The document discusses the controlling function in management, emphasizing the importance of comparing actual performance to set standards and taking corrective actions. It outlines various traditional and modern techniques of control, including budgetary control, responsibility accounting, management audits, and the use of technology for real-time monitoring and analysis. Additionally, it addresses challenges posed by IT as a control tool, such as cybersecurity threats, data privacy concerns, and the need for effective change management.

1. CONTROLLING
Presented By:
Parth Gupta
UNIT-6

2. Chiaki Sato
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Control is a primary goal-oriented
function of management in an
organization. It is a process of
comparing the actual performance
with the set standards of the
company to ensure that activities are
performed according to the plans and
if not then taking corrective action.
CONTROLLING
Teddy Yu
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Reese Miller
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Estelle Darcy
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3. Establishing standards: This means setting up of the target which needs to be achieved to meet
organisational goals eventually. Standards indicate the criteria of performance.Control standards are
categorized as quantitative and qualitative standards. Quantitative standards are expressed in terms of
money. Qualitative standards, on the other hand, includes intangible items.
Measurement of actual performance: The actual performance of the employee is measured against the
target. With the increasing levels of management, the measurement of performance becomes difficult.
Comparison of actual performance with the standard: This compares the degree of difference between the
actual performance and the standard.
Taking corrective actions: It is initiated by the manager who corrects any defects in actual performance.
PROCESS
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4. Techniques of Controlling
Controlling techniques are methods that help managers to regulate the activities and functions of an organisation. It
provides managers with the information for comparing the actual performance against the set standards expected
from the different operations of units or departments. Organisations make use of regular standard methods of
financial, budgetary and project reports for getting regular and consistent information.
Every domain within the organisation has its own techniques of controlling, which help superiors to regulate the
functions of units. The controlling technique enables managers to collect the information, which will be used to
check the performance.
According to Donnell, “Just as a navigator continually takes reading to ensure whether he is relative to a planned
action, so should a business manager continually take reading to assure himself that his enterprise is on the right
course.”
The manager of the organisation should be aware of the different controlling techniques and the situation for which
they must be used. The main reason for using the method of controlling is to ascertain if the activities are being
carried out according to the plans.
Hence, the manager must determine the required standards for taking corrective actions. There are many methods
of controlling that can be put under two categories.
Let us understand the traditional and modern techniques of controlling in detail.
Traditional Techniques
Modern Techniques
C O N T R O L L I N G T E C H N I Q U E S

5. Personal observation
The method of personal observation and guidance is one of the oldest techniques of controlling. It is a
traditional technique in which supervisors review the work of employees. In this way, supervisors are in
direct contact with employees and have first-hand knowledge of the ways of working. For in- stance, Ritvik is
being monitored by his supervisor while he works on ‘Aluminium Foil Container Making Machine’ so as to
prevent wastage and guide him immediately if he commits any mistake.
In case of any problems, supervisors or managers are in a position to solve them and find solutions.
Employees also remain cautious of their performance as they are being monitored and observed by the
supervisor or manager. This type of control is more common in smaller business organisations.
Statistical reports
The statistical method is used to make a total analysis of the data and reports that are measured using
averages, ratio, percentages, mean, median, and more. For instance, sales managers collect data of previous
five years sales and analyse it to know the sales trend and accordingly put efforts to control if a downward
trend is seen.
It helps in providing useful and quantifiable information for the managers regarding the performance of the
organisation. Managers collect all the data and analyse it before finding the results. The data and
information mentioned in statistical reports help managers to understand the problems and find out the
appropriate solutions to handle them.
T r a d i t i o n a l T e c h n i q u e s

6. Break Even/Profit & Loss Control analysis
The break-even analysis acts as a controlling method used for measuring the performance of an
organisation. It is a situation of no profit no loss. The break-even analysis is in the form of sale output,
production volume, the price of products, and it is also used to define the profit and loss according to the
selling price, the volume of goods, and different ratios. It also measures the performance and the impact on
the revenues.
In other words, the break-even analysis establishes a relationship between the volume and cost of producing
and selling goods. For instance, an automobile organisation entered into the manufacturing of electric
vehicles.
In order to fix the minimum number of vehicles to sell every year to be profitable, the break-even analysis is
done to know the no profit and no loss situation as this acts as a guide in fixing the vehicles to be sold every
year. In case of sales less than the expected numbers, corrective measures would be taken as per the control
mechanism.
T r a d i t i o n a l T e c h n i q u e s

7. Budgetary control
Budgetary control is an important technique used by managers for controlling the different functions and
operations that are performed according to the set budget for a particular plan. It is an important method of
controlling that helps an organisation to decide the level of spending and evaluating revenues.
For instance, material budget made by the production department is also helpful in keeping a track of misuse
or wastage of materials during production process. The manager needs to plan the budget to avoid
unnecessary spending. If the expenditure is more than the sanctioned budget, then employees as well as
managers are answerable to the management and this helps in controlling the expenditure of different
departments.
Budget injects a sense of clarity, direction, and purpose in the activities of various operating units within the
organisation. Budget control is used by the supervisor to keep a check and control expenditure. It is the
technique of controlling the finances for keeping the costs under control.
T r a d i t i o n a l T e c h n i q u e s

8. Return on Investment (ROI)
ROI is an important technique used for controlling. This technique enables an organisation to evaluate the
benefit received from the investment, and measure the total profits made against the capital that is invested.
If there is a high ROI, then the financial performance of an organisation is considered to be good.
ROI is an effective way to measure the performance and the financial position of an organisation. It is a
method of comparing the performance of the present year with that of the past years. For instance,
departmental ROIs are also calculated to measure and compare the performance of different departments
and accordingly take the control measures.
Ratio analysis
The technique of ratio analysis gives a total understanding of the organisation’s performance, efficiency,
liquidity, and profits. It is the most common form of controlling technique used by enterprises.
For instance, the various turnover ratios like debtors turnover ratio, inventory turnover ratio, fixed assets
turnover ratio etc. are helpful in knowing whether the resources are effectively used in operations of a
business or not. A higher turnover indicates better utilisation of resources. In case of low turnover ratio
proper control measure are taken to have better utilisation of available resources.
M o d e r n T e c h n i q u e s

9. Responsibility accounting
Responsibility accounting is a system of accounting in which the different units of an organisation are
converted into responsibility centers. For instance, the production department of an organisation may be
classified as the cost centre to keep control on the cost incurred during production process.
A production budget acts as a guide in knowing whether the costs are under control or not. Each unit is
responsible for controlling the areas assigned to it. A responsibility centre can be a division, department, or
section headed by a manager who is accountable for achieving specified targets.
The idea of creating different units is to increase the level of profits in terms of ROI and reduce the cost
involved in production. There are separate budgets made for each unit. If the expenditure of each unit is less
than the budgeted cost, then the unit is doing well.
The procedure of responsibility accounting involves:
•Setting responsibility units or centres keeping in mind the overall objective of the organisation
•Measuring actual performance by using systematic accounting
•Comparing, calculating, and analysing inconsistencies •
•Reporting inconsistencies to the higher level of management
M o d e r n T e c h n i q u e s

10. Management audit
Management audit refers to the technique in which a comprehensive and constructive review of the overall
all performance of the organisation is done. Under management audit, managers undertake a systematic
checking of the effectiveness and efficiency of the management.
Auditors investigate the in-depth performance of management concerning the day-to-day working of
systems and functions. In management audit, the auditor systematically evaluates the operational
procedures and various management functions. Auditors do thorough checking of the entire management
system.
For instance, an organisation carries an internal audit of the purchase department at the end of every month
to keep a check on timely availability of material for production process and proper utilisation of the
materials purchased.
PERT & CPM
Program Evaluation and Review Technique (PERT) and Critical Path Method (CPM) are significant techniques
used for controlling. CPM and PERT methods are used to minimize the cost and time for particular activities.
It helps in taking necessary actions for completing the activities within the specified time.
For instance, construction projects, aircraft manufacturing, and shipbuilding. etc., use PERT & CPM
techniques to compute the total expected time needed to complete a project and to identify the bottleneck
activities also that may have a perilous effect on the project completion date.
M o d e r n T e c h n i q u e s

11. Human
Aspects
of Control
Some balance is needed between individual discretion and
formalized measures of performance. The greater the
professional competence of the manager or staff involved, the
more decentralized the decision-making process can be.
Therefore, different types of controls are needed at different
levels of the organization. Board members and managers must
communicate, discuss and attain a high level of commitment to
the goals and objectives of the organization. The greater the level
of their personal commitment, the higher the organization’s
performance tends to be. Second, the purposes of control need
to be known by all. It must be emphasized that performance is
being monitored to assist in attaining goals, not to place blame.
Finally, employees must feel that the manager is honestly seeking
their input and that the organization is committed to helping
them reach their best capabilities.

12. Control as Feedback
System
In this latter sense, all these types of control function as a feedback mechanism
to help leaders and managers make adjustments in the strategy, as perhaps is
reflected by changes in the planning, organizing, and leading components.

13. Control as Feedback
System
Why might it be helpful for you to think of controls as part
of a feedback loop in the P-O-L-C process? Well, if you are
the entrepreneur who is writing the business plan for a
completely new business, then you would likely start with
the planning component and work your way to
controlling—that is, spell out how you are going to tell
whether the new venture is on track. However, more
often, you will be stepping into an organization that is
already operating, and this means that a plan is already in
place. With the plan in place, it may be then up to you to
figure out the organizing, leading, or control challenges
facing the organization.

14. Feed-forward control
It is the type of control exercised before the work is
done. This control is implemented by managers
while creating organisational policies, rules and
procedures. The aim behind implementing the feed-
forward control is to avoid rigid behaviour of
employees towards the organisation’s policies and
rules.
For instance, when a sales manager, who receives
the monthly sales figures showing the actual sales
results, compares the actual results with the
expected results and tries to discover the cause of
deviation, then the sales manager is said to be
virtually working with a feed-forward control.

15. Preventive control
A preventive control (also commonly referred to as a “preventative control”) is a
control that is put into place and intended to avoid an incident from occurring.
The point of preventive control is to stop any trouble before it starts. A preventive
control attempts to block any unauthorized attempts to change a system before it
happens, and therefore, prevention, in theory, means that an attack will fail. As an
example, if a bad actor attempts to break into a host online, but that host is not
connected to the Internet, then the attack has been prevented. Typically,
preventive controls involve implementation of mechanisms that users cannot
override. These are mechanisms that are expected to be implemented in a correct,
unalterable way, and this prevents a bad actor from defeating the mechanism by
changing it.
Preventive controls and mechanisms are often process-oriented and increase the
time for carrying out certain system activities. At times, preventive controls may
interfere with system use, to the point that they hinder normal use of the system.
In these such cases, determination by Company management regarding whether
preventive controls are the best control functionality option that should be
implemented should be considered.

16. Use of Computer for Controlling and
Decision making
Data Collection and Analysis: Computers are used to collect vast amounts of data from
various sources within and outside the organization. Advanced analytical tools and
algorithms then process this data to extract valuable insights, such as consumer trends,
market demand, and operational performance.
Forecasting and Planning: With the help of sophisticated modeling techniques and
algorithms, computers aid in forecasting future trends and scenarios based on historical
data and current market conditions. This enables businesses to make informed
decisions regarding resource allocation, production planning, and inventory
management.
Real-time Monitoring and Control: Computers are employed to monitor key
performance indicators (KPIs) and operational metrics in real-time. Automated systems
can detect deviations from desired targets and trigger alerts or corrective actions to
maintain optimal performance levels.
Optimization and Simulation: Computers facilitate optimization processes by
simulating different scenarios and evaluating the potential outcomes. This allows
businesses to optimize various aspects of their operations, such as supply chain
logistics, production scheduling, and pricing strategies, to maximize efficiency and
profitability.

17. Use of Computer for Controlling and
Decision making
Decision Support Systems (DSS): Decision support systems are computer-based tools that assist
managers in making semi-structured or unstructured decisions. These systems provide analytical
capabilities, data visualization tools, and scenario analysis features to help managers evaluate
alternatives and make well-informed decisions.
Artificial Intelligence (AI) and Machine Learning (ML): AI and ML technologies enable computers to
learn from data patterns and make predictions or recommendations without explicit programming.
These technologies are increasingly being utilized in decision-making processes, ranging from
customer segmentation and personalized marketing to predictive maintenance and risk assessment.
Communication and Collaboration: Computers facilitate communication and collaboration among
decision-makers within an organization. Collaboration platforms, project management tools, and
video conferencing software enable teams to share information, discuss strategies, and collectively
make decisions regardless of geographical locations.
Security and Risk Management: Computers play a crucial role in managing security risks by
implementing robust cybersecurity measures, monitoring network activities for suspicious behavior,
and detecting potential threats in real-time. Advanced encryption techniques and access control
mechanisms help protect sensitive data from unauthorized access or breaches.
Feedback and Continuous Improvement: Computers enable businesses to gather feedback from
various stakeholders, including customers, employees, and suppliers, to assess the effectiveness of
decisions and identify areas for improvement. This feedback loop facilitates continuous learning and
adaptation to changing market dynamics.

18. Challenges created by IT as a Control Tool
Cybersecurity Threats: One of the most significant challenges is the constant threat of cyberattacks,
including malware, phishing, ransomware, and data breaches. Protecting sensitive information and
systems from unauthorized access and exploitation requires robust cybersecurity measures and
ongoing vigilance.
Data Privacy Concerns: With the proliferation of data collection and storage capabilities,
organizations face increasing scrutiny regarding data privacy and compliance with regulations such
as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
Safeguarding customer and employee data while ensuring compliance with regulatory requirements
is a complex and ongoing challenge.
Integration Complexity: As organizations adopt a variety of IT systems and applications to support
different functions, integrating these systems to ensure seamless data flow and interoperability
becomes a challenge. Legacy systems may be incompatible with newer technologies, leading to
integration complexities and potential data silos.
Dependency on Technology: Organizations become increasingly reliant on technology for critical
business operations, making them vulnerable to disruptions caused by system failures, cyberattacks,
or technical glitches. Maintaining robust backup and recovery mechanisms is essential to mitigate
the risk of downtime and data loss.
Skills Gap and Talent Shortage: The rapid pace of technological advancement often outpaces the
availability of skilled IT professionals capable of managing complex systems and addressing
emerging cybersecurity threats. Recruiting and retaining qualified personnel with expertise in areas
such as cybersecurity, data analytics, and cloud computing pose significant challenges for

19. Challenges created by IT as a Control Tool
Costs and ROI: Implementing and maintaining IT control tools and infrastructure can incur
significant costs, including upfront investments in hardware, software, and personnel, as well as
ongoing expenses for maintenance, upgrades, and cybersecurity measures. Ensuring that the
benefits derived from IT investments justify the associated costs requires careful planning and
evaluation.
Change Management: Introducing new IT control tools and processes often requires organizational
change, including updating policies and procedures, providing training to employees, and addressing
resistance to change. Effective change management strategies are essential to minimize disruption
and ensure successful implementation.
Data Overload and Information Overload: While IT enables organizations to collect vast amounts of
data, managing and interpreting this data effectively can be challenging. Organizations must invest
in analytics capabilities and decision support systems to derive actionable insights from data and
avoid information overload.
Ethical and Social Implications: The use of IT control tools raises ethical and social concerns, such as
the potential for algorithmic bias, privacy infringements, and the impact of automation on jobs and
society. Organizations must consider the ethical implications of their IT initiatives and adopt
responsible practices to mitigate risks and promote trust among stakeholders.