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Subject: Business Studies
Chapter: Controlling
Meaning of Controlling
• Controlling is the process of monitoring, comparing, and correcting the activities of
employees to ensure that organisational goals are achieved as planned.
• It makes sure that “actual performance matches planned performance.”
• Example: A company sets a target of producing 1,000 shirts in a month. At the end of the
month, actual production is checked against the target. If only 900 are produced, corrective
action is taken.
Nature / Features of Controlling
1. Goal–oriented
Controlling always focuses on the goals set in the plan. It checks whether the activities are
moving in the right direction or not. Without clear goals, controlling has no meaning.
Example: If a company has a sales target of ₹5 lakh, controlling will check whether actual
sales are closer to this target or not.
2. Pervasive
Controlling is required at all levels of management and in every type of organisation. The
only difference is the scope — top managers control overall results, middle managers
control departmental work, and supervisors control day-to-day tasks.
Example: A principal controls the whole school, HODs control their departments, and
teachers control students in the classroom.
3. Continuous process
Controlling is an ongoing activity. It does not stop after comparing once; it continues at
every stage of work so that mistakes can be corrected on time.
Example: In a factory, production is checked daily, weekly, and monthly to ensure the
yearly target is achieved.
4. Comparative process
Controlling is always based on comparison. Actual performance has no meaning until it is
compared with the standards set in planning. This comparison shows whether things are on
track or if there are deviations.
Example: If the plan was to produce 1,000 units and actual is 950, comparison highlights a
shortfall of 50 units.
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5. Action–oriented
Controlling does not end with pointing out mistakes. Its main purpose is to take corrective
action so that performance matches the plan. It is a forward-looking step to ensure future
work is better.
Example: If students perform poorly in a test, the teacher gives extra classes as corrective
action
Importance of Controlling
1. Achieves goals
The main aim of controlling is to make sure that actual work is going as planned. By
keeping a regular check, controlling ensures that the organisation stays on the right track to
achieve its goals.
Example: If a target of 500 mobiles per day is set, controlling ensures production is close to
this figure.
2. Efficient use of resources
Controlling reduces wastage and helps in the proper use of resources like money,
manpower, and material. Resources are limited, so their careful use is important for growth.
Example: If electricity consumption is above the set level, controlling will point it out and
help reduce wastage.
3. Improves employee motivation
When employees get feedback on their work, they feel more responsible and motivated. If
their performance is good, they get appreciation, and if it is not up to the mark, corrective
training or guidance is given.
Example: A worker is praised for meeting targets, while another is trained to improve his
speed.
4. Facilitates coordination
Controlling helps bring together the efforts of all departments by checking that each one is
working according to the plan. This creates unity and avoids conflicts.
Example: In a company, the production, sales, and finance departments are controlled in
such a way that all move towards the same sales target.
5. Helps in decision-making
By pointing out deviations and their causes, controlling gives managers the information
they need to make better decisions. It guides whether corrective action is needed and what
changes should be made in future plans.
Example: If sales are falling due to poor advertising, the manager decides to increase the
budget for marketing.
Relationship between Planning and Controlling
1. Controlling is based on planning
Planning sets the goals and standards, and controlling checks whether those goals are being
achieved. Without planning, there would be no basis for controlling.
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Example: If planning fixes a sales target of ₹5 lakh, controlling compares actual sales with
this target.
2. Planning without controlling is meaningless
A plan will remain only on paper if there is no controlling to ensure its implementation.
Controlling makes sure that activities are moving as per plan and deviations are corrected.
Example: A school may plan to finish the syllabus by January, but only through controlling
can the principal check whether teachers are actually on track.
3. Planning is prescriptive, controlling is evaluative
Prescriptive means it tells what is to be done in the future, i.e., it prescribes the targets and
actions. Evaluative means it judges and measures how well the plan has been carried out.
Example: Planning prescribes “produce 500 units in a month,” while controlling evaluates
whether 500 units were actually produced and why there is a gap if not.
4. Both are backward-looking and forward-looking
• Backward-looking: Controlling looks back to compare past performance with planned
standards.
• Forward-looking: Planning uses this information and feedback to improve future decisions
and set better targets.
Example: If last month’s production was lower than planned, controlling identifies the
reasons, and planning uses this feedback to avoid the same problem in the future.
• In short, Controlling looks back to check performance, but works forward by taking
corrective action. Planning learns from the past, but is always aimed at the future.
“That’s why planning and controlling are called inseparable twins of management, one sets the
direction, the other ensures it is followed.”
Process of Controlling
1. Setting Performance Standards
• The first step is to decide the standards of work or targets which should be achieved.
• Standards act like a reference point to judge performance later.
• Standards can be:
• Quantitative (in numbers): e.g., produce 500 units in a month, or achieve sales of ₹5
lakh.
• Qualitative (related to quality/behaviour): e.g., improve customer service, reduce
wastage, maintain discipline.
• Standards should be clear, specific and realistic so that workers know what is expected.
• Example: A shoe factory sets a target of producing 200 shoes per day.
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2. Measuring Actual Performance
• Once work is done, the next step is to measure how much has actually been achieved.
• Measurement can be done by: reports, supervision, quality checks, customer feedback,
financial statements, etc.
• Example: Checking daily production reports to know how many shoes were really produced
in the factory.
3. Comparing Actual Performance with Standards
• The actual work is then compared with the standards set in step 1.
• This helps to find out whether performance is as expected, above expectation, or below
expectation.
• The difference between standard and actual is called a deviation.
• Example: If the target was 200 shoes per day but only 180 are made, the deviation = –20.
4. Analysing Deviations
After comparing standards with actual performance, managers find out the differences, called
deviations. But not every deviation requires action. Small differences are natural and can be
ignored, while major deviations need careful study.
To handle this, managers mainly use two techniques:
• Management by Exception: Managers pay attention only to significant deviations and
ignore minor ones. This saves time and effort. For example, if a target is 200 units and
actual production is 198 units, it can be ignored. But if production falls to 160 units, then it
requires immediate action.
• Critical Point Control: Not all areas of performance are equally important. Managers
focus more on key areas which directly affect the organisation’s success. For example, in a
car company, the engine’s performance is more important than the colour of the seats.
Positive and Negative Deviations
Deviations can be of two types — positive when actual performance is above the set target, and
negative when it is below the target.
For example: If the target was 200 units and production is 220, it is a positive deviation. If
production is only 180, it is a negative deviation.
“But in controlling, both types of deviations are studied because even positive ones (like extra
production) may cause problems such as overstocking or higher costs.”
5. Taking Corrective Action
The last and most important step is to take corrective action to remove the causes of deviations and
bring the work back on the planned path. Without corrective action, the whole controlling process
has no meaning.
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Corrective action may involve different measures depending on the cause:
• If workers are unskilled → give them proper training.
• If machines are not working properly → repair or replace them.
• If motivation is low → introduce incentives or better working conditions.
• If planning itself was unrealistic → revise the standards.
Example: If a factory is producing 150 units instead of 200 due to frequent machine breakdown,
the corrective action will be to repair or replace the faulty machines so that production comes back
to the target level.
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