Controlling

Nature of Controlling

• It is a goal-oriented function — it exists to ensure objectives are met.
• It is pervasive — every manager at every level performs controlling.
• It is a continuous process — not a one-time activity.
• It is forward-looking — though it deals with past performance, its purpose is to improve future results.
• Controlling and planning are inseparable — plans provide the standards against which performance is measured.

Importance of Controlling

1. 1.Accomplishes organisational goals — detects and corrects deviations in time.
2. 2.Judges accuracy of standards — reveals whether set standards were realistic.
3. 3.Makes efficient use of resources — prevents wastage by monitoring activities.
4. 4.Improves employee motivation — employees perform better knowing their work is evaluated.
5. 5.Ensures order and discipline — creates a culture of accountability.
6. 6.Facilitates coordination — ensures all departments align toward common goals.

Limitations of Controlling

• Difficulty in setting quantitative standards for certain activities (e.g., human behaviour, creativity).
• Little control over external factors (government policy, competition, economic conditions).
• Can be expensive if not carefully designed (cost of monitoring may exceed benefits).
• May create psychological resistance among employees who feel over-monitored.

Controlling Process (Steps)

Step 1 — Setting Performance Standards
Standards are benchmarks against which actual performance is measured. They may be quantitative (units produced, revenue, time) or qualitative (customer satisfaction, employee morale).

Step 2 — Measurement of Actual Performance
Performance is measured through personal observation, statistical reports, oral/written reports, and management by exception. The more objective and reliable the measurement, the more effective the control.

Step 3 — Comparison of Actual with Standard
Actual performance is compared against the set standard. The result is the deviation (positive or negative). Critical point control focuses attention on key areas where deviation has the most impact.

• Step 4 — Analysing Deviations
• Not all deviations require action. The manager uses two concepts:
• Critical Point Control — focus on key result areas that have the greatest impact on performance.
• Management by Exception (MBE) — only significant deviations are reported to higher management; routine variations are handled at lower levels.

• Step 5 — Taking Corrective Action
• If the deviation is significant, the manager must:
• Revise standards if they were unrealistic.
• Identify the root cause of the deviation.
• Take corrective steps: additional training, equipment repair, process change, etc.

Relationship Between Planning and Controlling

• Planning and controlling are two sides of the same coin:
• Planning provides standards for controlling.
• Controlling provides feedback to improve future planning.
• Together they ensure that what is planned is achieved; if not, the next plan is revised.

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Worked Example:
A company set a monthly production target of 5,000 units. Actual output was 4,200 units.

1. 1.Deviation = 4,200 - 5,000 = -800 units (unfavourable)
2. 2.Significance: This is a 16% shortfall — significant, so it requires attention (management by exception).
3. 3.Analysis: Investigation reveals 2 machines broke down for 5 days.
4. 4.Corrective action: Schedule preventive maintenance to avoid future breakdowns.

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