The Directing And Controlling Accounting Essay

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Part 1 - Directing

1.0 Introduction:

Directing is the function of management in which the managers guide, instruct and administer the performance of the employees to attain the predetermined objectives. All the planning, organizing and staffing would be in vain without directing. Thus directing is said to be very vital and crucial process of the management. Directing is an incessant process following a top down approach through organizational hierarchy.

1.1 Definitions:

"Directing consists of process or technique by which instruction can be issued and operations can be carried out as originally planned."- Human

"Directing concerns the manner in which a manager influences the actions of his subordinates. It is the final action of a manager in getting others to act after all preparations have been completed."-J.L.Massie

"Directing is telling people what to do and seeing that they do it to the best of their ability. It includes making assignments, corresponding procedures, seeing that mistakes are corrected, providing on-the-job instruction and of course issuing orders."-Earnest Dale

"Directing is the guidance, the inspiration, the leadership of those men and women that constitute the real core of responsibilities of management." -Urwick and Breach

"Directing deals with the steps a manager takes to get subordinates and others to carry out plans." -William Newman and Kirby Warren

1.2 Need / Importance:

Initiates Action: All the planning of the organization is in vain if efforts are not taken to actualize these plans. The actualization of plans starts when the function of directing begins. It is through directing that employees understand what they are actually supposed to do in the organization.

Effective Utilization of Resources: Directing helps to make it clear to all the employees their duties and responsibilities. Thus the scope for duplication and overlapping of work is reduced to greater extent leading to effective utilization of all the resources.

Motivation: One of the important elements of directing is motivation. The employee is not only made aware about the tasks to be performed but also motivated for better performance. The managers may use different motivation techniques like monetary (Incentive, bonus) and non-monetary (promotion, increase in responsibility) or positive (recognition, appreciation) and negative (warnings, memos).

Helps to achieve organizationalobjectives: As under the directing function the manager guides, motivates and supervises the subordinates it ultimately helps to achieve the organizational goals.

Responding to change: Every organization is affected by the changes in the environment in which it operates, it could be both internaland external environment. It is the human nature to resist a change. In such circumstances the manager utilizes the element of communication to make the subordinates utilize the benefit of change. This is how the directing function helps respond to a change. Ex: In some circumstance the company might be required to change over from the current technology and adopt a new one to sustain in the market. Here the employees need to be convinced about the changeover.

OrganizationalStability: The four elements of directing function - leadership, communication, supervision and motivation, provide stability in the organization and maintain organizational balance. Thus, organization exists for a long period and its divisions / departments work in an efficient manner.

Elements of Directing:

ELEMENTS OF DIRECTING

Fig. 6.1.1 Elements of Directing

Supervision:

"Day-to-day relationship between an executive and his immediate assistant and covers training, direction, motivation, coordination, maintenance of discipline, etc." - Newman and Warren

Supervision implies to the process of overseeing the work of subordinates. It is the responsibility of every superior to supervise his subordinates to ensure that they perform their tasks as desired. It is one of the important elements of the directing function. Supervision is significant specifically at the operating level of management. Each organization has some objectives and this element of directing function ensures accomplishment of these objectives.

Communication:

"Communication is the transfer of information from one person to another person. It is a way of reaching others by transmitting ideas, facts, thoughts, feelings and values." - Newstrom and Davis.

Communication is an indispensible element for an organization to exist. In simple words, no organization can exist without communication. Communication is the process by which individuals exchange their ideas and information for mutual understanding. The prime responsibility of the manager is to foster two way communications within the organization to attain better understanding and coordination.

Leadership:

"Leadership is the ability to awaken in others the desire to follow a common objective."- R.T. Livingston

Leadership is a trait which an individual possesses to influence the behavior of his/her employees or team mates to work eagerly for accomplishing goals and objectives set by the organization or the team. It is an indispensable constituent for success of an organization. Effective leadership is a major attribute that differentiates a successful organizationfrom an unsuccessful organization.

Motivation:

"Motivation is the willingness to expand energy to achieve a goal or a reward."- Hodge and Johnson

Motivation means to inspire subordinates to work willingly and more efficiently towards the organizational goals. Motivation is core of management. Motivation is a complex process that depends on motive and motivating. The manager may choose to motivate his subordinates through various techniques. Ex.: Financial and Non-Financial.

Principles of Directing:

Directing is a complex management function since it requires the manager to understand the motives, needs and attitudes of his subordinates. Different strategies have to be formulated based on the circumstance and individuals. Following are the principles that could prove to be useful for the manager while directing:

Principles relating to the purpose of Directing:

Principle of maximum individual contribution: The growth and development of an organization depends largely on the efforts of the individual employees working for the organization. Thus, the technique of direction that enables maximum individual contribution should be adapted by the management.

Principle of harmony of objectives: Everyorganization exists to achieve its predefined objectives. Also all the employees working in the organization have their own objectives. In such a case it becomes very important for the management to direct the employees in such a manner so that it would lead to the accomplishment of both, the organizational as well as individual objectives.

Principle of efficiency of direction: The sense of belongingness and commitment of the employees increases when they are given an opportunity to participate in the decision-making. This would also lead to easy implementation of the decisions and increase in efficiency of the subordinates.

Principles relating to the process of Directing:

Principle of Comprehension: It is essential that the employees be communicated about what is to be done and the way in which it should be done. But more important is the extent of understanding by the subordinates. If the subordinates are unable to understand even after informing the entire directing function is in vain.

Principle of Unity of Command: This principle states that a person in the organization should receive instructions from one superior only. If instructions are received from more than one, it creates confusion, conflict and disorder in the organization.

Principle of Communication: One of the prime responsibilities of the managers is to communicate the policies, procedures, plans and responsibilities to the subordinates.

Principle of Appropriateness of direction technique: Selecting the directing technique depends on various factors like degree of complexity of the situation, knowledge of the subordinates etc. The managers can select from the three techniques available that are: authorization, participative or free-rein.

Principle of Follow through: Directing is not a one-time activity. It is an ongoing process. This principle states that only issuing the orders is not sufficient but the managers should also supervise their subordinates to ensure that the instructions or orders are begin followed and guide them as and when required.

Principle of effective leadership: While directing the subordinates, managers should exercise good leadership as it can influence the subordinates positively without causing dissatisfaction among them.

Techniques of Directing:

Autocratic Technique: In this technique the superior issues orders to his subordinates without prior discussion with his subordinates. In this technique the subordinates have no scope to take any initiative or put in their creativity. In simple words it can be referred as "do what I say" style.

Consultative Technique: This technique implies that the instructions are issued after consulting the subordinates. It does not conclude that the superior is inefficient or incapable. This technique is usually used to identify different alternatives to a problem. Though the superior consults his subordinates he is free to take his own decision. The success of this technique lies in the cooperation of the subordinates. Increased employee morale is the outcome of this technique.

Free-rein Technique: This technique can be used when the subordinates are well qualified and efficient. It emphasizes on encouraging the employees to work independently once the task is assigned.

Characteristics of Directing:

Directing is required at all levels of management. Every superior provides guidance to his subordinate.

It commands, motivates, communicates, supervises the employees and controls the organization.

Directing is not a one-time activity. It is a continuous process.

Directing function unearths the complexity in human behavior mainly the unpredictability, thus increasing its level of significance.

It facilitates in securing co-operation of the subordinates for achieving goals of the organization.

Direction function initiates action leading to converting of plans into performance.

It also provides the necessary leadership in the business.

Part 2 - Controlling

2.0 Introduction:

Controlling is another important managerial function which if not exercised properly can drastically impact the organization from every aspect. Each of the organizations strives to achieve the predefined objectives. In order to measure the performance the management sets some standards against which the actual performance can be measured. It is the controlling process that deals with setting up the standards and taking corrective action whenever the performance is deviated from the stated standards.

2.1 Definitions:

"Control is checking current performance against pre-determined standards contained in the plans, with a view to ensure adequate progress and satisfactory performance."-E.L.F Breach

"Control of an undertaking consists of seeing that everything is being carried out in accordance with the plan which has been adopted, the orders which have been given, and the principles which have been laid down. Its objective is to point out mistakes in order that they may be rectified and prevented from recurring."-Henry Fayol

"Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished."- Koontz and O'Donnell

"Control means to guide something in the direction it is intended to go."-Louis Allen

"Controlling is the process of ensuring that actual activities conform to the planned activities."-James Stoner

2.2 Need of Controlling:

Even the best plans tend to fail if not controlled. This is the prime reason why controlling is required in the organization. The other reasons why control is required is required in the organization are as mentioned below:

Optimum Utilisation of Resources: Control helps the organization to make optimum utilization of all the available resources. This ultimately results in increased profit.

Minimizes Deviation: From the definition of controlling it is clear that control means to keep a track on the deviations from the set standards and taking corrective actions, resulting to minimal deviations.

Increased Efficiency: Properutilization of resources and minimal deviations due to the corrective measures brings about efficiency in the organization's processes. Also as the manager controls the tasks done by the subordinates the individual performance also increases. Thus overall efficiency of the organization rises.

Coping with the changes: There are continuous changes in the social, legal, political and technological environment in which the business operates. For an organization to survive in the market it is essential to cope up with these changes. Control has a management function helps the managers to respond to these changes as and when required.

Value Addition: Anorganization that attempts to survive through competition should be able to add value to products or services so that customers prefer them over those offered by the organization's rivals. In most of the cases this added value takes the form of above-average quality achieved through demanding quality techniques.

Facilitates Delegation and Teamwork: In modern days with participative style of management the nature control process has undergone a prominent change. In initial times the managers used to set the standards and methods of performance. Whereas today the managers just specify the standards and allow the individual and teams to utilize their own creativity to solve a problem. Thus the control process assists the manager to monitor his subordinates without impeding their creativity.

2.3 Steps in the Controlling Process:

Establish Standards and Performance Measures

Is there dfDeviation? Type: Positive ijijjjjjjNegative jhjhjNone

Take Corrective Action

Measure Performance

Negative Deviation

Positive Deviation

Or

No Deviation

No Action Required

Fig. 6.2.1Steps in Control Process

The steps involved inthe control process are explained in detail with an example.

Establish Standards and Performance Measures: A standard is a benchmark against which the actual performance is measured. The standards that can be defined and measured easily are called quantitative standards, example: number of units manufactured, number of units sold etc. And the standards that cannot be defined and measured easily are called qualitative standards, example: effect of training on the individual's performance etc. The standards should be such that they can be understood both by the superiors and subordinates.

Ex:The Marketing department has established standard that,1000 units of product 'A' should be sold in east region, 2000 units in the north region and 1500 units in the south region per month.

Measure Performance: After the establishment of standards the managers should make sure that the subordinates receive all the required resources to carry out the given task. The next important task of managers is to guide, direct and motivate his subordinates to perform the job. The next step is to measure the actual performance of the subordinates.

Ex: After one month, it was observed that 700 units were sold in east region, 2200 units were sold in north region and 1500 units were sold in south region. These are actual performance output of the respective regions.

Compare Actual Performance against established standards: Here the actual performance is compared with the standard to identify the deviation, if any, so that necessary action could be taken.

Ex:

Region

Target (No. of Units)

Sold (Actual)

Deviation?

Type of Deviation

East

1000

700

Yes

Negative

North

2000

2200

Yes

Positive

South

1500

1500

No

None

Corrective Action: Comparing the actual performance with the established standards make it clear whether corrective action has to be taken.

Ex:

Region

Type of Deviation

Corrective Action Required?

Examples of corrective Action

East

Negative

Yes

More Advertising, Training the sales executive or establishing new standards

North

Positive

No

No Action Required

South

None

No

No Action Required

2.4 Design of Effective Control System:

Controlling is one of the most essential ingredients in the success of organization. An effective control system ensures that the organization is working as per the plan. Thus designing an effective control system is most essential and crucial task to be performed by the managers.

Objective Oriented:Each organization has some predefined objectives which it strives to achieve. To realize these objectives various tasks are to be carried out. Also these tasks need to be monitored at each phase. Thus a control system should be designed based on these organizational objectives if it is to function as an effective control system.

Suitability: Theorganization can frame the control system depending on its requirements. In order to design a control system it is essential to know internal environment, nature of the business, employee requirements etc.

Flexibility: The business environment is dynamic and undergoes changes continuously. While designing the control system this should be kept in mind and a system capable of accommodating all the changes or failures in plans should be prepared.

Quick Action: Management gets the information from various line managers or supervisors about the deviation in standards and these should be suggested to the planner to take a correct and quick action to avoid future wastage. Actually speaking, the success of control depends entirely on quick action and its implementation.

Economical: The control system must be economical. In simple words, cost of the control system should not go beyond its benefits.

Capability to foresee: The control system should be designed in such a manner that it helps the managers to keep a control on the operation in advance. If the errors and flaws can be determined in advance it would reduce the occurrences of deviations leading to smooth functioning of the organization.

Enables Feedback: An effective control system is the one which provides reliable feedback so that the future activities can be planned accordingly.

Provides Suggestions: A control system that only identifies the deviations is of no use. It should be capable of suggesting alternative actions.

Timely Revisions: With the change in the organizational objective the control system should also undergo revision to upkeep with the changing requirements.

Employee Participation: The benefits of an effective control system can be reaped only when it is implemented in the organisation. For this reason active participation of employees is a must not only whileimplementing but also while designing the control system.

2.5 Types of Control:

Control is generally classified into the following types:

Feedback Control

Feed-forward Control

Concurrent Control

TYPES OF CONTROL

Fig. 6.2.2Types of Control

Feed-forward Control: In an organization before performing any task planning is done. An attempt that is made to anticipate the deviations that can occur while realizing the plan is called feed-forward control. Thus it has a close association with planning. The manager tries to identify problems before the actual operation starts. Also the alternatives to overcome the anticipated problems are evaluated.

Ex: Some of the sugar industries have an additional manufacturing line apart from those operating on a daily basis. This extra line is set up so that the production can continue even if any of the line is under maintenance.

Concurrent Control: It means to control the tasks while they are being performed.This type of control ensure that the work is being performed as per the plan, if not, corrective actions are taken.

Ex: A supervisor at the shop floor in a manufacturing unit monitors continuously that the tasks are being performed as per the predefined methods and standards. If any deviations are noticed corrective actions are taken by the supervisor.

Feedback Control: On completion of a task a review is made to identify if the anticipated results are accomplished or not. In short feedback control provides information stating whether the organizational goals are met. It is the basis on which further move of the organization can be decided.

Ex:If it is observed that the target was not met because some employees were not able to complete the tasks efficiently then the organization could plan to carry out a training session for these employees.

2.6.0 Budget:

Budget is a financial plan that is used to estimate the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money. The budgeting process is carried out to identify whether the person / organization can continue to operate with its projected income and expenses. The budget should be objective driven. It means that the expected revenues and expenditures of each department will ultimately be based on the organizational objective.

2.6.1 Budgeting Process:

Budgeting and monitoring of budgets is an ongoing process. Monitoring involves checking the targets, feedback etc. The budgeting process involves the following procedure:

Define the objectives of Organization: Firstly the management tries to set the organizational objectives. These would include identifying the profits, market share and other targets to be achieved. The targets should be realistic made after studying the potential of the organization and the market situation.

Set Production. Marketing and Financial Budget: These are three major functional budgets and each is dependent on the organizational objectives.

Production Budget: Expressed in quantitative terms only and is geared to the sales budget. It involves; costs of raw material, direct labor costs, costs of purchasing components etc. This is an expenditure onlybudget.

Marketing Budget: It is a combination of both the income and expenses. Revenue from sales forecasted and expenses involved in actualizing the marketing strategy.

Financial Budget: The financial budget depicts projected cash flow. It helps to identify if the funds are in a proportion to cover the expenses or not. If not the management can find alternatives to raise additional funds.

Fragmentation of Budget: Each of the above stated budgets is then broken down, so there could be different budgets like training budget, sales budget etc.

Budget monitoring procedures must be established:As per the business objectives and the internal senvironment of the business appropriate budget monitoring procedures must be established.

Identify Variances:Any Variances in the projected budgets must be identified and responded too.

Feedback:The experience and knowledge achieved while setting the budget for one period must be utilized while deciding on the budget for another period.

2.6.2 Advantages of Budgeting:

Help to monitor and control operations

Provides a framework of delegation

Creates a sense of responsibility among the managers

Can improve communication system within the organization

Promotes forward thinking

Helps in coordination of different departments and align them towards shared objective.

2.6.3 Limitations of Budgeting:

Can demotivate employees if they do not get an opportunity to participate in the budgeting process.

It is difficult to estimate all the revenues and expenditure in advance.

It can result in building perceptions of unfairness.

If budgets are inflexible then it fails to reflect the necessary changes.

Budgeting might result in competition among the departments for resources.

2.7.0 Variance Analysis:

Variance analysisis the investigation of the difference between actual and planned behavior. For example, if the budgeted sales is worth ` 1 Cr and actual sales ar worth 80 lakhs then; variance analysis yields a difference of`20, 00,000.

Variance analysis helps to identify the difference between planned and actual results and its effect on the performance of the organisation.Variance analysis can help to identify certain types of task that regularly overrun their budget while other tasks may be seen to frequently come under their budget.

The variance can be either favorable (F) or adverse (A).

The variance can be said favorable when:

the expenditure is less than expected or

the revenue is greater than expected

<

>

Expected Expenditure

Actual Expenditure

Expected Revenue

Actual RevenueOR

FAVOURABLE VARIANCE

Fig. 6.2.3Favorable Variance

The variance can be said adverse when:

the expenditure is greater than expected or

the revenue is less than expected

>

<

Actual Expenditure

Expected Expenditure

Expected Revenue

Actual RevenueOR

ADVERSE VARIANCE

Fig. 6.2.4Adverse Variance

Example:

Budgeted (in `)

Actual (in `)

Variance(in `)

Cost of Raw Materials

10,00,000

8,50,000

1,50,000 (F)

Labour Cost

5,00,000

5,50,000

5,000 (A)

Sales Revenue

50,00,000

42,00,000

8,00,000 (A)

Total Variance

6,55,000 (A)

2.7 Control Techniques:

There are various control techniques from which the best suited can be selected depending on the factor to be controlled and situation. Some of the control techniques are as mentioned below:

Traditional Techniques:

Direct Supervision and Observation: This is the oldest control technique. In this type the manager or the superior monitors and controls his subordinates. Thus the manager is aware about the entire situation. His presence also has an influence on the behavior of his subordinates. This technique proves to be effective especially in cases where the subordinates are not capable of identifying the issues and controlling them.

Financial Statements: Financial statements are used by the stakeholders of the company to identify the financial stability of an organization. The stakeholders might include the employees, shareholders, financial institutes, investors, unions, customers etc. These statements facilitate monitoring the liquidity, general financial condition and profitability of the organization over a given time period.

Ex: Balance sheet, Profit and Loss Account etc.

Budgetary Control: Budgetary control is a methodical control of organizations operations through establishment of standards and targets regarding income and a continuous monitoring and adjustment of performance against them. Budgetary control can be done for various aspects of the business like income, expenditure, sales budget etc.

Break Even Analysis: Breakeven point is the point wherein theorganization is in a no profit -no loss situation. The effort made to identify such point is nothing but break even analysis. Break even analysis is a easy to use control instrument.

Ex: When a startup company sells 2000 bikes it will be break even since the investment involved in production and delivery of 2000 bikes is equal to the revenue generated.

Modern Techniques:

Control by Return on Investment: Thistechnique is used generally by the large organizations. ROI helps to identify the returns earned on the investments made. The investments include the assets and the capital. ROI gives a clear picture about the financial performance of the company and its divisions or departments.

ROI is calculated using the following formula:

ROI =Net income X Sales

Sales Total Investment

Management by Objective: Management by objectives is a technique applied primarily to employee management. It involves goal formulation for individual employees, deciding the time frame during which the goals are to be achieved followed by recording the performance and then monitoring it.

Management Audit: Management Audits are becoming popular in the recent times since they deal with controlling the overall performance of the organization. It is an effective tool that can be used to examine the efficiency and effectiveness of the various organizational processes. It is an internal audit wherein an expert team reviews quality of management. The management audit is intended to serve the interest of the organization as a whole.

Management Information System: For the process of planning and decision making it is important that the information available must be reliable so that the performance or output can be evaluated. To provide such information readily and speedily, available MIS is installed in the organizations. This would in turn help the managers to take decisions without waste of time.

CPM and PERT: Critical Path Method and Project Evaluation Review Technique are techniques used to plan, schedule and control many tasks associated with projects.

There are six steps common to both PERT and CPM. The procedure is as follows:

Identify the tasks and activities of a new or an existing project

Sequence the tasks such that there is a start time and an end time to complete each and every task and also the project.

Draw the network connecting all of the activities or tasks as per the predecessor and successor sequence.

Allocate time and or cost to each activity or task.

Compute the longest path through the network i.e. the maximum time a project will take to come to closure; the path is called the critical path.

Use the network diagram to help schedule, observe, and manage the project.

Below is an example which explains these mathematical tools

Given the following information regarding a project as activities and estimates of the optimistic, most likely and pessimistic times in days for completion of various activities

Activity →

Time estimates↓

(days)

1 - 2

1 - 3

2 - 4

2 - 5

3 - 7

4-6

5-6

6-8

7 - 8

Optimistic(to)

4

1

6

2

3

5

3

1

4

Most Likely(tm)

7

5

12

5

9

11

6

4

19

Pessimistic(tp)

16

15

30

8

27

17

15

7

28

Draw the PERT network diagram.

Identify the critical path.

Find the expected duration and variance for each activity. What is the expected project length?

What is the probability that the project will be completed in 40 days?

Solution: Using the given data, we calculate the expected time and the variance for

activity.

Activity

Time estimates (in days)

Expected time

Variance

Activity

Optimistic

to

Most Likely

tm

Pessimistic

tp

1-2

4

7

16

8

4

1-3

1

5

15

6

49/9

2-4

6

12

30

14

16

2-5

2

5

8

5

1

3-7

3

9

27

11

16

4-6

5

11

17

11

4

5-6

3

6

15

7

4

6-8

1

4

7

4

1

7-8

4

19

28

18

16

i) The project network is shown below:

E2=8

L2 =8

E5=13

L5 =26

E8=37

L8=37

E3=6

L3=8

E4=22

L4=22

E7=17

L7=19

E6=33

L6=33

E1=0

L1=0

7

1

2

3

5

4

6

7

8

8

14

11

6

11

4

54

18

ii) The critical activities are 1 → 2, 2 → 4, 4 → 6 and 6 → 8.

Hence the critical path is 1 → 2 → 4 → 6 → 8

iii) The expected duration of the project is 37 days.

The variance of the project length is the sum of the variances of the critical activities.

e2 = 4 + 16 + 4 + 1

= 25

Variance of the project length = 25 days

iv) Probability that the project will be completed in 40 days is given by

The standard normal deviate is given by:

P (z  0.6) = 0.5 + (0.6)

= 0.5 + 0.2257

= 0.7257 (From Normal Table)

Hence the probability that the project will be completed in 40 days is 0.7257

Self-Control: Some of the behavioral scientists state that control is more effective when it is self - directed. This technique is considered to be very effective in the modern era. It increases employee morale since the employees are free to set their own targets and there is no close supervision. Using this technique the superior can control the entire situation without enforcing any control on his subordinates.

Nowadays the Modern Management and Control techniques have been implemented by various

organizations across the nations for effective governance of the Organizations.

Directing and Controlling at a Glance

Need of Directing

To initiate action

To utilize resources

Motivate people

Help organization achieve objective

Bring organizational stability

Continuously managing change

Elements of Directing

Supervise

Communicate

Motivate

Lead

Principles of Directing

The Principles of Directing are basically dealt from the aspect of purpose and process. Under the purpose concept the focus is chiefly on individual contribution, harmony of organizational objectives and efficiency in Direction.

From process perspective it would center on Principle of Comprehension, Unity of Command, Communication, and Appropriateness in Direction and Follow Through and Leadership

Techniques of Directing

Autocratic Style : "Do as I say"

Consultative Style : To take other's opinions and finally taking his/her own decision

Free rein : Giving independence to experienced employees

Characteristics of Directing

Is a continuous process

Directing gets significance because of complexity in human behavioral traits

Facilitates in securing co-operation of the subordinates

Plans are transformed into performances

Provides leadership in business

Need of Controlling

To optimally utilize the resource

Minimize deviations and increase efficiency

Coping with continuous changes

Facilitating teamwork

Value Addition to Organization

Control Process Steps

Establish Standards and Performance Measures

Measure performance

Compare the actual versus the planned measure

Take the corrective action

Design of Effective Control Systems

The control system should be flexible, suitable, action oriented, economical, feature ability to forecast, enable feedback, timely revisions and for its total effectiveness should actually call for active participation of employees.

Types of Control

Feed Forward Control: An attempt that is made to anticipate the deviations that can occur while realizing the plan is called feed-forward control.

Concurrent Control: This type of control ensures that the work is being performed as per the plan, if not, corrective actions are taken.

Feedback Control: Feedback control provides information stating whether the organizational goals are met. It is the basis on which further move of the organization can be decided.

Budgeting Process

Define organizational objectives

Set Production. Marketing and Financial Budget

Fragmentation of Budget

Processes should be established for monitoring budget

Variance Identification

Provide Feedback

Advantages of Budgeting

Help to monitor and control operations

Provides a framework of delegation

Creates a sense of responsibility among the managers

Can improve communication system within the organization

Promotes forward thinking

Helps in coordination of different departments and align them towards shared objective.

Limitations of Budgeting

Can demotivate employees if they do not get an opportunity to participate in the budgeting process.

It is difficult to estimate all the revenues and expenditure in advance.

It can result in building perceptions of unfairness.

If budgets are inflexible then it fails to reflect the necessary changes.

Budgeting might result in competition among the departments for resources.

Variance Analysis

Variance analysis helps to identify the difference between planned and actual results and its effect on the performance of the organization.

Control Techniques: These are categorized under Traditional and Modern techniques. Under traditional we have:

Direct Supervision and Observation

Financial statement

Budgetary Control

Break Even Analysis

Under Modern Techniques are the following:

Control by ROI

Management By Objective

Management Audit

Management Information System

PERT/CPM

Control By Self

Questions from various universities to be attached later

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Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.