Business Studies 4 Marks Question

There is a close and reciprocal relationship between planning and controlling because:

1. Controlling is blind in the absence of standards which are provided by planning;
2. Planning without controlling is meaningless as controlling ensures that the events conform to the plans.
3. Planning prescribes an appropriate course of action for achieving objectives whereas controlling evaluates whether decisions have been translated into desired actions.
4. Planning and controlling both are forward-looking as well as looking back.

Controlling helps in 'achieving objectives':Controlling function measures the progress towards the organisational goals, finding out the deviations, if any, and taking the necessary corrective action, thereby helping in achieving objectives.
Controlling helps in improving employee's morale:
Controlling function ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be judged, thereby, improving employees' morale.

Budgetary control is a technique of managerial control in which all operations are planned in advance in the form of budgets and actual results are compared with budgetary standards to ensure attainment of organisational objectives.Advantages of budgetary control:

1. Helps in attainment of organisational objectives.
2. Acts as a source of motivation.
3. Helps in optimum utilisation of resources.
4. Is useful in achieving co-ordination.
5. Facilitates management by exception.
6. Helps in fixation of responsibility.

The controlling function lays down performance standards for each department and employee which are well coordinated with one another, thereby helping in achieving better co-ordination in the organisation. The controlling function by revising existing plans in light of the deviations, if any, and laying the basis for the formulation of new plans, helps in better planning.

Points highlighting the importance of controlling in an organisation:

1. Achieving goals: Controlling ensures that various activities are carried out correctly according to the plans. It ensures that deviations if any are identified and appropriate corrective action is taken.
2. Reviewing standards: An effective control system ensures that standards are set accurately. As the business environment changes, it ensures that the standards are also reviewed so as to adapt to the changes taking place.
3. Enables efficiency in resource utilisation: An effective control system ensures that there is minimum wastage of resources. In other words, it ensures that the resources are utilised optimally and in the most efficient manner.
4. Better motivation: With controlling, employees know what is expected from them and how their performance would be evaluated. This clarity motivates employees to perform better.

1. Steps in the process of controlling discussed in the above case:

1. Setting performance standards.
2. Measuring actual performance.
3. Comparing actual performance with standards and Analysing deviations.

2. Steps not discussed in the above para:

1. Comparing actual performance with standards to find out the deviation.
2. Taking corrective action if deviations go beyond the acceptable limits.

Budgetary control is a technique of managerial control in which all operations are planned and this will help us in knowing how much we have to spend in order to achieve the future result. It compared the actual result with budgetary standards. This comparison reveals the necessary actions to be taken so that the organisational objectives are accomplished. Budgeting offers the following advantages

1. Budgeting focuses on specific and time bound targets.
2. Budgeting is a source of motivation to the employees they set the standards against which their performance will be appraised and thus, enables them to perform better.
3. Budgeting helps in optimum utilisation of resources by allocating them according to the requirements of different departments.
4. It helps the management in setting standards.

Management audit is a technique which helps in measuring the efficiency and effectiveness of management. It is a comprehensive and constructive review. Thus, we can say it is defined as the review of the functioning performance and to improve its efficiency in future period hence it serves as an effective technique of controlling following points are proving the same.

1. It helps to locate present and potential deficiencies in the performance of management functions.
2. It helps to improve the control system of an organisation by continuously monitoring the performance of management.
3. It ensures updating of existing managerial policies and strategies in the light of environmental changes.

This results in efficient controlling of management.

Standards Used in Various Functional Areas:

S. No.	Functional Areas	Standard-1	Standard-2	Standard-3	Standard-4
1.	Production	Quality	Quantity	Cost	IndividualProduction
2.	Marketing	Sales Volume	Sales Expenses	Target ofSalespersons	-
3.	Personnel Management	LabourRelations	LabourTurnover Rate	Absenteeism Rate	Dispute Rate
4.	Finance andAccounting	CapitalExpenditure	Flow of Capital	Liquidity	-

1. Accomplishing Organisational Goals: The controlling process is implemented to take care of the plans. With the help of controlling, deviations are immediately detected and corrective action is taken. Therefore, the difference between the expected results and the actual results is reduced to the minimum. In this way, controlling is helpful in achieving the goals.
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.

As per the limitations of controlling, there are many areas in business where measurable standards cannot be set. Such areas are employees morale, job satisfaction and customer satisfaction. Thus, from this aspect, it is difficult to measure customer satisfaction. Even if a manager imposes a control system, it will depend more on his capabilities. He can initiate customer feedback and get information on quality of food, waiting time, service quality, attitude of waiters, etc. This information might be quite useful in finding the problem areas and thus the company can work towards improvement in customers' satisfaction.

The statements of both Rahul and Rohit are correct from different points of view.

1. According to Rahul, plans are always formulated for future. On the contrary, controlling is looking back because under it a manager tries to find out, after the work is completed, whether it has been done according to the standards or not. It is thus clear that planning looks ahead and controlling looks backward or in the past.
2. According to Rohit, planning is called looking back because the plans are formulated on the basis of the happenings of the past. On the other hand, controlling evaluates the work done in the past but under it corrective action is taken in respect of future. Hence, there should not be any hesitation in saying that planning looks backward while controlling looks ahead.

Following are the steps of controlling process:

1. Setting Performance Standards: The first step of controlling is to set performance standards. A manager evaluates the actual performance on the basis of these standards and finds out the deviations.
2. Measurement of Actual Performance: The second step in the controlling process is the measurement of actual performance. The measurement of actual performance tells the manager whether the work has been done according to the plan or not.
3. Comparison of Actual Performance with Standards: At this step, actual performance iscompared with the standards and deviations are found out.
4. Analysing Deviations: At this stage, deviations are analysed.

S. No.	Functional Areas	Standards Used
1.	Production	Quantity, Quality, Cost
2.	Marketing	Sales volume, Advertising expenditures, Sales person's performance
3.	Personnel Management	Labour relations, Labour turnover, Labour absenteeism
4.	Finance and Accounting	Capital expenditures, Inventories, Flow of capital

Planning and controlling are inseparable. Planning is the primary function of every organisation it is the thinking process, which means looking ahead or making plans that how desired goal is achieved in future thus it is called a formed looking function on the other hand controlling is a systematic function which measures the actual performance with the planned performance. It compared and analysed the whole process of an organisation and take correcting actions. Thus, it is a backward looking function but the statement “Planning is looking ahead and controlling is looking back” is partially correct because it should be understood that planning is glided by past experiences and the corrective action initiated by control function which aims to improve future performance. Thus, planning and controlling are both backward looking as well as a forward looking functions.

Controlling ensures that results of operations conform as closely as possible to the predetermined objectives. Every organisation draws up a plan of action at periodical intervals. The plan indicates the expected behaviour and activities of people working in different units of the organisation. When the activities are actually in progress, there is possibility of actions being going off the track. Important activities might be ignored. Targets are likely to be missed. Some errors and loss of effort may take place leading to the results falling short of the expectations. By keeping a close watch over performance at various levels, controlling tries to correct the deviation between actual results and desired results. Mistakes are located promptly and appropriate remedial actions are initiated. Thus, it helps in achieving the objectives laid in the plan of action.
Controlling improves employee's performance as it creates an atmosphere of order and discipline in the organisation. Employees know well in advance what they are expected to do and the standards against which their performance will be judged. Evaluation of performance against predetermined standards induces employees to do things in a proper manner. It prompts them to perform well and also earn the rewards. Such a healthy attitude to work helps in keeping the employees morale at a high level. In organisations where the control process is not effective, employees tend to be negligent and careless. Controlling prevents these tendencies.

Following facts should be kept in mind while setting standards:

1. Standards should be reasonable. (It should be neither to easy to achieve nor practically very tough to achieve. The first would result in lethargy to the workers and second would frustrate them).
2. Standards should be measurable.
3. Standards should be flexible so that changes can be introduced according to the changing situations.
4. Standards should be simple and clear so that the people for whom they are laid down should understand them easily.

A good control system enables a manager to verify whether standards set are accurate or not. Following are the advantages of controlling:

1. A good control system helps in improving the quality of the product which in result, increases the goodwill of the company.
2. It helps in minimising the wastage of resources.
3. It facilitates the fixation of responsibility and one knows upto what level he/ she has to perform.
4. It also facilitates the coordination and thus, work flows smoothly in the organisation and finishes in time.