CONTROLLING

BY: Toral Thanki

 CONTROLLING - DEFINITION
 Control consists in verifying whether everything
occurs in conformity with the plan adopted, the
instructions issued and the principles established.
- Henry Fayol
 “Controlling is determining what is being
accomplished – that is, evaluating performance and,
if necessary, applying corrective actions so that the
performance takes place according to plans.”
– Terry & Franklin
PROCESS/ STEPS OF CONTROLLING
 STEP 1: ESTABLISHMENT OF
STANDARDS
 Standards (objectives) are set so that it can be compared with
actual performance.
 In the lights of these, standards are established which are
criteria against which actual results are measured.
 Standards are generally results which are desired in an
organisation. E.g. Targets, goals, profit, revenue, sales etc.
 While setting / establishing the standards, precision is required,
standards should be specific enough, should neither be too broad
nor too narrow.
 Standards will be precise if they are set in quantitative terms.
E.g. Man hour, machine hour, costs, revenue, investment etc.
 STEP 2: MEASUREMENT OF
PERFORMANCE
 Measurement of performance against the standards
which were set in step 1.
 The measurement of standards should be on future
basis so that deviations can be detected in advance
of their actual occurrence and avoided by appropriate
actions.
 That means performance should be measured on
advanced or preliminary basis so that any deviation
/ difference from standard performance can be
identified in advance.
 Performance measurement can be easy if standards
are set in quantitative terms.
 STEP 3: COMPARING ACTUAL AND
STANDARD PERFORMANCE
 Two things are involved as far as comparison is
concerned i.e.
 firstly
finding out deviations and
 secondly identifying causes / reasons of deviations.

To find out extent of deviations:

 Management has enough information related to work
performance, data, graphs, chart and written reports are
available.
 This performance is measured against standards.
 If deviations are not there control process completes here
itself but if there are certain deviations, causes is to be
found out.
 STEP 3: COMPARING ACTUAL AND
STANDARD PERFORMANCE
Identifying causes of deviations:
 Managers may come across two types of causes.

1. Deviations may occur because of controllable causes

2. Deviation may occur because of uncontrollable causes
 If deviations are there because of uncontrollable causes,
control process ends and if deviations are there because
of controllable causes, then corrective actions are
necessary to be taken.
 STEP 4: TAKING CORRECTIVE
ACTIONS
 Ifdeviations are beyond a prescribed limit, corrective
actions are necessary to be taken to achieve the
organizational objectives.
 Corrective actions may be any one or more of the
following:
 Review of plans
 Change in the assignment of task
 Change in existing technique of direction
 Change in organisation structure
 CAUSES OF RESISTANCE TO CONTROL
1. Curb on Freedom
 Control process tries to regulate the freedom of employees
because it tries to regulate the behavior and performance
of employees in a specified way.
 And this specified way may not match with their way of
behaving and doing.
2. Curb on Creativity & Innovation
 Human beings have their own creativity and innovation
pattern but this creativity and innovation can be used in
supportive environment and not in regulatory environment.
 Sometimes because of rigidity of control process, creativity
and innovation of employees cannot be used in an
organisation.
 CAUSES OF RESISTANCE TO CONTROL
3. Rigid Control Standards
 Sometimes there prevails a feeling that control standards
which are set are too high and too rigid.
 Some control standards are such which may be difficult for
employees to fulfil and are uncontrollable.
4. Faulty Evaluation Pattern
 Individuals in organization resist control because of the
feeling that performance evaluation system from which
they will have to pass is faulty and will not let them do their
work in a proper environment.
 CAUSES OF RESISTANCE TO CONTROL
5. Fear of discrimination
 Individuals sometimes may perceive that they are likely to be
discriminated by those who will exercise control.

6. Against self-control
 Organizations apply control because they feel that individuals
lack self-control.
METHODS OF CONTROLLING

Budgetary Control

Break Even Analysis

Total Quality Management (TQM)

Six Sigma

Responsibility Accounting

Kaizen Control

Benchmarking
 BUDGETARY CONTROL
 “Budgetary control is a process of comparing the actual results
with the corresponding budget data in order to achieve
accomplishments or to remove the differences by either
adjusting the budget estimates or correcting causes of
differences.”
❖ Features of Budgetary Control
 1. Budgetary control establishes a plan or target of
performance which becomes the basis of measurement.
 2. It tries to measure outcomes of activities in quantifies terms so
that actual results can be compared with budgeted
performance.
 3. It tries to reduce deviation between actual and budgeted
figures.
 MERITS OF BUDGETARY CONTROL

 Tool for planning the activities

 Thinking in advance

 Co-ordination of efforts

 Control of expenditure

 Solving financial difficulties

 Better utilization of resources

 Criteria of self-examination

 Ensures proper communication

 DEMERITS OF BUDGETARY CONTROL

 Inaccuracy because Budgetary data are estimates

 Rigidity

 Time consuming process

 More paperwork
SIX SIGMA – (DEGREE OF VARIATION)
 Six Sigma is a set of techniques, and tools for process
improvement.
 It was developed by Motorola in 1986.
 Sir Bill Smith, “the Father of six sigma” introduce this
quality improvement Methodology to Motorola.
 Jack Welch launched Six sigma at General Electronics in
1996.
 Six Sigma relies heavily on advanced statistical methods
that complement and reduce the process and product
variations.
 It is a new way of doing business that would eliminate the
existing defects efficiently and would prevent defects
from occurring.
SIX SIGMA – INTRODUCTION
 Six Sigma seeks to improve the quality of process
outputs by identifying and removing the causes of
defects.
 The concept of Variation states “NO two items will be
perfectly identical.”
 In a process that has achieved six sigma capability, the
variation is small compared to the range of specification
limit.
 A six sigma process is one in which 99.9999966% of the
products manufactured are statistically expected to be
free of defects (3.4 defects per million).
SIX SIGMA – INTRODUCTION
 Six Sigma is a very clever way of branding and
packaging many aspects of Total Quality Management
(TQM). ( TQM is a management approach to long–term
success through customer satisfaction.)
 Manufacturing methods of six sigma are used in Batch
production, Job production & Mass production.
SIX SIGMA OBJECTIVES
Overall Business Improvement:
 Six Sigma methodology focuses on business
improvement.
 Beyond reducing the number of defects present in any
given number of products.
Remedy Defects/Variability:
 Any business seeking improved numbers must reduce
the number of defective products or services it produces.
 Defective products can harm customer satisfaction
levels.
SIX SIGMA OBJECTIVES
Reduce Costs:
 Reduced costs equal increased profits.

 A company implementing Six Sigma principles has to look to

reduce costs wherever it possibly can--without reducing
quality.
Improve Cycle Time:
 Any reduction in the amount of time it takes to produce a
product or perform a service means money saved, both in
maintenance costs and personnel wages.
 Additionally, customer satisfaction improves when both
retailers and end users receive products sooner than
expected. The company that can get a product to its customer
faster may win her business.
SIX SIGMA OBJECTIVES
Increase Customer Satisfaction:
 Customer satisfaction depends upon successful resolution of all
Six Sigma’s other objectives.
 But customer satisfaction is an objective all its own.
BENCHMARKING
 Benchmarking is the process of improving performance by
continuously identifying, understanding, and adapting
outstanding practices found inside and outside the
organization.
 Benchmarking is the process of comparing one's business
processes and performance metrics to industry bests and/or
best practices from other industries.
 Why are others better ?
 How are others better ?
 What can we learn ?
 How can we catch up ?
 How can we become the best in our industry ?

 Benchmarking is a standard that companies compare

themselves to and strive to be that good.
TYPES OF BENCHMARKING
 Process benchmarking
 Financial benchmarking
 Benchmarking from an investor perspective
 Performance benchmarking
 Product benchmarking
 Functional benchmarking
 Best-in-class benchmarking
 Operational benchmarking

BENEFITS OF BENCHMARKING
 Fewer customer complaints
 Reduction of defects
 Reduction in service response time
 Reduction in defective incoming parts
 Reduction in inventory costs
 Reduction in labor costs
 Reduction in billing errors
WHY BENCHMARKING?

 Benchmarking is a more efficient way to make improvements.

 Managers can eliminate trials and errors.
 Benchmarking speeds up organization’s ability to make
improvements.
 Today, time is of the essence. Benchmarking has the ability to
bring your performance up as a whole significantly.
 Learn from others’ experiences Set realistic but ambitious
targets
ADVANTAGES OF BENCHMARKING?
Product and Process Improvement:
 By implementing benchmarking activity, organizations can
improve their operation process
Time & Cost Reduction:
 Bench marking is time and cost efficient because it involves
imitation and adaptation rather than pure invention.
Competitive Strategy:
 By implementing benchmarking activity, organizations can
improve their operation process.
DISADVANTAGES OF BENCHMARKING?
 What is best for someone else may not suit you
 Poorly defined benchmarks may lead to wasted effort and
meaningless results.
 Incorrect comparisons
 Reluctance to share information