Business Studies

Question

Explain the steps in the controlling process?

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Studies Tanya Dhamija 4 months 2 Answers 58 views Bronze 0

Answers ( 2 )

  1. 1. Setting performance standards.
    2. Measurement of actual performance.
    3. Comparing actual performance with standards.
    4. Analyzing deviations.
    5. Taking corrective actions.

  2. 1) Setting Performance Standards:
    The first step in the process of controlling is concerned with setting performance standards. These standards are the basis for measuring the actual performance. Thus, standards act as a lighthouse that warns & guides the ships at sea. Standards are the benchmarks towards which efforts of entire organisation are directed. These standards can be expressed both in quantitative and qualitative terms.
    2) Measurement of Actual Performance:
    Once the standards have been determined, the next step is to measure the actual performance. The various techniques for measuring are sample checking, performance reports, personal observation etc. However, in order to facilitate easy comparison, the performance should be measured on same basis that the standards have.
    3) Comparing Actual Performance with Standards:
    This step involves comparing the actual performance with standards laid down in order to find the deviations. For example, performance of a salesman in terms of unit sold in a week can be easily measured against the standard output for the week.
    4) Analysing Deviations:
    Some deviations are possible in all the activities. However, the deviation in the important areas of business needs to be corrected more urgently as compared to deviation in insignificant areas. Management should use critical point control and management by exception in such areas:-

    a) Critical Point Control:
    Since it is neither easy nor economical to check each and every activity in an organisation, the control should focus on Key Result Areas (KRAs) which act as the critical points. The KRAs are very essential for the success of an organisation. Therefore, the entire organisation has to suffer if anything goes wrong at these points. For example, in a manufacturing organisation, an increase of 7% in labour cost is more troublesome than an 18% increase in stationary expenses.
    (b) Management by Exception:
    Management by exception or control by exception is an important principle of management control. According to this principle, an attempt to control everything results in controlling nothing. Thus only the important deviations which exceed the prescribed limit should be brought to the notice of management. Thus, if plans provide for 3% increase in labour cost, deviations beyond 3% alone should be brought to the notice of the management.

    5) Taking Corrective Action:
    The last step in the process of controlling involves taking corrective action. If the deviations are within acceptable limits, no corrective measure is required. However, if the deviations exceed acceptable limits, they should be immediately brought to the notice of the management for taking corrective measures, especially in the important areas.

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