principles of management – chpt 17 : controlling
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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
CHAPTER 17
CONTROLLING
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.
PLANNING
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”
Areas or scope pf controlControl 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.
Steps in Control process
Measuring performance
Comparison of
actualwith standards
Establishing standards
Taking corrective action
Requirements of effective control system
FeedbackObjectiveSuitabilityPrompt reportingPointing out exceptionsFlexibleEconomyIndelibleSuggest remedial actionMotivation
Techniques of controlTechniques of controlManagement Management
information information systemsystem
Critical path Critical path methodmethod
personal personal observationobservation
ControlControl
Statistical control reports
Cost accounting and cost control
Performance evaluation
Standard costing
Break –even analysis
Special control repots
return on investments
Managerial statistics
Responsibility Accounting
management audit Internal Audit
Production control
Gantt milestone
chart
Zero-based budgeting
Advantage of pert/cpmEnsure planning:identification of favorable factors:Savings of cost and time:Taking preventive or corrective actions:Attention on critical activities:Everything at right:
Pert/Pert/CpmCpm
Advantage of pert/cpmMaking awareness of responsibilities:Securing co-operation:Facilities decision-making:Improved communication:Simultaneous performance of works:Advance control action:Timely completion of a project:
Limitations of pert/cpm
Error in estimation of time and costapplicationTime consuming and expensive
Distinction between pert and cpmPERT 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
Characteristics or features of control
Controlling process An Essence of action
Universal
Dynamic process
Forward looking
Influencing factor
Control involves management
Need of control
Judging the accuracy of standards:Minimize dishonest behavior:Better performance:
Advantages of controlAdjustments in operationverification of policymanagerial accountabilityPsychological pressureMaintaining moralityCo-ordinationEfficiency
Limitations of control
Absence of perfect standardsUncontrollable factorsDifficulty in fixing responsibilityExpensive process
Types of managerial control
Standardizing controlpreserving controlDelegation of authority controlMeasurement controlMotivating control
Budget & Definition of budgetBudget 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”
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.”
Characteristics of budgetary controlThe 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.
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.
Advantages of budgetary control
Tool for planning the activities
Thinking in advance
Control of expenditure
Co-ordination of efforts
Better utilization of resources
Delegation of authority
Solving financial difficulties
promotion of efficiency
Achievement of goals
Criteria of self-examination
Promoters balanced activities
Budgetary
Ensures proper communication
Fixation of responsibility
Encourages exchange of information
Disadvantages, Limitations or problems of budgetary control
Inaccuracypersonal biasNon-availability of Co-operationRigidityResults are not attainable
Disadvantages, Limitations or problems of budgetary control
ConsistencyTime Consuming processIneffective budgetary controlDiscourage the initiativeMore paperwork
Essentials of Effective budgeting system
Efficient organizationPreparing master budgetQuick reportingFlexible
Essentials of Effective budgeting system
Support of top managementBased on reasonable assumptionReward and punishmentAppropriate authority
Techniques of controlTechniques of controlManagement Management
information information systemsystem
Critical path Critical path methodmethod
personal personal observationobservation
ControlControl
Statistical control reports
Cost accounting and cost control
Performance evaluation
Standard costing
Break –even analysis
Special control repots
return on investments
Managerial statistics
Responsibility Accounting
management audit Internal Audit
Production control
Gantt milestone
chart
Zero-based budgeting
Types of budgetsTypes of budgets
Sales budgetSales budget
Types of Types of budgetsbudgets
Master budget
Cash budget Research and
development budget
Selling and distribution cost budget
Production budget
Physical property budget
Supplies budget
Production overhead
budget
Production cost budget
Time and material budget
Balance sheet budget
Budget can also be classified asFixed budgetFlexible budgets
Preparation of a budgetSound forecastingDeveloped accounting systemFixation of responsibility centersFormation of budget committees
Preparation of a budgetClear definition of business policiesStatistical informationSupport of top managementBudget period