Controlling - Concept, Process & Techniques

Summary

This video explains the concept, process, and techniques of controlling in management. It outlines how controlling ensures tasks are completed on time, resources are used efficiently, and goals are achieved. The process involves setting standards, measuring performance, comparing results, and taking corrective actions. Various traditional and modern techniques are discussed, including personal observation, statistical reports, break-even analysis, ROI, and responsibility accounting. Additionally, the video covers tools like PERT, CPM, and management information systems, offering valuable insights into improving organizational performance and decision-making.

Takeaways

• 😀 Controlling is one of the most important management functions, ensuring tasks are completed on time, activities align with plans, and resources are used effectively and efficiently.
• 😀 Controlling is a continuous and forward-looking process that involves setting standards, measuring performance, comparing results, and taking corrective actions.
• 😀 Controlling is closely linked to planning, as it helps ensure that plans stay on track and resources are used appropriately to achieve organizational goals.
• 😀 The process of controlling is circular, where each step (setting standards, measuring performance, comparing, and taking corrective actions) repeats periodically.
• 😀 Traditional controlling techniques include personal observation, statistical reports, break-even analysis, and budgetary control, which help in measuring and controlling performance.
• 😀 Personal observation allows managers to gather firsthand information about employee performance but can be time-consuming and less effective in all scenarios.
• 😀 Break-even analysis helps managers understand the relationship between costs, volume, and profits, determining the sales volume where the organization breaks even.
• 😀 Budgetary control involves setting budgets for different activities and comparing actual results with these standards to identify areas requiring corrective action.
• 😀 Modern controlling techniques include ROI, ratio analysis, responsibility accounting, management audits, PERT/CPM, and management information systems to improve decision-making and resource allocation.
• 😀 Management information systems (MIS) support effective decision-making by providing accurate data in real-time, helping managers take corrective actions when deviations from standards occur.

Q & A

What is the primary function of controlling in management?

The primary function of controlling is to ensure that tasks are performed on time, activities align with plans, and resources are used effectively and efficiently to achieve predetermined goals.

How does controlling differ from the other management functions like planning and staffing?

Controlling is not a last function; instead, it connects back to planning. While planning sets the objectives, controlling ensures that the progress aligns with the plan and adjusts any discrepancies, making it an ongoing and cyclical process.

What are the key characteristics of the controlling function?

The key characteristics of controlling include being pervasive (applied at all levels of management), forward-looking (focused on future performance), continuous (ongoing with regular reviews), closely linked to planning, and aimed at minimizing costs and saving time.

What are the four steps involved in the process of controlling?

The four steps in the process of controlling are: 1) Setting standards (defining expectations), 2) Measuring performance (evaluating actual results), 3) Comparing performance (analyzing discrepancies), and 4) Taking corrective action (adjusting to stay on track).

What is break-even analysis, and how does it help in controlling?

Break-even analysis helps managers determine the point at which total revenue equals total costs, indicating no profit or loss. This analysis is essential for understanding profit and loss scenarios at different activity levels, assisting managers in resource control.

How does budgetary control function within the traditional techniques of controlling?

Budgetary control involves planning operations in advance through budgets for various activities. It compares actual performance with budgeted standards to identify discrepancies, helping managers take corrective actions when needed.

What is ROI (Return on Investment), and why is it important in modern controlling techniques?

ROI is a financial metric used to evaluate the profitability of investments by calculating the ratio of net income to total investment. It is crucial because it helps managers assess whether invested capital is generating an adequate return.

What types of ratios are typically analyzed in ratio analysis as part of modern controlling techniques?

Ratio analysis includes liquidity ratios (e.g., current ratio), solvency ratios (e.g., debt-equity ratio), profitability ratios (e.g., gross profit ratio), and turnover ratios (e.g., inventory turnover ratio), which help in assessing various aspects of the organization's financial health.

What is responsibility accounting, and how does it support controlling?

Responsibility accounting assigns responsibility to different departments or centers, such as cost centers, revenue centers, profit centers, and investment centers. Each center is accountable for its specific performance, helping managers control costs, revenues, and investments effectively.

How do PERT and CPM techniques assist in controlling project performance?

PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method) are tools used for scheduling and resource allocation in complex projects. They help managers ensure that projects are completed on time by identifying key tasks, their dependencies, and critical milestones.