Controlling

• It ensures that activities are carried out as planned and that

organizational resources are used effectively and efficiently to
achieve goals.
• Simply put, Controlling means comparing actual performance with
planned performance, identifying deviations, and taking corrective
actions.
Nature of Controlling
• Pervasive Function
• Present at all levels of management – top, middle, and
lower.
• Every manager, whether in a business, school, hospital, or
club, must exercise control.
• Continuous Process
• Not one-time; controlling goes on throughout the life of
the organization.
• After planning → controlling → planning again (cycle
continues).
• Backward & Forward Looking
• Backward: Measures past performance against standards.
• Forward: Provides lessons for better planning in the
future.
• Primary Function
• Essential part of every managerial activity, not optional.
Why Controlling is Important?

• Helps in achieving organizational goals.

• Ensures optimum use of resources.
• Detects deviations and errors on time.
• Improves future planning.
• Brings discipline and order in the organisation.
Importance of Controlling
1. Accomplishing Organisational Goals
• The primary purpose of controlling is to ensure
that organisational objectives are achieved.
• It measures actual performance, compares it
with the standards, and identifies deviations.
2. Judging Accuracy of Standards
• Controlling helps management evaluate whether
the standards set in planning are realistic,
accurate, and fair.
• If standards are found to be too rigid, too lenient,
or outdated due to environmental changes,
controlling highlights this need for revision.
3. Making Efficient Use of Resources
• Organisational resources such as men, money,
materials, and machinery are limited and
valuable.
• Controlling reduces wastage, misuse, and
inefficiency by ensuring that work is performed
in accordance with set norms and standards.
4. Improving Employee Motivation
• A sound control system clarifies what is
expected of employees and the performance
standards against which they will be evaluated.
• This certainty motivates employees to put in
better efforts, knowing their work will be
assessed on objective grounds.
5. Ensuring Order and Discipline
• Controlling creates an atmosphere of order and
discipline in the organisation.
• Regular monitoring of employee performance
reduces dishonest practices, negligence, and
misconduct.

6. Facilitating Coordination in Action

• Through predetermined standards and
objectives, controlling brings unity of direction
among different departments and individuals.
• The efforts of all units are coordinated,
duplication of work is avoided, and conflicts are
minimised.
Limitations of Controlling

1. Difficulty in Setting Quantitative Standards

• A control system works best when standards can be expressed in measurable or
quantitative terms.
• However, in areas such as employee morale, job satisfaction, or human behavior,
it is difficult to define standards quantitatively.

2. Little Control over External Factors

• Managers cannot exercise control over many external factors that affect
organizational performance.
• Changes in government policies, economic conditions, technological
developments, or increasing competition often lie beyond the scope of
management’s control.
3. Resistance from Employees
• Sometimes employees view control as a restriction on their freedom.
• They may feel that close supervision or strict monitoring (for example,
through CCTV cameras) shows a lack of trust in them.
4. Costly Affair
• Designing and maintaining a good control system involves heavy
expenditure, time, and effort.
• For small enterprises, installing elaborate control mechanisms may
not be financially feasible.
• Managers must carefully evaluate whether the cost of operating a
control system is justified by the benefits derived from it.
Relationship between Planning and Controlling
• Planning and controlling are often called the inseparable twins of management
because they are closely linked and reinforce each other.

1. Interdependence of Planning and Controlling

• Planning provides the basis for controlling:
• Control is only possible when performance standards are already set.
• These standards are given by planning.
• Controlling ensures the success of planning:
• It monitors performance, finds deviations, and applies corrective actions to
keep activities aligned with plans.
• Without planning → no basis of control.
• Without controlling → planning becomes meaningless.
2. Nature of Planning and Controlling
• Planning is prescriptive: It decides what, how, and when tasks should
be done (future course of action).
• Controlling is evaluative: It checks whether actions match the plan
and suggests corrections.
• 3. Forward-looking vs. Backward-looking
• Planning: Forward-looking, as it is based on forecasts and future
objectives.
• Controlling: Backward-looking, as it compares actual results with past
standards.
• However:
• Planning uses past experiences to improve the future.
• Controlling also looks forward by suggesting improvements for future plans.
• Therefore, both functions are forward-looking and backward-looking.

• 4. How They Reinforce Each Other

• Planning based on facts makes controlling easier and more effective.
• Controlling provides feedback from past results, which improves future
planning.
Step 1: Setting Performance Standards
• Standards are the benchmarks/criteria against which actual performance
is measured.
• They can be:
• Quantitative standards → e.g., cost to be incurred, revenue to be earned, units to be
produced/sold, time to complete tasks.
• Qualitative standards → e.g., goodwill of the firm, motivation level of employees,
customer satisfaction.
• Standards should be:
• Clear and measurable (e.g., reducing defects from 10/1000 pieces to 5/1000 pieces).
• Flexible, so they can be modified with changes in internal and external environment.
Step 2: Measurement of Actual Performance
• Actual performance must be measured objectively and reliably.
• Techniques:
• Personal observation
• Sample checking (checking a few items at random)
• Performance reports
• Financial ratios (e.g., Gross Profit Ratio, ROI)
• Measurement should ideally be done in the same units as the standards.
• Example: In a manufacturing plant, gas levels can be continuously monitored for
safety; in marketing, progress may be measured by increase in market share.
Step 3: Comparison of Actual Performance with
Standards
• Actual performance is compared with the standards to find
deviations.
• Easier when standards are expressed in quantitative terms.
• Example: If standard output = 100 units per week but actual = 80
units, deviation = 20 units.
 Step 4: Analyzing Deviations
• Since small deviations are natural, only significant deviations should be attended to.
• Critical Point Control
• Control efforts should focus on Key Result Areas (KRAs) that are crucial to
organisational success.
• Example: A 5% increase in labour cost may be more critical than a 15% rise in
postal
• Management by Exception (MBE)
• Only major deviations beyond permissible limits should be brought to
management
• Example: If 2% rise in labour cost is acceptable, only an increase beyond 2% (say
5%) requires managerial attention.
• Causes of deviations: Unrealistic standards, Defective process, Inadequate resources,
Organisational weaknesses, External/environmental factors
Step 5: Taking Corrective Action
• No action is required if deviations are within acceptable limits.
• If deviations are significant, corrective actions are taken such as:
• Training employees (if targets are not met).
• Adding more resources or overtime (if project is delayed).
• Revising standards (if they are unrealistic due to external changes).
• Aim: Ensure deviations do not recur and standards are achieved.
Advantages of Critical Point Control (CPC) and
Management by Exception (MBE)
• Saves Time and Effort
• Managers do not waste time on minor issues.
• Their attention is directed only to significant deviations.
• Focus on Important Areas
• Managerial attention remains concentrated on key result areas (KRAs).
• Leads to better utilisation of managerial talent and skills.
• Facilitates Delegation
• Routine problems are handled by subordinates.
• Builds trust, responsibility, and morale among employees.
• Ensures Timely Action
• Helps in identifying critical problems early.
• Timely corrective action ensures the organisation remains on the right track.