Business Studies 3 Marks Question

1. Controlling helps in accomplishing organisational goals: Controlling measures progress and compares with the planned activities. If there is a deviation timely action is taken to bring back the activities on the path of planning. It guides the firm to achieve its goals.
2. Judging Accuracy of Standards: While performing the function of controlling, a manager compares the actual work performance with the standards. He tries to find out whether the laid down standards are not more or less than the general standards. In case of need, they are redefined.

Management by Exception: This principle of management control emphasizes that a manager who tries to control everything may up controlling nothing. So he should make a priority list and bring to the notice of top management only significant deviations which go beyond the permissible limits. E.g. if plans lay down 3% increase in material cost as an acceptable range of deviation in a manufacturing firm, then only material cost beyond 3% should be brought to the notice of management.

Controlling compares actual results with the standards, finds out the deviation, if any, detects the reasons for the deviations and employs corrective measures to prevent the recurrence of these mistakes in the future. It seeks to improve the future on the basis of the past experience. So, controlling is forward looking.

Controlling is looking back as it compares the actual performance with the standards. This involves scrutinising the events after they have taken place.

Controlling means ensuring that activities in an organisation are performed as per the plans. Controlling also ensures that an organisations resources are being used effectively and efficiently for the achievement of desired goals. Controlling is, thus a goal oriented function. Controlling is a very important managerial function. Because of controlling manager is able to compare actual performance with the planned performance. In order to control the activities at all levels manager needs to perform controlling function.

To ensure that controlling function is effectively performed, there must be prompt flow of information to the manager about the actual performance. The necessary corrective actions must also promptly follow. Such a system of communication is called feedback in controlling. Feedback plays a very important role in the process of controlling. Without feedback, actual performance cannot be compared and no corrective action can be taken.

Controlling involves verifying whether activities undertaken are in conformity with the plans adopted, instructions issued and results expected. In other words, it is through control that managers/ supervisors ensure the execution of plans and achievement of goals. Controlling simplifies the task of a supervisor by comparing the actual performance with the standards continuously, and finding out the deviations so that the root cause can be identified and not repeated in future.

Three benefits of the principle of critical point control are as follows:

1. It helps in saving time, and thus manager can focus on other relevant issues.
2. It helps in analysing the key areas, which have a direct impact on the whole organisation.
3. It enables a manager to focus on Key Result Areas and correct deviations.

A 2% increase in the cost of raw material is more critical, as the deviation which is occurring in Key Result Areas (KRAs) should be corrected first. A 2% increase in cost of raw material will have an impact on the profitability, thus it is a KRA. Whereas, 20% increase in postal cost will not have much of the impact on profitability of the company.

Main standards used in various functional areas are:

S. No.	Functional areas	Standards used
1.	Production	Quality, quantity, cost, individual job
2.	Marketing	Sales volume, sales expense, advertising expenditure, sales person performance
3.	Human resource	Labour relations, labour turnover, labour absenteeism.
4.	Finance and accounting	Capital expenditure, inventories, flow of capital, liquidity.

In big organisations, manager cannot control the whole work being done, covering all the activities. Control should focus on key result areas (KRAs) which are critical to the survival and success of the whole system. The key areas or aspects of the activity which are vital for its successful completion, are known as critical or strategic points. The principle of critical point control states that effective control requires attention to those factors which are critical to evaluating performance against plan.

Controlling is called a process of looking back because under it the actual results are compared with the expected results. On this basis, this is true that controlling means looking back. But it will be wrong to say that controlling does not include looking forward. Under controlling, when the actual results are compared with the expected results to find out deviations and corrective action is initiated, this corrective action is taken with reference to future. On this basis, it can be said that controlling looks forward also.

Controlling is forward looking: To be effective, the control should be forward looking. It must focus attention on two things checking current performance and providing early information to achieve results in conformity with standards. Checking the operations should enable prompt detection of faults and of the causes before it is too late for remedy. Deviations, if any, should lead to investigation of the factors responsible and noting the effect on future operations. Remedial action should follow so as to prevent the occurrence of defects thereafter. In other words, control must ensure timely detection of deviations and prevention of their repetition in future.

Controlling ensures that the activities in an organisation are performed as per plans. Importance of controlling can be highlighted by the following points:

1. It helps in achieving the organisational goals.
2. It helps in judging the accuracy of standards.
3. It facilitates efficient use of resources.
4. It provides direction to all activities and thus, it facilitates coordination.

No, I do not agree with this statement.
It is not true that an ideal control technique is the one that checks every bit of performance. A good control system should concentrate on key performance aspects. There are hundreds and thousands of activities to be controlled. In real life, it is difficult to control each and every activity. This is the reason why attention should be focused on key points only. Extending the control system beyond the key variable may mean doing what is not really essential. Controlling each and every item results in delay, increased costs and neglect to key control points. Paying attention to each and every minor aspect of performance is unprofitable and time consuming.

S.No.	Causes of Deviation	Corrective action to be taken
1.	Defective material	Change the quality specification for the material used.
2.	Defective machinery	Repair the existing machine or replace the machine if it cannot be repaired.
3.	Obsolete machinery	Undertake technological upgradation of machinery.
4.	Defective process	Modify the existing process.
5.	Defective physical conditions of work	Improve the physical conditions of work.

This statement is absolutely right. Here, the ‘principle of critical point control’ is applicable. According to this principle, those points or activities should be determined in the very outset which have an important role to play in ensuring the actual work progress in accordance with the plans. These are known as Key Result Areas (KRAs). It means that the managers should not be involved in small insignificant activities but should pay more attention to those activities where unfavourable results can cause heavy loss to the enterprise.

It’s a well known fact that “Jack of all master of none” when we start controlling everything it results in controlling nothing because it is not possible at one time to control various activities as this process may neither be economical nor easy. Control thus focus on KRAs (Key Result Areas). It means instead of controlling all activities, control where the critical points goes wrong and by which organisation suffers. Thus, KRAs are set as critical points and one should be aware that he has to control what.

1. Judging Accuracy of Standards: While performing the function of controlling, a manager compares the actual work performance with the standards. He tries to find out whether the laid down standards are not more or less than the general standards. In case of need, they are redefined.
2. Improving Employee Motivation: Through the medium of controlling, an effort is made to motivate the employees. The implementation of controlling makes all the employees to work with complete dedication because they know that their work performance will be evaluated and if the progress report is satisfactory, they will have their identity in the organisation.

Controlling is a pervasive function as it is a primary function of every manager. Controlling is required everywhere, whether it is an educational institution, military, hospital, a club or any business organisation. Managers at all levels of management need to perform controlling functions to keep a control over activities in their areas.

There are chiefly four basis for setting standards:

1. Quantity.
2. Quality.
3. Time.
4. CostQuantity Standards are related to production, sales, stock, etc. Quality Standards are related to raw material finished goods, customers’ service and employees’ morale. Time Standards refer to the time consumed in the production of goods. Similarly, Cost Standards refer to labour, material and other expenses.

Control is based on planning, as it involves measurement of actual performance against the standards to analyse deviations and take corrective action. Planning is the base function in which standards are set, which act as yardstick for checking whether the actual performance is upto the required level. Thus, controlling is impossible without planning.

Controlling helps in maintaining and improving quality. Controlling process has to start from the beginning, i.e., screening the quality of raw materials, then the process of conversion of raw materials into output and later on the inspection of final product. An effective quality control system will ultimately result in quality products, thereby increasing sales and profits, e.g., in Maruti Udyog Ltd., there is a strong control system which starts from the beginning, i.e., raw material to finished products, i.e., car which ensures in maintaining and improving quality of Maruti cars of various models.

Feedback in controlling means information or list of deviations alongwith the corrective measures. Without feedback report, one cannot analyse the situation and the comparative analysis would not be possible. Secondly, no corrective actions can be taken in its absence and the whole process suffers. Thus, feedback is the most effective tool in controlling process.

Controlling is called a process of looking back as under it actual results are compared with the standards decided in the past. After that, a corrective action is initiated. In other words, if the standards are not decided in the past, controlling is not at all possible. Hence, it is true that ‘controlling is backward looking’.

Under controlling, actual results are compared with the expected results and deviations are find out. Then corrective action is initiated to improve the performance. The corrective action is taken with reference to future on the basis of past experience. On this basis, it can be said that controlling looks forward.

Yes, controlling is a systematic process which involves following steps:

1. Setting performance standards.
2. Measurement of actual performance.
3. Comparing actual performance with standards.
4. Analysing deviations.
5. Taking corrective action.

Deviations can be of two types:

1. Negative Deviation.
2. Positive Deviation.

In the controlling process, it is important to know the causes of negative deviation but it is not less important to know about the causes of positive deviations. Positive deviation means that the actual performance is more than the standard work. If the information received regarding the actual performance being more than the standard, the corrective action can help in improving the efficiency in future.

Controlling should not be misunderstood as the last function of management. It is a function that brings the management cycle back to the planning function.
In general, the process of management begins with planning and ends at controlling, but when a manager performs the function or steps of controlling, it is observed that the first step of controlling is setting standards. The controlling function finds out how far actual performance deviates from standards and analyses the corrective actions to be taken. This process helps in formulation of future plans, thus becomes the premise of setting plans. Therefore, we can say it is the beginning of management process. Thus, it can be stated that, controlling function is both the beginning as well as the end of the management process.

Controlling is an expensive and time taking process. Considerable time and huge expenditure is required to install a control system. Thus, it is suggestive that small enterprises should not install it, as it may not justify the expenses involved. Personal observation method can be adopted for this purpose, since it is a less expensive way to monitor the progress of tasks and behaviour of employees.

The statement refers to use of ‘Critical Point Control’, while analysing deviations.

1. Meaning of Critical Point Control: It refers to that concept of management which holds that instead of all activities, the management should focus its attention on only important activities.
2. Example: In a manufacturing organisation, an increase of 5% in the labour cost may be more troublesome than 15% increase in postal charges.

Mr. Saurabh kumar should pay immediate attention towards rising production cost as its 5% increase is more critical to performance of the organisation as compared to 15% increase in refreshment expenses.
Critical Point Control:

1. It is neither economical nor easy to keep a check on each and every activity in an organisation.
2. Control should, therefore, focus on key result areas (KRAs) which are critical to the success of an organisation. These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organisation suffers.
3. For instance, in a manufacturing organisation, an increase of 5 per cent in the labour cost may be more troublesome than a 15 per cent increase in postal charges.

1. Saves the time and efforts of managers.
2. Focuses managerial attention on important areas.
3. Routine problems are left to the subordinates.

Control involves taking corrective action whenever needed. If the management is informed of the activities, then only they will be able to identify and solve problems before they become unmanageable. This will enable them to take decisions for future course of action also.
For example: If there are frequent production delays, then the manager should find out the reasons for it immediately. Then only he will be able to take relevant decisions and prompt remedial action.

Controlling involves taking corrective actions whenever required. In an organisation, first, the manager plans in advance, what is to be done, then through controlling, he measures the progress and keeps checking that everything is in accordance with plan or not and if there is any deviation, he takes preventive measures to correct that deviation. In this way, it facilitates decision-making. e.g. Suppose in XYZ Ltd, production is delayed due to lack of resources, then through the controlling function, manager takes decision to provide resources on time.

Nature of controlling are as follows:

1. It is pervasive as it is required at all levels of management and by all executives to control the activities.
2. It is a continuous process as in this, actual results are compared with targets on a regular basis.
3. It is a goal-oriented process as it keeps the work on track, so that organizational goals could be achieved.

Under the principle of critical-point control, it is sought to be understood on which points or activities control will be profitable, while in the principle of exception deviation is taken care of in respect of the predetermined critical points and in case of especially good or especially bad deviation in respect of some particular critical point corrective action is taken.

The purpose of control is not only to detect errors and defects in performance of work but also to adopt remedial measures. Without taking corrective actions, controlling has no meaning. Corrective actions are, therefore, initiated on the basis of factors causing deviations between standards and actual results. For example, actual performance may fall short of standards due to outdated machines or absence of adequate incentives to workmen. This can be rectified by installing up-to-date machinery or offering suitable incentives to workers for better performance. Thus, a corrective action may involve a change in methods, machinery, rules or procedure. Improving physical conditions of work, or changing the nature of supervision may also be necessary at times. Where the deviations cannot be rectified through managerial action, the standards may have to be revised.

The purpose of control is not only to detect errors and defects in performance of work, but also to adopt remedial measures. Without taking corrective actions, control has no meaning. The base of controlling process is taking actions in order to ensure that the actual activities conform to the planned activities. For example, if actual output falls short of standard output, we take several actions like checking the raw material, checking the production activities, corrective actions may be taken, analysis of standards, reassignment of duties, bringing change in the style of production, etc.

This statement is not true. An ideal control system should concentrate on key aspects of performance. There are several activities to be controlled. In practice, it is not possible for management to control each and every activity due to limited time. Moreover, minor deviations from plans and targets are insignificant for success.
Therefore, an attempt to control everything is likely to be a futile exercise. Control system should focus attention on exceptional and key factors only. This will help to save time, efforts and money On the other hand, controlling each and every activity results in delays, increased cost and neglect of key items. The control system should be designed in such a manner that only significant deviations from the standards are reported to the higher level managers.

Facilitating coordination in action. According to this, controlling facilitates coordination by keeping all activities and efforts directed towards the achievement of goals in conformity with plans. Controlling provides direction to all activities and efforts, so that organisational goals could be achieved.

1. Difficulty in setting quantitative standards: Control system loses its effectiveness when standards cannot be defined in quantitative terms. This makes it difficult to compare and measure the performance with the standards. This may lead to create problems in human behaviour, job satisfaction and employee morale.
2. Resistance from employees: Control system is often not liked by the employees. They see it as a restriction imposed on them.

1. Controlling.
2. The other steps Controlling are:

1. Setting performance standards.
2. Measurement of actual performance.
3. Comparing actual performance with standards.
4. Analysing deviations.

There are chiefly four basis for setting standards:

1. Quantity.
2. Quality.
3. Time.
4. CostQuantity Standards are related to production, sales, stock, etc. Quality Standards are related to raw material finished goods, customers’ service and employees’ morale. Time Standards refer to the time consumed in the production of goods. Similarly, Cost Standards refer to labour, material and other expenses.

The controlling is a pervasive function of the management as it is performed in all organisations (business and non-business) and at all managerial levels. It is that function of management under which every manager at every level assures that the actual progress is in conformity with the plans.