CONTROLLING

What is Controlling? performances are made in

confirmities with plans.
Controlling consists of verifying whether 2. Controlling is a pervasive function-
everything occurs in confirmities with the which means it is performed by
plans adopted, instructions issued and managers at all levels and in all type
principles established. of concerns.
3. Controlling is forward looking-
Controlling ensures that there is effective because effective control is not
and efficient utilization of organizational possible without past being
resources so as to achieve the planned controlled. Controlling always look
goals. to future so that follow-up can be
made whenever required.
Controlling measures the deviation of
4. Controlling is a dynamic process-
actual performance from the standard
since controlling requires taking
performance, discovers the causes of such
reviewal methods, changes have to
deviations and helps in taking corrective
be made wherever possible.
actions
5. Controlling is related with planning-
According to Brech, “Controlling is a Planning and Controlling are two
systematic exercise which is called as a inseperable functions of
process of checking actual performance management. Without planning,
against the standards or plans with a view controlling is a meaningless exercise
to ensure adequate progress and also and without controlling, planning is
recording such experience as is gained as a useless. Planning presupposes
contribution to possible future needs.” controlling and controlling succeeds
planning.
According to Donnell, “Just as a navigator
continually takes reading to ensure whether Controlling as a management function
he is relative to a planned action, so should involves following steps:
a business manager continually take
reading to assure himself that his enterprise 1. Establishment of standards-
is on right course.” Standards are the plans or the
targets which have to be achieved in
Controlling has got two basic purposes: the course of business function.
They can also be called as the
1. It facilitates co-ordination criterions for judging the
2. It helps in planning performance. Standards generally
are classified into two-
Features of Controlling Function a. Measurable or tangible -
Those standards which can
Following are the characteristics of
be measured and expressed
controlling function of management-
are called as measurable
standards. They can be in
1. Controlling is an end function- A
form of cost, output,
function which comes once the
 CONTROLLING
expenditure, time, profit, d. Their communication with
etc. the superiors.
b. Non-measurable or
intangible- There are It is also sometimes done through
standards which cannot be various reports like weekly, monthly,
measured monetarily. For quarterly, yearly reports.
example- performance of a
manager, deviation of 3. Comparison of actual and standard
workers, their attitudes performance- Comparison of actual
towards a concern. These are performance with the planned
called as intangible targets is very important. Deviation
standards. can be defined as the gap between
actual performance and the planned
Controlling becomes easy through targets. The manager has to find
establishment of these standards out two things here - extent of
because controlling is exercised on deviation and cause of deviation.
the basis of these standards.
Extent of deviation means that the
2. Measurement of performance- The manager has to find out whether the
second major step in controlling is to deviation is positive or negative or
measure the performance. Finding whether the actual performance is
out deviations becomes easy in conformity with the planned
through measuring the actual performance. The managers have to
performance. exercise control by exception. He
has to find out those deviations
Performance levels are sometimes which are critical and important for
easy to measure and sometimes business.
difficult. Measurement of tangible
standards is easy as it can be Minor deviations have to be
expressed in units, cost, money ignored. Major deviations like
terms, etc. Quantitative replacement of machinery,
measurement becomes difficult appointment of workers, quality of
when performance of manager has raw material, rate of profits, etc.
to be measured. Performance of a should be looked upon consciously.
manager cannot be measured in Therefore it is said, “ If a manager
quantities. It can be measured only controls everything, he ends up
by- controlling nothing.”

For example, if stationery charges

a. Attitude of the workers,
increase by a minor 5 to 10%, it can
b. Their morale to work,
be called as a minor deviation. On
c. The development in the
the other hand, if monthly
attitudes regarding the
production decreases continuously,
physical environment, and
it is called as major deviation.
 CONTROLLING
Once the deviation is identified, a In absense of controlling, no purpose can be
manager has to think about various served by. Therefore, planning and
cause which has led to deviation. controlling reinforce each other. According
The causes can be- to Billy Goetz, “Relationship between the
two can be summarized in the following
a. Erroneous planning, points”
b. Co-ordination loosens,
c. Implementation of plans is 1. Planning preceeds controlling and
defective, and controlling succeeds planning.
d. Supervision and 2. Planning and controlling are
communication is ineffective, inseperable functions of
etc. management.
4. Taking remedial actions- Once the 3. Activities are put on rails by planning
causes and extent of deviations are and they are kept at right place
known, the manager has to detect through controlling.
those errors and take remedial 4. The process of planning and
measures for it. There are two controlling works on Systems
alternatives here- Approach which is as follows :
a. Taking corrective measures
for deviations which have Planning → Results →
occurred; and Corrective Action
b. After taking the corrective
measures, if the actual 5. Planning and controlling are integral
performance is not in parts of an organization as both are
conformity with plans, the important for smooth running of an
manager can revise the enterprise.
targets. It is here the 6. Planning and controlling reinforce
controlling process comes to each other. Each drives the other
an end. Follow up is an function of management.
important step because it is
only through taking In the present dynamic environment which
corrective measures, a affects the organization, the strong
manager can exercise relationship between the two is very critical
controlling. and important. In the present day
environment, it is quite likely that planning
Planning and controlling are two separate fails due to some unforeseen events. There
fuctions of management, yet they are controlling comes to the rescue. Once
closely related. The scope of activities if controlling is done effectively, it give us
both are overlapping to each other. stimulus to make better plans. Therfore,
Without the basis of planning, controlling planning and controlling are inseperate
activities becomes baseless and without functions of a business enterprise.
controlling, planning becomes a
meaningless exercise.
 CONTROLLING

Controlling – A Function of Management 1. What is Controlling

Controlling is a primary goal- According to Brech, Controlling is a

oriented function of management in an systematic exercise which is called as a
organization. It is a process of process of checking actual performance
comparing the actual performance with against the standards or plans with a
the set standards of the company to view to ensure adequate progress and
ensure that activities are performed also recording such experience as is
according to the plans and if not then gained as a contribution to possible
taking corrective action. future needs.

Management needs to monitor and

evaluate the activities at all levels. It
helps in taking corrective actions by the 2. Characteristics of Controlling
manager, in the given timeline, in order
• Controlling is an end function –
to avoid contingencies and losses.
It is a function, which comes once
Controlling is performed at the, upper,
the performances are made in
middle and lower levels of the
conformity with plans.
management.
• Controlling is a pervasive
function – It is a pervasive
In this guide, you will learn the function because it is performed
following point about controlling by managers at all levels and in
1. What is controlling all type of concerns.

• Controlling is backward as well

2. Characteristics
as forward looking – Effective
3. Objectives control is not possible without
4. Advantages of Controlling past being controlled. Controlling
always look to future so that
5. Limitations
follow-up can be made, whenever
6. Steps Involved in Controlling required.

7. Types of Control • Controlling is a dynamic

process – Controlling requires
8. Techniques of Controlling
taking revival methods, changes
have to be made wherever
 CONTROLLING
possible. Focus has to be on
4. Advantages of Controlling
controlling all the time, which
makes it a dynamic function. • It helps plans to be implemented
• Controlling is related with effectively.
Planning – Planning and • Controlling facilitates
Controlling are two inseparable coordination in organizational
functions of management. functioning, by reducing diversity.
Without planning, controlling is a
• It encourages high morale on the
meaningless exercise and without
part of employees.
controlling, planning is useless.
Planning presupposes controlling • It ensures order, discipline and
and controlling succeeds obedience on the part of
planning. subordinates.

• Controlling helps the

3. Objectives organization to preserve and
• To identify the actual progress of promote its distinct identity
the work in the company. against environmental changes.

• To facilitate R&D department to • It makes effective use of physical

improve efficiency. and human resources, for
achieving organizational goals.
• To facilitate coordination in the
organization. • It enables organization to keep
watch on external environmental
• To measure the actual
for better control over it.
performance with the set
standard. • Control promotes integration
between Short Term Goals and
• To calculate the actual quantity
Long-term Objectives Corporate
and quality of the product.
Goals and Departmental Goals.
• To eliminate wastage of
• It saves time and energy and
resources.
helps in timely corrective action
• To meet the deadline of the by the manager.
projects.
• Control allows managers to
concentrate on important tasks.
 CONTROLLING
• It also allows better utilization of judging the performance. Standards
the managerial resource. generally are classified as

•
• Measurable or Tangible
Standards- Those
5. Limitations
standards which can be
• There is difficulty in setting measured and expressed
qualitative standards. are called as measurable
• There is no Control over External standards, such as cost,
Factors. output, expenditure, time,
profit, etc.
• There is resistance to change
from Employees. • Non-Measurable or
Intangible Standards –
• It is a costly affair, especially for
These cannot be measured
small companies.
monetarily, such as
performance of a manager,
6. Steps in Controlling Function deviation of workers, their
Steps in Controlling Function include attitudes towards a
establishing standards, measuring concern. These are called
performance, comparing actual as intangible standards.
performance with standard 2. Measurement of Performance –
performance and finally taking remedial Deviations are found out by comparing
measures. standard performance with the actual
performance. Performance levels are
sometimes easy to measure and
sometimes difficult. Measurement of
Figure : Steps in Controlling Function tangible standards is easy as it can be
1. Establishment of Standards – expressed in units, cost, money terms,
Standards are the targets required to etc. Performance of a manager cannot
be achieved. Controlling becomes easy be measured in quantities. It is also
through establishment of these sometimes done through various
standards because controlling is reports like weekly, monthly, quarterly,
exercised on the basis of these yearly reports. It can be measured only
standards. They are the criterions for by their-
 CONTROLLING
1. Post-Action-Control/Feedback
Attitu Mor Respons Communic
Control – This process involves
de ale e ation with
collecting information about a finished
to towards the
task, assessing that information and
work physical superiors.
improvising the same type of tasks in
environ
the future. The results of the completed
ment
activity are compared with pre-
determined standards and if there are
3. Comparison of Actual with Standard
any deviations, corrective action can be
Performance –By comparing the actual
taken for future activities. For example,
with standard, deviations are identified.
a restaurant manager may ask the
Manager has to find out whether the
customer about the quality and taste of
deviation is positive or negative or
food ordered by him/her and take
whether the actual performance is in
suggestions to improve the meals.
conformity with the planned
performance. The managers have to 2. Concurrent Control – It is also called
exercise control by exception. real-time control. It checks any problem
and examines it to take action, before
4. Taking Remedial Actions – Once the
any loss is incurred.
causes and extent of deviations are
known, the manager has to detect those 3. Steering Control – The key feature of
errors and take remedial measures for this control is the capability to take
it. There are two alternatives as follows: corrective action, when the deviation
has already taken place, but the task
Taking corrective In the end, if the has not been completed. The big
measures for actual performance advantage of steering control is that
deviations which is not in conformity corrective actions can be taken early.
have occurred with plans, the
4. Yes/No Control – This control is
targets are revised.
designed to check at each check point,
whether the allow activity to proceed
further or not. These controls are
7. Types of Control necessary and useful where a product
passes sequentially from one point to
another, with improvements added at
Figure : Types of Control each step along the way. These controls
stop errors from being compounded.
 CONTROLLING
Safety checks and legal approvals of • Budgeting
contracts, prior to approval are
• Break-Even Analysis
examples of yes/no controls.
• Financial Statements
5. Predictive/ Feed Forward Control –
This type of control helps to foresee • Statistical Control
problem ahead of occurrence. • Self Control
Therefore, action can be taken before
8.2 Modern Techniques
such a circumstance arises.
• Management Information System
In an ever-changing and complex
environment, controlling forms an (MIS)
integral part of the organization. • Management Audit

• Responsibility Accounting

• Program Evaluation and Review

Technique (PERT) and Critical
Path Method (CPM)
8. Techniques of Controlling
• Balanced Card
Techniques of control are being used by
managers since long and there are two • Ratio Analysis
categories of controlling namely the • Economic Value Added (EVA)
traditional techniques and the modern
techniques.

Figure: Techniques of Controlling

8.1 Traditional Techniques

• Personal Observation