Namita and Shamita are students of class 12th (Commerce). They have an argue on Controlling. Namita says Controlling is forward-looking function whereas Shamita says it is backward-looking function. Whom do you think is correct?
a) Namita
b) Shamita
c) Namita or Shamita
d) Namita and Shamita
✔ Answer
d) Namita and Shamita
'A good control system 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 appraised'. Importance of controlling described here is:
a) Accomplishing organisational goals.
b) Judging accuracy of standard.
c) Making efficient use of resources.
d) Improving employee's motivation.
✔ Answer
d) Improving employee's motivation.
'Managers at a New York City import-export company suspected that two employees were robbing it. Corporate Defense Strategies (CDS) of Maywood, New Jersey, advised the firm to install a software program that could secretly log every single stroke of the suspects' computer keys and send an encrypted e-mail report to CDS.' Which function of management is related to the above case study.
a) Organizing
b) Directing
c) Controlling
d) Staffing
✔ Answer
c) Controlling
Assertion (A): Controlling can prevent deviations.
Reason (R): Controlling helps to minimize deviations by taking actions and decisions that reduce their recurrence.
a) Both (A) and (R) are true and (R) is the correct explanation of (A).
b) Both (A) and (R) are true and (R) is not the correct explanation of (A).
c) (A) is true but (R) is false.
d) (A) is false but (R) is true.
✔ Answer
d) (A) is false but (R) is true. · (Controlling can only minimize deviations, not prevent them completely)
Process of controlling does not involve
a) Setting of performance standard
b) Analyzing of deviations
c) Organizing resources
d) Taking corrective actions
✔ Answer
c) Organizing resources
'Crucial point control' technique refers to
a) Controlling significant deviations
b) Controlling key result areas
c) Controlling through sample checking
d) Controlling through personal judgement
✔ Answer
b) Controlling key result areas
The main objective behind controlling is:
a) Pointing out inefficiency
b) Fixing responsibility of the subordinate
c) Ensuring conformity of actual performance with set standard
d) Creating an atmosphere of order and discipline
✔ Answer
c) Ensuring conformity of actual performance with set standard
Supervisory management spends most of time in
a) Planning and controlling
b) Directing and controlling
c) Planning and directing
d) Organizing and controlling
✔ Answer
b) Directing and controlling
Which of the following has no scope for a biased report on actual performance?
a) Sample checking
b) Performance report
c) Personal observation
d) Accounting ratios
✔ Answer
d) Accounting ratios
Which of the following affects effectiveness of control?
a) External factors
b) Employees' behavior
c) Subjective standards
d) All the above
✔ Answer
d) All the above
Vinod Ltd. is engaged in manufacturing machine components. The target production is 250 units per day per worker. The company had been successfully attaining this target until two months ago. Over the last two months it has been observed that daily production varies between 200-210 units per worker.
1. Name the function of management and identify the step in the process of this function which helped in finding out that the actual production of a worker is less than the set target.
2. To complete the process of the function identified in (a) and to ensure the performance as per set targets, explain what further steps a manager has to take.
✔ Answer
1. The management function is
Controlling.
“Comparing actual performance with standards” is the step involved in the process of controlling which helped in finding out that the actual production of a worker is less than the set target.
2. A manager has to take the following two further steps to complete the process of controlling:
- Analysing deviations
- Taking corrective action
'Controlling is considered to be blind without planning and planning is meaningless without controlling.' Explain.
✔ Answer
Controlling is blind without planning because it is the planning which sets standards in advance, which act as a basis for assessment and comparisons. If there are no standards then there is nothing to control.
Planning is meaningless without controlling because controlling ensures that all plans are implemented as planned and if there are any deviations then controlling initiates corrective action. Therefore, in the absence of controlling, the best of plans may fail.
'All effort to control everything may end up in controlling nothing.' Explain.
✔ Answer
This statement highlights the importance of the principle of 'Management by Exception.' It stresses the fact that it is not possible to control each and every activity effectively. If we try to control all activities giving equal importance, it may lead to crucial activities being ignored and as a result, we may lose control over overall performance of the organisation.
The principle 'Management by Exception' states that in order to have effective control over organisation's performance, management should lay down the permissible limits of deviations in actual performance and then instead of controlling each and every deviation, management must try to control and take corrective actions for deviations which are beyond the acceptable range.
Saurashtra is a company involved in the export of indigenous food products like chutneys and pickles. It has tied up with the small farmers in various states for sourcing of fruits and vegetables. In this way it helps the small farmers to sell their produce at reasonable rates. The company follows a practice where only significant deviations from a budget or plan are brought to the attention of management. The degree of deviations allowed in different categories in the budget are well defined in advance, along with the appropriate levels of managements who will respond to the deviations in question. For example, a deviation of Rs. 20,000 or more in purchase costs will be reported to the concerned department manager.
In context of the above case:
1. Identify the principle of management control adopted by the company. State the belief underlying this principle.
2. Identify the function of management discussed in the above case study.
✔ Answer
1. Management by Exception is the principle of management control adopted by the company. It is based on the belief that "if you try to control everything, you may end up controlling nothing."
2. Controlling
Anupam has set up an export house after completing his masters in fashion designing. As the quality of the garment depends on the quality of raw materials used, he assures that the fabric meets the requirements by conducting a series of tests for the fabrics like shrinkage test, testing colour fastness to washing, colour fastness to light, colour fastness to perspiration etc. through laboratory tests. Later on, at the production areas, fabric inspection is also conducted by stopping the production process. The tests help to detect the deviations and also take corrective action.
In context of the above case:
1. Identify the function of management being performed by Anupam by conducting tests to assure for the quality of the garments manufactured in his export house.
2. Briefly explain the term "deviations."
3. Identify the steps of controlling process discussed in the above case.
✔ Answer
1. Controlling is the function of management being performed by Anupam by conducting tests to assure for the quality of the garments manufactured in his export house.
2. The term
"deviations" refers to the difference between the actual performance and planned performance. If the actual performance is more than the planned performance, it may be said to be positive in nature or vice-versa.
3. Steps of controlling process discussed:
- Step 4: Analyzing Deviations
- Step 5: Taking corrective action
Rohan, sales manager of Sona Garments Ltd. is a very good leader. He always motivates his team to perform the best. Till three months ago he and his team were exceeding targets. However, from last three months they have not been able to meet their target. On analyzing the performance, it was observed that one of the team members left the job and he offered competitor's products to some of the clients at cheaper rates.
(a) Name the function of management and identify the step in the process of controlling which helped management to find out the fall in performance.
(b) Identify the step followed to find the reason of fall in performance.
(c) Suggest the corrective action management must take to achieve the performance as per targets.
✔ Answer
(a) The function of management is
'Controlling'.
'Comparing Actual Performance with Standards' is the step in the process of controlling followed to find that targets were not achieved.
(b) 'Analyzing Deviations' helped management to find reasons of deviations or not meeting targets.
(c) Management must take following corrective actions to achieve targets:
- The sales manager must meet all clients especially the ones they have lost to competitors to revive business opportunities.
- Either reduce prices to meet competitors' prices or give better quality and services to their clients so that they remain loyal.
Identify the step in the process of controlling in the following situations.
(a) Management of Best Services Ltd. replaced the old machinery with latest technology to overcome quality issues.
(b) The production manager of Medical Point conducted work study to fix standard time to be taken to produce one unit.
(c) The managers calculated the total sales and revenue earned by each sales executive to conduct appraisals at the end of the year.
(d) The Finance Manager prepared a variance analysis report for the management to explain the difference between forecast profits and actual profits.
(e) The Finance Director analysed the variances to find the causes of variances.
✔ Answer
(a) Taking Corrective Action
(b) Setting Performance Standards
(c) Measurement of Actual Performance
(d) Comparison of Actual Performance with Standards
(e) Analysing Deviations
Airtech Ltd. is manufacturing mobile phones both for domestic Indian market as well as for export. It has enjoyed a substantial market share and also had a loyal customer following. But lately it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also, mobile market in India has grown tremendously and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing. It also decides to offer its basic models of mobile phones at 50% discount to the poor people.
1. State any two benefits the company will derive from a good control system.
2. How can the company relate its planning with control in this line of business to ensure that its plan is actually implemented and targets attained.
3. Give the steps that the company should follow to remove the problems it is facing.
✔ Answer
1. Two benefits the company will derive from a good control system are:
- Accomplishing organizational goals of increasing market share and customer satisfaction.
- Making efficient use of resources by controlling wastage and spoilage of resources and ensuring that each activity is performed according to the predetermined standards.
2. Controlling will improve future planning by providing information to the company derived from past experience that its targets were not met with regard to sales and customer satisfaction. The company should undertake technological upgradation of machinery, and modify the existing process so that cost is reduced and the company can set lower price for its mobile phones to beat its competitors.
3. Steps that the company should follow:
- Set clear and measurable standards for sales and customer satisfaction.
- Measure actual performance against these standards.
- Compare actual performance with standards to identify deviations.
- Analyze the causes of deviations.
- Take corrective actions such as technological upgradation, cost reduction, and competitive pricing.
'AS Ltd.' is a large company engaged in assembling of air-conditioners. Recently the company had conducted the 'Time' and 'Motion' study and concluded that on an average, a worker can assemble ten air-conditioners in a day. The target volume of the company in a day is assembling of 1,000 units of air-conditioners. The company is providing attractive allowances to reduce labour turnover and absenteeism. All the workers are happy. Even then the assembling of air-conditioners per day is 800 units only. To find out the reason, the company compared actual performance of each worker and observed through CCTV that some of the workers were busy in gossiping.
1. Identify and explain the function of management discussed above.
2. State the steps in the process of the function identified which are discussed in the above paragraph.
✔ Answer
1. The function of management discussed above is
Controlling.
Controlling is a primary goal-oriented function of management in an organization. It is a process of comparing the actual performance with the set standards of the company to ensure that activities are performed according to the plans and if not then taking corrective action.
2. The steps involved in the process of controlling which are discussed in the above paragraph are:
- Setting standards of performance: "concluded that on an average, a worker can assemble ten air-conditioners in a day." "The target volume of the company in a day is assembling of 1,000 units of air-conditioners."
- Measurement of actual performance: "Even then the assembling of air-conditioners per day is 800 units only."
- Comparison of actual performance with the standards: The company compared actual performance of the workers with the planned performance and noted deviation of 200 units.
- Analyzing deviations: "To find out the reason, the company compared the actual performance of each worker and observed through CCTV that some of the workers were busy in gossiping."
Rajeev and Sanjeev are managers in the same organisation heading different units. While discussing about the functions of management, Rajeev says that 'Planning is looking ahead whereas controlling is looking back.' But Sanjeev says, 'You are wrong because planning is looking back whereas controlling is looking ahead.' Both are giving reasons in favour of their statements. Explain the possible reasons given by both and justify who is correct.
✔ Answer
Both Rajeev and Sanjeev are correct in their statements as explained below:
Planning is considered as a forward-looking function by Rajeev as plans are made for future.
Planning may be considered as a backward-looking function by Sanjeev because the quality of planning can be improved with the help of valuable information provided by controlling in terms of results achieved.
Controlling is considered as a backward-looking function by Rajeev as it is like the post mortem of the past activities to ascertain the deviations if any.
Controlling is considered as a forward-looking function by Sanjeev as it helps to improve the future performance by providing guidance for taking corrective action so that deviations do not reoccur in future.
Conclusion: Both are correct because planning and controlling are complementary functions. Planning looks ahead while controlling looks back, but controlling also looks ahead by guiding future actions.