CBSE Class 12 Business Studies Controlling Notes Set B

Meaning & Definition 
Controlling means ensuring that activities in an organisation are performed as per the plans. Controlling also ensures that an organisation resources are being used effectively and efficiently for the achievement of predetermined goals. It can be defined as comparison of actual performance with the planned performance

Importance of Controlling: –

1. Controlling helps in achieving organisational goals: – The controlling function measures progress towards the organisational goals and brings to light/indicates corrective action.

2. Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate or not.

3. Making efficient use to resources – By the process of control, a manager seeks to reduce wastage of resources.

4. Improves employee’s motivations: A good control system ensures that employees know well in advance what they are expected to do & also the standard of performance. It thus motivates & help them to give better performance.

5. Facilitating Coordination in action: In controlling each department and employee is governed by predetermined standards which are well coordinated with one another.

Limitations of Controlling

1. Little Control on external factors: Generally, no enterprise can control external factors such as government policies, technological changes, competitions etc.

2. Resistance from employee – Control is often resisted by employees. They see it as a restriction on their freedom.

3. Costly affair: Control is a costly affair as it involves a lot of expenditure time and efforts.

4. Difficulty in setting quantitative standards: – Control system loses some of its effectiveness, when standards cannot be defined in quantitative terms. In the absence of quantitative standards, comparison with standards becomes difficult.

Controlling Process:

1. Setting performance Standards: – Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks.

2. Measurement of Actual performance: Performance should be measured in an objective and reliable manner. Which include personal observation, sample checking.

3. Comparing Actual performance with standard: This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired performance.

4. Analysing Deviations – The deviations from the standards are assessed and analysed to identify the causes of deviations.

5. Taking Corrective Action: – The final step in the controlling process is taking corrective action. No corrective action is required when the deviations are within the acceptable limits.