8.12 Controlling – Business Studies 12/CBSE

Meaning & Nature of Controlling

  1. What is controlling?
    Controlling refers to comparison of actual performance with planned performance and taking corrective actions in case of deviation between actual and planned performance.
  2. Case Study
    1. KENT had decided to manufacture 10000 units of Aura Air Purifiers in June. (Planned performance)
    2. Unfortunately KENT manufactured only  9000 units. (Actual performance; Deviation – shortage of 1000 units)
    3. Out of the 9000 units produced, 100 were defective. (Actual performance; Deviation – 100 defective pieces)
    4. What should Quality Manager Jack do?
    5. What should Production Manager Peter do?
  3. Nature of controlling?
    KENT needs proper controlling of its quality and quantity because of the following reasons.

    1. Goal oriented
      1. KENT aims to produce best quality air-purifiers.
      2. If there is no controlling, the products will not be up to the satisfaction of the customers.
      3. To make sure, KENT has to do proper controlling of its production, quality and sale departments.
    2. Pervasive
      1. Controlling is exercised not only in production or quality departments.
      2. Controlling is necessary at all departments and levels.
    3. Continuous
      1. KENT cannot stop controlling after accomplishing a goal.
      2. It has to continuously control all the departments.
    4. Backward looking and forward looking.

Importance of Controlling

  1. Accomplishing organizational goals.
    1. After his department’s failure in producing 10000 units of air purifiers, Production Manager Peter Mortimer took immediate corrective actions.
    2. To avoid similar shortage in production, he decided to recruit five more employees.
    3. He will also buy another machine to boost production.
    4. Thus, he will make sure that there will be no shortage of production.
  2. Judging accuracy of standards.
  3. Making efficient use of resources.
  4. Improving employee motivation.
    1. Production Manager Peter Mortimer called Level 1 electrician Mr. Eldos to his cabin.
    2. He explained that the shortage of 1000 units happened because of him.
    3. Mr. Eldos said that it was a misunderstanding between him and Mr. Narayan, the Level 2 electrician.
    4. Peter understood the situation. He told Mr. Eldos and Mr. Narayan that the two of them should work in accord.
    5. This motivates Mr. Eldos.
  5. Ensuring order and discipline.
  6. Facilitating coordination in action.

Limitations of Controlling

  1. Difficulty in setting quantitative standards
  2. Little control on external factors
  3. Resistance from employees
  4. Costly Affair

Relationship between Planning and Controlling

  1. Both planning and controlling are interrelated and interdependent
  2. Planning is prescriptive while controlling is evaluative
  3. Both are backward looking and forward looking

Controlling Process

  1. Setting Performance Standards
    1. KENT decided to make its new product ‘AURA 2000″
    2. Production manager (Mr. Peter) and quality manager (Mr. Quintin) made planning.
    3. Peter made quantitative planning:
      1. How many units? – 10000 units.
      2. Cost of production? – ₹ 3000 x 10000 = 30,000,000
      3. Revenue from 10000 units sold? = ₹ 40,000,000
      4. How much time to produce? = 50 hours.
    4. Quintin made qualitative planning:
      1. How many units? – 1000 units.
      2. Cost of production? – ₹ 5000 x 10000 = 50,000,000
      3. Revenue from 10000 units sold? = ₹ 55,000,000
      4. How much time to produce? = 100 hours.
      5. Improving goodwill of the company
      6. Motivation level of employees
  2. Measurement of Actual Performance
  3. Comparison of Actual Performance with Standards
  4. Analyzing Deviations
  5. Taking Corrective Actions
    1. Peter
    2. Quintin

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