Chapter 8: Controlling

PLANNING & CONTROLLING:

Relationship between Planning and Controlling:

Meaning: -Planning is deciding in advance what is to be done in the future (setting standards). Controlling measures the actual performance against standards and take corrective action if there is any deviation. Relationship

1. Planning without controlling is meaningless and controlling is blind without planning: - Without a plan, there is no basis for controlling if the standards are not set in advance. Controlling measures the actual performance with standards and makes planning effective by taking corrective actions
2. Planning is a thinking process and controlling is evaluative: - explain the path to achieve the objectives and controlling checks that decisions have been translated into action or not
3. Both Planning and controlling are forward-looking: -.

• Plans are prepared for the future called a forward-looking function.
• Controlling examines past activities to find out deviations from the standard  is a backward-looking
• Planning gets feedback and becomes better through controlling, as controlling suggests corrective measures through modification of plans

Conclusion - Both planning and controlling are inter related and interdependent

CONCEPT & MEANING:

Controlling: - Controlling means that activities in an organization are performed as per the plans and if there is any difference then take immediate action.

IMPORTANCE OF CONTROLLING:

Importance of Controlling

1. Facilitating coordination in action:
   • Each department and employee performs a particular task.
   • Controlling coordinate the activities of various departments
2. Accomplishing organizational goals:
   • Controlling measures progress towards the organizational goals and bring the deviations, if any, and take corrective action and ensure objectives are achieved.
3. Accuracy of standards can be the judge
   • Work is performed as per predetermined standards and if there is any deviation immediate action is taken so that they do not occur again in the future.
4. Motivation of employee
   • Every employee knows in advance what they have to do.
   • Employees performing as per targets  are rewarded/promoted get motivation
5. Ensuring order and discipline:
   • Every employee is given targets and fixed work to maintain discipline.
   • They work as per rules and try to achieve the given targets within the fixed time

CONTROLLING PROCESS:

Process

1. Setting Performance Standards:

• Standards are set-to compare with the actual performance
• They can be set in both quantitative as well as qualitative terms. I
• Example:- producing 300 units in a month

2. Measurement of Actual Performance:

• Actual Performance is measured using controlling techniques like personal observation, sample checking, and ratio analysis.
• Example:- Actual production may comes:-  290,250,310,300 units,

3. Comparing Actual Performance with Standards:

• Comparison will tell the difference  between actual performance and standards
• If actual production is 290 unit and standards was 300 units (already fixed). Difference is = -10 units

4. Examine Deviations:

• Finding the extent of deviation and causes of deviations
• Deviations can be observed by using
  1. Critical path control: - focus should on deviation in important areas.
  2. Management by exception:- minor deviation should be avoided

5. Taking Corrective Action:

• When the deviations are minor no corrective action is required
• When differences are major immediate actions are required. For example
  • Training of employees
  • Adding more workers and machines
  • Increasing no of working hours

CPC & MBE

 (a) Critical Point Control

• Critical Point Control’ helps in controlling processes by focusing on key result areas which are critical to the success of an organization.
• The key result areas are set as critical points since it is neither economical nor easy to keep a check on each activity of the organization.

(b) Management by Exception

• Management by Exception helps in the controlling process by identifying only significant deviations which go beyond the permissible limit and bringing them to the notice of the management.
• It is based on the belief that any attempt to control everything results in controlling nothing

Advantages of Critical path control and Management by exception

1. Saves the time and efforts of managers as they deal with only major deviations.
2. Identifies critical problems which keep the organization right on track.
3. Management by exception promotes delegation of authority and increases the morale of the employees

Nature of Controlling/Features of Controlling

1. Controlling is a goal-oriented function: Controlling as a function of management ensures that the overall directions of individuals and groups are consistent with short and long-range plans of the organization. So it is completely a goal-oriented function.
2. Controlling is an all-pervasive function: Controlling is a function that applies to all types of organizations and at all levels. Top managers are concerned with administrative control, which is exercised through broad policies, plans and other directives. The middle-level managers are concerned with executive control to get the plans, policies, and programs executed. At the lower level, supervisors exercise operational control to ensure the successful performance of actual operations.
3. Controlling is a continuous function: Control is not a one-time activity. Rather, it is a dynamic process that involves constant analysis of actual and planned performance. The resultant deviations, if any, are correct as per the need of the situation.
4. Controlling is both a backward-looking as well as forward-looking function: Effective control is not possible without analyzing our past mistakes. So from this point of view, we can call it backward-looking. But the business environment is ever-changing and controlling helps bring in changes in the organization in a conducive manner. So we cannot ignore the forward-looking aspect of it as well.
5. Controlling is a dynamic process: Since controlling requires taking reviewable methods, changes have to be made wherever possible.
6. Controlling is a positive process.

• Controlling should never be viewed as being negative – as a hurdle in getting objectives won.
• Controlling is a managerial necessity and help, not an impediment or a hindrance.