UNIT-8: CONTROLLING

Meaning: - Comparing actual performance with standards & finding deviations if any and taking
corrective action.
Actual Performance = Standards = No deviation
Nature of Controlling:-
(a) Controlling is a goal-oriented function.
(b) Controlling is an all pervasive.
(c) Controlling is both backward looking as well forward looking function.
(d) Controlling is a continuous function.
Importance of controlling:-
(a) Helps in achieving organisational goals.
(b) Judging accuracy of standards.
(c) Making efficient use of resources.
(d) Improves employee‘s motivation.
(f) Ensures order and discipline.
Process of Controlling:-
1. Setting performance standards: Standards are the Criteria against which actual performance would be
measured. Standards serve as bench marks. They can be set in both quantitative as well as qualitative.
2. Measurement of actual performance: Performance should be measured in an objective and reliable
manner.
3. Comparing actual performance with standards: in this step actual performance is compare with the set
standards and deviations arebeing found.
4. Analyzing deviations: Major deviation or minor deviation and analyzing the causes of deviation.
Critical point control: Focus only on Key Result Areas (KRAs).
Management by Exception: Concentrate only on major deviations only.
5. Taking corrective action: When deviations go beyond the acceptable range, especially in the important
areas, it demands immediate managerial attention so that deviations do not occur again and standards are
accomplished.
6. Feedback in controlling
Relationship between Planning and Controlling:
Planning and controlling are inseparable twins of management. Planning initiates the process of
management and controlling completes the process. Plans are the basis of control and without control the
best laid plans may go astray. Planning is clearly a prerequisite for controlling. It is utterly foolish to think
that controlling could be accomplished without planning.

Case Studies:-
Question 1.
Hina Sweets is a renowned name for quality sweets since 1935. Harsh the owner of Hina Sweets was
worried as the sales had declined during the last three months. When he enquired from the Sales Manager,
the Sales Manager reported that there were some complaints about the quality of sweets. Therefore Harsh
ordered for sample checking of sweets.
Identify the step taken by Harsh that is related to one of the functions of management.
Answer:
Measurement of actual performance is the step in controlling process being described.
Question 2.
State the steps in the process of controlling.
Answer:
The various steps involved in the controlling process are described below:
1. Setting performance standards: The first step in the controlling process involves setting standards in
clear, specific and measurable terms. Standards can be set in both quantitative as well as qualitative terms. It
is important that standards should be flexible enough to be modified with the changes taking place in the
internal and external business environment.
2. Measurement of actual performance: The next step relates to the measurement of actual performance.
Performance should be measured in an objective and reliable manner. As far as possible, performance
should be measured in the same units in which standards are set as this would make their comparison easier.
Depending upon the nature of work various techniques for measurement of performance like personal
observation, sample checking, performance reports, etc. may be used.
3. Comparison of actual performance with standards: This step involves comparison of actual performance
with the standard. Such comparison will reveal the deviation and noting deviations if any. If the actual
performance is more than planned performance deviations are said to be positive or vice-versa.
4. Analysing deviations: Once the deviations are identified it is important to analyse them through:
(a) Critical point control: All the deviations may not be significant. Moreover, it may not be either
economical nor easy to monitor each and every activity in the organisation. Therefore, every organisation
identifies and states its specific key result areas (KRAs) or critical points which require tight control are
likely to have a significant effect on the working of the business. Any deviations on these points are attended
to urgently by the management. Like if the expenditure on refreshment of workers goes up by 10% it can be
ignored but if the production cost goes up by 5% it may call for managerial action.
(b) Management by exception: Management by exception is the principle of management control which is
based on the belief that if you try to control everything, you may end up controlling nothing. Therefore, only
significant deviations which go beyond the permissible limits should be brought to the
notice of the management. Like the output defects upto 2% may be considered acceptable but if goes up by
5% it may call for managerial action.
5. Taking corrective action: This is the final step involved in the controlling process. When the deviations
are within acceptable limits no corrective action is required. However, when the deviations go beyond the
acceptable range, especially in the important areas, it demands immediate managerial attention so that
deviations do not occur again and standards are accomplished. Corrective action might involve training of
employees, buying new machinery, increasing supervision and so on.
Question 3.
How does controlling help in ―Judging accuracy of standards‖ and ―Ensuring order and discipline‖?
Answer:
Controlling helps in ―Judging accuracy of standards‖ and ―Ensuring order and discipline‖ as explained
below:
(a) Judging accuracy of standards: An efficient control system enables management to determine whether
the standards set are accurate and objective. This is because it helps to helps to review and revise the
standards in light the changes taking place in the organisation and in the environment.
(b) Ensuring order and discipline: Controlling helps to minimise dishonest behaviour on the part of the
employees by keeping a close check on their activities. Thus, it creates an atmosphere of order and
discipline in the organisation.

Question 4.
K&K Co. Ltd. is engaged in manufacturing of machine components. The target of production is 200 units
daily. The company had been successfully attaining this target until two months ago. Over the last two
months it has been observed that daily production varies between 150-170 units. Identify the possible
causes for the decline in production and the steps to be taken to achieve the desire targets.
Answer:
The possible causes for decline in production are listed below:

 The workers are not well versed with the production process.
 The working environment is not conducive to efficient working.
 The raw materials and other equipment are not available on time.
 The machinery is defective or has become obsolete.

The deviations require immediate management attention so that- they do not reoccur in future. Therefore,
the manager should take appropriate corrective action after analyzing the situation like providing training
to workers, improving the work environment, ensuring timely availability of the raw materials and other
equipment or replacing the machinery.
 CLICK ON IMAGE TO
JOIN US ON TELEGRAM

CLICK HERE TO JOIN