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Question

Give the Meaning of 'controlling'


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Solution

Controlling is the process of comparing the actual performance with the standards set by the company to ensure that all the activities are happening according to the plan and if any deviations are found, then corrective action needs to be taken.

The steps in controlling are as follows:

  1. Establishing standards: It is the first step in controlling which involves setting up standards based on which the actual performance will be measured.
  2. Measurement of actual performance: After setting up a standard, the next step is to determine actual performance. The performance should be measured in a reliable and objective manner. Several ways of measuring performance are performance reports, observation and sample checking.
  3. Comparison of actual performance with standards: This step involves comparing the actual performance with the standard, and finding out any deviations from the standard performance.
  4. Analysing deviations: This step involves analysing the deviations that were obtained after measuring the actual performance. There can be a chance that some amount of deviation is seen, it is normal to have deviations, the business needs to define the range of normal deviations.
  5. Detailed analysis needs to be done to find out the cause of the deviation and deal with it properly. Management by exception needs to be followed to address such deviations.

  6. Taking corrective steps: In this step, which is the final step of controlling, corrective actions are required when the deviations are not within the normal range i.e. exceeds the normal range.

Also read:

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