1. Introduction
Control is an essential function of management in every organization. The management process is incomplete and sometimes useless without the control function. The control function is concerned with ensuring that the planning, organizing, staffing and directing functions result in the attainment of organizational objectives. In other words, control is a tool that helps organizations measure and compare their actual progress with their established plan. Context, ‘control’ refers to the evaluation of performance and the implementation the term ‘control’ has different meanings in different contexts. In the management it refers to corrective actions to accomplish organizational objectives.
Meaning
• A process of monitoring performance and taking action to ensure desired results.
• It sees to it that the right things happen, in the right ways, and at the right time.
• It helps ensure that objectives and accomplishments are consistent with one another throughout an organization.
• It refers to bring the actual results closer to the desired results.
• Causes of deviations are found out and corrective action is taken so that in future the mistakes are not repeated
2. DEFINITIONS OF CONTROLLING
Henry Fayol :-“Control of an undertaking consists of seeing that everything is being carried out in accordance with the plan which has been adopted, the orders which have been given, and the principles which have been laid down. Its object is to point out mistakes in order that they may be rectified and prevented from recurring.”
EFL Breach:-
“Control is checking current performance against pre-determined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance.”
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.”
3. CHARACTERISTICS OF CONTROLLING
Control is an essential function of management in every organization. The management process is incomplete and sometimes useless without the control function. The management process includes planning, organizing, staffing, leading, and controlling. Planning sets forth the objectives a manager intends to achieve. Organizing provides the structure of an organization by determining how and where the employees will be placed in the organization and the responsibilities that they will need to fulfill to attain predefined objectives. Staffing involves the managerial function of placing the right person in the right job in the organization. Leading involves the managerial function of influencing, motivating and directing the human resources of the organization to achieve organizational goals. The control function is concerned with ensuring that the planning, organizing, staffing and leading functions result in the attainment of organizational objectives. In other words, control is a tool that helps organizations measure and compare their actual progress with their established plan.
• Controlling is related to results
Controlling is all about assessing progress on the basis of results and corrective actions after finding out deviations.
• Controlling is a continuous activity
The control process is cyclical which means it is never finished. Controlling leads to identification of new problems that in turn need to be addressed through establishment of performance standards, measuring performance etc. it is a process of regular measurement, comparison and verification.
• Controlling has both positive and negative approach
Positive approach of control aims at making an effective use of all available resources in the enterprise and while the negative approach aims at preventing the misuse of resources.
• Controlling is both beginning and end of the process of management
The process of management commences with the planning and ends with controlling. To have control, standards are necessary which are laid down in planning. In this way the beginning of managerial process starts in the form of planning which are also first step of controlling process. On the other hand, to attain the standards already determined comes under controlling which is last step of managerial process.
4. IMPORTANCE OF CONTROLLING
• Accomplishing organizational goals-controlling process is implemented to take care of the plans. Therefore the difference between the expected results and the actual results is reduced to the minimum.
• Judging accuracy of standards-in controlling a manager compares the actual work with the standards. He tries to find out whether the laid down standards are not more or less than the general standards. in case of need they are redefined.
• Ensuring order and discipline-controlling ensures order and discipline. With its implementation, all the undesirable activities like theft, corruption, delay in work and uncooperative attitude are checked.
• Improving employee motivation-an effective controlling system states the standards of performance in clear and definite way. It helps employees to know what is expected of them and perform accordingly. Controlling identifies efficient and inefficient workers through appraisal of their performance.
• Making efficient use of resources-controlling ensures that work is performed in conformity with established standards in terms of quantity, quality, time and cost. It secures the best possible use of human and material resources by minimizing wastage and loss.
• It helps in better planning- planning and controlling are closely interrelated. The real test of planning is controlling. Control reveals deficiencies and deviations and suggests corrective action for prevention.
• It helps in coordination- controlling facilitates the work of coordination by keeping all activities and efforts directed towards the achievement of goals in conformity with planned standards.
5. LIMITATIONS OF CONTROLLING
• Difficulty in setting quantitative standards-in some cases, it is difficult to set the standards against which performance can be measured. Setting of standards for work which is qualitative in nature in difficult, therefore for their measurement the help of some indirect standard is taken. For example, the work of measuring the high morale of employee is qualitative in nature so it can not be measured in direct manner.
• Controlling can only be for internal factors- a manager can control only internal factors through controlling like manpower, material, machine etc .but it is impossible to control external factors like government policies, technical changes and competition. Therefore a situation of absolute control can not be established.
• Resistance from employees-absolute control over human factor is very difficult to obtain. They see it as a restriction on their freedom and generally do not support it.
• Costly affair- in order to implement the controlling process a lot of money, time and efforts are required. Small organizations cannot bear such expenditure.
6. CONTROLLING PROCESS
Controlling as a management function involves following steps:
1. Establishment of standards- Standards are the plans or the targets which have to be achieved in the course of business function. They can also be called as the criterions for judging the performance. Standards generally are classified into two-
a. Measurable or tangible – Those standards which can be measured and expressed are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc.
b. Non-measurable or intangible- There are standards which cannot be measured monetarily. For example- performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible standards.
Controlling becomes easy through establishment of these standards because controlling is exercised on the basis of these standards.
2. Measurement of performance- The second major step in controlling is to measure the performance. Finding out deviations becomes easy through measuring the actual performance. Performance levels are sometimes easy to measure and sometimes difficult. Measurement of tangible standards is easy as it can be expressed in units, cost, money terms, etc. Quantitative measurement becomes difficult when performance of manager has to be measured. Performance of a manager cannot be measured in quantities. It can be measured only by-
a. Attitude of the workers,
b. Their morale to work,
c. The development in the attitudes regarding the physical environment, and
d. Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.
3. Comparison of actual and standard performance- Comparison of actual performance with the planned targets is very important. Deviation can be defined as the gap between actual performance and the planned targets. The manager has to find out two things here- extent of deviation and cause of deviation. Extent of deviation means that the manager has to find out whether the deviation is positive or negative or whether the actual performance is in conformity with the planned performance. The managers have to exercise control by exception. He has to find out those deviations which are critical and important for business. Minor deviations have to be ignored. Major deviations like replacement of machinery, appointment of workers, quality of raw material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a manager controls everything, he ends up controlling nothing.” For example, if stationery charges increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand, if monthly production decreases continuously, it is called as major deviation.
Once the deviation is identified, a manager has to think about various cause which has led to deviation. The causes can be-
a. Erroneous planning,
b. Co-ordination loosens,
c. Implementation of plans is defective, and
d. Supervision and communication is ineffective, etc.
4. Taking remedial actions- Once the causes and extent of deviations are known, the manager has to detect those errors and take remedial measures for it. There are two alternatives here-
a. Taking corrective measures for deviations which have occurred; and
b. After taking the corrective measures, if the actual performance is not in conformity with plans, the manager can revise the targets. It is here the controlling process comes to an end. Follow up is an important step because it is only through taking corrective measures, a manager can exercise controlling.
Points to remember
• When comparison of actual performance is done with the planned one.
• Deviations can be of two types-(i) negative deviations (ii) positive deviations.
• In the controlling process, it is important to know the causes of negative deviations but it is not less important to know the causes of positive deviations. Positive deviations mean the actual performance is more than the standard. This situation tells that the standards were not set as per the real efficiency.
Analyzing deviations includes the answers to following questions-
• Is standard being attained?
• Is deviation acceptable?(minor deviations can be ignored)
• Is standard acceptable?( means if standard is found wrong then there is need to revise standard)
At the time of analyzing deviations one can come across two type of deviations one are of those which need to be attended urgently and there are others which are minor one. These two categories of deviations may be controlled by following ways-
1. Critical point control-it means those points and activities should be determined which have an important role to play in ensuring the actual work progress in accordance with plans. here we keep focus on some key areas(KRAs). It means that the managers should not be involved in small insignificant activities but should pay more attention to those activities where unfavorable results can cause heavy loss.
2. Management by exception-”if you try to control everything, you may end up by controlling nothing.” This is the basic idea behind this principal is that it says- the focus should be on more important exceptions. Here important exceptions mean the especially good or especially bad deviations. Manager should not waste energy and time on minute or minor deviations rather he should concentrate on removing deviation of high degree.
Advantages of MBE (Management by Exception) –
• By taking care of important deviations both time and efforts are saved.
• The managers remain focused on important areas.
• By delegating authority to handle less important problems to the subordinates helps in raising their morale.
• By locating important problems quickly, possible loss can be avoided.
In the process of controlling one more thing is very important that is factors to be considered while taking corrective actions. These are the following tips-
• Corrective action should be taken only after a careful inquiry into the causes of deviations.
• If the wrong standards had been determined, they should be modified.
• Corrective actions should be of such type which is liked by the people who are actually engaged in work performance.
• Action should be immediately taken so that loss can be avoided in future.
7. RELATIONSHIP BETWEEN PLANNING AND CONTROLLING
Planning and controlling are two separate functions of management, yet they are closely related. The scope of activities if both is overlapping to each other. Without the basis of planning, controlling activities becomes baseless and without controlling, planning becomes a meaningless exercise. In absence of controlling, no purpose can be served by. Therefore, planning and controlling reinforce each other.
According to Billy Goetz,
Relationship between the two can be summarized in the following points.
• Planning precedes controlling and controlling succeeds planning.
• Planning and controlling are inseparable functions of management.
• Activities are put on rails by planning and they are kept at right place through controlling.
• The process of planning and controlling works on Systems Approach which is as follows :
• Planning → Results → Corrective Action
• Planning and controlling are integral parts of an organization as both are important for smooth running of an enterprise.
• Planning and controlling reinforce each other. Each drives the other function of management.
In the present dynamic environment which affects the organization, the strong relationship between the two is very critical and important. In the present day environment, it is quite likely that planning fails due to some unforeseen events. There controlling comes to the rescue. Once controlling is done effectively, it gives us stimulus to make better plans. Therefore planning and controlling are inseparable functions of a business enterprise.
8. Techniques of controlling
9. BUDGETARY CONTROL
Budgetary control is a system of management control in which all operations are forecasted and planned ahead in the forms of budgets and the actual results are compared with the forecasted and planned ones so that necessary actions can be taken to achieve the organizational objectives.
• Budgets are used to compare actual results with planned objectives.
• Budgets are useful in controlling operations.
• Budgets are quantitative objectives set by different departments.
• Advantages of Budgetary control, it focuses on standards or objectives.
• Budgets help subordinates to compare their performance with budgetary standards.
• Budgets help to improve coordination between various departments.
• Helps to use the principle of management by exception.
• Resources can be allocated to departments as per budgetary allocation.
10. Definitions of budgetary control
George R. Terry:-
“Budgetary control is a process of comparing the actual results with the corresponding budget data in order to approve accomplishments or to remedy differences by either adjusting the budget estimates or correcting the cause of differences.”
W.W.Bigg:-
“The term budgetary control is applied to a system of management and accounting control by which all operation and output are forecast as far ahead as possible and actual results, when known, are compared with the budget estimates.”
11. Characteristics of budgetary control
• Comparative study
Under it figures or estimates are compared with the actual work progress.
• Analysis of deviations-
Deviations are sorted out and studied deeply and causes of deviations are discovered.
• Based on forecasts
• The budgets are prepared on the basis of forecasting.
• Corrective actions
Causes of deviations are discovered and remedial actions are suggested. it does not control the activities directly but it points out where corrective action is needed and what type of corrective action should be taken.
• Budgets are for all department
They can be made for all the departments and not restricted to any particular one.
12. Advantages of budgetary control
• Helpful in attaining objectives: budgets are prepared for all the departments and they are based on plans and expectations from all the departments. The department managers put their best efforts to achieve the targets decided in budgets.
• Source of motivation in employees: employees can be motivated by comparing their actual performance with expected one.
• Optimum utilization of resources: budgetary control divides the resources among all the departments in an appropriate manner. This makes it possible the optimum utilization of the available resources in the organization.
• Facilitates management by exception: management by exceptions means bringing only the important deviations to the notice of the higher rank managers. Budgetary control makes every deviation-big or small noticeable. Small deviations remain confined to the subordinates and a report about the big deviations is sent to higher authorities.
13. Disadvantages of budgetary control
• Danger of rigidity
Generally it has been observed that budgets lack flexibility. Because of this reason it is not possible to induce changes.
• Human limitations
The cooperation of all the employees working in the organization is essential for the success of budgetary control. However, it is not possible to have the cooperation of all the employees.
• Expensive method
In order to make this system successful, more money, time and efforts are needed. Sometimes its costs overweigh the profits expected out of it.
• Danger of inaccurate estimates:
Budgets are based on certain forecasts and forecasts are never free from the danger. The success of budgetary control depends on the success of forecast.
14. Other techniques of controlling
• Return on investment
• Break even analysis
• Personal observation
• Responsibility accounting
• Management audit
• management information system
• statistical reports
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