CHAPTER 8 — CONTROLLING

1. MEANING OF CONTROLLING

1. Controlling is a managerial function that ensures all activities are performed as planned.
2. It involves measuring actual performance, comparing it with standards, and taking corrective action if required.
3. It makes sure that organizational goals are achieved efficiently and on time.
4. Controlling checks whether activities are progressing in the right direction.
5. It identifies deviations early so that errors do not become major problems.
6. Controlling ensures that resources such as money, materials, time, and manpower are used properly.
7. It is a continuous process—managers keep reviewing performance regularly.
8. Controlling is applicable to all levels—top managers, middle managers, and supervisors.
9. It helps maintain discipline, uniformity, and accuracy in organizational operations.
10. Without controlling, planning becomes meaningless because execution cannot be ensured.
11. It acts like a feedback system—information about performance helps managers make better future decisions.
12. Controlling minimizes wastage and reduces costs.
13. It increases accountability because every employee’s performance is tracked and measured.
14. Controlling helps maintain quality standards in production and service delivery.
15. It strengthens coordination among departments because deviations in one area affect the other.
16. Controlling also ensures compliance with rules, safety standards, and ethical guidelines.
17. It removes unnecessary processes and improves efficiency.
18. Modern organizations rely on controlling to manage complex operations.
19. It also builds confidence among managers and employees about the organisation’s progress.
20. In summary, controlling ensures that “plans become results” by monitoring performance and implementing improvements.

2. CONTROL THROUGH COMPUTER MONITORING

Technology has transformed the way organizations control activities.
Computer-based control systems help managers track performance in real time.

A. Meaning of Computer Monitoring

1. Computer monitoring means using software, digital tools, sensors, and automated systems to measure and track performance.
2. It allows managers to collect data continuously and accurately.
3. It reduces human error and speeds up decision-making.
4. Computer monitoring supports predictive analysis by identifying potential problems before they occur.

B. Examples of Computer-Based Control

1. Management Information Systems (MIS)

• Provides periodic reports on sales, production, finance, and HR.
• Helps managers analyze performance quickly.

2. Enterprise Resource Planning (ERP) Systems

• Integrates all departments on one digital platform.
• Ensures real-time information flow and immediate detection of deviations.

3. Computer-Aided Quality Control

• Sensors monitor product quality during production.
• Detects defects instantly.

4. Surveillance and Access Control Systems

• Cameras monitor employee behaviour and safety compliance.
• Electronic entry logs track attendance and movement.

5. Online Inventory Management

• Tracks stock levels automatically.
• Sends alerts when stock falls or rises beyond desired levels.

6. Computerized Financial Monitoring

• Software monitors cash flows, payments, expenses, and budgets.
• Helps prevent fraud and over-spending.

7. Biometric Attendance Systems

• Ensures accurate attendance records.
• Reduces time theft.

8. Customer Relationship Management Tools

• Tracks sales leads, customer complaints, and employee responses.
• Helps measure service performance.

C. Benefits of Computer Monitoring

1. Real-time, accurate data.
2. Faster corrective actions.
3. Reduction in mistakes and manual workload.
4. Better coordination among departments.
5. Enhanced transparency and accountability.
6. Supports data-driven decisions.
7. Improves efficiency and productivity.
8. Helps with long-term planning by providing trends and insights.
9. Saves cost through automation.
10. Strengthens security and compliance.

3. STANDARDS USED IN FUNCTIONAL AREAS TO GAUGE PERFORMANCE

Different organizational departments use different standards for measurement.
These standards help managers evaluate accuracy, quality, speed, and effectiveness.

A. Production Department

1. Quantity Standards
   • Units produced per day/week/month.
   • Production target achievements.
2. Quality Standards
   • Number of defects per 1000 units.
   • Rejection rates.
   • Customer complaints related to product quality.
3. Cost Standards
   • Cost of raw materials.
   • Cost of labour per unit.
   • Cost of energy, machinery maintenance, and wastage.
4. Time Standards
   • Time taken per unit.
   • Machine downtime vs. uptime.
5. Safety Standards
   • Number of accidents.
   • Compliance with safety norms.

B. Sales and Marketing Department

1. Sales Volume Targets
   • Units sold compared to target.
   • Monthly/quarterly sales growth.
2. Revenue and Profitability
   • Revenue per product.
   • Contribution margin.
3. Market Share
   • Percentage of market captured.
   • Competitor comparison.
4. Customer Satisfaction
   • Surveys and ratings.
   • Repeat purchase ratio.
   • Customer complaint analysis.
5. Promotional Performance
   • Effectiveness of advertising.
   • Lead conversions.
   • Cost per advertisement response.
6. Salesperson Performance
   • Number of calls/visits.
   • Sales closed.
   • Client retention.

C. Human Resource Management (HRM)

1. Labour Productivity
   • Output per employee.
   • Efficiency of manpower use.
2. Employee Turnover Rate
   • Number of employees leaving.
   • Replacement cost.
3. Attendance and Punctuality
   • Absenteeism rate.
   • Late arrival frequency.
4. Training Effectiveness
   • Skill development results.
   • Performance improvement post training.
5. Employee Satisfaction Scores
   • Surveys
   • Feedback forms
   • Suggestion box results
6. Discipline Standards
   • Number of misconduct cases.
   • Adherence to company policies.

D. Finance and Accounting Department

1. Budgetary Control Standards
   • Budget vs actual expenditure.
   • Variance analysis.
2. Liquidity Standards
   • Current ratio.
   • Quick ratio.
3. Profitability Standards
   • Net profit margin.
   • Return on investment.
4. Cost Control Indicators
   • Cost per unit.
   • Overheads variance.
5. Cash Flow Monitoring
   • Cash receipts and payments.
   • Borrowings and repayments.
6. Internal Control Measures
   • Accuracy of records.
   • Prevention of fraud.

E. Research and Development (R&D)

1. Innovation Rate
   • Number of new products developed.
   • Patents filed.
2. Success Rate of Trials
   • Prototypes that become final products.
3. Cost of R&D
   • Expenditure on experiments vs returns.
4. Time Required for Development
   • Speed of bringing products to market.
5. Quality of Innovation
   • Customer response.
   • Competitive advantage created.

4. ADVANTAGES OF CRITICAL POINT CONTROL (CPC) AND MANAGEMENT BY EXCEPTION (MBE)

Both CPC and MBE help reduce unnecessary workload and improve managerial efficiency.

A. Critical Point Control (CPC)

Meaning

Critical Point Control means identifying key result areas (KRAs) or “critical points” that have maximum impact on performance and focusing control measures on them.

Examples:

• Quality defects in production
• Sales in key market segments
• Cost of raw materials
• Safety compliance in hazardous units

Advantages

1. Focus on Important Areas

• Managers concentrate on key factors that influence success.
• Prevents wastage of time on unimportant matters.

2. Efficient Use of Resources

• Money, manpower, and time are used on areas that matter most.

3. Early Detection of Problems

• Critical points are monitored regularly, so errors are spotted early.

4. Better Performance

• Employees focus more on activities that directly affect results.

5. Helps Maintain High Standards

• Critical areas like quality and safety get more attention.
• Maintains consistency in output.

B. Management by Exception (MBE)

Meaning

Management by Exception means managers should focus only on significant deviations, not minor ones.
Routine, normal work is handled by lower-level employees.

Advantages

1. Saves Time

• Managers avoid dealing with unnecessary minor issues.
• Focus on strategic and important tasks.

2. Improves Decision-Making

• Managers devote more time to major deviations requiring expertise.

3. Reduces Managerial Workload

• Routine tasks are handled at the operational level.

4. Encourages Employee Participation

• Employees handle minor issues, gaining experience and confidence.

5. Focus on Key Challenges

• Major deviations (e.g., huge cost overruns, low productivity, serious defects) get immediate attention.

6. Promotes Efficiency and Accountability

• Everyone knows their role in managing deviations.
• Supervisors handle small issues; managers handle major ones.

5. CONCLUSION

1. Controlling is an essential managerial function that keeps the organization on the right track.
2. It ensures that actual performance matches planned objectives.
3. Through measurement, comparison, and corrective action, controlling increases efficiency.
4. Modern organizations depend on computer monitoring, MIS systems, and automated tools to manage performance accurately.
5. Different functional departments use different standards—quality, cost, time, productivity—to measure performance.
6. Tools like Critical Point Control and Management by Exception help in focusing on important issues and avoiding overload.
7. Controlling not only corrects performance but also prevents future deviations by providing useful feedback.
8. It builds discipline, improves coordination, and ensures optimum utilization of resources.
9. Controlling makes planning meaningful and helps organizations achieve their long-term goals.
10. In summary, controlling is the backbone of managerial success, ensuring that what is planned is actually achieved.