence is not
conclusive and much seems to depend upon situational factors.

EMPLOYEE CENTERED AND PRODUCTION CENTERED SUPERVISORS

Another major research study was carried out at the University of Michigan Institute for Social
Research at the same time as the Ohio State Studies. Effective supervisors (measured along
dimensions of morale, productivity and cost reduction) appeared to display four common
characteristics:

Delegation of authority and avoidance of close supervision;

An interest and concern in their subordinates as individuals;
Participative problem solving; and
High standards of performance.

19
Like consideration and structure, employee centered and production-centered supervision
needs to be balanced. Likert concluded that employee-centered supervisors who get best
results tend to recognize that one of their main responsibilities is production. Both the Ohio
State Studies and the University of Michigan studies appear to support the idea that there is no
single behavioral category of leadership which is superior. There are many types of leadership
behavior and their effectiveness depends upon the variables in any given situation.

[Link] THE SITUATIONAL THEORY

This theory concentrates on the importance of the situation in the study of leadership. A variety
of people with differing personalities and from different backgrounds have emerged as effective
leaders in different situations. The person who becomes the leader of the work group is
thought to be the person who knows best what to do and is seen by the group as the most
suitable leader in the particular situation.
The continuum of leadership behavior draws attention to forces in the situation as one of the
main forces influencing the nature of the managerial behavior. The situational approach
emphasizes the situation as the dominant feature in considering the characteristics of effective
leadership.

THEORY OF SERVANT LEADERSHIP

What is the use of living if not to strive for noble cause and to make this muddled world a better
place for those who will live in it after we are gone? Winston Churchill
Perhaps you have seen or heard the phrase “Lead, follow, or get out of the way.” The phrase
seems pretty straightforward—it categorizes people as performers of one of three functions in
our society: leader, follower, and bystander.

These three functions are not exclusive of each other; each of us performs them simultaneously
in the many different arenas in which we operate. But regardless of the mix of functions in our
lives, we know the most successful leaders are also capable of being successful followers.

What are the attributes of successful leaders? You may be able to identify individuals you know
who are successful leaders. They are always searching, listening to others, and expecting that a
better mousetrap is just around the next bend. Above all, they make certain that meeting other
people’s needs is their highest priority. Because of their extreme dedication to the service of
others before themselves, we call them Servant Leaders.

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CHARACTERISTICS OF A SERVANT LEADER

[Link] KNOWLEDGE: Servant leaders know a great deal about themselves. They know about
their skills, prejudices, talents and shortcomings. This knowledge of self is at the heart of the
development of their confidence, and self-confidence is critical to successful leadership (Kouzes
& Posnser, 1990). Leaders know they are most successful when they lead with their strengths
and work to manage their weaknesses.

[Link] TO OTHERS: Often we encounter people who seem to wander through life without
purpose or a sense of direction, playing the third role: bystander. Devoting one’s energies
through service not only assists in the development of another but also brings with it “ a kind of
psychological, emotional, spiritual reward in the form of internal security and peace” (Cnvey,
1990). This reward is not necessarily felt immediately when the servant leader is focusing on
the follower, but comes along in what Covey calls “the second mile”. In reflecting on the
impact he or she has had on the follower, the leader assesses his or her in the other’s
development. This assessment includes consideration of the leader’s talents that were
instrumental in the follower’s development; through this assessment, the servant leader
bolsters his or her self-confidence.
Just how do servants build one-to-one servant relationships? Servant leadership relationships
progress through a series of five developmental levels (Dodge, 1988). It is important for the
leader to be aware of each level so that gentle nudges can be given, when appropriate, to
encourage the progress of the relationship.

OBSERVATION-ENTERTAINMENT: During this initial stage, the servant leader and the individual
with whom the leader is building the relationship or “investee” are getting to know one
another. They begin to explore each other’s likes and dislikes. Participation in spectator
activities, watching television, or attending movies or athletic events gives both individuals
opportunities to begin the process of discovery.

PARTICIPATION-ENTERTAINMENT: In this second stage, the relationship moves beyond the

observation of others to an active role in joint activities.

LEARNING PARTICIPATION: At this level of involvement, the servant leader and the investee
participate in some activity in which they are learning a new skill. (Examples would be learning
to play tennis or chess, taking a class in photography, or participating in other education
programs.) The strength of this type of activity lies in the sharing of both individuals growing
together in the same skill at the same time. Because both individuals are trying to learn

21
something new, they are taking risks. Their willingness to risk with one another builds trust in
the relationship. This trust building is critical, making this one of the significant levels of
interaction.

TEACHING-ORGANIZING: This level of activity occurs only after the relationship has successfully
moved beyond the first three stages. The two individuals begin to help organize and plan
events for others, confident of each other’s skills and interests. The servant leader and investee
is poised to begin his or role as the servant leader in someone’s else’s life.

INVESTING IN OTHERS: At this level, the investee is able to identify personal strengths and, with
the support and guidance of the servant leader, direct these strengths toward helping other
individuals grow. Once the relationship successfully moves through this level, the investee is
poised to begin his or her role as the servant leader in someone else’s life.

Healthy relationships are easily recognized through the strong desire of both parties for mutual
growth and development of the other’s potential. The emotional bank accounts of the servant
leader and the investee grow as both put the needs of the other before their own (Covey,
1990). This selflessness is born out of genuine desire for what is best for the other, and that
desire, coupled with trust building, will carry the relationship successfully through these five
levels of servant leader investment.

MOTIVATION OF OTHERS: Leaders start by getting to know their followers, taking the time to
determine the individual strengths and interests of each. Using the knowledge of individual
strengths and interests, leaders delegate tasks the followers are capable of and interested in
doing. Motivation then becomes what people generate for themselves when they experience
growth (Senge, 1990).

ACTIVE LISTENING: Servant leaders have well-developed listening skills. They are able to focus
all their attention on the speaker and to “seek first to understand then to be understood”
(Covey, 1990). Servant leaders do not merely wait to the speaker to finish so they may tell their
stories, but analyze the speaker’s message, preparing to ask questions and respond
empathetically. Servant leaders recognize that little can be learned by speaking, but only by
listening to the messages of others.

INSTIGATION OF CHANGE: Servant leaders realize that things seldom remain as they are and
that change is a way of life. In fact, most often servant leaders are the ones who instigate
change. If asked to describe change, servant leaders would focus on the change’s impact on the
followers and others who will be directly or indirectly affected or influenced by the change.

22
Servant leaders apply a simple litmus test when contemplating change: If I encourage this, do
those served grow as persons? Do they, while being served, become healthier, wiser, free, more
autonomous, more likely themselves to become servant? And what is the effect on the least
privileged in society; will they benefit or, at least, not be further deprived? (Greenleaf, 1977).

TRUSTWORTINESS: We often hear leaders say they would not ask others to do something they
themselves would not do. In involving others in the effort, the building of the vision community
begins (Neal, 1990). The vision community is a group of individuals bound together by the same
vision, shared values, and common goals. In the beginning, the servant leader and the followers
are on a honeymoon, finding out about each other – their hopes, dreams, strengths, and
weaknesses – and building a relationship. During this time discovery, the followers are learning
about the integrity of the leader. The followers will be sensitized to the leader’s actions, ever
vigilant to be sure that the leader’s words are mirrored in his or her actions. The perceived
integrity of the leader sets up a demonstrated expectation of the integrity of the follower. As a
result, the quality of the leader’s integrity will be reflected in the followers.

One important way in which servant leaders inspire the trust of followers is by freely sharing
the key resource for solving problems: information. Therefore, servant leaders must skillfully
communicate with their followers. They risk as they share because, along with information,
they communicate their opinions, judgements, concerns, intentions, and feelings. This
vulnerability of the servant leader builds trust with the followers as they begin to see
themselves as equal partners in achieving the mutual vision. The mutual vision is supported by
a mutual agreed-on strategy.

If an undercurrent of distrust is allowed to enter the process, followers will hold back. Their
emotional stability will not allow them to be free to express themselves through creative
endeavors. Mistrust causes followers to feel rejected or defensive. Those who do not trust
others will conceal or distort information, and this distortion will lead to action on the basis of
an incomplete portrayal of reality. Mistrust does not allow for development of a mutually
agreed-on strategy between the servant leader and the follower.

VISION: A vision statement states what you truly want out life – not what you predict will
happen in your life. Most important, a vision statement defines the kind of person you want to
be. It details your principles and beliefs. A vision statement gives you the power to create and
design your life around your personal values. It clarifies what is important to you and defines
where you are willing to commit your time, energy and effort. Eg. I have a dream of Martin
Luther King. The clarity of vision helps the servant leaders refocus, adjust, direction, and
continue forward progress.

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ABILITY TO COPE WITH UNCERTAINTY: As we moved through our early education, it may have
seemed every question had a definite answer. As we grow older, we find this is not always the
case. When we work with individuals, not equations, definite answers may not be readily
available. There is no solution manual for all the problems we encounter as we move through
life. Servant leaders realize before embarking on the journey that all the preliminary questions
may not have answers. In some cases, a perfect solution may not exist, and midstream
adjustments may be needed along the way; but the journey is worth the energy the leader and
followers give to it, for along the course of the journey exist opportunities to help others
develop.

REALISM: Although sometimes seen as dreamers, servant leaders are grounded in reality. They
have an accurate, insight view of current reality, and are able to understand and account for
the limitations and possibilities in themselves and others (Senge, 1990).

FUTURE ORIENTATION: therefore, you have to take risks every day.

OWNERSHIP OF PROBLEMS: Servant leaders see problems as situations whose solutions begin
with them, and they assume ownership for finding and implementing solutions to problems.
Those who assume the role of bystander may view themselves as “only one person,” incapable
of bringing about change, but servant leaders see themselves as compelled to act. This action is
often grounded in the servant leader’s personal responsibility to make a positive difference in
the life of another and, ultimately, the world. This betterment translates into touching other in
a positive manner, either directly or indirectly.

FOLLOWERSHIP: As human beings we participate in many arenas and, generally, we do not

(indeed, cannot) each the role of the servant leader in every arena. But the irony is that “the
follower that is willing to speak out shows precisely the kind of initiative that leadership is made
of (Bennis, 1993). In essence, the very characteristics we see in servant leaders often are found
in their followers. Followership with the support of a strong servant leader is rich training
ground for future servant leaders. Further, servant leaders are not necessarily the individuals
found in the upper strata of organizations. Servant leaders know that leadership is action, and
often they can have a greater impact on others if they are not serving in the upper strata
(Kelley, 1985).

24
CONCLUSION: In his inaugural address of January, 1961, John F. Kennedy immortalized the
statement: “And so, my fellow Americans, ask not what your country can do for you – ask what
you can do for your country.” On a more personal level, servant leadership asks not what
others can do for you, but what you can do for others. It is found in our colleges, factories,
boardrooms, hospitals, civic centers, and any other place people are bound together in
successful vision community. Servant leadership makes a positive difference in the lives of the
followers as well as the leader; most important, each of us has the capacity to be a successful
servant leader.

5.3 LEADERSHIP STYLES

Attention to leadership as a behavioral category has drawn attention to the importance of

leadership style. In the work situation it has become increasingly clear that managers can no
longer rely on solely on the use of their position in the hierarchical structure as a means of
exercising the functions of leadership. In order to get the best results from subordinates the
manager must also have regard for the need to encourage high morale, a spirit of involvement
and co-operation, and a willingness to work. This gives rise to consideration of the style of
leadership and provides another heading under which to analyze leadership behavior.

Leadership style is the way in which the functions of leadership are carried out, the way in
which the manager typically behaves towards members of the group.

The development of behavioral science has drawn attention to the processes of interpersonal
behavior in the work situation and to the effects of leadership on those being led. The attention
given to leadership style is based on the assumption that subordinates are more likely to work
effectively for managers who adopt a certain style of leadership than they will for managers
who adopt alternative styles.

BROAD CLASSIFICATION OF LEADERSHIP STYLE

There are many dimensions to leadership and many possible ways to describing leadership
style, such as, for example, dictatorial, unitary, bureaucratic, benevolent, charismatic,
consultative, participative and abdicatorial.

The style of managerial leadership towards subordinate staff and the focus of power can be
classified within a broad three-fold heading.

5.3.1 Theory X and Theory Y assumptions

25
Douglas McGregor has identified, at the extremes, two styles of managing: Theory X, or
autocratic, and Theory Y, or participative. Each style involves certain assumptions concerning
human nature. A theory X manager has assumed that:

The average human being has an inherent dislike of work and will avoid it if he or she can.
Because of this human characteristic of dislike of work, most people must be coerced,
controlled, or threatened with punishment to get them to put forth adequate effort toward the
achievement of organizational objectives.
The average human begin prefers to be directed, wishes to avoid responsibility, has relatively
little ambition, and wants security above all.

A Theory Y manager holds directly views concerning people and their attitudes toward work.
Assumptions made in Theory Y are:

Work is a source of satisfaction and is as normal as play or rest.

Threat of punishment is only one way to induce people to work, and it is not usually the best
way. People who are committed to achieving the organization’s objectives will display self-
motivation and self-direction.
A person’s commitment to objectives depends on the rewards he or she expects to receive
when goals are achieved.
Under the right condition, the average person will both accept and seek responsibility.
The abilities to think creatively, to innovate, and to solve problems is widely, not narrowly
distributed among people.
The intellectual abilities of most people are under-utilized.

5.3.2 The authoritarian (or the autocratic) style is where the focus of power is with the
manager, and all interactions within the group move towards the manager. The manager alone
exercises decision making and authority for determining policy, procedures for achieving goals,
work tasks and relationships, control of rewards or punishments.

5.3.3 The democratic style is where the focus of power is more with the group as a whole and
there is greater interaction within the group. The leadership functions are shared with
members of the group and the manager is more part of the team. The group members have a
greater say in decision making, determination of policy, implementation of systems and
procedures.

26
5.3.4 A genuine laissez-faire style is where the manager observes that members of the group
are working well on their own. The manager consciously makes a decision to pass the focus of
power to members, allow them freedom of action and not to interfere; but is readily available if
help is needed. There is often confusion over this style of leadership behavior. The word
‘genuine’ is emphasized because this is to be contrasted with the manager who could not care,
who deliberately keeps away form the trouble spots and does not want to get involved. The
manager just lets members of the group get on with the work in hand. Members are left to face
decisions which rightly belong with the manager. This is more a non-style of leadership or it
could perhaps be labeled as abdication.

ATTENTION TO STYLE OF LEADERSHIP

Attention to the manager’s style of leadership has come about because of a greater
understanding of the needs and expectations of people at work. It has also been influenced by
such factors as:
Changes in the value system of society;
Broader standards of education and training;
The influence of trade unions;
Pressure for a greater social responsibility towards employees, for example through schemes of
participation in decision making and the quality of working file; and
Government legislation, for example in the areas of employment protection. All of these
factors have combined to create resistance against purely autocratic styles of leadership.

THE CONTINUUM OF LEADERSHIP BEHAVIOR

One of the best known works on leadership style is that by Tannenbaum and Schmidt. They
suggest a continuum of possible leadership behavior available to a manager and along which
various styles of leadership may be placed. At one extreme of the continuum is boss-centered
leadership (authoritarian) and at the other extreme is subordinate-centered leadership
(democratic).

Boss centered
Leadership Subordinate-centered
Leadership

27
USE OF AUTHORITY
BY THE MANAGER
AREA OF FREEDOM
FOR SUBORDINATES

Manager Manager Manager Manager Manager Manager Manager

makes sells presents presents presents definers permits
decision decision ideas and tentative problem, limits, subordinates
and inertes decision gets asks to function
announces questions subject to suggestions, group within
it change makes to defined by
decision superior
Figure 2 Continuum of leadership behavior

The Styles of leadership on the continuum:-

1) Leader makes decision and announces it: In this case, the leader who is frankly
authoritarian “tells” people what his decisions are, and demands unquestioning
obedience. He does not give any consideration to what they will think or feel about his
decisions. A bureaucratic leader who manages entirely by the organization’s policies,
procedures, and rules and permits people little or no freedom falls under this category.

2) Leader sells decision: Here the leader behaves like a diplomat. Although like an autocrat
he has already taken a decision, he prefers to take the additional step of persuading his
subordinates to accept it. In doing so he usually relates his decision to the personal
individual needs and aspirations of his people. He tells them what they have to gain
from his decision. This style of leadership is indispensable for the ‘staff’ who realize the
inadequacy of their real authority and are utterly dependent on the skills of persuasion
to get the help and cooperation needed.
3) Leader presents ideas and invites questions: Here the leader who has arrived at a
decision provides an opportunity for his subordinates to get a fuller explanation of his
thinking and his intentions. After presenting the ideas, he invites questions so that his
associates can better understand what he is trying to accomplish.

4) Leader presents tentative decisions subject to change: This kind of a behavior permits
the subordinates to exert some influence on the decision. The initiative for identifying
and diagnosing the problem remains with the leader. He also arrives at a tentative

28
 decision. But before finalizing it, he presents this tentative decision for the reaction of
his subordinates.
5) Leader presents problem, gets suggestions, and then makes decision: Up to this point
the leader has come before the group with the solution of his own. Not so in this. The
subordinates now get the first chance to suggest solutions. The leader’s initial role
involves identifying the problem. He then in consultation with his subordinates develops
a list of alternative solutions and selects the solution that he regards as most promising.
In this way he reserves the final decision to himself.

6) Leader defines the problem and limits of actions and lets the group make decision: At
this point, the leader acts as a participative leader. He passes to the group the right to
make decisions either by consensus of majority vote. Before doing so, however, he
defines the problem to be solved and the boundaries within which the decision must be
made.
7) Leader permits subordinates to function within limits defined by the situation: This
represents an extreme degree of group freedom only occasionally encountered in
formal organizations.

The continuum presents a range of action related to the degree of authority used by the
manager and to the area of freedom available to subordinates in arriving at decisions. The
Tannenbaum and Schmidt continuum can be related to McGregor’s supposition of theory X and
Theory Y. Boss centered leadership is towards Theory X and subordinate-centered leadership is
towards Theory Y.

THREE FORCES IN DECIDING TYPE OF LEADERSHIP

Tannenbaum and Schmidt suggest that there are three factors, or forces, of particular
importance in deciding what types of leadership are practicable and desirable. These are: forces
in the manager ; forces in the subordinates; forces in the situation.
FORCES IN THE MANAGER – the manager’s behavior will be influenced by their own
personalities, backgrounds, knowledge and experiences. These internal forces will include:

Value systems;
Confidence in subordinates;
Leadership inclinations; and
Feelings of security in an uncertain situation.

29
FORCES IN THE SUBORDINATE –subordinates are influenced by many personality variables and
their individual set of expectations about relationship with the manager. Characteristics of the
subordinate are:
The strength of the needs for independence;
The readiness to assume responsibility for decision making;
The degree of tolerance for ambiguity;
Interest in the problem and feelings as to its importance;
Understanding and identification with the goals of the organization;
Necessary knowledge and experience to deal with the problem; and
The extent of learning to expect to share in decision making.

The greater the positive response to these characteristics, the greater freedom of action can be
allowed by the manager.

FORCES IN THE SITUATION – the manager’s behavior will be influenced by the general situation
and environmental pressures. Characteristics in the situation include:
Type of organization;
Group effectiveness;
Nature of the problem; and
Pressure of time.
Tannenbaum and Schmidt conclude that successful leaders are keenly aware of those forces
which are most relevant to their behavior at a particular time. They are able to behave
appropriately in terms of their understanding of themselves, the individual and the group, the
organization, and environmental influences. Successful managers or leaders are both
perceptive and flexible.

5.3.5 Situational Leadership Style

Contingency theories are based on the belief that there is no single style of leadership
appropriate to all situations.

One of the first leader-situation models was developed by Fiedler in his contingency theory of
leadership effectiveness.

Fiedler’s contingency model was based on studies of a wide range of group situations, and
concentrated on the relationship between leadership and organizational performance. In order
30
to measure the attitudes of the leader, Fiedler developed a ‘least preferred co-worker’ (LPC)
scale. This measures the rating given by leaders about the person with whom they could work
least well. The questionnaire contains up to twenty items. Examples of items in the LPC scale
are pleasant/unpleasant, friendly/ unfriendly, helpful/ frustrating, distant/close, co-operative,/
uncooperative, boring/ interesting, self-assured/ hesitant, open/guarded.
Each item is given a single ranking of between one to eight points, with eight points indicating
the most favorable rating.

The LPC score is the sum of the numerical rating on all the items for the least preferred co-
worker’. The less critical the rating of the least preferred co-worker and the more favorably
evaluated, the higher the leader’s LPC score. The more critical the rating, the lower the LPC
score.

The leader with a low LPC score derived most satisfaction from performance of the task and
achieving objectives. Establishing good relationships with subordinates in a secondary
motivation. It was thought that high LPC scores would be associated with effective
performance by the group. However, the interpretation of LPC has changed a number of times
and there is still uncertainty about its actual meaning.

FAVOR ABILITY OF LEADERSHIP SITUATION

Fiedler suggests that leadership behavior is dependent upon the favor ability of the leadership
situation. There are three major variables which determine the favour ability of the situation
and which affect the leader’s role and influence.

 Leader-member relations- the degree to which the leader is trusted and liked by group
members, and their willingness to follow the leader’s guidance.
 The task structure – the degree to which the task is clearly defined for the group and the
extent to which it can be carried out by detailed instructions or standard procedures.
 Position power – the power of the leader by virtue of position in the organization, and
the degree to which the leader can exercise authority to influence (for example)
rewords and punishments, or promotions and demotions.

From these three variables, Fiedler constructed different combinations of group task situations
through which to relate leadership style.

31
When the situation is
 Vary favourable (good leader-member relations, structured task, strong position power);
or
 Very unfavourable (poor leader-member relations, unstructured task, weak position
power);
 Then a task-oriented leader (low LPC score) with a directive, controlling style will be
more effective.

When the situation is

 Moderately favorable and the variables are mixed, then the leader with an interpersonal
relationship orientation (high LPC score) with a directive, controlling style will be more
effective.
 When the situation is
 Moderately favorable and the variables are mixed, then the leader with an interpersonal
relationship orientation (high LPC score) and a participative approach will be more
effective.

Fiedler’s work has been subject to much criticism but it does provide a further dimension to
the study of leadership. It bring into consideration the organizational variables which affect
leadership effectiveness and suggests that in given situations a task-orientated, or structured,
style of leadership is most appropriate. The ‘best’ styles of leadership will be dependent upon
the variable factors in the leadership situations.

Fiedler argues that leadership effectiveness may be improved by changing the leadership
situation. Position power, task structure and leader-member relations can be changed to make
the situation more compatible with the characteristics of the leader. Leaders with a low LPC
score could be placed in a leadership situation which is very favourable or very unfavorable.
Leaders with a high LPC score could be placed in a leadership situation which is of moderate
favourability.

5.4 MOTIVATION

5.4.1 Meaning of Motivation

In a sense managers are judged not by what they do but rather by what they cause others to
do. A key part of a manager’s job is to motivate people to want to perform activities so that
goal can be achieved.

32
Knowledge of what motivation is and how it can be applied effectively is important in
managing. It is easier to see the results of motivation than to explain how it works. For
example, when the underdog in an athletic contest pulls a big upset, we may say that the team
displayed intense motivation. Or we may say that the team favored to win wasn’t motivated.

The goal of motivation is to cause people to put forth their best efforts with enthusiasm and
effectiveness in order to achieve and hopefully surpass organizational objectives.

WHAT ARE MOTIVES?

A motive is an inner force that moves a person to behave in a certain way. Some motives stem
from physiological needs, such as the need for water, food, air, sleep, or sex.

Motives also stem from psychological needs, such as needs for self-esteem, affiliation,
achievement, and status. Almaz, for example, may feel inadequate as she compares herself
with others and may have a need for greater self-esteem. To satisfy it, she is motivated to
return to college and take additional course work.

The environment in which we find ourselves at any given time has great influence on our
motivation. A simple example concerns hunger: You may not be hungry until you smell food or
see a tantalizing food commercial that awakens a physical need for food. Or, in another case,
you may be reasonably satisfied with your work situation until you perceive your superior
treating you unfairly. This perception reduces your motivation and may cause you to take some
kind of action, such as complaining, working less diligently, or even quitting.

In work situations managers have considerable control over the environment or climate in
which work is performed. For example, managers design both the monetary reward system
(salaries, bonuses, fringe benefits, and so on) and the psychological inventive program (status,
recognition, authority, and so on). Managers also have much control over the physical aspects
of work, such as equipment, tools, and buildings.

Managing the environment in which work is performed to achieve goals is challenging but is
rarely accomplished easily or completely.

Reward Versus Punishment: A component of Most Motivation Theories

By far the oldest-one can say the original - theory of motivation calls for rewarding people for
“good” behaviour and punishing them for “bad” performance. It is the pat - on - the - back

33
versus the slap - on - the wrist method and certainly is still used very extensively. Parents
probably use this approach to child raising more than any other.

In the adult world of managing, rewards can take many forms-money, bonuses, titles, special
office arrangements, awards, more power, entertainment allowances, company cars, and so on.
Punishments also come in many forms, such as demotions, undesirable transfers, no pay
increases, and lack of recognition.

All modern motivation theories stress rewards as a basis for encouraging desired behaviour.
Less mention is made, however, of punishment as a motivational tool, since there is no
evidence that punishment helps produce more effective or desirable behaviour in the long run.
It is known, for example, that very few prisoners who undergo extensive punishment return to
society as rehabilitated citizens. Also, managers who are by passed for promotions or pay
increases when they feel they deserve them often quit and join other organisations if the
opportunity arises, or they may become defensive, become troublemakers, or in some other
way act against the interests of the organisation.
Rewards and punishments are basic to motivation. How they are used relates to the style of
the individual manager and the situation.

5.4.2 THEORIES OF MOTIVATION

Fortunately, as we shall see, a number of important theories of motivation have been

developed to help us better understand the complexities involved in motivating people to
accomplish organizational goals willingly and effectively.

[Link] Maslow: Hierarchy-of-Needs Theory

Abraham H. Maslow, a psychologist, developed a theory of human motivation based on the

idea that needs form a hierarchy. He also postulated that as one need is satisfied the need at
the next higher level emerges. Maslow’s five needs are:

Physiological Needs: The main physiological needs are to satisfy hunger, thirst, sleepiness,
and sexual desire. Maslow considers physiological needs to be prepotent. When a person is
extremely and dangerously hungry, for example, all other needs are forgotten.

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Safety Needs:When physiological needs are gratified, safety needs emerge. Maslow notes that
the “healthy, normal, fortunate adult in out culture is largely satisfied in his safety needs. The
peaceful, smoothly running, ‘good’ society ordinarily makes its members feel safe enough from
wild animals, extremes of temperatures, criminals, assault and murder, tyranny, etc.”

Maslow goes on to note that beyond this point, safety needs in a modern society are dealt with
by buying life insurance, looking for a job with tenure, and in other ways seeking economic
security.

Love Needs:According to Maslow’s theory, when both physiological and safety needs are
gratified, the need for affection, belongingness, and love emerges. People yearn for friends.
The love needs include needs for both giving and receiving love. Thwarting of the love need
can have serious consequences and is, according to Maslow, “basic in the picture of
maladjustment.”

Esteem Needs: The desire for self-respect and the respect of others is next in the hierarchy.
People want to achieve and to be recognised for their achievements. Satisfaction of esteem
needs leads to self-confidence and a feeling of worth.

Self-actualization Needs: When physiological, safety, love, and esteem needs are satisfied,
people will soon become discontented unless they are doing what they want to do. Maslow
observes, “A musician must make music, an artist most wants to do with one’s life is called self-
actualization.

Significance of Maslow’s Theory of Management

Whether or not human needs fit the hierarchy ascending from physiological up to self-
actualization is still being debated. What is of greater significance is that the Maslow model
spells out what needs people have. When managers know what people need, they are in
position to as the question “What can we do to help satisfy those needs so that our personnel
will enjoy greater satisfaction and perhaps be more productive?” for example, everyone has a
physiological needs to sleep. Since people differ in terms of when they prefer to sleep,
consideration of this need might be a factor in deciding who works the day shift and who works
the night shift.

According to Maslow, people differ in the degree to which they want security, but all people
have this need. Knowing this, a participative-style manager can try to identify specific ways in

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which people in the organisation can be made to feel more secure. On the other hand, an
autocratic-style manage manager may look for ways to make people feel less secure.

Managers can attempt to satisfy love needs in various ways, such as assigning compatible
people to work together, showing affection, and making people feel they are important to the
group.

Esteem needs may be met in part by recognizing people for achievement, both large and small.
Often managers fail to show appreciation. When this happens, the person who has not been
praised may perform less satisfactorily.

Self-actualization needs are the most difficult to satisfy. In organized life many people are
required to perform tasks that they do not like. But managers can make considerable progress
toward satisfying self-actualization needs by trying to identify what a person wants to do and
then assigning the person to that kind of work.

[Link] Herzberg: Two-Factor Motivation Theory

Psychologist Frederick Herzberg has developed a motivation theory based on extensive

research. His theory explains worker motivation in terms of two types of factors. The first are
hygiene, or maintenance, job factors, which are necessary before an individual can be motivate.
They do not in themselves inspire or motivate a person to put forth maximum effort on a job.
These factors include acceptable salary; company policy; supervision; job security; work
conditions; and inter-personal relationships with one’s supervisor, peers, and subordinates.
Herzberg considers these factors to be hygienic because they are required to have a healthy
organisation. He has noted that “when feelings of unhappiness were reported, they were not
associated with the job itself but with the conditions that surround the doing of the job.” The
Hygiene factors need to be applied properly and effectively to prevent poor job attitudes from
arising.

The other types of factors are motivator factors. These include achievement, recognition,
advancement, the job itself, and the possibility for growth and responsibility. Herbage believes
these factors are essential to motivation. He has observed, “Man tends to actualise himself in
every area of his life, and his job is one of the most important areas. The conditions that
surround the doing of the job(hygiene factors) cannot give him this basic satisfaction; they do
not have this potentiality. It is only from the performance of a task that the individual can get
the rewards that will reinforce his aspirations.”

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Thus, according to the Herzberg findings, an organisation may have good working conditions,
provide adequate compensation, and offer job security but still have low motivation. Physical
conditions are not as important as psychological conditions in motivating people.

Here is how Professor Herzberg explains motivation:

The motivator factors are a direct derivation of the connections I have observed between the
quality of motivation and hygiene and the quality of job performance. The basis of the idea is
that motivators are the factors that meet man’s need for psychological growth, especially
achievement, recognition, responsibility, advancement, and opportunity. (Hygiene) factors are
concerned with the job environment conditions and treatment surrounding the work,
specifically company policy and administration, supervision, relationships with others, salary,
personal life, status, and security. Their underlying dynamic is the avoidance of pain within the
work environment. Motivators are concerned with using people well and, when combined with
a good hygiene program, with treating people well. The result will be motivated performance.

[Link] Expectancy Theory

The expectancy theory was proposed by Victor Vroom of Yale School of Management in 1964.
Vroom stresses and focuses on outcomes, and not on needs unlike Maslow and Herzberg. The
theory states that the intensity of a tendency to perform in a particular manner is dependent
on the intensity of an expectation that the performance will be followed by a definite outcome
and on the appeal of the outcome to the individual.

The Expectancy theory states that employee’s motivation is an outcome of how much an
individual wants a reward (Valence), the assessment that the likelihood that the effort will lead
to expected performance (Expectancy) and the belief that the performance will lead to reward
(Instrumentality). In short, Valence is the significance associated by an individual about the
expected outcome. It is an expected and not the actual satisfaction that an employee expects
to receive after achieving the goals. Expectancy is the faith that better efforts will result in
better performance. Expectancy is influenced by factors such as possession of appropriate skills
for performing the job, availability of right resources, availability of crucial information and
getting the required support for completing the job.

Instrumentality is the faith that if you perform well, then a valid outcome will be there.
Instrumentality is affected by factors such as believe in the people who decide who receives
what outcome, the simplicity of the process deciding who gets what outcome, and clarity of

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relationship between performance and outcomes. Thus, the expectancy theory concentrates on
the following three relationships:

 Effort-performance relationship: What is the likelihood that the individual’s effort be

recognized in his performance appraisal?
 Performance-reward relationship: It talks about the extent to which the employee
believes that getting a good performance appraisal leads to organizational rewards.
 Rewards-personal goals relationship: It is all about the attractiveness or appeal of the
potential reward to the individual.

Vroom believed that employees consciously decide whether to perform or not at the job. This
decision solely depended on the employee’s motivation level which in turn depends on three
factors of expectancy, valence and instrumentality.

Advantages of the Expectancy Theory

 It is based on self-interest individual who want to achieve maximum satisfaction and
who wants to minimize dissatisfaction.
 This theory stresses upon the expectations and perception; what is real and actual is
immaterial.
 It emphasizes on rewards or pay-offs.
 It focuses on psychological extravagance where final objective of individual is to attain
maximum pleasure and least pain.

Limitations of the Expectancy Theory

 The expectancy theory seems to be idealistic because quite a few individuals perceive
high degree correlation between performance and rewards.
 The application of this theory is limited as reward is not directly correlated with
performance in many organizations. It is related to other parameters also such as
position, effort, responsibility, education, etc.

Implications of the Expectancy Theory

The managers can correlate the preferred outcomes to the aimed performance levels.
The managers must ensure that the employees can achieve the aimed performance levels.
The deserving employees must be rewarded for their exceptional performance.
The reward system must be fair and just in an organization.
Organizations must design interesting, dynamic and challenging jobs.
The employee’s motivation level should be continually assessed through various techniques
such as questionnaire, personal interviews, etc.

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Other theories
McClellamd: Need-Based Motivated Theory

David McClelland’s theory of motivation states that human beings have three basic
motivational needs: Power, affiliation, and achievement.

The power need is expressed in a strong desire to change or alter the course of events. People
who are strongly motivated by the need for power are often effective speakers, may be
argumentative, like communicating, and want to exercise influence.

The affiliation need exists in all of us but in widely differing degrees. Individuals with a strong
affiliation need want love and group approval. They value friendship very highly.

The achievement need is the twin desire to (1) succeed and (2) not fail. McClelland and his
colleagues have explored the need for achievement in considerable depth. They have found
that people who have a strong achievement need seek challenge, set big goals, work hard and
long, and generally want to win for the sake of winning.

All three needs-power, affiliation, and achievement-are important in considering ways of

motivating people. Very importantly, McCelland found that the need for achievement can be
increased through education and training. For example, the kinds of stories told children may
affect their desire to achieve. Children who are told Horatio Alger-type stories may, as adults,
have stronger achievement needs than children who are told passive kinds of stories.

Likert: Paricipative-Management Approach

Renysis Likert and his associates have spent decades in shedding tight on the question “What
management style gets the best results?” Likert tried to determine whether highly autocratic
management (“Do it may way”) or, at the other extreme, participative management (“What
ideas do you have for getting the job done?”) Works best.

Generally , Likert’s research shows that managers who practice effective human relations by
letting lower-level personnel participate in making decisions that affect them achieve better co-
operation, higher motivation, and greater productivity. He found that people who do the work
want to be consulted about how to do it.”

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Mayo: The Hawthorne Effect

G. Elton Mayo, a Harvard psychologist, conducted an extensive study of worker motivation at

the Hawthome plant of the Western Electric Company in the 1930s. In his experiments Mayo
modified the density of lights in the work area, pay scales, amount of rest time, and other
environmental factors to determine the effects of these changes on productivity. Surprisingly,
productivity of the workers in the study went up even when working conditions worsened.

Mayo, discovered that workers’ productivity increase s when special attention is focused on
them; the attention gives them special status among their peers. His study showed that
workers’ attitudes are a key to their motivation-and fair treatment improves their attitudes.
Workers resent being taken for granted and treated like machine.

Skinner: Motivation Through Positive Reinforcement

B.F. Skinner, a Harvard psychologist, is a leading advocate of behavior modification as a

motivational tool. Skinner believes that all behavior is a result of a similes. Behaviour is best
modified by deciding what behavior pattern is desired and then selecting and using the stimulus
that produces the desired behavior.

Skinner is a great believer in positive reinforcement, or rewards, as the best way to achieve.
Desired behavior. In his view, punishment is likely to produce undesirable behavior. Certainly,
in the animal world the Skinner approach to developing desired behavior has long been used.
Professional dog trainers, for example, never whip or beat the animal to produce desired
behavior.

Managers who follow the skinner philosophy emphasise praise, encouragement, and prompt
assistance in solving problems. Even when an individual’s performance falls short they
commend the person on what he or she did right and then explain how the task can be
performed satisfactorily next time. Positive reinforcement, to be used effectively, requires that
people be assigned to jobs for which they are qualified and that they participate in setting goals
and methods for achieving them.

Hall: The Relationship Between a Manager’s Motivation and Success as a Manager

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Most studies of motivation have focused on what motivates lower-level employees not
managers. An important work that employed sophisticated techniques attempted to
determine how behavioral patterns of managers relate to their performance. In a five-year
research project, Jay Hall, a social psychologist, studied over 16,000 managers representing
many different companies in an attempt to determine the behavioural difference among high,
average, and low achievers. Hall was able to verify statistically many of the concepts developed
by Maslow, Herzberg, McGregor, and Likert.

He discovered that the need for self-actualization is the dominant motivational influence for
high achievers that ego-status needs are the main motivator for average achievers, and that
low achievers are mainly interested in creature comforts.

Hall found that a manager’s level of personal motivation directly affects his or her subordinates’
desire to achieve. He notes:

Not only does personal motivation affect a manager’s achievement level, so does his perception
of the motivational process and his consequent practices in the management of motives.
Indeed, in what appears to be a casual fashion, a manager’s achievement is directly linked to
the motivational profile of his subordinates. A sobering thought is inferred: The needs and
quality of motivation characterizing a manager’s subordinates may say more about the
manager than about his subordinates.

Hall also observed that managers who are high achievers make extensive use of participative
management:

Low achievers, as reported by their subordinates, make minimal use of participative practices;
Average Achievers make only slightly greater use. High Achievers, according to their
subordinates, not only employ far and away greater amounts of the technique, but so much so
that participative methods may be said to be a major characteristic of the High Achieving
approach to management.

Only subordinates of High Achievers report the kind of satisfaction, commitment and pride in
work that characterizes the work force of healthy organizations. Low Achievers, and to some
extent Average Achievers, employ practices which result in repressive and frustrating
circumstances typically found in neurotic organizations.

Hall draws the following conclusion from his study:

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The High Achiever’s approach to management can result in not only sweet dreams of success,
but true excellence-be it in a small firm, one of Fortune’s 500 or the Oval Office. Each of us has
the option of becoming an Achieving Manager because the manager’s achievement may be
traced to the behaviours he employs. If we would make one impression, let it be this:
Managerial achievement does not depend upon the existence of personal traits and
extraordinary skills unique to outstanding individuals. It depends on the manner in which the
manager behaves in conducting organizational affairs and on the values he holds regarding
personal and interpersonal potentials. All of which can be learned. The key to becoming an
Achieving Manager is to learn to behave like one.

BASIC FACTORS THAT MOTIVATE

Researchers and theorists in management and in behavioural psychology are not in full
agreement as to what motivates people-and to what degree-to perform work in organizations.
There is a general consensus, however, that the following factors are involved in motivation.

Challenging Work

Many people are motivated by challenging work. But in our language, “work” is usually
thought of in non-challenging, negative terms such as “toil,” “drudgery,” and “travail.”
Boredom may be a motivational depressant. To motivate personnel to perform at their best,
managers should try to make work as challenging as possible, keeping in mind that what is
challenging to one person may not excite another. For example, conducting an orientation
session for new employees may be exciting to someone just appointed as an instructor in a
training department but boring to the head of the department. Loading trucks day in and day
out may be challenging to someone with limited education but may prove utterly unchanging to
someone with limited education but may prove utterly unchallenging to a young person just
out of college. Because of these individual differences, managers should consider the workers
aptitude, interest, intelligence, skills, and education in making work assignments.

Participation in planning

Generally, as was indicated by Likert,s and Hall’s findings, employees are more strongly
motivated if they are asked to help plan their work and shape the environment in which it is

42
performed. Salespeople tent to perform better, for example, if management permits them to
help set their quotas, plan how to cover their territories, and help develop their sales
presentations.

The higher in an organization one goes, the more participation in planning is a strong
motivational force. Senior-level people are, in fact, often insistent on being able to directly
participate in planning their roles in the organization. Even at lower levels participation is
important. A supervisor, for example, may be motivated when permitted to make decisions
about scheduling work; an employee may be motivated when allowed to select the tools
needed to perform the job; and a short-order cook probably likes to decide how to clean the
grill.

There are, however, exceptions to participation in planning as a motivational force. Some

employees are more comfortable-and therefore we assume better motivated-when the
manager spells out in detail what they are expected to do and how: Some students prefer a
professor who gives absolutely cut-and-dried assignments to the instructor who allows
considerable freedom in homework assignments. Effective motivation requires that managers
recognize individual preference among personnel. What turns one person on may turn another
person off.

Recognition and Status

The desire for recognition and the improved status it brings appears universal regardless of
position, age, education, and other factors. All of us seem to want approval from our peers as
well as from our superiors. When Alem, a firefighter, is singled out for the good job he did in
fighting a fire, he is likely to be motivated to do even better at the next fire. Executives may be
motivated by such things as a company car, titles, special dining facilities, and a club
membership. Recognition, of course, must be sincere and based on above-average
performance, or it will not be appreciated by the recipient and will be resented by others.
Giving Abebe a fancy title for no reason will probably not motivate him to perform better in the
future.

The degree to which recognition serves as a motivational stimulant varies considerably among
individuals. Some people crave it more than others. There are incidents, for example, when
very shy or timid people prefer not to be recognized, at least publicly, for fear of
embarrassment.

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Almost anything can be a status symbol if it is recognised by the group as a badge of distinction.
A key to the executive washroom, a large office, a ten-year pin, a reserved parking space, and
carpeting on the floor are just a few of the almost countless ways recognition-and thereby
status-can be conferred.

More Responsibility and power

Not everyone wants more responsibility and power. Not all soldiers want to become officers,
not all sorority sisters want to be president of the group, and certainly not all employees desire
the responsibility and the power that comes from being made supervisor. Nevertheless, a
significant number of individuals who are part of organized groups do in fact want more
responsibility and are motivated by the prospect of attaining it. In fact, it is probable that more
people want to become bosses than the number of vacancies permit. When an executive dies
or is fired, for example, a number of people usually jockey to get the job.

In a constructive way, then, management should devise a plan for using the chances of
promotion, more power, and greater responsibility as a way to motivate people to perform
more effectively.

Security

The need for security-that-is, the desire to be free of such things as job loss, demotion, and loss
of income-apparently is inherent in all of us. The degree to which individuals desire security
varies considerably among people. To some, security is all-important. Individuals who put
security foremost will put up with almost any inconvenience and maltreatment just to hang on
to their jobs. Even among management personnel there are individuals who strongly dislike
their jobs but nevertheless keep them because they are afraid of losing their retirement
benefits.

One of the most difficult tasks facing management is to determine how much security should
be provided. Security is a strong motivator, but too little or too much can be harmful. If too
little security is provided, workers will seek jobs in which there is more assurance of steady
employment and job benefits. On the other hand, if too much is given, workers may develop a
lackadaisical attitude and produce at a low level.

Independence of Action

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Probably all of us desire at least some independence of action. A cab driver may prefer to
select the exact streets he or she uses to reach a destination rather than have this information
dictated by the dispatcher. Little children often express exasperation when a teacher or a
parent insists that they perform a task a certain way and angrily may say, “Let me do it my
way.”

Complete dictation of how a job is to performed, however simple the job may be, lowers
motivation. Part of the problem in motivating many assembly-line workers, for example, is
their resentment at having to perform work that allows no deviation from prescribed
procedures. As will be explained later, one of the goals of job enrichment is to overcome or at
least reduce dissatisfaction resulting from extremely detailed and prescribed plans.

Opportunity for Personal Growth

Most people would like to grow in skill, professional capability, and experience. A strong
motivational device is to promise-and then deliver-an opportunity to an individual to grow
more skilful as a result of a work experience.

The desire for personal growth ties in with the fact that people are goal-oriented creatures. An
employee may ask, “Will be a better individual (like myself more) if I pursue this work?”

Organizations that offer training and educational programs, travel, job rotation, and other job-
building experiences and devices are using personal growth as a motivator.

Opportunity for Advancement

Closely allied to personal growth as a motivator is opportunity for advancement. Not everyone
wants to be promoted to higher levels in the organization, but a significant portion to the work
force does.

Some of the best potential job candidates are turned off when they learn promotions are
unusually slow and hard to come by. One of the greatest appeals of young, aggressive
organizations is “You can get ahead fast with us.”

The desire to advance varies, of course, among individuals. Some are frightened by aggressive
organizations that provide opportunities for promotion; to them the desire for security is a
stronger influence. They prefer a very stable organization in which they are sure of a job.

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Money and Other Financial Rewards

The role of money as a motivational factor has been controversial, especially over the past two
decades. Research to date has not yielded any hard conclusions about the importance of
money for individuals of different ages, social classes, cultural background, job types, or
organizational levels. The research of Herzberg, as noted, suggests that money is more a
dissatisfier than a motivator. But many people at lest appear to value money highly.

Certainly for some individuals money is the strongest motivational influence. People who are
very hard pressed financial may be more highly motivated by money than by any other factor.
The fact that many people moonlight indicates that money is important. But in some situations
money and other financial rewards are not as effective in stimulating superior performance as
most people believe.

For example, suppose you supervise ten clerical employees. They are paid the prevailing wage
for the type of work they do. Through your persuasive skills you are able to induce your senior
management to double their pay immediately. What would probably happen to the quantity
and quality of their output? No one knows, but it is most unlikely that productivity would
increase in proportion to the increase in compensation. Productivity might even drop! “Now
that we’re making so much more money, we can take more days off and not work as hard”
might be the response of some workers. In any event, most employee would soon become
adjusted to the new, higher pay and take it for granted.
Consider some other indications that money may be overrated as a motivator:

Generally, the longest and most difficult strikes to settle are in relatively high-paying industries
such as steel production, the airlines, and coal mining. Lower-paid employees, even if
unionized, are less likely to call for work stoppages because of money matters.
Supervisors often find it difficult to induce employees to work overtime, even for double the
normal pay. Employees may rather participate in leisure activities than make more money.
People with very high incomes are often willing to accept substantial pay cuts to serve as
government employees or to join university faculties.
Some highly motivated members of various religious orders work for what amounts to room
and board and security in their old age.
Countless thousands of people, highly motivated, work for no compensation in hospitals and
for charitable organizations such as the Red Cross.

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The desire for recognition and status is closely related to the desire for money. The salary an
individual receives is important because (since the more one earns the “better” one is) it is a
status symbol. It “proves” to others that one is superior.

Good Working Conditions

Working conditions, which include both physical and psychological factors surrounding a job,
vary in importance as a motivator. We often find persons working in ultra-modern job
environments with the newest equipment and pleasant facilities who are not highly motivated.
On the other hand, some people who work in unattractive environments are extremely
motivated.

Competition

Competition is an important manager motivator, since managers typically want to excel. Many
companies hold recognition banquets to make awards to those managers who outperformed
other managers. The idea behind such events is to encourage those who “lost” to try harder
and those who “Won” to stay on top.

FACTORS THAT COMPLICATE THE TASK OF MOTIVATION

Motivating people to perform in desired ways is difficult because knowledge about motivation
is largely subjective. There are far fewer hard facts about how the mind works than about
physics. It is not known precisely why some people work harder than others or why some
people are more prone to mistakes than others.

We begin to appreciate the complexity of motivation when we try to answer such a question as
“What does it take to get Samson to do a better job, to work harder, to produce more, and to
cooperate more effectively so our group goal can be achieved?” Some specific factors that
complicate motivation are explained in the following sections.

People’s Wants Differ

Not all persons are motivated to the same degree by the same motivators. Effective managers
understand that people differ in cultural background, intelligence, ambition, education, ethical
standards, and many other respects. We know, for example, that most people want status. But
what is a status symbol to one person may not be important to another. Girma may regard the
size and location of his office as a badge of his success. But Solomon, a manager on the same

47
level, may not even care whether he has an office. To him an important status symbol may be
heading up the United Appeal Campaign or serving on a certain committee.

People also differ in their feelings concerning rewards. For example, Selam is motivated by the
possibility of promotion. She works long hours, takes work home, and tries to improve her
managerial skills. Meanwhile, Genet is content with her job and puts forth only enough effort
to keep it. She would refuse a promotion if offered one.

As a result of such differences, managers must generally tailor their motivational efforts to
individuals. The most effective manager is one who is aware of the special needs and desire of
his or her staff members.

People’s Wants Change Over Time

A young employee just starting out may be intensely motivated to succeed, win promotions,
make more money, and acquire power. Over the years, as his or her career settles down, he or
she may gradually become more interested in security and holding on to the position already
acquired. In part, changes in job expectations related to changes in responsibilities in one’s
personal life. Younger employees are more likely to have strong monetary needs than middle-
aged people.

Another example of how motivation may change over time concerns Winston Churchill. When
young, Churchill was turned off by the discipline of attending classes, making reports, and
earning his marks. But when presented with challenge of leading Britain through its darkest
hour, he was exceptionally motivated.

Social Conditions Are Dynamic

As noted previously, people are better educated than in the past, employees have more rights,
people are more affluent, much work has become boring, and there is a tendency to reject
authority. All these conditions complicate managing. Motivating factors that worked well a
decade ago may be ineffective today.

Management Lacks Control Over the Nonwork Environment

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Motivation is also made more complicated because numerous factors that affect it are beyond
the control of managers in the work situation. All individuals have personal problems that
affect their job performance but that a manager usually cannot solve. Some large companies
do have special services to help employees with certain problems such as alcoholism and other
forms of drug addiction. For the most part, however, management is either unaware of an
individual’s off-the-job problems or, if it is a matter of company policy, does not try to
intervene.

HIGH MORALE: THE RESULT OF MOTIVATION

High morale is a confident, resolute, often self-sacrificing attitude of a group that has strong
faith in its leadership and believes organizational goals can be achieved. Low morale is just the
opposite. It is characterized by depression, lack of confidence, and a negative (“who gives a
damn”) attitude toward the achievement of a goal.

JOB ENRICHMENT

Job enrichment, also called job reform, is the process of designing jobs to make them more
interesting, challenging, and meaningful. It includes planned efforts of management to make
jobs more satisfying, such as giving workers greater freedom in choosing work methods and
letting them help plan their work. Job enrichment thus affects morale.

Types of Job Enrichment

The most common forms of job enrichment are discussed below.

Job rotation permits workers to move at frequent intervals from one task or activity to another.
In many instances, job rotation reduces boredom. It also gives employees more experience.

Job enlargement entails adding more tasks to a job to make it less boring. The idea behind job
enlargement is to increase workers. A salesperson has his or her job enlarged when invited to
participate in discussions about changes in products, selling methods, pricing, and packaging.

Job redesign is the restructuring of a job to make it more appealing to workers. A salesperson’s
job may be redesigned by changing the territory or by permitting the person to specialize with
certain customers.

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Flextime is another morale building device that is finding steadily increasing use. Usually,
flextime requires all employees to be at work during a core period, but the employees decides
when they will begin and end their workday.

UNIT VI

50
 THE CONTROL FUNCTION

6.1 THE MEANING OF CONTROL

The word control may be interpreted in a number of different ways with varying connotations.
Tannenbaum, for example, sees control as an inherent characteristic of the nature of
organizations. The process of control is at the center of the exchange between the benefits
that the individual derives from member-ship of an organization and the costs of such benefits.

Organization implies control. A social organization is an ordered arrangement of individual

human interactions. Control processes help circumscribe idiosyncratic behaviors and keep the
conformant to the rational plan of the organization. Organizations require a certain amount of
conformity as well as the integration of diverse activities. It is the function of control to bring
about conformance to organizational requirements and achievement of the ultimate purposes
of the organization.

Control often has an emotive connotation and is interpreted in a negative manner to suggest
direction or command by the giving of orders. By their very nature, control systems are
concerned with the regulation of behavior. People may be suspicious of control systems and
see them as emphasizing punishment, an indication of authoritarian management, and a means
of exerting pressure and maintaining discipline. Some writers seem to take this view, and even
to suggest organizational control as exploitation of employees.

This is too narrow an interpretation, however. There is far more to control than simply a means
of restricting behaviour or the exercise of authority over others. Control is not only a function
of the formal organization and a hierarchical structure of authority. It is also a function of
interpersonal influence. Control is a general concept, which is applied to both individual
behaviour and organizational performance.

Control can stand for reliability, order and stability. Whenever a person inquires “I would like
to know how well I am doing”, this in effect can be seen as asking for control. Members of staff
want to know what is expected of them and how well they are performing. This places
emphasis on the exchange of information, and feedback and comparison of actual results
against planned targets. Control is a basis for training needs, the motivation to achieve
standards and for the development of individuals.

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Most people show an ambivalence towards control, while they may not wish to have them
applied to their own performance they recognize the need for, and usefulness of control
systems. Under certain conditions, however, people may actually desire control. Lawler, for
example, gives three reasons why employees might want to be subject to a control system:

 To give feedback about task performance;

 To provide some degree of structure of tasks, definition of how the tasks are to be
carried out, and how performance will be measured; and
 Where reward systems, for example pay, are based on performance.

At the organizational level, management need to exercise ‘control’ over the behaviour and
actions of staff in order to ensure a satisfactory level of performance. Managerial control
systems are a means of checking progress to determine whether the objectives of the
organization are being achieved. Control completes the cycle of managerial activities. It
involves the planning and organization of work functions, and guiding and regulating the
activities of staff. Control provides a check on the execution of work and on the success or
failure of the operations of the organization, The whole purpose on management control is the
improvement in performance at both the individual and organizational level.

The concern for the regulation of behaviour and improvement in performance raises questions
as to the ethical nature of control. For example, in discussing the goals of organizational
behaviour (OB) Robbins makes the following observation.

The most controversial goal is using OB knowledge to control behavior. When a manager asks,
for instance: “What can I do to make Girma put more effort on his job?’ That manager is
concerned with control. Why is control controversial? A democratic society is built upon the
concept of personal freedom. Therefore, the idea that one person should attempt to get others
to behave in some premeditated way, when the subjects of that control may be unaware that
their behavior is being manipulated, has been viewed in some circles as unethical and/or
repugnant… However, you should be aware that the control objective is frequently seen by
managers as the most valuable contribution that OB makes towards their effectiveness on the
job.

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6.2 DIMENSIONS OF CONTROL

6.2.1 Types of Control

The three types of control are preliminary, concurrent, and feedback. Preliminary control takes
place before operations begin and includes policies, procedures, and rules designed to ensure
that planned activities are carried out properly. Examples include inspection of raw materials
and proper selection and training of employees. Concurrent control takes place while plans are
being carried out. It includes directing, monitoring, and fine-tuning activities as they occur.
Feedback control focuses on the use of information about results to correct deviations from the
acceptable standard after they arise.

You may notice a connection between the three types of control and two important models
described elaswhere in the text. First, preliminary, concurrent, and feedback control focus on
the inputs, transformation processes, and outputs, respectively, of the systems model
described in Chapters 1 and 2. Second, they also correspond to the A-B-C model of motivation
described in Chapter 15. Preliminary control sets antecedents that dictate how people should
behave. Concurrent control monitors behavior as it takes place. Feedback control occurs after
the fact, and the corrective action can include rewards and punishments for proper and
improper performance.

Preliminary Control

Preliminary control (sometimes called feed forward control) is future oriented; its aim is to
prevent problems before they arise. Instead of waiting for results and comparing them with
goals, a manager can exert control by limiting activities in advance. For example, companies
have policies defining the scope within which decisions ar4e made. A company may dictate that
managers adhere to clear ethical and legal guidelines when making decisions. Formal rules and
procedures also prescribe people's actions before they occur. Stating that a financial officer
must approve expenditures over $1,000 or that only components that pass all safety tests can
be used in a product specifies in advance which actions can and cannot be taken. To approvals
by bank officers before authorizing a loan.

Japan has a unique cost management system that provides preliminary cost control. In the
United States and Europe, accountants set a product's cost after various departments have
built in their cost specifications. But in Japan, the price at which the product will appeal to

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potential buyers is determined first, and then each department is assigned a cost that it must
be priced beyond what consumers are willing to pay.

An important mechanism of preliminary control focuses on suppliers.

Concurrent Control

Concurrent control, which takes place while plans are carried out, is the heart of any control
system. On the production floor, all efforts are directed toward producing the correct quantity
of the right products in the specified amount of time. In an airline terminal, the baggage must
get to the right airplanes before flights depart. In factories, materials must be available when
and where needed, and breakdowns the production process must be required immediately.
Concurrent control also is in operation when supervisors watch employees to ensure they work
efficiently and avoid mistakes.

Advances in information technology have created powerful concurrent controls. Computerized

systems give managers immediate access to data from the most remote corners of their
companies. For example, managers can continuously update budgets based on an ongoing flow
of performance data. In production facilities, monitoring systems that track errors per hour,
machine speed, and other measures allow managers to continuously correct small production
problems before they become disasters.

Feedback Control
Feedback control implies that performance data were gathered and analyzed and the results
returned to someone( or something) in the process to make corrections. When supervisors
monitor behavior, they are exercising concurrent control. When they point out and correct
improper performance, they are using feedback as a means of control.

Timing is an important aspect of feedback control. Long time lags often occur between
performance and feedback, such as when actual spending is compared against the quarterly
budget or when some aspect of performance is compared to the projection made a year ago. If
feedback on performance is not timely, managers cannot quickly identify and eliminate the
problem and prevent more serious harm.

Some feedback processes are under real-time (concurrent) control, such as a computer-
controlled robot on an assembly line. Such units have sensing units, which continually
determine whether they are in the correct potion to perform their functions. If not, a built-in
control device makes immediate corrections.

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6.2.2 COMPONENTS OF ORGANIZATIONAL CONTROL SYSTEM

Whatever the nature of control may be there are five essential elements in a management
control system.
 Planning what is desired;
 Establishing standards of performance;
 Comparing actual achievement against the planned target; and
 Rectifying and taking corrective action.

Planning what is desired:

Planning what is desired involves clarification of the aims to be achieved. It is important that
people understand exactly what is required of them. This requires that objectives and targets
are specified clearly, and given some measurable attribute. Planning provides the framework
against which the process of control takes place.

Defined standards of Performance:

Related to planning is the establishment of defined standards of performance against which the
level of success can be determined. This requires realistic measurements by which the degree
and quality of goal achievement can be determined. Whenever possible these measurements
should be stated in quantitative terms. Planning and measurement are prerequisites of control.
Without them there can be no control. Objectives and targets, and standards of performance
should be stated clearly and communicated to those concerned, and to those who are subject
to the operation of the control system.

Monitoring and comparing performance:

The third aspect of control is the need for a means of monitoring actual performance. This
requires feedback and a system of reporting information which is accurate, relevant and timely,
and in a form that enables management to highlight deviations from the planned standard of

55
performance. Feedback also provides the basis for decisions to adjust the control system, for
example the need to revise the original plan. Feedback should relate to both the desired end
results and the means designed to achieve them.

Next, it is necessary to compare actual performance against planned targets. This requires a
means of interpreting and evaluating information in order to give details of progress, reveal
deviations, and identify probable causes. This information should be fed back to those
concerned to let them know how well they are getting on.

Corrective Action:

The final element of a management control system is the taking of corrective action to rectify
the situation, which has led to the failure to achieve objective or targets, or other forms of
deviations identified. The requires consideration of what can be done to improve performance.
It requires the authority to take appropriate action to correct the situation, to review the
operation of the control system and to make any necessary adjustment to objectives and
targets or to the standards of performance.

FORMS OF CONTROL

Control is far-reaching, it can serve a number of functions and can be manifested in a number
of different forms.

 Control systems can focus on the measurement of inputs, outputs, processes or the
behaviour of people.
 Control can be concerned with general results or with specific actions.
 Controls can be concerned with an evaluation of overall performance of the
organization as a whole or with major parts of it. This requires broadly based standards
of performance and remedies for corrective action. Total quality control, concerned
with all areas of the organization, can be seen as part of Total Quality Management
programs.
 Controls can be concerned with the measurement and performance of day-to-day
operational activities. This calls for more specific standards of performance and speedy
corrective action.

Assumptions of organization and management:

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One form of classification of organizations may be coercive, remunerative and normative based
on the nature of control and the power used by superiors to obtain the compliance of
subordinates. The exercise of control is an expression of management systems and styles.

Another view of control is based on the classical approach and traditional assumptions of
organization and management. Control is viewed as an essential feature of the formal
organization and a hierarchical structure of authority. The traditional view assumes the amount
of control is fixed. It is based on the use of routine procedures and the exercise of rules and
regulations in an attempt to create consistency and predictability in behaviour.

Still other alternative view of control is more in keeping with the relations approach. Control is
seen as a feature of interpersonal influence and takes place within a network structure of
interaction and communication. While the need for some form of control is constant, the
extent and manner of control is variable. It is a function of the common commitment to the
objectives of the organization.

6.3 IDENTIFYING CONTROL PROBLEMS

Over the years, management audits have developed as a means for evaluating the effectiveness
and efficiency of various systems within an organization, from social responsibility to
accounting control. Management audits may be external or internal. Managers conduct
external audits of other companies and internal audits of their own company. Some of same
tools and approaches are used for both types of audits.

6.3.1 Internal Audits

Internal audits improve the planning process and the organization's internal control systems.
Periodic assessment of a company's own planning, organizing. Leading, and controlling is the
essential function of an internal management audit reviews the company's past, present, and
future.

Among the more common undesirable practices uncovered by a management audit are the
performance of unnecessary work, duplication of work; poor inventory control; uneconomical
use of equipment and machines; procedures that are more costly than necessary; and wasted
use of resources.

To perform a management audit, a list of desired qualifications is drawn up and weights are
attached to each qualification. The audit assesses (1) what the company has done for itself and
(2) what it has done for its customers or other recipients of its goods or services. The company

57
can be evaluated on a number of factors, including financial stability, production efficiency,
sales effectiveness, human resources development, earnings growth, public relations, civic
responsibility, or other criteria of organizational effectiveness.

6.3.2 Symptoms of Inadequate Control

(1) Lack of satisfactory standards

It is quite difficult if not impossible to fix satisfactory standards for many activities particularly
those, which involve intangible performances such as results of management, development,
human relations and public relations. Cost of other activities cannot be accurately indicated by
any pre-set standards. Activities of the workers for service of advisory nature and other
activities relating to the behaviour of the workers do not indicate quantities output and identify
their level of attainment.

(2) Effects of External Factors

Internal factors can be checked and put in the right perspective in time, by the proper system of
control. but it is impossible to check and control the external factors. For example, change in
the government and its policy, new inventions or discoveries, changes in the fashions and liking
of the consumers, etc, cannot be checked by the system of control.

(3) Imperfections in Management

As explained above, intangible performance always brings difficulties at the time of setting
standards. This is also responsibility for making the task completed for the measurement of
results or evaluations. If one fails to measure the performance in quantitative and qualitative
terms, the results of behavioral and staff activities have to be evaluated by line managers on
their own thinking and managerial judgment. Further, economic consideration is not possible if
we measure everything and everybody's work.

(4) Problem in setting up individual responsibility

Assignment of individual responsibility for negative deviation from the standard is difficult. This
washouts the system of control completely. In some cases it is difficult to assign the
responsibility of negative deviation to an individual. The effective impact of control in most of
the cases depends on how responsible are the workers on has in the organisation.

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(5) Limitation of corrective actions

It is true that if all deviations and errors could be corrected in time, the chances of loss would
be relatively less in the organisation. To some extent, it is true that there are certain
organisation who had taken corrective and quick actions and were successful in avoiding errors.
But often problems arise, when management does not take corrective action in time to avoid
deviations.

(6) More expensive device

To make the control more systematic and effective, it requires careful and timely investigation
of different business activities. It enables the unit to find out the causes of variations with the
actual provisions made in the budgets. In order to investigate all the activities one has to
appoint more skilled people which requires more money to reward the workers for their work.
It therefore becomes a costly affair in terms of money and time.

(7) Human reactions to control

Control creates tension in the mind of workers and their actions and thinking is affected. The
pressure of work gives the negative results and reduces the quantity and quality of work.
Workers ignore long term goals and give false reports about the performance too. If the system
of control is introduced in the organisation in detail and close check of individual performance
exists then it produces adverse results among lower level managers.

6.3.3 Signs of Misguided Control Systems

The motivational and behavioral effects of controls are not always benign. Sometimes
organizational objectives can point in one direction, but performance measurement and
feedback practices can pull behavior in another. This phenomenon is called goal displacement
and it is a potential “dysfunctional" or untoward effect of controls. Sometimes measurement
and feedback, rather than stimulating performance, can demoralize employees and engender
more defensiveness than motivation to perform.

As we have indicated, employees tend to respond to controls by making sure the

measurements taken of their performance register at acceptable levels. Goal displacement
occurs when their behavior achieves this result at the expense of the objectives or goals the

59
controls are supposed to implement. For example, if a student cheated on an exam and
obtained a high score, the goal of learning the material would not have been implemented.
Similarly, if Service Representatives at Consolidated Telephone found ways of avoiding being
caught in a Contact Not Closed violation, and the ways of avoiding detection involved lying to
customers, falsifying records, or some other unseemly act, the goal of service would have been
displaced by the system of measuring service.

Dysfunctional compliance with controls involving goal displacement takes a number of forms
including rigid bureaucratic behavior, strategic behavior, and invalid data reporting.

Rigid bureaucratic behavior.

A classic example of narrowly limiting one's behavior to what was counted by the control
system is provided by the behavior of the employment interviewer in our discussion of latent
effects. Remember that before the more elaborate measurements covering not only number of
interviews but number of referrals, number of placements, and referral and placement ratios
were taken, only the number of interviews was counted, The researcher noted that under this
solitary measure of performance, the organizational objective of placing clients in jobs was
displaced:

When jobs became scarce after the war and time and effort were required to find one for a
client, this count of interviews had a detrimental effect on operations.... The interviewer's
interest in a good rating demanded that he maximize the number of interviews and therefore
prohibited spending much time on locating jobs for clients. This rudimentary statistical record
interfered with the agency's objective of finding jobs for clients in a period of scarcity.
Strategic behavior. Actions that are calculated solely to make the numbers look good for a
particular period are called strategic. For example, a Addis real; estate developer delayed
closing escrows scheduled for December one year on twenty new homes until January of the
next year to reduce income that would have to be reported in the first year. This was done to
gain an immediate tax advantage, but it violated promises to the purchasers and contravened
stated objectives concerning service and development timetables. In another case, law
enforcement officials supposedly serving an objective of effective enforcement were subjected
to a performance measurement system requiring completion of a fixed number of cases that
month. To comply, the agents dropped more complex cases that often involved more important
issues in favor of easier cases to satisfy the control.

Invalid data reporting. Estimates that go into budgets may often be inflated to provide slack for
difficulties that may arise. Sales projections might be understated so that actual results will

60
compare favorably. But is also true that information fed into the controls themselves as they
seek to measure performance can be false.

Measurement and feedback concerning performances do not invariably arouse motivation;

instead, they sometimes depress it . Studies of the administration of budgets, for example,
point out that individual doffer in their ability to withstand continued discouraging news that
their performance deviates unfavorably from the standards provided in the budget. Other
studies show the same effects stemming from performance appraisal plans complete with all
the features of goal setting, evaluation, and feedback that would seem, at first glance, well
suited to arousing achievement motivation.

Critical feedback seems particularly to dampen motivation. One study analyzed a performance
appraisal system in which critical feedback did have a negative effect on goal achievement.

In sum, measurement and feedback can stimulate misperformance and nonperformance as

well as performance that implements objectives. Promoting the last and containing the first
two is partly a matter of designing controls that measure enough aspects of performance and
measure them with enough objectivity to stimulate balanced " goal congruent" work.

Many management observers have become aware that controls sometimes produce behavioral
responses amounting to a loss of control or misdirection. But only one theorist, Rensis Likert
has actually proposed in some detail a fundamental and drastic change in the way managers
think about and practice control. Although Likert's proposals are not widely adopted, his
approach can help you gain a broad view of the theory of control- a view that could eventually
make you a more sophisticated manager.

Likert thinks of the organization as comprising three types of variables ( see Figure 1. First, the
causal variables include the factors that managers shape and alter-such things as organization
structure, controls, policies, and leadership behavior. Second, the intervening variables include
the attitudes, motivations, and perceptions of all the members. Third, the end-result variables
include measures of organizational performance such as productivity, costs, and earnings.

Most companies measure and evaluate end results. Company controls provide plenty of
information on these variables. But most control systems pay little heed to the intervening
variables. Consequently, managers manipulate the causal variables in response to information
only on end results, not on the intervening factors that influence those end results.

61
Because of this information gap, Likert believed managers take actions that harm the human
organization. They cut costs in response to a drop in earnings, for example. This shows a short-
run improvement earnings. But neither the damage to attitudes and motivation nor its toll on
future earnings is ever measured.

Causal Variables Intervening End Result Variables

o Organization Variables:  Productivity
structure o Attitudes  Costs
o Controls o Motivations  Earnings
o Policies and
o Leadership o perceptions of
behavior all members

Likert has devised new measurements that depict the state of an organization over time. The
questionnaire that Likert has developed measures a core of items covering both causal and
intervening variables. The questionnaire data graphically portray what Likert calls the "
management system" the cluster of factors including structure, controls, policies, and
leadership behavior plus the attitudes, motivations, and perceptions of the members. End-
results performance variables-productivity, costs, earning -are also measured.

Out of the large number of studies already conducted along these line, under Likert's direction,
by the University of Michigan's Institute for Social Research, has come the identification of four
types of management systems:

System 1: Exploitive-authoritative
System 2: Benevolent-authoritative
System 3: Consultative
System 4: Participative group

The gist of Linker's thesis is that particular management systems are consistently associated
with certain patterns of performance results over time. He expressed the idea cautiously in a
technical article:

The available and growing evidence justifies the view that further research very probably will
demonstrate strong and consistent relationships among the causal, intervening, and end-result

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variables: that certain leadership styles and management systems consistently will be found
more highly motivating and yielding better organizational performance than others.

Specifically, System 4 appears to be consistently associated with more effective performance;

system 1 with less effective performance.

According to Likert, studies of individual companies over several years show that as the
management system shifts from a lower to a higher number, the performance of the
organization improves.

Changes in the causal and intervening variables precede changes in the end-result variables.
The time lag appears to vary according to organization size, type of work, and organizational
complexity. The larger or the more complex organization has a greater time lag.

What follows therefore is the proposal that since the condition of the management system can
predict end results, it ought to be measured periodically as a kind of early warning system. Keep
in mind, however, that there has been no conclusive proof of Linkert's belief that a
participative-group management system is the best for all organization. It is, in fact, quite
inconsistent with the contingency approach to management. Nonetheless, convincing evidence
may eventually be developed that particular classes of management systems are precisely
correlated with future organizational results in particular classes of organizations. Management
systems, therefore, could be measured as valid predictors, barring intervening changes during
the time lag. At least such a prospect is conceivable as long as the whole system doesn't change
significantly.

Another important idea in the Likert scheme is that in tabulating the financial performance
records of any firm, hitherto uncounted assets should be measured. These include the firm's
human organization, its customer loyalty, its shareholder loyalty, its supplier loyalty its
reputation in the financial community, and its reputation in the community in which it has
plants. Some rough methods are in use for estimating the value of the firm's human
organization. They usually yield a value of 3 to 5 times payroll or 15 to 20 times earnings. There
is, in Likert's view, great need for a more comprehensive kind of accounting than we have now
because "When all forms of human resources are ignored in a firm's accounting reports, as at
present, the stated assets and true value are steadily decreasing by a substantial fraction."

In short, by measuring only those features of performance measured by traditional accounting

practice, management controls can create an illusion of well-being. This illusion can be
especially dangerous because the practices that lead to making the numbers register at

63
satisfactory levels can reflect actual but unconsidered damage to the very capacity of the
human organization to perform. Thus, periodic layoffs and other cost-cutting practices may
remove the human talent or the investments necessary to assure satisfactory earnings the next
year of the year after.

6.4 Control Techniques (Methods)

Budgetary control is one of the most widely recognized and commonly used methods of
managerial control. It ties together preliminary control. Concurrent control, and feedback
control. depending on the point which it is applied. Budgetary control is the process of finding
out what's being done and comparing the results with the corresponding budget data to verify
accomplishments or to remedy differences Budgetary control commonly is called budgeting.

A sales-expense budget
January February March
Expectancy Expectancy Expectancy
Actual Actual Actual
Sales $1,200,000 $1.350,00 $1,400,000
Expenses
General Overhead 310,000 310,000 310,000
Selling 242,000 275,000 288,000
Producing 327,000 430,500 456,800
Research 118,400 118,400 115,000
Office 90,000 91,200 91,500
Advertising 32,500 27,000 25,800
Estimated gross
Profit 80,100 97,900 112,900

Fundamental Budgetary Considerations

In private industry, budgetary control begins with an estimate of sales and expected income.
Table shows a budget with estimates for sales and expenses for the first three months of the
year. There is space to enter the actual accomplishments to expedite comparison between
expected and actual results. Note that the total expenses plus estimated gross profit equals the
total sales expectancy.

Budgeting is based on data that are either constant or variable. Constant data means that the
budget standards are for a fixed level; that is, the targets remain constant, and the estimates

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have a high degree of accuracy. Variable data include several levels of budgeted estimates to
recognize variations in sales, production cash, or other key data.

Budgeting information is supplied to the entire enterprise or to any of its units; it is not
confined to financial matters. Units other than dollars typically are used. For example, industry
uses budgeting of production in physical units and of labor by different skills.

Another consideration of budgeting is the length of the budget period. All budgets are prepared
for a definite time period. Many budgets are for one, three, or six months or for one year. The
length of time selected depends on the primary purpose of the budgeting. The period chosen
should include the enterprise's complete normal cycle of activity/ For example, seasonal
variations should be included both for production and for sales. The budget period commonly
coincides with other control devices, such as managerial reports, balance sheets, and
statements of profit and loss. In addition, the extent to which reasonable forecasts can be
made should be considered in selecting the length of the budget period.

Some companies use moving budgeting, which features a yearly forecast; them, when each
month ends, another month is added to the period. For example, at the end of November, a
forecast for the next November is added so that a moving 12-month forecast is maintained.

Regardless of which practice is used, revisions are made at any time they are believed
necessary.

Applying Budgetary Control

Budgetary control proceeds through several stage. Establishing expectancies starts with the
broad plan for the company and the estimate of sales, and it ends with budget approval and
publication. The budgetary operations stage, then, deals with finding out what is being
accomplished and comparing the results with expectancies. The last stage, as in any control
process, involves taking corrective action when necessary.

Although practices differ widely, a member of top management often serves as the chief
coordinator for formulating and using the budget. Usually the treasurer. controller, or chief
accountant has these duties. He or she needs to be less concerned with the details than with
resolving conflicting interests, recommending adjustments when needed, and giving official
sanction to the budgetary procedures.

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Types of Budgets
 There are many types of budgets. Some of the more common types are as follows:
 Sales budget. Usually data for the sales budget are prepared by month, sales area, and
product.
 Production budget. The production budget commonly is expressed in physical units.
Required information for preparing thos budget includes types and capacities of
machines, economic quantities to produce, and availability of materials.
 Cost production budget. The information in the cost production budget sometimes is
included in production budget. Comparing production cost with sales price shows
whether of not profit margins are adequate.
 Cash budget. The cash budget is essential to every business. It should be prepared after
all other budget estimates are completed. The cash budget shows the anticipated
receipts and expenditures, the amount of working capital which outside financing may
be required, and the periods and amounts of cash available.
 Master budget. The master budget includes all major activities of the business. It brings
together and coordinates all the activities of the other budgets and can be thought of a
" budget of budgets."

Accounting records must be inspected periodically to ensure they were properly prepared and
are correct. Accounting audits, which verify accounting reports and statements, are essential to
the control process. This audit is performed by members of an outside firm of public
accountants. Knowing that accounting practices (GAAP) forms a reliable base for sound overall
controlling purposes.

In addition to budgets, businesses commonly use other statements for financial control. Two
financial statements that help control overall organizational performance are the balance sheet
and the profit and loss statement. In each type of report information for several consecutive
years reveals important trends, such reports are called comparative, that is, they provide data
comparing one year with another.

Comparative Balance Sheet

The comparative balance sheet shows the financial picture of a company at a given time. This
statement itemizes three elements: (1) assets, (2) liabilities, and (3) stockholders' equity. Assets
are the values of the various items the corporation owns. Liabilities are the amounts the
corporation owes to various creditors. Stockholders' equity is the amount accruing to the
corporation's owners.

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The relationships among these three elements is as follows:

Assets= Liabilities + Stockholders' equity

This relationship is the balance sheet equation.

Comparative Balance Sheet
For the Years Ending December 31
Assets This Year Last Year
Current assets:
Cash................................................................................. $ 161,870 $ 119,200
U.S. Treasury bills.......................................................... 250,400 30,760
Accounts receivable........................................................ 825,595 458,762
Inventories:
Work in process and finished products...................... 429,250 770,800
Raw materials and supplies...................................... 251,340 231,010
Total current assets............................................. 1,918,455 1,610,532
Other assets:
Land............................................................................... 157,570 155,250
Building......................................................................... 740,135 91,784
Machinery and equipment.............................................. 172,688 63,673
Furniture and fixtures..................................................... 132,494 57,110
Total other assets before depreciation...................... 1,202,887 367,817
Less: Accumulated depreciation and amortization 67,975 63,786
Total other assets...................................................... 1,134,912 304,031
Total assets......................................................................... $3,053,367 $1,914,563
Liabilities and Stockholders' Equity
Current liabilities:
Account payable........................................................... $ 287,564 $ 441,685
Payrolls and withholdings from employees................. 44,055 49,580
Commissions and sundry accruals................. ............. 83,260 41,362
Federal taxes on income................. ............................. 176,340 50,770
Current installment on long-term debt.......................... 85,985 38,624
Total current liabilities................. ......................... 667,204 622,021
Long-term liabilities:
15-year, 9 percent loan, payable in each of the years
1988 to 2001................................................................ 210,000 225,000
5 percent fist mortgage................................................ 408,600
Registered 9 percent notes payable............................. _________ 275,000
Total long-term liabilities 618,600 500,000

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Stockholders' equity:
Common stock: authorized 1,000,000 shares, 492,000
outstanding last year 492,000 shares, outstanding this
year 700,000 shares at $1 par value................................... 700,000
Capital surplus................. ................. ................. ........ 981,943 248,836
Earned surplus................. ................. .......................... 75,620 51,706
Total liabilities and stockholders' equity........................... $3,053,367 $1,914,563

Table 2 shows a comparative balance sheet. During the year, the company grew because it
enlarged its building and acquired more machinery and equipment by means of long-term debt
in the form of a first mortgage. Additional stock was sold to help finance the expansion. At the
same time, accounts receivable were increased and work in process reduced. Observe that
Total assets ($3,053,367)= Total liabilities ($677,204 + $618,600) + Stockholders' equity
($700,000 + $918,943+$75,620).

Table 3 A comparative statement of profit and loss

Comparatives Statement of Profit and Loss For the

Years Ending June 30
Increase or
This Year Last Year
decrease
Income
Net sales $253,218 $257,636 $4,418
Dividends from investments 480 430 50
Other 1,741 1,773 32
Total 255,439 259,839 4,400
Deductions
Cost of goods sold 180,481 178,866 1,615
Selling and administrative expenses 39,218 34,019 5,199
Interest expense 2,483 2,604 121`
Other 1,941 1,139 802
Total 224,123 216,628 7,495
Income before taxes 31,316 43,211 11,895
Provision for taxes 3,300 9,500 6,200
Net income $28,016 $33,711 $5,695
Decrease

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Summarizing balance sheet items over a long period of time uncovers important trends and
gives a manager further insight into overall performance and areas in which adjustments need
to be made.

Profit and Loss Statement

The profit and loss statement is an itemized financial statement of the income and expenses of
the company's operations during the accounting period. It basically shows income less
expenditure. Table 3 shows a comparative statement of profit and loss for two consecutive
years. In this illustration. the operating revenue of the enterprise has increased. Expense also
has increased, but at a lower rate, resulting in a higher net income. Some managers draw up
tentative profit and loss statements and use them as goals. Then performance is measured
against these goals or standrds. From comparative statements of this type, a manager can
identify trouble areas and correct them.

Controlling by profit and loss is most commonly used for the entire enterprise and, in the case
of a consolidated corporation, its subsidiaries. However, if controlling is by departments, as in a
decentralized organization in which department managers have control over both revenue and
expense, a profit and loss statement is used for each department. Each department's output is
measured, and a cost, including overhead, is charged to each department's operation. Expected
net income is the standard for measuring a department's performance.

Suppose a manufacture has three departments: punching, welding, and assembling. The
punching department produces and sells its products and services to the welding department,
which in turn sells its products and services to the assembling department. Each department is
a separate enterprise with its own profit and loss statement. In this way, the contribution of
each department to the net income of the entire enterprise can be assessed.

Financial Ratios
An effective approach for checking on the overall performance of an enterprise is to use key
financial ratios. A ratio is the relationship between two numbers. Ratio help indicate possible
strengths and weaknesses in the company's operations. Ratio analysis is a broad and complex
subject; we will discuss only a few ratios that have wide recognition and acceptance.

Key ratios are calculated from selected items on the profit and loss statement and the balance
sheet, like the balances sheet of ABC Company in Table 4. We will briefly discuss three
categories of financial rations. Liquidity, leverage, and profitability.

Liquidity Ratios

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Leverage rations show the relative amount of funds in the business supplied by creditors and
shareholders. An important example is the debt-equity ratio, which indicates the company's
ability to meet its long-term financial obligations. The debt-equity ratio for ABC is the sum of
total current liabilities plus funded debt, divided by capital stock plus surplus. ) This is one of
several ways a debt ratio can be calculated.) If this ratio is less than 1.5, as it is in our example,
the amount of debt is not considered excessive.
Profitability Ratios
Profitability ratios indicate management's ability to generate a financial on sales or investment.
For example, return on investment ( ROI) is a ratio of profit to capital used, or a rate of return
from capital. ROI is calculated by

Table 4 Balance sheet

PEGGY LYNN PRODUCTS COMPANY
Balance Sheet
December 31, 1989
Assets
Current assets
Cash:
Cash in bank $32,846.85
Petty cash fund 300.00 $ 33,146.85
Accounts receivable 173,465.30
Less: Reserve for doubtful accounts
6,118.25 167,347.05
Inventories:
Raw materials 123,655.40
Work in process 60,521.62
Finished goods 177,831.70 362,008.72 $562,502.62
Fixed assets:
Land 28,500.00
Building 156,620.00
Less: Reserve for depreciation 22,050.00 134,570.00
Machinery and equipment 248,300.00
Less: Reserve for depreciation 40,500.000 207,800.00 370,870.00
Deferred charges 2,380.00
Unexpired insurance 6,750.40 9,130.40
Total assets $942,503.02
Liabilities
Current liabilities:
Notes payable:
Bank $50,000.00

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 Trade 13,925.00 $63,925.00
Accounts payable 87,058.77
Accruals 11,571.25
Federal income tax 87,000.00
Other taxes 16,948.00 $266,503.02
Funded debt: 91/2 percent
First mortgage 91/2 percent bonds 100,000.00
Capital stock:
Common stock-par value $1.00 per
share:
authorized 50,000 shares, issued and 400,000.00
outstanding 400,000 shares
Surplus 176,000.00
Total liabilities $942,503.02
Tangible net worth $576,000.00
Net working capital $562,502.62
266,503.02 295,999.60
Total sales 2,100,000.00
Earnings 175,000.00
Average number of employees 100

Dividing earnings ( $175,000) by investment ( $942,503.02) which equals 4 cent. This ratio
indicates a satisfactory return on investment.

Using Financial Ratios

Ratios need interpretation. First, ratios can be compared with past ratios and with ratios of
similar companies in similar industries. Moreover, managers should consider the ratio's source,
the accuracy of the factors used for calculations, and the ratio's usefulness to various company
operations and individual managers.

Ratios are not the only possible performance standards and indicators of what has occurred.
Exclusive reliance on financial ratios can have negative consequences. Because ratios usually
are expressed in compressed time horizons (monthly, quarterly, or yearly), they often cause
management myopia managers focus on short-term earnings and profits at the expense of their
longer-term strategic obligations. Control systems using long term (e.g., three-to-six- year)
performance targets can reduce management myopia and focus attention farther into the
future.

A second negative outcome of ratios is that they relegate other important considerations to a
secondary position. Research and development, management, progressive human resources

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practices, and other considerations may receive insufficient attention. Therefore, the use of
ratios should be supplemented with other control measures. Organization can hold managers
accountable for market share, number of patents granted, and sales of new products, human
resources development, and other performance indicators.

Another important method if managerial control is the use of fixed and variable costs and their
subsequent analysis in break-even charts. Fixed costs are expenditures that remain relatively
constant regardless of the volume of work output for a periled. Items such as executives'
salaries, depreciation, and interest on borrowed money are fixed costs. Variable costs are
expenditures that relate to and change directly with the volume of work output. Direct material
costs and salespeople's commissions are examples of variable costs.

Fixed-and variable- cost analyses provide a picture of the cost of operations and the profit
possibilities at carious levels of sales. They also can indicate the column necessary to break
even, that is, the point at which total income equals total expenditures and there is no loss.
Break-even analysis has many uses in control and managerial decision making, including (1)
dropping. adding, or pricing products; (2) equipment selection or replacement ; (3) make-or -
buy decisions: (4) promotion
( advertising ) mix decisions; and (5) choice of distribution channels.

Four fundamental constraining factors are central to break-even analysis:

1. Sales equal fixed cost plus variable cost plus or minus profit, or

S = FC + VC  P.

2. At the break-even point, sales equal fixed cost plus variable cost, or

S BEP = FC + VP

3. Variable costs (and profits) vary with sales.

4. Fixed costs remain fixed within the range of the sales being considered.

For example, assume a company has sales of $3 million; variable costs are 40 percent of sales;
and fixed costs are estimated at $1.5 million. The problem is to find the profits, if any, at this

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level of sales and the break-even point. The profits, if any, at sales of $4 million and at $2
million also need to be calculated.

To solve this problem using algebra, first substitute values in the first formula:

S= FC + VC + P
$3,000,000 = $ 1,500,000 + 40% of $3,000,000 +O
$3,000,000=$1,500,000+$1,200,000 +P
$300,000 = Profit

To determine the break-even point, use the second formula: Fixed cost remains fixed, so

SBEP = FC + VC
100% S BEP = $1,500,000 + 40% S BEP
60% S BEP = $1,500,000
S BEP $2,500,000

For profit at sales of $4 million using formula 1:

$4,000,000 = $1,500,000 + 40% of $4,000,000 + P

$900,000 = Profit

For profit at sales of $2 million using formula 1:

$2,000,000= $1,500,000 + 40% of $2,000,000 +P

-$300,000=Profit (Loss)

CONTROL: THE HUMAN FACTOR

So far, you have learned about control from a mechanical viewpoint. But organizations are not
mechanical; they are composed of people. Control systems are used to constrain people's
behavior and make their future behavior predictable. But controlling human behavior difficult
and sometimes controversial.

As you can see from the preceding example, people are not machines that automatically fall
into line as the designers of control systems intend. In fact. Control systems can lead to

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dysfunctional behavior. A control system cannot be effective without consideration of how
people will react to it.

For effective control of employee behavior, managers should consider three types of potential
responses to control: rigid bureaucratic behavior, strategic behavior, and resistance.

Rigid Bureaucratic Behavior

Often people act in ways that will help them look good on the control system's measures. This
tendency can useful, because it causes people to focus on the behaviors management requires.
But it can result in rigid, inflexible behavior geared toward doing only what the system
requires.

For example, budgets can become ends in themselves, causing people to do foolish or unethical
things to meet their budgets ( particularly if incentive pay is at stake). Similarly, sales incentive
systems often create a single-minded focus. Sales people concentrate only on sales volume and
neglect other important but unmeasured behaviors like stock work, arranging merchandise for
display, and customer service.

Rigid bureaucratic behavior occurs when control systems prompt employees to stay out of
trouble by following the rules. Unfortunately, such systems often lead to poor customer service
and make the entire organization slow to act (recall the discussion of bureaucracy in Chapter
10). In one hospital, a patient with eye pains entered an emergency room at midnight. He was
classified as a nonemergency case and referred to the hospital's eye clinic (which didn't open
until the next morning). When he arrived at the clinic, the nurse asked for his referral slip,
which the emergency room doctor had forgotten to give him. The patient returned to the
emergency room, waited for physician to screen him, and was referred back to the eye clinic
and to a social worker to arrange payment. Then a third doctor looked in his eye and removed a
small piece of metal a 30-second procedure. We all have been victimized by examples of rigid
bureaucratic behavior.

Strategic Behavior
Control systems will be ineffective if employees engage in strategic tactics aimed at " beating
the system." The most common type of strategic behavior is to manipulate information or
report false performance data.

People may produce two kinds of invalid data: about what has been done and about what can
be done. False reporting about the past is less common, because it is easier to identify someone

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who misreports what happened than someone who gives an erroneous prediction or estimate
of what might happen. Still, managers sometimes change their accounting systems to "smooth
out" the numbers. Also, people may intentionally feed false information into a management
information system to cover up errors or poor performance.

More commonly, people falsify their predictions or requests for the future. When asked to give
budgetary estimates, employees usually ask for larger amounts than they need. On the other
hand, they sometimes submit unrealistically law estimates when they believe a low estimate
will help them get a budget or a project approved. Budget-setting sessions can become tugs-of-
war between subordinates trying to get slack in the budget and supervisors attempting to
minimize slack.

Similar strategic behaviors are exhibited when managers negotiate unrealistically low
performance standards so that subordinates will have little trouble meeting them; when
salespeople project low forecasts so they will look good by exceeding them; and when workers
slow down the work pace when time-study analysts are setting work pace standards. In these
and other cases, people are concerned only with their own performance figures rather than will
the overall performance of their departments or companies.

Resistance to Control

Often people strongly resist control systems. This occurs for several reasons. First,
comprehensive control systems increase the accuracy of performance data and make
employees more accountable for their actions. Control systems uncover mistakes, threaten
people's job security and status, and decrease people's autonomy.

Second, control systems can change expertise and power structures. For example, management
information systems can make the costing, purchasing, and production decisions previously
made by managers. Thus, individuals fear a loss of expertise, power, and decision-making
authority.

Third, control systems can change the social structure of the organization. They can create
competition and disrupt social groups and friendships. People may end up competing against
those with whom they formerly had comfortable, cooperative relationships. Because people's
social needs are so important, they will resist control systems that reduce social need
satisfaction.

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CHARACTERSTICS OF EFFECTIVE CONTROL SYSTEMS

Effective control systems maximize the potential benefits and minimize dysfunctional
behaviors. To achieve this, management needs to design control systems that (1) are based on
valid performance standards; (2) communicate adequate information to employees; (3) are
acceptable to employees; and (4) use multiple approaches.

Valid Performance Standards

An effective control system must be based on valid performance standards. The most effective
standards, as discussed earlier, are expressed in quantitative terms; they are objective rather
than subjective. Also, the measures should not be easily sabotaged or faked.

Moreover, the system must incorporate all important aspects of performance. As you learned
earlier, unmeasured behaviors are neglected. But management must also defend against
another problem: too many measures that create over control and employee resistance. To
make many controls tolerable, mangers can devote attention to a few key areas while setting
"satisfactory" performance standards in others. Or they can establish simple priorities. The
purchasing agent may have to meet targets in the following sequence: quality, availability, cost,
inventory level. Finally, managers can set tolerance ranges. For example, in financial budgeting
optimistic, expected, and minimum levels sometimes are specified.

Many companies' budgets set cost targets only. This causes managers to control spending, but
also to neglect earnings. At Emerson Electric, profit rather than cost is the key measure. If an
unanticipated opportunity to increase market share arises, managers can spend what they need
to go after it. The phrase "it's not in the budget" is less likely to stifle people at Emerson than at
Emerson than at most other companies.

This principle applies to nonfinancial aspects of performance as well. At Motorola, the

recruiting department used to be measured by how much money was spent for each new hire.
Now it is measured by how well its recruits subsequently perform.

Adequate Information

Management must adequately communicate to employees the importance and nature of the
control system. Then people must receive feedback about their performance. Feedback
motivates people and provides information that enables them to correct their own deviations

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from performance standards. Allowing people to initiate their own corrective action encourages
self-control and reduces the need for outside supervision.

Information should be as accessible as possible, particularly when people must make decision
quickly and frequently. For example, national food company with its own truck fleet had a
difficult problem. The company wanted drivers to go through customer sales records every
night, insert new prices from headquarters every morning, and still make their rounds - an
impossible set of demands. To solve this control problem, the company installed
microcomputers in more than 1,000 delivery trucks. Now diverse use their PCs for daily two-
way communication with headquarters. Each night drivers send information about the stores,
and each morning headquarters sends price and recommended stock mixes.

In general, a manager designing a control system should evaluate the information system in
terms of the following questions:

1. Does it provide people with data relevant to the decisions they need to make?

2. Does it provide the right amount of information to decision makers throughout the
organization?

3. Does it provide enough information to each part of the organization about how other related
parts of the organization are functioning?

Acceptability to Employees

Employees are less likely to resist a control system and exhibit dysfunctional behaviors if they
accept the system. They are more likely to accept systems that have useful performance
standards but are not over controlling.

The control system should emphasis positive behavior rather than trying to control negative
behavior alone.

One of the best ways to establish reasonable standards and thus gain employee acceptance of
the control system is to set standards participative. Participation in decision-making secures
people's understanding and acceptance and results in better decisions. Allowing employees to
participate in control system decisions that directly affects their jobs will help overcome
resistance and foster acceptance of the system.

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Multiple Approaches

Multiple controls are necessary. For example, casinos exercise control over card dealers by (1)
requiring them to have a card dealer's license before being hired; (2) using various forms of
direct scrutiny, including up to three levels of direct supervision, closed-circuit cameras, and
observation through one-way mirrors; and (3) requiring detailed paperwork to audit transfers
of cash and cash equivalents. As you learned earlier in this chapter, control systems generally
should include both financial and nonfinancial performance targets and incorporate aspects of
preliminary, concurrent, and feedback control.

Managers can apply three broad strategies for achieving organizational control: Bureaucratic
control, market control, and clan control. Bureaucratic control is the use of rules, regulations,
and authority to guide performance. Market controls are financial and economic, such as when
divisions in a corporation are evaluated based on profit and loss. Performance is monitored and
comparisons are made against other years, other divisions, or other companies. This chapter
has focused on bureaucratic and market controls.

The third type of control, unlike the first two types, is a form of social control derived from
other people. Clan control is based on the values, trust, and goals shared among group
members. When members share goals and values and trust one another, formal controls are
less necessary. clan control is based on many of the interpersonal process.

Often a company's top management team operates based on clan control. Even chief
executives of different organizations who certificate to the same "phantom club" of elite
business leaders control one another's behavior through shared norms and values. For
example, clan control is evidenced by the unwritten-pro even unspoken-code against talking
about one another to outsiders such as journalists. Criticizing other CEOs, or even tolerating
disparaging rumors about personal habits or conduct, is taboo.

When groups are cohesive, share a "family" feeling, perform according to group norms, or
make decisions based on friendship and trust, clan control is being exercises.

6.5. Types of management control

 Budgetary
 Non-budgetary

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Budgetary control is the process of finding out what is being done and comparing the results
with the corresponding budget data to verify accomplishments or correct variances. It involves
setting targets for production, sales and other activities of business; comparing actual
performance with budgeted figures, and taking corrective actions in case of deviations. Non-
budgetary control involves other techniques other than budgets, such as:
Financial control:- the use of financial ratios and financial statements such as comparative
balance sheets, profit and loss statements.
Cost volume- profit analysis- a device used to determine the usefulness of the profit planning
process of the firm. The break- even point ( BEP) is the most widely used of the Cost-volume
Profit analysis –Break-even point is the specific way of presenting and studying the
interrelationship between costs, volume and profit-revenues and cost relationship.
Management audit- evaluating the effectiveness and efficiency of various systems within and
organization, form social responsibility to accounting control and the like.

6.6 Principles of Management Control System

 Objectivity- Measurable or quantifiable

 Systematic - procedures and methods must be clearly established and made known.

 Economical- practical and less costly to implement

 Relevant and reliable- critical and consistent

 Feasible- be applicable and achieve anticipated results.

 Flexibility - capable to adapt changes both to internal and external changes.

 Feed back- Information is the basic of control. Feedback of performance measurements

makes it possible to compare actual with intended results and to attempt adjustments

where indicated.

 Establish proper accountability and autonomy of operation.

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