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Special Techniques & limitations of Control

Special Techniques & limitations of Control

Special Techniques of Control

The management has at its disposal a number of control techniques which may be employed depending on the situations. A control technique or a tool is a specific method which deals with the pertinent organizational information problems.

The important techniques of control can be grouped into the following categories;

  • General Techniques of Control.
  • Special Techniques Control.
  • Modern Techniques of Control.

I. General Techniques of Control

They include personal observations, setting examples to subordinates, principles and policies of the organization, records and reports, disciplinary action, setting up a separate department of control to bring the control process more effectively. Written communication by letters and circular, accounting system recording all transactions, auditing of accounts, etc.

II. Special Techniques of Control

A brief description of special control techniques are given below:

  1. Budgetary control-

    Budgetary control is exercised by middle level managers. Budgeting is the process of stating in quantitative terms, usually in rupees, planned organizational activities for a given period of time. Budgets may include such figurers as projected income, expenditures, and profits. Budgets are prepared for the organization as a whole, as well as for the subunits. Budgetary performance is based on achieving its goals, by operating within predetermined expense constraints set through managerial judgment or discretion. Controls can be exercised by limiting the budgetary provisions

  2. Financial control-

    Financial control techniques include the use of financial statements, ratio analysis, comparative financial analysis and financial audits.

Financial statement is a summary of a major aspect of an organization’s financial status. It includes a balance sheet, income statement, etc. Ratio analysis is the process of determining and evaluating financial ratios. This includes liquidity ratio, analysis, asset management ratios, debt management ratios, profitability ratios, etc. All these methods exercise financial controls.

  1. Quality control-

    At the present time quality control gets greater than the past. A major reason is that a number of companies are making serious in global markets by offering and services of superior quality. As a result, top executives give much importance to quality of products and services.

The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or Implied needs is referred to quality. In examining the issue of quality and the need for quality control, we explore the strategic implications of quality, the concept of total quality control, quality circles and related developments at the present time, and statistical aids to quality control.

  1. Inventory control-

    This is another type of control system found in most of the organizations. Inventory is a stock of materials that are used to facilitate production or to satisfy customer demand. There are three types of inventories, namely, raw materials, work-in process and finished goods.

Inventory is important to organizations because it represents considered costs. There is item cost (the price of an inventory item), ordering cost (the expenses involved in placing an order), carrying or holding cost (the expenses associated with keeping an item on hand and finally stock out cost (the economic consequences of running out of stock). Inventory control is exercised to maintain the inventory system in the proper order.

III. Modern Techniques of Control

Modern techniques of control are as follows:

  1. Return on Investment/ROI:

    ROI is a control technique of overall performance. It measures the rate of return on investment i.e., capital employed. This technique is based on the assumption that the goal of business is not to maximize profits but to optimize return on capital employed.

  2. Management Audit:

    Audit is a systematic technique of evaluation of the working and effectiveness of management of entire management process. Audit is a periodic event.

The Audit team collects many facts and information from office records, personal interview with the members of organization. The audit team then makes certain recommendations for the future guidance of management.

  1. Management Information System (MIS):

    MIS is a system of collecting, processing and transmitting information needed by managers. Managers use this information for planning, decision-making as well as for controlling the activities of the organization.

  2. Zero base budgeting (ZBB):

    It is a budgeting technique which does not consider figures of previous year periods while preparing a budget. It prepares budget afresh without considering the figures of earlier year or period.

  3. PERT/CPM:

    These are network techniques which are also used in controlling the actions and performance. PERT stands for Programmed Evaluation and Review Technique and CPM stands for Critical Path Method.

PERT/CPM is a technique of scheduling complex projects involving many a activities. In this technique, a network diagram is prepared that displays he sequence of activities needed to complete a project and time and cost associated with each activity.

  1. Responsibility Accounting:

    It means a system of accounting whereby the performance of various people’ is judged by assessing how far they have achieved pre-determined targets set for the division, department and sections for which they are responsible. Each person is responsible for his area of operation. Costs are assigned to responsibility centers rather than to product. A responsible centre is an organizational unit such as division, department or section for which a person is assigned responsibility for achieving the target for his centre.

  2. Other techniques or Methods:

    (i) Cash Flow Analysis (ii) Logistic Control Systems, (iii) Linear Programming, (iv) Simulation, (v) Queuing and Game Theory etc.

Limitations of Control

Inspire of importance and usefulness, managerial controls have certain limitations. viz.,

  1. No control on external factors:

    This is one of the important limitations of control that it cannot be used on external factors like competitors activities, consumer behaviour and change in demands, government policies, etc.

  2. Difficulty in establishing standards:

    Standards are the base of control. Without the establishment of accurate standard, controls cannot be possible. Setting of physical standards (such as productivity per employee, wage rates, wage rates in terms of rupees, etc.). Therefore, in certain areas controls become difficult in the absence of standards.

  3. Absence of fixation of responsibility:

    Fixation of responsibility on certain persons is essential for effective controls. Many times, a particular work is performed by a number of persons and in case of any mistake it becomes difficult to determine who is the person responsible for such mistake. In such situations, the control system fails.

  4. Wastage of time, money and efforts:

    Many times it is experienced that the control system becomes more expensive, time consuming and much efforts are needed to correct the deviation.

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