At the turn of the 21st century organizational culture is becoming more

and more powerful factor influencing the effectiveness of economic activity. In this
regard, management’s activity must be oriented towards the formation and
purposeful change of the culture vector in the system of organizational-
economic management basing on modern technologies. Under the conditions of
increased uncertainty of market economy and due to strengthening of
competition aggressiveness it is necessary for economic entities’ management to
pay more attention to introducing modern technologies of business management. A
principal role in this case is given to controlling. Investigating historical stages
in the evolution of controlling contributes to the implementation of its subsystems
in organizational-economic management and enables to improve corporate culture.
Managers at all levels of management Top, Middle & Lower – need to perform
controlling function to keep control over activities in their areas. Therefore,
controlling is very much important in an educational institution, military, hospital, &
a club as in any business organization.
Control is any process that guides activity towards some predetermined goals.
Thus, control can be applied in any field such as price control, distribution control,
pollution control, etc. However, control as an element of management process can be
defined as the process of analysing whether actions are being taken as planned and
taking corrective actions to make these to conform to planning. Thus, control process
tries to find out deviations between planned performance and actual performance and
to suggest corrective actions wherever these are needed.
For Example – Terry has defined control as follows:
“Controlling is determining what is being accomplished, that is evaluating the
performance and, if necessary, applying corrected measures so that the performance
takes place according to plan.”
Based on the definition of control, its following features can be identified:
1. Control is forward looking because one can control future happenings and not
the past. However, on control process always the past performance is measured
because no one can measure the outcome of a happening which has not occurred. In
the light of these measurements, managers suggest corrective actions for future
period.
2. Control is both an executive process and, from the point of view of the
organizations of the system, a result. As an executive process, each manager has to
perform control function in the organization. It is true that according to the level of a
manager in the organization, the nature, scope, and limit of his control function may
be different as compared to a manager at other level.
The word control is also preceded by an adjective to designate a control
problem, such as, quality control, inventory control, production control, or even
administrative control. In fact, it is administrative control, which constitutes the most
comprehensive control concept. All other types of control may be subsumed under it.
 3. Control is a continuous process. Though managerial control enables the
manager to exercise control at the point of action, it follows a definite pattern and
timetable, month after month and year after year on a continuous basis.
4. A control system is a coordinated-integrated system. This emphasises that,
although data collected for one purpose may differ from those with another purpose,
these data should be reconciled with one another. In a sense, control system is a
single system, but it is more accurate to think of it as a set of interlocking subsystems.
In the words of Koontz & O’Donnell, “Controlling is the measuring and
correcting of activities of subordinates to assure that events conform to plans”.
According to G. Terry, “Controlling can be defined as the process of
determining what is to be accomplished, that is the standard; what is being
accomplished, that is the performance; evaluating the performance; and if necessary
applying corrective measures so that the performance takes place according to plans,
that is, in conformity with the standard”.
According to Brech, “Controlling is a systematic exercise which is called as a
process of checking actual performance against the standards or plans with a view to
ensure adequate progress and also recording such experience as is gained as a
contribution to possible future needs.”
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 right course.”
Therefore, controlling function should not be misunderstood as the last function
of management. It is a function that brings back the management cycle back to the
planning function. Thus, the controlling function act as a tool that helps in finding out
that how actual performance deviates from standards and also finds the cause of
deviations & attempts which are necessary to take corrective actions based upon the
same.
This process helps in the formulation of future plans in light of the problems that
were identified &, thus, helps in better planning in the future periods. So from the
meaning of controlling we understand it not only completes the management process
but also improves planning in the next cycle.
.
XV century An attempt to solve the state management tasks with the use
of the controlling ideas was initiated (in the court of an
English king the position of "controller" was established).
1778 The department "Controller, Auditor, Treasurer and six
Commissioners of Accounts" was established; it aimed at
managing the state economy and at controlling the use of
funds (USA).
1880-1892 The position of "controller" was established by the
companies "Atchison, Topeka and Santa Fe Railroad" and
"General Electric" (USA)Controllers had to deal with
 financial economic issues and perform audits. This was
due to the specifics of American corporate legislation
that provided only two governing bodies: A General
Meeting of Shareholders and a Board of Directors that
required information management.
XX century Functions of controllers were limited to the registration of
information which enabled to make reports for managers;
controllers also dealt with revising the previous facts of
economic life (retrospective orientation) (USA).
1929-1933 During the Great Depression the global economic crisis drew
more attention to the methods and ideas of controlling with a
focus on future activity and not just on the past facts.
Accounting and reporting were transformed from tools of
control into a means of overcoming future problems.
Since 1930 controlling has been developing as a
management accounting system. A special role in the
development of the controlling system was played by
"The Controllers Institute of America", established in
1931 (in 1962 it was renamed to "Financial Executive
Institute" (FEI)). This is a professional organization of US
controllers, which conducts a lot of work to systematize the
tasks of controlling. In 1962 "Financial Executive Institute"
(FEI) defined the functions of the controller which enabled to
understand the objectives of controlling and strategies for
achieving them, such as planning, preparing and
interpreting reports; assessment (calculations) and
counseling; issues of taxation; reports to state bodies;
guarantees of property; macroeconomic research.
1934 "The Controller" journal that dealt with the practical problems
of controlling was established (USA).
1944 A scientific research institute "Controllership Foundation"
(presently "Financial Executives Research Foundation") that
significantly contributed to the development of controlling
in the USA was established.
1972 to the An organization IMA ("The Institute of Management
present Accounting") that deals with the standardization of
management accounting was established.In the modern
American concept controlling, in accordance with
regulation 4A of "Statement of Management Accounting"
(SMA), is one of the areas of responsibility of the accountant
(economist), which, in addition to controlling, includes
planning, evaluation, reliable reporting, preparation of
external reporting. In accordance with regulation 1A,
controlling is the provision of the integrity of financial
information relating to the activities of the enterprise and
its resources; monitoring and measuring effectiveness and
 initiating any corrective actions necessary to return activities
to the right track.

The analysis of the data presented in Table 2 enabled to conclude that the
development of controlling in the USA is exclusively practice-oriented. The
Anglo-American school is characterized by the pragmatic approach. The format
of management accounting is a priority and controlling is considered as one of
responsibilities of management accounting. Controllers or accountants
(economists) in management accounting are assistant managers; they do not carry
out controlling independently but support managers in planning, monitoring and
analysis. At the beginning of the 21 st century management accounting also
included the components of economic philosophy exploring the ethical aspects
of economic actors’ activities [7].
In the 1950s with American economic expansion controlling began to spread in
many European countries. Further development of controlling was manifested in the
dualism of its directions: Anglo-Saxon (American) and European (German). At that
time in West Germany a special approach to the application of controlling was being
formed, despite the fact that in the middle of the 19th century Thyssen and Krupp
companies already had certain elements, which could be attributed to the sphere of
controlling.
In the 1950-1970s the economy of West Germany was characterized by
high GDP growth and industrial production providing the scientific-technological
revolution (STE). This period was due to the formation of the "German model" of
economic development. The introduction of a management system by
responsibility centers could be considered as a prerequisite for the development of
controlling in German companies. The development and implementation of
controlling in those decades were directly related to changes in the external
environment of companies, significant reorientation of business outlook and
actions. There was no concept of management accounting in the theory and practice
of managing German companies: the database included production and financial
accounting indicators. The term "controlling", which was borrowed from the English
language, began to indicate a qualitatively new phenomenon in the management of
companies.
Approximately in 1965 in Germany the formation of profit centers in
large companies was widespread, which were autonomous in terms of management
and accounting. To regulate and manage their activities the use of previous tools
did not produce the expected results. The introduction of controlling is largely
associated with the name of Albrecht Deyhle. In 1967 Albrecht Deyhle's book,
"Controller-Praxis", was published, in which the concept of controlling was viewed
as an effective profit management tool [8].
As the administrative doctrine controlling has been used since 1970s,
mainly in large corporations in Germany, Austria and Switzerland. From this
point forward, the theory of controlling has been seriously developed. The
increased demand for controlling services stimulated the emergence of a
number of scientific and educational institutions. The Institute of Controllers for
Education in the Field of Enterprise Planning and Accounting (Controller-
Institut zur Ausbildung und Unternehmensplanung und Rechnungswesen
GmbH, Cauting) was the first to emerge. Since 1971 private and public
seminars have been held by the Academy of Controllers. In 1989 a special edition of
the "Controller" was issued promoting the ideas and philosophy of controlling.
Institutionally, the steps taken positively influenced the practical activities of German
companies, most of which began to have separate controlling units [9], [10].
In Russia the theoretical ideas of controlling for the first time appeared
on the pages of the journal "Schetovodstvo" ("Accounting") (1895) in the works
of an Italian accounting professor Giuseppe Rossi, in which a special role was
assigned to control as an accounting function. According to G. Rossi, to
analyze information on economic activities transforming accounting data to the level
of performers is necessary for conducting control. Rossi noted, "It is necessary
analyze data in relation to persons who are involved in the economic organism" [11].
Control allows the chief accountant, who knows accumulated accounting
records, to be the leading figure for persons who both make management
decisions and perform them. As a result, the chief accountant fulfills a new
advisory function in all management decisions that is "to increase or cut production,
change the activities of the enterprise, assign a sales price of goods, increase or
decrease the amount of interest, conclude a contract; in all these and other countless
cases accountants should express their opinion based on full knowledge of their
economy, market conditions, existing laws, etc." [11]. Thus, this function was a
manifestation of controlling.
In Russia controlling became of interest at the very beginning of the
1990s in the course of economic transformations. Initially, controlling appeared in
banks as a result of intensive development of the banking sector. From 1991 to
1995 controlling was identified with account costs, and in 1996-1997 it was
understood as accounting of costs and results. After the financial crisis in
1998 and as a result of the subsequent economic growth, some large industrial
enterprises began to form a new type of management.
In 1998-1999 controlling began to cover budgeting, planning and cost
management. From 2000 to 2010, in the process of restructuring the financial and
economic sector, the understanding of controlling as a supplier and interpreter of
information for managers, a coordinator of operational activities of an economic
entity prevails.
From 2010 to the present, according to S.G. Falco, the understanding of
controlling as a service of internal consulting to advise management of economic
entities is typical [12]. The task of the controller includes methodological and
consulting assistance in creating a system that manifests itself as economic
security (timely detection and prevention of hazards, removal of threats,
ensuring the achievement of strategic plans of economic entities). The controller as
a business partner contributes to the stability of the economic entity’s functioning,
anticipating and supplementing the manager’s actions under the changing conditions
of the market economy.
Importance of Controlling
After the meaning of control, let us see its importance. Control is an
indispensable function of management without which the controlling function in an
organization cannot be accomplished and the best of plans which can be executed can
go away. A good control system helps an organization in the following ways:
1. Accomplishing Organizational Goals
The controlling function is an accomplishment of measures that further makes
progress towards the organizational goals & brings to light the deviations, & indicates
corrective action. Therefore it helps in guiding the organizational goals which can be
achieved by performing a controlling function.
2. Judging Accuracy of Standards
A good control system enables management to verify whether the standards set
are accurate & objective. The efficient control system also helps in keeping careful
and progress check on the changes which help in taking the major place in the
organization & in the environment and also helps to review & revise the standards in
light of such changes.
3. Making Efficient use of Resources
Another important function of controlling is that in this, each activity is
performed in such manner so an in accordance with predetermined standards &
norms so as to ensure that the resources are used in the most effective & efficient
manner for the further availability of resources.
4. Improving Employee Motivation
Another important function is that controlling help in accommodating a good
control system which ensures that each employee knows well in advance what they
expect & what are the standards of performance on the basis of which they will be
appraised. Therefore it helps in motivating and increasing their potential so to make
them & helps them to give better performance.
5. Ensuring Order & Discipline
Controlling creates an atmosphere of order & discipline in the organization
which helps to minimize dishonest behavior on the part of the employees. It keeps a
close check on the activities of employees and the company can be able to track and
find out the dishonest employees by using computer monitoring as a part of their
control system.
6. Facilitating Coordination in Action
The last important function of controlling is that each department & employee is
governed by such pre-determined standards and goals which are well versed and
coordinated with one another. This ensures that overall organizational objectives are
accomplished in an overall manner.
 Types of control
Feedback Control: This process involves collecting information about a finished
task, assessing that information and improvising the same type of tasks in the future.
Concurrent control: It is also called real-time control. It checks any problem and
examines it to take action before any loss is incurred. Example: control chart.
Predictive/ feedforward control: This type of control helps to foresee problem
ahead of occurrence. Therefore action can be taken before such a circumstance arises.
In an ever-changing and complex environment, controlling forms an integral
part of the organization.
Elements of controlling are present in almost every enterprise, but they are
separate and due to disconnection do not lead to a synergistic effect in the overall
management system. The controlling system (Fig. 1) should be based on logically
connected elements that cover the management and organizational aspects of the
business organization.
Controlling system
Controlling methodology Controlling process Controlling structure Controlling
technique
Goals and objectives. Laws and principles. Methods and functions.
Technologies and practice. Communications. Scheme of the process. Development
and implementation of solutions. Information support. Organizational and functional
structures. Scheme of team relations. Staff skills. Computer and office equipment.
Communication network. Document management system.
What is Controlling – 12 Main Areas: Control on Wages and Salaries,
Control over Capital Expenditure, Control over Costs and a Few Others
For effective control, it is important to know what the critical areas where
control would be exercised are.
The identification of these areas of control enhances the management to:
(i) Delegate authority and fixing up of responsibility,
(ii) Reduce burden of supervising each activity in detail, and
(iii) Have means of securing satisfactory results.
Though controls are needed in every area where performance and results
directly and vitally affect the survival and prosperity of the organization, these areas
need to be specifically spelled out.
The following discussion points out the problems and methods of control in
each major area:
1. Control on Wages and Salaries:
Control over wages and salaries are done by having programme of job
evaluation, and wage and salary analysis. The functions are carried on by personnel
and industrial engineering departments. Often wage and salary committee is
constituted to provide help to these departments.
2. Control over Capital Expenditure:
Control over capital expenditure is exercised through the system of evaluation of
projects, ranking of projects on the basis of their importance, generally on the basis of
their earning capacity. A capital budget is prepared for the business as a whole. The
budget committee or appropriation committee reviews the budget.
For effective control over capital expenditure, there should be a plan to identify
the realisation of benefits from capital expenditure and to make comparison with
anticipated results. Such comparison is important in the sense that it serves as an
important guide for future capital budgeting activities.
3. Control over Costs:
Control over costs is exercised through making comparison between standard
costs and actual costs. Standard costs are set in respect of different elements of costs.
Cost control is also supplemented by budgetary control system, which includes
different types of budgets. Controller’s department provides information for setting
standard costs, calculating actual costs, and pointing out differences between these
two.
4. Control over External Relations:
The public relations department regulates external relations. This department
may prescribe certain measures to be followed by other departments while dealing
with external parties.
5. Control over Line of Products:
A committee whose members are drawn from production, sales, and research
departments exercise control over line of products. The committee controls through
studies about market needs. Efforts are made to simplify and rationalize the line of
products.
6. Control over Methods and Manpower:
Control over methods and manpower is keep to ensure that each individual is
working properly and timely. For this purpose, periodic analysis of activities of each
department is conducted. The functions performed, methods adopted, and time
consumed by every individual is studied to eliminate non-essential functions,
methods, and time. Many organizations create separate department or section known
as organization and methods to keep control over methods and manpower.
7. Control over Organization:
Organization charts and manuals are used to keep control over organization
structure. Organization manuals attempt at solving organizational problems and
conflicts, making long-range organizational planning possible, enabling
rationalization of the organization structure, helping in proper designing and
clarification of each part of the organization, and conducting periodic check of facts
about organization practice.
8. Control over Personnel:
Generally, personnel manager or head of the personnel department, whatever his
designation may be, keeps control over personnel in the organization. Sometimes, a
personnel committee is constituted to act as ail instrument of control over key
personnel.
9. Control over Research and Development:
Control over research and development is exercised in two ways – by providing
a budget for research and development and by evaluating each project keeping in
view savings, sales, or profit potentialities. Research and development being a highly
technical activity is also controlled indirectly. Improving the ability and judgement of
the research staff through training programmes and other devices does this.
10. Control over Service Departments:
Control over service departments is effected either-
(i) Through budgetary control within operating departments, or
(ii) Through putting the limits upon the amount of service an individual
department can ask, or
(iii) Through authorising the head of service department to evaluate the request
for service made by other departments and to use his discretion about the quantum of
service to be rendered to a particular department – Sometimes, a combination of these
methods may be used.
11. Controls over Policies:
Policies are formulated to govern the behaviour and action of personnel in the
organization. These may be written or otherwise, policies are generally controlled
through policy manuals, which are generally prepared by top management. Each
individual in the organization is expected to function according to policy manuals.
12. Overall Control:
Control over each segment of the organization contributes to overall
organizational control. However, some special measures are devised to exercise
overall control. This is done through budgetary control project profit and loss account
and balance sheet. Integrating and coordinating budgets prepared by each segment
prepare a master budget. The budget committee reviews such budget. This budget
acts as an instrument for overall control. Profit and loss account and balance sheet are
also used to measure the overall results.
If management cannot, or chooses not to avoid the control problems caused by
relying on other individuals, they must address the problems by implementing one or
more control tactics. The large number of tactics that are available to help achieve
good control can be classified usefully into three main categories, according to
the object of control; that is, whether control is exercised over specific actions,
results, or personnel. Table 1 shows many common controls classified according to
their control object; these controls are described in the following sections.
Table 1: A Control Tool Classification Framework

Control of Specific Actions

One type of control, specific-action control, attempts to ensure that individuals
perform (or do not perform) certain actions that are known to be desirable (or
undesirable). Management can limit the incidence of some types of obviously
undesirable activity by using behavioral constraints that render the occurrence
impossible, or at least unlikely. These constraints include physical devices, such as
locks and key-personnel identification systems, and administrative constraints, such
as segregation of duties, which make it very difficult for one person to carry out an
improper act.
A second type of specific action control is action accountability — a type of
feedback control system by which employees are held accountable for their actions.
The implementation of action-accountability control systems requires: (1) defining
the limits of acceptable behavior, as is done in procedures manuals; (2) tracking the
behaviors that employees are actually engaged in; and (3) rewarding or punishing
deviations from the defined limits. Although action-accountability systems involve
the tracking and reporting of actual behaviors, their objective is to motivate
employees to behave appropriately in the future. These systems are effective only if
employees understand what is required of them, and they feel that their individual
actions will be noticed and rewarded or punished in some significant way.
 A third type of specific-action control is preaction review. This involves
observing the work of others before the activity is complete, for example, through
direct supervision, formal planning reviews, and approvals on proposals for
expenditures. Reviews can provide effective control in several ways by: correcting
potentially harmful behavior before the full damaging effects are felt; or influencing
behavior just by the threat of an impending review, such as causing extra care in the
preparation of an expenditure proposal. One advantage of reviews is that they can be
used even when it is not possible to define exactly what is expected prior to the
review.
Control of Results
Control can also be accomplished by focusing on results: this type of control
comes in only one basic form, results accountability, which involves holding
employees responsible for certain results. Use of results-accountability control
systems requires: (1) defining the dimensions along which results are desired, such as
efficiency, quality, and service; (2) measuring performance on these dimensions; and
(3) providing rewards (punishments) to encourage (discourage) behavior that will
lead (not lead) to those results. As with action-accountability systems, results-
accountability systems are future-oriented; they attempt to motivate people to behave
appropriately. But they are effective only if employees feel that their individual
efforts will be noticed and rewarded in some significant way.
Control of Personnel
A third type of control can be called personnel control because it emphasizes a
reliance on the personnel involved to do what is best for the organization, and it
provides assistance for them as necessary. Personnel controls can be very effective by
themselves in some situations, such as in a small family business or in a professional
partnership, because the underlying causes of the needs for controls (personal
limitations and lack of goal congruence) are minimal. However, even when control
problems are present, they can be reduced to some extent by: (1) upgrading the
capabilities of personnel in key positions, such as tightening hiring policies,
implementing training programs, or improving job assignments; (2) improving
communications to help individuals know and understand their roles better and how
they can best coordinate their efforts with those of other groups in the organization;
and (3) encouraging peer (or subordinate) control by establishing cohesive work
groups with shared goals.
In most situations, managers can avoid some control problems by allowing no
opportunities for improper behavior. One possibility is automation. Computers and
other means of automation reduce the organization’s exposure to control problems
because they can be set to perform appropriately (that is, as the organization desires),
and they will perform more consistently than do human beings. Consequently, control
is improved.
Another avoidance possibility is centralization, such as that which takes place
with very critical decisions at most organization levels. If a manager makes all the
decisions in certain areas, those areas cease to be control problems in a managerial
sense because no other persons are involved.
 A third avoidance possibility is risk-sharing with an outside body, such as an
insurance company. Many companies bond employees in sensitive positions, and in
so doing, they reduce the probability that the employees’ behavior will cause
significant harm to the firm.
Finally, some control problems can and should be avoided by elimination of a
business or an operation entirely. Managers without the means to control certain
activities, perhaps because they do not understand the processes well, can eliminate
the associated control problems by turning over their potential profits and the
associated risk to a third party, for example, by subcontracting or divesting.