Controlling

Controlling: The process of controlling the activities of an organization - process through which managers assure that actual activities conform to planned activities.

Importance of Control:

1. Decentralization of Authority 
2. Rational structuring of human behaviour 
3. Ensures Efficient use of scarce and valuable resources 
4. Facilitates co-ordination 
5. Fosters organizational efficiency and effectiveness. 

Essential elements of the "controlling" process:

1. Establishment of goals and standards 
2. Measurement of actual performance against standards and their comparison 
3. Corrective action 
1. Operation phase
1. Prompt investigation of causes of deviation 
2. Deciding upon corrective course and close supervision thereof.
2. Administrative Phase 
1. Further investigation of recurring difficulties 
2. Disciplinary action where necessary 
4. Follow Through 
5. Feedback
6. Prompt reporting of deviations
7. Strategic Point Control - Not all deviations are created equal.

Techniques of Control

1. Traditional methods - less scientific
1. Budgetary control 
2. Standard Costing 
3. Financial Ratio Analysis
4. Internal Audit 
5. Break-Even Analysis 
6. Statistical Control 
2. Non-traditional methods - scientific
1. Zero Base Budgeting 
2. Network Analysis 
1. CPM - Critical Path Method 
2. PERT - Programme Evaluation and Review Technique 
3. Management Audit 

• Budgetary Control
• Budget: Statement of anticipated inflows and outflows expressed numerically.
• It involves the following steps:
• Determination of objectives to be achieved. 
• Noting the steps necessary to achieve the objectives. 
• Translating the course of action into quantitative and monetary terms.v 
• Constant comparison of the actual with the budget.
• Types of budget
• sales 
• production and manufacturing 
• purchase 
• capital expenditure 
• administration expenses 
• research and development 
• cash 
• Standard Costing - costs associated with every activity are recorded and classified, and then compared with the standard or budgeted costs. 
• Financial Ratio Analysis - The relation between various elements of financial statements expressed in mathematical terms.
• Internal Audit - Regular and independent appraisal of the accounting and financial and other operations of a business by a staff of internal auditors.
• Break-Even Analysis - The point of no profit, no loss 
• Statistical Control - Statistical reports compiled after analysis help in visualizing trends and weaknesses in respective areas of operation, and remedial steps can be suggested. 

• Zero Base Budgeting - An operative planning and budgeting process which requires each manager to justify his entire budget in detail from scratch.
• Network Analysis - A technique for planning and controlling complex projects and for scheduling the resources required on such products. It achieves this aim by analyzing the component parts of a project and assessing the sequential relationships between each event. 
• Critical Path Method
• Used to plan and control the most critical activities to accomplish any project.
• A project is broken into different operations or activities and their relationships are determined. 
• Assumes that activity times are proportional to the magnitude of  resources allocated to them, and by making a change in the level of resources, the activity time and the project completion time can become varied. 
• Programme Evaluation and Review Technique 
• Involves basic network technique which includes planning, monitoring and controlling of projects. 
• Management should know the goals to be achieved, determine the actions necessary to achieve those goals, the sequence in which these activities must be performed, and carefully establish the time that will elapse at each of the successive stages of actions required to achieve the goals.
• Usage of "probability" and "linear programming" for planning and controlling the activities. 
• Probability helps estimate the timings of various activities in the project.
• Linear programming maximizes the achievement of project objectives. 
• Management Audit: Systematic and dispassionate examination, analysis and appraisal of management's overall performance.
• Economic function 
• Corporate structure 
• Health of earnings 
• Service of shareholders 
• Research and development
• Directorate Analysis 
• Fiscal Policies 
• Production Efficiency 
• Sales Vigour 
• Executive Evaluation 

Planning is looking ahead, while controlling is looking back.