CHAPTER IV LEADERSHIP AND MANAGEMENT

Meaning and definition of leadership Need for leadership Types of leadership Functions of a leader Qualities of a good leader Role of committees in group decision making in management Organizational communication Management of change Management Vs. Leadership

Meaning and Definition of Leadership

Leadership is the process of influencing the behavior of the people. Leaders are the moving spirits and guiding stars of inspiration to their followers. A leader interprets the objectives of the business, suggests course of action and guides people to achieve the set objectives. He seeks active support and acceptance of the employees in following the proposed course of action. A successful leader is able to influence his subordinates by his conduct and expression to carry out his wishes and command. In the words of Koontz, ODonnel, Leadership is the ability of a manager to induce subordinates to work with confidence and zeal. According to Allen , a leader is one who guides and directs the people. He must give their efforts, direction and purpose. Need for Leadership Right leadership is the soul of any organization. Effective and successful leadership leads an organization to achieve business goals. Good leadership is essential for the success of a business because of; Imperfect organizational structure, Occurrence of fast technical, economic and social changes, Internal imbalances due to growth, Human nature and behavior, and Psychological reasons.

Types of leadership
Leadership may be ; I) Laissez-faire Leadership II) Autocratic leadership III) Democratic leadership IV) Intellectual or functional leadership V) Institutional leadership VI) Paternalistic leadership Laissez faire leadership is free from any interference by the superior in the work of subordinates. The leader only fixes the goals and leaves the steps to achieve them entirely to his subordinates. The leader even does not check the performance. Such a leadership generally proves to be a failure. An autocrat leader does not entertain any suggestions or initiative from his subordinates. He expects complete obedience to his command. Such a leadership is difficult to last for long. Democratic leadership is a compromise between laissez faire and autocratic leadership. In this, solutions to the problems are found out by mutual discussions. It is more rewarding and stable. Intellectual or functional leadership is based on informal authority. Leadership is acquired by technical superiority such as Accountant, Engineer, etc. Under institutional leadership , a person becomes leader and commands authority because of his high official position though he may not be an expert in the field of activity, e.g., IAS officers acting as directors of some enterprises. Paternal leadership is based on sentiments and emotions of the people. A paternal leader though gives protection and support to all his subordinates but under him no one grows. The worker is spoiled like a pampered child. Leadership basically is a process of motivation. Different leaders have different styles to motivate the people. Some leaders motivate their subordinates by introducing a severe system of punishment for the disobedient ones, while others adopt persuation and active participation as their techniques of motivation. An effective leader can motivate his workers better by enlisting their voluntary cooperation, directing and disciplining them and by keeping open channels of communication.

Functions of a Leader A leader has to undertake three major functions as given below in order to guide and motivate the employees and to understand their feelings and emotions:
Developing voluntary cooperation Proper communication Direction and discipline Voluntary cooperation may be obtained by offering friendliness and reposing trust in the subordinates. It can be obtained by inviting subordinates for a democratic participation and giving necessary support to the subordinates. A leader must maintain consistent and fair behavior. He must establish his reputation for genuineness of purpose and integrity of character. He must adopt a positive approach and help in removing the legitimate grievances of the employees in order to seek their best cooperation. He must also recognize differences in individual temperaments of the subordinates and change his behavior to suit each individual. Two way communications between the manager and workers are indispensable for good leadership. Information, must flow both upward and downward, i.e., from the leader to the subordinate and vice-versa. Due consideration must be paid to differences in personal view-point, difficulties of language, organizational distances and inferred meaning. All communications must be complete, clear and easily understandable. Undesirable behavior of the subordinate must immediately de disciplined and corrected by adopting fair and impersonal methods. Power must be used with humility and with a sense of obligation to use it carefully and discretely. Qualities of a good leader 1) Good personality physical and mental fitness 2) Emotional stability 3) Good understanding and better judgment and foresight 4) Balanced approach and behavior 5) Ability to guide and motivate subordinates 6) Communicating skill 7) Sociability 8) Technical superiority with sound general education 9) Sincere, fair and honest dealings 10) Courage to accept responsibility.

Role of committees
A committee consists of a group of people specifically designated to perform some administrative acts. It functions only as a group and requires the free interchange of ideas among its members. There is no piece of work in a modern business house which does not affect the work in other departments. For example, If the production manager wants to change the product even slightly, the sales manager would be deeply concerned because he has to convince his customers that the change is all to the good. Similarly, the sales manager cannot follow a policy without consulting the finance manager or the production manager. The decisions in a particular department should be made by the managers with the committees of the departments. This committee should preferably be presided over by the general manager. This will ensure that when a decision is arrived at, all departments are consulted and that, therefore, when the decision is put in to effect all departments will cooperate. When important policy decisions are arrived at only through committees, the various departmental managers will automatically begin to consider the viewpoints of other departments when they decide matters. Benefits of committees Committees have become popular with business organizations on account of the following advantages: These provide opportunities for pooling of ideas and lead to integrated group judgment. Personal bias and prejudice is eliminated from decisions and the problems are looked at from diverse angles. Committees promote co-ordination of various activities of an enterprise. This is possible because committee work develops awareness of the problems of other organizational units among members.

Committees secure co-operation of the various parts of the organization in the execution of plans. When an executive participates in the formulation of a plan in a committee, he naturally acquires a special interest in its execution. Committees train members in the problems of various divisions and make for continuity as some members may stay on the committees while others retire. Committees provide a safeguard against the evils of the concentration of power and bring about dispersal of authority.

Group decision making in Management

It is quite common in organizations that some decisions are taken by a manager individually while some decisions are taken collectively by a group of managers. Individual decisions are taken where the problem is of routine nature, whereas important and strategic decisions which have a bearing on many aspects of the organization are generally taken by a group. Group decision making is preferred these days because it contributes for better coordination among the people concerned with the implementation of the decision. Rational decision making process contains the following steps a) Define the problem A problem well defined is a problem half-solved. Wrong definition of the problem leads to wrong solutions. The problem has to be examined from different angles so as to identify the exact causes. Unless exact causes are identified, right decisions cannot be taken. b) Analyze the problem The problem has to be thoroughly analyzed. The past events that contributed to the problem, the present situation and the impact of the problem on the future have to be examined. Problems do not grow up overnight. The geneses of the problem and the various contributing factors have to be analyzed. Proper analysis of the problem helps the manager to assess the scope and importance of the problem. c) Develop alternatives There are hardly few problems for which there are not many alternatives. Effective decision-making depends on the development of, as many alternative solutions, as possible. The underlying assumption is that a decision selected from among many alternatives tends to be a better one.The ability to identify and develop alternative courses of action depends on the managers creativity and imagination. d) Evaluate alternatives Alternatives have to be evaluated in the light of the objectives to be achieved, and the resources required. Evolution involves a through scruitiny of the relative merits and demerits of each of the alternatives in relation to the objectives sought to be achieved by solving the problems. e) Select and implement the decision After weighing the pros and cons in detail, the best alternative has to be selected and implemented. It may not always be possible to select the best alternative for a given problem for want of complete information, time and resources. In such a case, the manager ha to satisfy with limited information and optimize the yields under a given set of circumstances. Once an alternative is selected, it has to be implemented in a systematic way. The required resources for the implementation and the necessary cooperation from the people concerned with or affected by the decision have to be ensured. f) Follow-up and feed back Once the decision is implemented, it has to be closely monitored. Adequate follow-up measures have to be taken. Constant follow-up helps to take corrective measures as and when necessary and enables to identify the shortcomings or negative consequences of the decision. It provides valuable feed-back on which the decision may be reviewed or reconsidered.

Management of Change
In large scale organizations, changes seldom occur without a bit of chaos. Usually change agents try to minimize it by imposing some order on the change process. Change becomes orderly when it is planned and implemented in a systematic way. The process of planned change comprises the following steps: 1. Identify the need for change : The manager should identify the forces demanding change. Those forces may be internal or external. Internal forces include; employee turnover, change related role conflicts, mounting problems from its

growing size, any other internal change like; introduction of new department due to expansion in sales, production, etc. External sources include; technological changes, new marketing strategies, new production techniques, etc. 2. Diagnose the problem : This step involves the identification of the root cause. Several techniques are used for diagnosis, e.g. interviews, attitude surveys, team meetings, questionnaires, etc. Where the problem can be traced to a single department, the focus of diagnosis is limited to that area. If the problem has wider implications and affects a large number of departments, organizational analysis is required. Organizational analysis includes exhaustive study of organizational goals, principles, practices and performance at a macro level. After such an exhaustive analysis, the change agent would be in a position to identify the areas where modifications have to be made. 3. Plan the change : This is a critical step in the management of change. It involves answering three important questions (i) when to bring the change (timing), (ii) how to bring the change (methods), and (iii) who will introduce the change (change agent). While introducing change, reactions from people must be carefully assesses. People affected by change must be consulted; the likely impact should be explained patiently; sufficient time to pick up new skills should be given and adequate reward to those who follow change should be indicated. 4. Implement the change : While implementing any change programme, managers encounter three programmes- resistance, power and control. Implementation of change: action steps Problem Resistance Implication Need to motivate Action Steps . Invite participation from people. Offer appropriate rewards. Encourage open communication. Explain why change is essential.
Use multiple and consistent leverage

Control

Need to manage the transition

points. organizational arrangements for transition. Build in feedback machinations.

Develop

Power

Need to shape the political domain

Assure the support of key groups. Use leader behavior to get support of

change. Use symbols and language.

5. Follow -up and feedback: Management of change is incomplete without proper follow-up. Organization must evaluate the effects of change. Objectives must be present and be compared with the performance to see the degree of success in change. End results should be operationally defined and measurements must be done both before and after the implementation of change.

Management versus Leadership

A burning question is how management differs from leadership. For some, there is no difference. But increasing complexity drives ever greater specialization, so we really need to recognize that leadership and management are two different functions. This is the same as saying they serve two different purposes. A clear way of differentiating the two is to say that Leadership promotes new directions while management executes existing directions as efficiently as possible. But the work of the manager is not just the mundane(routine)monitoring of daily operations. It includes getting the most complex projects done, like putting the first man on the moon. Unfortunately, management is mistakenly seen as task-oriented, controlling and insensitive to people's needs. By contrast, leaders are portrayed as emotionally engaging, visionary and inspiring. But, separating leadership from management in terms of style is a dead end, simply because leadership can be shown by quiet or forceful arguments

based on hard facts. An inspiring leader induces us to change direction while an inspiring manager motivates us to work harder to get a tough job done on time. The best managers are very strategic about themselves. They recognize that time and other resources are scarce, that competitive pressures demand efficient use of everything. Being strategic about themselves is the same thing as being a proactive, studious investor who regularly monitors his or her investments in order to shift them around to get a better return. Managers also have to be strategic about the business. It is not enough to do the work efficiently, it is essential to do the right things. Both of these imperatives can be thought of in terms of wise investment. Management is primarily a decision making role. Managers are charged with the responsibility to make a profit and this requires them to make sound decisions. By contrast, leadership is strictly informal influence. Leaders persuade people to change direction. This way of thinking about leadership means that it is not a position and that there is no such thing as autocratic leadership. It is vitally important to recast leadership in this way. Otherwise, how can we explain the leadership of Martin Luther King who influenced the Supreme Court to outlaw segregation on buses without any formal authority over this body? We confuse ourselves when we call senior executives leaders. The truth is that they are managers by virtue of their positions and they only show leadership when they influence people informally, like Martin Luther King did, to change direction. Leadership is an occasional act; management is an ongoing role.

Organizational Communication
Communication is an ever present activity. It is the means by which people exchange information with one another in an organization. Communication is as necessary to an organization as the blood stream to a person. Every manager has to communicate in the form of instructions, reports, notices, advertisements, etc. He also receives various communications in the form of suggestions, ideas, complaints, praise, etc. Communication is a process of transmitting information from one person to another and a means by which organized activity is justified. It encircles all functions of management and without it no function can be performed. Characteristics of communications Communication is an exchange of information between two or more persons. It is a two-way traffic of transmitting information from one person to another. It is a continuous process. It is a pervasive function which covers all levels of authority. Its main purpose is to cause mutual understanding. It has a circular flow which leads to some response or reaction. Objectives of communication 1. To exchange information for better understanding 2. To motivate employees 3. To educate people and spread knowledge 4. To change peoples attitude, behavior and action 5. To fill up gaps between level of decisions and levels of their implementation

Importance of communication Communication is one of the most important functions of management. It may cement an organization or disrupt. It promotes managerial efficiency and induces the human elements in an organization to develop a spirit of cooperation. It has become one of the most vital factors in the efficient performance of management. Efficient and smooth running of an enterprise Basis of decision making Proper planning and coordination For higher productivity at minimum cost Morale building Democratic management Binds people together Creates mutual trust and confidence.

Effective communication Process 1. Clarity: Every communication involves transmitting of an idea and unless the idea is clearly formulated and understood by the communicator, the communication is likely to be misunderstood. Contents of communication must be clear and not vague and confusing. 2. Participation: Good communication must be a two-way traffic, i.e., it must include telling by the communicator and listening by the recipient of the information. 3. Transmission: transmission of communications must be simple , clear and complete to ensure the desired result. 4. Motivation: A successful communication must arouse response. It must be clearly understood, accepted and acted upon by the person for whom it is meant. 5. Evaluation: Communication must provide for the assessment of their results by surveys or investigations, etc. to ascertain the effectiveness of each type of communication. Questions 1) Managers should be leaders but leaders need not be managers. Discuss. 2) What do you mean by leadership in business? What are the essential qualities of a good business leader?

Case Study Choice of a leader

Mr. Sumit Mishra is the Managing Director of an oil manufacturing company. To increase sales, the Board of Directors wanted to start a full-fledged marketing department; Mr. Mishra is entrusted with the task of finding a suitable candidate to head the proposed marketing department. After considering a number of candidates, he has narrowed down his choice to two persons: Mr. Vinod Agrawal and Mr. Ravi Kapoor. Mr. Agrawal has an excellent track record in the company. During his fruitful association with the company, to be precise 15 years, he has always shown a high degree of enthusiasm and initiative in his work. He is still young (38years) dynamic and aggressive. He is result-oriented and is more interested in ends rather than means. One of the workers, testifying his leadership qualities, remarked thus: though he is harsh at times, you will know where you stand when you work with him. When you have done a good job, he lets you know it. Mr. Agrawal is willing to shoulder additional responsibilities. He decides things quickly and when action is required, he is always on his toes. During his 20 years tenure in the Company, Mr. Ravi Kapoor has endeared himself to all his colleagues by his superior workmanship and pleasing manners. He always believes in the principle of employee participation in the decision making process. Unlike Mr. Agrawal, he encourages his subordinates to come out with innovative ideas and useful suggestions. Before arriving at a decision he always makes it a point to consult his subordinates. Not surprisingly, all his subordinates are very pleased to work under him and praise his leadership qualities. They readily admit that the participative climate has encouraged them to use their talents fully in the service of the organization. Company records also bear evidence for the increase in the production soon after Ravi Kapoor became the head of his department. Questions Analyze the leadership qualities and styles of Mr. Vinod Agrawal and Mr. Ravi Kapoor. Between the two people, whom would you recommend for the position of a marketing manager? Why?

CHAPTER V CONTROL PROCESS AND TECHNIQUES

Meaning and definition of controlling Process of controlling Planning and Control Tools and Techniques of Control Use of information technology for controlling

Meaning and definition of controlling

Control or controlling techniques are nothing new to business. They are as old as the business itself. Controlling is necessary for even the very best can be improved. Control implies information combined with action. It is a process of directing a set of variables towards predetermined objectives. Managerial function of control implies measurement and correction of the performance of subordinates in order to make sure that enterprise objectives and the plans devised to attain them are accomplished. Process of control ensures that what is done is what was intended. Thus, control is the function of management which comes at the end but is never ending. It is a function to be exercised at each level of management and not related to the top management only. In the words of Koontz & ODonnell , Controlling is the measuring and correcting of activities of subordinates to assure that events conform to plans. According to G.Terry , Controlling can be defined as the process of determining what is to be accomplished, that is the standard; what is being accomplished, that is the performance; evaluating the performance; and if necessary applying corrective measures so that the performance takes place according to plans, that is, in conformity with the standard. David Shetson , the meaning and purpose of control is : 1. Knowing exactly what work is to be done as to; quantity, quality and time available. 2. Knowing what resources are available for doing the work as to; personnel, materials, and other facilities. 3. Knowing that the work has been done or is being done; with the resources available, within the time available, at a reasonable cost and in accordance with the required standard of quality. 4. Knowing immediately of any delays, hold-ups or variations as to ; what happened, its cause and remedy. 5. Knowing what is being done, remove such hindrances as to; who is doing, how it is being done, what it is costing and when it will be completed. 6. Knowing about the completed work as to; time finished, quantity and final cost. 7. Knowing that resources are guarded against; in what way, by whom, at what cost and with what provision for periodic inspection.

Process of controlling
The process of control consists of the following steps: Establishment of standards Measuring actual or expected performance against the established standards. Finding out reasons for not reaching the standards Correcting deviations from standards and plans.

Standards (Plans) Corrective Action

Actual Performanc e Controlling Process

Analysis of deviations

Measurement of C performance Comparison of Actual and standard

Planning and control

Planning without control is useless and control without planning is meaningless. Planning is looking ahead and control is looking back. Planning is the determination of objectives, goals, strategies, policies and programmes of an organization to give purpose and direction to the activities of the organization over a specified period of time. It is anticipatory. It reduces confusion and uncertainty. Control, on the other hand, is the direction of the operations of an enterprise towards predetermined standards and monitoring the progress in this regard for the purpose of correction and feedback.

Planning

Actions

Controlling

Interrelationship between Planning and Control Controlling and planning are inter-linked. Managerial planning seeks consistent, integrated and articulated programmes while management control seeks to compel events to conform to plans. Control will be much better if the plans are more clear, complete and well coordinated and cover a longer period. The best control corrects deviations from plans before they occur. The next best detects them as they occur. Thus, planning and control are inter-dependent and complementary to each other.

Techniques of Control
A variety of tools and techniques are used by managers, now-a-days, to put their house in order and to ensure better control over the use of resources at various levels. A manager has many controlling techniques at his disposal. He employs these at various points of time, depending on the suitability of a particular technique. Control Techniques

Traditional Control techniques Personal Observation Statistical Reports and Analysis Cost control Budgetting Production Planning and control Inventory Control External Audit Control Break Even Analysis Standard Costing Financial Statement Analysis

Modern Control techniques Return on Investment Control Programme Evaluation and Review Technique (PERT) Critical Path Method (CPM) Management Information System (MIS) Total Quality Management (TQM) Quality Control Management Audit

Statistical data: statistical analysis of the various aspects of the operations of the business helps a great deal in its better control. It provides necessary feed-back. It facilitates comparison between performance and standards. Data must be clearly presented either in the form of tables or charts. It must clearly indicate the trend for effective control. Break-even point analysis: It is generally used to determine profitability of a given course of action as compared with the alternatives. It aims at the formulation of ratios between profit and sales after taking into account the gross revenues, fixed and variable expenses. Breakeven point analysis is the analysis of cost behavior in relation to changing volume of sale and its impact on profits. Breakeven point is the volume of sale or the point of production at which there is no profit no loss. When the sales increase over the breakeven volume, there will be profit.

Special reports and analysis : If the routine accounting and statistical data is inadequate for an effective control, special reports and analysis is used. Internal and external audits : Audits, besides ensuring arithmetical accuracy, establish substantial accuracy of the records of the business. Internal auditors give independent appraisal of the operations of the business. They may suggest improvements in policies, procedures, exercise or authority, etc., to make control more effective. They are concerned with all the aspects of business. Budget: Exercise of control through the pre-determined costs is popularly known as budget. An efficient businessman, in order to achieve maximum production at minimum cost, plans his budget much in advance on the basis of past experience and judgment and estimation about the future business opportunities. Budgeting helps a businessman in regulating and increasing the efficiency of his business. Profitability of a business will largely depend upon proper budgeting and budgetary control. Return on Investment : it measures the relationship between the amount of net profits and the size of investment in an enterprise. It is a key measure of overall performance, and an important technique of financial control. It can be calculated as: Net Income Sales ROI = ----------------------- X ---------------------------Sales Total Investment PERT and CPM : These are the techniques useful for planning, scheduling and implementing time bound projects involving performance of variety of complex, diverse and inter-related activities. Under both the techniques all activities of a project are integrated in a logical sequence to find out the minimum time required to complete the project. Total Quality management (TQM) : TQM refers to meeting the requirements of customers consistently by continuous improvement in the quality of work of all employees. For achieving total quality, three things are essential: a) Meeting customers requirement b) Continuous improvement through management process and c) Improvement of all employees.

Use of information technology for controlling

Modern civilization has become complicated and sophisticated and has to survive in a competitive world. There is widespread use of computers in handling information to a business. There is bulk collection of data which is needed for planning, decision-making and control by the managerial people. Management Information System (MIS is helpful to the management in undertaking managerial functions smoothly and effectively. The systems model of management shows that communication is needed for carrying out the managerial functions and for linking the organization with its external environment. The management information system (MIS) provides the communication link that makes managing possible. MIS is an integrated technique for gathering relevant information from whatever source it originates, and transferring it into usable form for the decisionmakers in management. It is a system of communications primarily designed to keep all levels of organizational personnel abreast of the developments in the enterprise that affect them. MIS provides working tools for all the management personnel in order to take the best possible action at the right time with respect to the operations and functions of the enterprise for which they are largely responsible. The emphasis of MIS is on information for decision-making.

MIS and its role : 1. MIS performs a useful triple service function to management. MIS is a three phase process data generation, data processing and information transmission. Management information system enhances managements ability to plan, measure and control performance by taking necessary and appropriate action at a right time. 2. Facilitates total performance by providing more specialized and technical kind of information for the concerned managers. It provides multiple types of information for all management levels on a large variety of organizational matter. 3. MIS takes into account important dimensions such as (1) real time requirement (how timely the information should be), (2) Frequency requirement (how often the information must be available), (3) accuracy requirement(how detailed or correct the information must be), (4) data reduction requirement(what volumes of data is to be processed), (5) distribution requirement(where the information must be supplied), (6) storage requirement (where the information must be stored), MIS provides answers to all these questions. 4. MIS reduces overload of information. MIS undertakes a painstaking collection of all forms and regular charts and reports, and then subjects them to a series of interpretation, refinement, consolidation. Thus, the information is literally churned out of the available and procured data. Any firm, large or small, uses MIS for its daily business. Not all MIS are computer based. Smaller organizations may use MIS by manual system. However, large organizations use computers (hardware) in conjunction with the programmes (software) that give direction to the computer what to do. One advantage of having computer-based MIS is that the computer has an impressive capability for analyzing huge quantities of data in a more accurate fashion and removes any perceived complexities in interpretation of data.

Questions 1. Define control and discuss the elements of controlling process. 2. Planning looking forward and control looking backward explain this statement. 3. Controlling ensures an efficient performance of other managerial functions. Comment. 4. Discuss the techniques of control. 5. Comment on Management Information System as a technique to controlling.

Case Study Financial Performance Management

ABC Cements is the leader among comparable companies in the cement industry. Since its formation, it has progressed fast. The excellent performance of the company is mainly due to it Managing Director who is widely respected. The M.D. hired a management consultant to suggest ways and means of increasing the return on investment. The consultant made the following report:

There are three ways to increase return on investment: i) Introduction of new varieties, improvement of the existing products and modification of price structure. j) Increase in prices, extension of credit facilities and reduction in investment on inventory. k) Reduce assets as also capital while maintain current profits so that the rate of return on investment moves up. Questions Analyze the case. What set of alternative would appeal to you the most and why?