Abfm Module A
Abfm Module A
Functions of Management
JAIIB_CAIIB_2024_NOTES_MCQs
Planning
Controlling
The control function deals with monitoring and measuring of performances of people
and comparing them with the pre-decided standards and projections.
JAIIB_CAIIB_2024_NOTES_MCQs
Importance of Management
The classical school believes in the use of technology for increasing efficiency of the
employees, and lays down more emphasis on the organisation, looks at the organisation
as a machine and the employees as its parts, who are important only as a means of
production.
The salient features of the classical or traditional school include:
This school of thought propounded the influence of human actions on the very existence
of an organisation. An organisation, according to this theory, comprises of both formal
and informal forms of organization, a fact which was overlooked by the Classical
theorists.
This School of Thought had the following salient features:
JAIIB_CAIIB_2024_NOTES_MCQs
• Focus on motivation
• Different persons get motivated diversely for satisfying their specific needs.
• For efficiency measurement, communication is a critical input.
• For organizational performance, team-work is essential
• The thought has two different perspectives, viz. Human Relations perspective
and Psychological perspective.
This school of thought was also the originator of Maslow’s hierarchy of needs,
Douglas McGregor’s X and Y Theory and Motivation-Hygiene Theory.
Maslow’s Heirarchy Of Needs
• Human beings have wants and desires which influence their behavior. Only
unsatisfied needs influence behavior, satisfied needs do not.
• Since needs are many, they are arranged in order of importance, from the basic to
the complex.
• The person advances to the next level of needs only after the lower-level need is
at least minimally satisfied.
• The further the progress up the hierarchy, the more individuality, humanness and
psychological health a person will exhibit.
• This school of management thought was propounded by Daniel Katz, and Ludwig
Von Bertalanffy, They advocated the concept of management being an open
system, which is required to interact with the environment constantly for getting
resources, which are both valuable and limited.
The Contingency School of Management
Learning Organisation
JAIIB_CAIIB_2024_NOTES_MCQs
A learning organisation may be defined as an organisation where all the employees take
part in identifying and solving the problems which it faces, and which permits the
organisation to continuously enhance its capacity to grow and learn, so as to achieve the
organisational goals.
The five disciplines of a learning organisation are:
Management faces a lot of challenges for achieving the business objectives and also gets
a lot of opportunities, which need to be properly evaluated in a time bound manner.
Several issues which are faced by the management include:
Business models are based on the type of clients to be served, the product offerings, the
revenue earning model, ways of differentiating and sustaining competitive advantages,
and the manner in which products or services are provided.
Some Business Models are:
• Solution Providing or Consulting Services: eg. IBM
JAIIB_CAIIB_2024_NOTES_MCQs
• Profit Pyramid Model: Under this model, the customers are provided low-
priced products initially and gradually they are moved to expensive products,
where the business earns higher profits. General Motors followed this model.
• Multi-component Systems Model: Such models have been used by companies
like Gillette and HP. Gillette sold the cheaper razors at no-profit no-loss basis and
made money on High-end razor blades.
• Advertisement Model: These models offer the basic product free and make
money through advertising. YouTube, Google etc. are live examples.
• Switchboard Model: This model allows a firm to acts as an intermediary for
connecting multiple sellers with multiple buyers. eBay, Amazon, Flipkart
• Time Model: This model depends on how fast research and development
happens.
• Efficiency model: A business following this model just waits for the market to
mature with standardisation of the product and enters with low-cost and low-
margin products with mass appeal. Wal-Mart and Dell
• Blockbuster model: This model is typically used by industries which are having
the protection under patent laws, like pharma and film industry, where profits
depend on a few items and are driven by star appeal.
• Profit multiplier model: This model involves developing concepts which may or
may not be profitable but are used for driving other products through synergy.
For example, Walt Disney used cartoon characters for developing theme parks,
merchandise, and licensing opportunities, which gave them huge profits.
• Entrepreneurial model: This model deals with offering specialized products or
services to clients which are not attractive to large competitors but have
potential of fast growth. e.g., 1MG was acquired by Tata’s.
• De Facto industry standard model: Free products, under this model, may be
offered at a very low cost to increase the market share and for saturating the
market to make everybody talk about the product as a great brand and industry
standard. Subsequently, the users are offered high-end and high-margin
products. Microsoft indulged into this strategy.
Information Explosion
Managing the Change
✓ New Products & Services
✓ Technological Changes
✓ Employee Management
Globalization and Environmental Sustainability
Impact of Globalization
✓ Increase in Transport of Goods
✓ Economic Specialisation
✓ Reduced Biodiversity
Impact of Environmental Sustainability
JAIIB_CAIIB_2024_NOTES_MCQs
✓ GOAL 1: NO POVERTY
✓ GOAL 2: ZERO HUNGER
✓ GOAL 3: GOOD HEALTH AND WELL-BEING
✓ GOAL 4: QUALITY EDUCATION
✓ GOAL 5: GENDER EQUALITY
✓ GOAL 6: CLEAN WATER AND SANITATION
✓ GOAL 7: AFFORDABLE AND CLEAN ENERGY
✓ GOAL 8: DECENT WORK AND ECONOMIC GROWTH
✓ GOAL 9: INDUSTRY, INNOVATION, AND INFRASTRUCTURE
✓ GOAL 10: REDUCED INEQUALITIES
✓ GOAL 11: SUSTAINABLE CITIES AND COMMUNITIE
✓ GOAL 12: RESPONSIBLE CONSUMPTION AND PRODUCTION
✓ GOAL 13: CLIMATE ACTION
✓ GOAL 14: LIFE BELOW WATE
✓ GOAL 15: LIFE ON LAND
✓ GOAL 16: PEACE, JUSTICE, AND STRONG INSTITUTIONS
✓ GOAL 17: PARTNERSHIPS:
Strategic Management
Strategies
A business entity normally develops its strategy in the following four phases.
• Basic Budgetary Planning: This is an area where all managers, especially the
Sales Managers, are involved for providing their views on the changes in the
business environment, and propose the next year’s budget. In this exercise,
normally not much analysis is conducted and the source of data is confined to
internal sources, to a large extent.
• Forecast-based Planning: The usefulness of annual budgets is limited from the
long-term perspective. This has prompted managers to go in for a model for a
long-term. This necessitates the compilation of long-term environmental data in
addition to the information available internally, so as to enable the managers to
prepare plans for more than one year. Extrapolation techniques may be used here
for predicting.
• Externally Oriented (Strategic) Planning: Assistance from outside consultants
is sought, wherever sophistication and innovation for gathering information and
for projecting future trends, is required. The approach is top-down and strategic
planning is entrusted to key managers of the organization, led by top in-house
planning experts.
• Integrated strategic plan/SM: The implementation, evaluation, and control of
strategic plans were accorded due importance at this juncture and the plans also
started factoring contingencies with the appreciation of the fact that perfect
planning or forecast is not possible. So instead of an annual plan, strategic plans
for longer term of five years were introduced with continuous review at shorter
intervals.
Benefits of Strategic Management
The right strategy impacts a business entity’s performance positively. Strategic planning
continues to attain more and more importance because of the ever-changing business
environment.
JAIIB_CAIIB_2024_NOTES_MCQs
• A business does not operate in isolation and, to succeed, the management must
understand the environment in which it operates.
• There are uncertainties, like technological changes and advancements, the
ecological and social environment, the regulatory changes, political, social,
cultural, and demographical changes, which can impact the performance of a
business. The operating environment of a company like suppliers, customers,
competitors etc. may also change. It is, therefore, imperative that a manager is
able to analyse, understand and appreciate the business environment in which
the organisation operates.
• A SWOT Analysis helps a lot in such situations. Effective managers must
understand their external environment well and have to remain prepared for any
eventualities and contingencies.
Steps in Planning
Opportunity Analysis
JAIIB_CAIIB_2024_NOTES_MCQs
✓ Forecasting
✓ Basic Policies
✓ Existing Plans.
Alternatives Identification
• When comparing the various approaches, the use of statistical methods and
computers proves to be extremely beneficial.
• One of the processes might be less desirable or effective compared to the others,
while another might be more suited to the immediate goal.
Selecting the best Alternative
• At this stage, the plan is to be adopted, and the numerous options are to be
evaluated, so that it can be determined which plan can best assist in the
accomplishment of the business objectives.
Formulating Derivative Plan
Importance of Planning
A SMART goal is a carefully planned, clear and trackable objective. SMART is an acronym
that stands for Specific, Measurable, Achievable, Realistic, and Timely.
Advantages in Planning
result. The milestones serve as a reference point for determining whether things
are moving as planned and, if not, when adjustments are necessary.
• Adaptability: When things start to change, the viability of the guiding principles
is dependent on how well these can adjust to the new environment.
Basic Advantages Of Planning
Disadvantages in Planning
Management By Objective
The phrase “management by objective” (MBO) was coined by Peter F. Ducker and
first appeared in his book “The Practice of Management,” which was published in
1954.
Limitations of MBO
• It provides a means for determining one’s goals and planning to achieve those
goals.
• Planning enables one to behave in a proactive manner and to approach the
accomplishment of goals in a disciplined manner.
• It also gives you the ability to plan for unforeseen circumstances and limitations
that could make planning more difficult.
• The process of MBOs also enables the preparation of contingency plans and
strategies for overcoming roadblocks, which may be obstacles to the plan.
• Objectives should be measurable so that progress can be monitored and altered
as necessary. If goals are effectively set, managed, and accomplished,
organisations have the potential to improve their overall efficiency
Plan Components
For an organisation to achieve the goals, Planning is essential. The key components
of Planning include:
• Objectives/ Goals
• Policies/ Overviews
• Procedures/ Directions/ Rules
• Programs/ Methods
• Budgets/Funding
• Time Schedule.
• Core values/ Mission/ Vision
• SWOT Analysis.
• Management.
JAIIB_CAIIB_2024_NOTES_MCQs
Environmental Analysis
PESTLE refers to the following six factors that can have an impact on the company:
• Political
• Economic
• Social
• Technological
• Legal
• Environmental
Internal Analysis
The internal environment of a company can be classified into the following broad
categories, based on its resources and assets:
• Physical resources like plant and machinery, technology, etc.
• Financial resources
• Distribution network
• Possession of strategic assets, such as access to raw material, locational
advantage, regulatory protection, etc
• Network with outside organizations (suppliers, customers, government,
distributors, etc.)
• Intangibles, like brand equity, goodwill, reputation, etc.
• Human resources-profile, skill, managerial competencies; and organizational
structure and administrative system, culture and values, and employee
motivation/relationship.
This internal analysis, which is initiated by the management of the company, is an
attempt to identify the areas of risk and opportunity in the business. An
organization’s capabilities, resources, and competitive advantages are examined in
JAIIB_CAIIB_2024_NOTES_MCQs
depth as part of an internal analysis, which reveals both the organization’s strengths
and its weaknesses in these areas.
GAP Analysis
• The Gap Analysis is a tool for conducting assessments that gives organisations
the ability to analyse and identify internal weaknesses as well as performance
deficiencies.
• It is very easy to understand and put into practice, and it is helpful to compare
the current position of the organisation to its projected position in the future.
Strategy Evaluation
• The process of analysing the outcomes brought about by the execution of a
strategic plan is referred to as strategy evaluation. It is very useful and helpful to
check that everybody understands the business strategy and works well with it.
SWOT Analysis
• SWOT stand for Strengths Weaknesses Opportunities Threats.
• The SWOT analysis is a useful model for conducting evaluations because it takes
into account both internal and external factors simultaneously.
• It is especially helpful to conduct a SWOT analysis to obtain a comprehensive
overview of a company, its products, its brand, or a new project at any stage in
the project life cycle.
Contingency Planning
• Contingency plans can be defined as alternative plans that can be put into effect if
certain key events do not occur as expected.
• The contingency plan minimises the risk associated with such unforeseen
unpredictable events. The contingency plans are referred to as “Plan B” because
they always work as an alternative course of action if things do not go as planned.
It involves the following:
✓ Specifying trigger points
✓ Estimating when contingent events are likely to occur.
✓ Assessing the impact of each contingent event
✓ Estimating the potential benefit or harm of each contingent event.
✓ Developing alternate plans
✓ Being sure that the contingency plans are compatible with current strategy and
that they are financially feasible.
Forecasting
JAIIB_CAIIB_2024_NOTES_MCQs
• The process of predicting or estimating the future based on the evidence from
the past and the present is referred to as forecasting.
• The process of forecasting gives knowledge about the possible occurrences of the
future as well as the implications those events will have for the business.
• It is not possible for forecasting to lessen the complexities and unpredictability of
the future.
• Managers at different levels may be given the responsibility of making forecasts,
or external or internal economists and statisticians may be employed for the
task.
• Since forecasting makes use of a wide variety of methods, another name for the
discipline is Statistical Analysis.
Types Of Forecasting
• Long-Term Forecasts: Forecasting for the long term typically covers a period of
time ranging from three to five years. It gives an overarching perspective of the
company’s monetary requirements as well as the availability of the investable
surplus in the foreseeable future.
• Medium -Term Forecasts: For making relatively minor strategic decisions
pertaining to the functioning of the firm, projections over the medium term are
generated. They play a crucial role in the operational budgeting as well as the
business budgeting, and the budget of the firm is formed based on these
projections.
• Short-Term Forecasts: The term “short term forecasting” refers to planning that
is done for a period that is relatively brief, with the planning period being less
than one year and the duration ranging from one to six months.
Decision Making
• Actual selection of one course of action, from among several alternatives, is called
decision-making.
• Decision making is not confined to planning alone but also embraces other
aspects of management like organising, staffing, controlling etc.
• Decision-making is a rational process and, to have a high degree of effectiveness,
should be based on systematic analysis of all the relevant facts and not based on
just intuition.
• Decision making plays an important role in enhancing the efficiency of the
organisation as decisions relating to future course of action, are taken in advance.
Decision Making By Groups
task is assigned to a group to decide on a particular matter, the exact scope of the
group’s authority to make that decision, should be clearly spelt out.
• Advantages of Group Decisions include: (i) Thorough evaluation, (ii)
implementation of decisions is easier (iii) Enhanced team spirit.
• Disadvantages of Group Decisions include (i) Time consuming and costly, (ii)
Disagreements and indecisions (iii) No-participation or domination.
Various Conditions for Decision-Making
Principles of Decision-Making
There are a few principles which, if followed by the decision makers, will be helpful in
enhancing the probability of the decision being correct. These principles of decision
making can be summarised as under:
There are five stages in the organising process, which are as follows:
• Defining and reviewing the plans and objectives of the company.
• Determining the work activities needed to accomplish the objectives
• Categorising and grouping essential work activities into manageable units
• Assigning activities and delegating authority
• Designing a hierarchy of relationships
Principles of Organising
Work Specialisation
• The legitimate power that is delegated to managers so that they may make
decisions, issue orders, and allocate resources on behalf of the organisation in
order to accomplish the goals of the organisation is referred to as authority. The
manager’s job role determines the scope of his or her authority as well as the
level of authority that comes with
Chain of Command
JAIIB_CAIIB_2024_NOTES_MCQs
• It is the continuous chain of authority that, in the end, connects every individual
with the most senior position in the organisation, with a managerial position
serving as the connecting link at each successive level in between.
• The concepts of responsibility and accountability are enforced through a chain of
command. The two guiding principles that underpin it are the Scalar Principle
and the Unity of Command.
• According to the principle of unity of command, each worker should have just
one manager, supervisor, or other reporting authority to whom he or she is
directly accountable for work-related matters.
• According to the scalar principle, there ought to be a transparent chain of
command that extends from the position of supreme authority at the very top of
the organisation to each and every person working there, connecting all of the
managers working at the various levels. It involves a concept known as a ‘gang
plank’, which allows a subordinate to contact a superior or his superior in an
emergency using a method that contradicts the hierarchy of control.
Delegation
Types Of Organisation
strategic direction, and other crucial areas. On the other hand, the size of an
Organisation is not necessary for it to be centralised.
• Decentralised Organisation: It functions by delegating decision making
capabilities to multiple teams across geographies. Most of the planning, strategy
and decision making is dome by middle and low level management with the
involvement of team members.
Line And Staff Organisation
Functional Organisation
Organisation Structure
Formal Organisation
• Individuals create some social and friendly groups within the organisation
because of the interactions that take place between them while working in
various employment positions. This structure is formed by a network of social
and friendly groups.
• Unofficial organisational structures spring into existence on their own, and the
primary purpose of these structures is to facilitate the attainment of
psychological fulfilment.
• An informal organisational structure does not have a predetermined chain of
command or set way for information to flow through it.
• Under an informal structure, it is impossible to determine the origin of
information because any individual can contact any other member of the
organisation.
JAIIB_CAIIB_2024_NOTES_MCQs
Organisation charts can also be classified into the following three types based on
how organisation charts are prepared:
• Vertical chart or Top-down chart: Vertical chart, also known as top-down chart
depicts the level of organisation as a hierarchical pyramid with a line of
command that descends from the highest level to the lowest.
• Horizontal Chart or left to right chart: The levels of organisation are shown
going from left to right in this diagram. The chain of command is broken up into
horizontal sections.
• Circular Chart: A circular form can be used to display a variety of jobs or
functions that are held inside an organisation. A concentric or circular chart
illustrates the vertex by placing it at the centre of a series of concentric circles.
Locations that are regarded as having approximately the same level of
significance can be found on concentric circles that are the same distance from
the centre. Channels of formal power are represented visually by lines
connecting various blocks of functions or positions.
Organisation Manuals
• Policy Manual
• Operational Manual
• Organisational Manual
• Rules and Regulations Manual
Advantages of Organisation Chart and Manual
• Management Tool: Both the Organisation Chart and the Organisation Manual
contain information about the structure, positions, and authorities inside the
organisation.
• Avoidance of Overlapping and Duplicate Activities: The organisation chart
and manual are prepared after careful analysis of the jobs and positions
requirements in the organisation. As a result, this ensures that all activities are
covered properly by various positions.
• Resolution of Organisational Conflicts: An Organisation Chart and Manual
Both clearly show Positions, Authority Relationships, and Procedures as a result,
they serve as an easily accessible resource for resolving organisational problems.
• Training Guides: The organisation chart and manual both serve to evolve the
work that is expected of employees in the organisation. As a result, they have the
potential to serve as a method of on -the-job training.
JAIIB_CAIIB_2024_NOTES_MCQs
• The values, attitudes, beliefs, and behaviours that characterise and contribute to
an organisation’s one-of-a-kind social and emotional work environment are
referred to as the organisation’s culture. Organisational culture is also referred to
as corporate culture.
• The organisational culture is one of the things that is the most difficult to change
because it is unique to each company and is comprised of both written and
unwritten rules that have been developed over the course of time.
JAIIB_CAIIB_2024_NOTES_MCQs
• The Clan Culture: This culture has its foundation in working together. Members
have a lot in common with one another and have the perception that they are
part of a large family that is very involved in activities. The organisation is held
together by its commitments and traditions, and leadership takes the form of
mentoring for its members.
• The Adhocracy Culture: This culture is characterised by a high level of energy
and inventiveness. It is expected of leaders to be innovative and entrepreneurial,
and employees are actively encouraged to take calculated risks. Experimentation,
with an emphasis on individual ingenuity and freedom, is the primary means by
which the organisation maintains its cohesion.
• The Culture of the Market: This culture is founded upon the competitive nature
of the market and the pursuit of tangible success. The focus is on achieving the
goals, and the leaders are known to be strict and demanding. The organisation’s
members are all working toward the same objective, which is to achieve an edge
over all of their competitors. Market share and profitability are the primary
factors that determine value.
• The Hierarchy Culture: This culture is characterised by its emphasis on
hierarchy and control. The atmosphere at work is very formal, and there are
stringent protocols established by the institution to provide direction. A culture
that places an emphasis on productivity and predictability is conducive to
leadership because it requires organised coordination and monitoring.
Authority
• A superior has the legal right to issue commands to those under his or her
supervision.
• The position of the boss within the organisation is the primary factor that, in
most cases, determines who has authority.
JAIIB_CAIIB_2024_NOTES_MCQs
• A superior can give his subordinate the authority to do something under his
supervision.
• The chain of command moves from superior to subordinate in a downward
direction.
• Authority can be defined as the legitimate power that an individual or group
possesses over other individuals.
Responsibility
• Legitimate Authority: This type of power typically originates from the status
quo and the cultural system of obligations that govern our rights and
responsibilities. As a result, the “position” is accepted by the people as being
“legitimate.”
• Coerciveness: It is based on the ability of one person to instil fear in another
person and is founded on the subordinate’s expectation that punishment will be
met for not agreeing or complying with superior orders or beliefs.
• Rewarding Authority: This results from the fact that some individuals possess
the ability to reward you. Permitting Company paid vacations is example of
awards.
• Expertise: This refers to the power that comes from having knowledge, abilities,
and expertise in a particular field. Because superiors are in possession of this
knowledge, subordinates strive to acquire it and carry out their instructions.
• Referent Authority: The recognition of a person’s faith as a leader who is held in
high esteem, admiration, and often imitation by those who are subordinate to
them is the foundation upon which referent power is built.
Forms of Responsibility
• The person who is doing the work is the one who is responsible for, or obligated
to fulfil, operating responsibility.
Ultimate Responsibility:
• The manager is ultimately responsible for fulfilling his or her final task, which is
to see to it that the work is carried out effectively by the staff members.
Organisational Change
• The term “organisational change” refers to the actions that are taken by a
company or business to modify a significant aspect of their organisation.
These aspects may include the company’s culture, the underlying technologies or
infrastructure that it makes use of to function, or their internal procedures.
The need for organisational transformation is driven by a variety of variables:-
• New management at the helm of the business entity or in other areas or
departments within the organization
• Alterations to the organisational structure of teams
• The introduction of innovative technologies
• The adoption of novel business models
There are three primary categories of organisational changes, which are as follows:
Management of Change
Resistance to Change
• The act of rejecting or battling against modifications or changes that affect the
status quo is what we mean when we talk about change resistance. This
resistance may show itself in a single worker or permeate the entire workplace.
• A lack of readiness to adjust one’s behaviour in response to changing
conditions can be defined as resistance to change. It can be done in an
indirect or direct manner, organised or on a personal level.
There is a clear indication of resistance to change in functions such as:
✓ Denunciation or Fault Finding
✓ Nit-picking over tiny details
✓ Offensive or Insulting remarks
✓ Absence in meetings
✓ Dishonouring commitments
✓ Continuous arguments
✓ Disruptive behaviour
Approaches to Change Management
Lewin’s Change Management Model: The model consists of three primary phases,
which are Unfreeze, Change, and Refreeze,
• Values that are shared: Shared values are the fundamental or primary
principles that an organisation bases its operations and decisions on in order to
function effectively.
• Style: The term “style” refers to the manner in which changes in leadership and
organisational structure are accepted or put into effect.
• Staff: The term “staff” can refer to either the workforce as a whole or individual
employees, as well as their individual capacities for work.
• Denial
• Anger
• Bargaining
• Depression
• Acceptance
Conflict Management
Staffing
Managers are responsible for building an organisation through the process of recruiting,
selection, and development of individuals as capable employees. This process is known
as staffing.
Functions of Staffing
• Obtaining qualified individuals for various job positions inside the organization
• The process of staffing ensures that the most qualified candidates are selected
for open positions, which results in greater levels of both productivity and
performance.
• It contributes to the promotion of the most effective and efficient usage of human
resources in a variety of ways.
• The successful recruitment of the right person raises the level of job satisfaction
and morale experienced by workers
• The process of staffing serves to guarantee that human resources are used more
effectively.
• It secures the organization’s continued existence as well as its continued
expansion using development managers.
• Proper people can be placed in the right jobs with the help of staffing services.
Objectives Of Staffing
Facets Of Staffing
Significance Of Staffing
expand at the desired rate if it is unable to satisfy the demand for managers of
this type.
Recruitment
Staffing refers to the process of hiring individuals who are the most qualified for a job
whereas recruiting is the process of finding potential applicants for a job and
encouraging them to apply for the vacant post.
The primary stages involved in the recruitment process:
• Determining the need for hiring
• Conceiving a recruitment strategy
• Drafting a job description
• Publicising the position
• Recruiting candidates for the position
• Examining applications
• Conducting a phone interview or initial screening
• Conducting interviews
• Evaluating candidates
• Conducting a background check
• Making a decision
• Checking references
• Making an offer of employment
• Hiring candidates
• On boarding of candidates
Types of Recruitment
• Internal Recruiting: The process of filling open positions within a company with
current staff members from that organisation is known as internal recruiting.
• Retained Recruiting: When a company engages a recruiting firm, they can do so
in numerous different ways; one of the most prevalent ways is retained
recruiting. When an organisation hires a recruiting firm to fill a vacant position,
the organisation is responsible for paying an upfront fee to the recruiting firm.
Up to the point that the post is filled, the company is responsible for locating
potential candidates.
• Contingency Recruiting: This type of recruiting, like retained recruiting,
requires the assistance of an outside firm. In contrast to retained recruiting,
contingency hiring does not require an upfront payment. Instead, the
recruitment company is only compensated when one of the candidates they
represent is offered and accepts a position within an organisation.
• Recruiting for Staffing Agencies: Staffing recruiters are employed by staffing
agencies. Staffing and recruiting involve pairing skilled job seekers with open
positions that meet their qualifications. In addition, most of the jobs that staffing
companies fill are either temporary or only available for a limited time.
JAIIB_CAIIB_2024_NOTES_MCQs
Selection
The phase of the staffing process known as selection is the component of the hiring
procedure that entails selecting an employee to hire from a shortlist of exceptional
applicants who have been reduced.
• Preliminary Interview: This is a very generic and basic interview that is held to
exclude the candidates who are utterly unfit to work in the organisation.
• Taking Applications: The candidates submit their resumes. The application
provides the interviewers with information about the candidates, such as their
biographical data, their work experience, their hobbies and interests.
• Examining the Applications: Once the applications have been received, a
special screening committee examines them in order to select potential
candidates from among the applications who will then be contacted to schedule
interviews.
• Employment Tests: This is accomplished by the administration of numerous
job exams, including IQ tests, aptitude tests, competence tests, personality tests,
and so on.
• Formal Interview: Interviews for jobs are conducted to determine in great
depth a candidate’s skill set and whether they have the capacity to work in the
business. The purpose of an employment interview is to determine whether the
candidate is suitable for the position, as well as to provide the candidate with
information regarding the work profile and the responsibilities that would be
expected of the potential employee.
• Verification of References: The individual who provides a possible employee’s
reference is also a very important source of information, so we must check with
them. The referee will be able to provide information regarding the individual’s
capabilities, experience in the prior firms, leadership, and managerial skills, and
more.
• Medical Tests: Employers can determine whether or not any of the potential
applicants are physically and psychologically fit to undertake the tasks associated
with their professions with the help of medical examination. There would be
JAIIB_CAIIB_2024_NOTES_MCQs
Training
Training is the process of increasing the skills, capacities, and knowledge of workers so
that they are better suited to perform certain job duties. The training process shapes the
way people think and ultimately leads to improved work performance from those
individuals.
Importance of Training
• Boosts Employee Morale: Training helps employees achieve job stability and
job satisfaction, which in turn boosts employee morale.
• Decreased requirement for supervision: An employee who has received
adequate training will be familiar with his duties and details of his work and will
require less oversight.
• Reduction in the number of accidents: When a person has received additional
training, there is a decreased likelihood of them being involved in an accident
while on the job, and they also become more proficient.
• Increased Promotion Chances: Training helps employees improve their
abilities and effectiveness, which increases their chances of being promoted.
• Increased productivity: Employees that have received adequate training
demonstrate both quantity and quality in their work. If staff are given the
appropriate training, there will be less waste of time, money, and other
resources.
Types of Training
• On-the-job Training: This type of training refers to the methods that are used to
instruct workers while they are performing their regular duties at an
organisation. The training method is straightforward and efficient in terms of
cost. “Learning by doing” is the guiding principle behind this type of instruction.
On-the-job training can take many forms, such as job rotation, mentoring,
temporary promotions.
• Off-the-job Training :. Training that takes place in a setting that is not the
employee’s normal place of employment is referred to as “off the job training.” It
is typically utilised if new workers are hired. Workshops, seminars,
conferences, and other similar events are all examples of non-work-related
training opportunities. A system like this is expensive, but it is effective if and
only if a big number of people need to be trained in a relatively short amount of
time. Off the job training is also known as vestibule training, which means
that the employees are trained in a different place (which could be a
vestibule consisting of a corridor, an entrance, a reception room, or
something else) where the actual working conditions are
JAIIB_CAIIB_2024_NOTES_MCQs
Practices that contribute to retention arise in every area of HR, and all positions within
an organisation will need to collaborate with one another to develop and implement
retention plans that incorporate multiple facets.
• Training and development: Employees who are not provided with the
opportunity to regularly upgrade their skill sets are more likely to leave a
company that does not provide these possibilities.
• Employee involvement: employees who were highly engaged in their work had
a probability of quitting that was five times lower than employees who were not
engaged in their work.
• Getting the most out of the experience and knowledge of staff members.
• Facilitating employees’ access to pertinent concepts that are necessary for them
to perform their jobs in a satisfactory manner
• Problem Solving
• Management of both physical assets and intellectual property
There is a model of KM that has been formally specified, and it consists of four different
parts. These aspects are referred to as socialisation, combination, externalisation,
and internalisation, respectively. This paradigm, which comes under the heading
of the SECI Model for Knowledge Management, was established by Nonaka and
Takeuchi
Learning Management Systems and the SECI Model
Socialisation
• True knowledge management requires that there be a constant flow of
information and knowledge amongst employees, and this flow should not be
restricted in any way.
• The utilisation of chat rooms and the opportunity for employees to communicate
with one another while they are studying are two features that are made
possible,by learning management systems (LMS).
Externalisation
• One approach is to connect the material covered in online learning courses to
events that are taking place in actual workplaces.
• For instance, workers can participate in training and then be directly asked to
apply what they’ve learned to their jobs outside of the context of a virtual
learning environment.
• Testing the employees’ expertise is yet another method for integrating
externalisation into the process. Then, based on how well individuals do their
jobs, externalisation can be utilised as a method to develop new forms of training
and learning.
Combination
• The combination component of the knowledge management theory has many
potential applications in the world of business. One approach to achieving this
goal is to make use, in the process of regularly updating and streamlining
training, of both the feedback of employees and the input of subject matter
experts.
Internalisation
• The ultimate purpose of utilising a learning management system is for employees
to internalise the information that they have gained. They should be taught
JAIIB_CAIIB_2024_NOTES_MCQs
essential skills in a manner that enables them to immediately put those skills to
use in their work.
Performance Appraisal
Broadly, all methods of appraisals can be divided into two different categories.
• Past-Oriented Methods
• Future-Oriented Methods
Past – Oriented Methods
a) Rating Scales: Rating scales consists of several numerical scales representing job
related performance criterions such as dependability, initiative, output, attendance,
attitude, etc. Each scale ranges from excellent to poor. The total numerical scores are
computed and final conclusions are derived.
Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated,
large number of employees covered, no formal training required.
Disadvantages – Rater’s biases.
JAIIB_CAIIB_2024_NOTES_MCQs
b) Trait Analysis: Under this method, checklist of statements of traits of employee in the
form of Yes or No based questions is prepared. Here the rater only does the reporting
or checking and HR department does the actual evaluation.
Advantages – economy, ease of administration, limited training required,
standardization.
Disadvantages – Raters biases, use of improper weights by HR, does not allow rater to
give relative ratings.
c) Forced Choice Method: The series of statements arranged in the blocks of two or
more are given and the rater indicates which statement is true or false. The rater is
forced to make a choice. HR department does actual assessment.
Advantages – Absence of personal biases because of forced choice.
Disadvantages – Statements may be wrongly framed.
d) Forced Distribution Method: Here employees are clustered around a high point on a
rating scale. Rater is compelled to distribute the employees on all points on the scale. It
is assumed that the performance is conformed to normal distribution. Assumption of
normal distribution, unrealistic, errors of central tendency may occur.
e) Critical Incidents Method: The approach is focused on certain critical behaviours of
employees that makes all the difference in the performance. Supervisors as and when
they occur record such incidents.
Advantages – Evaluations are based on actual job behaviours, ratings are supported by
descriptions, feedback is easy, reduces recent biases, chances of subordinate
improvement are high.
Disadvantages – Negative incidents can be prioritized, forgetting the positive ones,
overly close supervision.
f) Confidential Records: Mostly used by government departments, and in older
organisations where the concept of self-assessment is not encouraged.
Here the report is given in the form of Annual Confidential Report (ACR) and may record
ratings with respect to following items; attendance, self-expression, team work,
leadership, initiative, technical ability, reasoning ability, originality and resourcefulness,
etc. The system is highly secretive and confidential. Feedback to the assessee is given
only in case of an adverse entry.
g) Pen portrait: The assessor pictures in writing about the assessee, regarding his
qualities and performance as well as his potential. Armies use this method in evaluating
cadets.
Future-Oriented Methods
a) Management by Objectives: A concept popular till recently and introduced by the
management Guru, Peter Drucker, where performance is rated against the
achievement of objectives stated by the management. MBO process goes as under.
JAIIB_CAIIB_2024_NOTES_MCQs
• Scale of Incidents: This second group is generally asked to rate on a given scale,
the behaviour described in the incident as to how effectively or ineffectively it
represents performance on the appropriate dimension
• Develop Final Instrument: A subset of incidents (usually 6 or 7 per cluster) are
used as ‘Behaviour anchors’ for the performance dimensions.
• The BARS technique has advantages like – More accurate judgment, establishes
clear standards, provide good feedback to the people being appraised, make the
dimensions more independent of each other and it provides independence to the
rater.
f) Key Result Areas (KRAs): KRAs refer to general areas of outcomes or outputs for
which the department’s role is responsible. The Individual Performance and
Development Plan has two component parts, the Performance Plan and its related
Individual Development Plan.
The Performance Plan is constructed by the manager and employee together, focusing
on priority-setting for the performance management cycle and, working co-operatively
through a four-step process:
HRD can take many forms, such as on-the-job training or work shadowing, classroom
education or education obtained online, opportunities for professional development and
growth, and training to ensure compliance with laws and regulations.
• Learning the facets of a work while actually performing the tasks associated with
that employment is what is meant by “on-the-job training.”
• Another related method is “work shadowing”, in which an employee watches
another employee perform the duties of their job in order to acquire the
necessary abilities.
• Another type of growth is intellectual or professional growth, which can take the
form of attending classes at a university or certification programmes, as well as
job-specific trainings and seminars that focus on how to perform one’s job more
effectively
Managing Diversity
• The term “industrial relations” refers to the interaction that exists between
workers and management, which can either directly or indirectly be traced back
to the relationship between unions and employers.
• Industrial progress is impossible without cooperation of labours and harmonious
relationships. Therefore, it is in the interest of all to create and maintain good
relations between employees (labour) and employers (management).
• The management and the trade union both need to approach the building of good
industrial relations with a positive attitude if they want to see it succeed. Healthy
industrial relations require a number of important characteristics to be present,
including mutual respect, understanding, goodwill, and acknowledgement of
dignity.
Management of Change
Management of change involves managing the interaction between the people who are
leading the change effort and those who are expected to implement the new strategies.
It also involves managing the organisational context in which changes can take place
and managing the emotional bonds that are essential for any transition.
The following points and strategies can help for better management of change
within a workplace
Gaining an Understanding of the Change Process:
The following are the events that take place throughout each phase:
• Preparation: It is the responsibility of the change manager to get both the
organisation and its workers ready for the transition.
• Implementation: It is the responsibility of the change manager to ensure that
changes are carried out in a manner that is consistent with the long-term goals
of the organisation.
• Follow-through: It is the responsibility of the change manager to make certain
that the change is sustainable and that it is incorporated into the culture and
practices of the organisation.
Acquiring an Awareness of the Drivers of Change:
In order for managers to successfully manage change, they must first understand why it
is required. If you don’t do this, it will be impossible for you to design a strategy that
addresses fundamental issues and pressing challenges like the following:
• Once you have an understanding of the reason for the shift, the next step is to
devise a plan.
• This plan should include a high-level overview of the reasons for change,
describe the scope of the project, identify the main stakeholders, organise a team,
and present a thorough roadmap of the tasks that will be required to finish the
project.
Clarity of Communication:
• In the end, you will need to be competent of explaining change to two audiences
that couldn’t be more different from one another. The first category includes all
of your staff members and other members of your team.
• These personnel need to understand not just why the change is necessary but
also how their job responsibilities will be affected by the change.
Be Ready to Overcome Obstacles:
• No matter how well prepared you are for the possibility of change, there is no
guarantee that everything will go according to plan. You must ensure that you are
prepared for a variety of possible outcomes.
Formulating Career Strategy
The following is a rundown of the seven steps that make up the construction of the
career strategy:
• A career development plan (CDP) is a list of long and short-term goals that
employees set for themselves in either their current role or pre-emptively for
their future job. The first step is to do an in-depth analysis of your values,
strengths, and motivators
• The second step is to be aware of your advantages.
• Conduct research into the many possibilities and make the most of the
opportunities.
• Developing Expertise.
• Developing a network.
• Considering and evaluating your alternatives.
• Taking an action.
Stress Management
Characteristics
Elements of Directing
Elements of
Directing
Leadership
• The term “leadership” refers to both a set of behaviours and a set of attributes
that can be acquired through training and development respectively. Leadership
is the process of inspiring other people to work toward a common goal and
organising their resources to make that objective a reality.
Importance of Leadership
• Begins or starts the action: The responsibility of instruction is the activity that
determines where each subordinate’s workday actually begins. It is from this role
that action is taken, and subordinates comprehend their work and perform it in
accordance with the instructions that have been provided.
• Co-ordinates efforts: Directing subordinates at work enables supervisors to
advise, motivate, and instruct them to do their assigned tasks. Only by following
the instructions will each department’s efforts be able to be linked and linked to
the efforts of the other departments. The integration of efforts is going to bring
about efficiency and uniformity in the way that concerns are handled.
• Provides motivation: Having a sense of direction is beneficial to the
achievement of one’s goals. The purpose of a manager is to improve the
performance of their subordinates by providing incentives or compensation,
whether this would be monetary or non-monetary, and this can act as a morale
booster for their subordinates as well as help in development.
• Helps maintain equilibrium: Stability and balance, which become highly
crucial for the long-term sustainability of demand may be brought about by the
management with the assistance of four instruments or elements of direction
function:
✓ A strategic combination of compelling leadership qualities
✓ Communication that is clear and concise
✓ Strict oversight
✓ Efficient and effective motivation.
• Adapts to changing circumstances: The ability to adapt lets a company
withstand the planned growth and become the market leader despite the
constantly shifting environment. That is the directing function that is utilised in
order to accomplish the changes that are produced in the environment, both
inside and outside.
• Makes effective use of available resources: The only way that resources may
be used effectively is if there is a minimal amount of waste, duplication of efforts,
overlap of performance, etc. When a manager uses his talents in supervision,
guiding, directing, and motivation in order to motivate subordinates, the function
of subordinates becomes clearer as a result.
Leadership Roles And Responsibilities
Leadership Qualities
• Outward Look
• Vision and foresight
• Intelligence
• Capabilities in Communication
• Objective approach free from bias
• Knowledge of work
• Sense of responsibility
• Self-confidence and the ability to exert one’s will
• Humanist
Leadership Models
Authoritarian Leadership
• An authoritarian leadership style is described as being as leaders behavior that
asserts absolute authority and control over subordinates and demands
unquestionable obedience from subordinate.
• Creativity would suffer as a result of limited input from the team if this method
is implemented, despite the fact that it is effective in a short period of time.
• Leadership methods based on authoritarianism are utilised whenever the
members of a team require guidance.
Advantages of the authoritarian leadership style
✓ It is possible to cut down on the amount of time needed to reach an important
conclusion.
✓ It is possible to clear the command chain and punctuate.
JAIIB_CAIIB_2024_NOTES_MCQs
✓ The amount of repetition that occurs during the execution of the plans can be
reduced.
✓ Implementing an authoritarian paradigm of leadership lead to the production of
consistent results.
Disadvantages of the authoritarian leadership style
✓ Management style that is overly authoritarian might provoke discontent among
workers.
✓ By utilising this paradigm, you run the risk of stifling the originality and
innovation of your workforce.
✓ It is detrimental to the coordination and cooperation of the group.
✓ The amount of input from the group stands severely cut back.
✓ The utilisation of this model significantly contributes to an increase in the
employee turnover rate.
Participative Leadership
• It is a style of leadership in which all members of the organization work together
to make decisions. Participative leadership is also known as democratic
leadership
Advantages of the participative leadership style:
✓ The inspiration of workers and the gratification they got from their jobs rose.
✓ It allows for a more efficient utilisation of the employees’ creative potential.
✓ It assists in the development of powerful teams.
✓ It is possible to achieve high levels of productivity.
Disadvantages of the participative leadership style:
✓ The process of making decisions takes some time.
✓ Leaders are more inclined to apologise to their employees than employees
themselves.
✓ There would on occasion be problems with communication.
✓ Because of the openness with which information is shared, potential security
problems may emerge.
✓ If staff lack the necessary skills, poor decisions may be made.
Delegative Leadership
• The delegative leadership style, also known as the ‘laissez-faire’ leadership
style, is an approach that gives subordinates the power to make most of the
decisions regarding their day-to-day activities.
• This strategy has the potential to be successful provided the members of the
team are knowledgeable, willing to accept responsibility, and like the
opportunity to work on their own.
Advantages of the delegative leadership style:
JAIIB_CAIIB_2024_NOTES_MCQs
✓ Employees with more experience are eligible for perks that are determined by
their level of experience and credentials.
✓ The originality of the concepts and the inventiveness are very much appreciated.
✓ A productive working atmosphere that is the result of leadership that
emphasizes delegation.
Disadvantages of the delegative leadership style
✓ There is a lack of clarity regarding command accountability.
✓ The representative leadership struggled to adjust to the changes that were
occurring.
Transactional Leadership
• Transactional leadership, also known as managerial leadership, is a leadership
style where leaders rely on rewards and punishments to achieve optimal job
performance from their subordinates.
• Transactions between a leader and his followers, including incentives,
admonition, and other commutations, are utilised by the transactional leadership
model to accomplish the goal of getting the work done.
• The leader makes sure that everyone is aware of the objectives, and everyone on
the team is aware of how they will be rewarded for meeting the requirements.
This type of giving and taking is more concerned with adhering to existing
routines and procedures in an accomplished manner.
Advantages of the Transactional leadership style:
✓ Time-bound, measurable, and detailed objectives that are within the employees’
reach, which have been developed by the leaders.
✓ Enhanced levels of motivation and output from staff members.
✓ It can oust chaos in the chain of command or at least bring it to a manageable
level.
✓ The utilisation of this model results in the production of a system that is simple
for managers to put into action and straightforward for workers to adhere to.
✓ Employees have the ability to choose their own reward system.
Disadvantages of the Transactional leadership style:
✓ There is a possibility of inhibiting inventiveness and creativeness.
✓ Having empathy does not add any value.
✓ It fosters the development of more followers than leaders among the workforce.
Transformational Leadership
• It is a management philosophy that encourages and inspires employees
to innovate and develop new ways to grow and improve the path to a company's
future success. It's a management style that's designed to give employees more
room to be creative, look to the future, and find new solutions to old problems.
JAIIB_CAIIB_2024_NOTES_MCQs
• the leader inspires his or her followers by providing them with a clear vision, and
then the leader encourages and empowers the followers to work toward
achieving the goal. The leader is also responsible for serving as an example of the
vision.
Advantages of the Transformational leadership style
✓ A decrease in the number of employees who leave their jobs as a result of
utilising this methodology.
✓ A strong emphasis by the transformational leadership on the importance of the
business vision.
✓ When utilising this technique, you will see that your employees have a good
morale.
✓ It uses several methods of motivation and inspiration in order to gain the support
of the personnel.
✓ This style to leadership is not one of compulsiveness.
✓ The transformational leadership style places a high priority on the interaction
between parties.
Disadvantages of the Transformational leadership style
✓ It is possible for leaders to lie to their employees.
✓ It’s possible that you’ll need continuous encouragement and continuous
feedback.
✓ The work cannot move further until the staff give their approval.
✓ It has the potential to sometimes lead to a divergence of protocols and principles.
Motivation
The word “motivation” is derived from the Latin word “motive,” which can be translated
as “necessity,” “incline,” or “drive” within a person. People are motivated to take action
so that the goal can be achieved. It is possible that psychological factors are what drives
people’s behaviour during the course of the task they are trying to accomplish.
Types of Motivation
Communication
Communication refers, in its most fundamental sense, to the act of conveying meaning
from one individual to another by using a shared set of symbols.
Communication Models
Linear Model
• Linear communication is one-way communication where a sender or
speaker transmits a message to a receiver who reads or listens to the
message but doesn't respond.
• Larold Lasswell, a sociologist and psychologist, created this linear
communication model in 1948. The model asks five basic questions: who,
what, which channel, to whom, and to which effect? This model allows you to
define any piece of communication easily.
The model, as it was first conceived, was made up of five components, all of which
were arranged in a sequential fashion:
✓ The origin of the information
✓ Its transmission
✓ The transmission channel
✓ The receiver; and
✓ The destination
Dynamic Model:
• Other models of communication processes have been developed in order to cater
to the requirements of students of communication whose interests differ from
JAIIB_CAIIB_2024_NOTES_MCQs
Supervision
According to Vitiates – “Supervision refers to the direct and immediate guidance and
control of subordinates in the performance of their task.”
George R. Terry and Stephen G. Franklin have defined supervision as “Supervision is
guiding and directing efforts of employees and other resources to accomplish stated
work outputs.”
Supervision is the process of interaction, guidance and control of subordinates by
meeting them regularly about the performance of their work. It is intended at ensuring
that the subordinates work according to the plans and policies of the organization. A
supervisor plays two important roles:
Characteristics Of Controlling
Advantages Of Controlling
Limitations Of Controlling
JAIIB_CAIIB_2024_NOTES_MCQs
Broadly, the control management can be of 3 types, based on the timing of the
control:
• Feedback control: These controls are based on the feedback received after the
activity has taken place. So, the corrective action can be taken only for carrying
out similar activity in future.
• Proactive control: These are future-directed controls which anticipate problems
well in advance and the corrective action is taken accordingly.
• Concurrent control: These controls are based on the real-time engagement of
the controller as the activity is being carried out. So, the corrective action can be
taken simultaneously with carrying out the activity, to take care of any
deficiencies observed.
• Once a plan has been put into action, managers are required to continuously
monitor and assess its effectiveness. If things are not functioning as they should,
then they should always be prepared to take the necessary corrective actions. In
order to accomplish this, they must continually assess their current performance
in relation to the goals they have set for themselves.
• First, managers need to measure actual performance before they can compare it
to past performance. They can do this by measuring results in a monetary
context, seeking feedback from customers, and so on.
Taking steps to make necessary corrections:
• Managers are obligated to take immediate corrective action whenever there are
gaps between actual performance and the goals that they have set for their
teams. When taken promptly, corrective action can not only mitigate the existing
damage but also prevent it from occurring again in the future.
Continuing to monitor the effects of corrective actions:
• It is not enough for managers to simply implement corrective measures; they
must also bring these measures to their inevitable and logical conclusion. Even
this step requires thorough evaluation and comparison. Managers have an
obligation to work on finding a solution to the problem until they do.
The processes of planning and controlling are inextricably linked to one another. The
objectives of the organisation are determined through the planning process, and the
controlling process ensures that they are met. The relationship between planning
and control may be explained as under:
• The Planning Stage is the Originator of Control: During the planning phase,
objectives and targets are established. A control process is required in order to
successfully meet these objectives. Therefore, planning comes before controlling.
• Controls help Planning Sustain for Long-Term: The path that planning takes
can be influenced by controlling. The act of controlling draws attention to the
parts of the process that require planning.
• The control process supplies information that can be used for planning:
During the controlling process, the actual performance is compared to the
standards that were established, and any deviations that are found are recorded.
The data gathered for the purpose of exercising control are also utilised in the
planning process.
• Planning and controlling are interconnected in the following ways: The first
function that management is responsible for is planning. In order to enhance the
performance going forward, the appropriate corrective actions have been taken.
The first step in any process should be planning, and the last step should be
control. Both must have the other in order to function properly.
• Planning and control involve looking into the future: Both planning and
control are concerned with the activities that will take place in the future within
JAIIB_CAIIB_2024_NOTES_MCQs
the business. Planning is always done with an eye toward the future, and control
also looks ahead. The accomplishment of a company’s objectives is the primary
focus of both planning and controlling. Through their combined efforts, they
hope to achieve the highest possible output at the lowest possible cost.
Control Techniques
Controlling techniques are the tools that are used to establish control over business
activities, monitor those activities, and take any necessary corrective actions.
Controlling a business effectively can be accomplished using any number of
methods, both traditional and modern.
The selection of the methods absolutely needs to be done in a strategic manner. When
deciding on the approach that will be most effective, the organisation needs to take into
consideration:
• The Character of the Company or the type of business
• Specific Clientele or Users to Aim For
• The challenges that the Organizations are currently facing
Traditional Techniques Of Control
Personal Observation
• The manager does this by personally observing the employees or workers at the
location of the business. It is also known as On-the-Spot Observation or Direct
Observation.
• The employees are pressured and motivated to perform at their highest level of
productivity when they are directly observed. A significant amount of time is
required for supervision when utilising this method.
• Managers acquire genuine and first-hand information for the analysis. In the
event that the operations are not performing as expected, the managers have the
ability to make adjustments there and then. It allows employees to discuss issues
or problems simultaneously. Additionally, it improves the employees’ overall
sense of well-being and morale.
Break-even Analysis
• This control method illustrates the relationship between cost and volume at
varying levels of production output. The Cost, Volume, and Profit analysis is
another name for this approach. It forecasts the profits and losses that will
result from changes in the amount of output that is produced.
• The break-even point refers to the point at which the purchase price and the
selling price are equal to one another.
Break Even Point = Fixed Cost / (Price - Variable Cost). Under the Break-Even
Analysis technique, the evaluation is based on:
✓ Break-even Point
JAIIB_CAIIB_2024_NOTES_MCQs
✓ Angle of Incidence
✓ Contribution Margin
✓ Margin of Safety.
Statistical Reports
Information is gathered by the manager so that performance can be evaluated across
functional areas. The information that is gathered is then utilised for the purpose of
comparison. Involved in this process is the examination of numerical information in the
form of:
✓ Averages
✓ Percentages
✓ Coefficient of determination
✓ Ratios, etc.
• The aforementioned information is presented by the organisation in the form of
charts, graphs, tables, and so on. The data can be more easily visualised with the
help of these reports, and the areas that require attention can be located. As a
result, it is the method for data analysis that is utilised the most and provides the
most benefit.
Budgetary Control:
Comparing and analysing the actual performance with the planned performance is an
integral part of the budgeting process. In general, the following are included among the
steps in budgeting:
• There is a possibility that the final budget that was formulated will turn out to be
inaccurate and costly.
The following is a list of the various types of budgets that are typically prepared by
organisations:
✓ Cash Budget
✓ Sales Budget
✓ Production Budget
✓ Capital Budget
✓ Material Budget
JAIIB_CAIIB_2024_NOTES_MCQs
Return on Investment:
Calculating the rate of return on investment (ROI) allows us to measure the return that
was generated. Using this rate, one can better evaluate the company’s current financial
situation.
ROI Formula: Return on Investment = Net Income / Total Investment. There are
two ways in which we can increase our return on investment:
• By increasing the volume of sales in a manner that is proportionally greater than
the overall investment.
• By lowering the total investment while maintaining the same level of sales
volume.
It is useful for:
✓ Examining the differences and similarities in terms of wealth between the two
eras and companies.
✓ Finding areas that have a negative impact on return on investment
✓ Attracting investors and enhance the company’s reputation.
✓ Comparison among departments
Financial Statement and Ratio Analysis
Calculating a variety of Ratios is made easier, which in turn contributes to better
financial management of the organisation. In order to accomplish this goal, data is
compiled from the financial statements of the companies.
The following ratios are used the most frequently:
✓ Profitability Ratios
✓ Liquidity Ratios
✓ Solvency Ratios
✓ Turnover Ratios
Responsibility Accounting:
• It is a method of accounting in which the amount of responsibility placed on
the individual employee is taken into consideration. Therefore, businesses
will conduct an assessment to determine whether or not the employee is capable
of carrying out the responsibility in accordance with the criteria that have been
established.
• This method of command and control works well for large organisations that
have a number of different departments.
In general, there are four distinct categories of responsibility centres:
✓ Revenue Centre
✓ Cost Centre
JAIIB_CAIIB_2024_NOTES_MCQs
✓ Profit Centre
✓ Investment Centre
PERT And CPM
• Project Evaluation and Review Technique (PERT) is a procedure through
which activities of a project are represented in its appropriate sequence and
timing. It is a scheduling technique used to schedule, organize and integrate tasks
within a project.
• The critical path method (CPM) is a technique where you identify tasks that
are necessary for project completion and determine scheduling flexibilities. A
critical path in project management is the longest sequence of activities that
must be finished on time in order for the entire project to be complete.
• It is in the managers’ best interest to reduce the total amount of time and money
required to complete the activity.
Management Information System
• MIS, is essentially responsible for providing information that facilitates the
making of sound decisions. Managers are able to retrieve any data whenever it
is required. It is one of the techniques for cost-effectively controlling that
managers have at their disposal.
• In addition to this, it helps manage a massive quantity of data and delivers
information at precisely the right moment. The information that is obtained from
MIS is reliable and aids in the process of making decisions.
MIS is comprised of two primary parts:
✓ The Collection of Data
✓ The Management of Data
Management Audit
• It is the process of examining how a company uses its resources. It is started by
the top level of management in order to guarantee that the management
will perform effectively.
• While internal audit may be a continuous affair and periodicity may depend on
the size of the organisation, management audit may be conducted at intervals
decided by the Board of the Company which may be more than a year, say every
two or three years.
• After the conclusion of the financial audit, the next step is the management audit.
During the course of the audit, the overall management process will be subjected
to close scrutiny.
• The malicious hacking and virus will be used to gain unauthorised access to the
logical system. Therefore, you should use malicious hacking and antivirus
software to put a stop to it at any cost.
SDLA Controls Techniques
• SDLA means system development life cycle. It is also essential that it be
controlled. The standardisation of the system development life cycle is one way
that this can be accomplished.
BCP Controls Techniques
• “BCP” refers to the “business continuity process.” Maintaining control of it
would be possible if you have a sufficient number of backups and a solid recovery
strategy in place in case the system is destroyed.
Application Controls Techniques
• It is necessary to block unauthorised access to the recorded database in every
computer-based system so that changes cannot be made and data cannot be
removed. The two widely used application systems that an auditor needs to keep
an eye on are SAP and Quick-book.
Categories of IT Control
• Usually, the Chief Information Officer (CIO) or the Chief Information Security
Officer (CISO) of an organisation is the one who is accountable for the safety,
accuracy, and dependability of the systems that manage and report the
company’s data, including its financial data.
Internal Control Framework
• The COBIT Framework, also known as the Control Objectives for
Information Technology Framework, is a framework that has seen widespread
adoption and was developed by the IT Governance Institute.
• COBIT is a framework that is widely used that contains best practices for the
governance and management of information and technology, and it is directed
toward the organisation as a whole.
COSO
• The Committee of Sponsoring Organizations of the Treadway Commission
(COSO) identifies five components of internal control: a) control environment,
b) risk assessment, c) control activities, d) information and communication e)
monitoring.
• In order to accomplish the goals of financial reporting and disclosure, it is
necessary to have these components in place. COBIT offers comparable and
detailed guidance for information technology, while the interrelated Val IT
focuses on higher-level IT governance and value-for-money concerns.
The four COBIT major domains are:
✓ Planning and organising
✓ Acquiring and implementing
✓ Delivering and supporting
✓ Monitoring and evaluating.