Notes By Deepali Arora

Equilibrium Classes

Controlling

Introduction to Controlling

In business management, it is not enough just to plan, organize, and direct activities.
Managers also need to check whether the actual performance is going according to the
plan or not. If things are not going as expected, they need to take corrective actions. This
process is called controlling.

For example, if a company plans to produce 10,000 pens in a month but produces only 8,000,
the manager will identify the reason for the shortfall (like machine breakdown, shortage of
workers, etc.) and take corrective action to achieve the target next time.

Meaning of Controlling

• Controlling is the process of measuring actual performance, comparing it with

standards (plans, goals, budgets, etc.), and taking corrective action if there is
any deviation.
• It ensures that organizational activities are moving in the right direction to
achieve the goals effectively and efficiently.

In simple words: Controlling means checking whether work is going as planned and
correcting mistakes to ensure success.

Example:
A school principal sets a rule that every student must score at least 60% in English. After
exams, results are compared. If some students score below 60%, extra classes are arranged.
This is controlling.
Scope of Controlling
The scope of controlling is very wide because it applies to all levels of management and in
all departments of an organisation. Managers control finance, production, marketing, human
resources, etc., to make sure activities are moving as planned.

In general, controlling ensures:

• Proper use of resources

• Achievement of objectives
• Smooth functioning of all departments
• Correction of deviations on time

Two Aspects of Controlling Function

1. Strategic Control
o It is concerned with the long-term plans and overall goals of the
organisation.
o Managers check whether strategies (like expansion, diversification,
launching a new product, entering a new market) are working effectively
or not.
o It is usually done by top-level management.

Example: If a company’s strategy is to become the No. 1 smartphone seller in

India, strategic control will check whether sales growth, branding, and customer base
are moving towards that long-term goal.

2. Operational Control (Day-to-Day Control)

o It focuses on routine operations and short-term activities.
o Ensures that daily tasks (like production, sales targets, quality standards,
employee performance) are carried out properly.
o It is usually done by middle and lower-level management.

Example: In a car manufacturing unit, checking whether daily production of 500

cars is achieved or not is operational control.

In short:

• Strategic control = Long-term goals, big picture.

• Operational control = Day-to-day performance, routine work.
Nature of Controlling
1. Controlling is a Goal-Oriented Function

• Controlling is always related to the achievement of organisational goals.

• It compares actual performance with planned targets to ensure that objectives
are fulfilled.
• If deviations are found, corrective actions are taken to bring performance back
on track.

Example: If a company sets a target to produce 1,000 mobiles in a month but only 900
are produced, controlling helps managers find out the reasons (like shortage of raw materials
or labour problems) and take corrective steps to meet the goal.

Link: Shows that controlling always focuses on achieving organisational objectives.

2. Controlling is an All-Pervasive Function

• Controlling is required at all levels of management (top, middle, and lower).

• It is also required in all departments (production, finance, marketing, HR, etc.).
• Each manager has to exercise control over their team to ensure proper
performance.

Example:

• Top-level managers control overall company performance like profits and

strategies.
• Middle-level managers control departmental targets like sales, marketing
campaigns, or production schedules.
• Lower-level managers control routine activities like workers’ attendance or daily
output.

Link: This shows that controlling is universal and applies to every level and area of an
organisation.

3. Controlling is Both Backward-Looking and Forward-Looking

• Backward-looking: Controlling checks the past performance against set

standards. It helps managers learn from mistakes and avoid them in the future.
 • Forward-looking: It also prepares the organisation for the future by taking
corrective actions so that future performance can be improved.

Example:

• A bank compares last month’s customer complaint reports (backward-looking)

and then takes steps like employee training to reduce complaints in future
(forward-looking).

Link: Controlling uses past information but its main purpose is to ensure better results in
the future.

4. Controlling is a Continuous Function

• Controlling is not a one-time activity; it is an ongoing process.

• Since business activities are continuous, controlling also continues throughout
the life of the organisation.
• Every activity and every stage needs monitoring and correction.

Example: In a school, the principal regularly checks attendance, teaching quality, and
exam results every month. It’s not done once, but throughout the year.

Link: This proves controlling is an unending and regular activity.

In short:

• Goal-oriented → ensures objectives are met.

• All-pervasive → applies to all levels and departments.
• Backward & Forward-looking → learns from past, prepares for future.
• Continuous → never-ending process.

Importance of Controlling

1. Helps in Achieving Organisational Goals

• Explanation: Controlling ensures that the actual performance is in line with the
planned performance. If there is any deviation, corrective actions are taken
immediately. This helps the organisation to stay on the right track and achieve its
set goals.
 • Example: A school has set a target that all students must achieve at least 75%
marks in English. If teachers notice that students are scoring below expectations
in unit tests, they can take extra classes to help students improve.
• Link to Concept: By controlling, the gap between actual performance and
planned performance is reduced, which leads to goal achievement.

2. Judging Accuracy of Standards

• Explanation: Through controlling, managers can check whether the standards or

targets set are realistic, achievable, and accurate. Sometimes the standards may
be too high or too low.
• Example: A factory set a standard that a worker must produce 100 units per day.
But in reality, workers can only produce 80 units with full efficiency. Controlling
helps managers understand that the standard was set too high and needs
revision.
• Link to Concept: Controlling helps in evaluating whether standards are practical
or require adjustments.

3. Making Efficient Use of Resources

• Explanation: Controlling ensures that resources like money, materials,

machines, and manpower are used in the best possible way without any
wastage.
• Example: In a hospital, if controlling shows that too many gloves or masks are
being wasted, management can set strict rules for their use. This reduces
wastage and ensures efficiency.
• Link to Concept: Resources are limited, and controlling ensures they are used
properly to give maximum output.

4. Improving Employees Motivation

• Explanation: When employees know that their work is being evaluated and good
performance will be rewarded, they feel motivated to perform better. Controlling
also provides feedback, which helps employees improve.
• Example: A company tracks the sales performance of employees. Those who
meet or exceed targets are rewarded with bonuses. This motivates all employees
to work harder.
• Link to Concept: Controlling motivates employees by recognizing and rewarding
their efforts and guiding them where they fall short.
5. Ensures Order and Discipline

• Explanation: Controlling keeps everyone in check by monitoring behaviour,

rules, and procedures. It helps reduce irregularities, fraud, and misconduct.
• Example: In a college, CCTV cameras and attendance systems are part of the
controlling system. These ensure students and teachers follow discipline and
attend regularly.
• Link to Concept: Order and discipline in an organisation improve overall
performance.

6. Facilitates Coordination in Action

• Explanation: Controlling ensures that all departments and employees work

together in harmony by checking that everyone’s performance is aligned with the
overall plan.
• Example: In a garment company, the production team, marketing team, and
supply team must work in coordination. Controlling helps ensure that if
production is delayed, the marketing team adjusts its campaign accordingly.
• Link to Concept: Controlling acts like a link that brings unity in efforts of
different departments.

So, Controlling is important because it guides, motivates, and regulates all activities
to achieve goals, reduce wastage, and maintain discipline in the organisation.

Relationship between Planning and Controlling

1. Planning and Controlling are Interdependent and Interlinked

• Meaning: Planning and controlling cannot work without each other.

o Planning sets the goals and decides what to do and how to do it.
o Controlling checks whether the work is being done according to the plan
or not.
• Example: A company plans to produce 1,000 shirts in a month. Controlling
checks whether only 1,000 shirts were made, or less, or more.
• Link to concept: Without a plan, controlling has no standards to compare with.
Without controlling, planning remains incomplete because we can’t know if
plans were successful.
2. Both are Forward-looking and Backward-looking

• Planning is Forward-looking: It is always about the future. For example,

deciding how many products to make, how much money to spend, etc.
• Controlling is Backward-looking: It compares actual performance with the past
plans. For example, checking last month’s results to see if targets were achieved.
• But Controlling is also Forward-looking: Because the results of control help
managers improve future planning.
• Example: If the company planned to sell 1,000 phones but sold only 800,
controlling shows the mistake. Managers will plan better for the next time
(maybe improve marketing).
• Link to concept: This shows how past results (control) guide the future
(planning).

3. Planning is Prescriptive, Controlling is Evaluative

• Planning is Prescriptive: It prescribes (tells) what needs to be done, when, how,

and by whom.
• Controlling is Evaluative: It evaluates (judges) whether the things are going as
per the plan or not.
• Example: Planning says: “Produce 500 chairs in 15 days.” Controlling says:
“Let’s check if 500 chairs were made in 15 days or not.”
• Link to concept: Planning gives directions, controlling gives corrections.

In short:

• Planning without controlling is useless → because no one checks if goals are

achieved.
• Controlling without planning is meaningless → because there is no
goal/standard to compare with.
• Together, they are called “the twin sisters of management.”

Controlling Process
The process of controlling is systematic. It involves several steps that help managers ensure
that actual performance matches planned performance. Let’s study each step one by one in
detail.
Step 1: Setting up of Target / Standards

• Meaning: Standards are the benchmarks or targets against which actual performance
is measured.
• Standards should be:
o Clear and measurable (e.g., 100 units of production in one week).
o Realistic (not too high or too low).
o Consistent with organisational goals.
• Example:
A mobile manufacturing company sets a target to produce 1,000 phones in one
month with less than 2% defect rate.
• Link to Concept:
Without standards, controlling has no base. Standards act like a “measuring stick” for
performance.

Step 2: Measuring Performance

• Meaning: Actual performance of employees, departments, or processes must be

measured to see what is really happening.
• Performance can be measured through:
o Quantitative methods: Output, sales figures, cost per unit, profit, etc.
o Qualitative methods: Employee attitude, customer satisfaction, brand
reputation, etc.
• Example:
The company checks its production records and finds that 950 phones were
produced in the month and 3% defect rate was recorded.
• Link to Concept:
Measurement provides the “real picture” of performance. If it is not measured, it
cannot be controlled.

Step 3: Comparing Performance Against Standards

• Meaning: Actual performance is compared with the standards set in Step 1 to find
whether there are any gaps (deviations).
• Example:
o Standard = 1,000 phones with 2% defect.
o Actual = 950 phones with 3% defect.
o Deviation = 50 phones less + 1% more defect.
• Link to Concept:
This step highlights the gap between “what should be” and “what is.”
Step 4: Analysing Deviations

• Meaning: Not all deviations are equally important. Managers must identify which
deviations need immediate attention.
• There are two important techniques for this:

(a) Critical Point Control (CPC):

o Managers should focus only on key areas where deviations affect the
whole organisation.
o Example: In a hospital, controlling medicine supply is more critical than
controlling stationery use.

(b) Management by Exception (MBE):

o Managers should not waste time on small or minor deviations. They

should deal only with major and exceptional problems.
o Example: If an employee is late by 5 minutes, it can be ignored. But if an
employee is absent frequently, it requires immediate action.
• Advantages of MBE:
o Saves time and energy of managers.
o Focuses attention on important problems.
o Improves efficiency by not overloading management with small issues.
• Example:
If only 50 phones less were produced, it is a small deviation. But if 300 phones less
were produced, it becomes a serious issue that needs action.
• Link to Concept:
This step helps managers decide which problems matter the most and should be
corrected.

Step 5: Taking Corrective Measures

• Meaning: After finding significant deviations, managers must take actions to correct
them.
• Corrective actions may include:
o Changing production methods.
o Giving training to workers.
o Revising targets if they are unrealistic.
o Improving supervision.
• Example:
Since 50 phones were not produced due to machine breakdown, the company may
decide to increase maintenance checks or purchase better-quality machines.
• Link to Concept:
Controlling is not just about pointing out mistakes, but also about removing the
causes of mistakes.
Step 6: Feedback in Controlling

• Meaning: Feedback is the information about how the corrective measures worked. It
helps managers know if their actions have solved the problem or not.
• This step also provides learning for future planning and controlling.
• Example:
After the company repaired the machines and gave training, production increased to
1,020 phones next month with only 1.5% defect rate.
• Link to Concept:
Feedback closes the loop of controlling. It ensures that the same mistakes are not
repeated and performance continues to improve.

Summary of the Steps

1. Setting Standards → Decide targets.
2. Measuring Performance → Collect actual performance data.
3. Comparing with Standards → Find deviations.
4. Analysing Deviations → Focus on critical points and exceptions.
5. Taking Corrective Action → Fix problems.
6. Feedback → Learn and improve for the future.

Deviation in Controlling
Meaning of Deviation

• In the controlling process, managers compare actual performance with pre-

decided standards.
• The difference between the two (standard vs. actual) is called Deviation.
• It tells whether performance is as expected, better, or worse.

Example:

• Standard: Sales target = ₹5,00,000 per month.

• Actual sales = ₹4,50,000.
• Difference = ₹50,000 → This gap is called Deviation.
Types of Deviation
1. Positive Deviation

• Meaning: When actual performance is better than the standard.

• Example:
o Target production = 1,000 units.
o Actual production = 1,200 units.
o Deviation = +200 units (positive).
• Importance: Shows efficiency and better resource utilisation. Managers may
increase the standard in the future.

2. Negative Deviation

• Meaning: When actual performance is less than the standard.

• Example:
o Target production = 1,000 units.
o Actual production = 800 units.
o Deviation = –200 units (negative).
• Importance: Shows inefficiency, wastage, or problems. Managers must take
corrective action.

Quick Table for Revision

Aspect Positive Deviation Negative Deviation

Meaning Actual > Standard Actual < Standard

Nature Favourable Unfavourable

Indicates Higher efficiency Inefficiency / Problems

Example Target = 1000, Actual = 1200 Target = 1000, Actual = 800

Manager’s Motivate, revise standards Corrective action to remove

Response upward weakness
A. Case-Study Based Questions (3–4 Marks)

1. 2017 Board (Case Based)

A manager compares actual sales with the sales targets set for the month. He
found a deviation of 10%. He immediately took steps to improve the
performance of employees.
Questions:
(a) Identify the function of management being performed.
(b) Name the steps of the process highlighted.
Answer: Controlling; Comparing actual performance with standards + Taking
corrective action.

2. 2020 Sample Paper (Case Based)

The Production Manager of a company found that the actual production is less
than the planned production. He immediately investigated the reasons and took
necessary corrective action.
Questions:
(a) Identify the function of management involved.
(b) State its importance in this case.
Answer: Controlling; Importance → It helps in correcting deviations & achieving
goals.

B. MCQ/Objective Type Questions

1. 2019 Sample Paper (1 Mark MCQ)

“Which of the following is the first step in the process of controlling?”
(a) Setting performance standards
(b) Measurement of actual performance
(c) Taking corrective action
(d) Comparing actual performance with standards
Answer: (a) Setting performance standards.

2. 2021 Sample Paper (MCQ)

“Controlling ensures …”
(a) No deviations at all
(b) Minimisation of deviations
(c) Increase in deviations
(d) None of the above
Answer: (b) Minimisation of deviations.
 3. 2024 Sample Paper (Assertion–Reason type, 1 mark)
Assertion (A): Controlling helps in achieving organisational goals.
Reason (R): Controlling measures actual performance and compares it with
standards.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Answer: (a) Both A and R are true, and R explains A.

Q1. (2015 – Delhi/All India)

Question: State the steps in the process of controlling.

Answer:
Steps in the controlling process are:

1. Setting performance standards – Predetermined targets are fixed in

measurable terms.
2. Measurement of actual performance – Actual work done is measured through
reports, observation, or samples.
3. Comparison of actual performance with standards – Differences/deviations
are identified.
4. Analysing deviations – Causes of deviations are studied; only significant ones
are considered.
5. Taking corrective action – Steps are taken to remove defects and improve
performance.

Why: These are the official 5 steps as per NCERT/CBSE marking scheme.

Q2. (2016 – Delhi Set 1, Q22)

Question: Explain the importance of controlling. (Any three points)

Answer: Importance of controlling:

1. Helps in achieving organisational goals – Ensures actual performance

matches planned targets.
2. Judges accuracy of standards – Reveals if standards are realistic or need
revision.
3. Facilitates coordination in action – Ensures all departments are working
towards common goals.
Why: NCERT lists importance; examiner awards marks for any three valid points.

Q3. (2019 – Sample Paper)

Question: “Controlling is a forward-looking function.” Do you agree? Give reason.

Answer:
Yes, controlling is forward-looking because the corrective actions taken today are applied to
future activities, so that mistakes are not repeated again.

Why: Though it evaluates past performance, its focus is on improving future outcomes. (1
mark, reasoning mandatory.)

Q4. (2019 – Sample Paper)

Question: In the controlling process, the manager compares actual performance with
standards. Name this step and state what comes immediately after it.

Answer:

• The step is Comparison of actual performance with standards.

• The step immediately after is Analysing deviations.

Why: Exact NCERT process order → measurement → comparison → analysing →

corrective action.

Q5. (2024–25 – CBSE Sample Paper, Q28)

(a) “Planning and Controlling are both backward-looking as well as forward-looking.

Explain.”

Answer:

• Planning is forward-looking because it sets future goals and actions.

• Planning is backward-looking because plans are based on past experiences
and data.
• Controlling is forward-looking because corrective actions aim to improve
future performance.
• Controlling is backward-looking because it measures past performance
against standards.
OR

(b) The first step in controlling is setting performance standards. Explain the next two steps.

Answer:

1. Measurement of actual performance – Actual performance is measured

through reports, observation, samples, etc.
2. Comparison of actual performance with standards – Actual results are
compared with predetermined standards to find deviations.

Why: These are the second and third steps of controlling process as per NCERT.