art of controlling - principles of management
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Control is the last function of management. Success or failure of planning depends on the success or failure of controlling. For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/ZEcPAcTRANSCRIPT
Welingkar’s Distance Learning Division
CHAPTER-17
CONTROLLING
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Welingkar’s Distance Learning Division
Introduction
• Control is the last function of management. The controlling function will be unnecessary to the management if other functions of management are performed properly. Planning identifies the activities and controlling regulates the activities. Success or failure of planning depends upon the results of success or failure of controlling.
We Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division
We Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division
Definition
• “Control is any process that guides activity towards some pre-determined goal. The essence of the concept is in determining whether the activity is the achieving desire results”
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Areas or scope pf control
• Control over the policies of the concern, organization, the personnel employed in an organization, capital available to the concern, capital expenditure, production, wages and salaries paid to the employed, the cost of production, public relation, research and development, tools and equipment and overall control.
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Steps in Control process
Establishing Measuring standards performance
Taking Corrective action
Comparisonof
actual withstandards
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Requirements of effective control system
• Feedback• Objective• Suitability• Prompt reporting• Pointing out exceptions• Flexible• Economy• Indelible• Suggest remedial action• Motivation
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Techniques of Control
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CONTROL
Critical path method
Statistical control reports
Personal observation
Cost accounting and cost control
Break-even analysis
Special control reports
Zero-based budgeting
Production control
Performance evaluation
Managerial statistics
Standard costing
Gantt milestone
chart
Management information
system
Management audit
Responsibility accounting
Internal audit
Return on investment
Welingkar’s Distance Learning Division
Pert/Cpm
Advantages of pert/cpm• Ensure planning:• identification of favorable factors:• Savings of cost and time:• Taking preventive or corrective actions:• Attention on critical activities:• Everything at right:
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Advantage of pert/cpm
• Making awareness of responsibilities:• Securing co-operation:• Facilities decision-making:• Improved communication:• Simultaneous performance of works:• Advance control action:• Timely completion of a project:
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Limitations of pert/cpm
• Error in estimation of time and cost
• Application
• Time consuming and expensive
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Distinction between pert and cpm
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PERT CPM
Three times estimation done Three times estimation done
It gives importance to time It gives importance to cost
It is suitable where activity timings are not known
It is suitable where activity timings are well known
It is event oriented It is activity oriented
Welingkar’s Distance Learning Division
Characteristics or features of control
Controlling process An Essence ofaction
Universal Influencing factor
Forward looking Control involves management
Dynamicprocess
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Need of control
• Judging the accuracy of standards:
• Minimize dishonest behavior:
• Better performance:
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Advantages of control
• Adjustments in operation• verification of policy• managerial accountability• Psychological pressure• Maintaining morality• Co-ordination• Efficiency
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Limitations of control
• Absence of perfect standards
• Uncontrollable factors
• Difficulty in fixing responsibility
• Expensive process
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Types of managerial control
• Standardizing control
• preserving control
• Delegation of authority control
• Measurement control
• Motivating controlWe Learn – A Continuous Learning Forum
Welingkar’s Distance Learning Division
Budget & Definition of budget
• Budget is derived from the French word ‘Budgette’ which means small leather bag. Budget is a financial and quantitative statement.
• “Budget is a plan for income or outgo or both, of money, personal, purchased items, sales items, or any other entity about which the manager believes that determining the future course of action will assist in the managerial efforts”
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Budgetary control & Definition of budgetary control
• “The term budgetary control is applied to a system of management and according control by which all operations and output are forecast as far ahead as possible and the actual results when known are compared with the budge t estimates.”
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Characteristics of budgetary control
• The activities the organizations are presented department-wise or section-wise.
• Budgets give the extent of expenditure though which cost control is achieved.
• The co-ordination of various departmental activates helps to prepare the determined standards.
• Clear-cut and specific requirement of the organization are expressed in quantitative terms.
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Characteristics of budgetary control
• Determines the deviations by comparisons and causes of such deviations.
• Recommends and implements the corrective actions when ever necessary.
• The future is planned on the basis of past experience.
• Recording the present performance for comparing purpose with the pre-determined standards.
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Advantages of budgetary control Promotion of
Tool for planning efficiencyThe activities Better utilization of
resourcesThinking in advance Promoters
balanced activit
Co-ordination of BudgetaryEfforts
Achievements Criteria of Delegation of Control of of goals examination authority expenditure
Encourages Fixation of Ensures proper Solving financialexchange of responsibility communication
difficultiesinformation We Learn – A Continuous Learning Forum
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Disadvantages, Limitations or problems of budgetary control
• Inaccuracy• personal bias• Non-availability of Co-operation• Rigidity• Results are not attainable
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Disadvantages, Limitations or problems of budgetary control
• Consistency• Time Consuming process• Ineffective budgetary control• Discourage the initiative• More paperwork
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Essentials of Effective budgeting system
• Efficient organization
• Preparing master budget
• Quick reporting
• Flexible
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Essentials of Effective budgeting system
• Support of top management
• Based on reasonable assumption
• Reward and punishment
• Appropriate authority
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Welingkar’s Distance Learning Division
Techniques of Control
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CONTROL
Critical path method
Statistical control reports
Personal observation
Cost accounting and cost control
Break-even analysis
Special control reports
Zero-based budgeting
Production control
Performance evaluation
Managerial statistics
Standard costing
Gantt milestone
chart
Management information
system
Management audit
Responsibility accounting
Internal audit
Return on investment
Welingkar’s Distance Learning Division
Types of Budgets
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Types of Budget
Sales Budget
Cash budget
Time and material budget
Physical property budget
Research and development
budget
Production overhead budget
Production cost budget
Master budget
Selling and distribution cost budget Supplies budget
Balance sheet budget
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Budget can also be classified as
• Fixed budget
• Flexible budgets
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Preparation of a budget
• Sound forecasting
• Developed accounting system
• Fixation of responsibility centers
• Formation of budget committees
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Preparation of a budget
• Clear definition of business policies
• Statistical information
• Support of top management
• Budget period
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