NCERT Solutions - Controlling

Very Short Answer Type Questions

Q1: State the meaning of controlling.
Ans: Controlling is the process by which management ensures that actual activities conform to planned activities. It involves setting performance standards, measuring actual performance, comparing actual performance with the standards and taking corrective action when necessary so that organisational goals are achieved effectively and efficiently.

Q2: Name the principle that a manager should consider while dealing with deviations effectively. State any one situation in which an organization's control system loses its effectiveness.
Ans:

• Principle: Management by Exception.
• Situation: The control system loses effectiveness when standards are not set in measurable terms. For example, where standards are purely qualitative (such as employee morale or job satisfaction) it becomes difficult to measure performance and take objective corrective action.

Q3: State any one situation in which an organization's control system loses its effectiveness.
Ans: An organisation's control system may lose effectiveness when major external factors - such as sudden changes in government policy, rapid technological shifts or unexpected competitive moves - alter the business environment and these factors are beyond the firm's direct control.

Q4: Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department.
Ans:

1. Liquidity Ratios: Ratios such as the current ratio and quick ratio indicate the company's ability to meet short-term obligations and help assess short-term financial health.
2. Capital Expenditure Utilisation: Measures how efficiently capital investments are being used, for example by comparing planned returns on capital projects with actual returns.

Q5: Which term is used to indicate the difference between standard performance and actual performance?
Ans: The term is Deviation.

Short Answer Type Questions

Q1: 'Planning is looking ahead and controlling is looking back.' Comment.
Ans: The statement summarises the complementary roles of planning and controlling in management. Planning is forward-looking: it defines objectives, policies and the actions required to achieve future goals. Controlling is feedback-oriented: it reviews actual performance against the planned standards, identifies deviations and ensures corrective measures are taken. Together they form a continuous cycle - planning sets the direction and standards, while controlling checks progress and feeds information that improves future planning.

Q2: 'An effort to control everything may end up in controlling nothing.' Explain.
Ans: Trying to control every minor activity leads to dilution of managerial attention and resources. This causes three problems: managers become overloaded, important deviations are missed, and employees feel micromanaged which reduces initiative. Effective control therefore follows management by exception - focus on significant variances and critical areas, delegate routine matters, and apply controls where they add most value.

Q3: Explain how management audit serves as an effective technique of controlling.
Ans: Management audit is a systematic review of managerial performance, policies and procedures. It helps controlling by identifying weaknesses and strengths in management practice and suggesting improvements. Management audit serves as an effective control technique through:

• Comprehensive Evaluation: It examines planning, decision-making, organisation structure and leadership to assess overall managerial effectiveness.

• Detection of Deviations: It reveals gaps between intended and actual practice, bringing important deviations to management's attention.

• Insightful Analysis: It analyses resource utilisation, organisational processes and policy adherence to recommend corrective actions.

• Promoting Accountability: By highlighting responsibilities and performance, it increases transparency and encourages continuous improvement.

Q4: Mr. Arfaaz had been heading the production department of Write well Products Ltd., a firm manufacturing stationary 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 Ms. Vasundhara, the CEO of the Company, to file a complaint against Mr. Bhanu Prasad and requested her to terminate his services. Explain the principle of management control that Ms. Vasundhara should consider while taking her decision. (Hint: Management by exception).
Ans: Ms. Vasundhara should apply the principle of management by exception. This principle implies that managers should concentrate on significant deviations from standards and not on minor or routine variations. In this case:

1. A shortfall of 10 units for two days is a small deviation and may not justify severe action like termination, especially if the worker's overall performance has been satisfactory.
2. She should investigate the cause - for example, personal problems, machine issues, raw material shortages or unrealistic targets - before taking disciplinary action.
3. Appropriate responses might include counselling, temporary assistance, training, or easing short-term constraints rather than immediate termination.

By following management by exception, she will use managerial time efficiently and ensure fair and proportionate action.

Long Answer Type Questions

Q1: Explain the various steps involved in the process of control.
Ans: The control process is a systematic sequence of steps used to ensure that organisational activities conform to plans. The main steps are:

• Setting Performance Standards: Establish clear, measurable standards of performance linked to organisational objectives. Standards may be quantitative (e.g. units produced, cost limits, sales targets) or qualitative (e.g. product quality, customer satisfaction).
• Measurement of Actual Performance: Measure actual results in an objective and reliable manner using reports, observations, sampling or information systems. Measurement should be timely and relevant.
• Comparing Actual Performance with Standards: Compare measured performance with the standards to determine the extent of any deviation. Comparison is easier when standards are quantitative.
• Analysing Deviations: Determine the causes and significance of deviations. Decide what range of deviation is acceptable and identify which deviations require corrective action. Use tools such as critical point control and apply management by exception.
• Taking Corrective Action: Take appropriate action to correct unacceptable deviations. If deviations cannot be corrected, review and, if necessary, revise the standards or plans. Corrective action may include changes in operations, training, disciplinary measures or improvements in resources and processes.

Q2: Explain the techniques of managerial control.
Ans: Techniques of managerial control can be classified as traditional and modern:

Traditional Techniques:

• Personal Observation: Managers directly observe activities to assess performance and find problems early.
• Statistical Reports: Use of charts, graphs and statistical data to monitor trends and detect variances.
• Break-Even Analysis: Helps in understanding the relationship between costs, revenue and profit to control financial performance.
• Budgetary Control: Comparison of actual results with budgeted figures to control revenues and costs.

Modern Techniques:

• Return on Investment (ROI): Measures profitability and efficiency of investments to control capital use.
• Management Information System (MIS): Provides timely and relevant data to managers for monitoring and decision-making.
• Balanced Scorecard: Evaluates performance from financial, customer, internal process and learning & growth perspectives.
• Benchmarking: Compares processes and performance with best practices in the industry to identify areas for improvement.

Q3: Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?
Ans: Controlling is essential because without it plans cannot be implemented reliably. Its main importance and benefits are:

• Accomplishing Organisational Goals: Controlling measures progress and points out deviations so corrective action can ensure achievement of objectives.
• Judging Accuracy of Standards: It helps verify whether standards are realistic and, where necessary, supports their revision in the light of changing conditions.
• Efficient Use of Resources: Control reduces waste and ensures that resources are used effectively and economically.
• Improving Employee Motivation: Clear standards and feedback help employees understand expectations and improve performance.
• Ensuring Order and Discipline: Control creates a disciplined environment and reduces dishonest or unauthorised behaviour.
• Facilitating Co-ordination: Control synchronises activities across departments so that overall organisational objectives are met.

Problems in implementing effective control include:

• Difficulty in Setting Quantitative Standards: Some aspects such as employee morale or creativity are hard to measure precisely, which reduces control effectiveness.
• Limited Control Over External Factors: Organisations cannot fully control external forces like government policy changes, technological shifts or market competition.
• Resistance from Employees: Excessive control may be perceived as a lack of trust and may meet with resistance, lowering morale.
• Costly to Implement: Establishing and operating a control system can be expensive; benefits must justify the cost.

Q4: Discuss the relationship between planning and controlling.
Ans: Planning and controlling are closely linked and interdependent. Key points of their relationship are:

• Planning Provides Standards: Plans set the objectives and standards which are the basis for control.
• Controlling Ensures Implementation: Controlling monitors progress and ensures activities conform to the plan through feedback and corrective action.
• Feedback Loop: Information from control helps managers evaluate the effectiveness of plans and revise them when necessary.
• Mutual Reinforcement: Good planning makes controlling easier, and effective controlling improves the quality of future planning by providing reliable performance data.

Q5: A company 'M' limited is manufacturing mobile phones both for 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. 
Questions:
(a) Identify the benefits the company will derive from a good control system.
(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. 
(c) Give the steps in the control process that the company should follow to remove the problems it is facing.
Answers:
(a) Identify the benefits the company will derive from a good control system.
Ans: A good control system will help the company in the following ways:

• Help achieve desired sales and customer-satisfaction goals by identifying shortfalls early.
• Judge the accuracy of its plans and standards and revise them where necessary.
• Ensure efficient use of resources - reduce wastage in production, after-sales service and inventory management.
• Improve employee performance and morale by providing clear targets and feedback.
• Maintain order and discipline across marketing, production and service functions.
• Facilitate coordination between departments so product quality, pricing and delivery meet market expectations.

(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: The company can integrate planning and control by:

• Setting Clear, Measurable Standards: Translate plans into specific targets for sales, market share, product quality and customer service.
• Establishing Timely Measurement Systems: Use MIS and sales reports to monitor performance in real time.
• Regular Comparison and Feedback: Compare actual results with plans frequently and identify causes of deviations quickly.
• Taking Corrective Action: Make timely adjustments - for example, improve product features, revise pricing, increase marketing or enhance after-sales service.
• Using Control Inputs to Improve Future Plans: Feed lessons learned from control into future planning (product development, capacity expansion, budgeting).

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

• Setting performance standards (sales targets, quality levels, customer-satisfaction indices).
• Measuring actual performance using sales data, customer feedback and production reports.
• Comparing actual performance with the standards to spot variances.
• Analysing deviations to find root causes (technology gaps, pricing, service, competition).
• Taking corrective actions such as product upgrades, process improvements, training, pricing adjustments or marketing changes.

Q6: 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. 
Questions:
(a) Describe any two features of Controlling highlighted in the above situation.(Goal Oriented, continuous and pervasive - any 2). 
(b) Explain any four points of importance of Controlling.
Answers:
(a) Describe any two features of controlling highlighted in the above situation.
Ans:

1. Goal-Oriented: Controlling helps ensure that departmental activities and employee efforts are directed towards achieving the organisation's production and quality targets.
2. Continuous: Controlling is an ongoing activity - performance must be monitored continuously so that deviations are detected and corrected promptly.

(b) Explain any four points of importance of controlling.
Ans:

1. Ensures Goal Achievement: Control keeps activities aligned with objectives and helps ensure targets are met.
2. Improves Resource Utilisation: Control reduces waste and ensures effective use of materials, time and labour.
3. Facilitates Coordination: It synchronises actions of different departments so that overall production and delivery schedules are maintained.
4. Enables Corrective Action: Control identifies deviations early and enables timely corrective steps to restore planned performance.