 Welcome dear learners. My name is Chai Nika Sinnapati and I am from Maniram Devan School of Management, Krishnakanto-Hondikore State of the University. Welcome to the second part of the video session on the unit control. After going through this video session, you will be able to explain the behavioral implications of control, define the management by exception, then also classify the techniques of managerial control into budgetary and non-budgetary. So we have already discussed about the meaning of control, that it is a process of checking current performance against predetermined standards contained in the plans with a view to ensure adequate progress and satisfactory performance. So now let us discuss the behavioral implications of control. The essence of control is the people and the human resource that work in the organization and because management must control the people and the human resource and not the things or the resources there. So management is to control the material resources through controlling the people and the human resource that are working in that organization. So control system generally affects the behavior of the employees. So let us discuss it. Employees are likely to resent very close control. Employees may be present on the job physically but they may be absent mentally and emotionally. Employees may adopt hidden hostility instead of open hostility and hidden hostility may be more dangerous. Employees may react to minimize the control through absenteeism as well as turnover or by quitting their jobs. Sometimes they may develop innovative methods of deviation and may keep the deviations from being discovered. And then trade union may fight back against tighter control system adopted by the management and as a result the tighter control may lead to lower performance. So moreover tighter control system may create absenteeism then turnovers transfers union activity low employee morale then low productivity dissatisfaction of employees and poor organizational climate. Employees view regarding fixation of standard may be negative. They may not understand fully the standards if the standards are imposed on the employees without any accompanying explanation of their need and value. In case of corrective action most of the employees dislike being corrected because they find it difficult to accept the fact of the life and so develop a sense of frustration. Moreover employees blame control decisions as they expose their limitations to peers that their superiors and subordinates and sometimes it will be ego deflecting for the employees against whom corrective actions are taken. The perception of employees of an organization may be against the control system. The employees may think that the purpose of control is for the benefit of the organization and not for them. So in such situation or case control system will be adversely affected by the behavior of the employees. Now let us discuss some of the measures to overcome the behavioral problems that we have discussed. The behavioral implications of control that we have discussed now do not imply that management should not initiate control techniques in the organization and by overcoming the behavioral problems the control system can be made effective in the organization. So now let us discuss certain measures to overcome this behavioral problems. In an organization the management should avoid the direct hierarchical pressure so management can adopt structural arrangement. Management should improve the cooperation by increasing participation among the employees and for this purpose a suitable organizational climate is very much important and essential. Management can build a good communication network based on two-way communication. Group process should be strengthened in the organization for the purpose of obtaining coordination and cooperation in control system. In order to solve the problems of motivation arising from the control system the management should reinforce both economic as well as non-economic needs of the employees. At the time of designing the control system management should consider its long-term perspective so that frequent and abrupt changes never takes place. Now let us discuss a concept that is management by exception. Management by exception is an important principle of organizational control. According to this principle the manager should give attention only on a significant deviation from standards of performance. As per this principle a manager should send only information of important deviations to the top management. The manager should concentrate their efforts only on important matters that I have said and they should not observe each and every matter of the organization. If manager can apply this principle they can handle their control system more efficiently. This principle says that subordinates should perform all routine matters of the organization and thereby the subordinate should leave the manager free to deal with the non-routine or exceptional organizational issues. If the actual performance is within an acceptable range of deviation from the standards like the standard say like it is set at 3% then it need not report to management as no remedial action is required. However in a major deviation from the standard say if it is more than 3% then the matter has to receive the immediate attention of management on priority basis. Now let us discuss some of the benefits of management by exception. From the use of principles of management by exception let us discuss some of the benefits that can be enjoyed and it can save the time of top level management. It can increase the concentration of executives efforts on major problems. It provides better facilities in systematic delegation of authority. It makes possible the use of the knowledge of the managers and the important data and information for productive purpose. It helps the manager in the identification of critical problems. It provides both qualitative and quantitative yardsticks to judge situation and people. It improves the quality of communication among the various segments and the departments of an organization. It plays a vital role in the control system of large or big organizations. It helps in the development of skill of the lower level managers also and it minimizes the frequency of decision making. Now let us discuss some of the techniques of managerial control. Managerial control is a systematic effort to set performance standard along with the planning targets. There are various techniques of managerial control but in this video session we will discuss two categories that is budgetary control technique and non-vegetary control technique. Now let us discuss the budgetary control techniques. So first let us discuss about what is a budget. A budget is a recorded plan of action expressed in quantitative terms and budgetary control is derived from the concept and use of budgets. So according to Georgia Arterre, budgetary control is a process of comparing the actual results with the corresponding budgets. Here in this video session we will discuss four steps of modern system of budgetary control. So the first step is the budget policy guidelines. In an organization, the line managers have to base their expectations on various assumption in time of preparing budgets. These assumptions are related to economy, political trends, government policies, competitors actions and then strengths of the organization, basic principle, basic managerial policies etc. So the top management should prepare a common set of budget policy guidelines to be followed by all the managers of middle and the lower level. So budget policy guidelines also lays down the fundamental targets necessary for continuous progress of the business. Then the second step is the preparation of budget. According to nature, activities and size of the organization different types of budgets are prepared. Different departmental heads have to prepare their own budgets as per guidelines given by the top management and thereafter the budget committee would discuss all the budgets and observe the budgets that are prepared within the safety margin. Then the third step is reporting of variances. Cost variances is difference between a budgeted cost and the actual cost. There are mainly three cost variances like material cost variance, labor cost variance and overhead cost variance. On the basis of variance analysis, the managers can take immediate corrective action and the managing director you may can say can know the overall position of the organization from the report of variance. Generally the performance is measured against the budget and the variance is calculated by the budget department under the control of budget. Then the last step is the review and follow up. It is an important step in budgetary control process and generally the budget committee meets periodically to review the performance of various departments and if this review and the follow up action is neglected then no system of budgetary control becomes effective. There are certain types of budgets namely sales budget, selling and distribution cost budget, then production budget, production cost budget, then purchase budget, cash budget and master budget, name with you. There are some other techniques of control which are not based on budget. These are called non-budgetary control techniques. So different spatial reports and records can be prepared by the experts for controlling purpose and such spatial reports contain much deeper information. These are generally called investigative reports and these reports indicate the depth of the problem and can suggest the ways to auto ways of solving the problems. Then ratio analysis is the most important method of interpreting the financial statements. A financial ratio implies a relationship between two variables of financial statement of an organization and generally the variables for ratio analysis are taken from both profit and loss account and balance sheet. Break-even analysis is a graphical technique of control. By this technique business can identify and appropriate a number of units to be produced to generate maximum revenue to overcome the cost and by this technique a point is located where the total cost is equal to the total revenue and by this use of this by the use of this technique a production and sales volume can be controlled to avoid loss. Then there are POD and CPM these are the network techniques used for controlling the action and the performance. There is also inventory control which is also called material control which includes the kind the amount the location and timing of various materials. Material may be classified mainly into three categories that is raw material, work in progress and finished goods. Now let us discuss about statistical quality control that is also called SQC. So it is a statistical method which analyses data in the determination and control of quality. Now let us discuss about financial statement. So profit and loss account and balance sheet are the two principle of financial statement. This financial statement shows the working as well as the financial position of a business. Again there is human resource accounting and this is the accounting for people and the human resource of the organizational resource. It involves measuring the cost incurred by the business firms to recruit to select higher training to give training and development to the human assets of the organization. Peter Drucker defines management by objective as this is a system of improving the performance in both the individual managers and the organization or the enterprises of all by setting the objectives at the corporate department and individual managers level. Lastly let us discuss about management information system. Under this system selected decision oriented information is provided by management for planning controlling and evaluating the activities of the corporation or the organization and it is designed to control the organizational activities at all the level. The management information system requires the current as well as future information on marketing and administration then production research functions etc and on the basis of the data and information supplied by the MIS that is management information system the top management can formulate appropriate control techniques. So dear learners we have come to the end of today's video session which is the second part of the unit controlling where we have discussed about the behavioral implication of control we define the concept management of exception then also we discuss about the techniques of managerial control into budgetary and non-vegetary and hope you have got some idea on the topic and thank you so much for watching this video. Thank you.