NCERT Class 12 Business Studies Chapter 8 Controlling

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NCERT Class 12 Business Studies Chapter 8 Controlling

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Controlling

Chapter: 8

PART – Ⅰ  PRINCIPLES AND FUNCTIONS OF MANAGEMENT

EXERCISE

VERY SHORT ANSWER TYPE

1. State the meaning of controlling.

Ans: Controlling means ensuring that activities in an organisation are performed as per the plans. Controlling also ensures that an organisation’s resources are being used effectively and efficiently for the achievement of predetermined goals. Controlling is, thus, a goal-oriented function.

2. Name the principle that a manager should consider while dealing with deviations effectively. State any one situation in which an organisation’s control system loses its effectiveness. 

Ans: The manager should consider the “Principle of Management by Exception. This approach ensures that only major deviations from the budget or plan are reported to management for attention and action.

3. State any one situation in which an organisation’s control system loses is effectiveness.

Ans: An organisation’s control system loses its effectiveness when performance standards are not clearly defined. 

4. Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department. 

Ans: The standards that can be used by a company to evaluate the performance of its Finance & Accounting department are: Inventories, Liquidity.

5. Which term is used to indicate the difference between standard performance and actual performance? 

Ans: The term used to indicate the difference between standard performance and actual performance is “Deviation”.

SHORT ANSWER TYPE

1. ‘Planning is looking ahead and controlling is looking back.’ Comment. 

Ans: Planning is looking ahead while controlling is looking back. However, the statement is only partially correct. Plans are prepared for the future and are based on forecasts about future conditions. Therefore, planning involves looking ahead and is called a forward-looking function. On the contrary, controlling is like a postmortem of past activities to find out deviations from the standards. In that sense, controlling is a backward looking function. However, it should be understood that planning is guided by past experiences and the corrective action initiated by control function aims to improve future performance. 

2. ‘An effort to control everything may end up in controlling nothing.’ Explain. 

Ans: The statement ‘an effort to control everything may end up in controlling nothing’ is in regard with the principle of ‘Management by Exception’. Control can be thought of as a process through which management ensures that the actual operations follow the plans.

3. Explain how management audit serves as an effective technique of controlling.

Ans: A management audit is an effective technique for controlling because it helps identify and address deficiencies in management performance. It helps in identifying weaknesses, improving decision-making, and ensuring alignment with organizational goals.

4. Mr.Arfaaz had been heading the production department of Writewell Products Ltd., a firm manufacturing stationery items. The firm secured an export order that had to be completed on a priority basis and production targets were defined for all the employees. One of the workers, Mr.Bhanu Prasad, fell short of his daily production target by 10 units for two days consecutively. Mr.Arfaaz approached MsVasundhara, the CEO of the Company, to file a complaint against MrBhanu Prasad and requested her to terminate his services. Explain the principle of management control that MsVasundhara should consider while taking her decision. (Hint: Management by exception).

Ans: Management by exception, which is often referred to as control by exception, is an important principle of management control based on the belief that an attempt to control everything results in controlling nothing. Thus, if the plans lay down 2 per cent increase in labour cost as an acceptable range of deviation in a manufacturing organisation, only increase in labour cost beyond 2 percent should be brought to the notice of the management. However, in case of major deviation from the standard (say, 5 percent), the matter has to receive immediate action of management on a priority basis.

LONG ANSWER TYPE

1. Explain the various steps involved in the process of control.

Ans: Controlling Process Controlling is a systematic process involving the following steps. 

(i) Setting performance standards. 

(ii) Measurement of actual performance. 

(iii) Comparison of actual performance with standards.

(iv) Analysing deviations.

(v) Taking corrective action.

2. Explain the techniques of managerial control. 

Ans: Control techniques are essential tools that managers use to monitor, measure, and adjust activities within an organization to ensure efficiency and goal achievement. These techniques are broadly classified into traditional and modern methods, each playing a crucial role in improving organizational performance.

3. Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system? 

Ans: A good control system helps an organisation in the following ways: 

(i) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organisation and keeps it on the right track so that organisational goals might be achieved. 

(ii) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective. An efficient control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards in light of such changes.

(iii) Making efficient use of resources: By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards and norms. This ensures that resources are used in the most effective and efficient manner. 

(iv) Improving employee motivation: A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It, thus, motivates them and helps them to give better performance. 

(v) Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimise dishonest behaviour on the part of the employees by keeping a close check on their activities. 

(vi) Facilitating coordination in action: Controlling provides direction to all activities and efforts for achieving organisational goals. Each department and employee is governed by predetermined standards which are well coordinated with one another. This ensures that overall organisational objectives are accomplished.

4. Discuss the relationship between planning and controlling. 

Ans: Planning and controlling are inseparable twins of management. A system of control presupposes the existence of certain standards. These standards of performance which serve as the basis of controlling are provided by planning. Once a plan becomes operational, controlling is necessary to monitor the progress, measure it, discover deviations and initiate corrective measures to ensure that events conform to plans. Thus, planning without control is meaningless. Similarly, controlling is blind without planning. If the standards are not set in advance, managers have nothing to control. When there is no plan, there is no basis of controlling. 

Planning is clearly a prerequisite for controlling. It is utterly foolish to think that controlling could be accomplished without planning. Without planning there is no predetermined understanding of the desired performance. Planning seeks consistent, integrated and articulated programmes while controlling seeks to compel events to conform to plans.

5. A company ‘M’ limited is manufacturing mobile phones both for the domestic Indian market as well as for export. It had enjoyed a substantial market share and also had a loyal customer following. But lately it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also mobile market in India has grown tremendously and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing. 

(a) Identify the benefits the company will derive from a good control system.

Ans: Benefits of a Good Control System for ‘M’ Limited:

(i) Helps in Achieving Targets: Ensures that sales and customer satisfaction goals are met by identifying deviations and taking corrective actions.

(ii) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action. 

(iii) Making efficient use of resources: By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards and norms.

(iv) Improving employee motivation: A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised.

(v) Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimise dishonest behaviour on the part of the employees by keeping a close check on their activities. 

(b) How can the company relate its planning with control in this line of business to ensure that its plans are actually implemented and targets attained.

Ans: Planning and controlling are inseparable twins of management. A system of control presupposes the existence of certain standards. These standards of performance which serve as the basis of controlling are provided by planning. Once a plan becomes operational, controlling is necessary to monitor the progress, measure it, discover deviations and initiate corrective measures to ensure that events conform to plans. Thus, planning without control is meaningless. Similarly, controlling is blind without planning. If the standards are not set in advance, managers have nothing to control. When there is no plan, there is no basis of controlling.  

(c) Give the steps in the control process that the company should follow to remove the problems it is facing.

Ans: Steps in the Control Process for ‘M’ Limited:

(i) Setting Performance Standards: Define measurable targets for sales, market share, customer satisfaction, and product quality.

(ii) Analyzing Deviations: Analyzing deviations is a step in the controlling process that involves identifying and addressing differences between actual performance and standards. 

(iii) Taking Corrective Action: Implement strategies like improving product technology, competitive pricing, enhancing marketing efforts, and better customer service.

6. Mr Shantanu is a chief manager of a reputed company that manufactures garments. He called the production manager and instructed him to keep a constant and continuous check on all the activities related to his department so that everything goes as per the set plan. He also suggested him to keep a track of the performance of all the employees in the organisation so that targets are achieved effectively and efficiently. 

(a) Describe any two features of Controlling highlighted in the above situation.(Goal Oriented, continuous and pervasive – any 2).

Ans: Two Features of Controlling Highlighted in the Situation:

(i) Goal-Oriented: Controlling is a goal-oriented function of management. It aims at ensuring that the resources of the organisation are used effectively and efficiently for the achievement of predetermined organisational goals.

(ii) Continuous and pervasive” are key features of the “Controlling” function in management, meaning that it is an ongoing process that happens at all levels of an organization, across all departments, and is not a one-time activity; it needs to be constantly monitored and adjusted as needed.

(b) Explain any four points of importance of Controlling.

Ans: A good control system helps an organisation in the following ways:

(i) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organisation and keeps it on the right track so that organisational goals might be achieved. 

(ii) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective. An efficient control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards in light of such changes.

(iii) Making efficient use of resources: By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards and norms. This ensures that resources are used in the most effective and efficient manner. 

(iv) Improving employee motivation: A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It, thus, motivates them and helps them to give better performance.