CONTROLLING

Meaning, Features, and Importance of Controlling

Process of controlling. Relationship between planning and controlling

Meaning & Definition

Controlling means ensuring that activities in an organization

are performed as per the plans.
Controlling also ensures that an organisation’s resources are being used effectively
and efficiently for the achievement of predetermined goals.
Through comparison of actual performance with the planned performance, the
controlling function finds out how far actual performance deviates from standards,
analyses the causes of such deviations and attempts to take corrective actions based
on the same.
This process helps in the formulation of future plans in the light of the problems that
were identified and thus helps in better planning in the future periods.
Nature of Controlling/Features of Controlling

1. Controlling is a goal oriented function: Controlling as a function of

management ensures that the overall directions of individuals and groups are
consistent with short and long range plans of the organization. So it is
completely a goal oriented function.

2. Controlling is a pervasive function: Controlling is a function which is

applicable to all types of organizations business and non-business and at all
managerial levels.

3. Controlling is a continuous function: Control is not a one-time activity but it

is an ongoing process. It is carried on till the organization is surviving.
4. Controlling is both a backward looking as well as forward looking
function: Controlling is backward looking function as managers compare the
actual performance with planned performance and to measure the actual
performance they have to look back to the planned performance. That is why it is
backward looking.
Controlling is also forward looking also because it does not end only by
comparing past performance with future but it also suggest measures to
remove the reasons for failure of plans. This process helps in formulation
 of future plans in the light of the problems that were identified and thus,
helps in better planning in future periods.

Importance of Controlling :JAIFEE

Controlling function plays a vital role in the process of management. Controlling
assures that actual activities conform to the planned activities.

1. Controlling helps in achieving organizational goals: Controlling ensures

that results of business operations conform as closely as possible to the
predetermined objectives. Controlling tries to correct the deviations between
actual results and desired results, if any. This helps in achieving the goals of
the organisation

2. Judging accuracy of standards:

A good control system enables management to verify whether the standards

set are accurate and objective.

An efficient control system keeps a careful check on the changes taking place
in the organization and in the environment and helps to review and revise the
standards in light of such changes/

3. Making efficient use of resources: Wastage and spoilage of resources can

be reduced/minimized if all the activities are performed in accordance with
predetermined standards. Controlling ensures that all the resources are used
in the most efficient manner to achieve the goals efficiently.

4. Improves employee’s motivation: A good control system ensures that

employees know well in advance what they are expected to do & also the
standards against which their performance will be judged. This induces them
to do things in a proper manner. It thus motivates & helps them to give the
expected results. This keeps the employees morale at high level.
5. Facilitating Coordination in action: Controlling helps to achieve
coordination. This is because each department and employee is governed by
pre-determined standards which are well coordinated with one another. This leads
to unity of direction and ensures achievement of organizational goals.

6. Ensuring order and discipline: Controlling creates an atmosphere of order and

discipline in the organization. It helps to minimize dishonest behavior on the
part of the employees by keeping a close check on their activities.

Q. 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 function of
 management. Do you agree with this statement? Give reasons in support of
your answer. Answer: Importance of controlling.

[Hint- Controlling is still required to check whether performance is as per plans

or not.]

Controlling Process

Controlling Process: SM CAT

1. Setting Performance Standards: The first step in

the controlling process is to establish standards
of performance against which actual performance
can be evaluated. Thus standards become the basis
for comparison.
Standards can be set in both quantitative as well as
qualitative terms.
For instance, standards set in terms of cost to be
incurred, revenue to be earned, products unit to be
produced and sold are examples of quantitative
standards.
Improving Goodwill and motivation level of employees
are examples of qualitative standards.
2. Measurement of Actual Performance: Performance
should be measured in an objective and reliable
manner which includes personal observation, sample
checking. Performance should be measured in same
terms in which standards have been established, this
will facilitate comparison.
3. Comparing Actual Performance with Standard: This
step involves comparison of actual performance with the
standard. Such comparison will reveal the deviation
between actual and desired performance.

4 Analysing Deviations: It involves finding the extent of

deviations. Some deviations in performance can be
expected in all activities. It is therefore important to
determine the acceptable range of deviations.
Significant deviations are analysed thoroughly to identify
their causes. Once the deviations are identified it is
important to analyse them through:
1. Critical point control (CPC):
Critical point control helps in the controlling
process by focusing on key result areas which are
important and critical to the success of an
organization.
It is neither economical nor easy to have a check on
each and every activity. Therefore, attention must be
paid on key areas on which performance of entire
 organization depends. If anything goes wrong at the
critical points, the entire organization suffers.
For example: 10% increase in stationery cost is not
critical. But 5% increase in wages and Salaries is
critical.
2 Management by Exception/control (MBE): A manager
should take corrective action only when there is
exceptional deviation i.e. when they cross the permissible
limit or acceptable range. Deviations within acceptable
range are ignored. This principle of management control
emphasis that a manager who tries to control everything
may end up controlling nothing.
For example:

5.Taking Corrective Action: The final step in the controlling

process is taking corrective action. No corrective action is
required when the deviations are within the acceptable limits.
But where significant deviations occur corrective action is
required.

Relationship between Planning and Controlling

 Planning and controlling are interrelated and in fact
reinforce each other. Each drives the other function of
management. Activities are put on rails by planning and they are
kept at the right place The following points further highlights the
relationship between them:
 Planning is the basis of Controlling: Planning is pre-
requisite for controlling. Controlling is blind without
 planning. Plans provide the standard for controlling. If the
standards are not established through planning, the
controlling activity cannot be performed. Controlling is blind
without planning.
 Plan serves no purpose without control: Planning is
meaningless without controlling. Controlling is necessary
to monitor the progress So planning is fruitful when
control is exercised. It discovers deviations and initiates
corrective measures. Controlling ensures that work has
been done according to planning.
 .
 Controlling sustains planning: Planning and
controlling both are forward looking also. Controlling is
forward looking as it provides us important feedback for
the future plan. It helps in the adoption of new plans and
revision of existing plans on the basis of actual
performance against the set standards. Thus controlling
seeks to improve the future plan on the basis of past
experience.
 Prescriptive Vs. Evaluative: Planning prescribes an
appropriate course of action for achieving objectives whereas
controlling evaluates whether decisions have been translated
into desired action. Planning is, thus, prescriptive whereas
controlling is evaluative.
 Theoretical vs. Practical
Planning is theoretical whereas controlling is practical because
planning prepares a plan and controlling orks on it. For example,
Budget is an important instrument of planning. When budget is
prepared, it is planning whereas the implantation of the budget is
controlling.
MCQ
Q. Standards can be set in the following terms:
a. Only Qualitative
b. Only Quantitative
c. Both Qualitative and Quantitative
d. Neither Qualitative nor Quantitative