Controlling is a goal-oriented function which ensures that an organisation’s resources are being used effectively and efficiently for the achievement of predetermined goals. Managers at all levels of management – top, middle and lower-need to perform controlling functions to keep a control over activities in their areas. The controlling function of management finds out how far actual performance deviates from standards, analyses the causes of such deviations and attempts to take corrective actions based on the same.
Importance of Controlling function of management
A good control system helps an organisation in the following ways:
- It measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action.
- It enables management to verify whether the standards set are accurate and objective.
- It seeks to reduce wastage and spoilage of resources. It ensures that resources are used in the most effective and efficient manner.
- It motivates employees and helps them to give better performance
- It creates an atmosphere of order and discipline in the organisation.
Controlling Process
Controlling is a systematic process involving the following steps:
- Setting performance standards: This is the first step in controlling process. Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organisation strives to work. Standards can be set in both quantitative as well as qualitative terms. It is important that standards should be flexible enough to be modified whenever required. Due to changes taking place in the internal and external business environment standards may need some modification to be realistic in the changed business environment
- Measurement of actual performance: Once performance standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner. There are several techniques for measurement of performance such as personal observation, sample checking, performance reports, etc. As far as possible, performance should be measured in the same units in which standards are set as this would make their comparison easier
- Comparison of actual performance with standards: This involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results. Comparison becomes easier when standards are set in quantitative terms.
- Analysing deviations: Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations. Also, deviations in key areas of business need to be attended more urgently as compared to deviations in certain insignificant areas. The deviations and their causes are then reported and corrective action taken at appropriate level.
- Taking corrective action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within acceptable limits. However, when the deviations go beyond the acceptable range, especially in the important areas, it demands immediate managerial attention so that deviations do not occur again and standards are accomplished
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