MODULE V

CONTROLLING  Controlling refers to determining what is being accomplished, that is evaluating the performance and if necessary applying corrective measures so that the performance takes place according to plan.  Control consist in verifying that everything occurs in conformity with the plan adopted, instruction issued, and the principles established.  Controlling is an act of verifying on going activities in relation with plan and if required taking appropriate action to ensure that work is taking place as per plan.

FEATURES OF CONTROLLING
 Control is positive force : primary objective of controlling is to find out reasons for failure in company, who is responsible for the same and what corrective measures have to be taken to bring activities in line to achieve objectives of organization.  Control is continuous process : is a continuous process as it is one of the primary duty of manager to ensure company performance is as per expectation of management and monitor development of organization activities on continuous basis.  Control is forward looking : past experience of company are bases for designing the future activities of company foe which company based on its experience can predict future happening and accordingly plan in effective strategy to face future competition.  Controlling is based on planning : controlling process will have predetermined standards with wich actual performance of employees are compared with and this standard is set during process of planning in company.

 Control process is universal in nature : controlling is primary function of every manager, it has to be undertaken by every manager to ensure activities are in line with expectations of company.  Control process is dynamic in nature : control rather than static is dynamic in nature and is implemented in company as business environment is flexible in nature company has to regulate its activities in accordance with the changing environment.  Control is goal oriented : as it focuses on achieving organizational objective in efficient manner. It focuses on identifying the deviation and taking corrective action to overcome the same.  Delegation is the key to control : manager to get work done from his subordinates should have proper authority and responsibility and by delegating responsibility to employees in company manager creates control over operations in company.

IMPORTANCE OF CONTROLLING  Achievement of goals : controlling ensures proper and timely achievement of goals in company, if any deviation are found during the process corrective actions are take to bring organization activities in track.  Execution and revision of plan : it is through the step of controlling where every activity in the organization is implemented in accordance with the plan. when organization moves through adverse and unplanned situation controlling helps to revise and update the plan in line with demand of situation.  Brings order and discipline : while achieving the organizational goals employees in company often tend to do mistakes, controlling process ensures timely detection of mistakes and helps the company activities move in order according to discipline set in company.

 Facilitates decentralization of authority : managers delegate responsibility to employees to exercise control over their activities during which they give in authority and responsibility to employees thus promoting decentralization to employees in company.  Promotes coordination : control facilitates coordination between different departments and division by providing them unity of direction. All the employees in organization are bound to achieve single objective set by company.  Cope up with uncertainty and change : environment in which company operates is complex and dynamic in nature, where taste preference of customers change on continuous basis, technology development takes etc takes place which requires organization to continuously monitor external environment and accordingly control internal activities of company.

 Improved efficiency and effectiveness : controlling makes people to work as per plan where every employee has to contribute to his maximum extent to accomplish given task which leads to better quality of output generated by workforce in company.  Keeping organization active and engaged : controlling mechanism keeps people engaged in organization and ensure employees in company work actively and regularly as per policies and procedures set by the company.  Making managers feel responsible : even though managers delegates his responsibility to subordinates in company at end he is required to monitor activities of employees which makes manager feel responsible for his decision.

LIMITATIONS OF CONTROLLING  Rigid controlling activity in company mar demotivate employee as they may not like being supervised at every activity performed at workplace.  Setting control points for every activity in company may prove to be difficult task for company.  Implementation of controlling process in company proves to be expensive, time consuming, and requires managers to put in lot of efforts during the process.  Controlling may be effective only for performance which are quantitative in nature, while it is difficult to control qualitaive performance in organization.

FACTORS DETERMINING GOOD CONTROL SYSTEM ( characteristics of effective control system)

 Simplicity : control system should be simple and should be understood by employees who operate on the same. Information supplied by the top management to operational level should be understood or it proves to be irrelevant.  Adaptability : control system varies from business to business and operation in company so before choosing control system for any operation in company its suitability should be taken its consideration.  Economy : control system implemented in the company should be economical in nature and should cut down the operations cost to the company.  Versatile : control system should be versatile in nature, as it has to be flexible to adjust in accordance with changes happening in company.

 Quick action : control system should be responsive in nature to take timely corrective action to overcome the deviation in planning.  Progressive feature : control system should be progressive in nature as it should be able to forecast possible deviation in planned activity.  Need based system : control system should be in accordance with the needs of organization. It should comply with nature of business persisting in organization.  Identify sensitive areas : control system should be able to identify exceptional and sensitive activities to have better control.  Purposeful : control measures should be objective and purposeful. It should be able to identify human element, instant and adopt measures which are objectives.

PURPOSE OF CONTROL

Adopt to environmental change

Limit the accumulation of error

Control helps the organization

Cope with organization complexity

Minimize cost

PURPOSE OF CONTROL
 Adapting to environmental change : environment in which the companies operates is dynamic in nature for which if company wants to sustain in market it has to cope up with the change accordingly. Many variation can take place from the stage of planning till it is been implemented in the company, thus an effective control system helps manager to anticipate, monitor and respond to changing circumstances.  Limiting accumulation of error : small errors in short run do not bring in huge change in operation of company, but when these small errors get accumulated together they prove to be major hurdle in smooth working of company, for which control system implemented in company should be effective so that small deviation from actual planning can be identified at initial stage which can help company to overcome major problems in future.

 Coping with organizational complexity : complexity of organization depends on the level of operations in company, even though the operation of company are complex proper implementation of control system reduces the ambiguity in terms of providing about operation to be performed and making process of monitoring easy in company.  Minimizing costs : as control system helps in identifying deviation and helps in taking corrective actions in time, it thus facilitates proper utilization of available resources leading to reduced cost of operation in company.

Strategic control

Structural control

Operations control

Financial control

LEVELS OF CONTROL  Operational control : focuses on the process used by the organization to transform the resources into products or services.  Financial control : is concerned with the organization financial resources where it focuses on effective investment strategy and proper utilization of available financial resources in company.  Structural control : is concerned with how the elements of the organization structure are serving their intended purpose. It focuses on monitoring activities of company on continuous basis to generate quality output.  Strategic control : focuses on how effectively the organization strategies are succeeding in helping the organization to achieve desired goals.

CONTROL PROCESS

Establish standards

Measure performanc e

Compare performanc e with standard

Determine need for corrective action

Maintain status quo

Correct deviation

Change standards

 Establishing standards : first step in control process is establishing standards. Standards established for control purposes should be expressed in measurable terms. Control standards should be consistent with the organizational goals in relation to company nature of business. Controlling standards can be narrow or broad depending on activity of organization.  Measuring performance : second step in the control process is measuring performance. Performance measurement is constant and on going activity for most of organization. For effective implementation of control in company it is important to have valid performance measures. Performance measured may be quantitative or qualitative in nature depending on nature of job.

 Comparing the performance against the standard : third step in the controlling process is comparing the measured performance against the standard established in company. If performance of employee is as per expectation the no actions are required, if performance are not in line with standard deviation from the standard has to be verified. Criteria for comparing the performance standards depends on variety including importance and complexity of what is being controlled.  Considering corrective action : final step in controlling process is determining need for corrective action. Decision relating to corrective action depends on the analytical and diagnostic ability of manager. After comparing the performance against control standards three action may be taken by company : a. maintain status quo b. correct deviation or change the standard.

TYPES OF CONTROL

Concurr ent control

Feedba ck control Feed forward control

 Feedback control : it is the process of gathering information about completed activity, evaluating that information and taking steps to improve similar activities in future. Feedback control enables the manager to use information on past performance to bring the future performance in line with planned objectives. Critics argue against this method stating that it proves to be expensive as required action is taken once task is completed. On positive side feedback control tests the quality and validity of standard.  Concurrent control : is called as real time control. It considers present problem persisting in situation. It identifies deviation and takes timely corrective action to overcome the problem. Positive aspect of the method is that it leads to minimum cost compare to feedback control and negative part is that as it takes action during process it may bring in confusion and ambiguity for further process.

 Predictive or feed forward control : control system anticipates problems management may encounter in future. Predictive control is also termed as feed forward control. Predictive control attempts to anticipate problems or deviations from standard in advance before their occurrence in company. It is proactive in nature and focuses on taking action well in advance.

CONTROLLING TECHNIQUES Operational control Feedback

input transformatio n output

Preliminary control : focus is on input to the organization al system

Screening control : focus is on how inputs are being transformed into output

Post action control : focus is on outputs from the organization al system

1.Operational control : focuses on the processes organization uses to transform resources into products or services.  preliminary control : concentrates on the resources ( financial, material, information, human ) organization brings in the form of environment. Preliminary control attempts to monitor the quality and quantity of these resources before they enter organization.  Screening control : focuses on meeting the product or service quality or quantity during the actual transformation process itself. Process of screening control relies on the data obtained from the feedback. Periodicals provide feedback to the workers to know the present situation and suggest an idea to take timely action.

 Post action control : focuses on the output of the organization after the transformation process is complete. It monitors the output or results generated by company. Although it may not proves to be as effective as preliminary and screening control, but it serves to provides sufficient in formation required for improvement of present process in the company. Post action control proves to be one of the effective tool to identify and reward employees performance at workplace.

2. Financial control : refers to control over the utilization of financial resources in the company. It focuses on the flow of financial resources in company and suggest in strategies in terms of effective investment options which will yield better profit for future investment.  Budgetary control : budget is plan expressed in numerical terms. Organization establish budget for units, departments, groups and organization on the whole. Budget in company gives an brief outline about the availability of financial resources and the way in which company can go about allocating the same.

TYPES OF BUDGET  Financial budget : it indicates where the organization expects to get the cash from and it plans to use this available resources.
Financial budget sources and use of cash

1. Cash flow or cash budget

All sources of cash income and cash expenditure in monthly, weekly or daily periods. Costs of major assets such as plant, machinery, land etc. Forecast the assets and liabilities in the event all other budgets are met.

2. Capital expenditure budgets

3. Balance sheet budget

 Operating budget : is concerned with the planned operation in organization. It outlines what quantity of product and services the organization intends to create and what are resources required to create the same.
Operating budget Planned operation in financial terms

1. Sales and revenue budget

Income organization expects to receive form normal operations

2. Expense budget

Anticipated expense for organization during the coming time period Anticipated difference between sales, or revenues and expenses

3. Profit budget

 Non monetary budget : are budgets expressed in non financial terms units of output, hours of direct labour, machine hours etc. These budgets are used by managers at lower level management in organization.
Non monetary budget Planned operation sin non financial terms Hours of direct labour available for use Square feet or meters of space available for various functions Number of units to be produced during the coming time period

1. Labour budget

2. Space budget

3. Production budget

a. b. 

TOOLS FOR FINANCIAL CONTROL Financial statements : it is profile of financial aspect of organization in set of circumstances. It includes two financial statements prepared by the organization they are : Balance sheet : lists the assets and liabilities of organization at specific point in time, that is the last day of organization fiscal year. Income statement : it is summary of financial performance of company over period of time. Ratio analysis : financial ratios compare different elements of balance sheet or income statement to one another. It includes calculation of financial ratios to assess the financial health of organization. It includes various types of ratios such as liquidity, debt, return, coverage, operating ratio etc. Financial audit : it is an independent appraisal of an organizations accounting, financial and operating system. External audit are the financial appraisal conducted by the experts who are not employees of organization. They are concerned with determining that organization accounting procedures and financial statement are complied in an objective and verifiable manner.

Structural control
Bureaucratic control Employee compliance Strict rules, formal controls Directed towards minimum level Tall structure, top down influence
reward system

Dimension
goal of control approach

Decentralized control Employee commitment Group norms, self control

Directed towards enhanced performance

degree of formality

performance expectation organization design

Flat structure, share influence Directed at group performance Extended and informal

Directed at individual performance

participation

Limited and formal

 Bureaucratic control approach focuses on following formal and mechanistic structural arrangement in the company. In this approach company will have its own set of rigid rules and regulations which may or may not be framed with will and wish of employee, but are strictly to be followed by all employees working in the company. These company have tall organization structure and reward employee based on the individual performance and allow limited employee participation in company.  Decentralized control : organization is characterized by informal and organic structural arrangement in the company. Employees are encouraged to participate in the process of decision making in terms of planning, setting ojectives. Company follows falt organization structure and focuses on building and encouraging employees to work in group in the company.

4. Strategic control : focuses on five aspects of the organization they

are structure, leadership, technology, human resources, information and operational control systems as these factors prove to be components of organization in relation to attainment of organizational goals. It involves making a detailed analysis of existing strategies in company and check extent to which these strategies are facilitating in terms of attaining short and long term goals of the company. Once the review is completed in organization the existing strategies are streamlined to attain future goals of company.  International strategic control: as the level of operation increases in the company it also brings in increased complexity, company's operating outside the country following the centralized system have to report their working to the headquarters and in case company is following the decentralized operation system, then the frequency of reporting is comparatively less.

RESISTANCE TO CONTROL

Unachievable standards

Unpredictable standards

Inappropriate control

Reward for inefficiency

Over control

Resistance to control

Uncontrollable variables

RESISTANCE TO CONTROL  Over control : at times organization tries to control each and every activity of employee in company which may make employee feel blinded in work atmosphere which may give no scope to employee to think creatively.  Inappropriate control : controls which are not related to objectives of company may sound to be inappropriate and in no way will prove to be added value to activity of company.  Unachievable standards : standards set by organization for employees should be accurate and achievable or employee during period of time may be frustrated and quit organization.

 Unpredictable standards : control system should be predictable and employee should be clear about what is being expected from him by control system. If control system sates a standard and on accomplishment of same if uses different criteria to evaluate employees performance then employee will be confused and demotivated as appropriate recognition is not been given to work performed by him.  Rewards for inefficiency : controlling may prove to be inefficient if criteria chosen for control process is inappropriate and not suitable to nature of business persisting in company.  Uncontrollable variables : controlling process will yield good results only to those factors which can be controlled and variables which cannot be controlled may not prove to proper dimension to implement control in company.

OVERCOMING RESISTANCE TO CONTROL

Employee participatio n Positive reinforcem ent Justifiable controls

Assuring support

Overcoming resistance to control

precise

Accurate findings Timely communic ation

Realistic standard

OVERCOMING RESISTANCE TO CONTROL  Employee participation : when employees are involved in the process of planning and implementing control they are aware about the way in which the process works so they are likely less likely to resist change.  Justifiable controls : acceptability of control system will be justifiable only when reason for implementing control is appropriate and will prove to benefit every one in company.  Precise and understandable standard : controlling process should be simple and should be understood by all employees in company which provides them better clarity about process by which they tend to be less resistance to controlling in company.

 Realistic standards : control persisting in company should be realistic in the sense should be standard and follow accurate criteria for evaluating and regulating performance and activities in company.  Timely communication of finding : for control process to be effective in company should communicate deviations in time and accordingly take quick actions to overcome the same.  Accurate findings : control system existing in company should not only identify the deviation but also give in appropriate reasons for deviations with proper evidence for every deviation stated or identified during

 Assuring support : control system should focus on proving assistance for employees in improving their current performance rather then proving to be fault finding machine.  Positive reinforcement : employees who comply with the control system should be rewarded for efficient performance at work place which motivates them to perform better in future.