TECHNIQUES OF CONTROL

To control the activities in the organization, managers can use variety f tools and techniques. They are broadly grouped under two heads.

1.                  Traditional techniques.

2.                  Modern techniques.

Traditional techniques are those which have long been used by the managers. Some of the important techniques under this heads are budgetary control, financial statement and ratio analysis, auditing, break-even analysis and report writing etc.

“Budgetary control is a process of comparing the actual results with the  corresponding budgeting data in order to approve accomplishments or to remedy differences by either adjusting the budget estimates or correcting the cause of the difference.”

-          GEORGE R TERRY

The different budgets such as production budget, sales budget, overhead budget, labour budget etc. clearly indicate the limits for expenses and also the results to be achieved in a given period. It ensures effective co-ordination of the work of the entire organization. It promotes co-operation and team spirit among the employees

Standard Costing is one of the techniques of cost control and it is being increasingly used by modern business concerns for the purpose of cost reduction and cost control. It involves a comparison of actual with the standards and the discrepancy is called variance.

Break-even analysis is useful in planning and control because it emphasize the marginal cost and benefit concept. It helps to make profit estimation at the different levels of activity, ascertaining turnover for desire profit and estimating the impact of the variations of fixed and variable costs. It magnifies a set of relationships of fixed costs, variable cost, price, level of output and sales mix to the profitability of the organization.

Financial statement analysis such as Found Flow analysis, Cash Flow analysis and Ratio analysis help to know the financial performance and financial position of the business unit. The liquidity, profitability and solvency position of the business unit can be ascertained and efforts can be taken to maintain these factors in an optimum proportion,

Auditing is the process of investigating financial and other operation of a business establishment. It may be carried out by internal and external members. It helps to scrutinizes the applicability and relevance of policy, procedure and method which have a tendency to become obsolete. This it helps in choosing a suitable working procedures and methods.

Adoption of reporting system helps to analyse a particular problem and to take necessary corrective action over it. Reports may be prepared regarding taxation, legislation and its effect on profit, make or buy decisions, replacement f capital equipment, social pricing analysis etc.

A manager can also exercise effective control over his subordinates by observing them while they are engaging in work. Personal observation helps the managers not only in knowing the workers attitude towards work but also n correcting their work and method, if necessary.

Modern Techniques

These are of recent origin, which provide information not readily available with traditional methods. These techniques help to give sharper focus and promise increasingly to improve the quality of control. Program Evaluation Review Technique (PERT) and Critical Path Method (CPM) are two major techniques coming under this head.

PERT has been, developed by an U.S. Office in  1958 in connection with the Polaris Weapon System and is credited with reduction the completion time of the program by two years. CPM has been jointly developed by DUPoint and Remington Rand USA in order to facilitate the control of large, complex industrial projects. These techniques are used to minimize total time, minimize to cost, minimize idle resources etc. It is helpful in solving problems of scheduling the activities of on-time projects. These tools re widely being used in construction industry, planning and launching a new projects, scheduling ship construction etc. It ensures improved management of resources by facilitating better decision making. It aims to have future oriented control mechanism for the organization.

Management Information System provides needed information to each manager at the right time, in right form which aids his understanding and stimulate his action. MIS is a refined form of traditional information collection and supply to the organization points.

Management Audit is an evaluation of management as a whole. It examine the total managerial process of planning, staffing, directing and controlling. To evaluate the management achievement, the organization plans, policies, procedures, organization structure, system of control personnel relation should be measure with its end results.

1.         Budgetary control                               -           Financial performance

2.         Cost control                                        -           Cost performance

3.         Production control                              -           PERT  CPM

                                                                                    Production, performance, quality

4.         Inventory control                                -           Stores function performance

5.         Profit & Loss

            Control ROL control                          -           Overall organizational objective                                                                                             performance.

6.         External audit control                         -           Statutory performance

7.         Management self audit                       -