UNIT-V

CONTROLLING
 Meaning of Controlling
Controlling is one of the managerial functions and it is an
important element of the management process. After the
planning, organising, staffing and directing have been carried
out, the final managerial function of controlling assures that the
activities planned are being accomplished or not.
The managerial function of controlling is defined by Koontz and
O’Donnell,” as the measurement and correction to the
performance of activities of subordinates in order to make sure
that enterprise objectives and the plans devised to attain them
are being accomplished.”?
E.F.L. Brech:
• “controlling is checking performance against predetermined
standards contained in the plans with a view to ensuring
adequate progress and satisfactory performance.
 Nature of Controlling
1. Control is a Function of Management: Actually control is a follow-up action to the
other functions of management performed by managers to control the activities
assigned to them in the organisation.
2. Control is Based on Planning: Control is designed to evaluate actual performance
against predetermined standards set-up in the organisation. Plans serve as the
standards of desired performance. Planning sets the course in the organisation and
control ensures action according to the chosen course of action in the organisation
3. Control is a Dynamic Process: It involves continuous review of standards of
performance and results in corrective action, which may lead to changes in other
functions of management.
4. Information is the Guide to Control: Control depends upon the information
regarding actual performance. Accurate and timely availability of feedback is
essential for effective control action. An efficient system of reporting is required for
a sound control system. This requires continuing monitoring and review of
operations.
 The Factors to be Considered in the Significance of Controlling:

1. Size of Business: As the organisations grow in size and diversity, they become
increasingly complex to manage and hence the need for an efficient system of
controls which is required to coordinate activities and accomplish integration.
2. Uncertainty: Control forms a basis for future action. Today’s world of rapid
and sometimes unpredictable changes makes the future very uncertain. This
makes planning very difficult. Hence, control points are necessary to check the
progress of activities and plans and make the necessary and constructive
adjustments so as to accommodate any environmental changes.
3. Control is Vital for Morale: Workers are happier when things are under
control. People make mistakes. Intuitive decisions can result in errors of
judgments, especially when there are so many variables involved. Such wrong
decisions can result in lowering of morale. Control techniques reduce the
chances of errors in judgment thus making the organisational environment
more stable. which is morale boosting .
 Aims of Controlling
 To compare the actual performance of the
work at different stages with the particulars
indicated in the plans and policies.
 To ascertain the time within which the work is
completed.
 To verify quantity and testing quality of the
products.
 To see that causes of delay are eradicated and
operations are suitably re-scheduled.
  To maintain discipline and morale in the
organisation.
 CONTROL PROCESS
 

a) The Establishment of Standards:-Because plans are the yardsticks against which controls
must be revised, it follows logically that the first step in the control process would be to
accomplish plans. Plans can be considered as the criterion or the standards against which we
compare the actual performance in order to figure out the deviations.

Examples for the standards

1) Profitability standards:
2) Market position standards:
3) Productivity standards:
4) Employee attitude standards:
5) Social responsibility standards:

 
•           
2) Measurement of Performance: The measurement of performance against
standards should be on a forward looking basis so that deviations may be detected in
advance by appropriate actions. The degree of difficulty in measuring various types of
organizational performance, of course, is determined primarily by the activity being
measured. For example, it is far more difficult to measure the performance of highway
maintenance worker than to measure the performance of a student enrolled in a
college .
3)Comparing Measured Performance to Stated Standards: When managers have
taken a measure of organizational performance, their next step in controlling is to
compare this measure against some standard. A standard is the level of activity
established to serve as a model for evaluating organizational performance. The
performance evaluated can be for the organization as a whole or for some individuals
working within the organization. In essence, standards are the yardsticks that
determine whether organizational performance is adequate or inadequate.
4)Taking Corrective Actions: After actual performance has been
measured compared with established performance standards, the
next step in the controlling process is to take corrective action, if
necessary. Corrective action is managerial activity aimed at bringing
organizational performance up to the level of performance
standards. In other words, corrective action focuses on correcting
organizational mistakes that hinder organizational performance.
Before taking any corrective action, however, managers should
make sure that the standards they are using were properly
established and that their measurements of organizational
performance are valid and reliable.

At first glance, it seems a fairly simple proposition that managers

should take corrective action to eliminate problems - the factors
within an organization that are barriers to organizational goal
attainment. In practice, however, it is often difficult to pinpoint the
problem causing some undesirable organizational effect.
 TECNIQUES OF CONTROL
TRADITIONAL TECHNIQUES
 PERSONAL OBSERVATION
 BUDGETING
 BREAK-EVEN ANALYSIS
 FINANCIAL STATEMENT
 STATISTICAL DATA AND REPORTS
 QUALITY CONTROL
 MODERN TECHNIQUES OF CONTROL
 MANAGEMENT INFORMATION SYSTEMS
 MANAGEMENT AUDIT
 RESPONSIBILITY ACCOUNTING
 NETWORK ANALYSIS PERT AND CPM
 BALANCED SCORE CARD
 RATIO ANALYSIS
 BENCH MARKING
 LINEAR PROGRAMMING
 MANAGEMENT AUDIT
• Management audit plays a pivotal role in assisting the management to
strengthen its processes through a comprehensive assessment of the
organization. It is relevant irrespective of the size of operations. Management
Audit services aim to provide comprehensive, objective, reliable and accurate
assessments of company’s effectiveness, efficiency and internal controls and
suggest improvements in the processes.
A comprehensive understanding of the business operations 
Review of key processes, such as purchases, revenue, logistics, bank account
operations, etc.
Suggest on Cost saving measures
Ensure adherence to management policies and directives in order to achieve
efficiently and economically the organization 's objectives
Consolidation of observation based on specific review and general
observations related to efficiency of operations and adequacy of systems (both
IT and others).
 RESPONSIBILITY ACCOUNTING
Responsibility accounting is is an underlying concept of accounting
performance measurement systems. The basic idea is that large diversified
organizations are difficult, if not impossible to manage as a single segment,
thus they must be decentralized or separated into manageable parts. These
parts, or segments are referred to as responsibility centers that include:
1. revenue centers,
2. cost centers,
3. profit centers, and
4. investment centers.
This approach allows responsibility to be assigned to the segment managers
that have the greatest amount of influence over the key elements to be
managed. These elements include revenue for a revenue center (a segment
that mainly generates revenue with relatively little costs), costs for a cost
center (a segment that generates costs, but no revenue), a measure of
profitability for a profit center (a segment that generates both revenue and
costs) and return on investment (ROI) for an investment center (a segment
such as a division of a company where the manager controls the acquisition
and utilization of assets, as well as revenue and costs).
s
TYPES OF CONTROL SYSTEMS
The control systems can be classified into three types namely feed forward, concurrent
and feedback control systems
• a) Feed forward controls: They are preventive controls
that try to anticipate problems and take corrective
action before they occur. Example – a team leader
checks the quality, completeness and reliability of their
tools prior to going to the site.
• b) Concurrent controls: They (sometimes called
screening controls) occur while an activity is taking
place. Example – the team leader checks the quality or
performance of his members while performing.
• c) Feedback controls: They measure activities that have
already been completed. Thus corrections can take
place after performance is over. Example – feedback
from facilities engineers regarding the completed job.
 Management by Exception
• Management by exception is a concept that managers use to
focus on key areas of business performance instead of looking at
the business as a whole. Managers only look at the areas that
have large variances from the standard or budgeted projections.
Every other process that is running smoothly and closely to the
standard goals is ignored.

• Management by Exception (MBE) is a technique whereby

management only investigate high impact deviations from
planned results. This frees management to focus on strategic
activities. . 
.
• 1. Call Center Management
• A manager at a call center may spend 100% of his or her time dealing with customers who
have serious customer service complaints. 

This can be considered management by exception because the manager doesn't supervise
employees and only gets involved when there is a significant problem. 

This technique reduces management expenses. However, it's a reactive style of

management that tends to reduce customer satisfaction. 
• 2. Project Management
• A project manager doesn't schedule regular meetings. Instead, meetings are only
scheduled when their is a important issue to discuss. This approach frees project
resources to focus on their deliverables. 
3. Sales Management
• The management team of a sales driven organization focus on marketing and product
development. They manage the sales team with a series of sales KPIs. Management only
becomes involved in the sales process when a sales team, product or campaign is
underperforming. Management by Exception allows management to focus on key revenue
opportunities
• SELECTION OF CONTOLLING TECHNIQUES
• Every controlling technique has its strong and weak
points and the applicability management should use
appropriate technique suitable to overall situations,
depends on the following factors
 Area of operation
 Top-level management policy
 Availability of techniques
 Suitability of techniques
 Cost consideration
 Staff involved in controlling
 Time factor