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Chapter-8 Controlling Notes

The document discusses the concept of controlling in business management, emphasizing its importance in achieving organizational goals, evaluating standards, and improving resource efficiency. It outlines the nature of controlling, its relationship with planning, the controlling process, and its limitations. Key features include goal orientation, continuous monitoring, and the need for corrective actions when deviations occur.

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Economics 11th
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8 views3 pages

Chapter-8 Controlling Notes

The document discusses the concept of controlling in business management, emphasizing its importance in achieving organizational goals, evaluating standards, and improving resource efficiency. It outlines the nature of controlling, its relationship with planning, the controlling process, and its limitations. Key features include goal orientation, continuous monitoring, and the need for corrective actions when deviations occur.

Uploaded by

Economics 11th
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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UDIT WADHWA CLASSES

Business Studies
Class-XII, Chapter-Controlling

Controlling:- Controlling involves comparison of actual performance with the


planned performance. If there is any difference or deviation, then finding the reasons
for such difference and taking corrective measures or action to stop those reasons so
that they don’t re-occur in future and that organizational objectives are fulfilled
efficiently.
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 employees 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.
Nature of Controlling/Features of Controlling
1. Goal oriented: Controlling is directed towards accomplishment of organizational
goals in the best possible manner.

2. Pervasive: Controlling is an essential function of every manager and exercised at all


levels of management.

3. Continuous: It is not an activity to be pursued in the end only; it has to be done on


a continuous basis.

4. Controlling is looking back: Controlling involves measurement of actual


performance and its comparison with the desired performance. It is the process of
checking and verification.
UDIT WADHWA CLASSES

5. Controlling is forward looking: It is related to future because it seeks to improve


future results on the basis of experience gained in the past.

Relationship between Planning and Controlling


Planning and controlling are interrelated and in fact reinforce each other in the sense
that-

1. Planning is pre-requisite for controlling. Plans provide the standard for controlling.
Thus, without planning, controlling is blind. If the standards 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.
3. Effectiveness of planning can be measured with the help of controlling.
4. Planning is looking ahead and controlling is looking back: Planning is a future
oriented function as it involves looking in advance and making policies for the
maximum utilization of resources in future that is why it is considered as forward
looking function. In controlling we look back to the performance which is already
achieved by the employees and compare it with plans. If there are deviations in actual
and standard performance or output then controlling functions makes sure that in
future actual performance matches with the planned performances. Therefore,
controlling is also a forward looking function.

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.
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. Analysing Deviations: The deviations from the standards are assessed and analysed
to identify the causes of deviations.
Critical point control It means keeping focus on key result areas where deviations are
not acceptable and it should be attended on the priority basis.
Management by exception It means if a manager tries to control everything, it may
end up in controlling nothing. Thus, he should first handle the significant deviations,
which require his priority.
UDIT WADHWA CLASSES

5. Taking Corrective Action: The final step in the controlling process is taking
corrective action. No corrective action is required when the deviation are within the
acceptable limits. But where significant deviations occur corrective action is taken.

Limitations of Controlling
1. Difficulty in setting quantitative standards: Control system loses its effectiveness
when standards of performance cannot be defined in quantitative terms. This makes
comparison with standards a difficult task. E.g areas like human behaviour, employee
morale, job satisfaction cannot be measured quantitatively.

2. Little control on external factors:


An enterprise cannot control external factors like government policies, technological
changes, competition. etc.
3. Resistance from employees:
Control is resisted by the employees as they feel that their freedom is restricted. E.g
employees may resist and go against the use of cameras to observe them minutely.
4. Costly:
Control involves a lot of expenditure, time and effort. A small enterprise cannot afford
to install an expensive control system.
Managers must ensure that the cost of installing and operating a control system
should not exceed the benefits derived from it.

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