Chapter – VII Controlling
Hots Questions
1. What is feedback in controlling ?
2. What is the significance of standard ?
3. What is deviation in controlling ?
4. Which two steps in the process of control are concerned with compelling events to conform to plan ?
5. What is compared with that in controlling ?
6. What is the last step in the process of controlling ?
7. What is meant by budgetary control ?
8. Name the two techniques of analysing deviations ?
9. How does controlling help in achieving organizational goals ?
10. How does controlling help in efficient utilisation of resources ?
11. How does controlling helps in ensuring order and discipline ?
12. Why is controlling called a backward looking function ?
13. What is critical point control ?
14. What do you mean by ‘key result area (KRA’s) in the context of controlling ?
15. Only increase in labour cost beyond 2% should be brought to the notice of the management. Which principle of control have been highlighted by this statement ?
3 Mark
Q1. “Controlling is blind without Planning’ Comment.
Q2. “Controlling is the last function of management”. Comment.
Q3. ‘If you try to control everything, you may end up controlling nothing”. Explain.
Q4. “Planning is looking ahead and controlling is looking back”. Comment.
Q5. What is ‘critical point control’ ?
Q6. What is control by Exception.
4 Mark
Q1. “Controlling doesn’t require any process”. Comment.
Q2. “An ideal control technique is one that check every bit of performance” comment.
5-6 Mark
Q1. Explain ‘Budgetary control’ as a technique of managerial controlling.
Q2. Y Ltd. Produces safety pins on a mass scale. The co.’s policy is that at the most 2% of the daily production could be defective over a three months period it has been observed that 8-10% of the production is defective.
Identify the managerial function required to correct the above situation. Briefly explain the procedure to be followed for the purpose.
1 Marks
Ans 1. Report of happening.
Ans 2. Helpful in analyzing deviation.
Ans 3. Differences between actual performance and standard performance.
Ans 4. Analysing deviations and taking corrective actions.
Ans 5. Actual performance is compared with standard.
Ans 6. Taking corrective action.
Ans 7. Budgetary control is a technique of managerial control in which all operations are planned in advance in the forms of budgets and actual results are compared with budgetary standards.
Ans 8. Critical point control and management by exception.
Ans 9. Controlling helps in achieving organizational goals by correcting unfavorable deviations between actual performance and standard performance.
Ans 10. By exercising control, a manager seeks to reduce wastage and spoilage of resources. This helps in effective and efficient utilisation of resources.
Ans 11. Dishonest behaviour on the part of the employees is minimized by keeping a close check on their activities.
Ans 12. Controlling finds out the deviations from the standards in that sense controlling is a backward looking function.
Ans 13. Key areas that are critical for the success of an organization should be the focus of control.
Ans 14. KRAs are the critical points which are critical to the success of an organisation.
Ans 15. Control by Exception.
3 Marks
Ans 1. “Controlling is blind without Planning”-
Under the system of control actual performance is compared with budgetd standards to judge the effectiveness of performance. These standards are provided by planning. In the absence of standards there will be no justification left for control. Therefore it is correct to say that controlling is blind without planning.
Ans 2. “Controlling is the last function of management” Comment controlling should not be mis-understood as the last function of management. The controlling functions measures actual performance against standards, finds out the deviations analyses the causes of such deviations and takes corrective actions. This process helps in formulation of future plans in the light of the past problems. Thus controlling only completes one cycle of management process and improves in the next cycle.
Ans 3. According to the principle of ‘control by Exception” if you try to control everything, you may end up controlling nothing.
Minor deviations from standards are insignificant for success. They can be ignored.
Therefore only significant deviations, which go beyond the permissible limits, should be reported to the management so that management may take corrective action to deal with the situations.
Ans 4. It is often said that — planning is looking ahead while controlling is looking back” However, this statement is only partially correct —
Planning is deciding in the present what to do in the future, thus it is looking ahead and it is toward looking function.
Controlling is like a past-mortem of the post activities to find out the deviations from the planned standard. Thus is a backward looking function.
However future planning is guided by the past experience and corrective action initiated by controlling functions.
Thus planning and controlling are both backward looking as well as forward looking function.
Ans 5. A since it is neither easy nor economical to check each and every activity in an organistion, the control should focus on key result areas (KRAs). These KRAs are very essential activities for the success of organisation and act as critical point. If anything goes wrong to these critical point, the entire organisation suffers.
For Example— Increase in material cost by 10% is more harmful than 20% increase in stationery expenses. So management should focus the controlling these KRA or critical point.
This concept of also known as Management by exception.
Ans 6. Same as above in Ans. 5.
4 Mark
Ans 1. The given statement – “Control does not require any process” is not correct. Process of management control involves the following steps.
Setting performance Standard : Standards are required to judge whether the actual performance is proceeding in the right way. Standards must be in numerical or measurable terms.
Measurement of Actual performance : Actual performance is evaluated and expressed in terms of planned standards.
Comparing Actual performance with standards : Actual performance is compared with the planned performance and deviations if any found out.
Analysing the deviations : In order to know the causes of deviations, and in order to take corrective actions, deviations are analysed.
Taking corrective Actions : If the deviations exceed the acceptable limits they should be immediately brought to the notice of management for taking corrective measures.
Thus it is clear that controlling requires systematic process.
Ans. 2 The given statement-"A ideal technique is one that checks every bit of performance” is wrong. An ideal control technique should focus on ‘key result areas (KRAs)—
It is neither economical nor easy to keep a check on each and every activity in an organisation. There may be several activities to be controlled. In practice it is not possible for management to control each and every activity due to limited time & resources.
Therefore controlling should focus on KRAs which are critical to the success of an organization. The KRAs are set as the critical point. If anything goes wrong at the critical point, the entire organization suffers. So controlling should focus on these very important activities or KRAs.
5-6 Mark
Ans 1. Budgetary control is a technique of managerial control under which different operations of an organisation are planned in advance in the form of budgets viz sales budget, cash budget, material budget, production budget etc. These budgets act as standards for comparing with the actual performance and taking necessary corrective action if need be, for attaining organizational goals
Advantages of budgetary control :—
(i) Helps in attaining targets — It helps in attaining organisational objectives by focusing on specific and time bound targets.
(ii) Optimum utilization of resources — It ensures the optimum utilisation of resources by allocating them among different departments according to their requirement.
(iii) Helps in coordination — It helps in achieving co-ordination among different departments.
(iv) Facilitates the management by exception — By stressing on the operations which deviate from the budgeted standards it helps the management to control by exceptions. However, the effectiveness of budgeting depends on how accurately estimates have been made about future.
Ans 2. Here the actual deviations are more than planned acceptable deviations, so the management need to take corrective action to rectify the problems. The function of comparing actual performance with planned performance and taking corrective action is called ‘controlling’—
The steps involved in the process of controlling are —
(i) Setting Performance Standard.
(ii) Measurement of Actual Performance.
(iii) Comparing Actual Performance with Standards.
(iv) Analysing Deviations.
(v) Taking Corrective Action and re setting the performance standard.
[Explain the steps of controlling in brief.]
Q 3. Y Ltd. Produces safety pins on a mass scale. The company’s policy is that at the most 2% of the daily production could be defective. Over a three months period, it has been observed that 8-10% of the production is defective.
Identify the management function required to correct the above situation.
Briefly state the procedure to be followed for the purpose.
Ans. 3 The management function required to correct the above situation is known as ‘controlling’.
Procedure to be followed for improving the quality of production :
· Find out the causes of deviations.
· Take appropriate corrective actions.
| Causes of deviation | Corrective action to be taken |
| 1. Poor motivation of workers | 1. Introduce incentives for less rate of defective. |
| 2. Lack of effective supervision | 2. Supervisors should ensure regular & close supervision. |
| 3. Frequent breakdown of power | 3. Install generators & remove cause of frequent breakdown of powers. |
| 4. Defective materials | 4. Change the quality specification for the materials. |
| 5. Defective machinery. | 5. Repair the existing machine or replace the machine if it cannot be repaired. |
| 6. Obsolete machinery. | 6. Undertake technological upgradation of machinery. |
| 7. Defective process | 7. Modify the existing process. |
| 8. Defective physical conditions of work | 8. Improve the physical conditions of work. |
Q4. X Ltd. is engaged in manufacturing machine components. The target production is 200 units per day. The company had been successfully attaining this target until two months ago. Over the last two months, it has been observed that daily production varies b/w 150 & 170 units.
Identify the management function to rectify the above situation. Briefly state the procedure to be followed so that the actual production may come up to the target production.
Ans. 4 ‘Controlling’ is the management function to rectify the above situation.
Procedure to be followed to increase the level of production
(i) Find out the causes of deviation
(ii) Take appropriate corrective action.
| Causes of deviation | Corrective Action to be taken |
| 1. Poor motivation of workers | 1. Provide incentives to improve employees productivity. |
| 2. Lack of effective supervision | 2. Supervisors should ensure regular & close supervision. |
| 3. Frequent breakdown of power. | 3. Install generators & remove cause of frequent breakdown of power. |
| 4. Obsolete machinery. | 4. Install new machinery with advanced technology. |
| 5. Poor physical conditions of work | 5. Improve the physical conditions of work e.g., ventilation, proper lighting etc. |
Q. 5 “Control does not require any process”. Comment.
Ans. The given statement—“Control does not require any process”. Process of management control involves the following steps.
(i) Setting performance standards : Standards are targets against which actual performance can be measured and deviations can be found.
(ii) Measurement of actual performance : This step involves actual performance of various individuals and groups for comparing it with the standards.
(iii) Comparing actual performance with standards : After measuring the performance, the next step is to compare actual performance with the standard performance.
(iv) Analysing deviation : Control technique should focus on the key result areas only which are critical to the success of an organization.
(v) Taking corrective measures : No corrective action is required when the deviations are within the acceptable limits.
Q 6. Explain to a newly appointed foreman, under whose supervision school bags are being made, how he has to carry out process of control ?
Ans. The foreman should take following steps :
(i) Setting performance standards : Standards are targets against which actual performance can be measured and deviations can be found.
(ii) Measurement of actual performance : This step involves measuring actual performance of various individuals and groups for comparing it with the standards. There are several techniques for measurement of performance personal observation, sample checking, performance reports etc.
(iii) Comparing actual performance with standards : After measuring the performance, the next step is to compare actual performance with standard performance.
Such comparison will reveal the deviation between actual and desired results.
(iv) Analysing deviations : If the deviations are within reasonable limits they may be ignored. Only significant deviations from the standards should be reported to the management.
(v) Taking corrective actions : No corrective action is required when the deviations are within the acceptable limits.
Q 7. “An ideal control technique is one that checks every bit of performance”. Comment.
Ans. The given statement- “An ideal control technique is one that checks every bit of performance is wrong. An ideal control technique should focus on the key areas.
(i) Critical point control : There are several activities’ to be controlled. In practice, it is not possible for management to control each and every activity due to limited time.
(ii) Control by exception/management by exception : An attempt to control everything may end up by controlling nothing.
(iii) Advantages of critical point control and Management by exception : It identifies the critical problems which need timely action. The routine problems are left to the subordinate. It saves time and efforts of managers.
(iv) “Feedback” in controlling : Without the availability of feedback no action can be taken by the managers. Manager have to review the standards improve the quality of materials.
(v) “Deviation” in controlling : Deviation means the difference between actual performance and standard performance. Once the nature and magnitude to deviations are ascertained, the causes of deviations should be identified.
Q 8. There are two managers Rahim and Pankaj. Rahim is saying that controlling is forward looking where as according to Pankaj controlling is looking back Who correct ? Explain why ?
Ans. Both Rahim & Pankaj are partially correct. Controlling is bath backward looking as well as forward looking.
(i) Controlling is blind with out planning if the standards are not set in advance, managers have nothing to control.
(ii) Planning with out controlling in meaningless because once a plan becomes operational, controlling is necessary to monitor the progress Planning is looking ahead while controlling is looking back.
(iii) Plans are prepared for future to achieve the organizational goals. Planning is deciding in the present what to do in the future. Planning involves looking ahead and is called forward looking function.
(iv) Controlling is the process through which managers ensure that actual performance in according to planned standards. Controlling is finding out deviations from past. In this manner controlling is a backward looking function.
Q 9. If planning is done carefully and accordingly other functions of management are going in the right direction, then there is no need of the controlling functions of management’. Do you agree with the statement. Give reasons in support of your answer ?
Ans. No, I don’t agree with the given statement. Controlling is an indispensable function of Management Importance of Controlling.
(i) Controlling helps in achieving organizational goals
Management is setting organizational goals and establishing a procedure to achieve them performance may or may not necessarily according to plans.
(ii) Controlling helps in judging accuracy of standards
An efficient control system enables management to verify whether the standards set are accurate.
Controlling helps in making efficient use of resources :
By exercising, a manager seeks to reduce wastage and spoilage of resources. This ensures effective and efficient utilization of resources.
(iv) Helps in motivating employees
Good control system ensures to decide in advance what to do and how to do and on the basis of this their performance is evaluated.
(v) Facilitates Coordination
Coordination provides direction to all activities and efforts for achieving goals.
(vi) Ensures order and discipline
Controlling creates an atmosphere of order and discipline in the organization Helps to minimize dishonesty
.
Question Bank
(1 Mark)
1. Name the two techniques of Controlling.
2. What is ‘deviation’ in Controlling Process ?
3. Name any one type of budget.
4. How does controlling help in achieving organizational goals ?
5. How does controlling help in ensuring order and discipline ?
6. What is MBE ?
7. Define Standard.
8. Why controlling is called backward looking function ?
9. Name the first step in Controlling Process.
10. What is Managerial Control ?
11. What is Feedback in Controlling ?
12. What is CPM ?
13. What is meant by Budgetary Control ?
14. What is the basis of Controlling Process ?
15. Give one corrective measure to improve the motivation level of workers.
(3-4 Marks Questions)
1. State any four objectives of Controlling.
2. State any three points of importance of Controlling.
3. How does controlling help in financial matters ?
4. “Planning is meaningless without controlling.” Explain.
5. Controlling is blind without planning.
6. Explain MBE.
7. Explain the benefits of MBE.
(5-6 Marks Questions)
1. Define management controlling. Explain the various steps involved in controlling process.
2. Explain the importance of controlling.
3. ‘If planning is done carefully and accordingly other functions of management are going in right direction then there is no need of the controlling function of management.’ Do you agree with the statement ? Justify your answer.
4. How are planning and controlling interdependent and inter-linked ?
1. Taking corrective action is the last step in the process of management (a) Name the function (b) Explain the steps involved in this process.
Answers to Question Bank
(1 Mark)
1. PERT and CPM
2. The difference between actual performances and planned performance.
3. Sales Budget.
4. It compares standards with actual performance, finds deviations and takes corrective action to achieve goals.
5. Dishonest behaviour on the part of the employees is minimized by keeping a close check on their activities.
6. Management of Exceptions.
7. The criteria against which the actual performance is measured are known as standard.
8. As it involves comparing the actual performance with the planned standards which have been set in past.
9. Setting up of Standards.
10. Managerial controlling is a process of setting up standards, comparing the actual performance, finding deviations and taking corrective actions.
11. Report of happening.
12. Key areas that are critical for the success of an organization should be The focus of control.
13. Budgetary control is a technique of control in which all operations are planned in advance in the form of budgets.
14. Planning is the base of controlling process.
15. Introduce incentives for less rate of defectives.
(3-4 Marks)
Answers 1 : Four objectives of controlling are as under :
(i) To seek planned results from subordinates.
(ii) To evaluate the progress of the work.
(iii) To detect deviations from the planned activities.
(iv) To find the causes of deviations
Answers 2 : Importance of controlling is as under :
(i) It helps to accomplish organizational goals.
(ii) It helps in maximum utilization of available resources at minimum cost.
(iii) Systematic evaluation of performance and consequent rewards motivate employees to put in their best efforts.
Answer 3 : Through controlling, managers keep tight control over finance and spend well within the budget. To access different aspects of the organizations financial position and for optimum utilization of various resources of finance, managers take recourse to financial controls. They use modern techniques for controlling such as ratio analysis, cash flow statements. etc.
Answer 4 : Planning can be successful only in the presence of control. Under the process of planning, future activities are decided beforehand. Standards are stated and determined to achieve business objectives. But to ascertain the extent to which such activities and standards have been successfully implemented and achieved, the implementation of an appropriate control system is required. Therefore, it is correct to say that planning is meaningless without control.
Answer 5 : Under the system of control, actual performance is compared with budgeted standards to judge the effectiveness of performance. These standards are provided by planning. In the absence of standards, there will be no justification left for control.
Also, planning is required to correct the deviation identified in the process of control.
Thus, without planning, controlling is blind.
Answer 6 : It implies that manager must focus attention only on factors critical to performance. Normal factors or deviation should be ignored as they can be corrected at lower levels. It is based on the maxim – “and attempt to control everything results in nothing.
Based, on this, only major deviations from standards should be reported to top-level management and other routine problems should be looked into by the subordinates.
For example, if a plan allows 5 percent decrease in the output as acceptable range of deviation then only such decrease in output should be reported to the management as 1’s well beyond 5 percent.
Answer 7 : Benefits of management by exception are as under :
(i) It saves the valuable time of the management.
(ii) It helps the management to identify important deviations which need timely action to keep the organization on the correct path.
(iii) It facilitates delegation of authority and helps in increasing morale of employees.
(iv) It helps the management to concentration on important matters beneficial for the long-term profitability of the organization.
(5-6 Marks) :
Answer 1 :- Managerial control implies the measurement of accomplishment against the standard and the correction of deviation to assure attainment of objectives according to plans.
Steps :
* Establishment of Standards : The first step in control process is setting up of standards of performance. Standards are the criteria of performance and specify what should be accomplished. It is therefore, necessary that standards should be sat and stated in measurable terms.
* Measurement of Performance : The second step in controlling is measurement of performance. It means evaluation of work actually done and result achieved. Measurement is Most useful if actual performance is expressed in the same unit as the planned targets or standards comparison of actual and planned performance then becomes easier.
* Comparison of actual performance with standards and analysing deviation : Comparisons of actual performance with the planned target or standard involves two steps :
(a) finding the extent of deviation
(b) identifying the causes of such deviations.
* If performance falls short of standards, managers must find out the extent of deviation generally, minor deviations do not require managerial attention. To save time, managers concentrate on major deviations only.
* Taking corrective action : The purpose of control is not only to detect errors and defects in performance of work but also to adopt remedial measures. Corrective actions are therefore, initiated on the basis of factors causing deviations between standards and actual results.
* Corrective action may involve a change in methods, machinery rules or procedure, improving physical conditions of work, or changing the nature of supervision may also be necessary at times. Where the deviations cannot be rectified through managerial action, the standards may have to be revised.
Answer 3 : Importance of Controlling :
8.4 Importance of Controlling
Controlling is an indispensable function of management. Just as road signals are essential to ensure accident-free and smooth traffic, managerial controlling is necessary for the smooth running of business.
“Control is the soul of business management.”
A good control system helps an organization in the following ways :
1. Controlling helps in achieving organizational goals : The first steps in management is setting organizational goals and establishing a procedure to achieve them. The objective may be in terms of a target profit, target sales or target production. However, actual performance may or may not necessarily be according to plan.
If deviation are detected early, remedial action can be taken and the desired target is ultimately achieved. This will only happen if there is a control mechanism which detects and corrects deviations between actual and desired results.
2. Controlling helps in judging accuracy of standards : An efficient control system enables management to verify whether the standards set are accurate and objective by keeping a careful check on the changes taking place in the organization and in the environment.
3. Controlling helps in making efficient use of resources : By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards. This ensures effective and efficient utilization of resources.
4. Controlling helps in improving employees motivation : A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which their performance will be evaluated. It, thus, motivates them and helps them to give better performance.
5. Controlling ensures order and discipline : Controlling creates an atmosphere of order and discipline in the organization. It helps to minimize dishonest behaviour on the part of employees by keeping a close check on their activities.
6. Controlling facilitates coordination in action : Controlling provides direction to all activities and efforts for achieving organizational goals. Each department and employee is governed by predetermined standards which are well coordinated with one another. This helps is accomplishing the overall organizational objectives.
Answer 4 : The given statement is wrong. Controlling is an indispensable function of management. Rest is same to answer 3 in above.
Answer 5 : Planning and controlling are interrelated and interdependent as follows :
(i) Planning is the basis for controlling
Planning is the basis for controlling too. In the absence of plans it is not possible to measure and assess performance. For example, if the output is 500 units, the manager can know whether it is adequate or not only when there is a standard output set up by the planners. Thus, planning provides the base for comparison of actual performance with the budget performance.
(ii) Controlling helps in planning
Without effective controlling, activities can not be properly planned. Planning is guided by past experiences and corrective measures suggested by controlling.
(iii) Effective controlling helps in formulation of future plans
Controlling helps in revising plans to reap maximum benefits at minimum cost. Controlling ensures improvement in future performance.
(iv) Finding out deviations and cause there of effectiveness of planning can be measured with the help of controlling. Planning is based on fore cast about future conditions. Controlling sets standards and finds out deviations from standards. After that corrective actions are to be taken by controlling function.
Answer 6 (a) Controlling
Steps involved in the process of controlling
(i) Setting performance standards
Standards are the criteria, set in both quantitative and qualitative terms, against which actual performance can be measured. Standards are the benchmarks towards which efforts of entire organization are directed. In order to determine whether the actual performance is proceeding in the right way, standards are required. Thus standards act as a lighthouse that warns and guides the ships at sea. As far as possible, standards must be set up in numerical or measurable terms.
For example
Standard output – 1000 units per day.
Standard scales – Rs. 50 lakh per annum.
(ii) Measurement of Actual performance
After setting the standards, next step in the process of controlling is to be measure and evaluate the actual work. It means evaluation of work actually done. It is also preferable to get reports on performance of an employee at regular intervals. Performance may involve ratio analysis and preparation of cash flow statement etc at periodic intervals of time.
(iii) Comparing Actual performance with standards : This steps involved comparing the actual performance with the laid down standards. The standards should be in quantitative terms to facilitate such comparison.
(iv) Analysing Deviations : After identifying the deviations, various causes for same are analysed and the most exact causes are identified in order to take corrective measures. While analyzing the deviations, ‘Critical Point Control’ and ‘Management by exception’ techniques should be used.
(v) Taking Corrective Actions : The final step in the process of controlling involves taking corrective action. If the deviations are within acceptable limits, no corrective measure is required. However, if the deviations exceed the acceptable limits, they should be immediately brought to the notice of the management for taking corrective measures, especially in the important and critical areas.
From the above it can be concluded that controlling requires a systematic process. Controlling without a process is a meaningless activity. Controlling process helps to assure management that actual performance confirms to the planned performance.
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