Controlling is the process through which managers regulate the operations of an organization to ensure achievement of organizational goals and objectives.
Control is simply making things happen in the way it was planned. Control refers to the comparison of actual performance of a task with the previously established standards or benchmarks, for the purpose of finding out deviations in performance and correcting them.
According to Bateman and Snell, ‘Control is any process that directs the activities of individuals, towards the achievement of organization goals’
Controlling refers to the process of regulating organizational activities and people carrying out those activities to ensure minimum deviations between actual performance to expected performance. It the process through which the management ensures that all resources of the organization are used effectively and efficiently to meet organizational objectives.
Process of Controlling
(1) Establishment of standards – The first task of controlling is establishment of performance standards or benchmarks against which the actual performance will be measured. While setting standards the main focus is on questions like:
What standards should be set?
How should the standards be set?
In what terms should these standards be expressed?
Standards are generally set for key management tasks keeping in mind the past achievements, industry average, major competitors, capabilities of a firm, core competencies, risk bearing ability, strategic clarity, flexibility etc. Control standards may be quantitative (expressed in physical or monetary terms) or qualitative (expressed in intangible terms) in nature. Quantitative (production, sales, profit)Qualitative (goodwill, morale, attitude)Time – Length of TimeEmployee moraleCost – Cost of ProductionIndustrial relationsProductivity – OutputGoodwillRevenue – Sales/profit
(2) Measurement of performance – The next step in controlling is the measurement of actual performance. This may be done through traditional or modern techniques of control. Measurement may be done simply through personal observation or through an elaborate system of accounting, reporting and communicating. However, before choosing a technique of control on must keep in mind the Difficulty, Timing and Periodicity in measurement.
(3) Analyzing deviations – The third step involves finding out the deviations in performance and the cause of those deviations.
When actual performance is equal to the expected performance tolerance limits must be set.
When actual performance is greater than expected performance one must check the validity of standards and efficiency of management.
When actual performance is less than budgeted performance one must pinpoint the areas where performance is low and take corrective actions accordingly.
The cause of deviations may be – External or internal, Random or expected, Temporary or permanent.
(4) Taking corrective actions – The last step involves taking necessary actions to correct the deviations in performance. It includes –
In-depth analysis and diagnosis of the factors that might be responsible for poor performance.
Lowering or elevation of standards according to the actual conditions.
Reformulating strategies, plans, objectives.
Techniques of ControllingTraditional techniques of controllingModern techniques of controllingPersonal observationReturn on investmentStatistical DataResponsibility accountingSpecial Reports & AnalysisProgram Evaluation and Review Technique (PERT)Operational AuditCritical Path method (CPM)CostingManagement Information systemBreak-Even AnalysisManagement AuditBudgetary controlTotal Quality Management Zero Based Budgeting Six Sigma Human Resource Accounting Performance Budgeting Social Audit
Importance of Controlling
Importance of controlling lies in –
Achievement of organization goals
Efficient execution and implementation of plans
Maintaining order and discipline in an organization
Facilitating de-centralization of authority and responsibility
Promoting coordination by providing unity of direction
Coping up with changes and uncertainty