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CONTROL TECHNIQUES & GLOBAL


CONTROLLING
CONTENTS
9.0

Aims and Objectives

9.1

Introduction

9.2

Control Aids
9.2.1

Budgeting

9.2.2

Standard Costing

9.2.3

Responsibility Accounting

9.2.4

Reports

9.2.5

Standing Orders, Rules and Limitations

9.2.6

Personal Observation

9.3

Other Methods of Control

9.4

Critical Path Method (CPM)

9.5

Gantt Chart

9.6

Programme Evaluation and Review Technique

9.7

Global Controlling & Global Challenges

9.8

Let us Sum up

9.9

Lesson-end Activity

9.10 Keywords
9.11 Questions for Discussion
9.12 Suggested Readings

9.0 AIMS AND OBJECTIVES


This lesson is intended to discuss various methods and techniques of management control.
After studying this lesson you will be able to:
(i)

apply techniques, aids and tools of effective management control

(ii)

describe CPM, PERT and Gantt Chart

(iii) understand global controlling system

9.1 INTRODUCTION
A variety of tools and techniques have been used over the years to help managers
control the activities in their organizations. There can be control in different perspectives.
Time control relate to deadlines and time constraints, material controls relate to inventory
control etc. Various techniques of control are discussed in this lesson.

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Principles of Management and


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9.2 CONTROL AIDS


9.2.1 Budgeting
A budget is a statement of anticipated results during a designated time period expressed
in financial and non-financial terms. Budgets cover a designated time period - usually a
year. At stated intervals during that time period, actual performance is compared directly
with the budget targets and deviations are quickly detected and acted upon. E.g. of
Budgets: Sales budget, production budget, capital expenditure budget, cash budget, master
budget etc.

9.2.2 Standard Costing


The cost of production determines the profit earned by an enterprise. The system involves
a comparison of the actuals with the standards and the discrepancy is called variance.
The various steps involved in standard costing are:
l

Setting of cost standards for various components of cost e.g.: raw materials, labour
etc.

Measurement of actual performance.

Comparison of actual cost with the standard cost.

Finding the variance of actual from the standard cost.

Findings the causes of variance.

Taking necessary action to prevent the occurrence of variance in future.

9.2.3 Responsibility Accounting


Responsibility accounting can be defined as a system of accounting under which each
departmental head is made responsible for the performance of his department.

9.2.4 Reports
A major part of control consists of preparing reports to provide information to the
management for purpose of control and planning.

9.2.5 Standing Orders, Rules and Limitations


Standing orders, rules and limitations are also control techniques used by the management.
They are issued by the management and they are to be observed by the subordinates.

9.2.6 Personal Observation


A manager can also exercise fruitful control over his subordinates by observing them
while they are engaged in work.
Check Your Progress

Explain the different types of control techniques.

9.3 OTHER METHODS OF CONTOL


1.
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Self-control: Each employee must exercise self-control and do what is expected


at work most of the time on most work related matters, as no enterprise can exist

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self-control. Self-control stems from the employees ego, orientation, training and
work attitudes.
2.

Group control: It affects individuals both in output and behaviour. Group norms of
doing a good job exert pressures on the individual to perform and to follow work
rules.

3.

Policies and procedures: They are guides to action for managers to use in
controlling behaviour and output of employees. They can, for example, protect the
firmss resources and equipment and require employees presence for appropriate
work times.

Control Techniques & Global


Controlling

9.4 CRITICAL PATH METHOD (CPM)


A critical path consists of that set of dependent tasks (each dependent on the preceding
one), which together take the longest time to complete. A CPM chart can define multiple,
equally critical paths. The tasks, which fall on the critical path, should be noted in some
way, so that they may be given special attention. One way is to draw critical path tasks
with a double line instead of a single line. Tasks, which fall on the critical path, should
receive special attention by both the project manager and the personnel assigned to
them. The critical path for any given method may shift as the project progresses; this
can happen when tasks are completed either behind or ahead of schedule, causing other
tasks which may still be on schedule to fall on the new critical path.

9.5 GANTT CHART


Henry Laurence Gantt (1861-1919) was a mechanical engineer, management consultant
and industry advisor. He developed Gantt charts in the second decade of the 20th century.
Gantt charts were used as a visual tool to show scheduled and actual progress of projects.
It was an innovation of worldwide importance in the 1920s. Gantt charts were used on
large construction projects. A Gantt chart is a matrix, which lists on the vertical axis all
the tasks to be performed. Each row contains a single task identification, which usually
consists of a number and name. The horizontal axis is headed by columns indicating
estimated task duration, skill level needed to perform the task and the name of the
person assigned to the task, followed by one column for each period in the project's
duration. Each period may be expressed in hours, days, weeks, months and other time
units. The graphics portion of the Gantt chart consists of a horizontal bar for each task
connecting the period start and period ending columns. A set of markers is usually used
to indicate estimated and actual start and end. Each bar on a separate line and the name
of each person assigned to the task, is on a separate line. In many cases when this type
of project plan is used, a blank row is left between tasks. When the project is under way,
this row is used to indicate progress indicated by a second bar, which starts in the period
column when the task is actually started and continues until the task is actually completed.
Comparison between estimated start and end and actual start and end should indicate
project status on a task-by-task basis.

9.6 PROGRAMME
TECHNIQUE

EVALUATION

AND

REVIEW

Program evaluation and review technique (PERT) is a variation on Critical Path Analysis
that takes a slightly more sceptical view of time estimates made for each project stage.
Critical Path Method (CPM) charts are similar to PERT charts and are sometimes
known as PERT/CPM. To use it, estimate the shortest possible time each activity will
take, the most likely length of time and the longest time that might be taken if the activity

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Principles of Management and


Organisational Behaviour

takes longer than expected. PERT charts depict task, duration and dependency
information. Each chart starts with an initiation node from which the first task or tasks,
originates. If multiple tasks begin at the same time, they are all started from the node or
branch, or fork out from the starting point. Each task is represented by a line, which
states its name or other identifier, its duration, the number of people assigned to it and, in
some cases, the initials of the personnel assigned. The other end of the task line is
terminated by another node, which identifies the start of another task or the beginning of
any slack time, that is, waiting time between tasks. Each task is connected to its successor
tasks in this manner, forming a network of nodes and connecting lines. The chart is
complete when all final tasks come together at the completion node. When slack time
exists between the end of one task and the start of another, the usual method is to draw
a broken or dotted line between the end of the first task and the start of the next
dependent task.

9.7 GLOBAL CONTROLLING & GLOBAL CHALLENGES


Need for Leadership in global organisations: The work place in the present day context
is increasingly multicultural and diverse. Employees are required to work together with
colleagues from different parts of the world with varied backgrounds, customs and practices.
Many products and services are produced for export. In addition, organisations are
outsourcing their work to countries having low labour costs to stay competitive. As
opportunities for global expansion increase, the workplace will have more diversity.
Organisations are now hiring professionals with different backgrounds, cultures, styles and
motivation. It is therefore necessary for organisations to expand the capacity for people to
handle the challenges of working with other cultures if they are to participate successfully.
Leaders must be adaptive and flexible to manage this diverse workforce. This requires
an understanding of the historical, political and economic references of people who work
in the organisations. Leaders must understand differences in worldviews, communication
styles, ethics and etiquette of the people they deal with both internally and externally.
Understanding different cultures: According to Richard D Lewis, the different nations
and cultures can be put into three groups:
1.

Linear-active: In these cultures, people focus on a scheduled timeline and like to


do one thing at a time. The people in these cultures are task-oriented planners.

2.

Multi-active: People belonging to these cultures are more focused on interactions


and dialogues. Meetings are given priorities and discussions and dialogues help to
build relationship and it is this relationship that determines what comes out of work.

3.

Reactive: People belonging to this type of culture are more introverted. They are
respect-oriented listeners and concentrate on what people have to say without
interruption and even if they interrupt it is rarely done. People in these cultures
usually express their ideas in a passive voice.

Leaders must understand different cultures when they work in an organisation which
has employees belonging to different cultures. The grouping done by Lewis is a simple
perspective that can help one to begin to understand basic differences in ways of doing
business in foreign countries. However, we must be cautious and avoid working with
unverified assumptions.

9.8 LET US SUM UP

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The techniques of control involve the feed forward control, concurrent control and the
feed-back process. There are several techniques to establish the control system in an
organisation like CPM, Gantt Chart, PERT, etc. We have also studied about global
controlling and global challenges.

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9.9 LESSON END ACTIVITY

Control Techniques & Global


Controlling

PERT is a management interventional technique designed to establish an effective control


system. Justify the statement.

9.10 KEYWORDS
Feedback
Feed Forward
Gantt Chart
Material Control
Performance
PERT
CPM

9.11 QUESTIONS FOR DISCUSSION


1.

What are the methods of effective control?

2.

Explain standard costing as a technique of control.

3.

What is the need for leadership in global organisations?

4.

Discuss the critical path method of controlling.

9.12 SUGGESTED READINGS


Billy E. Goetz, "Management Planning and Control", McGraw-Hill, New York (1979).
Chris Argyris, "Personality and Organization", Harper and Row, New York (1957).
Charles Handy, "Trust and the Virtual Organization", Harvard Business Review
(may - June 1995).
Douglas S. Sherwin, "The Meaning of Control", in Max D. Richards and William A
Nielander (eds.) Readings in Management, D.B Taraporevala, Bombay (1971).
George R. Terry, "Principles of Management", Richard D. Irwin, Homewood III (1988).
George R. Terry and Stephen G. Franklin, "Principles of Management" AITBS, Delhi
(2000).
G. B. Giglione and A.G Bedein, "Conception of Management Control Theory",
Academy of Management Journal (June 1974).
Harold Koontz, Cyril O'Donnell, and Heinz Weihrich, "Management", McGraw-Hill,
New York (1984).
John A. Pearce and Richard B. Robinson, "Strategic Management", Homewood III
Richard D. Irwin (1988).
McGregor Douglas, "The Human Side of Enterprise", McGraw Hill Book Company,
New York (1960).
Peter F. Drucker, "Management Tasks, Responsibilities and Practices", Harper &
Row, New York (1974).
Paul E. Holden, L.S Fish, and Hubert L. Smith, "Top Management Organisation and
Control", McGraw-Hill, New York (1981).

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Scanlon Burt K., "Principles of Management and Organisation Behaviour", John


Wiley and Sons (1973).
Tom K. Reeves and Joan Woodward, "The Study of Management Control", Joan
Woodward (ed.) "Industrial Organization, Behaviour and Control", Oxford University
Press, London (1970).
P.G. Aquinas, Organizational Behaviour, Excel Books, New Delhi.

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