Question

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.

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.

Answer 1

1. 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 benefits that the company would derive from an effective controlling system.

i. With effective controlling the deficiencies in the system can be identified and accordingly corrective action can be taken. This would help in moving in the right direction as per the set objectives.

ii. A controlling system would help in judging the accuracy of the standards adopted by the management. It would enable the manager to review and revise the standards according to the changing business environment.

iii. 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. The 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.

2. Planning and controlling are closely interrelated functions of management. While, planning decides the objectives to be achieved and the course of action to be followed, on the other hand, controlling refers to the process of managing and evaluating the work done in accordance with the standards and taking corrective measures, if there are any deficiencies. In the given situation plans can be made with regard to improving the sales, customer satisfaction and pricing policy. These plans would serve as standards in the controlling process. If there are no standards and no objectives, there is nothing to control.

3. The following steps would be followed in the controlling process.

i. Setting Standards: Setting up of standards involves developing the benchmarks against which the actual performance is to be measured. The standards can be set in qualitative (such as number of initiatives taken by an employee) as well as quantitative terms (such as in the form of sales targets, units to be produced).

ii. Measuring Actual Performance: Once the standards are set, the next step is to measure the actual performance of the activities. This may be done through various techniques such as personal observation and performance reports.

iii. Comparing the Performances: Performances once measured are then compared with the set standards. Such a comparison helps in assessing the deviations in the work. Thereby, it guides the managers in taking the necessary steps so as to improve the performances.

iv. Analysing Deviation: Every organisation faces deviations when comparing the actual performance with the pre-developed standards. Thus, it is important to find the deviations that are in the permissible range. It is said that deviations in key areas should be attended first. For analysing the deviations the managers generally use 'Critical Point Control' and 'Management by Exception'. Once the deviations are recognised, the cause for it must be identified.

v. Corrective Measures: When deviations go beyond the admissible limits, there arises a need for the management to take corrective actions. This is the last step of controlling which aims at correcting the deficiencies of the organisation so that the errors do not occur again.

4. The management can follow management by exception technique of controlling. According to this technique, only the essential and significant deviations that are beyond the acceptable limit should be controlled. For example, if there is a 6 per cent drop in sales whereas the permissible limit is just 3 per cent, then, this should be immediately brought into the notice of the management. On the other hand a 2 percent drop can be ignored.