Controlling — NCERT Solutions

Ms Vasundhara should consider the principle of management by exception.

According to this principle, only significant deviations from the standard should be brought to management’s notice. Small or routine deviations should generally be handled at the lower level so that management can focus on important matters.

In this case, Mr. Bhanu Prasad fell short of the target by 10 units for two days. The CEO should first see whether this deviation is within the permissible limit and whether there are genuine reasons such as shortage of material, machine problem, or any other cause. If the deviation is minor and not a major issue, immediate termination would not be appropriate. Management should first analyse the cause and take suitable corrective action if needed.

The process of control involves these steps:

1. Setting performance standards: Standards are the criteria against which actual performance is measured. They may be quantitative or qualitative.
2. Measurement of actual performance: Actual performance is measured objectively and reliably through methods like observation, sample checking and performance reports.
3. Comparison of actual performance with standards: This reveals the extent of deviation between desired and actual results.
4. Analysing deviations: The manager identifies the causes of deviations and decides which deviations need urgent attention. Critical point control and management by exception are used here.
5. Taking corrective action: If deviations are beyond acceptable limits, corrective action is taken, such as training employees, assigning extra resources, or revising standards if necessary.

The chapter mentions the following techniques of managerial control:

Traditional techniques

• Personal observation
• Statistical reports
• Breakeven analysis
• Budgetary control

Modern techniques

• Return on investment (ROI)
• Ratio analysis
• Responsibility accounting
• Management audit
• PERT and CPM
• Management Information System (MIS)

These techniques help managers measure performance, compare results with standards and take corrective action where needed.

Importance of controlling in an organisation

Controlling is important because it:

1. helps in accomplishing organisational goals by finding deviations and taking corrective action;
2. helps in judging the accuracy of standards and revising them when needed;
3. promotes efficient use of resources by reducing wastage and spoilage;
4. improves employee motivation because employees know what is expected of them;
5. ensures order and discipline in the organisation; and
6. facilitates coordination in action by aligning the efforts of different departments.

Problems faced in implementing an effective control system

The chapter mentions these limitations:

1. Difficulty in setting quantitative standards: Some areas like morale and job satisfaction cannot be measured precisely.
2. Little control over external factors: Government policies, technological changes and competition cannot be controlled.
3. Resistance from employees: Employees may see control as a restriction on their freedom.
4. Costly affair: A control system may involve high expenditure, time and effort, especially for small organisations.

Planning and controlling are inseparable twins of management. They are closely related in the following ways:

• Planning provides the basis for control. Control presupposes standards, and these standards are set through planning.
• Controlling ensures that plans are implemented. It measures actual performance, finds deviations and takes corrective action.
• Planning without controlling is meaningless, because the plan may not be followed.
• Controlling without planning is blind, because without standards there is nothing to compare actual performance with.
• Planning is mainly prescriptive while controlling is evaluative.
• Planning is generally forward-looking, and controlling is generally backward-looking, but both also support future improvement.
• They reinforce each other: planning based on facts makes controlling easier, and controlling improves future planning through feedback.

a. Benefits of a good control system

A good control system will help the company in these ways:

• Accomplishing organisational goals: It measures progress towards goals, finds deviations and suggests corrective action.
• Judging accuracy of standards: It helps check whether the standards set are accurate and objective, and can be revised if needed.
• Making efficient use of resources: It reduces wastage and spoilage and ensures effective and efficient use of resources.
• Improving employee motivation: Employees know what is expected of them and the standards on which they will be appraised.
• Ensuring order and discipline: It creates order and discipline and helps minimise dishonest behaviour.
• Facilitating coordination in action: It coordinates different departments and employees towards common organisational objectives.

b. Relationship between planning and controlling

Planning and controlling are inseparable twins. Planning provides the standards or benchmarks, and controlling checks whether actual performance conforms to those standards.

So, in this company:

• The company should first make clear plans for sales, customer satisfaction, technology improvement and export performance.
• These plans should provide measurable standards.
• Then controlling should compare actual performance with these standards.
• Deviations should be analysed and corrective action taken.
• The feedback from controlling should be used to improve future planning.

Thus, planning is the basis of control, and controlling improves future planning.

c. Steps in the control process

The company should follow these steps:

1. Setting performance standards

• Fix standards for sales targets, customer satisfaction, product quality, delivery time, and service levels.
• Standards should be as quantitative and specific as possible.

2. Measurement of actual performance

• Measure actual sales, customer feedback, product defect rates, and after-sales service performance.
• Use reports, performance records, surveys and other reliable methods.

3. Comparison of actual performance with standards

• Compare actual results with the target standards to identify deviations.

4. Analysing deviations

• Find the reasons for shortfall, such as poor technology, competition, wrong pricing, weak promotion, or service issues.
• Give priority to important deviations using critical point control and management by exception.

5. Taking corrective action

• Take action such as improving technology, training employees, changing pricing, improving customer service, or revising standards if necessary.

This will help the company remove its current problems and improve performance.

a. Any two features of controlling shown in the situation

1. Continuous process: The manager wants a constant and continuous check on activities, which shows that controlling is an ongoing process.
2. Pervasive function: He wants performance tracking in the whole organisation, showing that controlling is needed at all levels and in all departments.

b. Any four points of importance of controlling

1. Accomplishing organisational goals: Controlling measures progress and helps the organisation stay on the right track to achieve its goals.
2. Judging accuracy of standards: It helps management check whether the standards set are correct and objective.
3. Making efficient use of resources: It reduces wastage and ensures resources are used effectively and efficiently.
4. Improving employee motivation: When employees know the standards of performance in advance, they work better and are more motivated.

Other valid points from the chapter include: ensuring order and discipline, and facilitating coordination in action.