EM 202-BSCE 2B

Controlling

Controlling (Function Of Management)

This function ensures that all managers monitor and assess their subordinates’ performance, thus allowing them
to take corrective measures. This, in turn, helps organizations prevent losses. Moreover, control ensures the
efficient and effective utilization of the available resources to achieve the predetermined goals. There are three
levels of control in management — tactical, operational, and strategic control.

Importance
The following are some benefits of control in management:

 This function ensures efficient allocation and utilization of the available resources to achieve the
predetermined organizational objectives.
 It instills order and discipline in the business.
 Managers of an organization can delegate tasks to subordinates. This ensures the completion of the routine
chores on time.
 It boosts employees’ morale and motivates them.
 This function helps assess the accuracy of the set standards. In addition, it minimizes the gap between the
actual performance and the desired result.

Control Process
Control process involves monitoring and comparing the actual performance against the set standards and taking
corrective actions when necessary.

The process of control in management consists of five steps.

1.Setting the standards: Helps organizations improve their performance by specifying repeatable steps that
organizations consciously implement to achieve their goals and objectives, and to create an organizational culture that
reflexively engages in a continuous cycle of self-evaluation, correction and improvement of operations and processes
through heightened employee awareness and management leadership and commitment.

2.Measuring actual performance: The business measures employees’ performance in the next step. This way, it
becomes easier for organizations to identify deviations from their established standards. That said, one must remember
that with the increasing management levels, measuring actual performance becomes challenging for companies.

3.Comparing actual performance with standard or goal: Accept or reject the product outcome.

4. Analyzing Deviation: Identifying the deviations from the established standards is crucial for companies to assess their
performance. In this step, managers must figure out the cause and extent of the deviation. Without identifying the gaps
in performance, an organization cannot take corrective measures.

5.Taking corrective actions: Lastly, companies take the steps necessary to eliminate deviations from the set standards.

Thus, the process of control in management regulates an organization’s activities to ensure that the actual performance
conforms to the set standards. When companies have an effective control system, the managers can steer clear of
circumstances that lead to financial losses.
Types of Control
1. Feed forward Control- It is sometimes called preliminary or preventive controls, attempt to identify
and prevent deviations in the standards before they occur. Feed forward controls focus on human,
material, and financial resources within the organization.
2. Concurrent control- it takes place while an activity is in progress. It involves the regulation of
ongoing activities that are part of transformation process to ensure that they conform to
organizational standards. Concurrent control is designed to ensure that employee work activities
produce the correct results.
3. Feedback Control- This type of control focuses on the outputs of the organization after transformation
is complete. Sometimes called post action or output control, fulfills a number of important functions.
For one thing, it often is used when feed forward and concurrent controls are not feasible or are to
costly.

Techniques of Control in Management

A) Traditional

The traditional techniques are as follows:

1. Budgeting

A budget is a statement reflecting an organization’s future expenditures, profits, and earnings. It is an estimate of a
company’s future financial position. Units sold, units produced, and unit labor and material costs are a few of a budget’s
crucial components. Budgeting control involves comparing the actual performance with the budgeted or planned
performance. Some of the different types of budgets are cash budget, sales budget, and production budget.

2. Personal Observation

This is the easiest way for managers to control organizational activities. Managers of a business can observe the work in
progress to accumulate information as first-hand information. Then, if they spot any performance gap, they correct it
instantly by taking the necessary action.

3. Break-Even Analysis

Managers utilize this method to study the relationship between volume, profits, and costs. This helps them understand
the possible losses or profits at different activity levels while analyzing the organization’s overall position.

4. Statistical Reports

This refers to analyzing data and reports presented to an organization’s managers to give them an idea regarding the
business’s performance in different areas. The information is presented in tables, graphs, charts, etc., enabling managers
to compare with previous periods’ performance easily.

B) Modern
1. Return On Investment

Also called ROI, it is a useful technique that helps determine whether the business has been able to utilize the available
capital efficiently. Besides the overall organizational performance, one can gauge the performance of individual divisions
or departments using this technique.

2. Ratio Analysis

Companies use ratio analysis to measure the organization’s performance. The different types of ratios commonly used
are profitability ratios, solvency ratios, liquidity ratios, and turnover ratios.

3. Responsibility Accounting

This is an accounting system where the involvement of different sections, departments, and divisions is set up as
‘Responsibility Centers’. These centers can be of various types, like revenue and cost centers. Every center’s head is
responsible for achieving the center’s predetermined objective.

4. Management Audit

This is the systematic appraisal of an organization’s management team based on performance. It aims to assess the
efficiency of the management. Moreover, it plays a crucial role in improving future performance.