Controlling

Controlling is the management function that ensures organisational activities are performed according to plans, so that resources are used effectively and efficiently to achieve predetermined goals. In this chapter you will learn that controlling is a goal-oriented and pervasive function that is both backward looking and forward looking, and you will study its importance: accomplishing organisational goals, judging the accuracy of standards, making efficient use of resources, improving employee motivation, ensuring order and discipline and facilitating coordination. You will also understand its limitations, such as the difficulty of setting quantitative standards, little control over external factors, resistance from employees and the high cost of control systems. The chapter explains the close relationship between planning and controlling: planning without controlling is meaningless, and controlling without planning is blind. You will then study the five steps of the controlling process: setting performance standards, measuring actual performance, comparing actual performance with standards, analysing deviations using critical point control and management by exception, and taking corrective action, applied to realistic situations in factories, offices and service businesses.

Detailed Worksheet: Controlling Section A - Definitions (10 marks) 1. Define controlling. Why is it called a pervasive function? (2 marks) 2. Explain the statement, "Controlling is both backward looking and forward looking." (2 marks) 3. What is critical point control? Give one example from a manufacturing unit. (2 marks) 4. What is management by exception? State one advantage of it. (2 marks) 5. State any four limitations of controlling. (2 marks) Section B - Calculations and Applications (15 marks) 6. A factory set a standard output of 500 units per worker per month. Actual outputs of four workers were 520, 480, 450 and 505 units. Calculate the deviation and percentage deviation for each worker. If deviations up to 5% are acceptable, identify the workers whose performance needs management attention. (3 marks) 7. A company budgeted sales of Rs 40 lakh for a quarter but achieved Rs 34 lakh. Calculate the deviation and the percentage deviation. State which step of the controlling process this calculation represents, and suggest two corrective actions. (3 marks) 8. The standard cost of producing a shirt is Rs 250, made up of material Rs 150, labour Rs 60 and overheads Rs 40. Actual costs were material Rs 165, labour Rs 58 and overheads Rs 47. Calculate the deviation in each element and the total, and identify the element that should get priority under critical point control. (3 marks) 9. Identify the step of the controlling process in each case: (i) the manager fixes a target of 2% maximum defects (ii) defects are counted at the end of each shift (iii) the defect rate of 3.5% is compared with the target (iv) the cause is found to be old machinery (v) the old machine is replaced. (3 marks) 10. A courier company aims to deliver 98% of parcels within 48 hours. In a month it delivered 9,310 out of 9,800 parcels on time. Calculate the actual on-time percentage and the shortfall, and suggest how management by exception would apply here. (3 marks) Section C - Diagrams (10 marks) 11. Draw a flowchart showing the five steps of the controlling process, with a feedback loop from corrective action to setting standards. (4 marks) 12. Draw a diagram showing the relationship between planning and controlling as a cycle: planning -> organising -> staffing -> directing -> controlling -> planning. (3 marks) 13. Draw a chart showing the importance of controlling with six points. (3 marks) Section D - Analysis and Higher-order Thinking (15 marks) 14. A packaged food company found that its sales fell by 15% even though its production targets were met. On analysis, it found that a competitor had introduced a cheaper product. Analyse which limitation of controlling is shown, and explain the steps of the controlling process the company should follow to respond. (5 marks) 15. Planning and controlling are said to be inseparable twins of management. Explain this statement, and analyse with an example why planning without controlling is meaningless and controlling without planning is blind. (5 marks) 16. A hotel chain decided to monitor every minor complaint about room service personally by the general manager, and soon he had no time for strategic decisions. Evaluate this approach with reference to management by exception and critical point control, and recommend a better control system. (5 marks) Instructions: Time allowed 2 hours. Attempt all sections. Quote relevant lines from cases while identifying concepts, and show all calculations clearly.