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Controlling is an important and an indispensable function of management. It aims at managing the managerial actions by setting the standards and identifying the deviations of actual performance as against the set standards. It also ensures optimum utilisation of resources while taking corrective measures for the deviations. The following are the factors that highlight the importance of controlling.

(i) Achieving Organisational Goals: Controlling aims at accomplishment of the organisational goals by indicating the deficiencies and the corrective actions which are to be taken. It helps in moving in the right direction for attaining the set organisational objectives.

(ii) Evaluating the Standards: Controlling helps in judging the accuracy of the standards adopted by the management. A good controlling system enables the manager to check whether the set standards are accurate and feasible. It also helps the organisation to review and revise the standards according to the changing business environment.

(iii) Optimum Utilisation of Resources: A continuous control and monitoring helps in the efficient and optimum utilisation of resources. As each work is done according to the set standard, there is less wastage and spoilage of resources.

(iv) Employee Motivation: By exercising effective control, employees get to know well in advance about what is expected from them and the standards against which their performance will be assessed. This motivates them to achieve the assigned targets in a better way.

(v) Order and Discipline: Efficient controlling helps in creating an atmosphere of order and discipline in the organisation. As the employees are aware of the fact that they are being continuously observed, dishonesty and inefficiency in behaviour is minimised.

(vi) Promoting Coordination: Pre-determined standards provide a basis for better coordination within various activities. As the departments are made aware of their duties and tasks, controlling promotes coordination among them. Controlling provides unity of direction while ensuring that the organisational objectives are met.

Hence, Controlling is an important function that is performed by all the managers.

However, controlling has some limitations. The following points highlight the problems faced by the organisation when implementing an effective controlling system.

(i) Complication While Setting Standards: It is important to set the standards in quantitative terms as well as qualitative terms for better controlling. However, controlling becomes less effective when the standards are defined in qualitative terms. Qualitative standards make the evaluation of the performance and the comparison of actual work with the standards, a complicated task. Thus, it might pose a problem in the process of controlling.

(ii) External Factors: Business environment keeps on changing and the organisation have very little control over such external factors. These factors might create hurdles in effective controlling. Such factors can be in the form of change in government policies, environmental changes, competition, etc.

(iii) Resistance from Employees: Controlling can be resisted by the employees if it goes against their comfort zone and freedom. For instance, if the managers set a defined quantity for production as a standard and if the workers take it as unrealistic, then they can go on strike.

(iv) Expensive Process: Effective controlling is a costly affair in terms of time, money and effort. For example, setting up of CCTVs involves a lot of costs. Thus, it may not be possible for a small organisation to set up such system. Thereby, the managers should ensure that the costs incurred in operating such controlling systems do not exceed the benefits derived from it.

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

2. For Evaluating/Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate or not by careful check on the changes taking place in the organizational environment.
3. Making efficient use of resources: By the process of control, a manager seeks to reduce wastage of resources.
4. Improves employee’s motivation: 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 & helps 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. Control provides unity of direction.
6. Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organization by keeping a close check on the activities of its employees.

Controlling Process
1. Setting Performance Standards: Standards are the criteria against which actual performance would be measured. Thus standards become basis for comparison and the manager insists on following of standards. Standards can be set in both quantitative as well as qualitative terms. Is is important that standards should be flexible enough to be modified
whenever required. Please note that standards should be attainable and time bound.
2. Measurement of Actual Performance: Performance should be measured in an objective and reliable manner which includes personal observation, sample checking. Performance should be measured in same terms in which standards have been established, this will facilitate comparison.
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. If the performance matches the standards it may be assumed that everything is under control.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations. Deviations are analysed in the light of pre-determined deviation tolerance limit and key result areas.

a) Critical point control (CPC): It is neither economical nor easy to have a check on all the activities of an organisation. Hence, the manager should pay more attention on those activities which are important and critical to the success of an organisation. These are known as Key Result Areas- KRA’s.
b) Management by Exception (MBE): A manager should take corrective action when there is exceptional deviation i.e. when they cross the permissible limit or acceptable range. Deviations within acceptable range are ignored.

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. But where significant deviations occur corrective action is taken.

1. Little control on external factors: Generally no enterprise can control external factors such as government policies, technological changes, competitions etc.
2. Resistance from employees: Control is often resisted by employees. They see it as a restriction on their freedom e.g. Employees may resist and go against the use of cameras to observe them minutely.
3. Costly affair: Control is a costly affair as it involves a lot of expenditure of time and efforts.
4. Difficulty in setting quantitative standards: Control system looses some of its effectiveness, when standards cannot be defined in quantitative terms. In the absence of quantitative standards, comparison with standards becomes difficult.

Planning and controlling are interrelated and in fact reinforce each other in the sense that-
1. Planning is pre-requisite for controlling. Plans provide the standard for controlling. Thus, without planning, controlling is blind. If the standards are not set in advance managers have nothing to control.
2. Planning is meaningless without controlling. It is fruitful when control is exercised. It discovers deviations and initiates corrective measures.
3. Effectiveness of planning can be measured with the help of controlling.

4. Planning and controlling both are forward looking: Planning is a future oriented function as it involves looking in advance and making plans based on forecasts about future conditions.
Controlling is referred to as looking forward because the corrective action in controlling is taken to prevent the recurrence of the deviations in future.
5. Planning and controlling are both looking back: Planning is looking back because new planning is guided by the problem identified in the past. Controlling is looking back as it compares the actual performance with standards. This involves scrutinising the events after they have taken place.
Thus, planning and controlling cannot be separated. The two are
supplementary function which support each other for successful execution.
Planning makes controlling effective whereas controlling improves future
planning.

(b) Accounting centre is not a part of responsibility accounting. Responsibility accounting basically refers to a system in which different divisions of the organisation are established as responsibility centres. Herein, each department is given a set target and the head of the department (manager) is made responsible for achieving it. They are of different types of responsibility centres such as cost centre, investment centre, profit centre and revenue centre.

Controlling refers to the function of evaluating and assessing the progress of the work done. It involves setting a specific criteria or standards for the work and then comparing the actual work with the set standards. It helps in finding the deviations from the set targets and thereby, take the required corrective actions. It ensures that everything goes as per the plans adopted. It also ensures full and efficient utilisation of resources. Controlling is an imperative managerial function as it keeps a close check on the progress of work and thereby, forms the basis for future actions and planning.

Planning is looking ahead and controlling is looking back. This statement is partially true. Planning is a psychological process of ‘thinking and deciding in advance’ about ‘what is to be done’ and ‘how it is to be done’. It is a mental activity that includes deciding the goals and also the actions through which they are to be accomplished. Thus, it is said that planning is looking ahead as it involves predicting the future. Controlling on the other hand, involves an assessment of the past performance and evaluating them against the set standards. In this sense, controlling is said to be a backward looking function.

However, both these statements are only partially true. Though planning is a futuristic concept but it is based on past actions and experiences. Planning for future cannot take place without peeping into the past. Similarly, though controlling involves assessment of past performance, it also aims at improving the future performance by taking the required corrective actions. Hence, we can say that planning and controlling are backward looking as well as forward looking functions.

Budgetary control is a technique of controlling that involves preparing plans in the form of budgets. Budget refers to a financial or a quantitative statement that defines the targets to be achieved and the policies to be followed in a specific period of time. The actual performance is then compared with the budgetary standards. This comparison helps in identifying the deviations and thereby, guides in taking appropriate corrective measures. Budget can be prepared for different divisions of the organisation such as sales budget, production budget, purchase budget, etc. However, for the budgeting to be effective, future estimates must be made carefully. Budgeting also acts as a source of motivation for the employees by setting the standards against which their performance will be assessed. Thus, it encourages them to achieve the set objectives. In addition, it is also used to facilitate coordination among different divisions/departments of the organisation. Moreover, proper budgeting ensures that resources are allocated to different divisions as per their requirements. Thereby, it helps in optimum utilisation of the resources.

(b) Management audit implies a systematic assessment of the overall actions of the management of a company. It aims at evaluating the efficiency and effectiveness of the management and helps in identifying the areas where it lags behind. It reveals the deficiencies in performance and helps in taking corrective measures. Hence, management audit keeps a check on the overall performance of the management of the company.