MODULE 5

CONTROLLING
 CONTROLLING

 Controlling is determining what is being

accomplished, evaluating the performance and if
necessary applying corrective measures, so that
the performance take place according to plans
 Nature of controlling

 Planning is the basis of controlling

 Action is the essence of control
 Delegation is the key to control
 Information is the guide to control
 Process of Controlling

1. Establishing Standards of Performance

› Select important functional areas like production,
marketing, HR, etc.
› Standards should be established in quantitative
terms as far as possible.
Eg. Cost should be reduced by 12%
Orders should be executed within 3 days
› Standards must be flexible in order to adapt to the
changing conditions
2. Measuring and Comparing actual results
against standards

 through personal observation, study of figures,

reports and charts, we can measure actual
performance
 If the output is above the standards and expenses are
below the standards, they are desirable variations
 Delay in delivery schedule is an undesirable variation
 Measurement can be done at various stages of the
total process
3. Taking Corrective actions

 Corrective action should be taken without

wasting of time
 Determine the root causes of deviation
› The causes can be inadequate equipment,
inadequate communication system, lack of
motivation, ineffective system of selection and
training, inadequate remuneration etc.
 Control Techniques

1.Budgetary control
Budgetary control involves the use of budgets
to plan, to coordinate and control day to day
operations of business, in accordance with the
overall objectives
Budget
Budget is a financial or quantitative statement
prepared prior to a definite period of time, for
the purpose of obtaining a given objective
 Zero base budgeting

 In zero base budgeting, the current years budget

is not taken as the base. The new budget is
prepared almost from scratch, as if all proposals
were absolutely new.
 2. Network Techniques
 Under network analysis, a project is broken down to
small activities or operations which are arranged in a
logical sequence.

 After this the order in which various operations

should be performed is divided

 The object of network analysis is to help in

planning, organising and controlling the operations to
enable the management in accomplishing the project
economically and efficiently.
 There are two types of network techniques
› 1. PERT (Program evaluation & Review Technique)

› 2. CPM ( Critical Path Method)

 3. MIS (Management Information system)
 MIS is a system designed to supply information required
for effective management of an organisation
 Objectives of MIS
› To provide the desired information in the right form to
the right person at the right time
› To supply the required information at a reasonable
cost
› To use the most efficient methods of providing data
› To provide necessary security and secrecy for
important and confidential information
› To keep the information up-to-date
 4. Standard costing
 Steps
› Setting of cost standards for various components of
cost such as raw materials, labour and overheads
› Measurement of actual performance
› Comparison of actual cost with standards cost laid
down
› Find the variation of actual cost from the standard cost
› Finding the causes of variations
› Taking necessary action to prevent the occurrence of
variations in future
 5. Internal auditing
 Internal auditing is a control technique used by modern
management.
 This is conducted by internal auditors who will be the
employees of the organisation
 They make an independent appraisal of financial and
other operations
 In addition, they evaluate company’s policies, plans
and management performance.
 They pinpoint drawbacks in the policies or plans and
give suggestions for eliminating defects
 Internal audit should be conducted regularly to keep
the employees always alert
 6. External auditing
 It is an independent appraisal of the organisation’s financial
accounts and statements
 The purpose of external audit is to ensure the interest of the
shareholders and other outside parties connected with the
company and to safeguard against the malpractices of
management
 The external auditor is a qualified person and he has to
certify the annual profit & loss account and balance sheet
after careful examination of the relevant books of accounts
and documents
 In case the external auditor is a negligent in performing his
duties or become party to any fraud or error committed by the
management, he will be liable under both civil and criminal
laws
 7. Reports

 A major part of control consists of preparing

reports to provide information to the management
for the purpose of control and planning
 8. Break Even Analysis

 It involves use of a chart to depict the overall

volume of sales necessary to cover cost.
 Break even point is the point at which the cost
and revenue of the enterprise are exactly equal.
 In other words, it is that point where the
enterprise neither earns a profit nor incurs a loss.
 Uses of Break Even Analysis

 Identifying the minimum sales volume necessary

to prevent a loss
 Identifying the minimum sales volume necessary
to meet established profit objective
 Providing information helpful in making
decisions on the effect of raising or lowering
prices
 Providing data helpful in decisions to withdraw
or add product lines
 Coordination

 It is the management of interdependence for

attaining the corporate goals
Need for coordination
1. Division of work
2. Interdependence of work
3. Subordination of individual interest to
organisational interest
 Requirements for excellent
coordination
 Direct contact
 Early start
 Continuity
 Clear-cut objectives
 Simplify the organisation
 Clear defenition of authority and responsibility
 Effective communication
 Effective leadership and supervision
 Types of coordination

1. Internal Coordination
Coordination among employees within the
organisation

2. External Coordination
Coordiination among suppliers, Govt. agencies,
competitors, customers, banks and with whom
the organisation have connections
3. Vertical Coordination
From superior to subordinates

4. Horizontal coordination
Coordination among employees of same level
 Techniques of coordination
 Chain of command – hierarchy of authority
 Rules, Procedures & Policies
 Planning
 Committees
 Induction / Orientation
 Training
 Incentives
 Liaison department
 Logical sequence of work flow
 Assignment

 I. Write short notes on

› 1. PERT & CPM
› 2. Selection

II. Planning without control is meaningless and control

without planning is a waste.” Illustrate
III. Write down the features of control

IV. What is meant by Organizational chart

V. Explain the benefits of Control system

VI. Discuss need and importance of coordination.

 What is meant by group decision
 What is the difference between formal & informal
organization?
 Define Authority, Responsibility and Accountability
 Describe the need for centralisation of authority
 Discuss the need for Decentralisation of authority