INDIAN INSTITUTE OF TECHNOLOGY ROORKEE

Controlling

Prof. (Dr.) S. Rangnekar

Department of Management Studies
IIT Roorkee
 What is Controlling?

• Controlling is the measurement and correction

of performance in order to make sure that
enterprise objectives and the plans devised to
attain them are being accomplished

• Planning and controlling are closely related

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 THE BASIC CONTROL PROCESS

The basic control process involves

three steps:
 Establishing Standards
 Measuring performance against these standards
 Correcting variations from standards and plans

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 CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING

 Standards are criteria of performance

 They are yardsticks against which actual or

expected performance is measured

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 Principle of
Critical-Point Control

Effective control requires attention to those

factors critical to evaluating performance
against plans.

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 Types of
Critical-Point Standards
 Physical Standards
 Cost Standards
 Capital Standards
 Revenue Standards
 Program Standards
 Intangible Standards
 Goals as Standards
 Strategic Plans as Control Points for Strategic
Control 6
 What is Strategic Control?

Strategic control comprises systematic

monitoring at strategic control points as well as
modifying the organization's strategy on the
basis of this evaluation.

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 What is Benchmarking?
Benchmarking is an approach for setting
goals and productivity measures based on
best-industry practices.
Three types of benchmarking:
 Strategic
 Operational
 Management
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 CONTROL AS A
FEEDBACK SYSTEM

Management control is usually perceived

as a feedback system similar to that which
operates in the common household
thermostat.

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 REAL-TIME INFORMATION
AND CONTROL

Real-time information is information about

what is happening while it is happening.

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FEEDFORWARD, OR PREVENTIVE
CONTROL
What managers need for effective control a system that
will tell them potential problems, giving them time to take
corrective action before problems occur.
Feedforward systems monitor inputs into a process to
ascertain if the inputs are as planned; if they are not, the
inputs or the process is changed in order to obtain the
desired results.

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Feedforward in Human
Systems

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Comparison of Simple Feedback and
Feedforward Systems

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 Requirements for Feedforward Control
1. Make a thorough and careful analysis of the planning and control
system, and identify the more important input variables

2. Develop a model of the system

3. Take care to keep the model up to date; in other words, the model
should be reviewed regularly to see whether the input variables
identified and their interrelationships continue to represent realities

4. Collect data on input variables regularly, and put them into the system

5. Regularly assess the variations of actual input data from planned-for

inputs, and evaluate the impact on the expected end result

6. Take action
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 CONTROL OF OVERALL
PERFORMANCE

Control devises have been developed for

measuring the overall performance of an
enterprise against total goals.

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 PROFIT AND LOSS CONTROL

 The nature and purpose of profit and loss

controls
 Limitations of Profit and Loss Control

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 CONTROL THROUGH
RETURN ON INVESTMENT

Ratio of earnings to the investment of

capital.

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 MANAGEMENT AUDITS AND
ACCOUNTING FIRMS

Accounting audit firms have demonstrated

the greatest interest in pursuing management
audits.

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 BUREAUCRATIC
AND CLAN CONTROL

 Bureaucratic Control-
Wide use of rules, regulations, policies, procedures, and
formal authority

 Clan Control-
Based on norms, shared values, expected behavior and
other cultural variables

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 REQUIREMENTS
FOR EFFECTIVE CONTROLS
 Tailoring Controls to Plans and Positions
 Tailoring Controls to Individual Managers
 Designing Controls to Point up Exceptions at Critical
Points
 Seeking Objectivity of Controls
 Ensuring Flexibility of Controls
 Fitting the Control System to the Organization Culture
 Achieving Economy of Controls
 Establishing Controls that Lead to Corrective Action

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Control Techniques

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 THE BUDGET AS A CONTROL DEVICE

 The Concept of Budgeting

Budgeting is the formulation of plans for a given future period in numerical
terms.

 Dangers in Budgeting
Some budgetary control programs are so complete and detailed that they
become cumbersome, meaningless and unduly expensive.

 Zero-Base Budgeting
Zero-base budgeting is dividing enterprise programs into "packages"
composed of goals, activities, and needed resources and calculating the costs
for each package from base zero.
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 TRADITIONAL NONBUDGETARY
CONTROL DEVICES

There are many traditional control devices

not connected with the budgets, although
some may be related to, and used with,
budgetary controls.

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 TIME-EVENT
NETWORK ANALYSES

 Gantt Charts
 Milestone Budgeting
 Program Evaluation and Review Technique
(PERT)

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 Major Features of Program
Evaluation and Review Technique
(PERT)

 Circle (event)

 Arrow (activity)

 Activity Time

 Time Estimates

 Critical Path 25
 INFORMATION TECHNOLOGY

 Data are the raw facts that may not be very useful until they
become information, that is, after they are processed and
become meaningful and understandable by the receiver.

 The management information system is defined as a

formal system of gathering, processing, and dispersing
information internal and external to the enterprise in a
timely, effective, and efficient manner to support managers
in performing their jobs.

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 Expansion of Basic Data

 Information Indigestion and Intelligence

Services

 Managing by the Numbers

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 THE USE OF COMPUTERS IN
HANDLING INFORMATION

 The computer can store, retrieve, and process data so

that it becomes information

 The Impact of Computers on Managers at Different

Organizational Levels

 The Application and Impacts of Microcomputers

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 OPPORTUNITIES AND CHALLENGES
CREATED BY INFORMATION TECHNOLOGY
 Resistance to Computer Use
 Speech Recognition Devices
 Telecommuting
 A person can work at a computer terminal at home instead of
commuting to work
 Computer Networks
 The Internet
 Other Types of Networks
 Intranet, extranet
 Groupware
 Groupware makes it possible to collaborate with others over long
distances at the same time
 Information Security
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 THE DIGITAL ECONOMY,
E-COMMERCE, AND M-COMMERCE

 The Emerging Digital Economy

Four Kinds of Transactions:
– Business to Consumers (B2C)
– Consumer to Business (C2B)
– Consumer to Consumer (C2C)
– Business to Business (B2B)

 M-Commerce and Wireless Communication

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 Customer Relationship
Management (CRM)

CRM means promoting the interactions between

the customer and the organization by collecting,
analyzing and using the information to better
serve the client.

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