Management by Exception

Management By Exception...

Management by Exception propounded by F.W.Taylor.According to this principle,that everySuperior should set their organisational plan and plan for every subordinates and delegate the authority to perform their work and attain goals.Superior should not be interfere in their work if they work according to plans and within the scope of authority.Superior only interfere when the exceptional situation arises or subordinates not able to control the situation or their is any deviation between in Target results and actual results,that is why it is known as Management by Exception..

                 

Assumptions:-

I)  Managers delegate the authority to their subordinates.

ii)Managers set up the Performance standard.

III)Fix the scope of authority.

iv)Managers interfere when exceptional situation arises.

Advantages of Management by Exception:-

a)It save time and efforts because manager only interfere in exceptional situations.

b) Superior can pay more attention on exceptional matters.

c)It focus on standards which are set by management.

d)It reduce the chances of deviations.

e) Freedom to do their routine activities.

f) Subordinates motivate by giving freedom to perform routine activities without interfere.

Disadvantages of Management By Exception..

1)It requires clear establishment of Performance standards but it is difficult to set.

2)It requires clear reporting system so that report of subordinates Performance delivered to superiors.

3)It is difficult to measure and evaluate the performance of subordinates.

4)It requires delegation of authority without it ,this principle can not work.

5)By delegating authority to subordinates ,they misuse their authority.

Management by Objectives...

Principles of Management

Principles of Management

Principles of Management...

                    

Management

Meaning of Principle-A Principles is a fundamental truth which guides to a thought and actions of people."Principles is a fundamental truth or a statement which guide us in thinking and taken action".

   Management Principles- Principles of Management are general rules of Management which should have to be follow in doing managerial activities.

Henri Fayol who is recognised as the father of modern theory of Management formulated a set of 14 Principles of Management.These are...                   
                                 

1) Division of work-This principle states that every work should be sub divided into small parts and each part of work should be assigned to the employee who is specialized in that work.Every person has specific specialization so according to this principle total work is divided into small parts and then every part is assign to that employee who is expert in that work.

Advantages of Division of work principle..
1)Work is divided into small parts so work become easy.
2)Work is performed efficiently.
3)Cost of work perfom reduce because work performed by specialist so they perform it in a better way.
4) Productivity increases.
                      

2) Authority and Responsibility-Authority -It is a right to give order.Authority is vested in position not in an individual.When a person is in position he have authority to give orders and when he leaves position,he have no right of authority.for eg A school principal have authority to give orders to teachers but when he leaves his principal position he no more have authority to give orders. This is called authority.
   
Responsibility-A duty or obligation to perfom or complete a task assigned by someone or Responsibility is created by own's promise or circumstances to perfom job.
According to this principle , Authority and Responsibility must go together,there must be parity of authority and responsibility.It means proper authority should be delegated to meet the responsibility.

There are two reasons of parity between Authority and Responsibility..
I)If a employee given a responsibility to perfom a work without given sufficient authority he can't perfom his work in better way so the organization goals cannot be achieve.
ii)If a employee is given excess authority he may miss use it.

3) Discipline-This principle states that there should be discipline in every Organisation because discipline is necessary for every Organisation, without it success cannot be
achieved.This states that every subordinate in the Organisation must obey and respect the authority given by his Superior and also obey the rules and policies of Organisation.

4)Unity of Command-This principle states that an employee should receive orders from only one Superior.By this there may be no confusion in receiving and understanding the orders and it can be easily followed.

5) Unity of direction-It states that similar activities must be directed by one leader or one head .By this we can achieve co.ordination and unity in  havingaction.Activitieshaving  same  Objectives should be directed by only one manager under a one plan.

6) Subordination of individual interest to general interests-'Subordination means the act of placing in a lower rank', it means individual should place his interest in lower rank in front of organization interests.
  According to this principal general interest is superior to the individual interests.Every subordinate join organization for his individual Objectives and organization have their own Objectives,but when their is conflicts between them individual should subordinate his interest in front of organization.Manager must try to Integrate individual goal with the organization goals in such a way so that objectives of both can achieve.

7) Remuneration-Remuneration means money paid by employers to his employees for work or services performed.Every employee join organization for earnings,so that he fulfil his basic or other needs of life.
  According to this principle remuneration given to employees should be reasonable.It should not be low or high.Each 
employee get fair remuneration so that employee as well as employer are satisfied.Remuneration should be adequate
which motivates the employees to perfom better and raise standard of living of the employees.

8) Centralisation-Centralisation is when the authority retained by higher level of According to this principle manager should retain final responsibility and give enough authority to do their day to day job so they perform their work properly.There should be balance between Centralisation and decentralisation.Excess Centralisation and ecxess decentralisation is not good ,if there is excess Centralisation (all the authority to managers )in this condition employees not perform work properly.
Excess decentralisation (all authority is given to employees)in this condition employees misuse the authority.

9)Scalar Chain-Scalar chain means a chain in which authority and responsibility flows .Managers use Scalar chain in giving orders and employees use scalar chain for reports and grivences flows to the higher authority.The flow of information between employees and managers through scalar chain,but when the emergency condition arises which need immediate solution at that time we cannot follow scalar chain we make direct contact with the concerned employee.   

Scalar chain

11)Equity-This principle implies that there should be equity in every Organisation.It means manager should be friendly,kind with his subordinates.Mangers should treat his employees equally,because equity treatment is liked by everyone and make good relation between employers with his employees and employees are happy so Organisation goals can be achive easily.

12) Stability of personnel-This Principle implies that there should be Stability in tenure of personnel.No employee must be removed within a short period of time.Stability in personnel of tenure reduce the employee turnover and cost of training and learning of employees.New employees will demotivate by seeing the prior employees removed within a short period .
They feel insecure and cannot work concentrately.

13) Initiative-Initiative means to start,to begin a project,this  principle implies that freedom should be given to subordinates to carry out their plans.Management must taken suggestions from employees at the time of determine plan and then given freedom to initiative plan as they feel these are their own plans and they have to complete it.By doing this they are Motivated and they completely dedicated in their work.This will reduce wastage.

14) Esprit de corps-Esprit de corps means team spirit , according to this principle that there should be team spirit among employees.It means there must be sense of unity among employees so that purpose of Organisation can be achieved easily.

Overview about Organisation..

Organising...

Organisation-The term organisation means group of persons joint together systematically contributing their efforts and use the organisation resources and work under the direction of leader to attain organisation goals .

           

Organisation

"An systematic group of persons joint to work together for achievement of common goals is called organisation."

"The process in which activities are identified and then groping the activities and then assigning the duties , delegating authority and resources are allocating for attaining goals this process is known as organising".

Organisation must have all these...

👉 Group of Persons-Organisation is a group of persons.It may be small or big . Organisation is a systematic group of two or more persons."

👉Common objectives-Organisation is group of person who joint together to achieve Common goals.Success and failure  of Organisation is depends upon how much they able to achieve the Organisation goals.

👉 Division of work-In organisation work is divided among individuals.In Organising activities of Organisation are identified and then groups are made for every activity,and then activities are allocated to every individual according to their ability .

👉Co.operative relationship-Success of every business is depends upon his Organisation.if individuals of Organisation work together co.operatively Organisation get success.

👉 Communication-In Organisation there is communication between members.If they are communicated each other they perform their work coordinately.Absence of coordination brings dissatisfaction among individuals.

👉 Leader-Every group of individuals should have one leader . Group of individuals work under that leader.they get directions from leader and work under the control of their leader.

👉Rules and regulations-Every Organisation has their own rules and regulations which should be followed by every individual of Organisation.

👉 Delegation of Authority-Authority is also delegate to individuals to perform their work,they clearly know to whom they are responsible,who is their boss.

👉 Specialisation-In every Organisation,activities must be divided in such a way so that work can be performed efficiently and effectively,in Organisation activities are divided and assigned according to their skill.

👉 Unity of Command-Every individual should receive orders from only one Superior means every Organisation individual is responsible towards only one Superior.Unity of command avoids conflicts in Organisation and build sound structure.Every individual get command (order)from only one Superior

Organisation notes.

Management by objectives/MBO

Management by objectives/MBO

This model of goal setting was first offers by Peter Drucker in his book ,The Practice of Management,that time this is only used to set up management goals but now MBO is not only used for setting goals but also used as other techniques like planning , directing, motivation,performance appraisal and control technique.MBO goes beyond setting organisational goals ,it setting organisational goals ,departmental goals& employees goals.
       MBO refers to formal procedures that begin with setting organisational objectives, department objectives and employee objectives and continues till performance review.In MBO Managers and superior jointly set the objectives for organisation and then responsibility is also assign to everyone and performance is review periodically less than one year ,months ,quarter.Each person area of responsibility is defined according to objectives and then performance is measure . Performance is measures periodically..
"MBO is a process where superior and subordinate jointly determine their goals (target)which they want to achieve within a year or less than one year(month, quarter or year). "Responsibility is also assign to everyone and authority also given to perform duty at the end of period both manager and subordinate meet again and jointly review their performance.There is direct participation of employees in goals determination.

Company&his employees

          

 Objectives of MBO..

🖋️To set organisation goals and individual goals.

🖋️Active participation of employees.

🖋️ Employees clear about their responsibility.

🖋️Provide base for comparison.

🖋️ Individual performance measurable.

🖋️To Motivate employees.

🖋️ Maintain co.ordination.

🖋️Enhance communication.

🖋️ Performance Appraisal possible.

             

Ratio Analysis (liquidity ratio)

Ratio Analysis..

"Ratio is a simple arithematical expression of the relationship of one number to another.It is obtained by dividing the former by later .It express relationship of items of financial statements."

Classification of Ratios..

1)Liquidity or Short term solvency ratios-These ratio analysis the short term financial position of business.It represents the firm ability to meet it's current financial obligations.

😊Current Ratio-This ratio express the relationship between current assets and current liabilities it is also known as working Capital 

ratio, its ideal ratio  is 2:1.

   Current Ratio=__Current Assets

                               Current Liabilities

Current Assets are those assets which can be converted into cash within a period of one year .

              Current Assets are 👇

I)Cash and Bank balance

ii)Debtors

III)Bills Receivable

iv)Stock

v)Short -term investment or marketable securities

vi) Prepaid Expenses

vii)Advance Payment

viii)Accrued income

    

    Current Liabilities are those liabilities which are to be paid within a period of one year out of current Assets .

              Current Liabilities are👇

I) Creditors

ii)Bills Payable

III)Bank Overdraft

iv)Short term loans

v) Outstanding Expenses

vi) Income Tax payable

vii) Unclaimed Dividend

viii) Provision for Tax

ix) Proposed Dividend

      Current Ratio of a firm measures it's short term solvency means firm ability to pay it's short term obligations which are due.for eg .if current Assets of firm is 40,00000 and its current Liabilities is 20,00000 current Ratio is 2:1 it means firms current assets is double of its current liabilities means firm is able to pay it's current Liabilities in full margin of safety to short term creditors.if the current Ratio is  higher it is good from the Creditors point of view but extremely high current Ratio is not good from management point of view because it indicates •more funds of the firm invested into unproductive uses(inventory)which do not have return.

•it show poor investment Policy.

•poor credit management due to over extended accounts receivable.

   A low &declining current ratio it indicates

• inadequate margin of safety to the Creditors or no sufficient cash available.

• shortage of working Capital in the business for day to day transactions.
    
    

Liquidity or Quick Ratio...

    This ratio show the instant paying capacity of business debts ,it means how  fast can business pay off its current liabilities from their liquid assets within a period of 1-2months ,that is why this also known as acid test ratio, quick ratio.This ratio established relationship between quick/liquid assets and current Liabilities.

     

            

    Liquidity or Quick Ratio=Prepaid Expenses

                         Liquid or Quick Assets

                       Current liabilities

Current Assets

I)Cash and Bank balance

ii)Debtors

III)Bills Receivable

iv)StockPrepaid Expenses

v)Short -term investment or marketable securities

vi) Prepaid Expenses

vii)Advance Payment

viii)Accrued income

    All these current Assets are liquid assets except stock and prepaid expenses because  all these assets except (stock and prepaid expenses) can converted into cash within 1-2months to pay off its current Liabilities but from  Stock and  Prepaid Expenses we cannot get cash quickly because stock may not be sale within 1-2month and we cannot get cash back from our pre paid expenses so these assets are excluded from current assets.Its ideal ratio is 1:1.If business have 1:1 its quick ratio it indicates sound financial position..It means business can easily pay off its current liabilities from its quick Assets without any difficulty.

Absolute Liquidity Ratio..

 Meaning- Absolute Liquidity Ratio show more liquidity than current ratio and quick ratio that is why it is known as Absolute Liquidity Ratio.It shows the relationship between absolute liquid assets to quick liabilities formula..

   

Absolute Liquidity Ratio=

                           =Absolute liquid Assets

                             Quick & Liquid Liabilities

  In Absolute Liquidity Ratio we take those assets which can be converted into cash within few days for pay liquid liabilities and in liquid liabilities we include those all current liabilities which can be paid immediately .

Absolute & Quick Assets are 

😊Cash

😊Bank

😊 Marketable securities.

🖋️ Debtors and receivable are not included in Absolute liquid Assets because these assets take time to converted into cash .

🖋️All current liabilities are liquid liabilities except bank overdraft as it is not to be paid immediately.

 A standard ideal ratio in Absolute Liquidity Ratio is 0.5:1 it means fifty Paisa of absolute liquid assets are sufficient for one rupee worth of liquid liabilities.

Planning Process..

Planning Process..

🖋️ Determine the objectives-First and foremost function of business is deciding objectives which we want to achieve whether we want to earn profit or doing social service & serve society.

🖋️ Establishment of the planning premises-In this step we forecast the future controllingis planning premises.It means base which we determine eg what are the demand of our product in future,which type of tastes of consumers changes in future,what are government policies in future etc these are forecast in planning premises.Success of business depends upon correctly determination of planning premises because we are already prepare for the conditions which will come in future.

🖋️Search of Alternative courses of action-Every work can be complete in many ways ,there are many alternatives ,for completing work in this step we search the available alternatives.

🖋️Evaluate the alternative-After searching alternatives we evaluate the every available alternatives in many ways .

🖋️ Selection of best alternative-After evaluate the various alternatives we select the  best option through which our work is completed in time with the minimum cost.

Planning in present for future.

🖋️ Formulation of sub plans-In this step we formulate the sub plan to fulfill main plan.eg business main plan is to attain profit so for profit we had to make plan for purchase department,sales department etc without these sub plans our main plan cannot be achieve.

🖋️ Sequence the activities-In this step we make sequence of activities in order they perform,after manage in sequence we perform it one by one.

🖋️ Follow up plan-In our last step we follow up our plan and in the end of year we compare our desired performance to actual performance if there are any deviation or failure in it we make changes in our planning.
     

 Types of Plan..

Objectives.

1)

Rules

2)

Strategy

3)

Policies

4)

Procedures

5)

6)

Good luck results of good planning 

https://commerceclasses86.blogspot.com/2020/10/Good%20luck--result-good-planning.html

Business Planning

https://commerceclasses86.blogspot.com/2020/05/planning-process.html?m=1

Business Planning-A business plans is a written description of business,in this document we make plan what to do ,when to do,how to do.

"Planning is detailed blueprint prepared which activities to be performed in future to attain goals.."

Characteristics of Planning

😊It is based on objectives & policies.

😊It is mental activity.

😊It is pervasive activity.

😊It is primary function of Management.

😊It is dynamic process.

😊It is decision making process.

😊It concerns future activity.

Techniques of Planning..

 Planning is decided in advance what is to be done in future.In planning management doing overall planning for eg- how much raw material is required,how much capital is required,how much labour is required etc.. For doing planning manager use planning techniques these are...

1) Forecasting.

2) Budgets.

3) Break- Even Analysis.

4) Linear Programming.

5) Waiting line.

6) Network techniques: PERT/CPM.

7) Theory of Probability.

               

Techniques of planning

          Techniques of planning..

1) Forecasting -Forecasting is predicts the future events in present.It is the most important technique of planning, through forecasting we predicts the future.Manager predicts what is likely to be happen in future,so they will prepare according to that and make plan accordingly.

     Forecasting provide base for making planning and make plan for materials, personnel and other requirements.Forecasting is base on guess work and past & present conditions.Manager continuously monitor the environment before forecasting is done.Forecasting can be perform into two categories:-a) Quantitative b) Qualitative.

a) Quantitative forecasting- When the forecasting is perform on basis of past data &figures is called Quantitative forecasting.

b) Qualitative Forecasting- When the forecasting is perform on the basis of judgement and knowledge of people is called Qualitative Forecasting.

                             

Forecasting..

2) Budgets-Budgets is also for planning.In budget we showing the expected expenses and expected incomes of future through we come to know how much we spend in various resources and and how much expected capital expenditure and how much expected income in future . Manager make planning according to the budget.

3) Break-Even Analysis-It is widely used technique in planning.Through Break-Even Analysis we come to know how much units to be sold to cover the costs.Break -Even point is that point in which we come to know where the total costs equals to the total revenue.

Break-Even Analysis helps in planning in such a way..

*Through BEP we make planning how much units should we sold to cover costs.

*BEP helps in fix the price of units.

4) Network technique PERT/CPM -PERT /CPM are also Network techniques which is useful in planning, decision making and controlling.PERT  is Programming Evaluation and Review Technique and CPM is Critical Path Method.Through PERT technique every project is evaluated like what are the activities needed to complete the project.Its sequence of activities in project,how much cost and time associated in each activity and what are the expected obstacles in the project.Manager also monitor progress of the project.

CPM-Critical path method technique is used to Analysis the time of project .This technique helps in identify critical and non- critical tasks and avoid risks.

5) Queuing Theory-Queue - A line of people awaiting for their turn . Queuing theory is the mathematical study of queue .This technique provides badis of decision making about the resources needed to provide services.Queuing Theory helps in planning in this way👇

 1)To find out the cost of offering the service.

2) To find out the cost incurred due to delay in offering the service

3)To allocate the resources.

6) Theory of Probability-Theory of probability also helps in planning and decision making.Through this techniques managers use statistics to know the probability of risk in future plan and according to that probability make pattern of future plan.

Read this article of Planning..

https://commerceclasses86.blogspot.com/2020/08/financial-planning.html

https://commerceclasses86.blogspot.com/2020/05/planning-process.html

https://commerceclasses86.blogspot.com/2020/05/business-planning.html