Controlling

Meaning
Controlling involves comparison of actual performance with the planned performance. If there is
any difference or deviation, then finding the reasons for such difference and taking corrective
measures or action to stop those reasons so that they don‘t re-occur in future and that
organizational objectives are fulfilled efficiently.

Definition
According to Koontz and O‟ Donnell, “Managerial control implies the measurement of accomplishment
against the standard and the correction of deviations to assure attainment of objectives
according to plans.”

Nature/ Features: Importance:

Goal oriented Accomplishment of organizational goals
Pervasive Judging accuracy of standards
Continuous Making efficient use of resources
Forward looking Improving employee motivation
Involves looking back Ensuring order and discipline
Facilitating coordination in action
Extra points:
Action oriented*
Primary function- performed at all level*
Brings back management cycle back to planning*

Limitations of Controlling:
a. Difficulty in setting quantitative standards
b. Little control on external factors
c. Resistance from employees
d. Costly affair

Steps In The Process Of Control:

a. Setting performance standards

b. Measurement of actual performance
c. Comparing actual performance with standards
d. Analyzing deviations
 Critical point control
 Management by exception
e. Taking corrective action
 Features of Controlling

1. Goal oriented: Controlling is directed towards accomplishment of organizational goals in

the best possible manner.
2. Pervasive: Controlling is an essential function of every manager and exercised at all levels
of management.
3. Continuous: It is not an activity to be pursued in the end only; it has to be done on a
continous basis.
4. Controlling is looking back: Controlling involves measurement of actual performance
and its comparison with the desired performance. It is the process of checking and
verification.
5. Controlling is forward looking: It is related to future because it seeks to improve future
results on the basis of experience gained in the past.
6. Depends on planning: It pre supposes existence of planning because without planning no
control is possible.
7. Action oriented*: Control has no meaning if no corrective action is taken; So timely
action should be taken to prevent deviations.
8. Primary Function of Management* – controlling is performed at all levels and in all types
of organizations.
9. Brings back management cycle back to planning:* Control should not be viewed as the
last function. In fact it links back to planning. Controlling involves
• Comparing actual performance with standards
• Finding out deviations
• Taking corrective action so that they don‘t repeat in future
These are the guidelines when future planning is done. Thus controlling not only
completes one cycle of management process and also helps to improve planning in the
next cycle.

Importance of Controlling

Control is an indispensable function of management without which even the best of the
plans may go vary.

1. Helps in accomplishing goals:

 Ensures achievement of organizational objectives by identifying deviations and indicating
corrective action.
 Controlling ensures that all activities in the organization take place according to the plans.

2. Helps in judging accuracy of standards:

 Enables management to verify whether the standards set are accurate, achievable and
objective.
 An efficient control system reviews and revises standards from time to time to match them
with organizational and environmental changes.
3. Helps in making efficient use of resources:
 Reduces wastages and spoilage of resources.
 When each activity is performed according to the pre-determined standards and norms it
ensures that work is done in the most efficient and effective manner.

4. Helps to improve employee motivation:

 Employees know well in advance what they are expected to do and what are the standards
of performance on the basis of which they will be appraised.
 These reports become the basis for giving promotions, increments etc. to the employees.
 This motivates them to give a good performance.

5. Ensures order and discipline:

 Creates an atmosphere of order and discipline in the organization.
 Subordinates are under a vigil (check) at all times and they perform their functions
efficiently.
 It also leads to check over dishonesty and chances of fraud in the company.

6. Facilitates co-ordination:
 This is because each department and employee is governed by pre-determined standards
which are well coordinated with one another.
 This leads to unity of direction and ensures overall accomplishment of organization
objectives.

Limitations of Controlling

1. Difficulty in setting quantitative standards:

 Control system loses its effectiveness when standards of performance cannot be defined in
quantitative terms. This makes comparison with standards a difficult task.
 e.g areas like human behaviour, employee morale, job satisfaction cannot be measured
quantitatively.
2. Little control on external factors:
 An enterprise cannot control external factors like government policies, technological
changes, competition. etc.
3. Resistance from employees:
 Control is resisted by the employees as they feel that their freedom is restricted. E.g
employees may resist and go against the use of cameras to observe them minutely.
4. Costly:
 Control involves a lot of expenditure, time and effort. A small enterprise cannot afford to
install an expensive control system.
 Managers must ensure that the cost of installing and operating a control system should not
exceed the benefits derived from it.
Steps In The Process Of Control:

1. Setting performance standards:

 A standard is a criterion against which actual performance is compared.
 Can be quantitative (- eg costs, revenue, units to be produced, time spent in performing a task
etc) as well as qualitative (improving goodwill, motivation etc).

 Managers fix standards in the light of organizational goals. As they serve as the basis of
control, they should be set carefully. They should satisfy the foll requirements:
o Standards should be simple and easy to understand both for short and for long term.
o They should be achievable (not too high)
o As far as possible they should be set in precise quantitative terms so that it makes
comparison easier. E.g in terms of profits, cost, units (reduction of defects from 10 in
every 1000 pieces produced, to 5, produced in a quarter.)
o Should be flexible enough to be modified when the need arises, in view of the changes
taking place both in the internal as well as external business environments.

2. Measurement of actual performance:

o Performance should be measured in the same units in which standards are set as this would
make the comparison easier. Also performance measurement should be objective and reliable.

o Measurement of work can be done:

 After the task is completed or
 During the performance wherever it is possible .e.g in case of assembling task each part
produced should be checked before assembling.

o There are several techniques for measurement of performance:

 Performance of an employee may require personal observation or preparation of
performance report by his superior
 Measurement of company‘s performance may involve calculation of certain ratios like
gross profit, net profit, return on investment etc. at periodic intervals.
 Progress of work in certain operating areas like marketing may be measured in terms of
number of units sold, increase in market share etc.
 Efficiency in production may be measured by counting the number of pieces produced etc.
 In small scale operations each piece may be checked, while in large organizations, this
would not be possible. So certain pieces could be checked at random. This is called sample
checking.

3. Comparing actual performance with standards:

 Such comparison will reveal the deviation between actual and desired results.
 If there is a match between them then controlling ends there only. But if there is a mis-
match or deviation then the manager finds out the extent of such deviation.
 4. Analysing deviations:
 All deviations need not be brought to the notice of top management. Deviations in key
areas of business need to be attended more urgently as compared to deviations in certain
insignificant areas.
 Also it is important to determine the acceptable range of deviations. Deviations can be
analyzed in two ways:
o Critical point control:
 It is neither economical nor easy to keep a check on every activity in an
organization.
 Control should focus on key result areas (KRA‘s) which are critical to the
success of an organization.
 This is because if anything goes wrong at the critical points, the entire
organization suffers. e.g In a manufacturing organization, an increase of 5% in
labour cost may be more alarming than a 15% increase in postal charges.

o Management by exception:
 This principle of management control emphasizes that a manager who tries to
control everything may end up controlling nothing.
 So he should make a priority list and bring to the notice of top management
only significant deviations which go beyond the permissible limits.

5. Taking corrective action:

 When the deviations are within acceptable limits, no corrective action is required.
 However when deviations go beyond the acceptable range, it demands immediate managerial
attention so that deviations do not occur again and standards are accomplished.
 Corrective action may involve:
o Training of employees if targets could not be met/ assigning additional employees or
equipments to the project and permission for overtime work etc.
o Where deviations cannot be corrected through managerial action, it means that plans
are unrealistic.
o So plans need to be re-framed if they are over stated (when performance can‘t be
improved further) or under stated ( when performance is higher than the standards.)

Management by exception
 It means that the manager who tries to control everything may end up controlling nothing.
 If the control is to be effective and economical, it must focus attention on factors critical to
performance. In a large organization keeping a close check on each and every activity will be
o Tedious
o very time consuming
o increase unnecessary efforts and
o decrease attention on important problems.
 Therefore every manager must prepare his list of priorities and put more concentration on
important matters and ignore minor deviations (because if he involves himself in all the activities
then he will not be able to control even a single activity effectively). e.g if a group of 50 workers fail
to achieve the production target due to inefficiency of 3 workers, then only 3 of them should be
sent for training instead of wasting resources on all 50 workers.
 Similarly if postal expenses by 10% the deviation is too insignificant to require managerial
attention. On the other hand if labour costs rise by even 1% it should receive managerial
attention.
Benefits of Management by Exception :
1. It saves time and efforts of managers ( as they deal with only significant deviations.)
2. It focuses managerial attention on important areas. Thus there is better utilization of managerial
talent.
3. The routine problems are left to the subordinates .This way it facilitates delegation of authority
and increases morale of the employees.
4. It identifies critical problems which need timely action to keep the organization on the right track.

Therefore the more a manager concentrates his energies on important deviations, the more effective he
will be in the process of control.

Relationship between Planning and Controlling

Planning and controlling functions are very closely related. The relation between the two is explained
below:
 Meaning
 Planning and controlling are inter dependent and inter linked
 Planning and Controlling are both forward looking as well backward looking functions:

1. Meaning:
 Planning is the basic function of every enterprise as in planning we decide what is to be
done, how it is to be done and by whom it must be done. It bridges the gap between where
we are standing today and where we want to reach.
 Controlling means keeping a check that everything is in accordance with the plan and if
there is a deviation taking preventive measures to stop that deviation. Thus it ensures
correct and timely implementation of plans.

2. Planning and controlling are inter dependent and inter linked

 Planning and controlling are inseparable twins of management as one function depends
on the other.
 A system of control pre supposes the existence of certain standards. It compares actual
performance with the planned and if there is no planned performance then the controlling
manager will not be able to know whether the actual performance is O.K or not .e.g If a
worker has produced 800 units, the manger can know whether it is adequate or not only
when there is a standard output set by the planners. If standard output is 1000 units, the
manager makes sure that productivity of worker is increased to achieve the requisite
target. So the base for comparison/ yardstick to check is given by the planning function to
the controlling function.
 On the other hand planning function is also dependent on controlling as plans are not to
be made on the paper only but these have to be followed and implemented in the
organization. Controlling makes sure that everyone follows the plan strictly. So planning is
a pre requisite for controlling. So Planning without controlling is meaningless and
controlling without planning is blind. Planning is prescriptive whereas controlling is
evaluative.

3. Planning and Controlling are both forward looking as well backward looking functions:
 Some people are of the opinion that planning is forward looking as it involves looking
ahead as plans are prepared for future and are based on forecast of future conditions
while
 controlling is backward looking because we look back to
compare performance with the plans.
 However this is not completely correct. Planning is not only
futuristic but it is also guided by past experiences. Similarly
controlling is not only done with a view to do a post mortem
but also with a view to improve future performance. Thus
planning and controlling are both backward looking as well as
forward looking.

Therefore they are both inter-related and they re-inforce each other. That is,
1. Planning based on facts makes controlling easier and effective; and
2. Controlling improves future planning by providing information derived
from past experience.
 (Note: Shorten the answer according to marks)

Techniques of controlling are given in NCERT but are not in your syllabus