PRINCIPLES &

PRACTICE OF
MANAGEMENT
Dr. Sushant Kishore Waghmare
CONTROL
CONTROLLING
• Controlling
can 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
• Controlling helps managers monitor the effectiveness of their planning,
organizing, and leading activities.
• Controlling determines what is being accomplished — that is, evaluating the
performance and, if necessary, taking corrective measures so that the
performance takes place according to plans.
• Control is 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
Organizational
Accuracy & Resources
Goals
Standards Efficiently

Improving Facilitating
Ensuring Order
Employee Coordination
& Discipline
Motivation in Action
Control Process
1
2
Establishment
of Standards Measurement 3
of Actual 4
Comparison
Performance of Actual
Corrective
Performance Action (if
with the necessary)
Standards
Types of Control

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

Control

Traditional

Budget Cost Production Inventory

Techniques of Control (Modern)

Control

Modern

RoI PERT CPM MIS

Traditional Methods of Control
• The essence of control function is to confirm whether the actions are
going according to plans or not.
• If they 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.
• For this 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
• “A budget 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.
• Cash budget – 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.

• “Budgetary control 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
• It implies the planning of activities for each department.
• It
involves recording of actual performance for sake of
comparison and control.
• It
involves taking the necessary steps to improve the situation
and to prevent further deviations.
• It
involves 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.
• Budgetary control enables the introduction of incentives schemes of remuneration.
• It creates consciousness among the employees.
• The national 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.
• Thelack 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.
• This standard 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.
• It
provides valuable information for submitting tenders or
quoting prices of products and services.
• It reduces cost of an organization.
• Cost records 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
• It is 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.
• As a 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.
• In case 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.
• This method 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.
• This chart 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)
• The success 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.
• It is 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.
• It helps 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.
• Itis suitable for programmes where time is essential
consideration.