Even though the control process is essential and so many merits are demonstrated, it has some limitations and short-comings. In the same way a non-financial budget is prepared for material, production and so on. The very purpose of control is prevention and not punishing. Modern Management Control Techniques 16. Control gives unity of direction. As responsibility is fixed for each individual, effective performance is possible. (ii) Controlling is an essential function of all managers – Controlling is essential for managers at all levels, be it chief manager or any supervisor. As such, there is a need for individuals who can adapt to the evolution of our ever-changing academic organizations. Through supervision and motivation, projects are initiated and sustained. Internal audit is also an effective tool of control. Controlling also ensures that an organization’s resources are being used effectively and efficiently for the achievement of predetermined goals. Steps 8. v. The budget must make the organisational structure strong and viable to perform smoothly to achieve the goals. Information provides the means by which problems are recognised, declined and eventually solved. 1 20. The independent variables used to explain organizational structure were often transferred wholesale into the emerging theory of management accounting to explain the design and use of management accounting systems, with additional variables being added as the years progressed. Controlling is the function of every manager from president to supervisor. This is done through budgetary control and projected profit and loss account and balance sheet. These are not possible in the absence of control. Behaviour Implications 12. Managerial errors caused by unforeseeable events cannot be avoided. A management structure that plans finds it even easier to anticipate problems and cope with them. Apart from the above, the decision regarding expansion of productive capacity and control of fixed charges can be easily procured with the help of break-even point analysis. ii. In other words, it measures how much a company’s returns exceed the minimum required rate of return for its shareholders and lenders of capital. External relations are regulated by the public relations department. The balanced scorecard is an integrated method to measure the organisation’s performance. This budget assumes that instead of taking into consideration the previous year’s budget and adjusting it for preparing the future budget therefrom, zero based budgeting forces the managers to review the current objectives, goals and operations. vii. Therefore, while designing the control system, the organization should ensure that it is in tune with the needs of the people. As far as possible, it should try to prevent, rather than remedy, the situations arising from deviations. Control implies and involves a continuous check on the performance and behaviour of people in the organization. A complicated system will only create problems for the operative workers and defeat its very purpose. In fact, the secret of successful management lies in efficient controlling. Managers can improve their education, be transferred to acquire broader experience, or be cautioned to take better stock of the situation before making decisions. Dispatching deals with setting the productive activities in motion through release of orders and instructions in accordance with previously planned timings as embodied in operation sheet, route card and loading schedules. Naturally prerequisite of control is observation of the performance and locating points of lapses. Organization Quality : Is related to mental image and perception total from organization. However, managers at different levels of management are concerned with specific issues in functional areas. Control, on the other hand, is the direction of the operations of an enterprise towards predetermined standards and monitoring the progress in this regard for the purpose of correction and feedback. b. With it comes confusion, lack of direction and ultimately, failure. Ratio analysis helps to compare past and current figures, but it is not futuristic in nature. Organization manuals attempt at solving organizational problems and conflicts, making long-range organizational planning possible, enabling rationalization of the organization structure, helping in proper designing and clarification of each part of the organization, and conducting periodic check of facts about organization practice. By laying down the norms and procedures for settling workers issues, and resolving industrial disputes it ensures a congenial atmosphere. Sometimes control may be an obstacle in subordinates initiative and spirit. Break-even analysis can help the management to know the minimum volume of sales it should aim at to avoid losses. The Institute of Cost and Management Accountants England has defined budgetary control as, “the establishments of budget relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actuals with budgeted results, either to secure by individual action the objectives of that policy or to provide a firm basis for its revision”. The concept of balanced scorecard was developed in the 1990s by Robert Kaplan and Davis Norton. It helps the management to save money and other resources while minimizing losses. Continuous learning and growth is the basis of success for any organisation in today’s climate of rapid technological improvements. Our economic system stands in the midst of a global system. The standards fixed must not be too high or low. Solvency ratios measure the relationship between debts and owners’ equity and examine the proportion of debt the company is using. Plans furnish the standards of control.”, No doubt writers on management separate planning and controlling conceptually. In an organization, the controlling function of management focuses on checking whether progress is being made, while measuring the performance of various aspects. Objective – Control should be objective. This may be called direct control. ii. A flexible budget is used by such business enterprises in which uncertainty is more. Thus, ratio analysis as a measurement of company’s performance should be used along with other control techniques for better accuracy of results. Managers and organizations are inseparable; like love and marriage they go together. In the planning process, the fundamental goals and objectives of the organisation and the methods for attaining them are established. It should be analysed and brought to the attention of the top-level executives of the organisation. Ratios help to analyse the operational efficiency of a company and shed light on the short term liquidity and long term solvency of the enterprise. (iv) Controlling is both the beginning and the end of the process of management – Controlling is required both at the beginning and at the end of the process of management. Operational control is exercised at two levels of an action — post-action control and steering control. The EVA is calculated using the following formula: Economic Value Added (EVA) = Net Operating Profit less applicable taxes (NOPAT) – Cost of Capital, Cost of capital = [Cost of Equity x Proportion of equity from capital] + [Cost of debt x Proportion of debt from capital x (1-tax rate)]. Thus product life cycle works as an effective non-budgetary control technique. Planning is looking ahead and control is looking back. The life cycle gives the sales revenue and profit margin history of a product over a time frame. Therefore, it becomes difficult to trace important matters, which require immediate attention. Any hope of abolishing unsatisfactory results lies in changing the future actions of the responsible person, through additional training, modification of procedures, or new policy. was founded in 1906 by a group of men from the communities of Prairie Laurent and Leonville. Practical problems of management and leadership are being solved for … Break-even point is the particular ‘point of time’ at which the total income is equal to total cost, i.e., the position of no profit, no loss. They are better indicators of a company’s success as compared to other methods like ratio analysis. Following are some of the traditional control devices used in management: This is always related to a budget. Inventory control of material management refers to controlling the kind, amount, location, movement and timing of buying various commodities used in and produced by the industrial enterprise. It is a continuous process because business situations are always changing and the work-progress of one individual does not remain the same forever. A point to be noted is that market value added cannot be calculated at a company division level and is not applicable to privately-held companies. 1. 20. Due importance for implementation – Top executives must give due importance to implement the budget at the appropriate time itself. This may be either because of the adverse real impact of control on them or because of misperception of the impact of control. The major causes of resistance to control are as follows: The basic notion of the term control is to curb freedom as it tries to regulate behaviour and performance in a specified way. This technique involves budgets, to plan, to co-ordinate and to control day-to-day operations of business in accordance with the overall objectives, goals and targets of the business organisations. A company’s invested capital is the sum of cash investments that shareholders and debt holders have made in the company. It is this unplanned control that has more serious repercussion and is more counter-productive. These factors may force the organisation to deviate from the original plans. This has serious implications for organizational operation and, therefore, managers should find out the causes for such resistance and take suitable measures to overcome these. However, this is not an ideal situation and managers should look at the control system. Failure to plan can throw an entire business into disarray because no one will understand where they are headed. It is involved not only in product planning and development but also in pricing, promotion and distribution policies. It is anticipatory. Eases Supervision – Controlling sees to it that regular performance reports and updates are made and looked into; thus helping in identifying deviations and taking corrective measures before the issues escalate further. An organization requires both at … All these modifications are to be made with the target of achieving perfection in performance. Thus MIS is a system which provides each manager, in the organisation with the information needed to take decisions, plan and control within his area of responsibility. The British Academy of Management (BAM) is the leading authority on the academic field of ... outcome in the organization (practice). Planning is the determination of objectives, goals, strategies, policies and programmes of an organisation to give purpose and direction to the activities of the organisation over a specified period of time. There are four steps in the control process, 8 essential objectives of management techniques mentioned by M. f. Clay, 5 main Tools for controlling the finance of your organisation, Sales Promotion: Definition, Meaning, Techniques, Importance and Advantages, Essay on the Meaning and Definition of Business Management, Controlling in Management # Meaning, Definition, Types, Process, Steps and Techniques. Organizing involves defining and grouping roles, establishing authorities, and frameworks that are geared towards the attainment of goals. Flexibility – Whenever an inevitable change is needed, there must be flexibility to accommodate the change or to modify the budget according to the needs. The purpose of EVA is to provide a more rounded measure of a company’s performance by calculating its true economic profits. It is similar to the human life cycle. Such responses may be of the following types: i. In fact, this should rank as the sole deter­mining factor in judging the effectiveness of any control system. It is originated in USA in 1970.The key element in ZBB is future- objective-orientation of past objectives. These techniques of control are broadly classified into two categories, namely, budgetary control and non-budgetary control. It consists of the assignment of starting and completion times for various operations to be performed. iii. The following discussion points out the problems and methods of control in each major area: Policies are formulated to govern the behaviour and action of personnel in the organization. It is not possible to cut a piece of paper unless there are two blades. The entire budget should not be replaced, as a sequel to incorporation of the changes/modification. Therefore, it can be stated that analysis aids the management in establishing the profitable level of output and corresponding sales. When managers delegate authority to subordinates, their responsibility to their own superiors is not reduced. EVA and MVA are value added measures of performance, as they aim to measure the increase in the wealth of the company. b. management. A fixed budget is one which remains unchanged irrespective of the level of activity in a business organisation. For instance, a poor educational system cannot be controlled by criticising its product, the unfortunate graduate; a factory turning out inferior products cannot be controlled by consigning products to the scrap heap; and a firm plagued with customer complaints cannot be controlled by ignoring the complainers. According to the purpose, the budget serves, it is classified under the following heads: i. Budgeting provides a clear understanding of what an individual is trying to achieve. Therefore, a leader must have the ability to convince people to pull people towards his direction. These, two techniques are basically variations of Network methods. decay in its sales. Thus control makes necessary adjustments in operation. 2. TOS Organizational structures that foster an individual’s creativity include a strong support system, transfer of knowledge, and management styles. There are some non-quantitative aspects of business like employee morale, public relations, employee motivation which cannot be expressed in quantitative terms. 6. c. Analysis of time required to complete individual activity and the entire project. Facilitates Coordination – Con­trolling helps in coordinating efforts towards the common organisational objectives. 4. Employing EVA and MVA in an organisation would help in developing strategies for value creation. This perception is likely to enhance when evaluation system is faulty; there is lack of trust between controller and controlled; and control information is used to devise reward and punishment system. An effective management ensures profitability for the organization. The functions of material management differ from organisation to organisation. This is the crux of controlling the quality of management. Production control is effected through routing, scheduling, dispatching and follow up, as under: The first thing required in routing is preparations of a list of operations, the machines, equipment that are required in the production process. Control indirectly induces the employees to perform the work efficiently. Planning without control is useless and control without planning is meaningless. The best control corrects deviations from plans before they occur. 2.2 Communication as Essential Tool for Achievement of Strategic Goals in Organization Strategic management is the process by which an organization determines how it will seek to achieve the long- ... communication and business success are inseparable. The budget control is exercised to adjust budget estimates for smooth functioning of an organisation either by curtailing unnecessary expenditure or sanctioning the necessary one. 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