Chapter/Unit-8
Controlling
[A] Meaning of
Controlling:-
It is a process of bringing
actual results closer to the desired (standard) results.
OR It is the
process of minimizing gap (deviation/variation) between actual result and
expected result.
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[B] Steps/Process of
Controlling :-
1. Setting performance
standards: - What is expected from each employee is called standard.
First it standards are fixed for time, cost, efforts and quality of work.
Standards should be achievable, flexible and clearly explained to every one.
2. Measurement of actual
performance:- What is/How much actual work is done is called performance.
Secondly, performance of each employee is measured by personal observation,
sample check & reports.
3. Comparison of actual
performance with standards: - For finding out gap between standard and
actual work done (called-deviation/variation) both must be compared with each
other.
4. Analyzing deviations: -
Why the gap is arised between actual work and excepted (standard) woks, this
analysis is called deviation analysis. What are the reasons of devotion?. For
analysis two techniques are used (a) Critical Point Control (b) Management by
exception.
5. Taking corrective
action:- How the gap/deviation/variation may be removed (is called
corrective action) it is decided. Corrective action may be training,
additional resources and manpower, overtime
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[C] Deviation Analysis Techniques:-
1.Critical
Point Control: - Critical points or key
result areas – KRAs (most affecting areas for success of organization) should
be
fixed and more attention should be paid on these first.
2.
Management by Exception: - If a manger tries to control each
and everything, then he will fail to control
anything. So manger
should
pay attention on exceptional (major) deviations first.
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[D] Importance/Need/Advantages of Controlling:-
1. Organisation goals are achieved when no negative
deviation is arised or negative deviation is timely identified and removed, Negative
deviations are removed by controlling. So controlling make easy the
achievement of organizational goals.
2. If the real reason of deviation is in-accurate (non-achievable
and non-clear) standards. This in-accuracy is disclosed. In-accurate
standards are made accurate as corrective action. So controlling judges
accuracy of standards.
3. If resources are going waste then negative deviation
will arise. Negative deviation may be removed by stopping wastage of
resources. Resources are efficiently used by controlling.
4. When employees do not work with their full capacity and
willing, due to lack of inspiration, deviation will arise. Inspiration may be
given as corrective action. Controlling motivates employees.
5. Lack of order and discipline create negative
deviations. This negative deviation may be removed by establishing order and
discipline as remedial step. Controlling establishes order and
discipline.
6. Co-ordination means taking care about
inter-relatedness-interdependence of activities. Co-ordination is maintained
then negative deviation will not arise when. If co-ordination is not there,
it will be disclosed by controlling as a reason of deviation. Controlling
established Co-ordination.
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[E] Relationship between Planning and Controlling/
‘Planning is meaningless without controlling and controlling is blind without
planning’
(i) Controlling
is based on standards. Standards are set under planning function. Planning provides
eyes to controlling.
(ii) Planning is
meaningful when objectives are achieved. By controlling deviations are
removed and objectives are achieved, so controlling make planning meaningful.
(iii) Planning is
forward looking because it decides future actions, it is also backward
looking because past experiences of controlling are used in planning.
(iv) Controlling is backward looking because it analysis
what has already done, it is also forward looking because corrective actions
are taken in respect of future.
(v) Both planning
and controlling are backward looking as well as forward looking functions.
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[F] Limitations of Controlling/Why controlling
fails/Why planning is not guarantee to success :-
(i) Planning
cannot set standards correctly/accurately for the things which cannot be
measure in numerical values, so there is Difficulty in setting
quantitative standards.
(ii) If deviation is arised due to external
factors (like government policies, change in fashion-technology, competition) then
controlling is failed. Because business has No control on external
factors.
(iii) Controlling is
successful when employees support it. But employees take controlling as
interfere in their work and oppose it. So it fails due to Resistance from
employees.
(iv) |
[G] Technique of Controlling -----
Budgetary Control
(i) Meaning of Budget: - It is a statement
which shows future targets (in respect of sales, production, material
required, cash required, expense limit) in numerical values. Budgets may be
of various types like sales budget, production budget, material purchases
budget, capital budget, expense budget.
(ii) Meaning of Budgeting: - Process of
making budgets is called budgeting.
(iii) Meaning of Budgetary Control:- When
controlling is done by taking budgets as standard, then it is called
Budgetary Control.
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[H] Advantages/Importance of Budgetary Control :-
(i) Budgets focus
specific and time bound targets, so it helps in achievement of organizational
goals.
(ii) This
techniques clarifies targets/objectives of each employee and department in
the form of budget. If they work as per budgeted targets they are
appreciated,
so this technique motivates them.
(iii) Total
resources of organization are distributed on the basis of their budgeted requirement. So it make optimum
utilization of resources.
(iv) Each
department budget is prepared after seeing the interdependence of departments
like sale budget and production budget. So this techniques
maintains
co-ordination.
(v) This
techniques focuses on correction of significant deviation first. So it helps
in management by exception and critical point control.
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