UNIT-5

CONTROLLING

DR.DARSHANA VITHALANI, ASSISTANT PROFESSOR, MBA, MARWADI

UNIVERSITY, RAJKOT
 Meaning and Definition of Controlling:

→ Controlling is one of the important functions of a manager. In order to seek planned

results from the subordinates, a manager needs to exercise effective control over the
activities of the subordinates. In other words, the meaning of controlling function
can be defined as ensuring that activities in an organization are performed as per the
plans. Controlling also ensures that an organization’s resources are being used
effectively & efficiently for the achievement of predetermined goals.

→ According to George R. Terry “Controlling is determining what is being

accomplished that is evaluating the performance and, if necessary, applying
corrected measures so that the performance takes place according to plans.”
 Characteristics of Controlling:
1) Related to Planning
→As a managerial functions control and planning are closely related. It is the functions of
control to see whether all the activities are performed according to planning.

2) Continuous activity
→Like planning, controlling is a continuous process. There is constant supervision our
personal activities and material.

3) Positive activity
→Control is generally regarded to be an attack on worker’s freedom. These beliefs are not
correct. Control is a positive activities and it sees that workers work according to
planning.

4) Controlling at every level of management

→Control is found at every level of mgt. Every superior control subordinate to a more or
less extent at some level of mgt. The degree of control may be different at different
levels.
 Importance of Controlling:
1) Helpful in the Achievement of Objectives
→ Controlling finds out errors in the enterprise and takes corrective measures. As a
result achievement of objectives becomes easy, as all activities are performed
according to a plan.

2) Control on Activities
→ Various activities of an undertaking and functional areas like organization,
production, sales, employees, financial and quality aspects etc can be controlled.

3) Co-ordination between Various Activities

→ Controlling is helpful in co-ordinating various activities of the business
enterprise. It is only because of control that co-ordination is possible.

4) Barometer of Efficiency
→ In business enterprises if control is exercised efficiently, management becomes
more efficient. So controlling is called the barometer of efficiency of management.
Relationship Between Planning and
Controlling:
● Planning and controlling are inter-related to each other.
Planning sets the goals for the organization and
controlling ensures their accomplishment. Planning
decides the control process and controlling provides
sound basis for planning. In reality planning and
controlling are both dependent on each other. In the
words of M.C. Niles, “Control is an aspect and projection
of planning, where as planning sets the course, control
observes deviations from the course, and initiates action
to return to the chosen course or to an appropriately
changed one.”
The relationship between planning and control can
be explained as follows:

1) Planning Originates Controlling:

→ In planning the objectives or targets are set in order to achieve these
targets control process is needed. So planning precedes control.

2) Controlling Sustains Planning:

→ Controlling directs the course of planning. Controlling spots the areas
where planning is required.

3) Controlling Provides Information for Planning:

→ In controlling the actual performance is compared to the standards set
and records the deviations, if any. The information collected for exercising
control is used for planning also.
4) Planning and Controlling are Interrelated:
→ Planning is the initial step and controlling is in the process
and required at every step. For the same both are dependent
upon each other and inter-related.

5) Planning and Control are Forward Looking:

→ Planning is always for the future and control is forward
looking. No one has the control on past, it is only the future,
which can be controlled.
 Relationship between Planning and
Controlling (With Diagram)

→ ‘If planning is looking ahead; controlling is looking back’. By

the former part of the adage that planning is looking ahead,
one naturally implies that planning is future oriented and sets
objectives and best alternative courses of action to be
accomplished in future.

→Further, by the latter part of the adage saying that controlling is

looking back; we mean that controlling looks back to have a
glance at what has been achieved towards the accomplishment
of the plan; and what are the deviations occurring in
performance as judged against the planned standards to enable
management to undertake the necessary remedial action to
bring performance in conformity with the plans.
(a) Planning without Controlling:

→ Planning is possible without controlling. That is to say, the

management might make plans and hell care for their
implementation. However, in such circumstances, planning is a
meaningless, futile and wasteful managerial exercise involving only
a sheer wastage of the precious resources of the enterprise; without
the management having any means to assure whether objectives
would be realized or not and at what costs.
(b) Controlling without Planning:
→ However, controlling is not possible without planning. This is so
because that the very first step of the controlling process which
concerns itself with the determination of the standards of
performance; is nothing but an aspect of the planning process i.e.
it is the plans which lay down standards of performance for the
attainment of the planned objectives, and against which standards
the actual performance of people is to be measured, compared
and analyzed. To speak of controlling without planning would be
something like building castles in the air. Of necessity,
controlling has to be but based on plans, to be possible at all.
This circular relationship between planning and controlling
could be expressed by means of the following diagram:
 Control Process

 Controlling is one of the most important functions of management.

Its main objective is to ensure that an organization’s activities are
advancing as planned. The control process that all managers have to
implement consists of several steps. Each one of these is equally
important and plays a big role in effective management.

 The control process of management ensures that every activity of

a business is furthering its goals. This process basically helps
managers in evaluating their organization’s performance. By using it
effectively, they can decide whether to change their plans or continue
with them as they are.
 The control process consists of the
following basic elements and steps:
1) Establishing goals and standards

→ The task of fixing goals and standards takes place while planning but it plays a big role
in controlling also. This is because the main aim of controlling is to direct a business’s
actions towards its goals. If the members of an organization know their goals clearly,
they will invest their entire focus in achieving them.

→ It is very important for managers to communicate their organization’s goals, standards

and objectives as clearly as possible.

→ The goals that managers have to set and work towards may be either tangible/specific or
intangible/abstract. Tangible goals are those which are easy to quantify in numerical
terms. For example, achievement of sales worth Rs. 100 crores within one year is a
tangible goal.

→ On the other hand, intangible goals are those which are not quantifiable numerically. For
example, a company may aim to win some prestigious award for its corporate
social responsibility activities.
2) Measuring actual performance against goals and standards

→ Once managers know what their goals are, they should next measure their actual
performance and compare. This step basically helps them in knowing whether their
plans are working as intended.

→ After implementing a plan, managers have to constantly monitor and evaluate them.
They must always be ready to take corrective measures if things are not working
properly. In order to do this, they should keep comparing their actual performance
with their ultimate goals.

→ In order to compare their actual performance, managers first have to measure it.
They can do so by measuring results in monetary terms, seeking customer feedback,
appointing financial experts, etc. This can often become difficult if managers want
to measure intangible standards like industrial relations, market reputation, etc.
3) Taking corrective action
→ In case there are discrepancies between actual performances
and goals, managers need to take corrective actions
immediately. Timely corrective actions can reduce losses as
well as prevent them from arising in the future again.

→ Sometimes, business organizations formulate default

corrective actions in the form of policies. This, however, can
be difficult to do when it comes to complicated problems.

→ In such cases, managers need to first quantify the defect and

prepare a course of action to remedy it. Sometimes, they may
have to take extraordinary measures for unpredictable
problems.
4) Following up on corrective action

→ Just taking corrective measures is not enough; managers must

also take them to their logical conclusion. Even this step requires
thorough evaluations and comparisons.

→ Managers should stick to the problem until they solve it. If they
refer it to a subordinate, they must stay around and see to it that he
completes the task. They may even mentor him personally so that
he may be able to solve such problems by himself later.
Modern management techniques

 Business process re-engineering,

 Business outsourcing,
 benchmarking,
 kaizen,
 six sigma,
 knowledge management,
 just in time management,
 total quality management
KAIZEN
 Kaizen (or 'continuous improvement') is an approach of constantly
introducing small incremental changes in a business in order to improve
quality and/or efficiency.
 This approach assumes that employees are the best people to identify room
for improvement, since they see the processes in action all the time.
 The five foundation elements of Kaizen

 Teamwork.

 Personal discipline.

 Improved morale.

 Quality circles.

 Suggestions for improvement.

Two consideration
Yutori- reduction on human stress at workplace
Karakuri- No fuel – No electricity
5 S framework of kaizen
 Seiri/Sort (organize) -- Separate necessary workplace
items from unnecessary ones and remove unnecessary
items.
 Seiton/Set in order (create orderliness) -- Arrange
items to allow for easy access in the way that makes the
most sense for work.
 Seiso/Shine (cleanliness) -- Keep the workspace clean
and tidy.
 Seiketsu/Standardize (standardized cleaning) --
Systematize workplace cleanup best practices.
 Shitsuke/Sustain (discipline) -- Keep the effort going.
Benefits and limitations of kaizen
 Kaizen encourages scrutiny of processes so that
mistakes and waste can be reduced.
 Inspection needs are lessened, because errors are
reduced.
 Employee morale grows, because it engenders a sense
of value and purposefulness.
 Teamwork increases as employees think beyond the
specific issues of their department.
 Client focus increases as customer requirements
awareness is raised.
 Systems are in place to ensure improvements are
encouraged both short and long term.
 Kaizen disadvantages:
 Companies with cultures of territorialism and closed
communication may first need to focus on cultural
changes to create a receptive environment.
 Short-term Kaizen events may create a burst of
excitement that is shallow and short-lived and,
therefore, gets abandoned before long.
Example of companies following
kaizen
 Pixar Animation Studios. Pixar has taken a
continuous improvement model that reduced risks of
expensive movie failure by using quality control
checks and iterative processes.
Benchmarking
 Benchmarking is a process of measuring the
performance of a company’s products, services, or
processes against those of another business considered
to be the best in the industry, aka “best in class.”
 The point of benchmarking is to identify internal
opportunities for improvement.
 By studying companies with superior performance,
breaking down what makes such superior performance
possible, and then comparing those processes to how
your business operates, you can implement changes that
will yield significant improvements.
 There are two basic kinds of improvement
opportunities: continuous and dramatic.
 Continuous improvement is incremental, involving only
small adjustments to reap sizeable advances.
 Dramatic improvement can only come about through
reengineering the whole internal work process.
Benchmarking steps
 Choose a product, service, or internal department to
benchmark
 Determine which best-in-class companies you should
benchmark against – which organizations you’ll
compare your business to
 Gather information on their internal performance, or
metrics
 Compare the data from both organizations to identify
gaps in your company’s performance
 Adopt the processes and policies in place within the
best-in-class performers
 Benefits of benchmarking
 In addition to helping companies become more efficient
and profitable, benchmarking has other benefits, too,
such as:
 Improving employee understanding of cost structures
and internal processes
 Encouraging team-building and cooperation in the
interests of becoming more competitive
 Enhancing familiarity with key performance metrics and
opportunities for improvement company-wide
 In essence, benchmarking helps employees understand
how one small piece of a company’s processes or
products can be the key to major success, just as one
employee’s contributions can lead to a big win.
JIT-just in time
 The just-in-time inventory system is a management
strategy that aligns raw-material orders from
suppliers directly with production schedules.
 Companies use this inventory strategy to increase
efficiency and decrease waste by receiving goods
only as they need them for the production process,
which reduces inventory costs. This method requires
producers to forecast demand accurately.
Example of JIT
 For example, let's assume that Company XYZ is a
small car manufacturer.
 On Tuesdays the company assembles the car
chassis, and the workers put the windshield in on
Thursdays. With a just in time inventory method, XYZ
might have parts delivered exactly one day before
they need them.
 The chassis would be delivered on Monday and the
windshield on Wednesdays.
 JIT's encouragement of planning, simplification, and
standardization is aimed at reducing carrying costs
by eliminating the expense of housing idle materials
and lower the costs of defective products, wasted
space, extra equipment, overtime, warranty repair,
and scrap.
 JIT also speeds the production process, thereby
eliminating long lead times and improving delivery
performance.
TQM-Total quality management
 TQM-describes a management approach to long–term
success through customer satisfaction.
 In a TQM effort, all members of an organization
participate in improving processes, products, services,
and the culture in which they work.
 Total quality management can be summarized as a
management system for a customer-focused
organization that involves all employees in continual
improvement.
 It uses strategy, data, and effective communications to
integrate the quality discipline into the culture and
activities of the organization.
The key principles of Total Quality
Management
 Commitment from the management:
 Plan (drive, direct)
 Do (deploy, support, and participate)
 Check (review)
 Act (recognize, communicate, revise)
 Employee Empowerment
 Training
 Excellence team
 Measurement and recognition
 Suggestion scheme
 Continuous Improvement
 Systematic measurement
 Excellence teams
 Cross-functional process management
 Attain, maintain, improve standards
 Customer Focus
 Partnership with Suppliers
 Service relationship with internal customers
 Customer-driven standards
 Never compromise quality
Benefits of TQM
 This will increase the awareness of quality culture
within the organization.
 A special emphasis on teamwork will be achieved.
 TQM will lead to a commitment towards continuous
improvement
Knowledge Management
 Knowledge management is about making the right
knowledge available to the right people.
 It is about making sure that an organization can
learn, and that it will be able to retrieve and use its
knowledge assets in current applications as they are
needed.
 In the words of Peter Drucker it is "the coordination
and exploitation of organizational knowledge
resources, in order to create benefit and competitive
advantage" (Drucker 1999).
 Companies like Pfizer, and Infosys are thought to the
world leaders in KM. This is because they have a clear
set of guidelines for capturing knowledge after every
project or product that they rolled out.
 For instance, these companies have guidelines for
project managers to publish the learning’s that have
accrued after a project and upload them into the KM
system.
 Further, the bottom line imperative for a successful KM
system is that employees should have a sharing mindset
instead of an exclusivity mindset. What this means is that
the employees must be willing to share their insight and
knowledge with the other employees.
 Apart from this, to actualize a successful KM system,
hierarchy and barriers to sharing of knowledge
must be eliminated. What this means is that a
culture of openness must pervade the organization
with no impediments to the flow of knowledge
through the organizational arteries.
Knowledge management process
 Knowledge Discovery & Detection
 Knowledge Organization & Assessment
 Knowledge Sharing
 Knowledge Reuse
 Knowledge Creation
 Knowledge Acquisition
business outsourcing aka information
technology enabled services (ITES).
 Business process outsourcing, or BPO, is a business
practice in which one organization hires another
company to perform a task (i.e., process) that the
hiring organization requires for its own business to
successfully operate.
 BPO has its roots in the manufacturing industry, with
manufacturers hiring other companies to handle
specific processes, such as parts of their supply
chains, that were unrelated to the core competencies
required to make their end products.
 Organizations engage in business process outsourcing for
two main areas of work: back-office functions and front-
office functions.
 Organizations can outsource a range of back-office
functions (also referred to as internal business
functions) including accounting, IT services, human
resources (HR), quality assurance (QA) and payment
processing.
 Similarly, they can outsource various front-office
functions, such as customer relation services,
marketing and sales.
 Organizations can also outsource specific functions
(i.e., payroll) in those areas in addition to
outsourcing an entire functional area (i.e., human
resources).
Types Of BPO’s
 Offshore outsourcing, or just offshoring, occurs
when an organization contracts for services
provided with a company in a foreign country.
 Onshore outsourcing, or domestic outsourcing,
happens when an organization contracts for services
provided by a company that operates in the same
country as the hiring organization.
 Near shore outsourcing is when an organization
contracts for services provided by companies based
in neighboring countries.
Benefits of BPO
 Financial benefits: Organizations often find that an outsourced
provider can perform a business process at lower costs, or they often
find that by contracting with an outsourced provider they can save
money as a result of the relationship in other ways, such as in tax
savings.
 Flexibility: BPO contracts can allow organizations greater flexibility
to adjust how it completes the outsourced business process, allowing
them to better react to changing market dynamics.
 Competitive advantage: BPO allows organizations to outsource
those processes that aren't core to their businesses or missions,
thereby allowing organizations to focus more of its resources on the
operations that distinguish them in the marketplace.
 Higher quality and better performance: Because
the core business of BPO providers is performing the
specific processes they're hired to do, they are, in
theory, able to focus on providing those processes at
the highest levels, often with greater accuracy,
efficiency and speed.
Risk of BPO
 Security breaches: Organizations must create technology
connections between themselves and their service providers,
thereby creating another potential point that could be
exploited by bad actors; moreover, organizations often need to
share sensitive and/or regulated data with their service
providers -- another potential security risk.
 Relationship challenges: Organizations can face
communication problems with their outsourced providers or they
might find that there are cultural barriers to having a strong
business partnership, problems that could hinder hiring
organizations from seeing the full benefits of their BPO
contracts.
Six sigma
 Six Sigma is a system of statistical tools and
techniques focused on eliminating defects and
reducing process variability.
 The Six Sigma process includes measurement,
improvement and validation activities. The Six Sigma,
relates to the connection between the number of
defects per million opportunities and the number of
standard deviations found within a process
specification.
Six sigma
 A set of management techniques intended to improve business
processes by greatly reducing the probability that an error or
defect will occur.
 Any business process that produces less than 3.4 defects per 1
million chances is considered efficient; defects are considered
anything that's produced outside of consumer satisfaction.
 Second, it's a training program and certification that teaches the
core principles of Six Sigma.
 Practitioners can achieve Six Sigma belt levels, ranging from white
belt to black belt.
 Finally, it's a philosophy that promotes the idea that all business
processes can be measured and optimized.
DMAIC of six sigma
Business re-engineering
 Business process reengineering (BPR) is the practice of
rethinking and redesigning the way work is done to
better support an organization's mission and reduce
costs.
 Organizations reengineer two key areas of their
businesses. First, they use modern technology to
enhance data dissemination and decision-making
processes. Then, they alter functional organizations to
form functional teams.
 Reengineering starts with a high-level assessment of
the organization's mission, strategic goals, and
customer needs.
 Basic questions are asked, such as "Does our mission
need to be redefined? Are our strategic goals
aligned with our mission? Who are our customers?“
 An organization may find that it is operating on
questionable assumptions, particularly in terms of
the wants and needs of its customers. Only after the
organization rethinks what it should be doing, does it
go on to decide how best to do it
 Within the framework of this basic assessment of
mission and goals, re-engineering focuses on the
organization's business processes—the steps and
procedures that govern how resources are used to
create products and services that meet the needs of
particular customers or markets.
Methods of establishing control
 Direct Supervision and Observation
 Financial Statements
 Budgetary Control
 Return on Investment (ROI)
 Management by Objectives (MBO)
 Management Audit
 Management Information System (MIS)
 PERT and CPM Techniques
 Self-Control
THANK YOU