Learning Objectives

• Explain the meaning of controlling.
• State the importance of controlling.
• Describe the relationship between planning and controlling.
• Explain the steps in the process of controlling.
• Describe the techniques of controlling.

Controlling in Management

Key Terms

• Controlling: The process of ensuring that actual activities conform to planned activities.
• Critical Point Control: Focuses on key result areas critical to success.
• Management by Exception: Only significant deviations beyond permissible limits are addressed.
• Breakeven Analysis: A technique to determine when an investment will start to generate a positive return.
• Budgetary Control: Monitoring and controlling expenses against budgeted amounts.
• Return on Investment (ROI): A measure used to evaluate the efficiency of an investment.
• Ratio Analysis: A quantitative analysis of information in a company's financial statements.
• Responsibility Accounting: A system of accounting that segments financial data by responsibility centers.
• Management Audit: A systematic evaluation of the effectiveness of management practices.
• PERT and CPM: Project management techniques for scheduling project tasks.
• Management Information System: A system for managing and analyzing data to support decision-making.

Importance of Controlling

1. Accomplishing Organisational Goals: Measures progress and indicates corrective actions.
2. Judging Accuracy of Standards: Verifies if standards are accurate and objective.
3. Making Efficient Use of Resources: Reduces wastage and ensures effective resource use.
4. Improving Employee Motivation: Clarifies expectations and performance standards.
5. Ensuring Order and Discipline: Minimizes dishonest behavior and creates a disciplined environment.
6. Facilitating Coordination in Action: Ensures all activities are aligned with organizational goals.

Steps in the Controlling Process

1. Setting Performance Standards: Establish criteria for measuring performance.
2. Measurement of Actual Performance: Assess performance against standards using techniques like observation and reports.
3. Comparison of Actual Performance with Standards: Identify deviations between actual and desired results.
4. Analysing Deviations: Determine causes of deviations and their significance.
5. Taking Corrective Action: Implement changes to address deviations and improve performance.

Limitations of Controlling

• Difficulty in Setting Quantitative Standards: Challenges in defining measurable standards.
• Little Control on External Factors: Organizations cannot control external influences like government policies.
• Resistance from Employees: Employees may view control as restrictive.
• Costly Affair: Implementing control systems can be expensive, especially for small organizations.

Relationship between Planning and Controlling

• Interdependence: Planning provides the standards for controlling, while controlling ensures that plans are executed effectively.
• Feedback Loop: Controlling helps refine future planning based on past performance and deviations.

Techniques of Managerial Control

• Traditional Techniques: Personal observation, statistical reports, breakeven analysis, budgetary control.
• Modern Techniques: ROI, ratio analysis, responsibility accounting, management audit, PERT and CPM, Management Information System.