Staffing might not be applicable to a sole proprietorship, but it is still very essential. Efficient routing permits the best utilisation of physical and human resources employed in production. Break-even point is the particular ‘point of time’ at which the total income is equal to total cost, i.e., the position of no profit, no loss. Though opinions may differ on this question, often it is recognized that people engage in that behaviour which provides them satisfaction whether control or no control. The entire budget should not be replaced, as a sequel to incorporation of the changes/modification. This may be called direct control. Thus, planning and control are interdependent and complementary to each other. Naval department. Need for Organization …  Upper management creating the initial organizational architecture and structure. The independent variables used to explain organizational structure were often transferred wholesale into the emerging theory of management accounting to explain the design and use of management accounting systems, with additional variables being added as the years progressed. It also helps to remunerate employees fairly which in turn translates to increased job satisfaction. Proper performance of all managerial functions is necessary to achieve co-ordination. Features of the Balanced Scorecard Method: ii. This also indicates the relationship of various volumes, costs, sale price and sale mix to profit. Trust 7. Introduction Organization success is inseparable from the managerial practice just like any organized social activity is inseparable from the values, attitudes, abilities and behaviour of the group„s leader. If the estimates are superfluous, the budget becomes ineffective to achieve the goals. In audit, a careful examination of all account books, vouchers of transaction and all other relevant documents pertaining to financial transactions, profit and loss accounts and Balance Sheet of the company for the respective financial years are scrutinised thoroughly (cent per cent) to have a clear picture of the state of affairs of the financial matters of the company. ZBB cuts down wastage, weeds out inefficiency and reduces the cost of production because every budget proposal is evaluated on the basis of cost benefit analysis. If the communication system is not quite effective, it will affect the control system also to that extent, in communicating what is expected from a subordinate and also how he is performing. A good control system is one that can be easily installed and inexpensively maintained. (2005) effective leadership must be built on a solid foundation which is in turn dependent o… (adsbygoogle=window.adsbygoogle||[]).push({}); Our mission is to show you that everything in the world exists for a reason. Controlling in Management – Top 5 Characteristics. It is both forward and backward looking control device. Without such a system, managers will not be able to check on subordinates’ progress, and so will not be able to take corrective action until after a failure has occurred. Integrating Strategic Planning and Control System: Strategic planning and management control are the two most important systems contributing to the effectiveness of business organizations. ii. For example, the budgets and various financial ratios have broad applications. Through the downward communication, a superior sends the information about what a subordinate is expected to do; the upward communication is used to get control information from the subordinates, that is, what they have done. Balance scorecard can provide a focus for unifying all parts of the business. In every organization, management plays an important role for achieving the goals and objectives of the organization. Naturally, this may be more serious for those who are being controlled. Control chart is an example of concurrent control. 4. Controlling is the process of ensuring that the activities in an organization are performed as per the plans. The management frames the policies and plans to help the organisation function smoothly. Comparison of Actual Performance with the Standards: Once the actual per­formance is measured, comparison should be made with the standards to find out the variance or deviations, if any. Controlling is similar to planning. They are inseparable from each other. 7. However, this gap may be interpreted differently by different individuals because they differ in their orientations. Management achieves the objectives of the organisation through their limited resources. iii. As such, the control system should be appropriate to the nature, needs and circumstances of an organization and each level of activity inside it. Managerial planning seeks consistent, integrated and articulated programmes while management control seeks to compel events to conform to plans. However, some special measures are devised to exercise overall control. The management has to adopt various control systems to ensure that the firm’s performance is consistent with the organisational goals and objectives. Proper remedial measures have to be taken after analysis of the nature and type of anomaly that occurred. Control the standard of production process, v. Total quality control (TQM) of the product. Indicating the sequence of component activities in a network. The modern business climate is a very dynamic one and contemporary businesses need to implement a highly effective control system to make sure that the firm’s strategic goals are being met. 5. Limitations. Control job performance and continuous progress. The length of the life cycle, the duration of each phase and the shape of the curve vary widely for different products. Diversified product lines need to be watched closely to ensure that quality and profitability are being maintained; sales organisation’s various markets — foreign and domestic — require close monitoring. (iii) Controlling is a continuous process – Controlling is not a function which is performed only once. A flexible budget is used by such business enterprises in which uncertainty is more. Information has been defined as the rules or guidelines which have the potential to influence managerial decisions. Predictive control is essential to keep the control on the above matter. Modern Management Control Techniques 16. An effective management ensures profitability for the organization. We provide a comprehensive, searchable directory where you can learn about the importance of some of the world’s most interesting things. The production control consists of the following activities: i. These standards are budgets. The important aspects of controlling are listed below: 1. Control process tries to find out deviations between planned performance and actual performance and to suggest corrective actions, whenever these are needed. (Evans &Lindsay 2009) Dimensions of Services Quality Dimensions of services quality included : 1. Again, the control system for the sales manager has to be different from that for the production or personnel manager. Organizing paves the way for specialization and the best use of talents. It means the results of the control may not be same as anticipated by those who are exercising control. Budgets are taken as standards for comparison and budgetary control revolves around them. It breaks down how plans will be implemented and assign the resources needed to do so. The Business Process Perspective – This refers to internal business processes. Most of these challenges can be traced back to decisions about what needs to be controlled and how often progress needs to be measured. The product life cycle concepts is derived from the fact that a product’s sales volume and sales revenue follow a typical pattern of five phase cycle. Objective – Control should be objective. With it comes confusion, lack of direction and ultimately, failure. Budgeting and cost control cannot be of any use without this analysis. In these situations, individuals tend to resist control terming it as unfair, unjust, and discriminatory. Organizational members respond differently to control depending on the nature of control and its perception and the nature of those who are controlled. A good control system gives the following benefits to the management: Every organisation has certain objectives. The workers are expected to make best efforts to complete the work and to the satisfaction of the management. iii. Ratios help to analyse the operational efficiency of a company and shed light on the short term liquidity and long term solvency of the enterprise. It provides protection against uncertainty due to unforeseen failures in supply, increase in demand and delays in production. Sometimes, a human resource committee is constituted to act as an instrument of control over key personnel. This has serious implications for organizational operation and, therefore, managers should find out the causes for such resistance and take suitable measures to overcome these. Timelines and targeted performances are ensured only through controlling. The management, thus, knows the extent to which the objectives or goals are achieved. Each of the function blends into the other thus, affecting their performance. The deviation if any, between the standard set for and the actual performance are taken into account for proper analysis for implementing suitable remedial action. To control means to check and ensure that each activity is performed in a planned manner. To staff means to select, develop, maintain, and utilize personnel in such a way that the organization can achieve its goals effectively and economically. It thus brings efficiency to the function of supervision. ii. These techniques of control are broadly classified into two categories, namely, budgetary control and non-budgetary control. This aspect of the management is integral in the work of the organizational management, since all the organizations equally have impacts, equally have responsibilities but many of them by and large have been far less aware of them, far less concerned with their human, social, and community responsibilities than what the responsibilities they have towards their business. Managers, at all levels, exercise control with varying degrees. In its earlier days it was a simple performance appraisal framework which has now evolved into a full strategic management system. This technique involves budgets, to plan, to co-ordinate and to control day-to-day operations of business in accordance with the overall objectives, goals and targets of the business organisations. 2. Planning is the determination of objectives, goals, strategies, policies and programmes of an organisation to give purpose and direction to the activities of the organisation over a specified period of time. For effective control over capital expenditure, there should be a plan to identify the realization of benefits from capital expenditure and to make comparison with anticipated results. Control activities take into consideration the important factors and visualize the actions and resources from time to time. 2. Debt equity ratio = Total debt/total equity. But controlling takes place after the planning is completed and the organisational activities have begun. Based on this pattern of information systems, an information system is defined as follows: “An information system can be any organized combination of people, hardware, software, communication network, and data resources that collects, transforms, and disseminates information in an organization.”. This involves measurement of actual performance in the light of desired performance, comparison of actual and desired performance, identification of deviation between the two, analysis of causes of deviation, and taking of corrective actions to overcome deviation. Besides, these channels also serve other purposes. 3. Flexibility – Whenever an inevitable change is needed, there must be flexibility to accommodate the change or to modify the budget according to the needs. Steps 8. As Weihrich and others have put it, “Without objectives and plans, control is not possible because performance has to be measured against some established criteria.”, Finally, strategic plans require strategic control. They work as a team towards one common goal. In a nut-shell, the budgetary control plays an important role in an organisation. When everyone knows what they ought to do, they will be more responsible because they are doing what they know best. Therefore, the decision, at times, is more likely to be a guess work and misleading. Authority to be commensurate with responsibility – When an individual is given the responsibility to accomplish the budget targets, he must have the authority for its execution as desired by the management. The steps of control are discussed as follows: Step # 1. iv. Generally, human resource manager or head of the human resource department, whatever his designation may be, keeps control over personnel in the organization. Gross profit margin – This is the ratio of gross profit made in relation to sales. Delay in sending reports might hurt the purpose of control system. The control should be forward looking with a view to guard the business against future dangers. The person who prepares the list of sequential of operations must be thoroughly familiar with all the operations and the machines as well as equipment in the plant so that proper routes, which will ensure the maximum utilisation of the plant capacity can be established. Organization management gives a sense of direction to the employees. EVA and MVA, in conjunction with each other provide a meaningful target for the company to pursue for its strategic success. Financial statement ratios focus on the liquidity, profitability and solvency of the business, which are its three key aspects. If the products and services fail to satisfy the customers, then they will move away from the company. In this type of control, the individual performance of each decontrolled establishment with separate assets and infrastructure is rated on the basis of return (benefits) or investment received by the establishment. According to Henry Fayol, “In an undertaking control consist of verifying whether everything occurs in conformity with the plans adopted, the instructions issued and the principle established. Perspectives of Balanced Scorecard System: According to the balanced scorecard method, there are four perspectives of viewing an organisation’s objectives. Planning without control is useless and control without planning is meaningless. Manager is a decision maker. Standards are the indexes that guides the performances of employees. Copyright. Controlling helps to identify who is doing what in an organization. There are devices like statistics etc., to ensure the correctness of a budget. It is suitable for construction projects and plant maintenance. 6. 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