Management is both art and science. The art of getting things done is called management, and the mechanism to get things done is called efficient controlling in management.
Since its very inception, management has been an evolving entity, and so has been the controlling function of management. This article ellaborates various effective controlling techniques utilized by the managers to evaluate the performence of their subordinates or different strategies formulated by the management of the enterprise.
Management Controlling –
Controlling is considered one of the most crucial functions of a manager. The controlling function is often referred to as a goal-oriented function.
Controlling is an essential function as it encompasses the business with desired results. It helps to seek the planned results from the employee and the subordinates of the manager.
In this article, we shall discuss eleven such techniques that are efficient for controlling and are useful to meet the manager’s objectives and plans.
11 Efficient Controlling Techniques –
1. Personal observation –
Personal observation technique, being the most traditional method of control, fetches first-hand and basic information regarding the operation to the manager.
However, being the oldest form of managerial control techniques, some pros and cons are added to it.
It creates a phenomenon atmosphere of psychological awareness and pressure on the employees; as a result, they are well aware that they are being watched by their superiors, leading to the more efficient and fast working of the employees and the subordinates. The workers work in a more efficient way when they are aware of being watched by their superiors.
In this technique, the managers benefit from having a face-to-face interaction with the subordinates next weather the managers know the bids Off the operation and can also take immediate action whenever there seems to be anything of wrong order happening around.
Nonetheless, with all the benefits of personal and close observation, some disadvantages are also linked to it.
Being a conventional process, it proves to be a very time and energy-consuming process that will stop, moreover, and the observation may sometimes be subject to biases.
Not every operation could be suitable for close observation by the superior. Some sensitive and ultra-professional operations cannot be done with any foreign interference.
Personal observation, being the most traditional method of control, can also sometimes prove to be fatal as not everyone working with due diligence would like to be observed or watched closely by their superior.
2. Budgetary Control –
Budgetary control is also a traditional form of control. It can be defined as a quantitative expression that offers a pre-planned list for a future perspective and can be defined as a financial term.
A budget is a predetermined financial statement of management policy for a fixed amount of time, providing a standard for the comparison.
Budgetary control is a very common and profusely used technique for managerial control. It gives the enterprise of the financial standard to work upon.
It helps the company to run cost-efficient operations and also helps to keep a cheque on the financial deviations.
The different kinds of budgets are listed as below –
- Sales budget – the sales budget is an expression of the company’s plan for the sales of a given period.
- Purchase budget – states the amount of raw material to be purchased for an operation.
- Cash budget- it enlists the payments and anticipated receipts for a given time.
- Expense budget – it speaks about the estimated expenditure that the enterprise has made a standard to work with.
- Capital budget – represents the predetermined expenses on the plant, equipment, machinery, etc.
- Revenue budget – it represents the number of sales or profit to be received by marketing the products.
3. Break-even Analysis –
Break-even analysis determines an overall picture of possible profits and losses at distinct levels of operations.
Managers use this technique to analyze the relationship between profit, cost, and volume.
However, the identification of cost classification is not always possible in this type of analysis. The volume where there is no profit or loss is made is often termed as a break-even point.
Calculations for break-even point –
BEP = Fixed Costs/Selling price per unit – variable costs per unit.
4. Ratio Analysis –
The ratio analysis being the first financial tool to interpret and analyze financial statements, is still used widely.
The ratio analysis is a tool that helps in analyzing the relationship between two or more figures.
Essential examples of ratio analysis-
A. leverage ratio
B. Valuation ratio
C. Turnover ratio
D. Profitability ratio
5. Cost Control-
Cost control is a modern controlling technique, which has been widely used for a reduction in business expenses to see an increase in profits.
The management compares the budgeted expectations with the financial undertakings. If the cost expended becomes more than expected, then necessary steps are taken to balance the same.
6. Statistical Analysis –
Analysis of the statistical report has been a traditional method of controlling. In simple terms, it represents useful information such as productivity, effectiveness, profits, losses on a tabular chart, graphical format.
7. Management Audit –
For analyzing the success or failure of an operation, there should be an overall analysis of data report et cetera.
Since efficient management decides for the failure or success of an organization, management audit becomes a crucial part of management control. Management audit attempts a scientific evaluation and assessment of the quality of management.
8. Return On Investment (ROI) –
Return On Investment (ROI) is another modern technique for controlling. Being one of the essential techniques return on investment provides the organization with a figure to compare whether the invested capital is being used efficiently. It acts as a mirror that reflects all the prospects of the company.
9. Network Techniques –
Network techniques, which is a modern technique of control, have been in profuse use for controlling efficiently. In the network techniques, the project is divided into small programs, and each program is done in a technological sequence.
There are two types of network techniques-
- PERT (Program Evaluation and Reviewed Techniques)
- CPMC (Critical Path Method)
10. Management Information System –
The management information system provides the manager with quantitative and qualitative information, which helps him taking necessary actions. This technique aid supports and controls the operational function of organizations with uniform formation.
11. Internal Auditing –
Internal auditing aids the managers are with an independent procedure to verify and evaluate the financial, accounting, and other functions.
Internal auditing helps enhanced organizational effectiveness and individual efficiency; it says guards and maintains the enterprise’s assets.
One of the most crucial management functions is control. Controlling is an all-pervasive process. To put it another way, managers at all levels of management must employ control. It is something that every manager at every level must do effectively. Controlling measures can often improve the effectiveness of other management activities as well.
Setting predefined criteria, comparing actual performance to these standards, and, if necessary, taking corrective steps to assure the attainment of organizational goals is what management control entails. A good control system may always help a company become more efficient and effective.