What is Managerial Control?
The concept of managerial control does not only provide a historical record of what has happened to the business but also chalks out the reasons for its occurrence. Further, it provides data which enable the chief executive or the departmental head to take the rectifying step in that regard.
Koontz, O’Donnell and Weihrich have said “Controlling as the measurement and correction of the performance of activities of subordinates in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished.”
What Does the Managerial Function of Control Imply?
The managerial function of control measures the actual performance as compared with the standards already set by plans and, management control also corrects the deviations to ensure attainment of objectives according to the predetermined plans.
Thus, we can say control is an important fundamental of management. This is an essential feature of scientific management. In fact, much of the execution of managerial education is focused on the improvement of the control techniques. It is generally used for putting restrictions over the elements being controlled. In managerial terminology, control ensures the accomplishment of work according to the plans. Managerial Control guides activity towards some predetermined goals.
Modern Management Techniques
Modern techniques of controlling are of a recent origin and are generally new in management literature. These techniques allow a new thinking process. These include:
1. Return on Investment
Return on investment (ROI) can be defined as one of the most important and useful techniques which provide the basics and guidance for measuring the performance of an investment.
2. Ratio Analysis
The organizations use ratios which are to be divided further, ratios help in analysing the various requirements of cash and capital in relation to current liabilities. The different types of ratios are –
Liquidity ratios
Solvency ratios
Profitability ratios
Turnover ratios
3. Responsibility Accounting
Responsibility accounting is defined as a system of accounting where overall involvement of different sections, divisions and other departments of an organization is established as responsibility centres.
4. Management Audit
Management audit is a systematic appraisal system for the overall managerial performance of an organization. Efficiency and effectiveness of management are judged by this technique.
5. PERT & CPM
PERT or programmed evaluation & review technique and CPM critical path method are important network techniques which are useful in planning & controlling. These techniques, therefore, help in performing various functions of management.
Traditional Techniques for Controlling
Traditional techniques are those techniques which have been used by the companies for a long period of time which include:
1. Personal Observation -
Personal observation is one of those techniques which provides first-hand information. This creates a psychological pressure on the employees to perform in a predetermined manner to achieve individual as well as organizational goals of the enterprise. This is a very time-consuming exercise which is not always effective for all kinds of jobs.
2. Statistical Report -
This is defined as an analysis of reports and data that is used in the form of averages, percentage, ratios, correlation, etc., Statistical Report presents useful information to the managers about the performance of the company in various areas.
3. Break-Even Analysis -
This is a technique used by the managers to study the relationship between the costs, volume & profits which determines the overall picture of the profit & losses at different levels of activity.
This is a no-profit and no loss zone of the sales volume, and this is known as the break-even point.
4. Budgetary Control -
Budgetary control can be defined as the technique of managerial control where all operations that are necessary to be performed are executed as per the need to be performed and planned in advance with budgets & actual results that are compared with the pre-established budgetary standards.
FAQs on Techniques of Managerial Control
1. What is Scientific Management?
Ans. Scientific management is the theory of management which analyses and synthesizes the workflow of the organization. The main objective is improving the economic efficiency of the organization, especially affects labour productivity. Scientific Management is an attempt to apply science in the process of management.
2. How is Return on Investment Calculated?
Ans. Return on Income abbreviated as ROI is calculated as - Net income before or after tax is used for making comparisons. The total investment includes both working capitals as well as the fixed capital which is invested in the business.
3. Give Some Examples of Responsibility Accounting?
Ans. The examples of Responsibility Accounting are –
Cost centre
Revenue centre
Profit centre
Investment centre
4. What are Individual and Organizational Goals?
Ans. Individual goals do not only cover the aspects of an employee's work performance. Instead, these goals focus on factors like key results, outcomes or deliverables. There are numerous ways to write individual goals.
5. What is a BOP?
Ans. BOP or the Break-Even Point is the no profit and no loss zone. This is the point at which the total cost and total revenue are equal and even. There is no net loss or gain, though opportunity costs have been paid and the capital has been received.
The breakeven point is calculated by dividing the fixed costs of production with the price per unit and then deducting the variable costs of production.
