Chapter : 8

Controlling

ED
H
S
Controlling as a management function ensures that whether actual performance is as
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per planned performance or not. Once the plans become operational it is necessary for

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managers to measure the performance level at regular intervals and comparing it with set
E rs

targets/standards. After comparing actual performance with set standards differences are find
B
out. Such differences are commonly known as deviations. Deviation can be positive or
B a

negative.
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Positive deviation implies actual performance is better than set standards. For example,
assume that the sales target of Saya Automobiles during the first quarter was 50 lakhs but
TO ch

actual sales came out to be 55 lakhs. This is positive deviation. Negative deviation implies
actual performance is less than standards. For example: If in the above example actual sales
come out to be 40 lakhs then it is negative deviation.
T es

If deviations are positive then managers can take relief however, if deviations are
negative then necessary actions are required to correct such deviations. For correcting
negative deviations, new plans are made and implemented. It means controlling function
is not the last function of management rather it brings the organisation back to planning
function.
Controlling is the most important function of
O

management which provides sense to planning

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function. Actually, planning without controlling is

nothing. Controlling helps in introspection of
organisation. Thus, Controlling is the process
of comparing actual performance with set
standards to find deviations and after
analysing such deviations taking corrective
actions to fix such deviations.

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We have already discussed in planning that the top-level management does overall
planning, middle level does departmental planning whereas lower level does day to day
planning. Similarly, top level does overall controlling i.e. whether actual actions by middle
level are confirming to master plans or not, middle level does departmental controlling i.e.
whether actual actions by lower level are confirming to departmental plans or not, and lower
level ensures controlling of day to day organisational activities. Also. controlling is not one-
time function, managers need to compare actual performances with set standards at regular
intervals so that final objectives of organisation can be achieved.

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Process of Controlling

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(a) Setting standards
B a

(a) First step in the process of controlling is setting standards. Standards are the targets
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against which actual performance is compared. It can be both quantitative as well

as qualitative.
TO ch

(b) Quantitative standards are set for various organisational activities like sales,
purchase, labour hours, machine hours etc.. In practice, these standards are
specified in budget of organisation.
T es

For example : Organisation has 10 machines and each machine can be operated
for 20 hours a day. It means organisation has total (10 machines × 20 hours) 200
machine hours on daily basis and (200 × 30 days) 6000 machine hours on monthly
basis. This represents standard for machine hours available.
(c) Qualitative standards can be set for customer satisfaction, employees satisfaction
etc. As such it is difficult to set qualitative standards, so rating system can be
O

considered. For example: In the last month, average customer ratings were 4 out
of 5. Now in this month standard can be set to increase the customer ratings from
N

4 to 4.2.
(b) Measurement of performance
(a) After setting standards, next step is measurement of actual performance. Actual
performance is measured for various organisational activities like sales, purchase,
expenses, profits, customers satisfaction level, employee satisfaction level, labour
hours, machine hours, efficiency, effectiveness etc..

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(b) For measurement of performance, performance report is prepared by various

departmental managers and supervisors. For preparing performance report various
methods like physical count, analysis of books of accounts etc. are used.
For example : Sales can be verified from sales book, efficiency level can be verified
by comparing per unit cost of production in current period with per unit cost of
production in previous period. Effectiveness can be measured by comparing units
produced in current period with production in previous period.

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(c) Comparing actual performance with standards
(a) After measurement of actual performance, comparison is made between set
standards and achievements. It helps in finding deviations.

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(b) If the actual results are better than standards, it is known as positive or favourable

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deviation. However, if performance level is below standard it is known as negative
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or unfavourable deviation.

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(c) For example : If the production in a month is 1500 units against standard production
E rs
B
of 1400 units, it is positive deviation, However, if production in a month is 1200
units against standard production of 1400 units, it is negative deviation.
B a

(d) Analysing deviation

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(a) This is the most important step in controlling process. Under this, managers focus
on identifying the reasons behind deviation. If the deviations are within acceptable
TO ch

limit then it can be ignored. For example: Sales target of organisation was 100 lakhs
but actual sales come out to be 99 lakhs. Here, it is minor deviation and can be
T es

ignored. Also, all the deviations are not necessary to control. For example : If the
electricity bill gets increased by 10% due to increase in taxes on electricity
consumption then such deviation can be ignored.
(b) Management should focus on key result areas (KRAs) i.e. those areas which have
critical role on profitability and performance of business. This is also known as
critical point control. For example: In manufacturing organisation, increase in
production cost by 5% is more critical than 10% increase in postal charges.
O

(c) Also, all the deviations need not to be communicated to higher level management.
N

Only those deviations which are of exceptional nature should be communicated

to top level management. This is known as management by exception or control
by exception. If the top level will try to focus on all deviations then it may end up
by controlling nothing. For example : If increase in advertisement expenses upto
10% are admissible then increase in expenses beyond 10% should be brought into
the notice of top level management. Limit upto which deviations are acceptable
are defined in company’s policy.

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(e) Taking corrective action

(a) After analysing the deviations, the last step in the process of controlling is taking
corrective actions. Deviations which are affecting key result areas need to be
immediately focused whereas minor or acceptable deviations can be ignored.
(b) Corrective actions may include change in strategy, procedures, methods etc.. Under
this, new plans are made and implemented to ensure smooth functioning of an
organisation.

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Nature/Features of Controlling

H
Goal oriented
process

S
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Provides sense
Pervasive
to planning
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function
function
B
B a

Nature of
Controlling
ol

Forward and
TO ch

backward Continuous
looking Process
T es

Dynamic
Organisation

(a) Controlling is a goal oriented process

In controlling managers ensure whether actual performance is as per planned
O

performance or not. If any significant deviations are find out then corrective actions are taken
to fix the problem. This ensures achievement of goals.
N

(b) Controlling is a pervasive function of management

Controlling function is performed by managers at all levels of management. Top level
does overall controlling i.e. whether actual actions by middle level are confirming to master
plans or not, middle level does departmental controlling i.e. whether actual actions by lower
level are confirming to departmental plans or not, and lower level ensures controlling of day
to day organisational activities.

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Controlling 217

(c) Controlling is a continuous process

Controlling is continuous process as managers need to compare actual performances
with set standards at regular intervals so that final objectives of organisation can be achieved.
(d) Controlling helps in building dynamic organisation
After analysing the deviations corrective actions are taken. For this new strategies,
policies or methods are framed and implemented. Thus, controlling helps in adoption of new
plans and building dynamic organisation.

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(e) Controlling is forward as well as backward looking function
Controlling includes postmortem of activities done in past which makes it backward
looking function. However, after analysing the deviations, new plans are adopted for future

H
which makes it forward looking function. Therefore, controlling is both forward as well as

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backward looking function.
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(f) Controlling gives sense to planning function of management
PU .i
Without controlling planning is meaningless. If actual performance will not be compared
E rs
B
with set standards then there is no need to set targets for future performance. Thus, controlling
gives sense to planning function of management.
B a

Importance of Controlling
ol

(a) Controlling helps in achieving organisational goals

TO ch

In controlling, managers ensure whether desired results have been achieved or not and
if not then suitable actions are taken to achieve such results. In this way, controlling helps in
achieving organisational goals.
T es
O
N

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(b) Controlling helps in judging accuracy of standards

In controlling, by comparing the actual performance with set standards deviations are
find out. If such deviations are beyond the acceptable limit (in case of negative deviations)
or too favourable (in case of positive deviation) then it gives an indication to recheck the
standards.

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H
S
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E rs
B
B a
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TO ch

(c) Controlling helps in making efficient use of resources

Performance reports are prepared by supervisors and actual output from usage or
T es

resources are compared with expected output, and in case of unfavourable results immediate
actions are taken. Thus, controlling helps in maintaining efficiency by ensuring proper
utilisation of resources.
(d) Controlling helps in improving employee motivation
In controlling, targets are set in advance which makes it clear to employees that what
they are expected to do. Standards of performance are made clear to employees on the
O

basis of which their performance will be evaluated. This works as drive to work for
employees.
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(e) Controlling ensures order and discipline

Controlling creates an atmosphere of order and discipline in the
organisation. It helps to minimise dishonest behaviour on the part of
the employees by keeping a close check on their activities. For this
purpose, various equipment like CCTV installation, attendance
machines etc. can be used.

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(f) Controlling facilitates coordination in action

While setting standards, each department and employee are made clear their authorities,
responsibilities and answerability which are well coordinated with one another. Thereafter,
regular inspections help to identify the progress and hurdles. This helps in maintaining
coordination and accomplishing the organisational objectives.

Relation between Planning and Controlling

“Controlling provides inputs for planning and planning provides inputs for controlling”.

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This line shows interdependence between planning and controlling.
In controlling deviations are find out and analysed and after analysing such deviations,
reasons for such deviations are identified. Thereafter, future plans are made by keeping in

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mind such reasons. In this way controlling provides input to planning function of management.

S
Planning set targets to be achieved for achievement of organisational objectives. Such
n
targets work as standards for comparing actual performance with set standards. Thus, planning

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provides inputs to controlling.
E rs
B
Inputs
B a
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TO ch

Planning Controlling
T es

Inputs

(a) Planning and controlling are inseparable twins of management. Without

O

planning, there is no basis for controlling as we have to compare actual

performance with the standards. If the standards are not set in advance,
N

managers have nothing to control. Similarly, planning without controlling is

meaningless. Once a plan become operational, controlling is necessary to
monitor the progress, measure it, discover deviations and initiate corrective
measures to ensure that events confirm to plans.
(b) Controlling helps in judging the accuracy of standards whereas planning sets targets
which motivates individuals for providing favourable deviations.

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(c) Both planning and controlling work towards achievement of organisational goals.
Planning contributes by specifying desired actions whereas controlling contributes
by specifying reasons for non-achievements of targets.
(d) Both planning and controlling are forward looking as well as backward looking
functions of management.
➢ Planning involves thinking in advance what to do, how to do etc. therefore, it
is forward looking function of management whereas in the same sense,

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controlling involves adoption of new plans after analysing deviations.
➢ Planning is guided by past experiences which makes it backward looking
function of management whereas in the same sense, controlling involves

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postmortem of activities performed in past.

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☞ Previous Years Examination Questions
n
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1. Explain the process of controlling. (CBSE Delhi 2010)
E rs

2. Explain any four points highlighting the importance of controlling. (CBSE Delhi 2010)
B
3. Why is it said that “controlling is a continuous activity” ? (CBSE Delhi 2011)
4. What is important while analyzing deviations in controlling ? (CBSE Delhi 2011)
B a

5. “There is a close and reciprocal relationship between planning and controlling”. Explain
ol

the statement. (CBSE Delhi & Outside 2011)

6. Why is it said that “controlling is looking back” ? (CBSE Outside 2011)
TO ch

7. What should be the ‘focus-point’ for a manager while controlling, as controlling at each
and every step is not possible ? (CBSE Outside 2011)
8. “Controlling is a systematic process involving a series of steps”. State the steps involved in
T es

the process. (CBSE Outside 2011; Delhi (Comptt.) 2012)

9. Describe the relationship between ‘Planning’ and ‘Controlling’. (CBSE Delhi 2012)
10. Briefly explain the importance of controlling. (CBSE Delhi 2012)
11. What is meant by controlling ? State any five points of the importance of controlling.
(CBSE Outside 2012)
12. Standards are set in quantitative as well as in qualitative terms. Identify the type of standards
when it is set in terms of ‘time to be spent’.(CBSE Outside 2012; Outside (Comptt.) 2012)
O

13. ‘Planning and controlling are inseparable twins of Management.’ Explain.

N

(CBSE Outside 2012)

14. Explain the concept of controlling and any four points of its importance.
(CBSE Delhi (Comptt.) 2012)
15. ‘Controlling is a systematic process’. Explain the steps of this process.
(CBSE Outside (Comptt.) 2012)
16. ‘Controlling is an important function of management.’ Explain by giving any five reasons.
(CBSE Outside (Comptt.) 2012)

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17. What should be done while ‘taking corrective action’ in the process of controlling when
especially in the important areas deviations go beyond the acceptable range ?
(CBSE Delhi 2013)
18. ‘Planning and controlling are inseparable twins of management.’ How ?
(CBSE Delhi 2013)
19. Explain the various steps in the process of controlling. (CBSE Delhi 2013)
20. Explain any five points which highlight the importance of ‘controlling’ function in
management. (CBSE Delhi 2013)

ED
21. Explain how ‘Management by Exception’ helps in controlling process.
(CBSE Outside 2013)
22. Explain how controlling helps in :

H
i(i) accomplishing organisational goals; and
(ii) judging accuracy of standards. (CBSE Outside 2013)

S
n
23. Explain how ‘Critical Point Control’ helps in controlling process. (CBSE Outside 2013)

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PU .i
24. Explain how controlling helps in :
i(i) making efficient use of resources; and
E rs
B
(ii) improving employees’ motivation; (CBSE Outside 2013)
25. After setting the performance standards the next step in the controlling process is the
B a

‘measurement of actual performance’. Explain this step in the process of controlling.

ol

(CBSE Outside 2013)

26. How is controlling a forward-looking function ? State. (CBSE Delhi (Comptt.) 2013)
TO ch

27. ‘Controlling is a systematic process involving a series of steps.’ Explain these steps.
(CBSE Delhi (Comptt.) 2013)
28. Explain how controlling is an important and indispensable function of management.
T es

(CBSE Delhi (Comptt.) 2013)

29. ‘Planning and controlling are inseparable twins of management.’ Explain how.
(CBSE Delhi (Comptt.) 2013)
30. Why is it said that controlling is ‘looking back’ ? State. (CBSE Outside (Comptt.) 2013)
31. Explain, how controlling is an important and indispensable function of management.
(CBSE Outside (Comptt.) 2013)
32. ‘Controlling is a systematic process involving a series of steps.’ Explain these steps.
O

(CBSE Outside (Comptt.) 2013)

N

33. ‘Planning and controlling are inseparable twins of management’. Explain, how.
(CBSE Outside (Comptt.) 2013)
34. Explain the various steps in the process of controlling.
(CBSE Delhi & Outside 2014; Delhi & Outside (Comptt.) 2014)
35. Explain the relationship between planning and controlling.
(CBSE Outside 2014; Delhi & Outside (Comptt.) 2014)
36. Give the meaning of ‘Critical Point Control’. (CBSE Delhi (Comptt.) 2014)

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37. Explain any five points of importance of controlling. (CBSE Delhi (Comptt.) 2014)
38. What is meant by ‘Management by Exception’ in the process of controlling ?
(CBSE Outside (Comptt.) 2014)
39. ‘Controlling is an indispensable function of management.’ Explain this statement with the
help of any five points. (CBSE Outside (Comptt.) 2014)
40. ‘A.S. Ltd.’ is a large company engaged in assembly of air-conditioners. Recently the
company had conducted the ‘Time’ and ‘Motion’ study and concluded that on an average
a worker can assemble ten air-conditioners in a day. The target volume of the company in

ED
a day is assembling of 1,000 units of air-conditioners. The company is providing attractive
allowances to reduce labour turnover and absenteeism. All the workers are happy. Even
then the assembly of air-conditioners per day is 800 units only. To find out the reason the

H
company compared actual performance of each worker and observed through C.C.T.V.
that some of the workers were busy in gossiping.

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(a) Identify the function of management discussed above.
n
(b) State those steps in the process of the function identified which are discussed in the

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above paragraph. (CBSE Outside 2015)
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41. ‘I-phone India Ltd.’ is a manufacturer of advanced cateogry of mobile phones. The company
B
trained its engineers from Japan.It markets its mobile phones domestically as well as
internationally.The company had a substantial market share and had a loyal customer
B a

following because of quality of its i-phone. From the last financial year the company had
ol

been unable to achieve its targets because of competition in the market. The company is
planning to revamp its controlling system.
TO ch

(i) Identify the concepts of management involved in the above para.

(ii) State the steps of the revamped controlling process to be followed by the company to
solve this problem. (CBSE Delhi (Comptt.) 2015)
T es

42. ‘Jony India Ltd.’ is the manufacturer of large sized curved televisions. The company imparted
training to its engineers at an advanced training centre at Germany. It sells its television
sets throughout the country. The company had a substantial market share and had a loyal
customer following because of quality products. From the last financial year the company
had been unable to achieve its targets because of competition in the market. The company
is planning to revamp its controlling system.
(i) Identify the concepts of management involved in the above para.
O

(ii) State the steps of the revamped controlling process to be followed by the company to
solve this problem. (CBSE Outside (Comptt.) 2015)
N

43. Explain any five points which highlight the importance of controlling function of
management.
(CBSE Delhi 2016; Outside (Comptt.) 2016; Delhi 2017; Outside (Comptt.) 2017)
44. Explain the steps in the controlling process.
(CBSE Delhi & Outside 2016; Delhi (Comptt.) 2016)
45. Explain the relationship between controlling and planning functions of management.
(CBSE Delhi 2016; Delhi (Comptt.) 2016)

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Controlling 223

46. State any five points that highlight the importance of controlling.
(CBSE Outside 2016; Outside 2017; Delhi (Comptt.) 2017)
47. Explain (a) Management by exception and (b) Critical point control.
(CBSE Outside (Comptt.) 2016)
48. Hina Sweets is a renowned name for quality sweets since 1935. Harsh the owner of Hina
Sweets was worried as the sales had declined during the last three months. When he
enquired from the Sales Manager, the Sales Manager reported that there were some
complaints about the quality of sweets. Therefore Harsh ordered for sample checking of

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sweets.
Identify the step taken by Harsh that is related to one of the functions of management.
(CBSE Delhi 2017)

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49. State the steps in the process of controlling.
(CBSE Delhi & Outside 2017; Delhi (Comptt.) 2017)

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50. Describe briefly the relationship between controlling and planning.

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(CBSE Delhi & Outside 2017)
PU .i
51. Isha Machines was a renowned name for quality sewing machines since 1960.
E rs
B
Mr. Suresh, the owner of Isha Machines, was worried as the production had declined during
the last three months. He directed the Production Manager to find out the reason. The
B a

Production Manager ordered the different supervisors to prepare a performance report of

the workers working under them.
ol

Identify the steps taken by the Production Manager that is related to one of the functions
of management. (CBSE Outside 2017)
TO ch

52. The last step in the process of controlling is ‘taking corrective actions’. Briefly explain the
steps in chronological order that are taken in the process of controlling before this step.
(CBSE Delhi (Comptt.) 2017)
T es

53. “Planning and controlling are interrelated.” Explain. (CBSE Delhi (Comptt.) 2017)
54. Explain ‘Critical Point Control’ and ‘Management by Exception’ used by managers while
analysing deviations in the process of controlling. (CBSE Outside (Comptt.) 2017)
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1. If planning is done carefully and accordingly other functions of management are going in
O

the right direction, then there is no need of the controlling function of management. Do
you agree with this statement ? Give reasons in support of your answer.
N

2. Prakash Jha wishes to fix standard production for worker along with standard time to
complete the job. Under which function of management, standards are fixed ?
3. Jindal Ltd. could not achieve the target production of 15,000 cars p.a. It could produce
only 14,125 cars. While analysing the reasons for deviations, it was found that workers were
not efficient. Training programmes were organised and next year, company was able to
produce 15,000 cars. Production Manager is of the opinion, that with this, management
ends at controlling. Do you agree ? Give reason to support of your answer.

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4. Suppose you are the manager of ABC Clothing Ltd. It comes to your knowledge that postal
expenses have increased by 15% over the standard price and cost of labour and raw materials
has increased by 3%. Which of the two situations is more critical according to you ?
5. ‘Tricom Ltd.’, a computer hardware manufacturing company imported a new machinery
for manufacturing latest technology based computer systems. The human resource manager
determined that for operating the new machines, the company required the necessary workers
through placement agency.
After three months, it was reported by the production manager that the workers were not

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able to meet the target production. The General Manager got annoyed and ordered inquiry
for the same. It was reported that the newly recruited workers possessed the necessary skills
and abilities but lacked the willingness to do work.
(i) Name the functions of management involved above.

H
(ii) Name the relevant concept of functions identified in (i).

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(iii) Which concept of management will help the company in meeting the target production :
n
i. Staffing, Controlling, Directing

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ii. Recruitment, Controlling process
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(a) Comparing actual performance

B
(b) Analysing deviations
B a

iii. Motivation
6. Mr. Ankit is the chief manager in a well-known MNC, producing shoes. He called the
ol

production manager of his unit and told him to keep a constant watch on all the activities
of his respective unit so that there is no possibility of adverse results. As long as the company
TO ch

runs its operation employees at all levels will adopt it to achieve results.
1. Identify the function of management referred above.
2. Describe its three features quoting lines from the para.
T es

7. Polycons Ltd. is a firm manufacturing paper bags in Orissa. It has employed female workers
in the company and manufactures paper bags from recycle paper and there after sells them
to various firms at economic rates.
Since last 1 month, its customers (firms) are reporting of complaints received from the users
that these paper bags are unable to manage heavy weight and get torn easily.
(i) Which function of management has been ignored above ?
(ii) Discuss the steps to be undertaken in respect of the ignored function to remedy the situation.
O

(iii) State the value being followed by the company.

N

8. One day, the management instructor of BBA classes organised a “Panel Discussion” on
important topics of management. The students were given the following clues for discussion.
Each student was given 3 minutes for elaborating on the clues given below :
Clue 1 : They are inseparable twins.
Clue 2 : They are inter-dependent, inter-related and reinforce each other.
Clue 3 : They both are forward as well as backward looking.
(i) Identify the functions of management written in clues above.
(ii) Elaborate on the three clues.

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Controlling 225

9. Mr. Sandhu worked as a manager in a company manufacturing stationery items for 10 years.
Later he thought of starting his own business as he had acquired the skills and expertise in
past years. He started his own venture. He divided the organisation into six major
departments—Production, Purchase, Marketing, Legal, Human resource and Finance. After
a month, he called upon the meeting of all the departmental heads in his office and told
the production, marketing and finance department managers to be very vigilant as their
departments are critical to the success of the business. Shortcomings in Purchase, Personnel
or Legal department would not affect much the success of business. Therefore, Mr. Sandhu
determined deviation tolerance limits for the critical departments.

ED
(i) Identify the two functions of management referred above.
(ii) Describe the relevant concept of the identified functions.
10.

H
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B
B a
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TO ch
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Name and explain the first three steps of the function of management shown in the picture.

❏❏
O
N

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SPACE FOR STUDENT’S NOTES