Class 12 Business Studies · Chapter 8 NotesControlling
Learn about the concept, importance, steps, types, tools, and relationship of controlling with other managerial functions in Class 12 Business Studies.
Controlling is a crucial function of management that ensures activities align with planned objectives. This chapter explores the concept of controlling, its importance, and the steps involved in the controlling process. Students will learn about different types of controls, tools and techniques used for effective control, and the relationship between controlling and other managerial functions. Understanding these aspects helps managers guide organizations toward achieving their goals efficiently.
What you'll learn
1Understand the concept and importance of controlling
2Explain the steps involved in the controlling process
3Identify different types of controls in organizations
4Describe various tools and techniques of control
5Analyze the relationship between controlling and other managerial functions
Chapter at a glance
01Concept and Importance of Controlling
02Steps in the Controlling Process
03Steps in the Controlling Process
04Types of Controls in Organizations
05Tools and Techniques of Control
06Relationship of Controlling with Other Functions
Detailed chapter notes
01
Concept and Importance of Controlling
Controlling is a managerial function that ensures activities are performed according to planned objectives. It involves measuring performance, comparing it with standards, and taking corrective actions if necessary. The importance of controlling lies in its ability to help organizations achieve goals, judge the accuracy of standards, ensure efficient use of resources, improve employee motivation, and maintain order and discipline. Controlling is a pervasive function, applicable at all levels of management and in various types of organizations.
Ensures activities align with planned objectives
Helps achieve organizational goals
Judges accuracy of standards
Ensures efficient use of resources
Improves employee motivation
Maintains order and discipline
02
Steps in the Controlling Process
The controlling process involves several systematic steps. First, performance standards are set, which serve as benchmarks for measuring actual performance. Standards can be quantitative, like production targets, or qualitative, like employee satisfaction. Next, actual performance is measured using techniques such as personal observation, sample checking, and performance reports. The measured performance is then compared with the set standards to identify deviations. Deviations are analyzed to determine their causes, and corrective actions are taken to address significant deviations, especially in key result areas.
Setting performance standards
Measuring actual performance
Comparing actual performance with standards
Analyzing deviations
Taking corrective action
03
Types of Controls in Organizations
Organizations use various types of controls to ensure activities conform to plans. Critical point control focuses on key result areas that are crucial for the organization's success. Management by exception involves addressing only significant deviations that go beyond acceptable limits, saving time and effort. These controls help managers focus on important issues and delegate routine problems to subordinates, thereby improving efficiency and morale.
Critical point control
Management by exception
Focus on key result areas
Delegate routine problems
Improve efficiency and morale
04
Tools and Techniques of Control
Traditional techniques of control include personal observation, statistical reports, breakeven analysis, and budgetary control. Modern techniques encompass return on investment, ratio analysis, responsibility accounting, management audit, PERT and CPM, and Management Information Systems. These tools help managers measure performance, identify deviations, and take corrective actions to ensure organizational goals are met. For instance, budgetary control involves comparing actual financial performance with budgeted amounts to identify variances and take corrective measures.
Personal observation
Statistical reports
Breakeven analysis
Budgetary control
Return on investment
Ratio analysis
Responsibility accounting
Management audit
05
Relationship of Controlling with Other Functions
Controlling is closely linked with other managerial functions, particularly planning. Planning sets the standards and objectives, while controlling ensures that activities conform to these plans. Without planning, controlling has no basis, and without controlling, planning may not be effectively implemented. Controlling also complements functions like organizing, staffing, directing, and coordinating by ensuring that resources are used efficiently and organizational goals are achieved. This interrelationship reinforces the management cycle, making controlling an indispensable function.
Linked with planning
Ensures conformance to plans
Complements organizing, staffing, directing, and coordinating
Reinforces the management cycle
Indispensable function
Want the complete chapter resources?Topic notes, quizzes and flashcards for Controlling.
Which of the following best defines controlling as a management function?
AThe process of monitoring actual performance against planned standards and taking corrective action
BThe authority to direct subordinates to perform specific tasks
CThe process of setting goals and objectives for the organization
DThe function of organizing resources and assigning responsibilities
Show answer
Answer: (A) The process of monitoring actual performance against planned standards and taking corrective action
Controlling is the management function that involves comparing actual performance with planned standards and implementing corrective measures. It ensures that organizational activities are proceeding as planned.
Question 02
Which of the following is the first step in the controlling process?
AEstablishing standards and performance criteria
BComparing actual performance with standards
CTaking corrective action
DMonitoring performance
Show answer
Answer: (A) Establishing standards and performance criteria
The controlling process begins with setting clear standards and performance criteria that serve as benchmarks against which actual performance will be measured.
Question 03
Which of the following is a primary objective of controlling in an organization?
ATo ensure that actual performance matches planned performance
BTo increase the salary of employees
CTo eliminate all managers from the organization
DTo reduce the number of departments
Show answer
Answer: (A) To ensure that actual performance matches planned performance
Controlling ensures that organizational activities are performed as per plans and standards set during the planning process. It bridges the gap between expected and actual results.
Question 04
Which of the following is a basic tool of control used to monitor actual performance against predetermined standards?
ABudget
BRatio analysis
CBreak-even analysis
DVariance analysis
Show answer
Answer: (A) Budget
A budget is a fundamental control tool that sets predetermined financial and operational targets against which actual performance is measured and monitored.
Question 05
Which management function comes before controlling in the sequence of management functions?
APlanning
BOrganizing
CDirecting
DStaffing
Show answer
Answer: (C) Directing
Controlling follows planning, organizing, staffing, and directing. It is the final function that ensures execution aligns with plans through monitoring and corrective action.
Ready for more practice?Unlock the full quiz for this chapter.
Q1. Define controlling and explain why it is considered a necessary function of management.
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Model answer
Controlling is the management function that involves monitoring organizational activities to ensure they are performed as planned and taking corrective action when necessary. It is necessary because it helps ensure that actual performance matches planned objectives, identifies deviations early, maintains discipline and accountability, and guides the organization toward achieving its goals efficiently.
Sample question3 marks
Q2. Define controlling and explain why it is considered the final step in the management process. How does it relate to planning?
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Model answer
Controlling is the process of monitoring organizational activities to ensure they conform to planned standards and objectives. It is the final step because it measures actual performance against predetermined plans and takes corrective action if needed. Controlling is closely related to planning because it ensures that plans made during the planning stage are executed as intended. Without controlling, there is no assurance that organizational goals will be achieved.
Sample question3 marks
Q3. Define preventive control and explain how it differs from detective control in an organization.
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Model answer
Preventive control is a type of control that stops errors or problems from occurring in the first place by setting standards and guidelines before work begins. It focuses on preventing deviations before they happen. Detective control, on the other hand, identifies and detects errors or deviations after they have already occurred. For example, training employees before they start work is preventive control, while auditing financial records after transactions are completed is detective control. Preventive controls are generally more cost-effective as they avoid problems, while detective controls help minimize damage after problems occur.
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Q4. Define budgetary control and explain how it helps an organization monitor its financial performance.
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Model answer
Budgetary control is a management technique that involves preparing budgets for different departments and comparing actual results with budgeted figures to identify variances. It helps organizations monitor financial performance by ensuring that spending stays within planned limits, identifying inefficiencies early, and enabling timely corrective action. By tracking actual versus budgeted amounts, management can maintain cost discipline and achieve organizational objectives efficiently.
Sample question3 marks
Q5. Explain how controlling is related to planning. How does the controlling function help ensure that plans are executed effectively?
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Model answer
Controlling and planning are closely interconnected. Planning sets the objectives and standards that need to be achieved, while controlling monitors actual performance against these planned standards. Controlling identifies deviations between planned and actual results, enabling management to take corrective action. Without controlling, there is no assurance that planned activities will be executed as intended, making both functions essential for organizational success.
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Controlling is a managerial function that ensures activities are performed according to planned objectives by measuring performance, comparing it with standards, and taking corrective actions if necessary.
Why is controlling important in an organization?
Controlling is important because it helps achieve organizational goals, judges the accuracy of standards, ensures efficient use of resources, improves employee motivation, and maintains order and discipline.
What are the steps in the controlling process?
The steps in the controlling process are setting performance standards, measuring actual performance, comparing actual performance with standards, analyzing deviations, and taking corrective action.
What are the types of controls in organizations?
Types of controls include critical point control, which focuses on key result areas, and management by exception, which addresses only significant deviations beyond acceptable limits.
What tools and techniques are used for control?
Tools and techniques include personal observation, statistical reports, breakeven analysis, budgetary control, return on investment, ratio analysis, responsibility accounting, management audit, PERT and CPM, and Management Information Systems.
How is controlling related to other managerial functions?
Controlling is closely linked with planning, as planning sets the standards and objectives, while controlling ensures activities conform to these plans. It also complements organizing, staffing, directing, and coordinating.