Class 12th Business Studies Chapter Explanation

Chpater- Controlling

Meaning of Controlling

Controlling can be defined as the process of ensuring that actual activities conform to planned activities.

Nature of Controlling:
  1. Goal Oriented: as in controlling, activities are analysed on the basis of goals set by the managment.
  2. Pervasive Function: as Controlling is essential for achivement of organisational objectives, makes it part of management of all types of organisation
  3. Continuous Process: as activities are repetatively analysed in respect to objectives, throughout the life of the organisation
  4. Controlling is Both Backward and forward Looking: For controlling one need to consider both planning done in past and the possible future happening, to properly analyse the business activities.

Importance of Controlling"
  1. Accomplishing Organisational Goals: Controlling measure compares and identifies deviation putting the organisational progress on track.

  2. Judging Accuracy of Standards: As it compares the standers of the organisation with the changing environment and tells the accuracy of the standard.

  3. Making Efficient Use of Resources: As each activity is performed in accordance with predetermined standards, hence helps in reducing wastage and promotes efficiency.

  4. Improving Employee Motivation: With the help controlling, employees are guided to improve their performance.

  5. Ensuring Order and Discipline: It creates an atmosphere of order and discipline in the organisation. And minimise dishonest behaviour by keeping a close check on their activities.

  6. Facilitating Coordination: As all the employees are governed by the predetermined standards which are well coordinated with each other.

Relationship between Planning and Controlling:
  1. Standards developed by planning are basis of controlling: So, when there is no plan, managers have no basis for controlling. Thus, controlling is blind without planning.

  2. Planning is meaningless without controlling: as controlling ensures that the events conform to the plans.

  3. Planning and controlling both are forward-looking:
    1. Planning is looking ahead because plans are prepared for future and are based on forecasts about future conditions.
    2. Controlling is forward looking because the corrective action in controlling seeks to improve the future performance.

  4. Planning and controlling both are backward-looking too:
    1. Planning is looking back also new planning is guided by the problems identified in the past.
    2. Controlling is looking back as it compares the actual performance with the standards This involves scrutinising the events after they have taken place.

Steps in Controlling Process:
  1. Setting Performance Standards: In the this step the setting up of performance standards takes place, it can both quantities and qualitative.

  2. Measurement of Actual Performance: In this step the actual performance is measured using several techniques.

  3. Comparing Actual Performance with Standard: in this step the actual performance is compared to the predetermined standard on the basis of several parameters.

  4. Analysing Deviations: in this step the outcome of comparison is analysed to find out the reason behind the deviation, if any.

  5. Taking Corrective Action: after knowing the reason, the corrective measure is developed to remove the deviations.

Management by exception:

in this only significant deviation which go beyond the permissible limit should be brought to the notice of management, thus enabling the management keeping a check on almost each and every important deviation in the organisation.

Critical Point Control:

It is neither economical nor easy to keep a check on each and every activity in an organisation. Control should, therefore, focus on key result areas (KRAs) which are critical and affects the whole organisation’s growth.