UNIT - III: PLANNING AND CONTROL: Concept- Process and Types; Decision making concept and process; Bounded rationality; Management by objectives; Corporate Planning; Environment analysis and Diagnosis; Strategy Formulations; Managerial Control- Concept and process - Designing an Effective Control System - Techniques - Traditional and Modern (PERT and CPM).

1. UNIT-III PLANNING & CONTROL
Planning : In simple words , planning is deciding in advance what is to be done ,
when , where ,how and by whom it is to be done.
Planning is a fundamental managerial function
According to Koontz O'Donnel - "Planning is an intellectual process, the conscious
determination of courses of action, the basing of decisions on purpose, acts and
considered estimates".
The important elements of planning
1. The essence of planning is looking ahead . It is always concerned with future.
2. It involves a pre- determined course of action
3. This course of a action is determined after a careful study of alternative courses
4. It is continuous and integrated process
5. It has always a dimension of time
6. Its main object is to achieve better results

2. Thus planning is a mental process requiring the use of intellectual faculties
imagination , foresight and sound judgment.
Importance of planning
According to terry has very rightly said that planning is the foundation of most
successful action of an enterprise
It brings orderliness , efficiency and stability in managerial actions and decisions.
1. Planning eliminates future uncertainty and change
2. Planning helps in management by objectives
3. Better coordination
4. Economy in operation
5. Help in control
6. Help in execute development
7. Encourage innovation and creativity
8. Improves motivation 9. improves competitive strenght

3. Planning eliminates future uncertainty and change
future is uncertain and full of changes .these both elements make planning a
necessity . Planning bring a higher degree of certainty rationally and order into the
organization than would be present without planning
Planning helps in management by objectives
the first element of planning is setting the goals and objectives for the organization
as a whole and all its components . This gives a sense of direction the working of
the organization and saves it from going a stray or drafting about aimlessly
Better coordination
Planning helps the management in the coordination process also . Plans are
selected courses along which the management desires to coordination group action.
The well defined objectives ,well publicized policies , well developed programmes
and procedure these all things helps in coordination

4. Economy in operation : planning is the way only to realize the business objectives at
cheapest and the best way. Planning involving the development of one best way of doing
things which is economical in its sense also.
Help in control: planning is always a pre requisite for controlling . No controlling can be
exercised without planning . Planning distributes the responsibilities of different persons and
jobs , develops the standards for comparison of actual performance .
Help in execute development : planning helps in executive development also . The formal
planning leads to disciplined thinking .
Encourage innovation and creativity
Improves motivation
improves competitive strength

5. Types of Planning
Any organization can have different plans. We can classify the types of plans in the following
ways:
On the basis of Nature

6. Operational Plan:
1. Operational plans are the plans which are formulated by the lower level management
for short term period of up to one year.
2. It is concerned with the day to day operations of the organization.
3. It is detailed and specific.
4. It is usually based on past experiences.
5. It usually covers functional aspects such as production, finance, Human Resources etc.
Tactical Plan:
1. Tactical plan is the plan which is concerned with the integration of various organizational
units and ensures implementation of strategic plans on day to day basis.
2. It involves how the resources of an organization should be used in order to achieve the
strategic goals.
3. The tactical plan is also known as coordinative or functional plan.

7. Strategic Plan:
1. Strategic plan is the plan which is formulated by the top level management for a long
period of time of five years or more.
2. They decide the major goals and policies to achieve the goals.
3. It takes in a note of all the external factors and risks involved and makes a long-term
policy of the organization.
4. It involves the determination of strengths and weaknesses, external risks, mission, and
control system to implement plans.

8. On the basis of managerial level:
Top level Plans :
1. Plans which are formulated by general managers and directors are called top-level
plans.
2. Under these plans, the objectives, budget, policies etc.
3. for the whole organization are laid down. These plans are mostly long term plans.
Middle-level Plans
1. Managerial hierarchy at the middle level includes the departmental managers.
2. A corporate has many departments like purchase department, sales department,
finance department, personnel department etc.
3. The plans formulated by the departmental managers are called middle-level plans.
Lower level Plans:
1. These plans are prepared by the foreman or the supervisors.
2. They take the existence of the actual workplace and the problems connected with
it. They are formulated for a short period of time and called short term plans.

9. On the basis of time:
Long Term Plan:
1. Long-term plan is the long-term process that business owners use to reach their
business mission and vision.
2. It determines the path for business owners to reach their goals. It also reinforces and
makes corrections to the goals as the plan progresses.
Intermediate Plan:
Intermediate planning covers 6 months to 2 years. It outlines how the strategic plan will be
pursued. In business, intermediate plans are most often used for campaigns.
Short-term Plan:
1. Short-term plan involves plans for a few weeks or at most a year.
2. It allocates resources for the day-to-day business development and management
within the strategic plan.
3. Short-term plans outline objectives necessary to meet intermediate plans and the
strategic planning process.

10. On the basis of use
Single Plan
These plans are connected with some special problems. These plans end the moment of
the problems to be solved.
They are not used, once after their use. They are further re-created whenever required.
Standing Plan
These plans are formulated once and they are repeatedly used. These plans
continuously guide the managers.
That is why it is said that a standing plan is a standing guide to solving the problems.
These plans include mission, policies, objective, rules and strategy.

11. PLANNING PROCESS

12. Perception of Opportunities:
Although preceding actual planning and therefore not strictly a part of the planning
process, awareness of an opportunity is the real starting point for planning.
It includes a preliminary look at possible future opportunities and the
ability to see them clearly and completely, knowledge of where we stand in the
light of our strengths and weaknesses, an understanding of why we wish to solve
uncertainties, and a vision of what we expect to gain.
Establishing Objectives:
The first step in planning itself is to establish objectives for the entire enterprise
and then for each subordinate unit.
Objectives specifying the results expected indicate the end points of what
is to be done, where the primary emphasis is to be placed, and what is to be
accomplished by the network of strategies, policies, procedures, rules, budgets and
programs.

13. Considering the Planning Premises (grounds) : Another logical step in planning
is to establish, obtain agreement to utilize and disseminate critical planning
premises. These are forecast data of a factual nature, applicable basic policies, and
existing company plans.
Identification of alternatives:
Once the organizational objectives have been clearly stated and the planning
premises have been developed, the manager should list as many available
alternatives as possible for reaching those objectives.
Evaluation of alternatives
Having sought out alternative courses and examined their strong and weak points,
the following step is to evaluate them by weighing the various factors in the light
of premises and goals.

14. Choice of alternative plans
An evaluation of alternatives must include an evaluation of the premises on which the
alternatives are based. A manager usually finds that some premises are unreasonable and can
therefore be excluded from further consideration.
Formulating of Supporting Plans
After decisions are made and plans are set, the final step to give them meaning is to
numberize them by converting them to budgets.
Establishing sequence of activities
Once plans that furnish the organization with both long-range and short-range direction have
been developed, they must be implemented. Obviously, the organization can not directly
benefit from planning process until this step is performed.

15. Advantages of planning
All organization activities have to be undertaken as per planning .The advantage of planning
1. Optimum utilization of resources
As indicated earlier , planning enhances efficiency. Efficiency requires optimum utilization of
all inputs . Further it also requires optimum utilization of machinery , men and other
resources.
2.Economy in operations:
Planning eliminates the unnecessary operations in production , marketing and other
functions. In addition , it reduces the purchase price of material and other inputs.
3.Reduces uncertainties
Planning process estimates the future trends of the external environments , initiates the
steps to prepare for meeting the future challenges and converting some of the future
threats into opportunities.
4.Strengthens competitive ability an organizations competitive ability depends upon its
strength and matching these strengths with the environmental opportunities

16. Effective coordination
•coordination is linking various sections and departments through network. Planning
incorporates coordination in its process.
•In fact planning process provides the detailed process of programming of activities which
would result in effective coordination.
Act as change agent :
1. Planning helps to predict the future trends and also manipulate the environment factors.
2. Planning decides what should be done in terms of innovative product design
,technology ,marketing alliances.
Motivation :
Planning encourages subordinates to participate in formulating and finalizing the plans.
Employee participation is planning satisfies their need for involvement and belongingness
Effective control:
1. Planning provides the detailed programming for implementation of various activities .
2. Control function is based on the plans.
3. The detailed plans provides guidelines for effective control

17. Limitations of planning
Unreliability of forecast :
1. planners forecast future trends based on the past trends by the help of statistical
techniques.
2. But number of environmental factors change between the planning and execution
periods.
Time consuming:
1. planning process involves a number of steps as discussed earlier . In addition , forecast
of future events is based on a number of statistical tools.
2. Planning process requires a lot of time to perform all these activities and to make
planning effective and systematic.
High cost:
1. The planning process is not only time consuming but also expensive .
2. The planning process requires vast data and information to be collected and processed
3. In addition it requires use of statistical techniques and services of a number of
personnel.

18. Organizational politics
Though the planning is based on a systematic and sequential process , sometimes the
influential leaders dominate the planning process .

19. Decision-making
A decision is an act of selection or choice of one action from several alternatives.
Decision-making can be defined as the process of selecting a right and effective
course of action from two or more alternatives for the purpose of achieving a desired result.
Decision-making is the essence of management.
Definitions
George Terry defines decision-making “as the selection of one behaviour alternative from
two or more possible alternatives.”
In the words of D. E. Mcfarland:
“A decision is an act of choice wherein an executive forms a conclusion about what must be
done in a given situation. A decision represents behaviour chosen from a number of
alternatives.”

20. Principles of Decision Making

21. 1. Subject-matter of Decision-making:
Decisional matters or problems may be divided into groups consisting of programmed and
non-programmed problems.
Programmed problems, being of routine nature, repetitive and well-founded, are
easily definable and, as such, require simple and easy solution. Decision arrived in such
programmed problems has, thus, a continuing effect.
But in non-programmed problems, there is no continuing effect because they are non-
repetitive, non-routine, and novel.
2. Organizational Structure:
The organizational structure, having an important bearing on decision-making, should be
readily understood.
If the organizational structure is
rigid and highly centralized,
decision-making authority will remain confined to the top management level.

22. Analysis of the Objectives and Policies:
Proper analysis of the objectives and policies is needed for decision-making.
The clear definition of objectives and policies is the basis that guides the direction of
decision-making. Without this basis, decision-making will be aimless and unproductive.
Analytical Study of the Alternatives:
For decision-making, analytical study of all possible alternatives of a problem with their
merits and demerits is essential. This is necessary to make out a correct selection of decision
from among the alternatives.
Proper Communication System:
Effective decision-making demands a machinery for proper communication of information to
all responsibility centres in the organisation. Unless this structure is built up, ignorance of
decision or ill-informed decision will result in misunderstanding and loose co-ordination.
Sufficient Time:
Effective decision-making requires sufficient time. It is a matter of common experience that it
is usually helpful to think over various ideas and possibilities of a problem for the purpose of
identifying and evaluating it properly.

23. Study of the Impact of a Decision:
Decision is intended to be carried out for the realisation of the objectives of the
organisation. A decision in any particular area may react adversely in other areas of the
organisation.
Participation of the Decision-maker:
The decision-maker should not only be an observer while others will perform as per his
decision. He should also participate in completing the work for which decision was taken by
him. This experience will help him in decision-making in future.
Flexibility of Mind:
This is essential in decision-making, because decisions cannot satisfy everybody. Rigid
mental set-up of the decision-maker may upset the decisions.

24. The decision process
Identify & define
The problem
Gather
Information
Develop
alternatives
Evaluate
alternatives
Certainty Risk Uncertainty
Select
alternatives
Implement decision
Evaluate & control
Revise

25. Management by objective (MBO) is a model in which employees and their managers
collaboratively develop, define and explicitly agree to objectives.
The purpose of MBO is to increase employee productivity and efficiency and, as a
result, corporate performance.
Business management expert Pete Drucker developed the concepts of management by
objective in his 1954 book, The Practice of Management. Drucker also provided a best
practice framework for establishing objectives.
Pete Drucker outlined the following five steps for implementing MBO:
1. Establish or clarify organizational objectives in line with the company's mission and
vision.
2. Ensure that employees fully understand the objectives of the company as a whole.
3. Involve employees in determining their personal objectives to help achieve corporate
goals.
4. Monitor and measure employee performance relative to the goals.
5. Evaluate progress, reward success and provide feedback.

26. Features of MBO
Superior –subordinate participation
MBO requires the superior and the subordinate to recognize that the development of
objectives is a joint project / activity. They must be jointly agree and write out their duties
and areas of responsibility in their respective jobs
Joint goal setting
MBO emphasizes joint goal setting that are tangible , verifiable and measurable . The
subordinate in consultation with his superior sets his own short term goals. How ever it is
examined both by the superior and the subordinate that goals are realistic and attainable.
Joint decision on methodology
MBO focuses special attention on what must be accomplished goals rather than how it is to
be accomplished . The superior and the subordinate mutually device methodology to
followed in the attainment of objectives.
Makes way to attain maximum results
MBO is a systematic and rational technology that allows management to attain maximum
results from available resources by focusing on attainable goals.

27. Support from superior
When the subordinate makes efforts to achieve his goals, superior’s helping hand is always
available . The superior acts as a coach and provides his valuable advice and guidance to the
subordinate.
Need for MBO
1. The MBO helps the employees to understand their duties at the work place.
2. KRA’s are designed for each employee as per their interest , specialization and
educational qualification.
3. The employees are clear as to what is expected out of them
4. MBO process leads to satisfied employees . It avoids job mismatch and unnecessary
confusion later on.
5. Employees in their own way contribute to the achievement of the goals and objectives
of the organization
6. Every employee has his own role at the workplace.
7. MBO ensures effective communication amongst the employees . It leads to a positive
ambience at the work place.

28. 8. The MBO process leads to highly motivated and committed employees
9. The MBO process sets a bench mark for every employee.
10. The superior sets targets for each of the team members.
11. Each employee is given a list of specific tasks.

29. Pete Drucker outlined the following five steps for implementing MBO:
1. Establish or clarify organizational objectives in line with the company's mission
and vision.
2. Ensure that employees fully understand the objectives of the company as a whole.
3. Involve employees in determining their personal objectives to help achieve
corporate goals.
4. Monitor and measure employee performance relative to the goals.
5. Evaluate progress, reward success and provide feedback.

31. MBO Advantages & Disadvantages
Advantages
1. MBO programs continually emphasize what should be done in an organization to
achieve organizational goals.
2. MBO process secures employee commitment to attaining organizational goals.
3. Facilitates objective appraisal
4. Raises employee morale
5. Facilitates effective planning
6. Acts as motivational force
Disadvantages
1. The development of objectives can be time consuming, leaving both managers and
employees less time in which to do their actual work.
2. The elaborate written goals, careful communication of goals, and detailed performance
evaluation required in an MBO program increase the volume of paperwork in an
organization.

32. Corporate planning
Corporate planning refers to the process of planning undertaken by the top management to
achieve their organizational goals.
Two significant phases in corporate planning are:
1. Environment scanning
2. Strategy formulation
Mission is the guiding force for all the activities here .
The first step in the process of achievement of the mission is to break the mission into
objectives.
Strategies and programmes have to be formulated and implemented to achieve the given
objectives, which would eventually lead to the fulfillment of the mission.
A mission statement defines why the organization exists. It describes the customer
needs , both present and future. It identifies the functions to be pursued. It focuses on the
markets where the company can operate.

33. From the corporate mission statement , the major goals such as
profitability ,
customer service ,
share holders satisfaction ,
employee motivation and so on
The corporate plans provides a rational (balanced) approach to achieve corporate goals.
Corporate planning is not an easy task. It involves translation of the vision of the chief
executive or top management into achievable targets or goals.
Organizations develop mission statements considering the views of the shareholders and
stake holders.
Definition
Corporate planning can be defined as the process of formulating the corporate mission,
scanning the business environment , evolving strategies, creating necessary infrastructure
and assigning resources to achieve the given mission.
Corporate planning has company wide and comprehensive perspective .

34. It is not just a long term planning where , usually there is a selective focus like that on a
department or
product of the organization.
Strategic planning , if done for the entire organization ,can also be called corporate
planning.
Elements of corporate planning process
1. Identifying corporate mission
2. Formulating strategic objectives
3. Appraising internal and external environment
4. Developing and evaluating alternative strategies
5. Selecting the best strategy
6. Fixing key targets to SBU
7. Allot resources to each SBU
8. Developing operating plans
9. Monitoring the performance
10. Revising the plans , where necessary.

35. corporate mission
Formulating strategic
Formulating strategic
objectives
objectives
Appraising internal and external environment
Developing and evaluating alternative strategies
Selecting the best strategy
Fixing key targets to SBU
Developing operating plans
Monitoring the performance
Revising the plans , where necessary

36. Identifying corporate mission
Identify what the organization wants to achieve , to start with. For this purpose , it is
necessary that all concerned parties understand the overall purpose of the organization and
methods of attaining them.
Formulate strategic objectives:
By preparing statements of mission , policy , strategy and goals the top management
establishes the frame work within which its divisions or departments prepare their plans.
Appraise internal and external environment
To evolve alternative strategies to achieve these goals a detailed appraisal of both the
internal and external environment is carried out.
The appraisal of internal environment reveals the strengths and weakness of the firm.
The appraisal of external environment reveals the opportunities and threats of the firm.
An analysis of strengths, weakness ,opportunities and threats, popularly called as SWOT
analysis, is an essential exercise every firm has to capitalize on internal strengths, eliminate
or overcome the internal weakness .

37. Developing and evaluating alternative strategies
There could be some alternative strategies to pursue a given goal . If the goal is to expand
the business , the following could be the three alternatives.
1. Adding new products to the existing product line
2. Finding new markets , apart from the present market territories
3. Manufacturing within the organization, the components , which were earlier procured
from outside
Similarly ,if the goal is to attain stability the alternative strategies could be to maintain the
following
1. The existing range of products
2. The existing markets
3. The functions presently being carried out.

38. Selecting the best strategy:
For the firm to be more successful it is necessary to focus its strategies around its strengths
and opportunities . It is a prerequisite that the members of the team or organization agree
on a strategic plan.
Establish strategic business units : it is more strategic to define a business unit in terms of
1. customer groups
2. Needs
3. Technology and set up the business unit accordingly.
Hence the focus of marketing definition for ones products and services should be more on
satisfying the customer needs.
Nature of company Product orientation Marketing orientation
An engineering enterprise To sell products or
components
To sell solutions
A publishing company To sell books To disseminate information
A movie making company To make movie To entertain people

39. SBUs in a multinational company
To reinforce the accountability dimension , Reebok one of the multinational shoe companies
was restructured into six SBU
1. Performance footwear
2. Classic foot ware
3. Children foot ware
4. Apparel
5. Business development
6. Retail
Fix targets and allot resources to each SBU
The purpose of identifying the companies strategic business units is to develop separate
strategies and assign appropriate funding.

41. Developing operating plans
The operating or tactical plans explains how the long term goals of the organization can be
met.
1. The corporate plans reveal how much the projected sales and revenue.
2. most often the management would like to have performed better than these projections.
Monitor performance : the results of the operating plans should be well monitored from
time to time .
In case of poor or low performance , check up with the members of the team to find out
their practical problems.
Revise the operating plans:
It is necessary to revise the operational plans particularly when the firm does not perform as
well as expected . The operating plans can be revised in terms of focus , resources or time
frame.

42. Introduction
The purpose of environmental scanning is to identify and understand the new opportunities
in which the company can perform profitably.
Environmental scanning involves an analysis and diagnosis of the external and internal
business firm.
The external environment of the business consists of three parts:
1. General
2. Industry
3. International environment
The results of the diagnosis of these parts of the external environment enable the
organization to identify the opportunities and threats associated with it.
The internal environment is scanned to identify the
1. functional areas ,
2. Their sub factors
3. And their relative strengths and weakness so that a strategic advantage profile is built-
up

43. Environmental analysis
1 .The internal environment e.g. staff (or internal customers), office technology, wages and
finance, etc.
2. The micro environment e.g. our external customers, agents and distributors, suppliers,
our competitors, etc.
3. The macro environment e.g. Political (and legal) forces, Economic forces, Socio cultural
forces, and Technological forces.
These are known as PEST factors.
Environment
External environment
Macro environment
Micro Specific environment
Interactive environment
Industry environment
Internal environment

44. PEST analysis Of macro environ
1. Political factors
2. Economic factors
3. Socio cultural factors
4. Technologic factors
Political Factors
1. How stable is the political environment?
2. Will government policy influence laws that regulate or tax your business?
3. What is the government's position on marketing ethics?
4. What is the government's policy on the economy?
5. Does the government have a view on culture and religion?
Economic Factors
1. Interest rates.
2. The level of inflation Employment level per capita.
3. Long term prospects for the economy Gross Domestic Product (GDP) per capita, and so
on.

45. Socio cultural Factors
1. What is the dominant religion?
2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within society?
6. How long are the population living? Are the older generations wealthy?
7. Do the population have a strong/weak opinion on green issues?
Technological Factors
1. Does technology allow for products and services to be made more cheaply and to a
better standard of quality?
2. Do the technologies offer consumers and businesses more innovative products and
services such as Internet banking, new generation mobile telephones, etc?
3. How is distribution changed by new technologies e.g. books via the Internet, flight
tickets, auctions, etc?

46. Corporate planning
Environmental scanning
ENVIRONMENTAL DIAGNOSIS
ENVIRONMENTAL ANALYSIS
EXTERNAL ENVIRONMENT INTERNAL ENVIRONMENT
GENERAL INTERNATIOANL
INDUSTRY
OPPORTUNITIES AND THREATS
FUNCTIONAL AREA PROFILE
EVALUATION
STRATEGIC ADVANTAGE
STRENGTHS AND WEAKNESS

47. Interactive environment
1. Shareholders
2. Governmental institutions
3. Interest groups
4. Unions
5. Local administrative
6. Industrial chambers
7. Basically stakeholders without internal stakeholders
Industry environment
Porter`s 5 forces model
1. Risk of entry by potential competitors
2. Rivalry among current competitors
3. Bargaining Power of Buyers
4. Bargaining Power of Suppliers
5. Threat of Substitute products

48. Internal environment
1. Research and development
2. Engineering design and management
3. Production management
4. Managerial personnel
5. Accounting and financial policies and procedures
6. Resources
7. Abilities
8. Capabilities of the company

49. Strategy formulation and implantation
Strategy formulation and implantation is the crux of the strategic management process.
Strategy refers to the course of action desires to achieve the objectives of the enterprise.
Formulation , together with its implementation constitute an integral part of the managerial
activity.
Managers use strategies for different purposes such as
1. To overcome competition
2. To increase sales
3. To increase production
4. To motivate the employees
5. To provide their best
Implementation of a strategy is as crucial a task as the formulation of it.

50. Stages in strategy formulation and implementation
1. Identification of mission and objectives
2. Environmental scanning
3. Generic strategy alternatives
4. Strategy variations
5. Strategy choice
6. Allocation of resources and formulation of organizational structure
7. Formulation of plans , policies , programmes and administration
8. Evaluation and control
generic strategy alternatives:
generic strategy alternative refer to the strategy alternatives in broader terms.
generic strategy alternatives available to a firm.
There are four strategic alternatives for any business.
1. Expansion strategy
2. Stability strategy
3. Retrenchment strategy
4. Combined strategy

51. Expansion Retrenchment Stabilise Combinatio
n
Business
definition
Pace Business
definitio
n
Pace Business
definitio
n
Pace Business
Definition/
Pace
products Add new
product
Find
new
uses
Drop old
product
Decre
ase
produ
ct
devel
opme
nt
Maintain Make
package
changes,
quality
improve
ment
Drop old
while adding
new
products

52. Strategy variations
There can be a number of variations of the generic strategy alternatives. For instance , if the
strategy is to expand , then the alternatives are internal expansion or external expansion.
Internal expansion can be achieved through any of the following approaches.
1. Pentrate existing markets
2. Add new markets
3. Add new products
Similarly external expansion can be achieved through mergers or acquisitions.
Selection of best alternative
The best alternative is the one that can improve the performance . The selection of the right
alternative depends upon the
1. Particular configuration of objectives
2. Environmental threat and opportunity profile
3. Strategic advantage profile
4. The generic strategy itself.

53. Control consists of making something happen the way it was planned to happen.
According to Henri fayol control consists in verifying whether everything occurs in
conformity with the plan adopted the instruction issued and principles established.
Its objectives is to point out weaknesses and errors in order to rectify them and prevent
recurrence.
The controlling function includes three procedures
1. Measuring actual performance
2. Comparing performance to standards
3. Taking corrective action to ensure that planned events actually occur
General model of control process

54. Controlling
begins
Work
continues
Measure of
performance
New work
situation
begin
No corrective
action
necessary
Compare
measurement
To standards
Take corrective
action , change
plans
Performance
equivalent
standards
Performance
significantly
different from
standards

55. Attribute Strategic control Operational control
1. Basic
question
Are we moving in the right
direction
How are we performing
2. Aim Proactive ,continuous
questioning the basic
direction of strategy
Allocation and use of
organizational resources
3. Main
concern
Steering the organizations
future direction
Action control
4.Focus External environment Internal environment
5. Time
horizon
Long term Short term
6. Exercise
of control
Exclusively by top
management may be
through lower level support
Mainly by executive or middle
level management on the
direction of the top mgtm
7. Main
techniques
Environmental scanning ,
information gathering
,questioning and review
Budgets , schedules and MBO

56. Types of control
There are three types of control
1. Feed back control
2. Concurrent control
3. Feed forward control
Feed back control
Feed back control focuses on organizational activities and operations after they are
completed. In other words control process starts after the completion of the operations.
Feedback control plays three roles at the operating level
1. It provides the necessary information to the operating manager to evaluate overall
organizational effectiveness
2. It is useful as a basis for evaluating and rewarding employees
3. It alerts the operating managers who need to modify their activities.
Concurrent control
Concurrent control seeks to affect control while the work is in progress . In other words
control is applied while the operations are in progress.

57. For example, Compaq computers has set thirty four check points in its assembly line for
Successful production of laptop computers.
Feed forward control
Managers or supervisors in feed forward control identify the critical issues for the successful
Performance of organizational activities .They foresee the possible deviations in these critical
Issues and suggest to the employees regarding the preventive steps to be taken before
implementation of the plan

58. PROCESS OF CONTROL OR CONTROLLING PROCESS
The managerial control process consists of six steps
Key areas to be monitored
Establishing standards
Measuring performance
Compare performance with standards
Take no action if performance is in harmony
with standards
Take corrective action if necessary
Key areas to be monitored
1. Macro environment
2. Mission and objectives
3. Industry environment
4. Internal environment

59. Establishing standards
Evaluating an organizational performance is normally based on certain standards .these
standards may be the previous years achievements or the competitors records or the fresh
standards established by the management.
The standards may include
1. Quality of products/services
2. Quantity of products to be produced
3. Innovativeness
4. Volume of sales
5. Market share
Measuring performance
The manager has to measure the performance of various areas of the organization before
taking an action . Performance may be measured through quantitative terms or
qualitative terms.
Reports and statements help to measure the actual performance through quantitative
terms and managerial observation help to measure performance through quantitative

60. Compare performance with standards
Once the performance of different aspects of the organization is measured it should be
compared with the predetermined standards.
1. Standards are set to achieve the already formulated organizational goals and plans.
2. Organizational standards are yardsticks and benchmarks that place organizational
performance in perspective
• Profitability standards
• Market position standards
• Productivity standards
• Product leadership standards
• Human resources standards
Take no action .if performance is in harmony with standards
Take corrective action if necessary

61. Design effective control system
Essentials conditions for effective control system includes
1. Design controls to plans and strategies
2. Design controls to individual managers
3. Controls pointing up exceptions at critical points
4. Objectivity of controls
5. Flexibility of controls
6. Compatibility of the control system and organizational culture
7. Economy of controls
1. Design controls to plans and strategies: plans and strategies are the basis for control . In
fact The purpose of control is to ensure the effective implementation of plans and
strategies.
2. Design controls to individual managers: individual managers have to implement the
plans and strategies . Thus they are the monitoring points for the executions as such
control techniques and systems should be designed to individual managers.

62. 3. Controls pointing up exceptions at critical points :
there would be critical points in the implementation process of plans. For example rating of
the company is a critical point in the plan of raising the equity capital.
4. Objectivity of controls:
there should be objectivity in measuring the performance of the employees in terms
implementation of plans and strategies .
5. Flexibility of controls:
environment under which the plans are implemented is dynamic and ever changing . The
unforeseen circumstances make the plans and strategies vulnerable (weak , helpless ) to the
environmental changes.
6. Compatibility of the control system and organizational culture:
organisation culture is developed over the period and relatively stable in the short run . It
gets modified mostly in the long run and slowly. as such control techniques and systems
should be designed based on the organisational culture.
7. Economy of controls:
But the cost of the control system and techniques should not be more than the savings
derived from them.

63. Control techniques
Control techniques are broadly classified into
1. Budgetary Control techniques
2. Non- Budgetary Control techniques
Budgetary Control techniques :
Budgets are plans for a specific period in numerical terms. They are statements of
expected outcome in financial terms, physical terms , human resources terms etc.
Types of budgets:
1. Capital expenditure budgets
2. Cash budgets
3. Time , space and material budgets
4. Production budgets
5. Sales budgets
6. Zero based budgets

64. 1. Capital expenditure budgets:
Companies basically require capital for establishing
manufacturing facilities
marketing network
marketing the products / services
Employing and developing the people etc.
They formulate budgets before acquiring and incurring capital expenditure .
Capital expenditure budgets specify the estimates of the amount of capital required for
land , buildings , plants, equipment, machinery ,technology ,minimum level of materials.
The actual expenditure is compared with the budgeted capital expenditure and
steps are taken to control the deviations regarding the future capital expenditure.

65. 2. Cash budgets
Cash budgets provide the estimates of cash receipts and disbursements .
The actual cash receipts and disbursement are compared with the estimates ,if the
deviations are negative.
Cash budgets are highly essential in order to ensure required amount of cash to
meet the obligations.
3. Time , space and material budgets: budgets needs not be specified in financial and
physical terms .
They can be specified in other quantifiable terms like time and space.
a. Time based budgets are direct labor hours and machine hours rate.
b. Space budgets include square feet required and actually allocated for each machine or
office.
c. Materials budgets includes estimation of materials of various kinds needed and actually
allocated

66. Production budgets
They specify the amount of the estimated output estimated materials , human resources
etc.
Sales budgets:
Sales budgets specify the amount of estimated sales . They help to estimate the sales
,identify the factors hindering sales and control these factors.
Zero based budgeting:
•The recent budgeting technique is the zero based budgeting . Organizational programmes
for all the departments are divided into packages.
•Each packages focuses on its own goals, activities and resources. All costs or expenditure
are calculated a fresh for each budget period avoiding the past changes.

67. Non budgetary control techniques
Statistical data : statistical data provide the basis for performing a number of activities for
the present and the future . Future data act as a control technique for the present
operations.
Special reports and analyses:
Accounting reports , financial reports ,personnel reports , sales reports . This provides
information for reporting and control.
Operational audit:
1. Operational audit is also known as internal audit.
2. Internal audit specifies the results of financial operations of the company including the
company sales ,
3. profits ,
4. cost of salary etc. operational audit compares the results of one year with those of
another year and helps as a control technique.

68. Personal observation:
1. personal observations are more powerful control devices.
2. Managers observe the various activities and operations including
production
sales
human resources and
Finance
Operational research techniques of controlling
Operations research is the application of scientific / mathematical methods or techniques
and tools to the solution of operating business problems or business system.
Linear programming :
It is a mathematical technique for directing the most efficient use of
1. raw materials
2. Manpower
3. Tools of production
4. Capital toward a goal . It solves the product mix and distribution problems

69. Inventory theory
Inventory theory emphasizes on minimizing costs of holding inventories
Procurement of inventories
Shortage of inventories. This theory suggest how much to buy When to buy in order to
minimize the cost of inventory without affecting production schedules.
Queuing theory:
It attempts to minimize the costs of providing service and reduces customers waiting time.
For example : introduction of sudarshana chakra at tirumala.
Simulation :
It sets a model which is similar to a real life situation . Simulation means the duplication of
the essence of the system or activity without actually attaining reality itself
Decision theory
It is used in riskily and uncertain situations in order to take the decision which results in
minimum loss and maximum benefit.
Game theory : it is used to determine the optimum strategy in a competitive situation.

70. Network analysis
Network analysis refers to number of techniques for the planning and control of complex
projects. The basis of network planning is the representation of sequential relationships
between activities by means of a network of lines and circles.
Two most frequently used forms of network planning are:
1. PERT ( Programme evaluation and review technique)
2. CPM( Critical path method)
Programme evaluation and review technique is a tool to evaluate a given programme and
review the progress made in it from time to time .
A programme is also called a project. A project is defined as a set of activities with a specific
goal occupying a specific period of time.
It may be a small or big project , such as
1. construction of a college building ,
2. Laying of a road ,
3. Assembly of a PC
4. Writing software for a given problem

71. Pert is concerned with estimating the time for different stages such in such a programme or a
project and find out what the critical path is that is which consumes the maximum resources.
Critical path method
Critical path method assumes that the time required to complete an activity can be
predicted fairly accurately , and thus the costs involved can be quantified once the critical
path has been identified
Pert Cpm
It is event oriented It is activity oriented
It is based on three time estimates
1.optimistic 2.most likely 3. pessimistic
It is deterministic . Here time estimates are
based on past data.
Time in pert is not related to costs. Here time is related to costs
Pert terminology includes network diagram
,event ,slack
Cpm terminology involves arrow diagram
nodes and float
It assumes that all resources are available
as and when required
It is more realistic