According to Billy E. Goetz, “Management Control seeks to compel events to conform to plans.”<\/li>\n<\/ul>\nOn the basis of all the above definitions we can say that controlling includes verifying whether everything is happening properly, according to the plans, if not then finding out the obstacles and making efforts to remove them. For this purpose, the actual work progress is-measured and compared to the standard already determind in order to find out the deviations and remove such deviations by taking corrective action.<\/p>\n
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Question 2.
\n“Planning is looking ahead and controlling is looking back”. Comment.
\nAnswer:
\nPlanning is done always for the future. It is a well thought outline of the future events. According to George Terry, “Planning is oriented to and requires a feeling for the future. It is an investment of thought and time in the present for reaping the benefits in future. Some people believe’ that planning is unearthing the things for a better future.” It is called looking ahead because a well thought procedure is following in the future.<\/p>\n
According to Allen, “Plan is a trap which is laid down to catch the future.” Thus it is clear that planning involves making estimates for the future, the more correct the estimates the more successful would.be the PlAnswer:Thus it is true that planing is looking in to the future.<\/p>\n
It contrast to planning, control is called a looking back because a manager makes a comparison with the laid down standards Only after certain activity has been performed is compared with the- predetermined standards. Since both these activities have been already performed hence to compare them is in fact looking back. Looking back means, evaluating the work or performance which has already been done.<\/p>\n
The thought of looking back in context to control is partially – correct. Control is not only looking back but also looking ahead. This has two reasons – First, the corrective action which is an important part of control is one of the measures of looking ahead. Second a good control system is the one which informs about the deviations even before their occurrence and prevents their reoccurrence. In other words, control is not only a remedial action but also a preventive action which reduces the possibilities of deviations.<\/p>\n
Question 3.
\n“An effort to control everything may end up in controlling nothing”*. Explain. ‘ *
\nAnswer:
\nManagement control is that process of ensuring that actual activities conform to planned activities. Controlling helps in accomplishing organizational goals, judging accuracy of standards, ensuring different utilization of resources, but an effort to control everything sometimes create problems in controlling.<\/p>\n
Controlling, suffers from certain limitations. An organization has no control over external function The control system of an organization may face resistance from its employees. Controlling also looses its effectiveness when standards cannot be defined in quatitative terms which makes the measurement of performance arid their comparison with standards a difficult task. Controlling is a costly affair as it involves lot of expenditure, time and effort. A small enterprise cannot afford to control an expensive control system.<\/p>\n
Control is often resisted by employees. They see it as a curb to their freedom. External factors like government policies, technological changes, competition etc. cannot be controlled. Therefore, an effort to control everything is not justified. Overall organizational objectives should be kept in mind while controlling the activities in an organization.<\/p>\n
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Question 4.
\nWrite a short note on budgetary control as a technique of managerial control.
\nAnswer:
\nBudgetary control : Budgetary control is a system of management control in which all operation are planned ahead in the form of budgets and actual results are compared with budgetary Satandards and the necessary actions are taken to ensure attainment of organisational objectives.<\/p>\n
According to G.R. Terry “Budgetary control is a process of comparing the actual results with the corresponding budget data in order to approve accomplishments or to remedy differences by either adjusting the budget estimate or correcting the cause of the differences”.<\/p>\n
Thus, in budgetary control first of all, the budgets for all the activities of the Organisation are prepared, then the actual result are compared with these budgets and if any diviations are found on comparison then the reasons for them are located.<\/p>\n
If the deviations are able to be remove on correcting the reasons then the same is done otherwise necessary amendements are made in the. Plans Before studying budgetary control in detail it is necessary to understand the three related terms : budget, budgeting and budgetary control Budget.<\/p>\n
A budget’is a financial or quantitative expression of the plan of a action to be presumed in a definite future period. In other words, a budget presents financial or quantitative details of what is to be done in future.<\/p>\n
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Budgeting.<\/p>\n
The process of preparing a budget is called budgeting. In other words, the process of collecting the necessary information and data and presenting them in the form of a statement in numerical terms is called budgeting.<\/p>\n
Budgetary control
\nBudgetary control is a process of exercising control through budgets. It is a system of comparing actual result with the budgets and taking necessary steps to correct the deviations.<\/p>\n
Characteristics of Budgetary Control
\nThe main characteristics of budgetary control are as follows
\n(i) Process of Comparing : It is a process of comparing the actual results with the estimated figures.<\/p>\n
(ii) Finding out the Deviations : On comparing the actual results with the estimated ones, certain deviations are found. Steps are taken to find out the causes for. such deviations.<\/p>\n
(iii) Taking corrective action : After finding out the causes for deviations, corrective action is taken to remove the cause of such deviations.<\/p>\n
(iv) Budgets are based on Forecasts : The budgets are the estimates which are based on scientific forecasts.<\/p>\n
(v) Separate Budgets are prepared for all the Departments.<\/p>\n
Different budgets are prepared for all the Departments or activities and later all these budgets^are included in the form of a common budget for the entire enterprise, which is called a master budget.
\nRequisites for success of Budgetary control . To make the budgetary control successful following factors must be considered.<\/p>\n
(i) Full Support : The budgetary control must receive full support of the top executives of the enterprise.<\/p>\n
(ii) Full participation : The budgetary control can be. successful only when all the executives associated with its emplementation actively participate in its formation.<\/p>\n
(iii) Sound Organisation structure : The structure of the organisation should be according to the budget arrangements so that the specific responsibilities can be handed over to specific people.<\/p>\n
(iv) Clear Defination of Budget authority and Responsibility: The authority must and responsibility of making and executing the budget must be clearly defined.<\/p>\n
(v) Flexibility : A budget should be flexible enough to be changed according to . the changes in the situation.<\/p>\n
(vi) Motivation : For the success of budgetary control it must have arrangement for rewarding the efficient employee and punishing the inefficient ones.<\/p>\n
(vii) Feed back system : There must be proper arrangements of transmission of the progress report of various departments to the budget official. Also the opinion and suggestions of various officers responsible for implementing the budget must also reach the budget officials. This helps in bringing about improvements in the budget in the future.<\/p>\n
(viii) Adequate Time : The decisions of the success or failure of the budgetary control cannot be taken in short time. It can be taken only after the passage of some time.<\/p>\n
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Question 5.
\nExplain how management audit serves as an effective technique of controlling.
\nAnswer:
\nManagement Audit : The quality of management is the main determinant for the success or failure of an organisation. Management audit focuses attention on evaluation of quality of management.<\/p>\n
It is an independent and critical examination of total management process of planning, organising, staffing, directing and controlling. It helps in locating the deficiencies in the performance of these managerial functions and advice the top management for necessary adjustments in order to make the organisation more effective.<\/p>\n
Management audit is nothing but an extension of financial audit and its functions begin from where the functions of financial audit end. According to Koontz and O\u2019 Donnell, management audit, “Auditing the quality of managers through appraising them as individual managers and appraising the quality of the total system of managing in an enterprise.”<\/p>\n
Thus, we can say that the main objectives of management audit is to conduct a systematic and unbiased analysis and evaluation of a entire management system. It makes a critical analysis of the organisational structure, its various departments, Plans of management, Policies, work-procedures, use of human and physical resources and various other achievements and failures with a view to determine the afficiency of the managers. So as to bring about improvement in them.<\/p>\n
Procedure of Management Audit : The following Procedure is normally followed for conducting management audit.<\/p>\n
(i) Preliminiary Decisions : First of all, the board of directors of the organisation or the managing director decides about the objectives of the management audit, what shall be included in it, when it shall be done and who shall be its auditors.<\/p>\n
(ii) Audit : After making the initial decisions the actual work of the management audit begins. It includes various activites like determination of the\u2019sources and means of information, making the audit Programme, inspection of necessary records and reports, interviewing the managers, making surveys, inspection of the organisation structure, inspection of various techniques of motivation, communication and control, considering their suitability, reporting the difficulties etc. Apart from this, he judges the quality of managerial decisions taken in various field of management.<\/p>\n
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(iii) Critical Appraisal : After obtaining all the necessary informations, the management auditor makes a critical evaluation of it and tries, to find out unneccessary activities, differentiate between the activities which are required and which are not required for the achievement of objectives, what are the various problem related with the implementation of various Policies, Procedures and decisions.<\/p>\n
(iv) Suggestions for improvement : After making such analysis the auditor suggests the remedial actions which are based on his experience, suggestions of various executives and the directions of the top executives to bring about improvement in the management of the company.<\/p>\n
Long Answer Type Questions<\/span><\/p>\nQuestion 1.
\nExplain the various steps involved in the Process of control.
\nAnswer:
\nControl Process : The Process of control involves the setting of standards comparison of actual result with the standards, detection and correction, of the deviations if any.
\nThus, the Process of Control involves four steps:-<\/p>\n
\n- Setting standards<\/li>\n
- Measurement of Actual Performance.<\/li>\n
- Comparison of actual Performance with the standards and calculating Deviations.<\/li>\n
- Taking corrective Action.<\/li>\n<\/ul>\n
1. The Process of control can be presented by way of diagram as follows
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\nSetting Standards : The first step in the control Process is the setting up of control standards. Standards Present the criteria against which actual Performance is measured. Standards serve as the bench marks because they reflect the desired results or Performance. The standard can be laid down in terms of physical terms like quantities of the Product, labour-hours, units of service, speed, etc. or in monetary terms like sales value, costs, capital espenditure or Profit etc.<\/p>\n
These standards must be easily attainable through the available capability and resources. The standard must also be according to the Plans of Process of the enterprise. While setting the standards the managers should keep in mind that they are<\/p>\n
\n- Simple and easily attainable<\/li>\n
- definite<\/li>\n
- measurable<\/li>\n
- according to the objectives<\/li>\n
- flexible<\/li>\n
- \u00a0timely and<\/li>\n
- economical.<\/li>\n<\/ul>\n
To make standrds effective it should be ensured that different standards are laid down for different responsibility centers so that it becomes easier to motivate the employees of different centers.<\/p>\n
The extent of deviations which shall be considered as normal should also be laid down because some deviations between the standards and actuals are inevitable. Thus, the limits up to which deviations shall be tolerated must be established. such limits must neither be too high nor too low.<\/p>\n
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2. Measurement of actual Performance : The next step in the Process of Control is the measurement of actual Performance. While measuring actual Performance it should be ensured that<\/p>\n
\n- The date of Progress should be prepared regularly and constantly.<\/li>\n
- So far as possible measurement should be done during the course of Performance.<\/li>\n
- The figures of date of measurement should be accurate and reliable.<\/li>\n
- Report regarding important deviations should reach the manager very quickly so that corrective action may be taken immediatey.<\/li>\n<\/ul>\n
While Preparing the report maximum emphasis should be given to the deviations which are highly important because the top managers do not have must time and they are expected to concentrate only on important deviations. The managers may not pay need to the deviations which are with in the prescribed limits.<\/p>\n
3. Comparison of Actual Performance with Standards and Calculations of Deviation . The third major step in the control.Process involves the comparison of actual Performance with the Standard Performance. Such comparison will reveal the deviations between actual and desired results. Steps are taken to find out the reasons for the deviations. There could be many reasons for the deviations like:<\/p>\n
\n- Setting of wrong standards : Like wrong estimates of cost of production, sales, Profits etc.<\/li>\n
- General Hurdles : Like short supply of raw materials, breaking of machines etc.<\/li>\n
- Change in circumstances : Like entry of new competitors in the market, change in demand, fashion etc.<\/li>\n
- Human Causes : Inefficiency in completing the work by different individuals or groups.<\/li>\n<\/ul>\n
Here, managers should see that they concentrate only on major deviations because small deviation can be coincidental. Thus they need not be given much attention.<\/p>\n
From the analytical viewpoint deviations can be divided into following two categories.
\n(i) Controllable Deviations : Ones which can be controlled, and
\n(ii) Uncontrollable Deviations : Ones which cannot be controlled but can be reduced with the help of good system of forecasting. For example entry of various competing firms in the market is an uncontrollable deviation. Corrective actions can rectify only the controllable deviations.<\/p>\n
4. Taking Corrective Action
\nThe final step in the control Process is taking corrective action. Actually corrective action is the soul of controll Process. Its main aim is to help in making actual process in accordance with the expected Progress. It includes two types in activities.<\/p>\n