BUSINESS STUDIES MASTER

 

CLASS XII

CHAPTER 8: CONTROLLING-STUDY NOTES

INTRODUCTION TO CONTROLLING

• Purpose of Controlling:
• Intelligent Management: Managers must handle situations smartly to prevent potential damage to the business.
• Corrective Action: Ensures that corrective measures are taken promptly to avoid any adverse impact on organizational performance.
• Progress Tracking: Involves monitoring the progress of activities to ensure they align with set standards.
• Goal Achievement: Ensures that activities conform to pre-established standards, thereby contributing to the achievement of organizational goals.

MEANING OF CONTROLLING

• Definition:
• Crucial Function: Controlling is a vital function of management aimed at ensuring that the desired results are achieved through effective oversight of subordinate activities.
• Adherence to Plans: Ensures that all organizational activities are carried out as planned.
• Resource Efficiency: Ensures that resources are utilized effectively and efficiently to meet the predetermined goals of the organization.


• Characteristics:
• Goal-Oriented: Focused on achieving specific objectives set by the organization.
• Universality: Applicable to all levels of management, including top, middle, and lower levels.
• Broad Application: Necessary not only in business organizations but also in various other settings such as educational institutions, military organizations, hospitals, and clubs.

IMPORTANCE OF CONTROLLING

1. Accomplishing Organizational Goals

• Role of Controlling: Controlling measures progress towards organizational goals.
• Identifies deviations from the plan and highlights areas needing corrective action.
• Outcome: Helps guide the organization back on track.
• Ensures that goals are achieved by addressing issues and making necessary adjustments.

2. Judging Accuracy of Standards

• Role of Controlling: Verifies the accuracy and objectivity of the standards set by the organization.
• Monitors changes within the organization and its external environment.
• Outcome: Facilitates the review and revision of standards to ensure they remain relevant and effective.
• Ensures that standards are realistic and attainable in light of new developments.

3. Making Efficient Use of Resources

• Role of Controlling: Focuses on reducing wastage and spoilage of resources.
• Ensures that each activity is performed according to predetermined standards and norms.
• Outcome: Enhances the effectiveness and efficiency of resource utilization.
• Promotes optimal use of organizational resources to achieve set objectives.

4. Improving Employee Motivation

• Role of Controlling: Clarifies expectations and performance standards for employees.
• Provides clear guidelines on what is expected and how performance will be assessed.
• Outcome: Increases employee motivation by setting clear goals and performance metrics.
• Encourages better performance and engagement from employees.

5. Ensuring Order and Discipline

• Role of Controlling: Creates an atmosphere of order and discipline within the organization.
• Monitors employee activities to minimize dishonest behavior.
• Outcome: Maintains organizational integrity and reduces instances of misconduct.
• Promotes a disciplined work environment.

6. Facilitating Coordination in Action

• Role of Controlling: Provides direction and coordination for all activities and efforts.
• Ensures that departmental and individual efforts align with organizational goals.
• Outcome: Enhances overall organizational effectiveness by coordinating activities across various departments.
• Helps in achieving organizational objectives through synchronized efforts.

LIMITATIONS OF CONTROLLING

1. Difficulty in Setting Quantitative Standards

• Issue: Control systems are less effective when standards cannot be precisely defined in quantitative terms.
• Challenge: Measuring performance and comparing it against these undefined or subjective standards becomes problematic.
• Examples: Employee morale and job satisfaction are areas where setting clear, quantitative standards is challenging. Human behavior is another aspect where subjective measurement can hinder effective control.

2. Little Control on External Factors

• Issue: Enterprises often lack control over external factors that can significantly impact their performance.
• External Factors: Government policies, which can affect regulations and business operations; Technological changes, which may alter the competitive landscape; Market competition.
• Challenge: These factors are beyond the organization's control and can impact performance despite effective internal control measures.

3. Resistance from Employees

• Issue: Employees may resist control measures as they perceive them as restrictions on their autonomy and freedom.
• Examples: Monitoring employees with Closed Circuit Televisions (CCTVs) can lead to objections and a perception of invasion of privacy.
• Challenge: Resistance can reduce the effectiveness of the control system and impact employee morale and productivity.

4. Costly Affair

• Issue: Implementing and maintaining a control system can be expensive.
• Challenges: Costs include financial expenditure, time investment, and resource allocation. Small enterprises may struggle to justify high costs.
• Consideration: Managers must ensure benefits outweigh costs to make it a viable investment. Balancing cost-effectiveness is crucial for financial sustainability.

RELATIONSHIP BETWEEN PLANNING AND CONTROLLING

1. Interdependence of Planning and Controlling

• 1.1 Planning and Controlling as Complementary Functions: Planning and controlling are integral components of management, often described as inseparable. Planning establishes the standards and objectives that control systems rely on. Conversely, controlling ensures that these standards are met and that any deviations are corrected.

2. Planning as a Prerequisite for Controlling

• 2.1 Necessity of Planning for Effective Controlling: Controlling is dependent on planning, as it requires predefined standards to measure performance. Without a plan, there are no benchmarks for controlling to assess, making controlling ineffective and directionless.
• 2.2 Planning Provides Standards for Control: Planning sets the benchmarks or standards of performance that controlling uses to monitor progress and identify deviations.

3. Contrasting Functions of Planning and Controlling

• 3.1 Planning as a Forward-Looking Function: Planning is concerned with setting objectives and formulating strategies for future actions. It involves anticipating future conditions.
• 3.2 Controlling as a Backward-Looking Function: Controlling assesses past performance against the established standards. It involves evaluating whether actions have been implemented as planned.

4. Relationship between Planning and Controlling

• 4.1 Planning Facilitates Effective Controlling: Effective planning based on accurate facts simplifies the controlling process by providing clear standards.
• 4.2 Controlling Enhances Future Planning: The feedback obtained through controlling helps in refining and improving future planning efforts.

5. Integrated Perspective

• 5.1 Both Functions Reinforce Each Other: Planning and controlling are mutually reinforcing. Good planning ensures that controlling is effective, while insights gained from controlling improve future planning.

CONTROLLING PROCESS STEPS

1. Setting Performance Standards

• Definition: Performance standards are benchmarks or criteria established to measure the efficiency and effectiveness of organizational activities.
• Quantitative Standards: Measurable and expressed in numerical terms (e.g., 1,000 units per week).
• Qualitative Standards: Not directly measurable in numerical terms but important (e.g., customer satisfaction).
• Flexibility: Standards should be adaptable to changes in the business environment.

2. Measurement of Actual Performance

• Definition: This step involves assessing how well actual performance aligns with established standards.
• Techniques: Personal Observation, Sample Checking, Performance Reports.
• Timing: Measurement can be done either during the task or after its completion.

3. Comparing Actual Performance with Standards

• Definition: This step involves analyzing the differences between actual performance and the set standards. Identifying deviations (e.g., selling 4,500 units against a standard of 5,000).

4. Analyzing Deviations

• Definition: Understanding causes of deviations is crucial.
• Critical Point Control: Focuses on key result areas (KRAs) critical to success.
• Management by Exception: Only significant deviations exceeding the acceptable range are reported to management.
• Causes of Deviations: Unrealistic standards, Defective processes, Inadequate resources, Structural constraints, External factors.

5. Taking Corrective Action

• Definition: Implementing measures to address and correct deviations.
• Types of Actions: Additional Training, Resource Allocation, Revising Standards.
• Example: Re-training workers or adjusting production equipment if defect rates exceed standards.

UNIT 8 MASTER INDEX: CONTROLLING (UNABRIDGED)

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