CHAPTER – 8

CONTROLLING

Controlling
features
• Goal oriented function
• Pervasive function
• Continuous function
• Both backward and forward looking

Relationship between planning

Controlling process
and Controlling
• Setting performance standards
• Planning provides standard and
• Measuring actual performance
controlling check accuracy of
• Comparing actual performance
standards
with standards
• Planning is prescriptive while
• Analysing deviations
controlling is evaluative
• Taking corrective action
• Both are backward looking
• Both are forward looking

Importance Limitations
• Accomplishing organisational goals • Difficulty in setting quantitative
• Judging accuracy of standards standards
• Efficient use of resources • Little control on external factors
• Improve employee motivation • Resistance from employees
• Ensure order and discipline • Costly affair
• Facilitating and coordination.

1
Meaning & Definition

Controlling means ensuring that activities in an organization are performed as per

the plans. Controlling also ensures that an organisation’s resources are being used
effectively and efficiently for the achievement of predetermined goals.
It can be defined as comparison of actual performance with the planned
performance.
The controlling functions finds out how far actual performance deviates from
standards, analyses the causes of such deviations and attempts to take corrective
actions based on the same.
Nature of Controlling/Features of Controlling
1. Controlling is a goal oriented function:Controlling as a function of
management ensures that the overall directions of individuals and groups
are consistent with short and long range plans of the organization. So it is
completely a goal oriented function.
2. Controlling is an all pervasive function:Controlling is a function which is
applicable to all types of organizations business and non-business and at all
managerial levels.

3. Controlling is a continuous function:Control is not a one time activity.

Rather, it is a dynamic process that involves constant analysis of actual and
planned performance. The resultant deviations, if any, are corrected as per
the need of the situation.

4. Controlling is both a backward looking as well as forward looking

function: Under controlling past performance is analysed, therefore controlling
is backward looking. On the basis of this past performance analysis, remedial
action is taken to make future performance better, in this way controlling is
forward looking.

5. Controlling is a dynamic process: Since controlling requires taking

reviewable methods, changes have to be made wherever possible.

6. Controlling is a positive process: George Terry says, the function of

controlling is positive – it is to make things happen, i.e. to achieve the goal
within stated constraints, or by means of the planned activities. Controlling

2
 should never be viewed as being negative in character – as a hurdle in getting
objectives won. Controlling is a managerial necessity and a help, not an
impediment or a hindrance.

Importance of Controlling

1. Controlling helps in achieving organizational goals:The controlling

function measures progress towards the organizational goals and brings to
light/indicates corrective action.

2. For Evaluating/Judging accuracy of standards:A good control system

enables management to verify whether the standards set are accurate or
not by careful check on the changes taking place in the organizational
environment.
3. Making efficient use of resources: By the process of control, a manager
seeks to reduce wastage of resources.

4. Improves employee’s motivation: A good control system ensures that

employees know well in advance what they are expected to do & also the
standard of performance. It thus motivates & helps them to give better
performance.
5. Facilitating Coordination in action: In controlling each department and
employee is governed by predetermined standards which are well coordinated
with one another. Control provides unity of direction.

6. Ensuring order and discipline: Controlling creates an atmosphere of order

and discipline in the organization by keeping a close check on the activities
of its employees.
If planning is done carefully and accordingly other functions of management
are going in the right direction, then there is no need of the controlling function
of management. Do you agree with this statement? Give reasons in support
of your answer.

[Hint- Controlling is still required to check whether performance is as per

plans or not.]

3
 Controlling Process

Controlling Process

1. Setting Performance Standards:Standards are the criteria against which

actual performance would be measured. Thus standards become basis for
comparison and the manager insists on following of standards.

Standards can be set in both quantitative as well as qualitative terms. Is is

important that standards should be flexible enough to be modified whenever
required. Standards should be SMART as:

S – Simply Expressed
M – Measurable
A – Attainable
R – Reasonable
T – Time bounded

2. Measurement of Actual Performance: Performance should be measured

in an objective and reliable manner which includes personal observation,
sample checking. Performance should be measured in same terms in which
standards have been established, this will facilitate comparison.

3. Comparing Actual Performance with Standard: This step involves

comparison of actual performance with the standard. Such comparison will
reveal the deviation between actual and desired performance. If the
performance matches the standards it may be assumed that everything is
under control.

4
4. Analysing Deviations: The deviations from the standards are assessed
and analysed to identify the causes of deviations.

Deviations are analysed in the light of pre-determined deviation tolerance

limit and key result areas.
a) Critical point control (CPC): It is neither economical nor easy to have
a check on all the activities of an organisation. Hence, the manager
should pay more attention on those activities which are important and
critical to the success of an organisation. These are known as Key
Result Areas- KRA’s.

Example: 2% increase in stationery cost is not critical. But 2% increase

in wages Salaries is critical.
b) Management by Exception (MBE): A manager should take corrective
action only when there is exceptional deviation i.e. when they cross the
permissible limit or acceptable range. Deviations within acceptable range
are ignored.

Example: Wastage within Normal Wastage Range may be ignored. But

if wastage crosses this limit and becomes Abnormal then management
should control.
5. Taking Corrective Action: The final step in the controlling process is taking
corrective action. No corrective action is required when the deviations are
within the acceptable limits. But where significant deviations occur corrective
action is taken.

“Comparing the actual performance with laid standard, finding out deviations
and taking corrective action is an important process of a function of
management.” Name the process.
[Hint- Controlling Process]
Limitations of Controlling

1. Little control on external factors:Generally no enterprise can control

external factors such as government policies, technological changes,
competitions etc.

5
2. Resistance from employees: Control is often resisted by employees. They
see it as a restriction on their freedom e.g. Employees may resist and go
against the use of cameras to observe them minutely.
3. Costly affair: Control is a costly affair as it involves a lot of expenditure of
time and efforts.
4. Difficulty in setting quantitative standards: Control system looses some
of its effectiveness, when standards cannot be defined in quantitative terms.
In the absence of quantitative standards, comparison with standards
becomes difficult.
Relationship between Planning and Controlling
Planning and controlling are interrelated and infact reinforce each other in the sense
that-
1. Planning is pre-requisite for controlling. Plans provide the standard for
controlling. If the standards as the first step in controlling process are not set
in advance managers have nothing to control.
2. Planning is meaningless without controlling. It is fruitful when control is
exercised. It discovers deviations and initiates corrective measures.
Controlling ensures that work has been done according to planning.
3. Effectiveness of planning can be measured with the help of controlling.
4. Planning and controlling both are forward looking: Planning is a future
oriented function as it involves looking in advance and making plans based
on forecasts about future conditions.
Controllingis referred to as looking forward because the corrective action in
controlling is taken to prevent the recurrence of the deviations in future.
5. Planning and controlling are both looking back: Planning is looking back
because new planning is guided by the problem identified in the past.
Controlling is looking back as it compares the actual past performance with
standards. This involves scrutinising the events after they have taken place.
Thus, planning and controlling cannot be separated. The two are
supplementary function which support each other for successful execution.
Planning makes controlling effective whereas controlling improves future
planning.