Chapter: 8

What Are Controlling ?

Controlling involves comparison of actual performance with the planned performance.

Importance of Controlling

  • Accomplishing organisational goals
  • Judging accuracy of standards
  • Making efficient use of resources
  • Improving employee motivation
  • Ensuring order and discipline
  • Facilitating coordination in action

Limitations of Controlling

  • Difficulty in setting quantitative standards
  • Little control on external factors
  • Resistance from employees
  • Costly Affair

Relationship Between Planning And Controlling

Planning and controlling are two sides of coin. Planning is clearly a prerequisite for controlling. Controlling cannot be accomplished without planning.

Controlling Process

Setting Performance Standards

The Standards are being set against which actual performance would be measured.

Measurement of Actual Performance

After defining the standards, the actual performance is measured.

Comparing Actual Performance with Standards

After measuring actual performance, the actual performance is compared with the standard performance The comparison will reveal the deviation between actual and desired results.

Analyzing Deviation

Some deviation in performance is being expected in all activities while comparing actual with standard performance.

  • Critical Point Control

Control should focus on key result areas (KRAs) which are critical to the success of an organisation. These KRAs are set as the critical points.

  • Management by Exception

It is also called control by exception. According to this, only significant deviations which go beyond the permissible limit should be brought to the notice of anagement.

Taking Corrective Action

When the deviations are within acceptable limits, in that case no corrective action is required. If, the deviations go beyond the acceptable range, especially in the important areas, it demands immediate managerial attention.

Techniques Of Managerial Control

Traditional Techniques

Those techniques which have been used by the companies for a long time now. Traditional techniques includes:

• Personal observation

• Statistical reports

• Breakeven analysis

• Budgetary control

Modern Techniques

Those techniques which are of recent origin and are comparatively new in management. It includes:

• Return on investment

• Ratio analysis

• Responsibility accounting

• Management audit

• PERT and CPM

• Management information system