Controlling Techniques

• Subject : Management
Principles and
•
Applications
• Presented by: Samiksha
 INTRODUCTION
1. To enable managers effectively control the
organizational activities, a large number of
controlling techniques areavailable.
2. A manager should know these techniques and in
which situation it should beapplied.
3. There are two types of techniques of controlling.
 TWO TECHNIQUES

 Traditional techniques
 Modern techniques
 TRADITIONAL TECHNIQUES

1. Personal observation
2. Budgeting
3. Break-even analysis
4. Financial statement
5. Statistical data & report
6. Setting examples
7. Standard costing
8. Written instructions
PERSONAL OBSERVATION
 This is the most traditional method ofcontrol.
 It helps managers to collect first hand information.
 It also creates a psychological pressure on the
employees to perform well as they are aware that they
are being observed personally on their job.
 How ever it is very time consuming , & not suitable for
all kinds of jobs.
BUDGETING

• A budget is a statement  Benefit of budgeting-

which reflects future incomes
1. Standards of
,expenditures & profits of the
performance
firm.
2. Planning
3. Predicting the future
4. Financial planning
BREAK EVEN ANALYSIS
 It deals with the study of the relationship between
costs, volume, & profit.
 It determines the probable profit and losses at
different levels of activity.
 The sales volume at which there is no profit, no loss is
known as breakeven point.
 It can be calculated as,
 Breakeven point=fixed cost/selling price per unit –
variable cost perunit.
FINANCIAL STATEMENT

 Financial statements shows  It offers information on :

financial positionof a firm over 1. Liquidity
2. Financial strength
a period of time, generally one
3. profitability
year.
 These are prepared along with
last year statements, so that firm
can compare its present
performance with last year’s
performance & improve its
futureperformance.
STATISTICAL DATA & REPORT
 Statistical analysis in the formof
averages,percentages,ratios,..etc.
 Data can be used for diagramatic representations like
histograms, pie chart, bargraphs..etc.
 A Report is a statement that represents data in the
form of information for carrying out the controlling
function.
SETTING EXAMPLES

 It is old saying that “example is better than precepts”

 Some managers follow this and put good examples of
performance before subordinates and expect the same
from them.
 Behaviour and actions of subordinates can be
controlled through exemplary behaviour of the
manager.
 STANDARD COSTING

 It is a technique of cost control.

 Under this technique ,standard costs of
materail,labour,overheads etc. aredetermined.
 Actual cost are recorded and compared with the
standard costs and variances are found out.
 Then measures are taken to prevent variances in
future.
WRITTEN INSTRUCTIONS

 These instructions are issued time to time to the

organization members.
 These provide latest information and instructionsin
the light of changing rules andconditions.
 These are supplementary controltechnique.
MODERN TECHNIQUES

1. Return on investment.
2. Management audit.
3. Management information system(MIS).
4. PERT/CPM.
 RETURN ON INVESTMENT

 FIRST used by Du Pont in the USA.

 Investment consists of fixed asset
and working capital used in business.
 Profit on the investment is a reward for risk taking.
 If the ROI is high then the financial performanceof a
business is good andvice-versa.
 Focuses on matters of primary concern to
investors. It is a long term control measure than
budgets.
ROI

• It can encourage to adopt an integrated approach to assess

organisational efficiency
• FOR EXAMPLE if the ROI is low (as compared to competetitors or
the past results of the organisation itself)managers can go back to
the past to discover the poisiible reasons like low turnover ratio.
MANAGEMENT AUDIT

 Management Audit is an evaluation of the

management as a whole. It critically examines the
full management process.
 It finds out the efficiency of the management.
 Management auditing is conducted by a team of
experts.
 The data is analyzed and conclusions are drawn about
managerial performance and efficiency.
MANAGEMENT INFORMATION
SYSTEM
 In order to control the organisation properly the
management needs accurate information.
 Information is collected continuously to identify
problems and find outsolutions.
 They need information about the internal workingof
the organisation and also about the external
environment.
 MIS collects data, processes it and provides it to the
managers.
 PERT/CPM

 Programme Evaluation and Review Technique(PERT)

and Critical Path Method (CPM) techniques were
developed in USA in the late 50's.
 Any programme consists of various activities and sub-
activities.
 Importance is given to identifying the critical activities.
 by controlling the time of the critical activities, the total
time and cost of the job are minimized.
THANKS