MBA, Introduction to management, controlling

1. controlling
Course: MBA
Subject: Introduction to Management
Unit: III
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2. Topics
 The Control Function: Planning and Controlling
– Importance of Controlling – Levels of
Controlling, Control Process - Requirements for
Effective Controls.
 Control Techniques: Major Control Systems –
Financial Control: Financial Statements; Ratio
Analysis – Budgetary Control: Responsibility
Centers; Uses of Responsibility Centers – Quality
Control – Inventory Control.
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controlling
• Definition:
Acc. To Koontz: “Managerial control implies the
measurement of accomplishment against the standard and
the correction of deviations to assure attainment of
objective according to plans. “

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controlling
against
Measurement of
accomplishment
(performance)
Ex. 80 cards sold
Standard
Ex. 100 cards
Deviation (gap)
Ex. 20 cards
Corrective measures
Ex. -Giving proper
training
- Facilities of mobile
& petrol
- incentives
So that performance
can be achieved acc. To
plan
1

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2. Control process
1. Establishment of standards
2. Collecting data about actual performance
3. Comparing performance with standards
4. Taking corrective steps

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1. Establishment of standards / targets:
- Criteria to measure the performance
Ex. Selling / producing 1000 units
- Types:
(A) Physical standard:
- not expressed in financial terms
- to measure: materials consumed, labor hours, output of the factory
- quantity : production per man-hour, units produced in a day
- quality : hardness of steel, durability of cloth
(B) Cost Standard:
- expressed in monetary terms
- ex. Cost per unit of output, wages/ unit of output, expense / man hour

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(C) Revenue Standard:
- expressed in monetary terms but income side
- ex. Sales per unit of output, contribution of profit earned by an
employee
(D) Capital standard:
- expresses assets in money terms, concerned with balance sheet
- ex. Rate of return on capital invested, return on share holders’ funds,
ratios
(E) Intangible standards:
- not in physical or money terms
- morale/ motivation of the employees, honesty of the supervisor

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2. Collecting data about actual performance
- what is done?
- ways to find performance
(A) Personal observation:
- visit of the manager on the sight
- most suitable for intangible results i.e, morale of the employees , response of
buyers
- accuracy is absent
- delay in D.M.
- creates distrust in the empl.

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(B) Oral reports:
- orally taking info at the end of the day
- in the group meeting
- ex. Nu. Of units sold, nu. Of customers. visited
- increases relations with employees
- queries can be solved directly
(C) Written reports:
- detailed info.
- preserved for a record
- routine reports (monthly, weekly, daily) – special reports
- charts & table

10. 3. Comparing actual performance
- comparison of actual data of performance with the standard
- if its according to target – no problem
- if its not acc. to target
- finding the deviation (gap) if any
- ex. Actual performance is 200 laptops sold against target of
300 laptops – Deviation : 100 laptops
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11. Controlling incomplete without corrective steps
 If performance is not acc. to standard – corrective measures need to be taken
Corrective actions involve restructuring organizational set up, training to
employees or reassignment of duties
Should be with future reference
Cost – benefit analysis
Ex. If selling is less than standard :-- corrective steps may be:
- changing advertising copy
- training/ incentives to sales force
- increase frequency of adds.
- improve quality of product
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4. Taking corrective steps

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3. Control Techniques
- Ratio Analysis
- Budgetary control
- Zero Based Budgeting(ZBB)
- PERT - CPM

13. Ratio Analysis:
- Only financial statements (P&L acc., Balance sheet) are of little use for
investors, creditors etc.
- But its relationship provides useful hint for financial health and ability of
business to make profit
- “ Relation between two related items of financial statement is known as
Ratio”
- Ex. Banker used current ratio to know the capacity of repaying the loan
- Gross profit ratio, net profit ratio indicates the profitability
- Current ratio, liquid ratio shows the liquidity of the business
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14. (A) Types of Ratio:
1. Gross Profit Ratio:
Gross Profit 100
Sales
2. Expense Ratio:
Expenses 100
Sales
3. Current Ratio:
Current Assets 100
Current Liabilities
4. Debt- Equity Ratio:
Outside Liabilities 100
Shareholders’ funds
- Operation ratio, Net Profit Ratio, Stock Turnover Ratio, Quick Ratio etc..
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15. - Budgetary control :
- Budget: numerical statement expressing the plans , policies, and goals of
org for fix period in future.
- Budgetary control: acc. To G.Terry: “B.C. is a process of finding out what
is being done and comparing actual results with the prepared budget data
to find the difference and taking corrective steps”
- Types of Budget where B.C. is necessary:
- Operating Budget: sales budget, production budget, raw material budget,
labor budget, overhead budget
- Financial Budget: cash budget, capital budget, Projected balance sheet
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16. Control systems and techniques
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17. Managerial Levels and
Control Systems
Level of Management Type of Control
Top level management Financial control
Middle level
management
Budgetary control
Quality control
Lower level management Inventory control
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18. 1.Financial controls
 Balance sheet
 Ratio analysis
 Budget controls: Zero-Base Budgeting
2.Human Resource Controls
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19. 3.Marketing Controls
 Market research
 Test marketing
4.Quality Control
5.Inventory Control
•ABC analysis
•EOQ
•PERT/CPM
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20. Reference
1. https://lh4.ggpht.com/dpjWNEP-
MFaPQW0hg1wfJOxHa0H0U38h90cKUaIdqBGm9nRTuy
-Lxf33keqDBSYqLRsB7g=s115
2. https://lh5.ggpht.com/S0o_cwtxKxcz6afa-
dVPoEsI8W4oSoyNPnjD1AgfhUVLW__ZAvGGOnkB-
ey9TWoAdT4EsA=s131
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