1. Amity Business School
Topic : Principals of Control
Subject: Advanced Business Management
Name: Nitin Sachdeva
Enrolment No.: A0130321018
Batch: Ph. D. in Management (Part Time) (Jul 2021)
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Disclaimer: The purpose of this presentation is strictly educational
and should not be used for commercial purpose.
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1. Meaning of Control
‒ Control is a function of management which helps to
check errors in order to take corrective actions.
‒ It is the process that measures current performance and
guides it towards some predetermined objectives.
‒ Planning and controlling are closely related. In fact,
some writers on management think that these functions
cannot be separated. They may be viewed as the blades
of pair of scissors.
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Reference: MANAGEMENT by Heinz Weihrich
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2. Importance of Controlling
‒ Accomplishing organisational goals: The controlling
function measures progress towards the organizational
goals and brings to light the deviations.
‒ Judging accuracy of standards: A good control system
enables management to verify whether the standards set
are accurate and objective.
‒ Making efficient use of resources: By exercising control,
a manager seeks to reduce wastage and spoilage of
resources.
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Reference: NCERT
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2. Importance of Controlling
‒ Ensuring order and discipline: Controlling creates an
atmosphere of order and discipline in the organization. It
helps to minimize dishonest behavior on the part of the
employees by keeping a close check on their activities.
‒ Facilitating coordination in action: Controlling provides
direction to all activities and efforts for achieving
organizational goals. Each department and employee is
governed by predetermined standards which are well
coordinated with one another.
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Reference: NCERT
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3. Basic Control Processes
‒ Basic steps for controlling the processes involves 3
steps:
1) Establishing Standards
2) Measuring Performance against established standards
3) Correcting variation from standards and plans
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Reference: MANAGEMENT by Heinz Weihrich
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3.1 Establishing Standards
‒ The first step in the controlling process is setting up of
performance standards. Standards are the criteria
against which actual performance would be measured.
Thus, standards serve as benchmarks towards which an
organization strives to work.
‒ Benchmarking is a concept that is now widely accepted.
It is an approach for setting for setting goals and
productivity measures based on best industry practices.
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3.2 Measuring Performance
Measurement of performance is not always practicable, the
measurement of performance against standards should
ideally be done on a forward looking basis so that
deviations may be detected in advance of their occurrence
and avoided by appropriate actions.
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3.3 Correction of Deviations
Correction of deviations is the point at which control can be
seen as a part of the whole system of management and
can he related to the other managerial functions.
Managers may correct deviations by
- Redrawing their plans
- Modifying their goals
- Through reassigning of Duties
- Through clarifying of duties or the job
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4. Control Tools
‒ Manangement Audits & MIS
‒ Balance Scorecard
‒ Financial Controls (Budgets, Ratio Analysis)
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4.1 MANAGEMENT AUDIT & MIS
‒ Management audit refers to systematic appraisal of the
overall performance of the management of an
organization. The purpose is to review the efficiency and
effectiveness of management and to improve its
performance in future periods. It is helpful in identifying
the deficiencies in the performance of management
functions.
‒ Management Information System (MIS) is a computer
based information system that provides real-time
information and support in effective managerial decision-
making.
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4.2 Balance Scorecard
Factors used to develop scorecard goals and measures :
‒ Financial performance
‒ Customer Satisfaction
‒ Internal process improvement
‒ Innovation and learning
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Reference: John Wiley & Sons, 2013
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4.3 Financial Controls – Budgets
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Reference: Management Principles
Budget manages firm’s costs and expenses to control them
in relation to budgeted amounts.
Thus, management determines which aspects of its
financial condition, such as assets, sales, or profitability,
are most important, tries to forecast them through budgets,
and then compares actual performance to budgeted
performance. At a strategic level, total sales and indicators
of profitability would be relevant strategic controls.
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4.3 Financial Controls – Ratio Analysis
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Reference: John Wiley & Sons, 2013
Ratio Analysis – Profit Ratios, Stock turnover, Current Ratio, Debt Cycle etc.
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5. Limitations
‒ Difficulty in setting quantitative standards : Control system loses
some of its effectiveness when standards cannot be defined in
quantitative terms.
‒ Little control on external factors: Generally an enterprise cannot
control external factors such as government policies, technological
changes, competition etc.
‒ Resistance from employees: Control is often resisted by employees.
They see it as a restriction on their freedom.
‒ Costly affair: Control is a costly affair as it involves a lot of
expenditure, time and effort. A small enterprise cannot afford to
install an expensive control system.
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Reference: NCERT