Controlling Class 12 Notes

The definition of the controlling is built out of five clauses, and a candidate who has learnt the clauses has already learnt most of the chapter, because the features that follow simply restate them.

• It examines the actual performance, so it is the function of seeing what has happened and not of deciding what shall happen, and the deciding is the planning.
• It compares the actual performance with the standard, and this comparison is the core of the function, and without a standard there is nothing against which to compare, which is why the standard has to be set in the planning.
• It examines the deviation, so it finds the gap between the plan and the actual, measures the gap, and finds out the cause of the gap, and a control that finds a gap without finding the cause is not a control.
• It takes the corrective action, so it does not end at the finding, and it removes the cause of the deviation or takes the steps that reduce the gap, so that the objective of the enterprise is not lost.
• It ensures that the work does not go beyond the objective, so it corrects the excess as well as the shortfall, and a control that only stops the excess is only half a control.

The features say what kind of function the controlling is, and each of them separates it from one of the other functions or from the accounting.

• It is a secondary function and not a primary one, because the primary functions are the planning, the organising, the directing and the staffing, and the controlling comes after them and examines what those four have produced.
• It is a management function and not an accounting function, even though it makes extensive use of the accounting information, and the accounting reports what has happened while the controlling uses that report to guide what is to happen.
• It is a forward looking and not a backward looking function, because it uses the past results in order to guide the present and the future, and this is the single feature that most sharply separates it from the accounting.
• It is a continuous and an ever-ending process, and it has to be applied continuously to all the activities, because there is no end to the control and it goes on for the whole life of the enterprise.
• It is a pervasive function, so it applies at every level and in every function of the management, and it applies to the money, to the materials, to the men and to the methods.

The importance is the question that follows the definition, and the answer is that without the control the other four functions are exercises that nobody checks.

• It helps in achieving the goals of the enterprise, because the goals set by the planning are converted into the standards and the control checks whether each of them has been reached.
• It helps in detecting and correcting the deviations at the earliest stage, and an error corrected while it is small costs a fraction of what the same error costs when it has grown into a loss.
• It provides an information for the future action, since the record of what went wrong and what went right is the best guide to the next plan, and this is why the control is forward looking.
• It helps in the optimum utilisation of the resources, because the control of the cost, of the material, of the time and of the effort is what converts the resources into the output.
• It helps in the coordination of the activities, since the control reports the gap in one part of the enterprise to the person who can close it, and it is therefore the last function because it is the one that shows whether the coordination has worked.
• It helps in the growth and the survival of the enterprise, because an uncontrolled enterprise drifts away from its objective without noticing that it has drifted.

This comparison is one of the most frequently asked questions in the chapter, and the whole of it turns on a single sentence: there can be no controlling without the planning, because the plan supplies the standard.

• The planning is the primary function and the controlling is the secondary one, because the plan must exist before there is anything to check against.
• The planning is forward looking in the sense that it lays down the objectives for the period ahead, while the controlling is also forward looking in the sense that it uses the past to correct the present, and the two are therefore forward looking in different ways.
• The planning decides what is to be done and the controlling decides whether what was decided has been done, so the first is the formulation and the second is the evaluation.
• The planning is the function of the manager alone at the top, while the controlling is performed at every level by every manager for his own area, so the control is pervasive and the plan is not.
• The planning need not be continuous, since a plan may be made for a year or for five years, while the controlling must be continuous and ever-ending, because the deviations arise every day.
• The planning sets the standards and the controlling measures the actual against them, so the two are complementary and neither is complete without the other.

The control process is a sequence of three steps, and the same sequence works whether it is applied to a single machine or to the whole enterprise.

• Step one is the setting of the standards. The standard must be defined and it must be quantifiable, so it should be a specific and a measurable quantity and not a vague expectation, and a standard that cannot be measured cannot be controlled. The standards are set in the planning, and they may be the budget, the output target, the quality level or the time limit.
• Step two is the measurement of the actual performance, followed by the comparison of the measured performance with the standard. The measurement should be frequent and the unit of the measurement should be the same as the unit of the standard, so that the two are comparable, and the comparison gives the deviation. The deviation is then measured in its magnitude, in its frequency and in the time of its occurrence, and the causes are the human, the mechanical, the external and the internal, and the cause has to be found before the action can be chosen.
• Step three is the taking of the corrective action. The action may be to remove the cause of the deviation, or to revise the standard, or to revise the performance, and the choice depends on whether the standard was wrong or the performance was wrong. The action must be taken at the right time, because an action that is correct in itself but is taken late is of no use.

The last part of the chapter applies the control process, and it is where the application questions are set because the feedback and the choice between the standard and the performance are both examinable.

• The feedback is the information that goes back from the later stage to the earlier one, and it is what makes the process a cycle and not a straight line, and the person who receives the feedback uses it to correct the next period, and this is the link with the communication of the directing chapter.
• After the deviation has been analysed the manager must decide whether the standard was wrong or the performance was wrong. If the standard was set on an assumption that turned out to be false, the standard is revised and the performance was never at fault. If the standard was sound and the performance fell short, the performance is corrected.
• The controlling is not the work of a separate department, and it is done by every manager for his own area, so the foreman controls the output of his section, the sales manager controls the sales of his territory, and the chief executive controls the whole enterprise.
• The control and the coordination are different, and the coordination is the harmonious and the deliberate integration of the activities, while the control is the checking and the correcting, and the control is the last function because it is the one that finds out whether the coordination has actually worked.
• The control cannot be a one-time exercise, and the chapter is emphatic that it is a continuous and an ever-ending process, because the work of the enterprise does not stop and every period brings a new set of deviations to be examined.