1. Define Control.
Ans. Management control is the process by which managers assure that resources are obtain and used effectively in accomplishment of the organization’s objective.
2. What are the various stages in control processing?
Ans. The following are the stages involved on the process of control
a. Establishment of standards
b. Measurement of Actual performance and making comparisons
c. Finding out deviations
3. List out critical point standards?
1. Physical standards.
2. cost standards.
3. Capital standards.
4. Revenue standards.
5. Intangible standards.
4. What are the dangers in budgeting?
· Over budgeting
· Overriding Enterprise goals.
· Hiding inefficiencies.
5. Define preventive control?
A control technique in which better manager are developed and produced who can apply concepts skillfully, techniques and principles.
6. Give advantages of preventive control?
1 Better Accuracy.
2 Better Understanding
3 Aware of responsibility
4 Control burdens are eliminated
Revenue and expense budget.
Time space budget.
Capital and expense budget.
8. State the meaning of Zero base budgeting?
Budgeting in which enterprise programs are divided into packages comprising goals, activities and need resources, and costs are calculated for each package from the ground up.
9. Point out objectives of budget.
1. Planning and forecasting
3. Control operation
4. Means of Communication.
Section – B
1. Explain the importance of controlling?
Ans. The importance of controlling becomes clear from the following facts:
(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..
(2) Judging Accuracy of Standards:
While performing the function of controlling, a manager compares the actual work performance with the standards.
(3) Making Efficient Use of Resources:
Controlling makes it possible to use human and physical resources efficiently. Under controlling, it is ensured that no employee deliberately delays his work performance.
(4) 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
(5) Ensuring Order and Discipline:
Controlling ensures order and discipline. With its implementation, all the undesirable activities like theft, corruption, delay in work and uncooperative attitude are checked.
(6) Facilitating Coordination in Action:
Coordination among all the departments of the organisation is necessary in order to achieve the organizational objectives successfully. All the departments of the organisation are interdependent.
2. Explain the Limitations of Controlling:
1. Difficulty in setting quantitative standards:
Control system loses its effectiveness when standard of performance cannot be defined in quantitative terms and it is very difficult to set quantitative standard for human behaviour, efficiency level, job satisfaction, employee’s morale, etc. In such cases judgment depends upon the discretion of manager.
2. No control on external factors:
An enterprise cannot control the external factors such as government policy, technological changes, change in fashion, change in competitor’s policy, etc.
3. Resistance from employees:
Employees often resist control and as a result effectiveness of control reduces. Employees feel control reduces or curtails their freedom. Employees may resist and go against the use of cameras, to observe them minutely.
4. Costly affair:
Control is an expensive process it involves lot of time and effort as sufficient attention has to be paid to observe the performance of the employees. To install an expensive control system organisations have to spend large amount. Management must compare the benefits of controlling system with the cost involved in installing them. The benefits must be more than the cost involved then only controlling will be effective otherwise it will lead to inefficiency.
3. Explain the limitations of budgetary control? Some of the limitations are discussed as follows:
1. Uncertain Future:
The budgets are prepared for the future period. Despite best estimates made for the future, the predictions may not always come true. The future is always uncertain and the situation which is presumed to prevail in future may change. The change in future conditions upsets the budgets which have to be prepared on the basis of certain assumptions. The future uncertainties reduce the utility of budgetary control system.
2. Budgetary Revision Required:
Budgets arc prepared on the assumptions that certain conditions will prevail. Because of future uncertainties, assumed conditions may not prevail necessitating the revision of budgetary targets
3. Discourage Efficient Persons:
Under budgetary control system the targets are given to every person in the organization. The common tendency of people is to achieve the targets only. There may be some efficient persons who can exceed the targets but they will also feel contented by reaching the targets. So budgets may serve as constraints on managerial initiatives.
4. Problem of Co-ordination:
The success of budgetary control depends upon the co-ordination among different departments. The performance of one department affects the results of other departments. To overcome the problem of coordination a Budgetary Officer is needed. Every concern cannot afford to appoint a Budgetary Officer.
5. Conflict Among Different Departments:
Budgetary control may lead to conflicts among functional departments. Every departmental head worries for his department goals without thinking of business goal. Every department tries to get maximum allocation of funds and this raises a conflict among different departments.
6. Depends Upon Support of Top Management:
Budgetary control system depends upon the support of top management. The management should be enthusiastic for the success of this system and should give full support for it. If at any time there is a lack of support from top management then this system will collapse.
1) Explain the controlling process?
Ans. The controlling process involves:
1. Establishing standards to measure performance
2. Measuring actual performance
3. Comparing performance with the standard
4. Taking corrective action Controlling Process
The controlling process is simply a set of steps a manager uses to determine whether organizational goals have been met. Let's explore each step of the process and apply examples to demonstrate its function for management. Let's use the example of TQM Auto Repair Shop to understand the controlling process.
Establishing Standards to Measure Performance
This involves making decisions about the goals an organization wants to focus on during a period of time. These can be financial, customer satisfaction, production or employee performance-related goals.
Measuring Actual Performance
This involves creating measuring tools to collect data. The tool should be able to report on performance as it relates to the standards set, or 'measures,' developed in the first step of the controlling process. These tools can be a balance sheet, a sales report, data collected from a customer satisfaction survey or even an employee performance appraisal.
Comparing Performance with the Standard
This involves comparing 'actual' performance to performance standards based on data collected in the second step of the controlling process. Using the measuring tools created in the second step, managers are able to compare current performance and productivity to the standards set.
2) Explain the Requirements of Effective Control System:
A control system is not an automatic phenomenon but deliberately created. Though different organisations may design their control systems according to their unique and special characteristics or conditions, yet in designing a good and effective control system the following basic requirements must be kept in view:
1. Focus on Objectives and Needs:
The effective control system should emphasize on attainment of organizational objectives. It should function in harmony with the needs of the enterprise. For example, the personnel department may use feed forward control for recruiting a new employee, and concurrent control for training.
At the shop level, control has to be easy, but more sophisticated and broad ranging controls may be developed for higher level managers. Thus, controls should be tailored to plans and positions.
2. Immediate Warning and Timely Action:
Rapid reporting of variations is at the core of control. An ideal control system could detect, not create bottlenecks and report significant deviation as promptly as possible so that necessary corrective action may be taken well in time. This needs an efficient system of appraisal and timely flow of information.
3. Indicative, Suggestive as well as corrective:
Controls should not only be able to point to the deviations, but they should also suggest corrective action that is supposed to check the recurrence of variations or problems in future. Control is justified only if indicated or experienced deviations from plans are corrected through appropriate planning, organizing, staffing and directing. Control should also lead to making valuable forecasts to the managers so that they become aware of the problems likely to confront them in the future.
4. Understandable, Objective, and Economical:
Controls should be simple and easy to understand, standards of performance are quantified to appear unbiased, and specific tools and techniques should be comprehensive, understandable, and economical for the managers.
They must know all the details and critical points in the control device as well as its usefulness. If developed and complex statistical and mathematical techniques are adopted, then proper training has to be imparted to managers.
Standards should be determined based on facts and participation. Effective control systems must answer questions such as, “How much does it cost?” “What will it save?” or “What are the returns on the investment?”
The benefits of controls should outweigh the costs. Expensive and elaborate control systems will not suit, for example to small enterprise.
5. Focus on Functions and Factors:
Control should emphasise the functions, such as production, marketing, finance, human resources, etc and focus on four factors – quality, quantity, timely use and costs. Not one, but multiple controls should be adopted.
6. Strategic Points Control:
Control should be selective and concentrate on key result areas of the company. Every detail or thing cannot and is not to be controlled in order to save time, cost and effort. Certain strategic, critical or vital points must be identified along with the expectations at those points where failures cannot be tolerated and appropriate control devices should be designed and imposed at those stages.
Controls are applied where failure cannot be tolerated or where costs cannot exceed a certain amount. The critical points include all the areas of an organization’s operations that directly affect the success of its key operations.
Control must not become ends in themselves. It must be environment friendly and be able to make modifications or revisions necessitated by the rapidly changing and complex business environment. Flexibility in control system is generally achieved by the use of alternative plans or flexible budgets.
8. Attention to Human Factor:
Excess control causes corruption. It should not arouse negative reactions but positive feelings among people through focus on work, not on people. The aim of control should be to create self-control and creativity among members through enmeshing it in the organisational culture. Employee involvement in the design of controls can increase acceptance.
Controls have to be consistent with the organization structure, where the responsibility for action lies, position, competence, and needs of the individuals who have to interpret the control measures and exercise control. The higher the quality of managers and their subordinates, the less will be the need for indirect controls
3) Explain various control Techniques in Detail?
Many techniques have been developed to control the activities in management. The list is very long, and it is difficult to describe them all.
Some of the important techniques are:
Finance is related with mobilization of funds and their utilization and the return on them. Financial control is exercised through the following:
1. Financial Statements:
Income statement (telling about expenses, segmental incomes, overall income and expenses, and the net profit/loss), and Balance Sheet (shows the net worth at a single point of time and the extent to which the debt or equity finance the assets)
2. Financial Audits:
Financial audits, either internal or external are conducted to ensure that the financial management is done in line with the generally accepted policies, procedures, laws, and ethical guidelines. Audits may be internal (by Organisation’s own staff), external (statutory audit by chartered accountants), and management audit (by experts).
3. Ratio Analysis:
Ratio analysis monitors liquidity, profitability, debt, and activity related aspects.
4. Budgetary Controls:
Budgetary control is the process of constructing budgets, comparing actual performance with the budget one and revising budgets or activities in the light of changed conditions. Budgetary control is as such not related only to finance area, but all functional areas do take help of budgetary control. Budgets help not only in planning but also help to keep a tab on overall spending.
Budgeting may be top-down (managers prepare the budget and ask subordinates to use); bottom-up (figures come from lower levels and adjusted at upper levels); zero-based (justifying allocation of funds on the basis of activities or goals); and flexible budgeting (varying standards and varying allocations).
5. Break-even Analysis:
It is a tool of profit planning and deals with cost-volume-profit relationships.
Accounting includes responsibility accounting, cost accounting, standard cost approach, direct costing, and marginal costing.
In the field of marketing, to see that customer gets right product at the right price at the right place and through right communication, the control is exercised through the following:
It is to assess customers’ needs, expectations and the delivery; and the competitive scenario.
To assess consumer acceptance of a new product, a small-scale marketing is done. HUL uses Chennai for most of its test marketing.
Marketing managers control through marketing ratios and other statistics.
Human resource control:
Human resource control is required to have a check on the quality of new personnel and also to monitor performances of existing employees so as to determine firm’s overall effectiveness.
Goal setting, instituting policies and procedures to guide them are to help them. Common controls include performance appraisals, disciplinary programmes, observations, and development assessments.
All organizations have confidential and sensitive information to be kept secret. How to control access to computer databases is very important. This has become a key contemporary issue in control. Organizations keep a watch on employee’s computer usage in general and internet in particular.
To ensure quality production in right quantity at right time economically production controls are required. Two of the important techniques include: Inventory control (ABC Analysis, Economic Order Quantity, Just-in time inventory control), and quality control (through inspection, statistical quality control).
Network analysis is most suitable for the projects which are not routine in minimizing cost and completing project well in time. Network analysis makes use of two techniques
– Programme Evaluation and Review Technique (PERT), and Critical Path Method (CPM).
4) Explain the advantages of controlling function?
Some of the advantages of managerial control for an organization are as follows:
Managerial control is essential to efficient management. It helps the managers to measure actual performance and guide it towards the achievement of predetermined goals. It is important activity in any business enterprise.
Just as road signals are necessary at a busy road crossing to ensure accident free and smooth flow of traffic, management control devices are necessary in an organisation for the attainment of its goals. According to Terry, “Effective controlling assists in the efforts to regulate the planned performance to assure that performance takes place as planned.”
1. Efficient Execution:
Control is an important pre-requisite for an effective and efficient implementation of the pre-determined plans. It assists in determining variations, pinpointing the factors responsible for them and taking remedial measures.
2. Helps Delegation:
Control can be meaningful only when it is preceded by proper delegation of authority and duties. Thus, it promotes delegation of authority to the employees at lower levels. In this way they develop a sense of involvement in the working of an organisation.
3. Aid to Decentralisation:
The modern trend of business organizations is towards decentralisation which calls for a systematic attempt for controlling. Under decentralisation, the authority of decision making is dispersed throughout the organisation. Management must keep control in its hands to know whether the authority is being used properly. Without adequate controls, decentralisation cannot succeed.
4. Assists Co-ordination:
The size of modern business enterprises is increasing. A huge amount of capital and large number of people are employed in them. This creates the problem of adequate control as there are many divisions producing and distributing different products. In order to co-ordinate their activities, an efficient system of control is required.
Control simplifies supervision by pinpointing significant deviations. It keeps the employees under check and brings discipline among them. A good system of control detects the weak points very quickly. This helps the expansion of span of control at all levels.
6. Aids to Efficiency:
Basically, control is concerned with ensuring that all the important factors in the enterprise move along the right lines and at the right pace. This assists in promoting efficiency all rounds.
7. Boosts Morale:
Control techniques help in finding the deviations and identifying the factors responsible for the same. This boosts the morale of the employees because they know the work for which they are to be held responsible.
5. Explain the advantages of budgetary control?
Ans. Some of the advantages of budgetary control are:
1. Maximization of Profits:
The budgetary control aims at the maximization of profits of the enterprise. To achieve this aim, a proper planning and co ordination of different functions is undertaken. There is a proper control over various capital and revenue expenditures. The resources are put to the best possible use.
The working of different departments and sectors is properly coordinated. The budgets of different departments have a bearing on one another. The co-ordination of various executives and subordinates is necessary for achieving budgeted targets.
3. Specific Aims:
The plans, policies and goals are decided by the top management. All efforts are put together to reach the common goal, of the organization. Every department is given a target to be achieved. The efforts are directed towards achieving some specific aims. If there is no definite aim then the efforts will be wasted in pursuing different aims.
4. Tool for Measuring Performance:
By providing targets to various departments, budgetary control provides a tool for measuring managerial performance. The budgeted targets are compared to actual results and deviations are determined.
The planning of expenditure will be systematic and there will be economy in spending. The finances will be put to optimum use. The benefits derived for the concern will ultimately extend to industry and then to national economy.
6. Determining Weaknesses:
The deviations in budgeted and actual performance will enable the determination of weak spots. Efforts are concentrated on those aspects where performance is less than the stipulated.
7. Corrective Action:
The management will be able to take corrective measures whenever there is a discrepancy in performance. The deviations will be regularly reported so that necessary action is taken at the earliest.
It creates budget consciousness among the employees. By fixing targets for the employees, they are made conscious of their responsibility. Everybody knows what he is expected to do and he continues with his work uninterrupted.
9. Reduces Costs:
In the present day competitive world budgetary control has a significant role to play. Every businessman tries to reduce the cost of production for increasing sales. He tries to have those combinations of products where profitability is more.
10. Introduction of Incentive Schemes:
Budgetary control system also enables the introduction of incentive schemes of remuneration. The comparison of budgeted and actual performance will enable the use of such schemes.