Control : It is the process that measures current performance and guides it towards some

predetermined objectives.

• It involves setting up standards of individual and organisational performance, checking actual

performance against these standards to make sure that the objectives are being achieved as

originally anticipated in organisation’s plans.

• According to E. F. L. Breach, “Control is the process of checking actual performance against

the agreed standards or plans with a view to ensuring adequate progress and satisfactory

performance.”

• According to Koontz and Weihrich, “The managerial function of controlling is the

measurement and correction of the performance in order to make sure that enterprise

objectives and the plans devised to attain them are accomplished.”

Characteristics of control :

• It is a function of every manager along with other managerial functions like planning,

organising, staffing and directing. Managers at all levels have to perform this function to

contribute to the achievement of organisational objectives.VirtuosoCoder.in

• As long as organisation exists some sort of control is required. A manager has to perform this

function continuously along with other function.

• It leads to appraisal of past activities. The deviations in the past revealed by the control

process. This is also known as feedback information.

• It is linked with future as past cannot be controlled. A manager can take corrective action

only in regard to future operations.

• It implies taking corrective measures. The purpose of control is achieved only when

corrective action is taken on the basis of feedback information. It is only action which adjusts

performance to predetermined standards whenever deviations occur.

• It is a dynamic process. Control involves continuous review of standards of performance and

results in corrective action which may lead to change in the performance of other function of

management.

• It does not curtail the rights of individuals. It is a preventive action so that losses may be

avoided in future. Control in an enterprise is based on facts and figures and not on the whims

of managers.VirtuosoCoder.in

Feedforward Controls Concurrent Controls

Inputs Processing Outputs

Feedback Controls

Flow of InformationCorrective ActionVirtuosoCoder.in

Types of control :

o Feedforward controls, sometimes called preliminary or preventive controls, attempt to identify

and prevent deviations in the standards before they occur.

• Feedforward controls focus on human, material, and financial resources within the organization.

• These controls are evident in the selection and hiring of new employees. For example,

organizations attempt to improve the likelihood that employees will perform up to standards by

identifying the necessary job skills and by using tests and other screening devices to hire people

with those skills.

o Concurrent controls monitor ongoing employee activity to ensure consistency with quality

standards.

• These controls rely on performance standards, rules, and regulations for guiding employee tasks

and behaviors.

• Their purpose is to ensure that work activities produce the desired results. As an example, many

manufacturing operations include devices that measure whether the items being produced meet

quality standards. VirtuosoCoder.in

• Employees monitor the measurements; if they see that standards are not being met in some

area, they make a correction themselves or let a manager know that a problem is occurring.

o Feedback controls involve reviewing information to determine whether performance meets

established standards.

• For example, suppose that an organization establishes a goal of increasing its profit by 12

percent next year. To ensure that this goal is reached, the organization must monitor its profit

on a monthly basis. After three months, if profit has increased by 3 percent, management

might assume that plans are going according to schedule.

• This type of control focuses on the outputs of the organization after transformation is

complete.

• Feedback has two advantages over feedforward and concurrent control.

• First, feedback provides managers with meaningful information on how effective its planning

effort was.

• If feedback indicates little variance between standard and actual performance, this is

evidence that planning was generally on target. VirtuosoCoder.in

• If the deviation is great, a manager can use this information when formulating new plans to make

them more effective.

• Second, feedback control can enhance employees motivation.

Importance of control :

o Reduces Risk : Control eliminates the risk of non-conformity of actual performance with the main

goals of the organisation.

• Control is the function which regulates the operation to ensure the attainment of the set objectives.

• Regular measurement of work in progress with proper adjustments in operations puts the

performance on the right track and helps in the achievement of goals.

o Basis for future action : Control provides the information and facts to the management for

planning and organising when the work is completed and the result is evaluated.

• In fact, evaluation of results helps the management replant for non-repetitive operations and

rewarding, punishing and discipline the workers.

• It would be better to say that future long term planning is not possible unless and until control

information is available in time to the managers for the operation of work.VirtuosoCoder.in

o Size of the business : In large scale business in the modem times it is quite impossible to

work without proper policies, procedures and quality of different varieties of goods.

• That is why in a large scale organisation there is always the need of a scientific system of

control to solve the day to day problems.

o Indicator for managerial weakness : In the organisation there will be certain unforeseen

and unknown problems which cannot be traced out by mere planning, organising and staffing

efforts.

• It is the control process that can trace these out. That is why it is known as an indicator of the

managerial weakness.

• Control not only finds out the weakness of managers but also provides solutions and remedial

action to solve the problems.

o Facility of coordination : It binds all the workers and their activities and motivates them to

move towards the common objectives through coordination.

• Control will play the role of a middleman between the workers and management to provide

the required information in time to the workers.VirtuosoCoder.in

o Simplifies supervision : A systematic system of control helps in finding out the deviation

existing in the organisation which also simplifies the task of the supervisor in managing his

subordinates.

• So through control its becomes simpler for the supervisor to supervise and guide the workers

to follow the right track and fulfil the required goals.

o Extension of decentralisation : Control system helps the top management to extend the

frontiers of decentralisation without the loss of control.

• When proper procedures, policies, targets, etc, are clearly communicated to the subordinates,

they develop self-confidence and need not always refer to their supervisors with the

problems.

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VirtuosoCoder.in

Control process :

o Establishment of standards- Standards are the plans or the targets which have to be

achieved in the course of business function.

• They can also be called as the criterions for judging the performance. Standards generally are

classified into two-

Measurable or tangible - Those standards which can be measured and expressed are

called as measurable standards. They can be in form of cost, output, expenditure, time,

profit, etc.

Non-measurable or intangible- There are standards which cannot be measured

monetarily. For example- performance of a manager, deviation of workers, their attitudes

towards a concern. These are called as intangible standards.

• Controlling becomes easy through establishment of these standards because controlling is

exercised on the basis of these standards.

VirtuosoCoder.in

o Measurement of performance- The second major step in controlling is to measure the

performance.

• Finding out deviations becomes easy through measuring the actual performance.

• Performance levels are sometimes easy to measure and sometimes difficult.

• Measurement of tangible standards is easy as it can be expressed in units, cost, money terms,

etc.

• Quantitative measurement becomes difficult when performance of manager has to be

measured.

• Performance of a manager cannot be measured in quantities. It can be measured only by-

Attitude of the workers,

Their morale to work,

The development in the attitudes regarding the physical environment, and

Their communication with the superiors.

• It is also sometimes done through various reports like weekly, monthly, quarterly, yearly

reports. VirtuosoCoder.in

o Comparison of actual and standard performance- Comparison of actual performance with

the planned targets is very important.

• Deviation can be defined as the gap between actual performance and the planned targets.

• The manager has to find out two things here- extent of deviation and cause of deviation.

• Extent of deviation means that the manager has to find out whether the deviation is positive

or negative or whether the actual performance is in conformity with the planned performance.

• He has to find out those deviations which are critical and important for business.

• Minor deviations have to be ignored.

• Major deviations like replacement of machinery, appointment of workers, quality of raw

material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a

manager controls everything, he ends up controlling nothing.”

• For example, if stationery charges increase by a minor 5 to 10%, it can be called as a minor

deviation. On the other hand, if monthly production decreases continuously, it is called as

major deviation.

VirtuosoCoder.in

• Once the deviation is identified, a manager has to think about various cause which has led to

deviation. The causes can be-

Erroneous planning,

Co-ordination loosens,

Implementation of plans is defective, and

Supervision and communication is ineffective, etc.

o Taking remedial actions- Once the causes and extent of deviations are known, the manager

has to detect those errors and take remedial measures for it.

• There are two alternatives here :-

Taking corrective measures for deviations which have occurred; and

After taking the corrective measures, if the actual performance is not in conformity with

plans, the manager can revise the targets.

• Follow up is an important step because it is only through taking corrective measures, a

manager can exercise controlling.VirtuosoCoder.in

Techniques of managerial control :

Traditional Techniques

Modern Techniques

Personal observation

Good organisation structure

Unity of objectives, polices, procedures and

methods

Statistical reports and analysis

Breakeven analysis

Budgetary control

Management audit

Return on investment

Responsibility accounting

PERT and CPM

Management information systemVirtuosoCoder.in

Traditional techniques :

o Personal observation : The simplest way to control organisational activities is that manager

take round at work place and observe the progress of work.

• Defects in employees’ performance can be spotted and corrected immediately.

• A face-to-face interaction is possible whereby workers get their doubt solve on the job and

necessary guidance and counseling can also be provided them, then and there.

• Advantage – Creates a psychological pressure on the employees and they tend to perform

better.

• Disadvantage – It demotivates the employees who work under psychological pressure of

being watched.

• Suitable – Not suitable for large scale organisation.

o Good organisation structures : In a good organisation structure everybody knows the part he

has to play and how his role relates to those of others.

• Such a healthy system of roles and relationships helps to improve productivity and removes

obstacles to performance. VirtuosoCoder.in

• It helps to ensure that activities are carried out as planned.

o Unity of plans : Unity of objectives, policies, procedures and methods helps to make control

more effective.

• When the objectives of the organisation are integrated with the objectives of employees the

co-operation and loyalty of people can be secured.

• Such cooperation helps in ensuring that work is carried out in a predetermined manner.

• Policies provide a unified directions to operations.

• Control becomes easier to the extent policies of an enterprise are consistent with each other.

• Policies in different area such as production, marketing, finance, personnel, etc. should be

properly harmonised.

• Procedures and methods serve as operational guides in daily routine of an organisation.

• When well defined procedures are laid down the controlling authority has simply to see

whether the prescribed procedure is being systematically followed or not.

• E.g., control over purchase executives can be exercised by ensuring that all purchases are

being made through the prescribed purchase procedure.VirtuosoCoder.in

• Standards methods are also helpful in the control of activities and ensuring efficient utilisation of

resources.

o Statistical reports and analysis : Analysis of statistical data in the form of averages, percentages,

ratios, correlation, etc. is helpful in control of production, quality, inventory, etc.

• Statistical reports are analytical document in the form of tables, graphs, etc.

• They provide factual data and trends useful for managerial control.

• These reports reveal whether prescribed policies are being followed or not.

o Breakeven analysis : Breakeven analysis and cost volume profit analysis defines the relationships

between sales volume, costs and profits to find out sales at which sales revenue is equal to cost.

• The point at which sales revenue is equal to cost is the breakeven point.

• Sales volume beyond the breakeven point will earn profits for the organisation and sales volume

below the breakeven is a situation is loss.

• Managers compare their actual performance in terms of output sold with the breakeven point of

sales and if they are not able to sell beyond this point, they should improve performance by

increasing sales or reducing their costVirtuosoCoder.in

Advantages of breakeven analysis :

Improvement in performance

Helps in decision making

Helps in reduction in cost

Limitation of breakeven analysis :

Assumptions does not hold good in real life

Fixed cost does not always remain constant

o Budgetary control : A budget is a statement which reflects future incomes, expenditures and

profits of the firm.

• It is a future projection of the firm’s financial position.

• Budgetary control is a system of management control in which all operations are planned

ahead in the form of budgets and actual results are compared with budgetary standards and

the necessary actions are taken to ensure attainment of organisational objectives.

• Budgets are of several types. E.g., production budget, sales budget, cash budget, master

budget, etc. VirtuosoCoder.in

Modern techniques : Management audit : It is an overall and scientific appraisal of the quality of management

• This is very simple type of auditing which is done by chartered accountant and company manager

can used it as technique of controlling management .

• Managers establish their relations with CA of company and after discuss they make system of

internal management audit in which company CA and his staff audit at spot and check the

efficiency and correctness of plan and its implementation on staff of company.

• It is an evaluation of the management as a whole.

• It critically examines the full management process, i.e. planning, organising, directing, and

controlling.

• It finds out the efficiency of the management. To check the efficiency of the management, the

company's plans, objectives, policies, procedures, personnel relations and systems of control are

examined very carefully.

• Management auditing is conducted by a team of experts.

• They collect data from past records, members of management, clients and employees. The data is

analysed and conclusions are drawn about managerial performance and efficiency.VirtuosoCoder.in

• In 1962 Jakson Martindell of the American Institute of Management develop the scope and

methodology of management audit. He identified ten areas, such as :-

organisation structure, executive appraisal, functioning of the management board, soundness

of earnings, economic functioning, service to stockholders, research and development, fiscal

policy [use of government revenue collection (taxation) and expenditure (spending) to

influence the economy], production efficiency and sales vigour.

Advantages Of Management Audit :

• Management audit provides information about strong and weak points of the management

after reviewing policies and programs. So, it helps to the smooth operation of an

organization.

• Management audit provides suggestions to the management which helps to maintain effective

management.

• Management audit helps the management providing suggestions to attain goal of an

organization.

VirtuosoCoder.in

Disadvantages Of Management Audit :

• Management auditor cannot understand the practical problems. So, the suggestions provided

by them is theoretical but not practical.

• Scope of management audit is vague. So, it does not help to achieve specific goal.

• Generally management gives more emphasis on maintaining books of accounts rather than

concentrating on other factors. So, it consumes time of farsighted management.

Objectives of management audit :

• Establish the current level of effectiveness

• Suggest the improvement

• Lay down standards for futures

VirtuosoCoder.in

Process of management audit :

• Establishing the objectives of organization- The first job in the management audit is to

identify the objectives of the business organization.

• Evaluation of the organization structure- Next step in the management audit is to evaluate the

organization structure. To find out that whether the structure enough to achieve the goals of

the organizations.

• Evaluating the policies of the organization- Evaluating the policies of the organization is very

important. Any scope of improvement in it should be reported.

• Reviewing the actual performance- Auditor should review the actual performance of the

various work centres. The performance should be carefully and critically evaluated. Any

scope of the improvement or inefficient working should be reported.

• Report : On the basis of the above steps, auditor should prepare a report and

submit to the appointing authority. The report should point out all the weak and inefficient

points present in the organization.

VirtuosoCoder.in

Management information system :

• MIS means management information system .

• In this system , raw data (unanalyzed data; data not yet subjected to analysis) is collected

from direct or indirect sources and then after classification of data , different analysis is

rendered by company managers and after this company managers provide information about

favourable and unfavourable position of company's different planning.

• MIS is very important technique and it is used very high level after invention of computer

and Internet .

• In order to control the organisation properly the management needs accurate information.

• They need information about the internal working of the organisation and also about the

external environment.

• Information is collected continuously to identify problems and find out solutions.

• MIS collects data, processes it and provides it to the managers.

• MIS may be manual or computerised.

• With MIS, managers can delegate authority to subordinates without losing control.VirtuosoCoder.in

• MIS is a planned, organised, systematic and integrated system by which relevant, accurate

and timely information is collected, processed and supplied to executives.

• MIS is a structured, formal and systematic part of communication,

• It provides relevant and timely information to assist management in achieving the objectives

of the enterprise.

• MIS operates through formal reporting.

• MIS provides right Information to the right person at the right place at the right time in the

right form at the right cost

• The three sub-components Management, Information and System - together bring out the

focus clearly & effectively.

• System emphasizing a fair degree of integration and a holistic view;

• Information stressing on processed data in the context in which it is used by end users;

• Management focusing on the ultimate use of such information systems for managerial

decision making.

VirtuosoCoder.in

Objectives / functions of MIS :

o Data capturing : MIS captured data from various internal and external sources of

organisation. Data capturing may be manual or through computer terminals.

o Processing of data : the captured data is processed to convert into required information. It is

done by such activities as calculating, sorting, classifying and summarizing.

o Storage of information : MIS stores the processed or unprocessed data for future use. If any

information is not immediately required, it is saved as an organization record for later use.

o Retrieval of information : It retrieves information from its stores as and when required by

various users.

o Dissemination of information : Information is disseminated to the users in the organisation.

Advantages of MIS :

o It Facilitates planning : MIS improves the quality of plants by providing relevant information

for sound decision – making . Due to increase in the size and complexity of organizations,

managers have lost personal contact with the scene of operations.

VirtuosoCoder.in

o Minimizes information overload : MIS change the larger amount of data in to summarized

form and there by avoids the confusion which may arise when managers are flooded with

detailed facts.

o MIS Encourages Decentralization : Decentralization of authority is possibly when there is a

system for monitoring operations at lower levels. MIS is successfully used for measuring

performance and making necessary change in the organizational plans and procedures.

o Brings Co ordination : MIS facilities integration of specialized activities by keeping each

department aware of the problem and requirements of other departments. It connects all

decision centres in the organization .

o It makes control easier : MIS serves as a link between managerial planning and control. It

improves the ability of management to evaluate and improve performance . The used

computers has increased the data processing and storage capabilities and reduced the cost .

o MIS assembles, process , stores , Retrieves , evaluates and Disseminates the information .

VirtuosoCoder.in

Return on investment : Return on investment means capacity of earning profit on total

investment which is invested by company .

• ROI is a tool to improve financial performance.

• It helps the business to compare its present performance with that of previous years'

performance.

• It helps to conduct inter-firm comparisons. It also shows the areas where corrective actions

are needed.

• It is also known as return on capital employed.

• Return on investment (ROI) is one way of considering profits in relation to capital invested.

Advantages of ROI :

o It focuses attention on the basic objectives of business, i.e., profit earnings and relates them

to capital invested in business.

o It makes management alert to wastage and inefficiency.

o It helps in comparing performance of different divisions and departments of the enterprise.

o It facilitates balanced use of capital resources. It helps in rational allocation of resources.VirtuosoCoder.in

ROI

Turnover

Earnings as percentage

of sales

Sales

Total Investment Permanent

Investment

Account Receivable

Cash

Working Capital

Inventories

Selling Expenses

Factory Cost

Sales

Earnings

Administrative expenses

Cost of Sales

Sales

Divided By Plus Plus

Plus

Multiplied By

Divided By

Minus

Plus

Plus

VirtuosoCoder.in

Responsibility accounting : Responsibility accounting is that controlling technique in which

different responsibility centres are created by company managers and its name are cost center

, profit center and investment center .

Cost centre : In a cost centre targets are laid down in terms of costs. The performance of the

centre is evaluated by comparing the actual expenses with the budgeted cost.

Profit centre : In a profit centre targets are laid down in terms of profits. Performance of the

centre is appraised by comparing the profits actually earned with the target profit.

Investment centre : The head of an investment centre is responsible not only for costs and

profits but also for assets used. The investment made in each centre is separately ascertained

and return on investment is used as the basis for judging the performance of the centre.

• Main aim of making these centres is to increase profit , increase return on investment and

decrease cost of production .

• Different budgetary cost are set in first and the each centre's actual cost is counted and

recorded , if the actual cost of each center is less than budgeted cost , then it means that

center has perform his duty better .VirtuosoCoder.in

Network Techniques – PERT and CPM :

• Network analysis is the general name given to certain specific techniques which can be used

for the planning, management and control of projects.

• Under network analysis, a project is broken down into small activities which are arranged in

a logical sequence.

• The sequence in which the various activities should be performed and the time limit for each

activity are decided.

• A network diagram is then drawn up to present the interdependence and inter-relationship

between all the operations involved in the project.

• In network analysis an activity is defined as an operation required to accomplish the goal.

• It is denoted by an arrow in the diagram. It requires specific time span for completion.

• An event is a point of time when an activity is begun or completed. It is denoted by a circle in

the network diagram

• Two most popular techniques are PERT and CPM.

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• CPM was developed by Du Pont and the emphasis was on the trade-off between the cost of the

project and its overall completion time

• PERT was developed by the US Navy for the planning and control of the Polaris missile program

and the emphasis was on completing the program in the shortest possible time.

Steps involved in developing the PERT / CPM diagram :

o Breakdown the whole project into a number of clearly identifiable activities. The activities are

arranged in a logical sequence.

o Prepare a network diagram to show the sequence of activities. It has a beginning point and a

terminal point for the project.

o Time estimates for each activity are prepared. Three estimates for each activity are prepared :

Optimistic or shortest time, pessimistic time or longest time and normal or most likely time.

o The critical path is determined. It is the longest path through the network in terms of time. It

represents the sequence of activities that is critical for the completion of the project. If there are

delays in these activities the completion of the project will be delayed.

o The initial plan is modified and improved to control or minimize the time involved in completion

of the project. VirtuosoCoder.in

Difference between PERT and CPM :

• In CPM it assumed that the duration of every activity is constant and only one time estimate is

made for each activity. But PERT allows uncertainly in the duration of activities and three

times estimates are made for each activity.

• In PERT main focus is on time whereas in the CPM the focus in on cost.

• PERT is more suitable where activity timings are relatively unknown while CPM is more

appropriate for projects with well known times.

• PERT is event oriented while CPM is activity oriented.

Application of PERT/CPM :

o Building / construction projects

o Ship building

o Airport facilities building

o Construction of a new plant

o Launching of new products

o Installation of computer systems VirtuosoCoder.in

Definition : In CPM activities are shown as a network of precedence relationships using

activity-on-node network construction

• Single estimate of activity time

• Deterministic activity times

USED IN : Production management - for the jobs of repetitive in nature where the activity

time estimates can be predicted with considerable certainty due to the existence of past

experience.

Definition : In PERT activities are shown as a network of precedence relationships using

activity-on-arrow network construction

• Multiple time estimates

• Probabilistic activity times

USED IN : Project management - for non-repetitive jobs (research and development work),

where the time and cost estimates tend to be quite uncertain. This technique uses probabilistic

time estimates.

VirtuosoCoder.in