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Controlling – Class 12 Business Studies Chapter 8 Notes & NCERT PDF

Class 12Business StudiesChapter 8NCERT book: Business Studies Part I - Class 12

Notes and a simple summary of Chapter 8 of the NCERT Class 12 Business Studies book, with the official chapter PDF, flashcards, an MCQ quiz and an AI tutor for your doubts.

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Controlling: Keeping Performance on Plan

Introduction: Departure Control Systems

The chapter opens with the Departure Control System (DCS) used by airlines. A DCS automates airport operations - check-in, printing boarding passes, baggage acceptance, boarding, load control and aircraft checks. Almost 98% of DCS manage e-tickets through kiosks, online check-in, mobile boarding passes and baggage handling. It captures reservations from the airline's passenger name record (PNR) and updates status such as checked-in, boarded and flown, and may interface with immigration control and no-fly watch lists.

The lesson: managers must track progress and take corrective action before any damage is done. That is the job of controlling.

Meaning of Controlling

Controlling means ensuring that activities in an organisation are performed as per the plans, and that resources are used effectively and efficiently for predetermined goals.

"Managerial control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans." (Koontz and O'Donnell)

Controlling is:

  • Goal-oriented - it aims at predetermined goals.
  • Pervasive - needed at all levels (top, middle, lower) and in every organisation: schools, the military, hospitals, clubs and businesses.
  • Not the last function - it brings the management cycle back to planning. It finds deviations, analyses causes and takes corrective action, which improves planning in the next cycle.
  • Importance of Controlling

  • Accomplishing organisational goals - measures progress, brings deviations to light and keeps the organisation on track.
  • Judging accuracy of standards - verifies whether standards are accurate and revises them as the environment changes.
  • Making efficient use of resources - reduces wastage and spoilage.
  • Improving employee motivation - employees know in advance what is expected and how they will be appraised.
  • Ensuring order and discipline - minimises dishonest behaviour.
  • Facilitating coordination in action - departments work to well-coordinated standards.
  • Case: Control through computer monitoring

    Managers at a New York import-export company suspected two employees. On advice from Corporate Defense Strategies, software logged their keystrokes. It revealed they were deleting orders after processing them and pocketing the revenue; police arrested them when they came to steal a large electronics shipment. They were charged with embezzling $3 million over two and a half years from a $25 million-a-year firm.

    Limitations of Controlling

  • Difficulty in setting quantitative standards - employee morale, job satisfaction and human behaviour are hard to measure.
  • Little control on external factors - government policies, technological changes, competition.
  • Resistance from employees - seen as a restriction on freedom (for example, being watched on CCTV).
  • Costly affair - expenditure, time and effort; costs must not exceed benefits, so a small firm may not afford an expensive system.
  • Relationship between Planning and Controlling

    Planning and controlling are inseparable twins of management. Planning provides the standards; controlling monitors progress against them.

  • Planning without controlling is meaningless; controlling is blind without planning.
  • Planning is prescriptive (an intellectual process of deciding a course of action); controlling is evaluative (checks whether decisions became action).
  • "Planning is looking ahead and controlling is looking back" is only partially correct. Planning is guided by past experience, and corrective action aims to improve future performance - so both are backward-looking and forward-looking.
  • They reinforce each other: planning based on facts makes controlling easier, and controlling improves future planning with information from past experience.

    The Controlling Process

    Step 1 - Setting performance standards. Standards are benchmarks and may be:

  • Quantitative - cost, revenue, units produced and sold, time taken.
  • Qualitative - goodwill, employee motivation; define them measurably (for a self-service fast-food chain, time to get a table, place the order and collect it).
  • Set them precisely where possible (reduce defects from 10 to 5 per 1,000 pieces by quarter-end) and keep them flexible.

    NCERT's table of standards by functional area:

  • Production: quantity, quality, cost, individual job performance.
  • Marketing: sales volume, sales expense, advertising expenditure, salesperson's performance.
  • Human Resource Management: labour relations, labour turnover, labour absenteeism.
  • Finance and Accounting: capital expenditure, inventories, flow of capital, liquidity.
  • Step 2 - Measurement of actual performance. Measure objectively and reliably, in the same units as the standards, by personal observation, sample checking (random checks in large firms), performance reports and ratios (gross profit, net profit, return on investment). Measure during performance where possible, for example checking each part before assembly or monitoring gas levels in a plant.

    Step 3 - Comparing actual performance with standards to find the deviation. This is easier with quantitative standards (a worker's weekly output against the standard output).

    Step 4 - Analysing deviations. Fix an acceptable range and use two principles:

  • Critical point control - focus on key result areas (KRAs). A 5% rise in labour cost may matter more than a 15% rise in postal charges.
  • Management by exception - "an attempt to control everything results in controlling nothing". Only significant deviations beyond the permissible limit (say beyond a 2% rise in labour cost) go to management; a major deviation (say 5%) needs immediate priority action.
  • Advantages of these two: saves managers' time and effort; focuses attention on important areas; leaves routine problems to subordinates (aiding delegation and morale); identifies critical problems in time.

    Deviations may come from unrealistic standards, defective process, inadequate resources, structural drawbacks, organisational constraints or environmental factors beyond control. The exact cause must be found.

    Step 5 - Taking corrective action. None is needed within acceptable limits. Otherwise: training employees if production targets are missed; adding workers, equipment and overtime for a project running behind schedule; or revising standards if the deviation cannot be corrected.

    Techniques (from the chapter summary)

  • Traditional: personal observation, statistical reports, breakeven analysis, budgetary control.
  • Modern: return on investment, ratio analysis, responsibility accounting, management audit, PERT and CPM, management information system.
  • Key-Facts Sheet

  • Five steps: set standards, measure, compare, analyse deviations, take corrective action.
  • Deviation = difference between standard and actual performance.
  • Critical point control uses KRAs; management by exception reports only significant deviations.
  • Planning and controlling are inseparable twins; planning is prescriptive, controlling evaluative.
  • Board Exam Focus

  • Writewell Products case: Bhanu Prasad fell short of his target by 10 units on two days, and his manager wanted him dismissed. The CEO should apply management by exception - a minor deviation within tolerance need not reach top management.
  • Mr Shantanu case: constant checks on all activities and all employees show controlling is goal-oriented, continuous and pervasive.
  • Comment on "Planning is looking ahead and controlling is looking back."
  • Key Terms (Hindi)

  • Controlling - नियंत्रण
  • Standard - मानक
  • Deviation - विचलन
  • Corrective action - सुधारात्मक कार्यवाही
  • Management by exception - अपवाद द्वारा प्रबंध
  • Common Mistakes

  • Calling controlling the last function - it restarts the planning cycle.
  • Agreeing fully that planning only looks ahead and controlling only looks back.
  • Believing every deviation must go to top management.
  • Skipping analysis of deviations and jumping straight to corrective action.
  • 💡 Key Learning Points

    • ✓Controlling ensures that activities are performed as per plans; it is goal-oriented, pervasive and completes the management cycle by feeding back into planning.
    • ✓Controlling helps accomplish goals, judge accuracy of standards, use resources efficiently, motivate employees, ensure discipline and coordinate action.
    • ✓Its limitations are difficulty in setting quantitative standards, little control over external factors, employee resistance and cost.
    • ✓Planning and controlling are inseparable twins: planning is prescriptive and controlling evaluative, and both look backward and forward.
    • ✓The controlling process has five steps - set standards, measure, compare, analyse deviations (using critical point control and management by exception) and take corrective action.

    👨‍🏫 Teaching Tips

    • →Begin with the airline Departure Control System and ask what could go wrong at an airport without control.
    • →Draw the five-step control process as a loop feeding back into planning.
    • →Use the $3 million embezzlement case to discuss order and discipline, then debate privacy and employee resistance.
    • →Give numerical examples (defects per 1,000 pieces, 2% tolerance in labour cost) to practise management by exception.
    • →Have students set quantitative standards for a school canteen or sports team and measure actual results.
    • →Solve the Writewell Products case to apply management by exception.
    • →Debate 'Planning is looking ahead and controlling is looking back' in two teams.

    📋 Assessment Questions

    1. Can the student define controlling and explain why it is goal-oriented and pervasive?
    2. Can the student explain the importance and limitations of controlling?
    3. Can the student discuss the relationship between planning and controlling?
    4. Can the student describe the five steps of the controlling process with examples?
    5. Can the student apply critical point control and management by exception to a case?

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