Controlling as the Vital Function of Management - Essay Example

Controlling Introduction Controlling, as we all know is one of the vital functions of management. The role of controlling in business management cannot be over emphasized. The need for controlling function in every day life is also indispensable. In business parlance, controlling and controlling techniques have specific meaning and significance. In fact, effective business management is incomplete unless controlling functions are performed. In the sequence of management processes, controlling is considered the last one, which does not mean that it is least important. It is as relevant as any other function of management. Controlling functions and techniques are exercised in all functional areas of management such as finance, marketing, human resource, production, etc. The process of controlling is very much associated with planning, the primary function of management. Both these functions are complementary to each other in the sense that either of these has no meaning unless the other is performed. Meaning and Definition In simple terms, controlling is the process of ensuring that all activities are in conformity with what has been planned already. It is the act of identifying any deviation from the standard performance by comparing it with the actual performance. Controlling function is not complete once the deviations are identified. Correcting the deviation, if any, is also under the purview of controlling process. It is a four step process of establishing performance standards based on the firm’s objectives, measuring and reporting of actual performance, comparing the two, and taking corrective or preventive actions, if necessary. Definition Henry Fayol defines controlling as “ in an undertaking control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and principles established, It has for object to point out weaknesses and errors in order to rectify them and prevent recurrence. It operates on everything-things, people actions.” Performance standards are established at the planning stage in line with the objectives of organisation. Standards are set for almost every important task, which act as the guidelines for execution. The comparison is made with the help of certain techniques to identify the deviation of actual performance from that of standards. Corrective action is warranted only when actual performance is below standards to ensure that the problem will not recur. On the other hand, if the performance is greater than or equal to standards, the behavior or system because of which it happened will be reinforced. Characteristics of Controlling Process Controlling is a never-ending process. Organisations which strive for improved performance will keep on controlling the activities of all areas. The exercise of controlling process is cyclical in nature which permanently observes the discrepancies of actual performance and corrects such deviations. Controlling is inseparably associated with planning function as the former cannot be exercised without the latter. In other words, planning is pointless unless it is accompanied by controlling. Because, mere establishment of standards alone will not bring success in business, rather, it must be compared with the actual continuously. Controlling is both anticipatory and retrospective. It expects problems and takes preventive action. With corrective actions, the process also follows up on problems. It employs a number of techniques based on the nature and area of problems. Controlling process ensures successful and efficient performance from executors whom are held responsible for discrepancies. However, employees are reluctant to have control mechanism in organisation as it constantly evaluate their performance in terms of what is needed by organisation. Significance of Controlling Controlling function occupies a pivotal position in the day to day management of business organisations regardless of type, size and nature. Management functions are a set of decisions and actions that make and inspire others to work for a common good. The decisions are made by managers and execution is performed by a team of workers. The effectiveness and success of management are evaluated. 1. Facilitates planning 2. Ensures standard performance 3. Efficient execution 4. Helps delegation 5. Basis for future action 6. Facilitates decision making 7. Facilitates decentralization 8. Facilitates coordination 9. Helps in improving efficiency 10. Simplifies supervision 11. Improves employee morale 12. Saves money, time and energy 13. Development of disciplined atmosphere Defining Effective Control Systems The control system is usually tailored to specific situations. They generally follow the same processes. Organisations implement control systems in a number of ways and at different levels. Because, control system designed for strategic level would not be of any use in operational and tactical levels. However, an effective control system has the following characteristics: (The Five Functions of Management) Control at all levels in the business Acceptability to those who will enforce decisions Flexibility Accuracy Timeliness Cost Effectiveness Understandability Balance between objectivity and subjectivity Coordinated with planning, organizing and leading. Types of Control Systems Managers use a series of control methods and systems to deal with the various problems of their organizations. The major control systems that assist a manager in exercising control are financial control, budgetary control, quality control, inventory control, responsibility centers and computer-based information systems. 1. Financial Control This technique is used to evaluate the financial performance of an organisation. Monetary Standards are fixed for all major operational areas. Principal methods of financial analysis are Ratio Analysis, Trend Analysis, Common size statement analysis etc. 2. Budgetary Control Budgets are used as both planning and controlling technique. Budgets are the quantitative estimates of performance during a particular period in future. They are prepared for all major areas of operations such as sales. The mechanism of the use of budgets for controlling purpose is known as budgetary control. 3. Quality Control This technique is useful in manufacturing area of an organisation in maintaining and meeting quality standard in products and production techniques. 4. Inventory Control This is to ensure the proper usage of material and to avoid unnecessary stock and waste. Material Requirement Planning, Just-in-Time etc are the principal methods. Responsibility Centers This method was introduced on the plea that effective measurement of operations and performance requires assignment and acceptance of responsibility for performance. Under this method organisation is bifurcated into various expense and profit centers, which are independently compared and evaluated. Work Cited Controlling (n.d.) Chapter Eight.30 November, 2008 < http://72.14.235.132/search?q=cache:23shoCM_qbMJ:ncertbooks.prashanthellina.com/class_12.BusinessStudies.BussinessStudiesI/8.pdf+importance+of+controlling+function&hl=en&ct=clnk&cd=5&gl=in> Different Controlling Techniques (n.d.) Lesson-11, Controlling-II. 30 November, 2008< http://www.rocw.raifoundation.org/management/bba/essentialsofmanagement/lecture-notes/lecture-11.pdf> The Five Functions of Management (n.d.) 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