Chemical and Food Engineering Department
Chemical and Food Engineering Department
FINAL LECTURE 1
CONTROLLING
CONTROLLING
Setting plan, establishing the structure and directing the people do not guarantee that
everything in the organization is going on well. Control is making sure that something happens
the way it was planned to happen. As implied in this definition, planning and controlling are
inseparable functions. Controlling is also the task of ensuring that the activities are providing
the desired results.
IMPORTANCE OF CONTROLLING
o Plans rarely go smoothly. Most plans are executed by people and people vary in their
abilities, motivations and honesty.
• Plans become outdated and require revisions.
• For these reasons control is an important management function.
o Control means controlling every task in an organization – whether it is large or delegated
to some employee.
o Thus, for every task delegated, there has to be a control system that ensures completion
of performances in line with the plans
SYSTEM OF CONTROLLING
• Contrived Randomness works by unpredictable processes/combinations of people to
deter corruption, or anti-system behavior
• Competition works by fostering rivalry among individuals
• Oversight works by monitoring and direction of individuals from a point of authority
• Mutuality works by exposing individuals to horizontal influence from other individuals
CONTROL PROCESS
A basic control process involves mainly these steps:
1. ESTABLISHMENT OF STANDARDS
Plans can be considered as the criteria or the standards against which we compare
the actual performance in order to figure out the differences.
TYPES OF CONTROL
• Pre-Control - takes place before the work is performed. It is also known as FEED-
FORWARD Control. Pre control focuses on eliminating predicted problems.
• Concurrent Control - refers to the control that takes place as work is being performed.
• Feedback Control - refers to the control that concentrates on the post organizational
performance.
BARRIERS TO SUCCESSFUL CONTROLLING
Barriers to controlling include:
• Control activities can create undesirable overemphasis on short term production as
opposed to long term production.
• Control activities can increase employee’s frustration.
• Control can encourage falsification of reports.
Traditional techniques
Modern techniques
TRADITIONAL TECHNIQUES
Personal observation
Budgeting
Break-even analysis
Financial statement
Statistical data & report
Setting examples
Standard costing
Written instructions
1. PERSONAL OBSERVATION
This is the most traditional method of control.
It helps managers to collect first-hand information.
It also creates a psychological pressure on the employees to perform well as they are
aware that they are being observed personally on their job.
However, it is very time consuming, & not suitable for all kinds of jobs.
2. BUDGETING
A budget is a statement which reflects future incomes, expenditures & profits of the
firm.
Benefits of budgeting:
a. Standards of performance
b. Planning
c. Predicting the future
d. Financial planning
4. FINANCIAL STATEMENT
Financial statements show financial position of a firm over a period of time,
generally one year.
These are prepared along with last year statements, so that firm can compare its
present performance with last year’s performance & improve its future performance.
It offers information on:
a. Liquidity
b. Financial strength
c. Profitability
6. SETTING EXAMPLES
Some managers follow this and put good examples of performance before
subordinates and expect the same from them.
Behavior and actions of subordinates can be controlled through exemplary behavior
of the manager.
7. STANDARD COSTING
It is a technique of cost control
Under this technique, standard costs of material, labor, overheads, etc. are
determined.
Actual costs are recorded and compared with the standard costs and variances are
found out.
Then measures are taken to prevent variances in future.
8. WRITTEN INSTRUCTIONS
These instructions are issued time to time to the organization members.
These provide latest information and instructions in the light of changing rules and
conditions.
These are supplementary control technique.
1. Return on Investment
Return on investment (ROI) can be defined as one of the important and useful techniques. It
provides the basics and guides for measuring whether or not invested capital has been used
effectively for generating a reasonable amount of return. ROI can be used to measure the overall
performance of an organization or of its individual departments or divisions.
2. Ratio Analysis
The most commonly used ratios used by organizations can be classified into the following
categories:
Liquidity ratios
Solvency ratios
Profitability ratios
Turnover ratios
3. Responsibility Accounting
Responsibility accounting can be defined as a system of accounting in which overall
involvement of different sections, divisions & departments of an organization are set up as
‘Responsibility centers’. The head of the center is responsible for achieving the target set for his
center. Responsibility centers may be of the following types:
Cost center
Revenue center
Profit center
Investment center
4. Management Audit
Management audit refers to a systematic appraisal of the overall performance of the
management of an organization. The purpose is to review the efficiency and effectiveness of
management & to improve its performance in future periods.
References:
• https://riskviews.wordpress.com/2011/03/28/systems-of-controlling/
• https://www.slideshare.net/rithikloveboy4u/the-system-and-process-of-controlling
• https://www.toppr.com/guides/business-studies/controlling/meaning-of-controlling/
• https://www.cliffsnotes.com/study-guides/principles-of-management/control-the-linking-
function/the-organizational-control-process
• https://www.slideshare.net/rakeshkumar9275/control-techniques-14552038?
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