8.

Controlling
Introduction
Controlling is performed during every function so that weakness, if any can be detected at an
early stage and corrective measures taken. In other words, proper controlling help to locate
Mistakes and offers suggestions for their rectification.
Meaning
Controlling is a process through which management ensures that the actual performance
conforms to the plan. It verifies whether activities undertaken agree with the plan.
Controlling is the process of comparing actual performance with the standard with a view to
check deviations in order to take corrective actions. Thus controlling is considered the key to
organizational success. It is a continuous process and action oriented. Controlling is a
dynamic activity. “Management control implies the measurement of accomplishment against
the standard and the correction of deviations to assure attainment of objectives according to
plans”.
- Koontz and O’ Donnell
Features of Controlling
1. Goal oriented :
Controlling is directed towards the accomplishment of organisational goals in the best
possible manner.
2. Pervasive :
Controlling is an essential function of every manager. All managers perform the
control function. Control is exercised at all levels of management though the nature
and extent of control may differ from one level to another. Controlling is a universal
function.
3. Forward as well as backward looking
Controlling is both forward looking and backward looking .
Forward looking :
As it aims to improve future results on the basis of past experience , it is forward
looking.
Backward looking : As it measures and compares actual performance with standards
fixed in the past, it is backward looking.
4. Continuous
Controlling is a continuous or never ending process. Controlling involves
measurement, comparison of results with standards, corrections, suggestions for
changes in planning, organising, etc., on a continuous process.
Importance of Controlling
1. Accomplishment of organizational goals
It is through controlling that managers ensure the execution of plans and the
accomplishment of goals. In the absence of control, activities may not be carried out
according to plans, and the target may be missed.
2. Judging accuracy of standards
Control system helps in verifying the accuracy of standard set. For this, a careful
check is made with respect to the changes taking place in the organisation and in the
environment. This helps to review and revise the standards based on such changes.
3. Making efficient use of resources
A good control system seeks to reduce wastage and spoilage of resources. This
ensures effective and efficient utilization of resources.
4. Improving employee motivation
A good control system ensures employee awareness regarding what is expected to do
and what is the standard of performance for appraisal. Controlling thus motivates
employees and helps them to give better performance.
5. Ensuring order and discipline
Controlling ensures order and discipline in the organisation. It helps to minimize
dishonesty on the part of employees and helps them to give better performance.
 6. Facilitating co-ordination in action
Controlling facilitates coordination between different departments by laying down
standards of performance. All activities and efforts are directed towards the
accomplishment of common objectives.
Limitations of Controlling
1. Difficulty in setting quantitative standards
Control system is effective when standards are defined in quantitative terms. But it is
not possible to set quantitative standards in some areas such as employee morale, job
satisfaction and human behaviour. In the absence of quantitative standards,
measurement of performance and its comparison with standards becomes difficult.
2. Little control on external forces
An organisation cannot generally control competition in the market, technological
changes, government policies and other external factors.
3. Resistance from employees
Employees often resist control as they consider it a restriction on their freedom. For
example, employees might object installation of Closed Circuit Televisions (CCTVs)
as they will be kept under a strict watch.
4. Costly affair
Considerable time, effort and expenditure are involved in controlling. A small firm
cannot afford to install an expensive control system.
Relationship between Planning and controlling
 Controlling is blind without Planning :
Without planning, there is no basis for controlling activities. If the standards are not
set in advance, managers have nothing to control.
 Planning without control is meaningless:
Without effective system of control, planned activities cannot be properly
implemented. Controlling helps to ensure panned goals.
 Planning is prescriptive and Controlling is Evaluative :
Planning is prescriptive process as it prescribes the most appropriate course of action
to achieve the objectives. Controlling is an evaluating process as it evaluates whether
planned decisions have been translated into desired action.
 Both are Backward-Looking as well as Forward - Looking functions :
It is often said that planning is looking ahead and control is looking back. However,
we cannot fully agree with this. Planning is viewed as a forward-looking approach as
plans are prepared for future and are based on forecasts about future conditions.
Planning is also a backward-looking function as plans are guided by the past
experiences. Controlling is considered a backward –looking function as it measures
and compares actual performance with standard fixed in the past. Controlling is also a
forward- looking function as it aims to improve future performance, based on
experience gained in the past. So, planning and Controlling are both backward-
looking as well as forward- looking functions.
 Thus Planning and controlling are thus closely interrelated and in fact reinforce each
other.
Controlling process
Controlling process involves the following five steps
1. Setting performance standards.
2. Measurement of actual performance.
3. Comparison of actual performance with standards.
4. Analyzing deviations.
5. Taking corrective deviations.
1. Setting performance standards.
The first step in the controlling process is setting up of performance standards. Standard
acts as a reference line or a basis of evaluation of actual performance. According to Koontz
and O’Donnel, “Standards are established criteria against which actual result can be
measured”. Standards can be set in both quantitative as well as qualitative terms.
Quantitative standards are the standards which can be shown in fiqures. Quantitative
 standards are amount of sales, amount of production ,time taken to complete a task,
revenue, expense, etc., and Qualitative standards are the standards which cannot be shown
in figures. Improving goodwill and motivation level of employees are examples of
qualitative standards.
Standards may be fixed for individuals, groups, department and even for the whole
enterprise.
The standards should be (a) simple (b) attainable (c) definite (d) reasonable (e) quantitative
(f) flexible (g) determined in consultation with people who are to achieve it.
2. Measurement of actual performance
The second step in the control process is the measurement of performance of various
individuals, groups, departments or the whole enterprise. It means the evaluation of the work
done and result achieved. It involves the laying down of methods of evaluating performance
e.g., observation, inspection and reporting. The performance measured should be noted and a
comprehensive report regarding the actual result prepared.
3. Comparison of actual performance with standards.
The next step in controlling is comparing the actual performance with standards. Such
comparison will reveal the deviation between the planned and actual performance. If
performance matches the standard, it may be assumed that everything is under control.
If performance falls short of standards, we should find out the extents of deviations.
4. Analysing deviations
Some deviations in performance can be expected in most activities. Therefore, it is necessary
to determine the acceptable range of deviations. Critical point control and control by
exception are useful for this purpose.
(a) Critical Point Control (Key Result Areas)
According to this principle, control should focus on Key Result Areas (KRAs) which
are critical to the success of the organisation. When anything goes wrong in these
areas the entire organization suffers. So, attention must be paid on such critical points
as it neither economical nor easy to keep a check on each and every activity. For
example , a 5 percent increase in labour cost is much more harmful than a 20 percent
increase in postal charges.
(b) Control by exception/ Management by exception (if you try to control everything
you may end up controlling nothing)
There is a common saying “ If you try to control everything you may end up
controlling nothing ”.
According to this principle, only significant deviations from standards of performance
must be brought to the management attention. It is better to concentrate on
exceptional deviations than trying to control each and every deviation from the
standard. Management attention should be directed to the exceptions rather than
controlling all activities. This is known as management by exception or control by
exception. It helps to save time, money and efforts. For example, if actual labour cost
is within an acceptable range of deviation (say, 2%), then it can be ignored. However,
if it deviates by 15%, then it needs immediate attention of management.
After identifying the major deviations, their causes need to be analysed. The deviation may
arise due to errors in planning, defective implementation of plans or careless operative
performance and environmental changes.
6. Taking corrective action
The last but most important step in the control process is taking corrective action. Corrective
actions are initiated on the basis of factors causing deviations from standards. This will
involve taking decisions by the top management like changes in machinery, working
conditions, incentives, organisational structure, supervision, employee training, etc., it is
important to note that once corrective action is decided, it should be implemented promptly
and effectively. There lies the success of the control system.