1. Explain the meaning of controlling.

Solution:
It is the duty of the manager to control the activities of his subordinates and make sure that
everything goes as planned. He should also see to it that the reserves and supplies that are
purchased for the organization is put to use in the best possible way. This act of controlling is not
only with the top management, but applies to all levels of the organization because, effective
controlling leads towards the goals of the organization. The same controlling is required in all forms
of organizations like hospital, schools, colleges etc. controlling helps the organization to find out what
kind of variations that have taken place in an organization. Since controlling looks after the activities
of the organization, it also paves way for planning for the future as well.

2. ‘Planning is looking ahead and controlling is looking back.’ Comment.

Solution:
Planning and Controlling are two parts of a management team. There are certain standards fixed for
the same. These standards are set by the planning team and for this to work effectively in an
organization, requires assistance from the Controlling Department. They are the people who examine
the functions, compute, look out for deviations if any and correspond with the planned activities. It is
evident from here that Controlling cannot operate without prior planning, because, the standards are
set by the planning department and without them, there is no Controlling team at all.

Planning is a process which involves plenty of thinking, communicating and analysis to find out and
stipulate the suitable activities towards achieving the goals of the organization. Controlling refers to
the part where the planned activities are performed at the appropriate levels. Planning can be
termed to be more authoritative whereas controlling is more calculative.

Some people refer planning as looking forward and controlling refers to looking back and this is not
so. This is so because planning is anticipating for the future at conditions that are predicted and so it
is called a forward-looking function. Alternatively, controlling is about looking at the activities that
are already performed with the set conditions and so it is called backward functioning. Putting it in
other words, planning also takes place on the past performances of the people involved and
controlling is achieving the goals of the organization with the corrective measures if any. So with this
argument, we can conclude that both planning and controlling are both forward and backward
looking operations in an organization.

Both Planning and Controlling are inter related in the following ways

Proper planning leads to effective controlling

Controlling helps to plan well for the future

3. Write a short note on budgetary control as a technique of managerial control.

Solution:
Budgetary control

Budgets are prepared by the managers with the required standard in mind. Actual results are
compared with the budgets and appropriate actions are taken to reach the objectives of the
organization. Budgets show the actual policies of the organization for the specific period. There are
different types of budgets and they are sales budget, Production budget, Material Budget, Cash

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Budget, Capital Budget and R&D budget

The following are the advantages of preparing budgets.

Budget also keeps in mind the time factor and so is useful in reaching the objectives of the
organization.

The employees perform better because, it is prepared on set standards and they will be given an
appraisal depending on this.

The resources will be utilized to the maximum since they will be segregated according to the
respective departments.

There is plenty of co-ordinating work between the various departments in an organization and
emphasizes on they being inter-0dependent. For example, production budget cannot be prepared
without knowing the raw material budget.

Budgeting assists in the concept of management by exception by reiterating those operations that
cause variations among the organizational activities.

This again depends on the accuracy of the future predictions. Here again omes flexibility because,
the environmental factors keep changing an so should the budget be prepared in such a way having
these factors in mind. Budgeting should lead us to the goals of the organization.

4. Explain how management audit serves as an effective technique of controlling.

Solution:
The overall performance of the organization has to be appraised and this I the department
responsible for the same. The main aim is to evaluate the effectiveness and efficiency of the business
and to upgrade its performance for the future. It also points out the shortcomings in the functions of
the management.

The advantages of management audit are as follows:

it is useful in finding out the faults in the performance of management functions.

the control system is also monitored.

the various departments are brought together by proper o-ordination so that the goals of the
organization are achieved.

any change in the policies due to the change in the environment are also guaranteed by this
department.

There are certain problems too with this department as there is no hard and fast rule and is not
mandatory an very few manager opt for this.

5. Explain the various steps involved in the process of control.

Solution:
Process of controlling

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The following are the steps involved in Controlling

Setting performance standard

Performance being measured

Comparing performance with standards

Analysing deviations

Take remedial actions

A) Setting performance standard

This is the first step in controlling. The performance of the employees are measured only with the
standards that are set up and they could be either quantitative or qualitative. Examples for
quantitative work would be the costs that will be incurred, the revenue that is to be generated etc.,
and for qualitative would be to improve the goodwill of the organization.

The manager is responsible for setting up a standard that can be performed by their
employee/worker. For example, the return that the warehouse receives as faulty specifications could
be reduced by cross checking the orders and those that are sent for delivery. Another important
factor is the standards thus et should not be rigid, but flexible and has the possibilities to effect any
change that is to be made in future.

B) Performance being measured

The standards are now set and the next move is to measure them. There are many methods that are
followed to measure performance. The metrics that are used for performance should be similar to the
ones set for the standardization. Usually it is believed that performance is measured only after
completing the task.. Alternatively, performance could be measured even during the task is in
progress. For example, the products that leave the warehouse could be checked before leaving
rather than repent after it has been returned due to improper specifications.

The superior has to prepare the performance appraisal report for his subordinate. The organization
on the whole needs financial statements to be prepared to check for its performance. Small
organizations follow quality checking for all its products, whereas some big organizations make use
of the sample checking by checking only one unit of the many products manufactures in that
particular batch.

C) Comparing performance with standards

When the performance and the standards set are matched, then it will show the variation if any
between what was actually required and what actually has taken place. If the standards are set in a
quantitative manner, the comparison becomes even more easier.

D) Analysing deviations

If there are any deviations, then those must be analyzed and there should be a ranged fixed for
ranges that can be allowed as deviations from the planned course of action. The manager should
analyze the deviations in the following steps.

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I) Critical Point Control

It is very difficult to keep an eye on the many activities of an organization. Attention should be paid
to the KRS’s (Key Result Areas) that are important to the organization. Any activity that does not
take place as planned, then the whole organization collapses. For example, an increase in the cost of
raw materials by 10% is more than the increase in the labour cost by 15%.

II) Management by exception

When everything is brought under control, then nothing is controlled. Similarly, there should be
limits that are fixed for any kind of deviations from the original plans. For example, the increase in
the cost of raw materials is 3% and an increase upto 3% could be allowed. If the increase is about
6%, then the information should be conveyed to the management and immediate, necessary action
should be taken. The reasons for variations could be market reasons, lak of resources, social and
environmental factors etc.

E) Take remedial actions

This is the final step in the process of controlling. If the change is within the stipulated range, then
everything is fine. But if it exceeds the limits, then steps should be taken to rectify the variations.
Measures could be to train the employees or more output, additional workers might be allotted to
increase the production and meet the demand. Steps should also be take not to repeat such changes
in performance. At times, even the standards need to be reviewed an altered in order to bring about
uniformity in the performance level.

6. Explain the techniques of managerial control.

Solution:
Techniques of Managerial Control

There are basically two categories under which managerial control is divided into and they are as
follows

Traditional Techniques and

Modern techniques

1. Traditional techniques

As the name suggests, these are the methods are followed from olden days. They are as follows:

a) Personal observation

b) Statistical reports

c) Breakeven analysis

d) Budgetary control

2. Modern Techniques

These methods are very new to the managers and this provides new way to think for an

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organization. They are

a) Return on investment

b) Ratio analysis

c) Responsibility accounting

d) Management audit

e) PERT and CPM

f) Management information system

Traditional Techniques

Personal Observation: The manager collects first hand information. As a result of this, the
employees are always true to their work and work sincerely. Though this sounds good, it takes a lot
of time and is not affective.

Statistical Reports: Managers may use methods such as correlation, regression analysis, ratios to
calculate the performance of his employees. This helps him to gather information on the expected
work an the work that is produced.

Breakeven Analysis: This method is used to find out the relationship between cost, volume and
profit involved in the organization. The exact position at which the company earns neither a profit
nor a loss is called the break-even point. This helps to calculate the profit of the organization.

This figure shows that the break even point is at 50,000 units of output. Its is only after this point
that the company earns a profit. The formula for calculating Break even point is

Breakeven point = Fixed costs

___________

Selling price per unit – Variable cost per unit

The variable costs help the firm to earn the profit that has been targeted.

Budgetary Control

Budgets are prepared by the managers with the required standard in mind. Actual results are
compared with the budgets and appropriate actions are taken to reach the objectives of the
organization. Budgets show the actual policies of the organization for the specific period. There are
different types of budgets and they are sales budget, Production budget, Material Budget, Cash
Budget, Capital Budget and R&D budget

The following are the advantages of preparing budgets.

I. Budget also keeps in mind the time factor and so is useful in reaching the objectives of the
organization.

II. The employees perform better because, it is prepared on set standards and they will be given an

5
appraisal depending on this.

III. The resources will be utilized to the maximum since they will be segregated according to the
respective departments.

IV. There is plenty of co-ordinating work between the various departments in an organization and
emphasizes on they being inter-0dependent. For example, production budget cannot be prepared
without knowing the raw material budget.

V. Budgeting assists in the concept of management by exception by reiterating those operations that
cause variations among the organizational activities.

This again depends on the accuracy of the future predictions. Here again comes flexibility because,
the environmental factors keep changing an so should the budget be prepared in such a way having
these factors in mind. Budgeting should lead us to the goals of the organization.

Modern Techniques

Return on Investment

This is a basic tool used to compute as to whether the capital employed is put to effective use or not.
And whether it generates the expected return. This could be pertaining to the organization on the
whole or the individual departments. It is calculated as follows.

RoI = Net Income/Sales x Sales/Total Investment

Net Income either before tax or after tax can be computed. Fixed and working capital comprises the
total investment. The RoI can be adjusted with an increase in the volume of sales with an
appropriate increase in the volume of capital or reducing the total investment without a decrease in
the total sales. The various departments are measured an performance is compared with the help of
RoI.

Ratio Analysis

Ratio is of financial statements are computed and their ratios are used to find out the performance.
The following types are the most commonly used ratio techniques.

a. Liquidity Ratio: The present position of liquid funds are analyzed in order to find out the capacity
of the firm to pay of their shareholders in case of solvency of the business.

b. Solvency Ratio: Ratios which are useful to calculate the solvency of the business firm on a long
term basis is called Solvency ratio. It helps to know the capacity of the business to answer its
debtors

c. Profitability Ratio: The profit position of the business is calcuilated with this ratio. The profit thus
analyzed is with respect to sales or capital invested

d. Turnover Ratio: This ratio helps to find out how the organization has made best use of the
available resources. If the turnover is high, then it means the resources have been utilized to the
maximum.

Responsibility Accounting

A head is appointed for each department and he is responsible for achieving the targets that are set

6
for his centre. A number of departments and divisions can be found in the Responsibility centre.

There are many types or responsibility accounting and they are as follows

a) Cost Centre: The managers in this centre are held responsible in this centre, but they are not
held responsible for the revenue generated from this.

b) Revenue Centre: This is the centre or division that is responsible for generating the required
revenue for the organization.

c) Profit Centre: This manager is responsible for both the cost and profit.

d) Investment Centre: The investments made and the profits arising out of those investments are
the major responsibilities of this manager.

Management Audit

The overall performance of the organization has to be appraised and this I the department
responsible for the same. The main aim is to evaluate the effectiveness and efficiency of the business
and to upgrade its performance for the future. It also points out the shortcomings in the functions of
the management.

The advantages of management audit are as follows

it is useful in finding out the faults in the performance of management functions.

the control system is also monitored.

the various departments are brought together by proper o-ordination so that the goals of the
organization are achieved

any change in the policies due to the change in the environment are also guaranteed by this
department.

There are certain problems too with this department as there is no hard and fast rule and is not
mandatory an very few manager opt for this.

PERT and CPM

PERT (Programme Evaluation and Review Technique) and CPM (Critical Path Method) are major
networking techniques useful for planning an controlling. These are most useful for projects that
have time value added to it and those that are very diverse and complex in nature. These deal with
time scheduling and allocation of resources for these activities and the major aim is to accomplish
the projects within the stipulated time and cost

The steps involved using PERT/CPM are as follows.

1. the project is first divided into many smaller activities and then arranged in a sequential order.

2. a digramatic representation is also provided with the start and end points clearly mentioned.

3. time is allotted for each and every activity. PERT prepares three types of estimation, optimistic
(shortest time), pessimistic (longest time) and exact time. CPM prepares only one schedule and also

7
 prepares the cost for completing the project.

4. the time taken for the longest path is called the critical path. This method oes not take delays into
consideration.

5. the plan is also hanged is required so that the project ould be completed at the stipulated time.

The main areas which uses this method are ship building, huge construction projects, manufacture of
aircrafts, etc.

Management Information System

This Management Information System (MIS) is a computer based system that imparts upport and
information for effective managerial decision making. The data that is generated by the organization
is provided to all managers for their effective work. This is used as a control tool also in a way that
information is passed on to the managers so that corrective measures could be implemented ion case
of any deviation from the planned structure of work.

The advantages are as follows

1. it collects information and distributes information at various level of management and to various
other divisions of the organization.

2. planning, decision-making and controlling are also ably supported by MIS

3. the quality of information with which a manager works is improved with MIS.

4. MIS makes sure that cost effectiveness in managing information is complied with.

5. Since only the required information is passed on to the managers, it

reduces the workload of the managers.

7. Explain the importance of controlling in an organisation. What are the problems faced
by the organisation in implementing an effective control system?

Solution:
Importance of Controlling

The following points explain how and why controlling is important in an organization

A) Achieves the goals of the organization

Controlling helps in checking whether the organization is heading towards the right direction and if
there are any changes found, stops the activities and sets them on the right track. They act as a
guide for the organization.

B) Helps in judging the accuracy of the standards.

The standards set for the organization are checked by the controlling team and effects the changes
that are suggested and even reviews them regularly.

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C) Effectively uses the resources

Since the activities are performed which are already planned, the wastages are reduced and the
available resources are put to proper use.

D) Enhance the motivation provides to employees.

People working in the organization are able to improve their level of working because they are told
what to do and they work towards achieving their goal. This also helps in their appraisal.

E) Guarantee order and discipline

The employees are watched regularly and so they will make sure that they are honest and disciplined
in the organization.

F) Assist in co-ordination in action

All activities are controlled and so the goals of the organization are achieved not only with one
department, but with all departments of an organization. This co-ordination helps in achieving total
success of an organization.

Limitations of Controlling

There are certain limitations to controlling though we have seen their merits and they are as follows.

1) Difficulty in setting quantitative standards:

Controlling becomes difficult when the performance is not measurable quantitatively. The main
factors that are affected are employee morale, job satisfaction and behaviour of the people.

2) Less control on external affairs.

Controlling is possible within the organization and not on the policies framed by the Government,
changes in technology, market variations etc.

3) Resistance from employees

Certain employees oppose to being controlled. They feel they are not able to work in a free
environment. For example, some of them object to the presence of in and out register forcing them
to write where they go, when they leave etc.

4) Costs more.

There is a lot of time, money and effort that is spent on the controlling department. This becomes
unaffordable for the smaller organizations. So care should be taken that the costs does not surpass
the advantages that is enjoyed from the same.

8. Discuss the relationship between planning and controlling.

Solution:
Planning and Controlling are two parts of a management team. There are certain standards fixed for
the same. These standards are set by the planning team and for this to work effectively in an

9
organization, requires assistance from the Controlling Department. They are the people who examine
the functions, compute, look out for deviations if any and correspond with the planned activities. It is
evident from here that Controlling cannot operate without prior planning, because, the standards are
set by the planning department and without them, there is no Controlling team at all.

Planning is a process which involves plenty of thinking, communicating and analysis to find out and
stipulate the suitable activities towards achieving the goals of the organization. Controlling refers to
the part where the planned activities are performed at the appropriate levels. Planning can be
termed to be more authoritative whereas controlling is more calculative.

Some people refer planning as looking forward and controlling refers to looking back and this is not
so. This is so because planning is anticipating for the future at conditions that are predicted and so it
is called a forward-looking function. Alternatively, controlling is about looking at the activities that
are already performed with the set conditions and so it is called backward functioning. Putting it in
other words, planning also takes place on the past performances of the people involved and
controlling is achieving the goals of the organization with the corrective measures if any. So with this
argument, we can conclude that both planning and controlling are both forward and backward
looking operations in an organization.

Both Planning and Controlling are inter related in the following ways

Proper planning leads to effective controlling

controlling helps to plan well for the future

9. Explain the meaning of controlling.

Solution:
It is the duty of the manager to control the activities of his subordinates and make sure that
everything goes as planned. He should also see to it that the reserves and supplies that are
purchased for the organization is put to use in the best possible way. This act of controlling is not
only with the top management, but applies to all levels of the organization because, effective
controlling leads towards the goals of the organization. The same controlling is required in all forms
of organizations like hospital, schools, colleges etc. controlling helps the organization to find out what
kind of variations that have taken place in an organization. Since controlling looks after the activities
of the organization, it also paves way for planning for the future as well.

10. ‘Planning is looking ahead and controlling looking back’. Comment

Solution:
Planning and Controlling are two parts of a management team. There are certain standards fixed for
the same. These standards are set by the planning team and for this to work effectively in an
organization, requires assistance from the Controlling Department. They are the people who examine
the functions, compute, look out for deviations if any and correspond with the planned activities. It is
evident from here that Controlling cannot operate without prior planning, because, the standards are
set by the planning department and without them, there is no Controlling team at all.

Planning is a process which involves plenty of thinking, communicating and analysis to find out and
stipulate the suitable activities towards achieving the goals of the organization. Controlling refers to
the part where the planned activities are performed at the appropriate levels. Planning can be
termed to be more authoritative whereas controlling is more calculative.

Some people refer planning as looking forward and controlling refers to looking back and this is not
so. This is so because planning is anticipating for the future at conditions that are predicted and so it
is called a forward-looking function. Alternatively, controlling is about looking at the activities that

10
 are already performed with the set conditions and so it is called backward functioning. Putting it in
other words, planning also takes place on the past performances of the people involved and
controlling is achieving the goals of the organization with the corrective measures if any. So with this
argument, we can conclude that both planning and controlling are both forward and backward
looking operations in an organization.

Both Planning and Controlling are inter related in the following ways

1. Proper planning leads to effective controlling

2. controlling helps to plan well for the future.

11. ‘An effort to control everything may end up in controlling nothing’. Explain

• Solution:
1) Difficulty in setting quantitative standards:
Controlling becomes difficult when the performance is not measurable quantitatively. The main
factors that are affected are employee morale, job satisfaction and behaviour of the people.

2) Less control on external affairs.

Controlling is possible within the organization and not on the policies framed by the Government,
changes in technology, market variations etc.

3) Resistance from employees

Certain employees oppose to being controlled. They feel they are not able to work in a free
environment. For example, some of them object to the presence of in and out register forcing them
to write where they go, when they leave etc.

4) Costs more.
There is a lot of time, money and effort that is spent on the controlling department. This becomes
unaffordable for the smaller organizations. So care should be taken that the costs does not surpass
the advantages that is enjoyed from the same.

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