UNIT 7 CONTROLLING Controllin

g
Objectives

After reading this unit, you should be

• Understand
able to: the meaning of control
• Identify the steps in the control process

• Understand the features and elements of

•
control
• Appreciate the essentials of a good
• control system

List out the different types of control

Structur
e
7. Understand
Introductio the techniques of control
1 Meaning
7.2 n
7. Importance Features The
3 Control process Essentials of
7. a good control system Types
4 of control Techniques of
7. Control Summary
5
7.
6
7.10 Self-assessment
7.
questions 7.11 References/
7
Further Readings
7. INTRODUCTION
7.
1
Controlling refers to that activity where an effort is made to
8
ensure that all the activities of planning, organizing, and
7.
leading are integrated to have a control of the situation. In
fact
9 controlling is directly related to planning. The control
process ensures that the plans are being implemented
properly. If we see the functions of management cycle-
planning, organizing, directing and controlling – planning
moves forward into all other functions and control reaches
back. It is the final link in the functional chain of management
activities and brings the management into a full circle. Thus it
7.
assumes MEANING
significance in the process of management.

2
Control is a significant function of management. Managers
follow the control process where they assure that the resources
are obtained and are used optimally to achieve the objectives of 12
the organization. According to Koontz 7
Manageria and O’Donnell, it is a process of measuring and correcting the
l activities of subordinates to ensure that events conform to
Processes-
II plans. Thus this definition highlights the measures for control
and corrective action taken by the managers to ensure the
planned implementation of activities in the organization.

While highlighting the principles of management, Henry Fayol

included the
control function as an important principle of management. His
perspective is

in conformity with Koontz O’ Donnell relating to the

relationship between
planning and control. Fayol has included the managerial
instructions to his

subordinates and the principles that the managers established

to have an
effective control over the processes and activities. According to
Fayol, it

consists of verifying whether everything occurs in conformity

with the plans

adopted, the instructions issued and the principles established.
It aims IMPORTANCE
7. to
3
point out weaknesses and errors in order to rectify them and
Control is important
prevent
reoccurrence.
•
because
It identifies Thus,
the it of
areas is weaknesses
understoodand
as errors
a process
so that which
measures current
they can be
performance and guides it towards the pre-planned aims and
• rectified and prevents reoccurrence.
•
objectives. Its
essence lies inofchecking
The range deviationthe progress
from against
the original the
plan plans,,
could be setting
up of
•
individual and organizational goals and seeing that they are
identified.
It stimulates
achieved as per action which will gear up all the departments.
plan
• without any errors.
• It is an important function enabling the manager to take

clear cut
decisions.
Activity-
1WeAall
well designed control
experience system
that time ensures our
flies without good results.
knowledge. Have
As it is directly related to planning, it can make planning
you ever attempted to control your time on a single day? Make a
noteeffective
of your and
activities on a single day, try and control your time
andmeaningful
see if it has made a difference to see how important control
is.

1.
2.

3.
4.
12
8
 Controllin
7. FEATURES g
4
Controlling has the following
•
features:
Controlling is a circular process. Management function

begins with
planning and ends with controlling and hence it helps the
manager to

• identify a deviation from the plan, compelling the activities

to take place
with no deviations and as per plan.
•
Control is a continuous process. Managers constantly revise

the
standards and plan accordingly. Thus the process is
continuous, ensuring

• that there is no variation between the plan and performance.

Control is a forward looking activity, where the managers
• continuously
observe the past and plan for the future. Managers learn
from the
mistakes committed in the past and exercise effective
control to see that
7. theyTHE
don’tCONTROL PROCESS
recur in the future.

5 Control
Control is an
is the keyalldriver
pervasive activity.
for the success It applies at every levelThe
of the organization. of
management, although the scope of control varies across
levels.
control process has five basic elements. They are
Establishment of Standards
Control demonstrates a positive approach. It can never be an
A standard is a criterion against which future results could be
measured. Standards are created when objectives are set during
obstacle or
the hindrance; rather Control
planningagainst
manage process. it helpsbegins
the manager to successfully
with the establishment of
standards. An organization strategically plans and the plans are
broken down into department
pre-determined level,
objectives. The unit level
process and individual
is designed in such
objectives. Often, it is found that standards are of physical
a way
nature that
areitexpressed
canand
pinpoint in terms
the deviations of the number
and enhance of units, clock
performance.
hours and other measures. Organizational standards are also
expressed in terms of financial measures more in the nature of
increase in revenues, expenditure, investments etc. Some of the
standards relating to the people are also in the nature of job
satisfaction of employees, the brand of the organization, the
ranking of the organization etc. Whatever may be the choice of
standards, care has to be taken to see that they are measurable,
practical and attainable and not too difficult to achieve. There
are tangible standards like the sales volumes, financial results,
etc.and intangible standards like those related to people issues
like job satisfaction, job enrichment, etc. A tangible standard is
easy to evaluate and control compared to the intangible
12
standards. Technology and the technological tools have
however, made the standards easy to measure and quantify. 9
Manageria Measurement of Actual Performance
l
Processes-
The very purpose of control is to measure actual
II performance. Monitoring and measurement is a continuous
activity and involves collection of data that represents the
actuals to the intended so as to help the manager in his
control function. While establishing standards, if there is
clarity and uniformity, measuring the actual performance
would be an easy task. It also depends on the speed with
which the control information is required, otherwise the delay
in measurement will cause delays in taking the corrective
action. Normally an organization would evaluate the effort,
effectiveness, adequacy, efficiency and the process followed.
Comparison of Actual Performance with the Original
Standard
s
Once the standards are established and the actual performance
is measured; it has to be compared with the original standards.
It might result in either meeting the standards or deviating from
the standard. If the original standards are met the organization
can plan for higher standards, but if the manager has observed
deviation, corrective action has to be taken. Minor deviations
could be tolerated but the management has to view the major
Taking Corrective
deviations seriously. Action
If the manager has observed deviations, efforts have to be
taken by him for corrective action. The measurement of
performance and its comparison with the original standard
should lead to taking steps towards correcting those
deviations and checking the original standard itself. The speed
with which action is taken and the methods used towards the
same determine the process of controls in future. Corrective
action can take place in the simplification of processes, use of
advance tools and techniques restructuring the organization,
redefining the people management practices, effective
communication methods and channels etc. The corrective
action should be such that the planned performance takes
place with the corrective action taken by the organization.
Feedback
Feedback is an important element in the control process. The
manager who is in charge of control will receive a lot of
information and feedback on the actual performance in
comparison with the planned standards. A positive feedback
sends positive results and achievement of performance
standards. A negative feedback however, compels the manager
to take corrective action so that it motivates the subordinates
towards performance and standards.
Activity-2
Interview an owner of a small roadsideprovision/kirana store,
medical shop or even an apparel/cloth shop employing 2 to 5
employees Ask him how he controls his activity to understand
the process. Write down to check the control process is the
13 same as you have studied.
0
 Controllin
7. ESSENTIALS OF A GOOD CONTROL g
6 SYSTEM
Controlling is essentially a checking function of the manager.
Organizations do have effective control points and design them
carefully to help them grow and sustain its growth. There are
certain characteristics of effective control system, if followed
will benefit the organization. They are:
• The suitability is an essential element in the control activity.

Controls
differ in different units/ departments. For example, sales
and marketing

have different controls compared to the production

department or finance
• department in a manufacturing setting. Again, a
manufacturing set up is

different from a service organization. It has thus to be

appropriate and
• adequate.

One of the significant factors of a good control system is the

• flexibility
with which an organization can work. When standards
change, raised or

get changed due to unavoidable uncertain external

environment, the
needed flexibility has to be built into the control system.
•
The most important element of a good control system is the

• inbuilt
mechanism which will allow immediate reporting of
deviations from
• established standards.
A forward looking control system helps the organization to
• ensure that
the deviations do not recur in future. Since managers do not
have control
over the past, they do have the mechanism to see that all
• deviations are
corrected based on the learning that they have had in the
process of
deviations.

• A good control system should be able to pinpoint whether it

is a simple
deviation or a vital deviation leading to a strategic initiative.
• 13
1
Effective control presupposes defined standards so that they
Manageria systems should be selectively designed at critical check
l
Processes- • points. Accurate, objective and measureable data will help
II
the organization to
take the corrective action immediately so that the work flow
in the
Activity-
departments do not suffer.
3
Recall the elements of a good control system. Write down

as you recall. 1.
2.

3.

7. TYPES OF CONTROL
6
Controls can be classified into several types. They are most
effective only when they are applied at critical points. The
unit heads/managers can implement the controls before the
process begins, known as feed forward, during the process,
which is known as concurrent or after it is completed, which is
known as feedback. In the feed forward controls, the goal is to
prevent anticipated problems and hence the focus of control
is on the operations before it begins. Regular maintenance,
which is regularly done for automobiles, machinery etc.are
examples of feed forward control, because they prevent
problems in the operation of machines, automobiles, etc.
Controls like standard cost control are also adopted in
organizations to check the cost of a product before
commencing the commercial production.

Concurrent controls apply to processes as they are happening.

Examples of
concurrent controls include any type of steering or guiding
mechanism such

as direct supervision when the operation is being performed

or automated
systems, such as computers programmed to inform the user
when they have

issued a wrong command and also the quality checks that the

organizations
Write to2 ensure
have examples
quality
each
standard.
for the feedforward, concurrent and
feedback control, as you observed in any activity
Feedback controls are exercised after the completion of the
1
2
activity for
reviewing the results of operations. They guide future
planning, inputs and
3
4.
process designs. The timely – weekly, monthly, quarterly and
5
13 6
annual reports-
are examples which can ensure immediate adjustments at the
2 workplace.

Budgetary control is also an example of post action controls.

In addition to these types, organizations also use the internal Controllin
control system through the audit, risk and compliance division g

of the organization. Internal controls relate to the

organizational methods in order to safeguard its assets, check
and verify the accuracy of its data, promote efficiency in
operations and encourage adherence to the prescribed
policies, procedures and rules for compliance. Thus, control
and its scope extend beyond the matters that normally the
accounting and finance departments engage in. In layman
terms, internal controls help organizations to strictly follow
policies, procedures and rules so that the organizational
objectives ultimately are achieved.

Two types of internal controls are normally observed in

organizations-
preventive and detective.Both the types of controls are used by
organizations

because they serve different purposes. The internal controls

assume
significance because organizations continually reengineer their
processes and

procedures in order to grapple with change. A series of steps

are followed in
order to manage the company in the right direction with
effective controls.

As the name itself suggests, preventive controls decrease the

chance of errors
before they occur and prevents many untoward incidents/
events that occur in

the course of managing a company. Such controls are critical as

they
reinforce the quality standards of the organization. Examples
include
Observe your own activities like preparing for the examination.
Write down that
preapprovals what the
could be the insists
organization possibleon preventive and
the employees
detective controls you can have in reaching your goal. Repeat
like
the client process
same visits, with any organization.
travel authorization, organizational access controls including
access to
1.
passwords, representing the organization at official events, etc.
2.
Detective controls, on the other hand, help the organization to
3.
7.
detect TECHNIQUES
errors or OF CONTROL
problems after the transaction has occurred. It is but natural
for mistakes to
8
There are various techniques of control. Control technique is a
occur
specificin method
the management
or procedureof which
a company but what
deals with is more
the pertinent
organizational information with which the management is able
important is to
detect the lapses
to implement in order
a suitable to strategy
control take corrective
in order action.
to assessSome
the
examples include
performance of the organizational operations. The standard
the monitoring
control techniquesoffollowed
the departmental transactions,
by organizations review of
are as follows:
13
budget heads and 3
expenditure incurred to observe the differences and the
justification thereof,

the inventories and stocks maintained by the company, etc.

Manageria a. Gantt chart – Gantt chart is an instrument which helps the
l
Processes-
manager in planning and controlling simple projects. The
II manager can plot the process in each of the operations
along with the expected time and see for himself whether
the progress is on time, behind time or ahead of time. Any
deviations could be easily seen and corrective action can
be taken immediately. It facilitates control by continuously
comparing the actual performance against the expected
performance and hence the manager/the unit head can
keep the processes under control. An example of Gantt
Figure-1-
chart for GanttaChart
any starting for in
project Project
a month is as follows
1st
PreparationManagement
& 2nd 3rd 4th
Planning
Week
Week Week Week
Develop proposal
Approve proposal

Recruit Team
Develop & Test

Specify Details
Develop
prototype

Approve

prototype
Develop & test
beta
version
Apply corrections
Approve final
version

Implementation
Train Users

Roll out final

version
As can be seen in the figure-1, any project has to be planned.
The same activity of planning acts as a control mechanism. A
typical project will have to get prepared and planned, develop
and test, along with its implementation. There are other
activities that are involved in each of the activities of planning,
development and implementation. Each of the activities are
planned on a weekly basis. When the plan gets implemented,
the chart can be used as a control technique for implementing
the project.
Activity-6
Use the Gantt chart to prepare for any activity which you
consider as important. Make a chart and write down how helpful
the Gantt Chart was, in having control of your activity. It can be
used for preparing for your examination preparation also.
13
4
1. Controllin
g
2.
3.
4.
b Breakeven analysis- Breakeven analysis is a useful tool of
. control. It helps management to understand a set of
relationships among fixed cost, variable cost, total cost, price
per unit, level of output, profit/ loss etc. The manager can
modify the value of any of these variables in case of a
deviation through this analysis. Breakeven analysis examines
the relationship between total revenue and total cost at
various levels of production so as to establish a breakeven
point. The breakeven point demonstrates that the
organization can neither get profit nor loss, where total
revenue equals total cost. It focuses on the marginal concept
as a control tool. The marginal differences in the values of
variables, the results of the variation can be evaluated and
recorded, so that the marginal results of the managerial
decision by showing the effect of incremental changes in
volume or price etc. Breakeven analysis can help the
manager only when the prices, technology, efficiency levels,
c
machinery use etc. remain the same. In a dynamic world, all
.
these factors change and hence the tool has limited use.

Budgetary controls – Budget is the most universal device of

control. It is
a statement which provides the estimates of revenue and
expenditure for

a stated period of time. It forces the managers to account for

the
utilization of capital and other resources. It is a managerial
responsibility

to collect the information about the actual cost incurred

against budgeted
cost, so that deviation could be corrected and plans prepared
so that

major deviations do not take place in future. Budgets are

used as controls
measures in the various activities of the organization such
as production,

marketing, human resource management etc.

Managers have to deal with various types of budgets
which depend on
d the nature of activity. Master budgets, materials and utilities
. budget,
revenue and expense budgets, capital expenditure budgets,
sales budgets,
production budgets, flexible/ variable budget, balance sheet
etc. are some 13
of the types of budgets normally found in organizations. Zero 5
based
Manageria project can be estimated. As a control activity, it can help
l
Processes-
in estimating the probability of meeting project deadlines
II to observe the deviations. The construction of the PERT
network requires detailed analysis and assessment of each
component in the total project. The various sequence of
activities needed to accomplish the stated goal have to be
worked out and appropriately timed so that the project can
be delivered on time.

PERT expresses the program as a network of events and

their inter-
relationships with each other. Each component of the
program has to be

analyzed and assessed so that the goal can be achieved.

Further, each
event and the activity has to be timed properly for PERT to
deliver

results. Figure-2 shows the events as A,B,C and D and

1,2,3 and 4 as
activities which take time to complete. All the activities are

interdependent and structured in a logical way. Each of the

activitiesFigure-2- Events and activities in a

have to be timed in such a way that no activity will start
without
PERT chart
completing the1 preceding Bactivity. B cannot 3 be started

without
completing A. Similarly, C cannot start without completing B.
This

applies to all Athe activities that are listed inDthe PERT. Time

estimates are
made for each activity as the most optimum results, most
likely results 2
4
and the most pessimistic C results, depending on the

estimates that are

made. Assessment and control is dependent on the events,
activities and

the time estimates that are arrived at, while planning for the
CPMsame.
refers to the Critical Path Method. The critical path is

simply the
longest path in terms of the amount of time the entire project
will take. If the

events on the critical path are delayed, then the entire project

will be delayed
along with the project delivery. Any path which is other than the
critical path

is known as the sub critical path , which is shown shorter

13 than the critical

path and the difference in time between the critical path and
the sub critical
6
path is known as the slack time and it provides the cushion for
abilities of subordinates, information control through IT, MIS and Controllin
g
other computer applications leading to effective control in the
current situations, personal observation which provides
observations on the performance and standards of performance.
Thus the control techniques involve the use of budgetary and
non-budgetary tools to use them as controlling devices.
7. SUMMARY
9
Control is a fundamental managerial function which measures
current performance and guides it towards some pre-determined
objectives. The essence of control is action where the managers
can spontaneously apply corrective action in case of deviations
from the plan. It can make planning effective and meaningful.
However the managers have to follow the control process while
discharging their function. An organization uses both budgetary
and non - budgetary control mechanisms, which help in
achieving the goals of the organization.
7.1 SELF-ASSESSMENT QUESTIONS
0
1 What is controlling as a function? What are the features of
. control? “Planning becomes worthless without control”.
2 Comment on the
3 importance of control in the light of this statement.
.
. Highlight the characteristics of a good control system?
4 Describe the basic elements of the control process with
examples?
.
5 What is PERT and CPM? Under what circumstances would
7.11 REFERENCES/ FURTHER READINGS
. you use the
1 techniques
R.C. asR.H.
Dorf and the best method?
Bishop, Modern Control Systems. New
. Jersey: Pearson Education, 11th Edition, 2008.
2 Certo, Samuel, C. Principles of Modern Management:
.
3 Functions and
Systems. William C. brown & Company, 1983.
.
4 Anthony, R.N., Dearden, J, & Bedford, N.M. Management
.
Control
5 Systems. Illinois: Richard D Irwin, 1984
.
Miller, Robert, W. How to Plan and control with PERT. Harvard
6 Business Review. March/April, 1962. Pp. 93-104.
.
K. Ogata, Modern Control Engineering. New Jersey:

Prentice Hall, 3rd

Edition, 1997.
13
Daniel Katz, The Social Psychology of Organizations. New
7
York: Wiley,
1929.