CONTROLLING

THE PERVASIVE

FUNCTION
 DEFINTION
CONTROLLING
"Controlling is determining what is being accomplished, that
is evaluating the performance and if necessary, applying
corrective measures so that the performance takes place
according to the plans."                              - George .R.Terry

"Control is checking performance against predetermined

standards contained in the plans with a view to ensure
adequate progress and satisfactory performance."

                                                                         - G.F.L.Breach
 Features
CONTROLLING  Is a positive force

 Is a continuous process

 Is Universal

 Is Dynamic

 Is Goal oriented

 Is based on Planning

 Delegation is key to Control

 Basis Planning Controlling
Focus
CONTROLLING Is Impersonal, Long Is personal, Immediate
Range Problems Issues
Relies on
Estimates Specific Data

Time
Top Management's top Operating and Lower-Level
Priority item People spend more time

Structure 
Less Structures More Structured

Evaluation
Difficult, Takes time to Results Visible, especially
Visualize the impact when situations are stable
and not so complex.
RELATION SHIP BETWEEN PLANNING & CONTROLLING
 Importance
CONTROLLING

 Achievement of Goals

 Execution and revision of Plans

 Brings Order and Discipline

 Facilitates Decentralization of Authority

 Promotes Coordination

 Cope with Uncertainty and Change

 Limitations
CONTROLLING
 Influence of External Factors

 Expensive

 Lack of Satisfactory Standards

 Opposition from Subordinates

 Principles
PRINCIPLES Principle of efficiency of controls
OF CONTROLLING Principle of affirmation of the objectives
Principle of control responsibility
Principle of direct control
Principle of standards
Principle of critical-point control
The exception Principle
Principle of flexible controls
Principle of Action
Principle of reflection of plans
Principle of organizational aptness
Principle of individuality of controls
 Characteristics of Effective Control
CONTROLLING System
 Suitable
 Simple
 Selective
 Sound and Economical
 Flexible
 Forward Looking
 Reasonable
 Objective
 Responsibility for Failures
 Acceptable
CONTROL PROCESS
 Establishment of Standards
Standards serve as Benchmarks
CONTROLLING
Control Standards
v Quantitative Standards
v Time Standards
v Cost Standards
v Productivity Standards
v Revenue Standards
v Qualitative Standards
v Goodwill
v Employee Morale
v Industrial Relations

Setting Standards
 Study characteristics of the Work
 Should consider ordinarily flexible and Generally acceptable levels of
performance with respect to work characteristics
 Set different standards for different works as each work is unique
 Measurement of Actual  Performance
CONTROLLING
Actual performance is measured against Standards fixed for the job
Measurement should be done in Objective Manner
Standards may be Quantitative or Non- Quantitative
Key three aspects of Measurement
 Completeness
 Objectivity
 Responsiveness

When to Measure
 Comparision of
CONTROLLING Actual performance
with standards
Determines the Degree of Variation
between Actual Performance and
Standard

Only major or Exceptional Deviations

are communicated to top level
management 

The Management by Exception

Principle is followed(MBE)
 Taking Corrective Action
Are initiated by managers to rectify the actual performance
CONTROLLING
Corrective action may include 
v Methods
v Rules
v Procedures
v Change in Strategy
v Change in Structure
v Compensation Practices
v Training Programmes
v Redesign of Jobs
v Replacement of Personnel
v Re- establishment of Budgets or Standards
 Types of Control
CONTROLLING

 Strategic Control and Operational Control

 Feedforward Control, Concurrent Control and Feedback Control

 Outcome Control and Behavioral Control

 Financial Control and Non-Financial Control

 Internal Control and External Control

 Basis Strategic Control Operational Control

is the process of continually is the process of evaluating and

evaluating the strategy as it is correcting the performance
CONTROLLING Definition being implemented of various organizational units to
and take necessary assess their contribution to
corrective actions it required. the achievement
of organizational objectives.

Basic Are we moving in the

How are we performing?
question right direction?
Main Steering the organization’s future Action control.
concern direction.
Focus External environment. Internal organization.
Time
Long-term. Short-term.
horizon
Exclusively by top management.
Mainly by mid-level management
An exercise They may take the lower-level
on the direction of the top
of control support.
management.

 Environmental scanning,
Main information Budgets, schedules and MBO.
techniques gathering, questioning, and
review.
 v Feedforward Control
v Is also known as Proactivity Control
v can be defined as the monitoring of problems in a way that provides their timely prevention, rather
CONTROLLING than after the fact reaction. 
v addresses what can we do ahead of time to help our plan succeed. The essence of feedforward
control is to see the problems coming in time to do something about them. 
v include preventive maintenance on machinery and equipment and due diligence on investments.
v Concurrent Control
v Is the process of monitoring and adjusting ongoing activities and processes 
v Such controls are not necessarily proactive, but they can prevent problems from becoming worse. 
v Is described as real-time control because it deals with the present.
v  adjusting the water temperature of the water while taking a shower
v Feedback Control
v involves gathering information about a completed activity, evaluating that information, and taking
steps to improve the similar activities in the future.
v  is the least proactive of controls and is generally a basis for reactions.
v  Permits managers to use information on past performance to bring future performance in line with
planned objectives.
 Outcome controls 
  Is preferable if organization is using one or two performance measures to
CONTROLLING gauges of a business’s health. 

  Return on Investment or Return on Assets

  Are effective when there’s little external interference between managerial

decision making and business performance.

Behavioral controls 
  Involves direct evaluation of managerial and employee decision making
and not of the results of managerial decisions. 

  Are  more appropriate when there are many external and internal factors that
can affect the relationship between a manager’s decisions and organizational
performance. 

  Also, appropriate when managers must coordinate resources and capabilities

across different business units.
CONTROLLING
 Financial Controls 
 These evaluate the performance of an organization. 

  include budgets and various financial ratios 

 Non- Financial Controls 
  Are defined as controls where nonfinancial performance outcomes are
measured.

 Are likely to affect profitability in the long term.

 One important nonfinancial control is Quality management.
CONTROLLING
vInternal Controls 

v Refers to employees in the Organization practicing and

implementing the self-control in their work.
v Employees practice self-discipline in order to fulfill the
objectives or standards

v External Controls 

v Members in the organization are controlled through the

Management System by the Managers. 
 Dimensions of Control
Critical or Strategic Point Control
CONTROLLING
 Control, to be ef­fective, should be focused on key result areas which are
critical to the success of an enterprise.
 Management while reviewing standards must pick some strategic points that
reflect the entire organization. 
 Important Features of Strategic Points:
i. A central point is established for every key operation or event. 
ii. Central points must be comprehensive and economical. They are com­
prehensive in the sense they include all sub-operations in the operation.
Economy is also sought because each and every item produced need not be
checked or verified. Checking at strategic points brings economy also.
iii. Strategic points are generally balanced in the sense equal importance is given
to both qualitative and quantitative factors. 
iv. Managers as a rule, should focus attention on deviations at strategic points
only. 
 Types  of strategic control
 Premise Control
CONTROLLING  Every organization creates a strategy based on certain assumptions, or
premises.
 Premise control is designed to continually and systematically verify whether
those assumptions, which are foundational to your strategy, are still true. 

Implementation Control
 This type of control is a step-by-step assessment of implementation activities.
  It focuses on the incremental actions and phases of strategic implementation,
and monitors events and results as they unfold. 

 Two subcategories of Implementation Control:

Monitoring Strategic Thrusts Or Projects
Reviewing Milestones
Special Alert Control
 This is a reactive process, designed to execute a fast and thorough strategy
assessment in the wake of an extreme event that impacts an organization. 
 In some cases, a special alert control calls for the formation of a crisis team

Strategic Surveillance Control

 Strategic surveillance is a broader information scan.
  Its purpose is to identify overlooked factors both inside and outside the
company that might impact your strategy. 
 This process ideally covers any “ground” that might be missed by the more
focused tactics of premise and implementation control.
 Surveillance could encompass industry publications, online or social mentions,
industry trends, conference activities, etc.
 Management by Exception 
 More  attention is given to unusual or exceptional items.

CONTROLLING  Only important deviations from established standards should be brought to the notice of
management.

 In case of a major deviation from the standard, the matter has to receive the immediate
attention of management on a priority basis. 

 Top level is expected to  focus on key deviations and leave the minor ones to be taken
care of at lower levels.

Benefits of MBE:
i. It saves time (it is a time-saving technique.)

ii. It identifies critical problem areas.

iii. It stimulates communication.

iv. It reduces the frequency of decision-making.

v. It leads to concentration of effort on important things.

vi. It makes use of more knowledge and data.

vii. It is necessary in big organizations.

 Resistance to control
 Over Control
CONTROLLING  Inappropriate Controls
 Unachievable Standards
 Unpredictable Standards
 Rewards for Inefficiency
 Uncontrollable Variables

Overcoming Resistance to Control

 Employee Participation
 Justifiable Controls
 Precise and Understandable Standards
 Realistic Standards
 Timely Communication of Findings
 Accurate Findings
 Assuring Support
 Positive Reinforcement
 TECHNIQUES OF CONTROLLING
Traditional Methods
Modern Methods
• Personal Observation
• Statistical Reports and Analysis • ROI
• Cost Control • PERT
• Budgeting and Budgetary Control
• Standard Costing • CPM
• Production Planning and Control • MIS
• Inventory Control
• Profit & Loss Control
• Management Audit
• External Audit • Responsibility Accounting
• Operational Audit • Human Resources Audit
• Marketing Control
• BEP • Quality Control
• Financial Statement Analysis • TQM
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30
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 Personal Observation
TRADITIONAL M v  Is the most traditional method of control. 

v Personal observation enables the manager to collect first-hand information. 

ETHODS OF v Managers take round at the workplace and monitor the development of the work. 

v  Any fault in performance can be spotted and corrected instantly. 

CONTROLLING v  The personal observer accurately knows what is wrong and can take essential
proceedings quickly. 

v Managers can preserve work regulation among the employees, they can take
immediate action to prevent resistance to control measures. 

Statistical Reports and Analysis

 Data is compiled and analyzed using  averages, percentage, ratios, correlation, etc.,

 Information is presented in the various forms like charts, graphs, tables, etc.,

 This enables managers to read them more easily & allow a comparison to be made
with performance in previous periods & also with the benchmarks.
  Cost Control

TRADITIONAL M v  Is defined as the regulation by executive action of the costs of operating an undertaking.

v Aims  at achieving the target of sales.

ETHODS OF v It seeks to attain lowest possible cost under existing conditions. 

v Is a preventive function.

CONTROLLING v Tools of Cost Control

v External

v  Internal

• Budgetary control
• Standard costing

Budgeting and Budgetary Control

 A budget is an anticipated financial statement of revenue and expenses for a specified
period. 

 Budgeting refers to the formulation of plan for given period in numerical terms. 

 Budgetary Control is a system which uses budgets as a means for planning and
controlling entire aspects of organisational activities or parts thereof.
v Standard Costing

v Is defined as the preparation and use of standard costs, their comparison with
actual costs and the measurement and analysis of variances to their causes and
points of incidence. 

v Standard costs should be obtained under efficient operations.

v Starts with an estimate of what a product should cost during a future period

given reasonable efficiency.

v Standard costs are established by bringing together information collected from

various sources within the company.
  Production Planning and Control
TRADITIONAL M v Is a predetermined process which includes the use of human resource, raw

ETHODS OF materials, machines etc.

v Is the technique to plan each and every step in a long series of separate

CONTROLLING operation.

v Helps to take the right decision at the right time and at the right place to
achieve maximum efficiency.

v Elements of Production Planning and Control

• Routing

• Loading
• Scheduling
• Dispatching
• Follow up
• Inspection
• Corrective
  Inventory Control
TRADITIONAL M v Inventory Control is a science- based art of ensuring that sufficient inventory is held by an
organization to meet both its internal and external demand commitments economically. 
ETHODS OF v Phases of Inventory Control
i. Purchasing of materials

CONTROLLING ii.  Storing of materials

iii.  Issuing of materials.

v Techniques of Inventory Control

v ABC analysis

v Economic order quantity model

v Minimum Safety Stocks

v Re-order point

 Profit and Loss Control

  Refers to a control system under which sales, expenses, and profit or loss of each branch or
“product division” is compared with those of other branches and product-divisions

 Is as well compared with historical records, to measure deviations and  to take necessary
corrective action.
  External Audit
TRADITIONAL M  Is known as financial audit.

ETHODS OF  Refers to verification of financial statements.

 Control facilitated through verification of accounts against the standard principles. 

CONTROLLING  Is conducted at the end of the financial year when accounts have already been

prepared, it serves as a method to control future actions. 

 Operational Audit
 Is also known as Internal Audit

 Is the regular and independent appraisal of the accounting, financial and other
operations of an enterprise.

 Includes appraisal of operations in general, weighing actual results against planned

results.

 Confirm whether the accounts properly reflect the facts, appraise policies, procedures
and use of authority, quality of management, effectiveness of methods, special
problems, and other phases of operations.
  Marketing Control
TRADITIONAL M  Is the tool for ensuring that the marketing programmes and activities of the

ETHODS OF firm always get directed towards the marketing objectives of the firm. 

 Provides the means of testing whether the desired goals and results are

CONTROLLING actually being achieved or not.

 Is an ongoing monitoring of the marketing activity in all its aspects. 

 Break Even Point

  Is also known as ‘Cost-Volume Profit Analysis’

 Is an analysis of the inter-relationships among the cost of production, volume

of production and the amount of profits.
• Assistance in Decision Making
•  Determination of Profit
•  Cost Control
• Comparison
• Fixation of Selling Price
  Financial Statement Analysis
TRADITIONAL M   The figures of the current year can be compared with the previous year's
figures. 

ETHODS OF  They can also be compared with the figures of other similar organisations.
 Trend analysis

CONTROLLING  Common-size financial analysis

 Financial ratio analysis
 Cost volume profit analysis
 Benchmarking (industry) analysis
  Return on Investment

MODERN  Can be defined as one of the important and useful techniques. 

METHODS OF  Provides the basics and guides for measuring whether or not invested capital has

been used effectively for generating a reasonable amount of return. 

CONTROLLING  Can be used to measure the overall performance of an organization or of its

individual departments or divisions

PERT

 Is a planning and controlling tool for the management that provides the complete roadmap of

activities involved in the completion of a project, along with the estimated time required for the

completion of each task and the minimum time needed for the whole project to get completed.

 Is used majorly for analyzing the project scheduling problems, wherein the time needed for the

completion of each task and the whole project as a whole is uncertain. 

 lays emphasis on the uncertainty of completion time of the activities involved in the project. 

 Is  probabilistic in nature.
  PERT & CPM
MODERN  PERT (programmed evaluation & review technique) 

  CPM (critical path method) 

METHODS OF  Helps  in performing various functions of management like planning;

CONTROLLING scheduling & implementing time-bound projects involving the performance of

a variety of complex, diverse & interrelated activities.

 Are  used to compute the total expected time needed to complete a project 

  Can identify the bottleneck activities that have a critical effect on the project
completion date. 

 Are mainly used in areas like construction projects, aircraft manufacture, ship
building etc.
  Management Information System(MIS)

MODERN  Is a computer-based information system which provides accurate, timely and up-to-date

information to the managers for taking various managerial decisions. 

METHODS OF  Provides timely information to the managers so that they can take appropriate corrective

measures in case of deviations from standards.

CONTROLLING  Management Audit 
 Is a  systematic appraisal of the overall performance of the management of an organization. 

 The purpose is to review the efficiency & effectiveness of management and thereby 
improve the performance in future periods.  

 It considers both financial and non-financial factors including economic environment,

 Is  essentially a procedure or a form of appraisal of the total performance of the

management by means of an objective and comprehensive examination of the organisation
structure, its components such as a department, its plans and policies, methods of process or
operation and controls, and its use of physical facilities and human resources.
 The thrust of this audit is on evaluation, with appropriate analysis for improvement on
contribution towards industrial development.
 MODERN vResponsibility Accounting
 Is as a system of accounting in which overall involvement of different

METHODS OF sections, divisions & departments of an organization are set up 

 The head of the center is responsible for achieving the target set for his center. 

CONTROLLING  Types of Responsibility centers 

• Cost center
• Revenue center
• Profit center
• Investment center
 MODERN vHuman Resource Accounting (HRA) 
v Is primarily involved in measuring the various aspects related to human assets.

METHODS OF v Its basic purpose is to facilitate the effective management of human resources by

providing information to acquiring, develop, retain, utilize, and evaluate human

CONTROLLING resources.

v Methods of Valuation of Human Assets

• Historical Cost:

• Replacement Cost

• Standard Cost

• Present value of future earnings

• Acquisition Cost Method

• Replacement Cost Method

• Present Value of Future Earnings Method

• Expected realizable value

• Economic Value Method

• Competitive Bidding Method

 MODERN v Quality Control
v Is a strategic decision.
METHODS OF v Can  be defined as the systematic control of those variables which are
encountered in the manufacturing process and which adversely affect the
CONTROLLING excellence of the final product in one way or other.

v Methods of Quality Control

v Inspection

v Product Inspection

v Process Inspection

v Statistical Quality Control

v Analysis of Samples

v Use of Control Charts

v Corrective Measures
 MODERN v Total Quality Management
 Is defined as a customer-oriented process and aims for continuous improvement of

METHODS OF business operations. 

 "Is a way of creating organizational culture, committed to the continuous improvement

CONTROLLING of skills, teamwork, processes, product & service quality and customer satisfaction." 

 It ensures that all allied works (particularly work of employees) are toward the
common goals of improving product quality or service quality, as well as enhancing the
production process or process of rendering of services. 

 The emphasis is put on fact-based decision making, with the use of performance
metrics to monitor progress.

 Tools of TQM
 Balanced Score Card
 Benchmarking                       
 Ratio Analysis
 Quality Circles
 Economic Value-Added Method
 Empowerment
 Market Value Added Method
 Outsourcing

 Kaizen
 MODERN vBench Marking

v Is the practice of a business comparing key metrics of their operations to

METHODS OF other similar companies.

CONTROLLING v Steps of Bench Marking

• Understand in detail existing business processes
• Analyse the business processes of others
• Compare own business performance with that of others analyzed
• Implement the steps necessary to close the performance gap
 MODERN vQuality Circles
v  Is a small group of employees in the same work area or doing similar type of
METHODS OF work who voluntarily meets regularly for about an hour every week to
identify, analyze and resolve work related problems. 
CONTROLLING v Its objective is to improve quality, productivity and the total performance of
the organization and also to enrich the quality of work life of employees.

v Objectives of Quality Circles
v To improve quality, productivity, safety and cost reduction.

v To give chance to the employees to use their wisdom and creativity.

v To encourage team spirit, cohesive culture among different levels and sections of
the employees.

v To promote self and mutual development including leadership quality,

v To fulfill the self-esteem and motivational needs of employees.

v To improve the quality of work-life of employees.

 MODERN vSix Sigma 

v  is a disciplined, data-driven approach and methodology for eliminating

METHODS OF defects (driving toward six standard deviations between the mean and the
nearest specification limit) in any process – from manufacturing to
CONTROLLING
transactional and from product to service.

vTypes of Six Sigma

v DMADV

v DMAIC
 MODERN vEmpowerment

vOutsourcing
METHODS OF
vRatio Analysis

CONTROLLING vKaizen
 Is  defined as a continuous effort by each and every employee (from the CEO
to field staff) to ensure improvement of all processes and systems of a
particular organization.  

 Helps companies to outshine all other competitors by adhering to certain set

policies and rules to eliminate defects and ensure long term superior quality
and eventually customer satisfaction.

 Works on the basic principle - “Change is for good”.

 MODERN vBalanced Scorecard

v Is a strategic planning and management system that is used to align an organization’s vision

METHODS OF and strategic objectives with its tactical business activities. 

v Allows managers to translate the organization’s vision and mission directly into meaningful

CONTROLLING financial and non-financial work plans that can be communicated to employees.

v Proposes that the organization be viewed from four perspectives and that managers:
v Collect and analyze data, 

v Develop metrics and

v Measure performance relative to these perspectives.

vPerspectives 
v The Learning and Growth Perspective - deals with employee training, individual and corporate
self-improvement and organizational culture. 

v The Business Process Perspective  - is concerned with the business processes of the
organization. 

v The Customer Perspective -  deals with customer focus and customer satisfaction. 

v The Financial Perspective  - covers traditional financial data.

TOTAL QUALITY MANAGEMENT TECHNIQUES(TQM)
1.Benchmarking is the process of comparing the cost, cycle time, productivity, or quality of a specific
process or method to another that is widely considered to be an industry standard or best practice.

2.Quality Circles:A quality circle is a participatory management technique that enlists the help of
employees in solving problems related to their own jobs. Circles are formed of employees working
together in an operation who meet at intervals to discuss problems of quality and to devise solutions for
improvements.

3.Empowerment : giving people authority to make decisions based on what they feel is right, have control
over their work, take risks and learn from mistakes, and promote change. Empowering employees is
giving employees 'ownership of their jobs'.

4.Outsourcing: is the hiring of an individual or company to perform specialized tasks or services or

develop products for another company. You might think that outsourcing and quality management are
simple terms and therefore easy to implement.

5.Reduced cycle Time: Is to reduce the total time required to perform all the activities that occur during
order processing, design, supply management, production and distribution of a product or service.

6. Balanced scorecard (BSC) is a strategic planning and management system. Organizations use BSCs
to: ... Align the day-to-day work that everyone is doing with strategy. Prioritize projects, products, and
services. Measure and monitor progress towards strategic targets.