Question

Explain first four steps in the process of controlling.

Hint:

Sequential memory trick for Controlling Steps: 1. Set the standard benchmark $\rightarrow$ 2. Measure the actual work done $\rightarrow$ 3. Compare work against the standard $\rightarrow$ 4. Analyze deviations using CPC and MBE guidelines.

Answer 1

Concept: Controlling is a goal-oriented managerial function focused on ensuring that organizational activities conform to established plans. It helps measure progress against goals, identify deviations, and guide corrective actions. The controlling process follows a logical, sequential series of steps designed to maintain operational standards across the enterprise. Detailed Explanation of the First Four Steps:

• Step 1: Setting Performance Standards

• Explanation: The controlling process begins with establishing benchmarks against which actual performance can be evaluated. These standards serve as the targets the organization aims to achieve.

• Characteristics: Standards should be clear, realistic, and ideally expressed in measurable, quantitative terms (e.g., producing $500$ units per day, reducing defects by $2\%$, or increasing sales by $10\%$). When quantitative measurement isn't possible, qualitative standards (like improving employee morale) should be defined clearly to avoid ambiguity.

• Step 2: Measurement of Actual Performance

• Explanation: Once standards are established, the next step is to measure the actual work completed by employees or departments.

• Methodology: Performance should be measured objectively using reliable methods such as personal observation, statistical summaries, sample checks, or performance reports. To simplify comparisons, performance should be measured in the same units as the established standards. Measurement can occur during operations or after the task is completed.

• Step 3: Comparing Actual Performance with Standards

• Explanation: This step involves comparing actual performance directly against the pre-set standards to identify any differences.

• Impact: If actual performance matches the standard, operations are running smoothly under control. However, if performance falls short, a gap or deviation is identified. This systematic comparison provides managers with clear data on where operations are falling behind, highlighting areas that require attention.

• Step 4: Analysing Deviations

• Explanation: Not all deviations require equal attention from management; minor variations are normal in business. Managers must analyze deviations to understand their root causes using two key concepts: itemize

• Critical Point Control (CPC): Focuses control efforts on key result areas (KRAs) that are vital to the organization's success. A $10\%$ cost increase in raw materials is critical, while a $10\%$ increase in office stationery is minor.

• Management by Exception (MBE): Based on the idea that an attempt to control everything can result in controlling nothing. Only significant deviations that exceed acceptable tolerance limits should be escalated to top management.
itemize