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CONTROLLING 5 Moaks)
correche
Standard Acha) eowpand Analysi
Peneane dentom
NTRODUCTION
15-/) -3 tn V FACTORY
Controllingmeans ensuring thàt activities in an organisation are
Derformed as per the plans.
Controlling is the process of comparing the actual
performance with the standard, finding out deviation, if any
CONTROLLING
LA

and taking the necessary corrective actions to prevent the

recurrence of these deviations infuture.
The managerial function of controlling is the measutemen' andcorrectionof performance in order
to make sure that the enterprise's objectives and plans devised to attain them are being accomplished
-Harold Koontz and Heinz Weihrich

NATURE/FEATURES OF CONTROLLING turnrt 4 backujand- looking

1. Controlling is agoal-oriented function: Controlling function of managenernt not only
o t a t i
helpsin keeping a track onthe progress of activities but also ensuresthat activities conform
tothe standards set in advance so that organisational goals are achieved. Controlling is,
thus, a goal-oriented function. peorw d yall enag
preseut eetule
2. Controlling is apervasive function: Controlling unction of a manager i_ a pervasive
function because it is acprimary function of every manager. Manager at al levels (top,
middle, lower) need to perform this function to keep a control over activities in their areas.
Moreover, controlling function is performed in all organisation, whether business or non
business (e.g., educational institution, military, hospital, etc.) takiy correctin

3. Controlling is both a backward looking and forward looking function: Controlling is

like a post-mortem of past activities tofind out deviations from the standards. In that sense,
controlling is a backward looking function. However, the correçtive actions initiated by
control functions aims to improve futtre perfermance. Therefore, controlling is also a
forward looking function. neuesendina
4 Controlling is acontinuous processPControlling should not be misunderstood as the
last function of management. It brings the management cycle back to planning function.
The controlling function finds out how actual performance deviates from standards,
analyss the causes of such deviations and attempts to take corrective action based on the
problems that
same. This process helps in the formulation of future plans in the light of the
were identified and, thus, helps in the better planning in the future periods. Thus, controlling
completes only one cycle of management process and improves planning inthe next cycle.
bo ws
IMPORTANCE OF CONTROLLING

1. Improving Employee Motivation: Agood control system ensures that employees know
well in advance whatthey are expectedto do and what are the standards of performanc on
the basis of which they will be evaluated: It, thus, motivates them and helps them to give
better performanc

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 Analoiy ceTUS Me Donaldi 9c
a
MCDG2S SF P

function lays down the performane

2. FacilitatingCoordination in ActionpThe controlling well-coordinatedwith one anoBher
standards for each departmentand employee which are organisaion.
thereby helping in achieving better coordination in the
atmosphere of discipline andt
3 Ensurtng Discipline and Order Controlling creates an
behaviour, like fraud thet
order in the organisation. It helps to minimise dishonest
check on their activities.
D corruption etcion the part of the employees by keeping a close
tave (oYYectfe Atfou
Accomplishing Organisational Goals. The controlling function measures progress
4

( Qoaowards the organisational goals and brings to light the deviations, if any, and indicates
that
'correctivé action Thus, it guides the organisation and keeps it on right track so
organisational goals are achieved,
benclnia
dh MakingEfficient Use of ResourcesBy exercising control, a manager seeks to reduce
5

wastage and spoilage of resources. Each activity is performed in accordance with pre.
R s t a n determined (standards and norms.)This ensures that resources are used in the most
effective and efficient manner. h ers

6. Judging Accuracy of Standards: A good control system enables

S
noeals
tic
management to verify whether standards set are accurate and
objective. An efficient control system keeps a careful check on the
changes taking place in the organisation and in the environment
J u p l a t i )
and helps to review and revise the standards in the light of such der

naocib changes.

RELATIONSHIP BETWEENPLANNINGAND CONTROLLING V.U

(short at) 5wart
Planning and controlling are mutually
interrelated_and interdependent
activities. They are insèparable twins
Controlling:
implmentation No significant
of managements. Planníng
oNplans
comparing plans
with results
deviations from pians

1. Controlling takes place on the Significant deviations

basis of standards of
performance developed by Carrective action

planning. If the standards are Actual

not set in advance, managers
have nothing to control. Thus, Controling is blind without planning because when there is
noplan, there is no basis of controlling.
2 Once aplan is implemented, controling is necessary to monitor the progress, measure it,
identify and analyse the deviations and take corrective actions to ensure that events
conform to plans. Thus, planning is meaningless without controlling. (P’
Planning is an intelectual process involving thinking, articulation and analysis to discover
and prescribe an appropriate course of action for achieving objectives. Controlling, on the
Nate
other hand, evaluates whether decisions have been translated into desired actions.
Planning is thus, prescriptive whereas controlling is evaluative.

intelleckual
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 TipRXam
for
Planning and controlling both are forward looking PLANNING
functions.
Future
Goals
Plans are prepared for future and are based on Earlier
Plans
FORWARO
LOOKING

forecast about future conditions. Therefore, planning BÁCKWARD Puthd

OOKING
involves looking aheadl andlcalled forward lookina CONTROLLING
function In order o
make comparison not rpeat
we have to move

Controlling is (forward looking function because the backwards

FORWARD
corrective actions initiated by controlling function BACKWARD
LOOKING
Cot
LOOKING
aims to improve future performance. Qtio
bact wad
Planning and controlling are both looking back.
( earl
Planning is looking back because new planning is guided by past experiences. plaus,
Controlling is like a post-mortem of past activities to find out deviations from the standards. In that
sense, controling isa backward looking function.
Conclusion: Planningand controling are interrelated and,
infact, reinforce each other in the sense
facts makes controlling easier and effectiye; and controlling improves
that planning based on
from past experiences.
future planning by providing information derived
'Gond' MGo,oD
CONTROLLING PROCESS 26,o00
auato
Controlling is a systematic process involving
the following steps:
Setting Performance Standards
1.
the criteria
The standards of performance are measured. Setting Performance
againstwhich actual performance will be 1 Standards

enough whenever
Standards should be flexible Measurement of Actual
place in the internal
required. Due to changes taking
and external business
environment, standards may
2 Performance

have to be revised. Comparing Actual

Standards can be set in both

quantitative and
be
3 Performance with Standards

qualitative terms, For

instance, standards set to
incurred, revenue to be
earned, Analysing Deviations
in terms of cost to be
product units to be produced
and sold, time to be 4
task are examples of
spent in performing a
Improving goodwill and Taking Corrective Actions
quantitative standards.
motivation level of employees
are examples of 5
qualitatie standards.

standards, a manager should comparison with actual

At the time of setting quantitative terms as this would make their
precise every 1,000 pieces
try to set standards in reduction of defects from 10 in
easier. For instance,
performance much However, whenever
1,000 pieces, produced by the end of the quarter.
reduced to 5 in every would make
must be made to design them in the manner that
qualitative standards are set,
efforts food chain
instance, for improving customer satisfaction in a fast
their measurement easier. For
 having self service, standards can
time taken by him to place the order be set in terms of-time taken by a customer to
and time taken to collect the order. wait for
2. a
Measurement of Actual Performance table
Measurement of actual
performance should be done in an objective
There are several techniques for measurement of and reliable
" Personal performance manner
observation: Measurement shouldbe done
Sample checking: Certain pieces are continuously.during performance
checked at random for quality.
Performance reports Asuperiorprepares
his employees. 'Performance Report to measure
LReport ud) performance os
" Accounting ratios: Measurement of a
ratios like gross profit ratio, company's
net profit ratio, return performance involves calculation of certain
on investment, etc.
Performance should be measured in the
their comparison easier. same units in which the
standards are set, to make
" ltis generally
believed that measurement
wherever possible, measurement should be done afterthe task is
instance, in case of assembling should be done continuously duringCompleted. However.
task, each part product performançe. For
3.
Comparing Actual Performance with should be checked before assemblina.
Actual performance is
Standards
compared with standards to find out
difference between actual
performance and the deviations, if any.Deviation means
standards are set in quantitative standards.Comparison becomes easier whenthe
terms.
For example,the standard
then output for the week is 100
there is negative deviation units andperformance of a
of 8 units. worker is 92 units,
Analysing Deviations
The deviations from the "°tdc Aetl
standards are analysed to identify 43
tve oeUiation
While analysing deviations, it their causes.
the deviations of key is important to determine the
areas of business need
deviations in certain insignificant acceptable range of deviations. Also,
to be attended
should be used by the areas. Critical point control more urgently as compared to
management in this regard. and management by
Critical Point Control (CPC):
exception
It helps in the
controlling
Success of an organisation.process, by focussingon key result
areas (KRAs) which are critical
economical not easy to keep Theacheck key result areas are
set as critical points, to the
goes wrong at the on each and every activity in since it is
criticalpoints. the entire an organisation. If neither
organisation, an increase of 10per cent organisation suffers. For example, in anything
cent increase in postal charges. in the labour cost may be more a manufacturing
troublesome than a 20 per

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 Advantages of CPC:
(a) It identifies critical problems which need timely action to keop the organisationon the right
track.
(b) It tocuses managerial attention on impartant areas. Thus, there is better utilisation of
managerial talent.
Management by Exception (MBE) or control by exception:
It is an important principle of management control based on the belief that 'an attempt to control
everything. results in controlling nothing' Thus, significant deviations which cross a permissible lIimit/
acceptable range should be brought to the notice of the management. Deviations within the acceptable
range (.e. minor deviations) should be ignored,
For example, if the plans lay down 2per cent increase in labour cost as an acceptable range of devViation
in amanufacturing organisation, only increase in labour cost beyond 2per cent (say,. 5per cent) should be
brought to the range of management, so that immediate corrective actions can be taken.
Advantages of MBE:

(a) The routine problems are left to the subordinates. Management by Exception, thus, facilitates
delegation of authority and increases morale ofthe employees.
(b) lIt saves time and the efforts of managers, as they deal with only significant deviations,
After identifying the deviations that demand managerial attention, these deviations need to be
analysed to identify their causes, which may be- unrealistic standards, defective processes,
inadequacy of rsources, organisational and environmental factors beyond the controt of the
organisation, etc. It is necessary to identify the exact cause(s) of deviations, failing which an
appropriate corrective action might not be possible. The deviations and their cause(s) are then
reported,and corrective action is taken at the appropriatelevel.
5. Taking Corrective Actions
No corrective action is required when the
deviations are within the acceptable range/ Remedial SALH
permissible limit. Plan of Action

When the deviations go beyond the acceptable

range/ permissible limit, especially in the key
result areas (KRAs), immediate managerial
attention is required so that the deviations do
not occur again and standards are
accomplished.
Corrective action might involve training of
employees, in case the production targets could
not be met. Similarly, if an impotant project is
running behind schedule, corrective action
might involve assigning of additional workers and equipments to the project and permission for
Overtime work.

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 In case the deviation cannot be correctedthrough managerial action, the standards may
be revised. haave to
sOME EXAMPLESOF CORRECTIVE ACTION
CAUSE OF DEVIATION cORRECTIVE ACTION
1 Defective materials Change the quality specification for the material used!
2. Defective machinery Repair the existing machine or replace the machine ift
cannot be repaired
3 Obsolete machinery
Undertake technological upgradation of machinery
4. Defective process
Modify the existing process
5. Defective physical conditions of Improve the physical conditions of work
work

Onick REVISION
CONTROLLING

FEATURESOF CONTROLLING IMPORTANCE OF CONTROLLING

CONTROLLING PROCESS RELATIONSHIP BETWEEN

PLANNING &CONTROLLING
2
3

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