Controlling

Topics: Management, Control theory, Budget Pages: 10 (2615 words) Published: February 5, 2015
Introduction:
This unit deals about Controlling - Process of controlling; Making Controlling Effective; Techniques of Controlling. As seen from the previous case study, we identified the primary issue in the Mahindra & Mahindra is lack of proper control over its products. Controlling is the measurement and correction of performance in order to accomplish company’s aims and objectives. Also, planning and controlling are inseparable (Siamese twins) because we can’t decide whether we are going in the right direction unless we know the destination. Without objectives and plans, control is not possible because performance has to be measured against some established criteria. The control function consists of three procedures i.e.

i. Measuring actual performance,
ii. Comparing actual performance to standards,
iii. Correcting variations from standards and plans.
Basic process of Control:
The managerial process of control consists of 6 steps. The top management has to decide what elements have to be monitored, evaluated and controlled. Step 1: Key areas to be monitored
Macro environment, Mission and objectives, Industry Environment, Internal Operations need to be monitored as they are frequently vulnerable to changes. Step 2: Establishing Standards
Since plans are the yardsticks against which managers devise controls. The first step in the control process is to establish plans. And since plans cannot be supervised by the manager for 24/7 some selected points in the plans are selected as standards so that managers can check these standards. The standards may include: Quality of products

Creativity
Return on investment
Quantity of units produced
Step 3: Measuring Performance
The measurement of performance against standards should be done on forward looking basis so as to detect deviations in advance and avoid by appropriate actions. Performance can be measured in quantitative terms (reports and statements) and qualitative terms (managerial observations). Step 4: Compare Performance with standards:

Once the performance is measured, it should be compared with pre-determined standards. The manager should set standards in lieu of the company’s goals and objectives. The standards developed by General Electric can be used as model standards. They are: Profitability standards

Market position standards
Productivity standards
Human resource standards
Social Responsibility standards
Step 5: Take no actions, if performance is in harmony with standards If the performance matches with the standards, the manager just need to follow the process and there is no need to take corrective actions. Step 6: Take corrective action, if necessary

Managers should take corrective actions if there are any deviations. If the deviation is positive, revise the standards. On the contrary, take steps to improve the performance. Causes of deviations:

It is very easy to conclude that someone made a mistake, when a deviation is identified. But the deviation maybe the result of an unexpected changes in the external environment. Therefore we should consider the following: Was the cause of deviation internal or external?

Is the change temporary or permanent?
Was the cause random or anticipated?
Are the present plans still appropriate?
Does the organization have the capacity to respond to the change? Corrective Action: it may be defined as the changes in the company’s operations to ensure that it can more effectively and efficiently reach its goals and perform its established standards. It may include: i. Revision of plans

ii. Change of standards
iii. Taking of corrective action in the existing process without changing standards and plans. To making the controlling process more effective, we need to briefly describe the critical standard points and benchmarking. Types of critical standard points:

i. Physical standards:
They are the non-monetary measurements and are common at the operating level, where materials are used, labor is employed,...
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