Control Aids/Control Techniques
‘For effective controlling’ it is important for a manager to know what are the areas of control, tools and Control techniques. There are a number of devices which help in controlling. These devices have been developed by various management experts and experienced factory managers. These devices, in other words, are commonly known as a control in the budget. There are a number of other control techniques such as managerial statistics. Special reports, break-even analysis, internal audit, personal observation, standing rules, orders and regulations, etc. All of these are traditional control devices. In order to improve the quality of control, recently certain newer control techniques have been developed like PERT, IIT and Procedures Planning, etc. Thus, we see that the list of control aids available to a manager in his control kit is quite long and it is not possible to explain all of these here. But a brief description of these techniques and device is desirable to indicate the manner in which they are used.
1. Budget: The budgetary control is an important and traditional technique of controlling the financial, operating and other activities of business. A budget a is a quantitative expression of the plan of action. It serves as an aid to the co-ordination of plan, implementation of plan and control of performance. A budget which is formulated for the organisation as a whole is known as a ‘Master Budget’. Budgets prepared for various functional areas of an organisation such as sales, production, distribution and finance are known as functional budgets or operating budgets. The budgetary system is advantageous for both larger and small organisations. As this presents an overall estimate of future business activities and their consequences, it helps in planning, evaluating, coordinating and implementing the plans and motivating the employees of the organisation.
2. Managerial statistics: Managerial statistics are those facts and figures and numerical statements of business operations which are helpful for management in planning and decision-making. With the help of such data, an analysis of past performance is made for control purposes. Data relating to a volume of production, costs, sales, and expenses, etc. helps the management in projections for future. Such data is generally presented in the form of tables or charts. The control standard in such control technique may be the return on investment. To discuss the return on investment, the use of Du Pont Company chart is very common.
3. Special reports: To control the particular problem areas, the preparation and use of special reports are also very common. Routeing recording and statistical reports cannot help much in this direction. So special reports are needed. Such reports can be prepared either by the manager working within the organisation or they can be got prepared by any outside
practising expert or management consultant. In India, National Productivity Council also handles assignments of special investigations and prepares special reports.
4. Break-even analysis: It is also known as Cost-volume-profit Analysis. A break-even chart is prepared for this analysis. This chart presents graphically the relationship between sales and expenses under different assumed conditions. In other words, it examines the interrelationship of changes in costs, volume and profits. The break-even chart show the break-even
The point, the point of zero profits and zero losses. It can be expressed in terms of units produced, in percent of plant capacity or in the amount of sales. The break-even chart serves as a control and in a number of ways. It predicts the profit at different levels of sales or production volume. It also helps in making decisions about plant shut down or plant expansion, etc.
5. Cost accounts: Use of cost accounts as a control device is also very popular. the Though the costing is a part of the overall accounting process and its main object is cost finding but there are certain aspects of cost accounting which are helpful in the process of control. They are Standard Costing, Marginal Cost Analysis, Cost Variance Analysis, etc.
6. Internal audit: Internal audit is also an effective tool of control. It is conducted by an internal auditor who is an employee of the organisation. Internal audit attempts at regular and independent appraisal of accounting, financial and other operations. Internal audit is not concerned with the financial control only but it includes an appraisal of organisation’s policies, procedures, practices, plans and the quality of management, effectiveness of methods, etc. he can point out defects and neglected situations and can make suggestions based on his analysis. Internal audit is also instrumental in toning up morale and motivation of employees. It is also very helpful in enforcing events to conform to plans.
7. Personal observations: Personal observation is also a valuable device for control. Since the objectives are to be accomplished by people and control devices like budgets, charts, reports, internal audit, etc. are deficient in giving information about any inverse change in the attitude of people. So, personal observation is very helpful in it. By periodically observing the
subordinates, their work methods, their attitude towards work and their final results, a superior can exert more fruitful control. The possibility of being observed has an inevitable effect on workers. There is sufficient amount of truth in this saying that ‘when the cat is away from the mice will play’. So a planned and systematic observation will be very helpful in this direction.
8. Standing rules, limitations and orders, etc.: Standing orders, rules and limitations on the authority are also important to control devices. When subordinates are given freedom to make certain decisions on behalf of superiors, it becomes necessary to lay down limits for them. Such limits should be fixed having regard to the status of the subordinate, nature
of work and its importance. Standing orders are very helpful in developing the rational behaviour and developing performance habits among the subordinates.
9. Censure and disciplinary action: Censure implies checking and issuing the warning to the subordinates for their undesirable behaviour and work. Both censure and disciplinary actions are negative approaches to control. So they should be used very cautiously.
10. Overall control: Some firms use control devices to analyse how well the plans are meeting the objectives. Management by objectives is one of the devices most frequently used to regain overall control in firms where financial objectives predominate, the return on investment (ROI) measures are also used for this purpose.
11. Procedure planning: Procedure planning is also an effective tool of control. Procedures for various functional areas should be planned carefully. Procedures in personnel, marketing, production and finance, etc. affect each part of the enterprise considerably. But they should not come into conflict with each other. In planning procedures, the management should try to minimise procedures, design procedures in the form of plan and accomplish plans, avoid duplication and overlapping of procedures, etc.
12. Modern techniques: Recently, operation research has contributed the number of control techniques in the business field, for processing the data and making them readily available for control purposes, various electronic equipment have been developed. Logistic systems, improved information technology, programme evaluation and review techniques are
some examples of such control devices. PERT is also known as Time-Event Network Analysis. This technique helps in watching how the parts of a programme fit together during the passage of time and events.