2. 2
Controlling
The process of evaluating and
regulating ongoing activities to
ensure that goals are achieved.
3. 3
The Nature of Control
The regulation of organizational activities so
that some targeted element of
performance remains within acceptable
limits.
Provides organizations with indications of how
well they are performing in relation to their
goals.
Provides a mechanism for adjusting
performance to keep organizations moving in
the right direction.
4. 4
Why To Control?
Managing people performance
Coping with uncertainty
Detecting Irregularities
Identifying opportunities
Handling complex situations
Delegation
Minimizing Costs
Basis for planning
5. 5
AREAS OF CONTROL
Physical resources—inventory management,
quality control, and equipment control.
Human resources—selection and placement,
training and development, performance appraisal,
and compensation.
Information resources—sales and marketing
forecasts, environmental analysis, public
relations, production scheduling, and economic
forecasting.
Financial resources—managing capital funds
and cash flow, collection and payment of debts.
8. Establish Objectives and 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
8
9. Cont.…
Standards generally are classified into two-:
• 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.
• 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 in tangible standards.
9
10. Measuring Actual Performance
Measurements must be accurate enough to spot
deviations or variances between what really
occurs and what is most desired.
Without measurement, effective control is not
possible.
10
11. Comparing Results with
Objectives and Standards
• 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 11
12. 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.
12
13. Cont…
Once the deviation is identified, a manager has to
think about various cause which has led to
deviation. The causes can be-
• Erroneous planning,
• Co-ordination loosens,
• Implementation of plans is defective, and
• Supervision and communication is ineffective,
etc.
13
14. Taking Corrective Action
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-
1. Taking corrective measures for deviations which have occurred;
2. 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.
14
16. Relationship between planning
and controlling
Planning and controlling are two separate
functions of management, yet they are closely
related.
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 16
17. Cont.
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.
18. 18
Levels of Control
Levels of Control
Strategic
control
Tactical
control
Operations
control
Figure 14.2
19. 19
Feedforward Control
The active anticipation and prevention of
problems, rather than passive reaction.
Concurrent Control
Monitoring and adjusting ongoing activities and
processes.
Feedback Control
Checking a completed activity and learning from
mistakes.
TYPES OF CONTROL
21. 21
Characteristics of Effective Control
Integration with Planning
the more control is linked to planning, the more
effective the control system.
Flexibility
the control system must be flexible enough to
accommodate change.
Accuracy
Inaccurate information results in bad decision making
and inappropriate managerial actions.
Timeliness
A control system should provide information as often
as necessary.
Objectivity
A control system must be free from bias
and distortion
23. 23
Levels of Control
Levels of Control
Financial
control
Budgetary and Quality
control
Inventory
control
Figure 14.2
24. 24
Financial Control
Financial Statements
A financial statement is a profile of some aspect of an organization’s
financial circumstances.
Balance sheet
A listing of assets (current and fixed), liabilities
(short- and long-term), and stockholders’ equity at a
specific point in time (typically year-ending) that
summarizes the financial condition of the
organization.
Income statement
Summary of financial performance—revenues less
25. 25
Financial Control (cont’d)
Ratio Analysis
The calculation of of one or more financial ratios to assess some
aspect of the organization’s financial health
Liquidity Ratio (e.g. Current Ratio –
current assets/current liabilities)
Activity Ratio (e.g. Inventory Turnover Ratio –
Cost of goods sold/Inventory)
Debt Management Ratio (e.g. Debt Ratio –
Total Liabilities / Total Assets)
Profitability Ratio (e.g. Net Profit Margin –
26. 26
Budgetary Control
Budgets may be established at any organizational level.
Budgets are typically for one year or less.
Budgets may be expressed in financial
terms, units of output, or
other quantifiable factors.
27. 27
Budgetary Control (cont’d)
Budgets serve four purposes:
Help managers coordinate resources and
projects.
Help define the established standards for
control.
Provide guidelines about the
organization’s resources
and expectations.
Enable the organization
to evaluate the
28. 28
Responsibility Centers
Standard Cost Centers
Production Unit
Discretionary Expense Centers
R&D
Revenue Centers
Sales Department
Profit Centers
Business Unit
Investment Centers
Project
29. 29
Strengths and Weaknesses of Budgeting
Strengths
Budgets facilitate effective
operational controls.
Budgets facilitate coordination
and communication between
departments.
Budgets establish records of
organizational performance,
which can enhance planning.
Weaknesses
Budgets can hamper
operations if applied too
rigidly.
Budgets can be time
consuming to develop.
Budgets can limit innovation
and change.
30. 30
Structural Control
Bureaucratic Control
A form of organizational control characterized by formal and
mechanistic structural arrangements.
Clan Control
An approach to organizational
control characterized by
informal and organic
structural arrangements.
