Control And Its Process

Batch: FO_J11_01
Subject: Management
CS Foundation Programme
The ICSI Ahmedabad Chapter
Introduction

 Controlling is an important function of management. It is

the process that measures current performance and guides
it towards some predetermined objectives
 The modern concept of control envisages a system that not
only provides a historical record of what has happened to
the business as a whole but also pinpoints the reasons why
it has happened and provides data that enable the manager
to take corrective steps, if he finds he is on the wrong track.
DEFINITION

 According to George R Terry - "Controlling is

determining what is being accomplished i.e.,
evaluating the performance and if necessary,
applying corrective measures so that the
performance takes place according to plans."
 In the words of Haynes and Massie -
"Fundamentally, control is any process that guides
activity towards some predetermined goal. The
essence of the concept is in determining whether
the activity is achieving the desired results”.
STEPS IN CONTROL PROCESS

1. Establishing standards.
2. Measuring and comparing actual results against
standards.
3. Taking corrective action.
Establishing Standards

 The first step in the control process is to establish

standards against which results can be measured.
 The standards the managers desire to obtain in
each key area should be defined as far as possible in
quantitative terms.
 Standards expressed in general terms should be
avoided.
 Standards need to be flexible in order to adapt to
changing conditions.
Measuring and Comparing actual
Results against Standards
 Measurement of performance can be done by
personal observation, by reports, charts and
statements.
 If the control system is well organised, quick
comparison of these with the standard figure is
quite possible.
 A quick comparison of actual performance with the
standard performance is possible, if the control
system is well organised.
Taking Corrective Action

 After comparing the actual performance with the

prescribed standards and finding the deviations, the
next step that should be taken by the manager is to
correct these deviations.
 Corrective action should be taken without wasting
of time so that the normal position can be restored
quickly.
 These steps must be repeated periodically until the
organizational goal is achieved.
ESSENTIALS OF EFFECTIVE
CONTROL SYSTEMS
1. Suitable: The control system should be
appropriate to the nature and needs of the activity.
In other words, control should be tailored to fit the
needs of the organisation.
2. Timely and Forward Looking: The feedback
system should be as short and quick as possible. If
the control reports are not directed at future, they
are of no use as they will not be able to suggest the
types of measures to be taken to rectify the past
deviations.
ESSENTIALS OF EFFECTIVE
CONTROL SYSTEMS
3. Objective and Comprehensive: The control system
should be both, objective an understandable. Objective
controls specify the expected results in clear and definite
terms and leave little room for argument by the employees.
4. Flexible: The control system should be flexible so that it
can be adjusted to suit the needs of any change in the
environment. A sound control system will remain workable
even when the plans change or fail outright. It must be
responsive to changing conditions.
5. Economical: Economy is another requirement of every
control. The benefit derived from a control system should
be more than the cost involved in implementing it.
ESSENTIALS OF EFFECTIVE
CONTROL SYSTEMS
6. Acceptable to Organisation Members: The system
should be acceptable to organisation members. When
standards are set unilaterally by upper level managers, there
is a danger that employees will regard those standards as
unreasonable or unrealistic.
7. Motivate People to High Performance: A control system
is most effective when it motivates people to high
performance.
8. Corrective Action: Merely pointing of deviations is not
sufficient in a good control system. It must lead to
corrective action to be taken to check deviations from
standard through appropriate planning, organizing and
directing.
ESSENTIALS OF EFFECTIVE
CONTROL SYSTEMS
9. Reflection of Organisation Pattern: Organization is not merely a
structure of duties and function, it is also an important vehicle of control.
In enforcing control the efficiency and the effectiveness of the
organisation must be clearly brought out.
10. Human Factor: A good system of control should find the persons
accountable for results, whenever large deviations take place. They must
be guided and directed if necessary.
11. Direct Control: Any control system should be designed to maintain
direct contact between the controller and controlled. Even when there are
a number of control systems provided by staff specialists, the foreman at
the first level is still important because he has direct knowledge of
performance.
12. Focus on Strategic Points: A good system of control not only points
out the deviations or exceptions but also pinpoints them where they are
important or strategic to his operations.
Budgetary Control

 Budget: “A financial and/or quantitative statement

prepared prior to a defined period of time of the
policy to be pushed during that period for the
purpose of attaining a good objective.”
 Budgetary control “The establishment of objectives
relating to the responsibilities of executive to the
requirements of a policy and the continuous
comparison of actual with budgeted results, either
to secure by individual action the objective of that
policy or to provide a basis of its revision.”
Purpose of Budgeting

 To develop an organized procedure for planning

 Means Coordination
 A basis of control
 Increase efficiency in the field of production
 To determine capital requirement
 To encourage research and development
 To increase utility of cost records
Benefits of Budgeting

1. Maximum efficiency
2. Scrutinizing of the Expenses
3. Gives a target
4. Management by exception
5. No overlapping of the activities
Danger in Budgeting

1. Cumbersome and costly

2. Prime importance to departmental goals than
whole enterprise goal
3. Time consuming
4. Rigid
Essentials for Success

 Objectives must be defined

 There should be a budget director
 Must be appropriate for changing condition,
strategies of the firm.
 Must be flexible
 Limiting factors must be located
 Sufficient time to be allowed for budget programme
Reporting

 The report should be factual and objective

 The report should be brief and concise but clear
 Report must show what is exceptional
 Report must be shelved which is not used
 One copy must be given to the responsible person
of department.
 Report should be prompt.
Non Budgetary Control devices

1. BEP Analysis
2. Internal Audit
3. Statistical Data
4. Personal observation
Control of over all performance

1. Budget summaries and reports

2. P&L control
3. ROI
4. Internal external Audit
5. Key Results
 Profitability
 Productivity
 Employee Attitude
6. Control through inter firm comparison
Network Analysis

 It is a technique for planning and controlling

complex projects and for scheduling the resources
required on such projects.
 The result of this analysis are represented
diagrammatically as a network of interrelated
activities.
CPM and PERT

 A critical path consists of that set of dependent

tasks (each dependent on the preceding one), which
together take the longest time to complete.
 This path is shown with the network diagram
 It defines most critical activities where to pay more
attention.
 It assist in avoiding waste of time, energy and
money on unimportant activities.
CPM and PERT
 Program evaluation and review technique (PERT) is a variation on
Critical Path Analysis that takes a slightly more sceptical view of time
estimates made for each project stage.
 PERT charts depict task, duration and dependency information.
 It assist project manager in
1. Planning and schedules and costs
2. Determining time and cost status
3. Forecasting and manpower skill requirement
4. Predicting schedules slippages
5. Developing alternative time cost plans
6. Allocating resource among tasks
Management Audit

 Management Audit may be defined as the

systematic and dispassionate examination, analysis
and appraisal of management’s overall performance.
 For example, production efficiency and investment
 Financial audit is compulsory, looks into past and
useful for the external parties more.
 Management audit is not compulsory, looks into
future and mostly for internal purpose.
Appraisal Areas

1. Economic function
2. Corporate structure
3. Health of earnings
4. Service of shareholders
5. Research and development
6. Directorate analysis
7. Fiscal policies
8. Production efficiency
9. Sales vigor
10. Executive evaluation.