PRINCIPLES &

PRACTICE OF
MANAGEMENT
Dr. Sushant Kishore Waghmare
CONTROL
CONTROLLING
• Controllingcan be defined as that function of
management which helps to seek planned results
from the subordinates, managers and at all levels of
an organization.

• The controlling function helps in measuring the

progress towards the organizational goals & brings
any deviations, & indicates corrective action.
 Importance to Managers
• Controllinghelps managers monitor the effectiveness of their
planning, organizing, and leading activities.
• Controllingdetermines what is being accomplished — that is,
evaluating the performance and, if necessary, taking corrective
measures so that the performance takes place according to plans.
• Controlis a primary goal-oriented function of management in an
organization.
• It
is a process of comparing the actual performance with
the set standards of the company to ensure that activities are
performed according to the plans and if not then taking corrective
action.
 Controlling Helps Achieve…
Judging Using
Organizatio
Accuracy & Resources
nal Goals
Standards Efficiently

Improving Ensuring Facilitating

Employee Order & Coordinatio
Motivation Discipline n in Action
Control Process
1
2
Establishm
ent of 3
Measureme
Standards nt of Actual Comparison 4
Performanc of Actual
e Corrective
Performanc Action (if
e with the necessary)
Standards
Types of Control

Predictive/
Feedback Concurrent
Feed-Forward
Control Control
Control
Techniques of Control
(Traditional)
Control

Tradition
al

Budget Cost Production Inventory

Techniques of Control
(Modern)
Control

Modern

PER
RoI CPM MIS
T
Traditional Methods of Control
• The essence of control function is to confirm whether the
actions are going according to plans or not.
• Ifthey are not accordance with the plans then management
should take a corrective action to overcome such deviations.
• For this purpose management should determine standards
so that they can easily be compared with them.
• Forthis purpose many techniques have been developed.
Among them traditional such as Budgeting and
• Budgetary Control, Cost Control, Production Planning and
Control, Inventory Control etc. are the best examples.
Budgeting and Budgetary
Control
• “Abudget is pre-determined statement of management policy
during a given period provided a standard for comparison with
the results actually achieved”.
— J. L. Brown & L.R. Howard

• “A budget is a financial or quantitative statement prepared

prior to a defined period of time of the policy to be pursued
during that period for the purpose attaining a given objective”.
— I. C. W. A England
Characteristics
•A budget generally relates to a given future period
• It
differs from objectives or policies because it is set
down in specific numerical terms
• It should be flexible
• It
is fundamental to the organization and hence, it
receives the attentions and support of the top
management.
Importance
• Budgeting involves drawing up budgets based on
well-defined plans of action.
• It serves another important purpose i.e.,
coordinating plans and activities of various
departments and sections.
• It
facilitate control over expenses, income, costs and
profits.
 Types of Budget 1/2
• Sales budget – It represents the plan of sales for a given period.
• Purchase
budget – It presents the quantities of raw materials and other
consumable items to be purchased by a manufacturing company.
• Cashbudget – It is a statement of the anticipated receipts and
payments for a given period along with the resulting surplus or deficit.
• Expense budget – It lays down the estimates of the standard or norm
of operating expenses of an enterprise for a given period.
• Capital budget – This type of budget outlines the anticipated
expenditure on plant, machinery, equipment and other items of a
capital nature
 Types of Budget 2/2
• Revenue budget – It indicates the income or revenue expected to
be earned from sale of goods produced or purchased for re-sale.
• Production budget – It shows the volume of production to be
undertaken for a given period together with the material, labor and
machinery requirements sometimes production budgets also show
the anticipated cost of production.
• Laborbudget – It indicates the types of skills of laborers and the
numbers in each category estimated to be required in a given
period along with the standard wages payable.
• Master budget – This is prepared for the whole enterprise by
compiling the different sectional budgets which is finally adopted
and worked upon.
 Budgetary Control
• Itis the process of preparing various budgeted figures for the
organization for the future period and then comparing with the
actual performance for finding out variances. This enables
management to find out deviations and take corrective measures at
a proper time. Hence, a budget is a means and budgetary control is
the end result.

• “Budgetarycontrol is system which uses budget as a means of

planning and controlling all aspects of producing and or selling
commodities or services”.
• “Budgetary control is the planning in advance of the various
functions of business so that the business as a whole can be
controlled”.
Characteristics of Budgetary
Control
• Itimplies the planning of activities for each
department.
• It
involves recording of actual performance for sake
of comparison and control.
• Itinvolves taking the necessary steps to improve the
situation and to prevent further deviations.
• Itinvolves the co-ordination among various
department plans and budgets
 Advantages
• The budgetary control aims at the maximization of profits of an organization.
• It
provides the management with a means of control over planned
programmes.
• It facilitates co-ordination among various activities of an organization.
• Wastage is minimized and hence efficiency can be achieved.
• Budgetarycontrol enables the introduction of incentives schemes of
remuneration.
• It creates consciousness among the employees.
• Thenational resources will be used economically and wastage will be
eliminated.
• It
provides an effective means by which top management can delegate
authority and responsibility without disturbing overall control.
 Limitations of Budgetary
Control
• The future uncertainties reduce the utility of budgetary
control system.
• Budgetary
control may lead to conflicts among functional
departments.
• The lack of co-ordination among different departments
results in poor performance.
• The cost of employing additional staff for budgeting
increases the expenditure of an organization which
generally cannot be afford by small enterprises.
 Cost Control
• The cost of production is an important factor in calculating the income
of an organization. Hence, every organization tries it level best to keep
the cost within the reasonable limits.
• The techniques of cost control involve the setting of cost standards for
various components of cost and making comparison of actual cost data
with standard cost. This process is known as standard costing. This
standard costing refers to a pre-determined estimate of cost with can be
used as a standard.
• Thisstandard cost forms the basis of control under standard costing.
Actual cost is compared with the standards, variations are analyzed and
suitable action are taken to overcome such variations. Thus, standard
costing may be regarded essentially as a tool of cost control.
Advantages
• It helps in discovering efficient and inefficient
activities in an organization.
• Itprovides valuable information for submitting
tenders or quoting prices of products and services.
• It reduces cost of an organization.
• Costrecords become a basis for planning future
production policies.
• The reasons for variations in profit can be
ascertained.
Limitations
• It is very expensive to apply.
• The success of this method depends on the
reliability and accuracy of standards
 Production Planning and
•
Control
It is an important function of production manager. This is the function of looking
ahead, estimating difficulties to be occurred and remedial steps to remove them. It
guides and directs flow of production so that products are manufactured in a best
way.
• Following techniques are helpful in production planning and control:
• Routing – It is the determination of exact path which will be followed in
production. It determines the cheapest and best sequence of activities to be
followed.
• Scheduling – It is the determining of time and date when each operational
activity is to be started and completed.
• Dispatching – It refers to the process of actually ordering the work to be done.
• Follow up and Expediting – It is related to evaluation and appraisal of work
performed.
• Inspection – It is to see whether the products manufactured are of requisite
quality or not.
 Inventory Control
• It
refers to the control of materials in an efficient manner, which ensures
maximum return on working capital.
• It is very important for the smooth functioning of production department.
• Its
main objective is to maintain a suitable supply of material at the lowest
cost.
• This control is exercised at three phases:
• Purchasing of materials
• Storing of materials
• Issuing of materials.

• This can be exercised by establishing various criteria such as:

• Safety inventory level
• Maximum inventory level
• Reordering level
• Danger level
 Profit and Loss Control
• Itis a simple and commonly used overall control tool to find out the
immediate profit or cost factors responsible for either the success or
failure of business.
• Asa controlling device it enables the management to influence in
advance revenues, the expenses and consequently even profits.
• The sales, expenses and profit of different departments are compared.
• The department becomes a cost center.
• The in charge of the department is responsible for its performance.
• Even historical comparison is done to assess the performance.
• Incase there are deviations in performance than immediate steps are
taken to rectify them.
 Statistical Data Analysis
• It
is an important control technique. This analysis is possible by means
of comparison of ratios, percentages, averages, trends etc., of different
periods with a view to find out deviations and causes.
• Thismethod is applicable in case of inventory control, production
control and quality control.
• The minimum and maximum control limits are fixed and deviations
with in these limits are allowed.
• It
variations go beyond limitations then immediate steps are taken to
correct them. Statistical control charts are prepared with the help of
collected data and permissible limits are plotted.
• Thischart will give an idea whether everything is going as per the
plans or not. Hence, analysis of data is important device of control.
 MODERN
TECHNIQUES
Return on Investment Control
(ROI)
• One of the most successfully used control technique of
measuring both the absolute and the relative success of
a company is by the ratio of net earnings to investment
the company has made.
• This approach often referred to a ROI.
• If
the rate of return on investment is satisfactory, it will
be considered as good performance.
• The return on investment can be compared over a
period of time as well as with that of other similar
concerns.
 Programme Evaluation and
Review Techniques (PERT)
• Thesuccess of organization depends on its activities for the
accomplishment of an objective within stipulated time and cost.
• Management should determine activities to be performed and
their inter-relationships so that estimated resources and time
needed to complete these activities as per schedule and to
monitor and control the time and cost of the project.
• Through network analysis technique the time can be minimized
to complete the project and also overall project cost can be
minimized. For this purpose PERT and CPM are the two important
types of network analysis used in modern management.
 Project Management
1 Planning
• The planning of project includes the listing of different jobs that has to be performed to
complete the venture. Here, requirements of men, material and equipment are
determined along with the costs and duration for the various jobs, in the process of
planning.
2 Scheduling
• It is the arrangement of the actual jobs of the project according to sequence of the
time in which they have to be performed. At this stage calculation of manpower and
materials required are calculated along with the expected time of completion of each
job.
3 Control
• The process of control starts with comparison of the difference between schedules and
actual results. They analyze of difference and the corrective action taken is the
essence of control process. The most important condition for implementing PERT is the
breaking up of the project into activities and determining the order of occurrence of
these activities i.e., deciding activities which are to be completed before.
Advantages
• It
forces managers to chalk-out a plan to integrate all the
activities as a whole.
• Itis instrumental for concentrating attention on critical
elements that may need modifications.
• It
is helpful in solving problems of scheduling the activities of
one-time projects i.e., the projects which are not taken on
routine basis.
• Ithelps in completing a project on schedule by coordinating
different jobs involved in its completion.
Limitations
• The expected time for each activity of any
programme cannot be determined with certainty.
• It
is suitable for programmes where time is essential
consideration.