GNG 2.

0 By RAJAT ARORA SIR

Ch- 8
Controlling
DAY -13 GNG 2.O By Rajat Arora
Sir

1. KEYWORDS
Controlling
Critical point control
Management by exception
Breakeven analysis
Budgetary control
Return on investment
Ratio analysis
Responsibility accounting
2. CONTROLLING PROCESS
S – Setting performance standards
M – Measurement of actual performance
C – Comparison of actual performance with standards
A – Analysing deviations
T – Taking corrective action

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Q 1. Name the function of management that completes one cycle of management process and
improves planning in the next cycle.

a) Staffing
b) Directing
c) Organising
d) Controlling

Q 2. Which of the following is not a step of process of controlling function of management?

a) Setting Performance Standards

b) Assignment of Duties
c) Taking Corrective Actions
d) Comparing actual performance with standards

Q 3. Some employees have been assigned the job of measuring the output in an objective and
reliable way. They are applying different techniques for achieving this aim. Some of these are
personal-observation, sample-checking etc. They are also keeping the units of measurement same as
that of the units in the standards.

Name the step of 'Controlling process applicable in the above paragraph.

a) Analysing deviations
b) Comparing actual performance with standards
c) Establishing standards.
d) Measurement of actual performance

Q 4. It is an important principle of management control based on the belief that an attempt to

control everything results in controlling nothing. Identify the principle.

a) Critical Point Control

b) Management by Exception
c) Deviation
d) All of the above

Q 5. Controlling function is like a postmortem of past activities to find out deviations from the
standards. This statement reflects that the controlling function is a ………………. function.

a) Forward looking
b) Backward looking
c) Forefront function
d) None of the above

Q 6. Which of the following is not an importance of controlling function?

a) It ensures order and discipline.

b) It restricts co-ordination in action.
c) It helps in judging accuracy of standards.
d) It improves employee motivation

Q 7. The controlling function is performed by

a) Top level management

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b) Lower-level management
c) Middle level management
d) All of the above

Q 8. Controlling function brings the management cycle back to the

a) Organising function
b) Directing function
c) Planning function
d) None of the above

Q 9. What is compared with what in controlling?

Q 10. What is feedback in controlling?

Q 11. "If anything goes wrong with the performance of key activities, the entire organisation suffers.
Therefore, the organisation should focus on them." Explain the statement with a suitable example.

Q 12. Describe the relationship between controlling and planning.

Q 13. Explain any four points of importance of the controlling function of management.

Q 14. Explain "Critical point control" with respect to Analyzing deviations, a step in the process of 3
controlling. Give a suitable example.

Q 15. Explain how controlling helps in 'accomplishing organisational goals' and 'judging accuracy of
standards'.

Q 16. Textile manufacturer Super textiles reported 43% fall in its profits in the fourth quarter ended
31 March 2017 which is beyond the acceptable range 25% decided by the company. This was due to
higher fuel cost and lower yield on account of demonetization. The company aims to implement cost
saving measures by restructuring contracts and its business processes to meet its targets in the
future.
A. Name the function of management discussed above.
B. Also identify and explain the steps of the function of management discussed above.

Q 17. Mahima Jain is the Senior Manager in the Advisory Service department of Kodes Ltd. She
regularly prepares performance reports of her subordinates as a part of appraisal.
Identify the step of Controlling process performed by her.

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Answer Key
Ans 1. d) Controlling

Ans 2. b) Assignment of Duties

Ans 3. d) Measurement of actual performance

Ans 4. b) Management by Exception

Ans 5. b) Backward looking

Ans 6. b) It restricts co-ordination in action

Ans 7. d) All of the above

Ans 8. c) Planning function

Ans 9. In controlling, actual performance is compared with standard performance.

Ans 10. Feedback refers to communication regarding the reasons for mismatch between actual and
plan output and corrective actions.

Ans 11. The statement refers to the use of 'Critical Point Control', while analysing deviations.

It emphasises that deviations in the key areas need to be attended more urgently as compared to
deviations in certain insignificant areas. Control should, therefore, focus on these key result areas
which are critical to the success of an organisation.

For example, in a manufacturing organisation, an increase of 5 per cent in the labour cost may be
more troublesome than a 15 per cent increase in postal charges.

Ans 12. Planning and controlling are inseparable twins of management. The planning and controlling
functions of management are very closely related. The relation between both the functions is
explained as follows:

1) Nature and concept:

● Planning is the basic function of every enterprise as in planning we decide what is to be
done, how it is to be done when it is to be done and by whom it must be done.
● Controlling means keeping a check that everything is under the plan and if there is any
deviation, taking preventive measures to stop that deviation.
● The meaning of controlling makes it clear that controlling function is undertaken for
right and timely implementation of plans.
2) Planning and controlling are interdependent and interlinked:
● Planning and controlling functions always co-exist or have to exist together as one
function depends on the other.
● The controlling function compares actual performance with the planned performance
and if there is no planned performance then the controlling manager will not be able to
know whether the actual performance is ok or not.
● On the other hand, the planning function is also dependent on controlling function as
plans are not made only on papers but these have to be followed and implemented in
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the organization. The controlling functions make sure that everyone follows the plan
strictly.
● So, both functions are interlinked and interdependent as for the successful execution of
both the functions planning and controlling must support each other.
3) Planning and controlling both are backward and forward looking:
● Controlling is backward looking because like a postmortem of past activities, the
managers look back to the previous year's performance to find out its deviation from
the standard.
● Planning is also backward looking because planning is guided by past experiences and
feedback report of controlling function.
● Planning is forward looking because plans are prepared for future. It involves looking in
advance and making policy for maximum utilization of resources in future.
● Controlling is also forward-looking because controlling does not end only by comparing
past performance with standard. It involves finding the reasons for deviations and
suggests the measures so that these deviations do not occur in future.
● So, this statement is correct as planning and controlling are both forwards looking as
well as backwards looking.
4) Planning is prescriptive whereas, controlling is evaluative:
● Planning is basically an intellectual process involving lot of thinking, and caparison to
prescribe a particular course of action for achieving objectives.
● Controlling evaluate or check whether the desired cause of action is followed or not.
5) Controlling takes place based on certain standards, developed by planning:
● The standards of performance which serve as the basis of controlling are provided by
planning.
● If the standards are not set in advance, managers have nothing to control.
● In other words, without planning, there is no predetermined understanding of the
desired performance.
● Planning is a prerequisite for controlling.
● Thus, controlling is blind without planning.

Ans 13. Four points of importance of the controlling function of management are:

1) Helps in achieving organizational goals:

● When the plans are made in the organization these are directed towards the achievement of
organizational goals.
● The controlling function ensures that all the activities in the organization take place
according to plan.
2) Judging accuracy of standards:
● Through strategic controlling we can easily judge whether the standard or target set are
accurate or not.
● An accurate control system revises standard from time to time to match them with
environmental changes.
3) Making efficient use of resources:
● Like traffic signal control guides the organization and keeps it on the right track.
● Each activity is performed according to predetermined standards.
● As a result, there is the most effective use of resources.
4) Improving employee motivation:

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● An effective control system communicates the goals and standards of appraisal for
employees to subordinates well in advance.
● It thus, motivates them and helps them to give better performance.

Ans 14. Critical point control:

i) It means keeping a focus on some key areas (KRAs) and if there is any deviation in
these key areas, then it must be attended urgently.
ii) Key areas are those which have an impact on whole organization.
iii) For example: In a manufacturing organization, an increase of 5% in the labour
iv) cost may be more troublesome than a 15% increase in postal charges.

Ans 15. Accomplishing organizational goals:

● When the plans are made in the organization these are directed towards the achievement of
organizational goals.
● The controlling function ensures that all the activities in the organization take place
according to plan.
Judging accuracy of standards:
● Through strategic controlling we can easily judge whether the standard or target set are
accurate or not.
● An accurate control system revises standard from time to time to match them with
environmental changes.

Ans 16. A) Controlling (Explain)

B) The steps of controlling process discussed above are:
Critical point control:
i) It means keeping a focus on some key areas (KRAs) and if there is any deviation in
these key areas, then it must be attended urgently.
ii) Key areas are those which have an impact on whole organization.
iii) For example: In a manufacturing organization, an increase of 5% in the labour cost
may be more troublesome than a 15% increase in postal charges.
b) Management by exception:
i) It means a manager who tries to control everything may end up controlling nothing.
ii) The deviations which are beyond the specific range should only be handled by
managers and minute or minor deviations can be ignored.
iii) For example: If production cost increases by Rs 2, it can be ignored but if it increases
more than Rs 2, then managers must try to find out the reasons for deviations which
need immediate attention.
Taking Corrective Action:
● On comparing the actual performance with the planned performance, then the next step
is to know the reasons for such deviations and try to remove deviations in future.
● The managers take measures to bring back everything on track, i.e. according to plan.
● Taking corrective measures may involve:
a) Let the situation remains the same if the deviations are minor.
b) Redesigned the plans or strategies if these are overstated or not matching with
the present day business environment.
c) Taking corrective measures to improve the performance so that in future it
matches with the plan.

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● The manager must take corrective measure only by finding the root cause of the
deviation and try to remove that cause.

Ans 17. Measurement of Actual performance

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GNG 2.0 Rajat Arora Sir

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