Module 3.

Controlling
What Is Control?

• The process of monitoring activities to ensure that they

are being accomplished as planned and of correcting any
significant deviations.
•
An effective control system ensures that activities are
completed in ways that lead to the attainment of the
organization’s goals.
•
According to Harold Koontz, “Controlling is the
measurement and correction of performance in order to
make sure that enterprise objectives and the plans
devised to attain them are accomplished’.

• Types of control :
Feed forward Control
Concurrent Control
Feedback Control
The Control Process
The Role of Controlling in
The Management Process
Characteristics of ‘Control’
Planning is the key : Effective planning facilitates control
Pervasive in nature : Control is exercised by all levels in the management and in
all functions
Continuous process : Control is a dynamic on going process continuously
exercised .
Forward looking : Actions of past cannot be regulated or improved . Past
experiences can guide managers to take right actions in future.
Both anticipatory and retrospective : Based on past experiences , we can
anticipate problems and try to prevent them.
Information – Key resource : Timely information if provided , provides excellent
results. If information is not available , measuring deviations and taking corrective
actions is not possible.
Importance of prompt action : Promptness of action is required to ensure
deviations do not occur in future
Delegation : Delegation of activities along with empowerment has to be given to
employees to take corrective action.
The role of feedforward, concurrent, and
feedback controls in organizations.
Feed forward Control

• Also known as preliminary or preventive control.

• It is future oriented.
• Based on the principle of ‘prevention is better than cure’
• Eg. inspecting raw materials to ensure quality of output
• An essential requirement of feed forward control is timely
and accurate information.
Concurrent Control

• This method focuses on the present.

• Control is exercised as activities take place to
ensure that they are consistent with standards.
• Eg. A supervisor inspecting quality of products .
• An advantage is that since control is exercised while
work is being performed ,deficiencies can be
corrected at the initial stages.
Feedback Control

• Also known as post action or output control.

• In this method ,results of completed activities are
analyzed and deviations pointed out to enable
taking corrective action.
• The advantage is that it provides information
regarding the effectiveness of planning.
• The disadvantage is that deficiencies and deviations
can only be measured but cannot be corrected.
⮚Internal and external control
• Internal control
• Allows motivated individuals and groups to exercise self-discipline in fulfilling job expectations.
• External control
• Occurs through personal supervision and the use of formal administrative systems.
The Control Process
Steps in the Control Process
1. Measuring actual performance
Personal observation, statistical reports, oral reports,
and written reports

Management by walking around (MBWA)

A phrase used to describe when a manager is out in
the work area interacting with employees
2. Comparing actual performance against a
standard
○ Comparison to objective measures: budgets,
standards, goals

○ Range of variation
■ The acceptable parameters of variance
between actual performance and the
standard
Defining an Acceptable Range of
Variation
3. Taking managerial action to correct deviations or
inadequate standards
○ Immediate corrective action
■ Correcting a problem at once to get
performance back on track
○ Basic corrective action
■ Determining how and why performance has
deviated and then correcting the source of
deviation
○ Revising the standard
■ Adjusting the performance standard to reflect
current and predicted future performance
capabilities
Requirements of a Control
System
1. Should be easily understandable.
2. Reflect organization’s needs.
3. Report deviations quickly.
4. Must be appropriate and adequate.
5. Forward looking.
6. Must be flexible.
7. Economical.
8. Motivating.
Importance of Control
1. Basis for future action.
2. Facilitates decision-making.
3. Facilitates decentralisation.
4. Facilitates co-ordination.
5. Helps in improving efficiency.
6. Psychological pressure.
Features of an Effective Control
system
•Suitability : The system should be suitable for the organization
for which it is done
•Prompt reporting : Plans as well as deviations are promptly
reported.
•Effectively set standards : Specific, attainable ,challenging ,fair,
observable and measurable standards have to be set.
•Principle of exception : Focus should be on deviations which
have high impact and require immediate action.
•Quick corrective action : When deviations are reported ,the
causes must be analyzed.
•Objectivity : The control system should not be
influenced by anyone . There should be uniform application
of control procedures.
•Flexibility : The control system should be designed in such a
way that it adapts to changes.
•Motivation to employees : The system should motivate
employee to higher levels of performance .Standards set
should be challenging.
•Economical : The control system must be economical . The
benefits derived should be more than its cost of operations.
Traditional Control Techniques

1. Budgeting and budgetary control.

2. Cost control.
3. Production planning and control.
4. Inventory control.
5. Break even analysis.
6. Profit and loss control.
7. Statistical data analysis.
1. Budget:
Budget is an overall blue print of a comprehensive plan of operations
and actions expressed in financial terms
Types of Budget:
Budget is prepared for sales, production, materials, labour,
manufacturing overheads, R & D, Cash, capital expenditure .
2. Cost Control:
Controlling the costs of an enterprise to achieve cost effectiveness.
Costs may be fixed cost or variable cost.
3. Break even Analysis:
• The relationship between the revenue, cost and profit at various
levels of sales is evaluated through this technique.
• It is a point where the total cost is equal to total revenues. There is
no profit and no loss.
• Starting from that point further, the organization begins to earn
profit.
4. Financial Statements:
The financial health of a business can be found by preparing the
balance sheet . Ratio analysis, profitability ratio, liquidity ratio ,
turnover ratio, solvency ratio are calculated.
5. Production planning and Control:
• Production planning is done in the production department ahead
of the production process so that production is done based on the
requirements.
• Production control is concerned with the quality check and the
adherence to the production schedule.
6. Inventory control:
• Ensuring that the right amount of stock of the raw materials as
well as the finished goods are kept available so that the
production process as well as the distribution process would
function as per the schedule.
• Types of Inventory control: LIFO,FIFO, ABC Analysis, Batch
tracking, Safety stock, JIT
7. Personal Observation:
• A visual inspection of the performance can be done to ensure
standards are followed . Any deviations ,if found ,can be rectified.
• The demerit is that, personal bias of the observer may influence
the results.
Modern control techniques
1. Return on investment control.
2. Programme Evaluation and Review Technique (PERT).-It
analyzes the time required to complete each task and its
associated dependencies to determine the minimum time
to complete a project.
3. Management Information Systems (MIS).
4. Management Audit.
1. Program Evaluation and Review Technique (PERT):
• This is used to calculate the total time required to complete
a project and also identify the possible problems that may
arise towards delay of the project completion.
• The Critical Path Method (CPM) helps in identifying the
critical areas in project implementation which deserve the
attention of the control process.
• PERT enables the management to observe the project
implementation, the actual, compare them with the planned
standards, identify deviations, and take corrective actions.
2. Management Information System:
• An information system which aids the management in
decision making.
• It keeps track of all information related to the organization
and provides the right information to the right person
3. Return on Investment:
• The evaluation is done with the capital invested in the business and
the returns received during the period
4. Management Audit:
• Evaluating the entire management of the organization at all levels.
• It is done by an external team. There are exclusive agencies who
conduct this audit for companies.
• 5. Responsibility Accounting:
• The departments in the organization are designated as responsibility
centres and the person heading that centre is responsible for the
targets set in that particular centre.
• Eg. Cost centre, Revenue centre, Profit and investment centre
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