CONTROLLIN

G
What is Controlling?
• refers to the process of ascertaining whether organizational
objectives have been achieved.

• is checking current performance against pre-determined

standards contained in the plans, with a view to ensure adequate
progress and satisfactory performance (EFL Branch, 1916).

• is the measurement and correction of performance in order to

make sure that enterprise objectives and the plans devised to
attain them are accomplished (Koontz, H., 1916).
Concept of
Where we are? (Measurement)
It is the process of measuring actual
performance and comparing with standards o
Controlling
How can we get on track
again? (Correction)
identify any deviation. It also helps in taking
corrective actions to meet the standards. It
Where we are? discovers the deviations and takes corrective
(Measurement) measures.
It also analyzes whether the
action taken is as planned
and taking corrective action.
It is known as the key to
management for Where we planned to be?
implementation of the plan (Evaluation)
in the actual field. It also It helps to check the errors and
prevents and corrects take corrective action, so it is
deviation from plans. known as an important function of
How can we get Where we management. The standard
on track again? planned to be?
(Evaluation)
deviations are minimized and the
(Correction)
desired goals of the organization
are achieved in the desired
manner.
 Importance of
Controlling
Accomplishing Organizational Goals
The controlling guides the activities of subordinates in achieving the goals. It ensures
the use of human and material resources in the best possible manner so that there may
be pre-determined objectives of the organization.

Judging Accuracy of the Standards

A manager compares the actual work performance with the standards while performing
the function of control. He tries to find out whether the accuracy of the standards is not
more or less than the general standards. In case of the needs, they are redefined.

Improves Efficiency
The organization sets the goal for the future which is not certain. So, controlling is
the way which focuses on uncertainty and to attain the goals. Regular control shows
the deviation in plan and actual achievement which helps to keep the staffs on the
right track.
 Importance of
Controlling
Improve Employee Motivation
Controlling makes all the employees work with complete dedication as they know that
their work performance will be evaluated. Their identity will be established if the
progress report is satisfactory in the organization.

Ensuring Order and Discipline

The implementation of controlling help to check all the undesirable activities like theft,
corruption, delay in work and uncooperative attitude.

Facilitate Coordination
A good control system facilitates coordination among the departments and
employees. Controlling facilitates coordination by providing the unity of direction. It
helps to secure coordination by avoiding the overlapping and duplication of works
and promptly correcting the deviations.
 Importance of
Controlling
Guides in Achieving Goals
Process of control provides standards or norms for appraisal and management of
actual performance. It provides feedback information for taking remedial actions.
Controlling managers keep the organization on the right track and ensure attainment
of planned goals.

Simplifies Supervision
It helps to simplify the task of the supervisor by printing out significant deviations
from the standards of performance. It keeps the subordinates under check and
facilitates to maintain and develop the discipline among them. It helps to check and
supervise the activity of the organization.

Effective Delegation of Authority

The delegation in authority will be meaningless without an adequate system of
control.

Corrective Action
When the results do not match the objectives then corrective actions need to be taken
to correct the weakness and problems.
 STEPS IN CONTROL PROCESS
Established Performance Actual
Take
Objectives and Standards Measure Actual Performance Match
Corrective
Performance the Standards
Action

DO NOTHING

Established Performance Objectives & Standards 2nd Measure Actual Performance

1st
- Where adjustments could be made.
Standards differ among various organizations. What has to be - - the adjustments will depend on the actual findings.
achieved must first be determined: - Measuring tools differ from organization to
organization, as each have has its own unique
a. Sales Targets – are expressed in quantity or monetary objectives.
terms.
b. Production Targets – are expressed in quantity and Examples:
quality. a. Some firms will use annual growth rate as standard
c. Worker Attendance – expressed in terms of rate of basis.
absences. b. Other firms will use some other tools like the market
d. Safety Records – expressed in number of accidents for share approach and position in the industry.
given periods.
e. Supplies Used – expressed in quantity or monetary terms
for given period.
 STEPS IN CONTROL PROCESS
Established Performance Actual
Take
Objectives and Standards Measure Actual Performance Match
Corrective
Performance the Standards
Action

DO NOTHING

Comparing Actual Performance to Objectives and 4th Take Corrective Action

3rd Standards
- The purpose of comparing actual performance with the
- Once actual performance has been determined, this will desired result is to provide management with the
be compared with what the organization seeks to achieve. opportunity to take corrective action when necessary.

Example: Examples:
a. Actual production output will be compared with the target a. Hire additional personnel
output. b. Use more equipment
c. Require overtime work
 3 Types of
control
Input/
Pre-
operations
Phase
Feedforward Control
- A control measure when
management anticipates
problems and prevents their
occurrence.
- This provides the assurance that
the required human and
nonhuman resources are in
place before operations begin.
Process/Act
ual
Operations
Phase
Concurrent Control
- corrects problems as they happen.
- To be undertaken when operations are
already ongoing and measures to detect
variances are made.
- It is always possible that deviations
from standards will happen in the
production process.
- When such deviations occur,
adjustments are made to ensure
compliance with requirements.
Information on the adjustments is also
necessary inputs in the pre-operations
phase.
Output/Post
Operations
Phase
Feedback Control
- Corrects problems after they occur.
- Evaluating a completed activity and
deriving required steps for improving
the activity.
- Its features are corrective actions
aimed at improving future activities.
- It validates objectives and standards.
- If accomplishments consist only of a
percentage of standard requirements,
the standard may be too high or
inappropriate.
 Components of Organizational Control Systems
Strategic Plan
- Provides the basic control mechanism for the organization.
Long-Range Financial Plan
- The financial plan recommends a direction for financial activities. (ex., long lead times
needed for capital projects).

Operating Budget
- This indicates the expenditures, revenues, or profits planned for some future period
regarding operations. The figures appearing in the budget are used as standard
requirements for performance.

Performance Appraisal
- Measures employee performance. This also function as effective checks on new policies
and programs.

Statistical Reports
- Contains data on various developments within the firm. These are labor efficiency rates,
quality control rejects, accounts receivable and payable, sales report, accident reports, and
power consumption reports.

Policies and Procedures

- Procedures refer to the framework within which the objectives of the organization must be pursued.
- Procedure is a plan that describes the exact series of actions/steps to be taken in a given situation.
 Strategic Control Systems
Financial Analysis
- the success of most organizations depends heavily on its
financial performance.
a. Balance Sheet – contains information about the company’s
assets, liabilities, and capital accounts. Comparing the current
balance sheet accounts with previous ones may reveal
important changes which may provide clues to performance.
b. Income Statement – contains information about the
company’s gross income, expenses, and profits. When
compared with previous year’s income statement, any change
in the figure provided will help management determine if the
company did well on the current year.
Financial Ratio Analysis
- This is more elaborate approach used in controlling business
activities.
- Under this method, one account appearing in the financial
statement is paired with another to constitute a ratio.
- The result is compared with a required norm, which is usually
related to what other companies in the industry have achieved,
or what the company has achieved in the past.
- When deviations occur, explanations are sought in preparation
for whatever action is deemed necessary.
 Liquidity Ratios Efficiency Ratios
-  Are used to assess the ability of a company to meet -  Show how certain assets/ liabilities are used
its current obligations. efficiently in the production of goods and services.
a. Inventory Turnover Ratio =
a. Current Ratio =
b. Fixed Assets Turnover =
b. Acid-test Ratio = Financia
l Ratio
Analysi
Financial Leverage Ratios Profitability Ratios
s -  Measures how much operating income/net income a
 - A grouping of ratios designed to assess the balance
of financing obtained through debt and equity company is able to generate in relation to its assets,
sources. owner’s equity and sales.

a. Debt to Total Assets Ratio = a. Profit Margin Ratio =

b. Times Interest Earned = b. Return on Assets Ratio =

c. Return on Equity Ratio =

 Identifying Control Problems

Executive Reality Check

Comprehensive Internal Audit

Symptoms of Inadequate Control