CONTROLLING

CLASS 12
CONTROLLING
Comparison of actual performance with the planned performance. If
there is any deviation then finding the reasons for such difference and
taking corrective measures or action to stop those reasons so that in
future there is match between actual and planned performance.
In other words, Controlling is comparison of actual performance with
standard, to estimate deviations, if any, and taking corrective actions
to achieve the desired tasks.
NATURE OF CONTROLLING

 Controlling is a goal-oriented function. Controlling function

makes sure every one follows the plan or work is accomplished
as per the plan and plan always aim at achieving organisational
goal.
 Controlling is a continuous process. It means that once the
actual performance and standard performance of a business are
compared and corrective actions are taken, the controlling
process does not end. Instead, the firms have to continuously
review the performance and revise the standards.
NATURE OF CONTROLLING
 Controlling is an all pervasive function. Controlling is not the task of top le
vel managers only but managers working at all the levels, i.e., top, middle and
operational level perform controlling function
 Controlling process is both a forward-looking and backward-
looking function. As a forward-looking function, it aims at improving the
future performance of an organisation on the basis of its past experiences.
However, as a backward-looking function, it measures and compares the actual
performance and planned performance (fixed in past) of the organisation.
 IMPORTANCE OF CONTROLLING
1. Accomplishing Organisational Goals
Organisation can keep the business activities on the right track and can achieve
the organisational goals effectively and efficiently, and take the necessary
corrective actions if required.
2. Judging Accuracy of Standards:
helps in keeping a check on the changes taking place in the business
environment and making required changes in the standards whenever it is
necessary.
3. Making Efficient Use of Resources
Helps in reducing wastage of resources, as it aims at ensuring that every
activity of the firm is performed according to the pre-determined goals.
IMPORTANCE OF CONTROLLING
4. Improving Employee Motivation
The employees know in advance on what standards their performance will be
measured, compared, and appraised. This set of pre-determined goals motivates them
to give a better performance.
5. Ensuring Order and Discipline
An efficient control system helps in creating an atmosphere of discipline and order in
the firm. Also continuous check on the employees ensures minimise undesirable
activities, such as theft, corruption, fraud, etc.
6. Facilitating Coordination in Action
Every employee and department of the organisation is governed by a pre-determined
set of goals. It also motivates employees in achieving these common goals through
coordination to avoid duplication of efforts.
RELATIONSHIP BETWEEN PLANNING
AND CONTROLLING

1. Nature:
Planning is the basic function of every enterprise to decide what is to be done,
how it is to be done, when it is to be done and by whom it must be done.
Planning 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 plan
and if there is any deviation, taking preventive measures to stop that deviation.
The meaning of controlling makes it dear that controlling function is undertaken
for right and timely implementation of plans.
RELATIONSHIP BETWEEN PLANNING
AND CONTROLLING

2. Planning and controlling are interdependent and interlinked.

Both functions always co-exist or have to exist together as one function depends on the other. The
controlling function compares actual performance with the planned performance and if there is no
planned performance then controlling manager will not be able to know whether the actual
performance is satisfactory or not. The base for comparison is given by planning to controlling
function.
On the other hand, the planning function is also dependent on controlling function as plans are
not made only on papers but these have to be followed and implemented in the organisation. The
controlling function makes sure that everyone follows the plan strictly. Continuous monitoring
and check in controlling make it possible that everyone follows the plan.
RELATIONSHIP BETWEEN PLANNING AND
CONTROLLING
3. Both are Forward-Looking Functions
• Both planning and control are concerned with the future activities of the firm. Planning
is always done for the future. And control too is a forward-looking activity.
• The past cannot be changed or controlled, we can only focus on controlling the future.
It is the objective of both these functions to combine and achieve the business
objectives and goals of the firm.
4. Planning is prescriptive whereas controlling is evaluative.
Planning is basically an intellectual process involving lot of thinking, comparison to
prescribe a particular course of action for achieving objectives. Controlling on the other
hand, evaluate or check whether the desired cause of action is followed or not
CONTROLLING PROCESS

Step 1: Establishment of standards:

Standards are the plans or the targets which have to be achieved in the course of business function.
Standards can be classified as
 Measurable or tangible - Those standards which can be measured and expressed are called as
measurable standards. They can be in form of cost, output, expenditure, time, profit, etc.
 Non-measurable or intangible- There are standards which cannot be measured monetarily. For
example- performance of a manager, deviation of workers, their attitudes towards a concern.
These are called as intangible standards.
Controlling becomes easy through establishment of these standards because controlling is exercised
on the basis of these standards.
CONTROLLING PROCESS
Step 2: Measurement of performance:
Finding out deviations becomes easy through measuring the actual performance. Performance
levels are sometimes easy to measure and sometimes difficult. Measurement of tangible standards
is easy as it can be expressed in units, cost, money terms, etc. Quantitative measurement becomes
difficult when performance of manager has to be measured. Performance of a manager cannot be
measured in quantities. It can be measured only by
• Attitude of the workers
• Their morale to work
• The development in the attitudes regarding the physical environment, and
• Their communication with the superiors.
It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.
CONTROLLING PROCESS
Step 3: Comparison of actual and standard performance
Deviation means gap between actual performance and the planned targets.
Manager has to find out whether the deviation is positive or negative or whether the actual performance is in
conformity with the planned performance. He has to find out those deviations which are critical and important
for business. Minor deviations have to be ignored. Major deviations like replacement of machinery,
appointment of workers, quality of raw material, rate of profits, etc. should be looked upon consciously.

Once the deviation is identified, a manager has to think about various cause which has led to deviation. The
causes can be-
• Erroneous planning,
• Co-ordination loosens,
• Implementation of plans is defective, and
• Supervision and communication is ineffective, etc
CONTROLLING PROCESS

Step 4: Taking remedial actions

Once the causes and extent of deviations are known, the manager has to detect
those errors and take remedial measures for it. There are two alternatives here
• Taking corrective measures for deviations which have occurred; and
• After taking the corrective measures, if the actual performance is not in
conformity with plans, the manager can revise the targets. It is here the
controlling process comes to an end. Follow up is an important step because it
is only through taking corrective measures, a manager can exercise controlling.