CHAPTER SEVEN:

THE CONTROLLING FUNCTION

1
 7.1 Meaning and need for control
• Organizational resources are limited. Their acquisition &
use are critical to the survival of the organization.
• Controlling is the last management function and it
affects or is affected by the other managerial functions.
• Planning, organizing, staffing & directing must be
monitored to maintain their effectiveness & efficiency.
• Managers review performances of employees daily,
weekly, and monthly to determine actual performances.
• Control is the process of monitoring, evaluating,
comparing performance to standards and taking
corrective action, if needed.
• In other words, control involves measurement and
regulation. It is the means by which management assures
that desired objectives are being achieved.
 Meaning and need for control(cont’d…)
• Control is closely associated with the management
function of planning. People often refer to «planning
and control» in one phrase, as if the two were almost
one function.
• Control is the process of monitoring activities to
ensure that they are being accomplished as
planned and of correcting any significant
deviations.
• The purpose of controlling is to determine whether
people & the various parts of an organization are on
target, achieving the progress towards the planned
objectives.
Meaning and need for control(cont’d…)
• Planning and controlling are highly interrelated in a
sense that it is the planned objective that supervised
and it is usually the objective used as a bench mark
for controlling.
• Controlling attempts to prevent failure reduce the
degree of failure and learn from previous failure and
are able to function properly.
Meaning and need for control(cont’d…)
• Management control is a systematic effort
– to design information feedback systems,
– to set performance standards with planning
objectives,
– to compare actual performances with those
predetermined standards,
– to determine whether there are any deviations and
to measure their significance, and
– to take corrective action accordingly
– to assure that all organizational resources are being
used in the most effective & efficient way in
achieving organizational objectives.
 7.2 Control process
• Feedback provides information on the progress of
the various levels of plan and performance to
management.
• In undertaking managerial controlling there are a
series of activities that need to be performed.
• The initial view of control process reveals that it
composed of a cycle of steps includes following:
• Establishing Standards
• Measuring Performance and compare it
against standards and
• Taking corrective action
 Control process (cont’d…)
1. Establishing Standards
• Standards are the bench marks against which performance is
compared. Standards can take a variety of forms and be
derived from a variety of sources. For example, standards
could take the form of goals or could consist of professional
guidelines or legal or financial procedure.
• Standards can also be derived from the practice of
benchmarking, examining the performance of other
organizations. The standards are the criteria against which
performance will be compared.
• The standards can be developed using a top- down approach
and unilaterally develop standards; this approach may not
work well in practice.
• A participative approach to creating standards takes longer but
yields standards that are understood by every one. When
employees participate in creating standards, they are likely to
be more committed to the standards and will work harder to
achieve the desired results.
 Control process (cont’d…)
2.Measuring Performance and compare it against
standards
• It is measuring the performance & determining
whether the performance is in line with the set of
standards. It is comparison between ‘what is’ & ‘what
should be’. It is discovering the deviation.
3. Taking corrective action
• It is the final step in the control process. When
deviations from a standard are meaningful and gaps
in performance, a manager should take corrective
action. If corrective action is appropriate but is not
taken, the control process becomes simply a
measurement exercise. Corrective actions need to be
directed at the cause(s) of the deficiencies.
 Control process (cont’d…)
• The cause of performance deficiencies need to be
carefully identified so that corrective action can be
effective and lead to improvement.
• Determining precise action to be taken depends on
three things.
– the standard
– accuracy of the measurements that determine
the existence of deviation &
– the diagnosis of the person or device
investigating the causes of deviation.
• Corrective action can be prescribed by management in
advance through policies, procedure & practices. It is
sometimes automatic.
 8.3 Types of Control
• Work performed by an organization & their employees
has
– a starting point (Where inputs takes place)
– a period of performance (where inputs are processed) &
– a final product (out put)
 There are three basic types of control :
 Prevention control ( called as pre-action control)
• Prevention control is designed to prevent problems before
they occur. It is established to prevent problems from
occurring rather than to fix them after they happen.
• It is also represented by rules and procedures that are to
be followed so that ethical and performance problems are
minimized.
 Types of Control(cont’d…)
2.Feed forward/Concurrent control
• Concurrent control takes place as the work process is
being carried out. A knowledgeable manager observes
the work process and quickly corrects problems as they
occur. The focus of control is on the ongoing activities
in feed forward control.
3. Feedback control
• It is some times called post-action control. It occurs
after a process has been completed.
• Feedback control uses data from past performance to
improve future.
• Performance timelines is a serious concern with
feedback. The longer feedback is delayed, the less
useful it becomes. In feedback control the focus is on
the end results.
 7.4 Techniques of control
• Formal and outcome-focused control techniques
regulate performance by applying standards or
guidelines to the outcomes of a process.
 Market control-
• It is the use of indicators of market values as
standards for regulating performance.
• For example, an organization may use profits as
the means for evaluating the performance of a
business unit. Poor profit levels may result in
corrective actions, from various improvement
efforts to closing or selling the unit.
 Techniques of control (cont’d…)
 Financial controls
• Financial control use various monetary measures
to regulate performance. While market controls
rely on external measures of the value of products
or services, financial controls focus on internal
monetary values regarding revenues and expenses
in the organization.
• For example, a business unit could, be doing very
well in terms of the market value of its products
or services, but may not be in a good financial
health internally.
 Techniques of control (cont’d…)
 Budgetary control- Budgets used to specify amounts to be
expended for various activities or events. Budgets are frequently
stated in monetary terms, but they can take other forms. A
production budget might specify the number of units to be
produced and a labor budget might specify the number of hours of
labor that will be available along with dollar amounts.
• Budgets provide quantitative measures. These measures provide
the standard by which performance can be judged.
• Budgeting allows management to control & allocate its resources.
Without budgetary control, the best of business ventures can easily
run into financial trouble and even bankruptcy.
• Financial statements -In addition to budgets, financial
statements are tools that are used to asses and control the
financial health of the organization.
• Two of the most commonly used are balance sheets and profit
and loss statements.
 7.5 Effective control system
An effective control system requires the following
essentials.
1.Control must be understandable.
• Individuals must understand what the control system is
attempting to do.
2. Control must be flexible.
• Standards and plans on which controls are based
frequently need modification or revision when
underlying circumstances change. Flexibility makes
control workable and effective when there are changes
in plans and in unforeseen circumstances.
3. Control must be economical.
• Controls should be worth in its costs.
 Effective control system(cont’d…)
4. Control must be objective:-Effective control system
calls for objectives, accurate, suitable and definite
standards.
5. Control should recognize the importance of time
element:- In controlling timeliness is very important
factor.
6.Control system should provide useful and
understandable information:-Effective control system
provides information to the right people who can use
them in correcting deviations and fostering growth.
7.Control should be forward-looking :- Effective control
system is always aiming at the future. Control aids in
further planning.
 Effective control system
8. Control should be selective.
• Management should also concentrate on certain control
points as to who is responsible for what execution of plans
and for any deviations for them.
9. Control should reflect the organization structure & needs.
• Organizational structure clarifies the roles of people in
organization and the control system reflects as to who is
responsible for what execution of plans and for any
deviations for them.
10. Control should lead to corrective action.
• Only discovering deviations in the performance of
operations is not enough. Effective control system must
lead to appropriate and corrective action.
End of the course!!!

18
THANK YOU