Controlling

• the function of management which helps in measuring the progress towards the
organizational goals & brings any deviations, & indicates corrective action. 
• 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.

Nature of Controlling Function of Management

1. Controlling is an end function- A function which comes once the

performances are made in confirmities with plans.
2. Controlling is a pervasive function- which means it is performed by managers
at all levels and in all type of concerns.
3. Controlling is forward looking- because effective control is not possible
without past being controlled. Controlling always look to future so that follow-
up can be made whenever required.
4. Controlling is a dynamic process- since controlling requires taking reviewal
methods, changes have to be made wherever possible.
5. Controlling is related with planning- Planning and Controlling are two
inseperable functions of management. Without planning, controlling is a
meaningless exercise and without controlling, planning is useless. Planning
presupposes controlling and controlling succeeds planning.

Steps in Control Process

1. Establish Standards
 A control standard is a target against which subsequent
performance will be compared.
 Control standards should also be consistent with the organization’s
goals.
 Common examples of standards are as follows:
 a. Sales targets – which are expressed in quantity or monetary
terms
b. Production targets – which are expressed in quantity or quality
c. Worker attendance – which are expressed in terms of rate or
absences
d. Safety record – which is expressed in number of accidents for
given periods
e. Supplies used – which are expressed in quantity or monetary
terms for a given periods

2. Measure Actual Performance

 The measurement of performance against standards should be on a forward
looking basis so that deviations may be detected in advance by appropriate
actions.
 For control to be effective, performance measures must be valid.
 Examples:
o Daily, weekly, and monthly sales figures measure sales performance, and
production performance may be expressed in terms of unit cost, product
quality, or volume produced.
o Employees’ performance is often measured in terms of quality or quantity
of output, but for many jobs, measuring performance is not so
straightforward.

3. Compare Performance with Standards

 The third step in the control process is comparing measured performance
against established standards.
 The timetable for comparing performance to standards depends on a variety of
factors, including the importance and complexity of what is being controlled.
 Performance may be higher than, lower than, or identical to the standard.
 Example: Actual production output, for instance, will compared with the target
output.

4. Take Corrective Action

 After actual performance has been measured compared with established
performance standards, the next step in the controlling process is to take
corrective action, if necessary.
 Corrective action focuses on correcting organizational mistakes that hinder
organizational performance.
 Before taking any corrective action, however, managers should make sure that
the standards they are using were properly established and that their
measurements of organizational performance are valid and reliable.

Characteristics of Effective Control Systems

An effective control system should satisfy most of the following criteria:
 Effective. Control systems should measure what needs to be measured and
controlled.
 Efficient. Control systems should be economical and worth their cost.
  Timely. Control systems should provide the manager with information in
time to take corrective action.
 Flexible. Control systems should be tools, not straitjackets, and should be
adjustable to changing conditions.
 Understandable. Control systems should be easy to understand and use,
and they should provide information in the format desired by the users.
 Tailored. Where possible, control systems should deliver to each level of
manager the information needed for decisions, at the level of detail
appropriate for that level.
 Highlight deviations. Good control systems will “flag” parameters that
deviate from planned values by more than a specified percentage or amount
for special management attention.
 Lead to corrective action. Control systems should either incorporate
automatic corrective action or communicate effectively to an agent that will
provide effective action; this is why the control system exists.

Types of Control Systems

Controls can be categorized according to the time in which a process or activity occurs
1. Feed forward controls
 also known as preliminary, preventive, or proactive control.
 involves anticipating trouble, rather than waiting for a poor outcome and
reacting afterward; it is about prevention or intervention.
 An example of proactive control is when an engineer performs tests on
the braking system of a prototype vehicle before the vehicle design is
moved on to be mass produced.

2. Concurrent controls:
 sometimes called screening controls; occur while an activity is taking
place.
 Example – the team leader checks the quality or performance of his
members while performing.

3. Feedback controls
 occurs after an activity or process is completed; is reactive.
 For example, feedback control would involve evaluating a team’s progress by
comparing the production standard to the actual production output. If the
standard or goal is met, production continues. If not, adjustments can be
made to the process or to the standard..

Financial and Non-Financial Controls

 Financial the control of financial resources as they flow into the organization
(such as revenues and shareholder investments), are held by the organization
(for example, working capital and retained earnings), and flow out of the
organization (like pay and expenses).
 Managers need to know about financial controls because their continued
employment may be dependent upon how they support and contribute to their
company’s “bottom line.”
 Financial controls include budgets, financial statements, financial ratios, and
financial audits.
A. Budgetary Controls
 Budgets are perhaps the most common and universally used control
techniques.
 Budgets are plans for the future allocation and use of resources (usually, but
not always financial ones) over a fixed period of time.
 The budgeting process forces managers to think through future operations in
quantitative terms and obtain approval of the planned scope of operations, and
it provides a standard of comparison for judging actual performance in the
control process.
Types of Budget
 Organizations use various types of budgets to help manage their control
functions.
 The three major categories of budgets are financial, operating, and
nonmonetary.
 There are several different types of budgets in each category.
 To be most effective, each budget must be carefully matched with the specific
function being controlled.

B. Financial Statement
 A profile of some aspect of an organization’s financial circumstances
 The two most basic financial statements prepared and used by virtually all
organizations are a balance sheet and an income statement.

 Balance Sheet: List of assets and liabilities of an organization at a specific

point in time
 Income Statement: A summary of financial performance over a period of time,
usually one year
C. Financial Ratios
  are ratios of two financial numbers taken from the balance sheet and/or the
income statement.
 These ratios provide a framework for historical comparisons within the firm and
for external benchmarking relative to industry performance. They can also be
used to set financial targets or goals for the firm.
 Some of the commonly used financial ratios are:

Quality Control Management

 One of the most important non-financial control is the Quality Control
Management.
 involves controlling, monitoring, and modifying tasks to maintain a desired level
of quality or excellence
 At the core of quality management is customer satisfaction. Companies pursue
the level of quality for their products and services that customers expect and
desire. 
 Total Quality Management (TQM) and Six Sigma are well-known programs for
managing quality.
 The following video explains the role TQM plays in an organization as a whole:
https://youtu.be/85Y8iBhzqwk