Controlling

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CHAPTER – 8
Controlling
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Controlling as a Function of Management
Controlling refers to the function of management that involves evaluating, assessing and
monitoring the progress of the work done. It is a rigorous process involving setting up standards for
performance, comparing the actual performance with the set standards, analysing deviations and
taking the required corrective measures.

Controlling: A Forward-Looking as well as a Backward-Looking Process

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Controlling and Planning are Interlinked
Both planning and controlling are important functions of management. While planning is the first
step in the management process, controlling is the final step. They are interdependent; one cannot
function properly without the other. The following points highlight the relationship between these
two functions of management:
 Planning provides the base for controlling. It lays down standards for working against which the
performance can be measured. In this way, it helps in making controlling a much easier and
effective process.
 Controlling provides useful information based on the evaluation of past performance and takes
corrective measures in case of any deviations. These assessments and corrective actions form
the base for future planning.
 Controlling without planning is meaningless. Without standards or objectives, there is nothing
to control.
 Without controlling, planning cannot be accomplished. Controlling is a requisite for analysing
whether the plans are being properly implemented.
In this regard, we can say that both planning and controlling are interlinked with each other and
incomplete without each other.

Features of Controlling
1) Pervasive-Controlling is a pervasive function. It is exercised by all managers irrespective of
their level, department or division.

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2) Backward-looking as well as forward-looking- Controlling is backward-looking in the sense
that it evaluates the past performance against the pre-defined set of standards and takes the
required corrective actions in case of any deviations. This assessment and corrective actions
form the base for future planning. That is, it is on the basis of corrective actions taken under
controlling that future plans are formed. In this way, it is said to be a forward-looking function.
3) Positive process- Controlling is a positive process as it aims at achieving the organisational
goals despite of working constraints.
4) Continuous process- Controlling is an on-going process as it involves a constant assessment
and evaluation of the progress of current tasks and activities as against the set standards.
5) Goal-oriented function- Controlling keeps a close watch on the work in progress and
constantly works towards the accomplishment of organisational goals.

Dimensions of Controlling
1) Strategic control- It involves managing the overall work of the organisation. It includes
assessing the strategies and policies of the organisation and ensuring that these are implemented
as intended, while correcting any deviations. Strategic control involves long time frames and is
primarily the responsibility of top-level managers.
2) Operational control- It involves monitoring the activities and operations of an organisation on a
day-to-day basis. This mainly includes examining the actions involved in the process of
transforming the raw materials and resources into final products and services. This control is
usually exercised by lower-level managers.

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Importance of Controlling
1) Accomplishing organisational goals- Controlling indicates the deviations in performance and
takes the required corrective measures. In this way, it helps in the accomplishment of
organisational goals in a better manner.
2) Evaluating the standards- It helps in assessing and reviewing the accuracy and feasibility of
the set standards according to the changing business environment.
3) Optimum utilisation of resources- Controlling ensures that each task is performed as per the set
standards, thereby helping in minimising the wastage of resources.
4) Employee motivation- The employees know well in advance as to what is expected from them
and the standards against which their performance will be judged. This encourages them to
work to the best of their capabilities and achieve the assigned targets.
5) Order and discipline- The employees are aware of the fact that they are being continuously
observed. Thus, dishonesty and inefficiency in behaviour is minimised.
6) Promoting coordination-Proper controlling ensures that every department is aware of its
respective activities and tasks and coordinates with one another.

Limitations of Controlling
1) Difficulty in setting standards- Controlling becomes less effective when the standards are
defined in qualitative terms. It is difficult to assess the performance of a task in qualitative
terms rather than in quantitative terms.
2) No control on external factors- The continuously changing business environment in the form
of government policies, environmental changes, competition, etc., often create obstacles for
effective controlling.
3) Resistance from employees- If the measures taken under controlling go against the comfort
zone of the employees, they may oppose and resist it.
4) Expensive affair- Effective controlling is a costly affair in terms of time, money and effort.
Thus, managers should ensure that the costs incurred in operating the controlling systems do not
exceed the benefits derived from it.

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Controlling Process
The process of controlling involves the following steps:
1) Setting standards- This forms the first step in controlling and involves developing both the
qualitative and quantitative benchmarks against which the actual performance would be
measured.
2) Measuring actual performance- The actual performance is measured through various
techniques such as personal observation, checking the sample, performance reports, etc. It must
be ensured that the evaluation is done in an objective and reliable manner.
3) Comparing performances- Once the performances are measured, they are then compared with
the pre-defined standards. Such a comparison helps in assessing the deviations in the
performance.
4) Analysing deviations- The deviations are then properly analysed using two methods namely,
‘Critical Point Control’ and ‘Management by Exception’. Once the deviations are recognised,
the cause for these deviations is identified.
5) Corrective measures- When deviations go beyond the admissible limits, corrective actions are
taken to ensure the errors do not occur again.

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Important Standards Involved in the Controlling Process
 Qualitative standards- Qualitative standards are those that cannot be quantified in numeric
terms. For example, level of coordination in work, goodwill of the organisation, motivation
level of employees, etc.
 Quantitative standards- These standards can be quantified in numeric terms. They can be in the
form of sales targets, production units to be produced, time to be spent on a particular action,
etc.

Techniques of Controlling
The following are the two techniques of controlling used by managers:
 Critical Point Control- This technique is based on the belief that a manager cannot control each
and every activity of the organisation. Thus, focus should solely be on the key result areas
(KRAs) that are critical to the success of the organisation.
 Management by Exception- According to this technique ‘an effort to control everything may
end up in controlling nothing’. Thus, only significant deviations which are beyond the
permissible limit should be acknowledged.
Significance of Critical Point Control and Management by Exception
1) Saves time and efforts- As managers have to deal only with the significant deviations, this
saves the time, effort and cost involved to a large extent.
2) Facilitates delegation- While managers need to focus only on the important or the key areas
of success, routine problems can be delegated to the subordinates.
3) Facilitates growth- By focusing on the key areas of success, the management ensures that
work proceeds in the right direction and the organisational goals and objectives are met
appropriately.