CONTROL:

Control function is complementary to other management functions and

considered as NERVOUS SYSTEM of body of knowledge that reports the function of the
parts of the body to the whole system. It measures the deviations from the desired course
of action and thereby suggests for desired direction.

Definition: Controlling is the process of influencing the performance or executing

the supervision, so that the results of organizational efforts will reach the expectations.

23
Massie stated four essential elements of control as follows:

!
A pre-determined criterion / goal / benchmark.
!
A means of measuring current activity quantitatively, if possible.
!
A means of comparing current activity with a prefixed criterion.
!
Some means/measures of correcting current activity to achieve desired criterion/
goal.
Control does not mean restriction of power over subordinates. Control system
sounds a warning when necessary for taking up remedies for problems. Workers in general
make mistakes, so the plans finally could not be executed according to schedule. Then
there will be great need for having control system to set right the things. Through proper
controlling, managers would become aware of weak spots in organizational, directional and
co-ordinating efforts and operations of the business.

Another important purpose is to evaluate the progress being made towards

organizational goals. In the absence of control system employees can not respect the
programmes, disregard and in-accuracy are likely to [Link] control programmes should
be checked periodically and reviewed so that the irrelevant control programmes can be
dropped.

To be successful, the agribusiness manager must apply this functional knowledge and
ability to each of four basic areas of agribusiness viz., financial management and
planning, marketing and selling, production and operations, and personal and human
dimension.

24
Fundamentals of AgriBusiness Management

Lecture 7
CONTROLLING

Control means the power or authority to direct, order or restrain. In the context of an enterprise, control may be
defined as “comparing operating results with the plans, and taking corrective action when results deviate from the
plans”.
Control require two things first, that there is a clear – cut and specific plan according to which any work is to proceed.
Secondly, that it is possible to measure the results of operations with a view to detecting deviations.

Identification of Evaluation of Actual Measurement of Actual Actual Perfor-

Deviations Performance Performance mance

Evaluation of Actual Measurement of Actual Actual Perfor-

Identification of Performance Performance mance
Deviations

Fig. 7.1. Steps in Controlling Process

72
Fundamentals of AgriBusiness Management

Need for Control

A control system is needed for three purposes to
i) measure progress
ii) uncover deviation and
iii) taking corrective action
To Measure progress
The control process measures progress towards those goals. In an undertaking, control consists in varying whether
everything occurs in conformity with plan adopted, the instructions issued and principles established.

To Uncover Deviations
Once a business organization is set into motion towards its specific objectives, events occur that tend to pull it „off
target‟. Major events which tend to pull on organization „off target‟ are as follows:
i) Changes
ii) Complexity
iii) Mistakes
iv) Delegation
To Indicate Corrective Action
Controls are needed to indicate corrective actions. They may reveal that plans need to be redrawn or goals needed to
be modified or their is need for reassignment or clarification of duties or additional staffing.
Steps in a Control Process
There are three basic steps in control process:
i) Establishing standards
ii) Measuring and comparing actual against standards
iii) Taking corrective action

73
Fundamentals of AgriBusiness Management

Establishing Standards
Establishing standards against which results to be measured. Identify key areas for establishing standards like
profitability, market position, productivity etc.

i) Physical standards
 Labour hours per unit of output
 Level of production per machine hour
Cost Standard
Direct and indirect costs per unit produced, material cost per unit, selling cost per unit of sale etc.
Revenue Standard
Average sales per customer, sales per capita in a given market area etc.

Capital Standard
Rate of return on capital invested Current asset / current liabilities = current ratio.
Intangible standard
Competence of manager and employees. Standards should emphasis the achievement of result more than conformity
to rules to methods.
Measuring and Comparing Actual Results Against Standards
Measurement of performance can be done by personal observation while they are engaged in work and by a study of
summaries of figures, reports, charts and statements.
Desirable Variations
Output above the standard or expenses below the standard.
Undesirable Variations
A variation in the delivery schedule agreed upon with the customer, or variations in diesel consumption by vehicles.

74
Fundamentals of AgriBusiness Management

Who to Introduce a Control System

Whether measurement and comparison are to be done at stages in the total process or at the end. It depends upon
purpose. If the purpose of control is to catch trouble while it is forming, then this should be done at various strategic
points before the end of the process.
Taking Corrective Action
Compare actual performance with prescribed standards and find deviations. Corrective action should be taken
without wasting of time so that normal position can be restored quickly. Identify the causes for deviations like
inadequate and poor equipment and machinery, inadequate communication system, lack of motivation of
subordinates, defective system of training and selection of personnel, defective system of remuneration etc.

Important Devices or Tools of Control

1. Traditional Devices
1. Budgeting or budgetary control
2. Cost control
3. Production control
4. Inventory control
5. Break-even point analysis
6. profit or loss control
7. Statistical Data Analysis
8. Audit
II. Modern Devices
1. Return on Investment Control
2. Programme Evaluation and Review Technique (PERT)
3. Management Information System (MIS)
4. Cybernetics
5. Management Audit
75

[Link]
Fundamentals of AgriBusiness Management

Traditional Devices
1. Budgetary Control
A budget is a financial plan for a definite period time. Budgetary control evolves a course of action that would make
the realization of the budgeted targets possible. Zero-based budgeting as a method of budgeting under which all
activities are reevaluated each time a budget is formulated.
2. Cost Control
It refers to control of all the costs of an undertaking, both direct and indirect, in order to achieve cost effectiveness in
business operations.
3. Production Control
Production control is the process of planning production in advance of operations, establishing the exact route of each
individual item, part or assembly, setting, starting and finishing dates for each important item, assembly and the
finished product; and realizing the necessary orders as well as initiating the required follow up to effect the smooth
functioning of the enterprise.
4. Inventory Control
It refers to controlling the kind, amount, location, movement, and timing of the various commodities used in and
produced by the industrial enterprises.
5. Break – Even Point Analysis
The break even point may be defined as the point when sales revenue is equal to total cost (fixed and variable). In
other words, it represents the level of activity when there is neither any profit nor loss.
Co s t & Re v n u

76

[Link]
Fundamentals of AgriBusiness Management

Total Revenue
Y Break even point
Profit
Total Cost
Costs & Revenue (Rs)

loss
Fixed
Cost

Break even output

Units of Output X
Fig. 5.2. Break even point analysis

Selling Price :: Rs.200

Variable Cost Rs.300
Contribution
Per unit : Rs.100
F.C. : Rs.1,50,000
B.E. Point : 1,50,000 / 100
= 1500 units

77

[Link]
Fundamentals of AgriBusiness Management

Fixed overhead
Breakeven point = ----------------------------
Contribution

Contribution = Sales revenue – Variable cost

6. Profit and Loss Control

Profit and Loss Control refers to a control system under which sales, expenses, and hence profits of each branch or
“product division” are compared with those of other branches and product divisions, as well as with historical trends,
with a view to measuring deviations and taking necessary corrective action.
7. Statistical Analysis
Comparison of ratios, percentages, averages etc. of different periods can be done to monitor – deviations and their
causes.
8. External and Internal Audit
External audit is enforced by law in respect of all joint stock companies, co-operatives etc. Its objective is to safeguard
the interest of the share holder against the malpractices of management.
Firms may also have internal audit under which staff members of the company may verify financial transactions and
financial records for analyzing the overall control system of the organization.

78

[Link]