CBSE Class 12 Business Studies Chapter 8 Controlling Notes | Process, Importance & Planning
CBSE Class 12 Business Studies Unit 8 – Controlling Notes
Controlling – Concept, Importance, Relationship with Planning & Process of Control
Introduction
Controlling is an important function of management. It helps a manager check whether the actual work is being done according to the planned targets or not.
For example, if a company plans to sell 1,000 units in a month, the manager will compare the actual sales with the target. If only 800 units are sold, the manager will find out the reason and take corrective action.
In simple words:
Planning decides what has to be done, while controlling checks whether it is being done properly or not.
1. Meaning and Concept of Controlling
Controlling means comparing actual performance with planned performance, finding deviations, analysing their causes and taking corrective action wherever necessary.
Simple Definition
Controlling is the process of:
Setting standards → Measuring actual performance → Comparing performance → Finding deviations → Taking corrective action
Easy Example
A school decides that every Class 12 student should score at least 75% in the pre-board examination.
After the examination:
Target = 75%
Actual average = 68%
Deviation = 7%
The teacher will identify the reasons for the lower performance and take corrective steps such as revision classes, practice tests and doubt-solving sessions.
This is controlling.
2. Importance of Controlling
Controlling is important for every organisation because it ensures that activities are moving in the right direction.
1. Accomplishing Organisational Goals
Controlling helps managers check whether organisational activities are moving towards the planned goals.
Example:
If the target is to increase sales by 10%, controlling helps check whether the target is actually being achieved.
2. Judging Accuracy of Standards
Controlling helps management check whether the standards set during planning are realistic and appropriate.
Example:
If a company sets a production target that is impossible to achieve with available resources, controlling may reveal that the standard needs to be reconsidered.
3. Making Efficient Use of Resources
Controlling helps reduce wastage and ensures that resources are used efficiently.
Resources include:
Money
Materials
Machines
Labour
Time
Example:
If too much raw material is being wasted during production, management can take corrective action.
4. Improving Employee Motivation
When employees know that their performance will be measured against clear standards, they are encouraged to perform better.
Good performance can also be recognised and rewarded.
5. Ensuring Order and Discipline
Controlling helps ensure that employees follow organisational rules, policies and procedures.
It creates discipline in the organisation.
6. Facilitating Coordination
Different departments must work together to achieve common organisational goals.
Controlling helps identify problems between departments and improves coordination.
7. Improving Managerial Effectiveness
Controlling provides managers with information about actual performance.
This information helps managers take better decisions and improve future performance.
3. Relationship Between Planning and Controlling
Planning and controlling are closely related functions of management.
Planning establishes the objectives and standards, while controlling checks whether those objectives and standards are being achieved.
Simple Example
A business plans to produce 5,000 units in one month.
Planning decides the target = 5,000 units.
Controlling measures actual production.
Suppose actual production = 4,500 units.
Deviation = 500 units.
Management finds the reason.
Corrective action is taken.
Therefore, planning and controlling work together.
Planning and Controlling – Two Sides of the Same Coin
Planning and controlling are often described as two sides of the same coin.
Why?
Planning without controlling:
There is no way to know whether plans are being properly implemented.
Controlling without planning:
There are no predetermined standards or targets against which actual performance can be compared.
Therefore:
Planning provides the basis for controlling, and controlling helps improve future planning.
Relationship in Flow Form
Planning
↓
Sets Objectives & Standards
↓
Controlling
↓
Measures Actual Performance
↓
Compares with Standards
↓
Corrective Action
↓
Improved Future Planning
4. Steps in the Process of Controlling
The controlling process generally consists of the following steps:
Step 1: Setting Performance Standards
The first step is to establish standards against which actual performance will be measured.
Standards may be related to:
Quantity
Quality
Cost
Time
Sales
Profit
Example
A company sets a production standard of 10,000 units per month.
Here, 10,000 units is the performance standard.
Step 2: Measurement of Actual Performance
The next step is to measure the actual performance of employees or the organisation.
Performance should be measured in a reliable and objective manner.
Example
Actual production during the month is 9,000 units.
Therefore:
Actual Performance = 9,000 units
Step 3: Comparing Actual Performance with Standards
The actual performance is compared with the predetermined standards.
Example
Standard production = 10,000 units
Actual production = 9,000 units
Deviation = 1,000 units
This comparison helps management identify whether performance is according to the plan.
Step 4: Analysing Deviations
If there is a difference between actual performance and standard performance, the manager analyses the deviation.
Not every deviation requires immediate corrective action.
Management should identify:
Size of deviation
Reasons for deviation
Whether deviation is important or not
Whether corrective action is required
Example
Production is lower because of:
Machine breakdown
Shortage of raw materials
Labour problems
The manager must identify the actual reason before taking corrective action.
Step 5: Taking Corrective Action
The final step is to take corrective action to remove the causes of significant deviations.
Example
If production is low because of frequent machine breakdowns, management may:
Repair the machine
Replace old machinery
Increase maintenance
Provide technical support
The purpose is to bring actual performance closer to the planned standard.
Controlling Process – Easy Revision
Remember this sequence:
S → M → C → A → C
S – Setting Standards
M – Measuring Actual Performance
C – Comparing Performance
A – Analysing Deviations
C – Corrective Action
One-Line Flow
Set Standards → Measure Performance → Compare → Analyse Deviations → Take Corrective Action
Important Difference: Planning vs Controlling
| Basis | Planning | Controlling |
|---|---|---|
| Meaning | Deciding objectives and how to achieve them | Checking actual performance against standards |
| Main focus | Future | Actual performance and corrective action |
| Function | Sets targets | Measures achievement of targets |
| Sequence | Comes before implementation | Follows implementation and measurement |
| Relationship | Provides standards for control | Provides feedback for future planning |
Important Questions & Answers
Q1. What is Controlling?
Answer:
Controlling is the process of comparing actual performance with planned performance, identifying deviations, analysing their causes and taking corrective action wherever necessary.
Q2. State any four points showing the importance of controlling.
Answer:
The importance of controlling is:
Accomplishing organisational goals – It helps ensure that organisational objectives are achieved.
Making efficient use of resources – It helps reduce wastage of money, material, time and other resources.
Improving employee motivation – Employees are encouraged to perform better when performance standards are clear.
Facilitating coordination – It helps different departments work towards common organisational objectives.
Q3. Explain the relationship between planning and controlling.
Answer:
Planning and controlling are closely related.
Planning provides standards: Planning determines objectives and standards which become the basis of controlling.
Controlling checks performance: Controlling compares actual performance with planned standards.
Controlling provides feedback: Information obtained through controlling helps management improve future plans.
Both are interdependent: Planning without controlling cannot ensure proper implementation, while controlling without planning has no standards for comparison.
Therefore, planning and controlling are considered two sides of the same coin.
Q4. Explain the steps involved in the process of controlling.
Answer:
The controlling process involves the following steps:
Setting performance standards
Measurement of actual performance
Comparison of actual performance with standards
Analysing deviations
Taking corrective action
Q5. What is meant by setting performance standards?
Answer:
Setting performance standards means establishing predetermined targets against which actual performance will be measured.
Example:
A company sets a target of producing 20,000 units per month. This target becomes the performance standard.
Q6. What is measurement of actual performance?
Answer:
Measurement of actual performance means finding out the actual results achieved by employees or the organisation.
Example:
If the production target is 20,000 units but actual production is 18,000 units, then 18,000 units is the actual performance.
Q7. Why is comparison of actual performance with standards important?
Answer:
Comparison helps management identify whether actual performance is:
Equal to the standard
Above the standard
Below the standard
It helps managers identify deviations and decide whether corrective action is required.
Q8. What is meant by analysing deviations?
Answer:
Analysing deviations means finding out the reasons for the difference between actual performance and standard performance.
For example, low production may be caused by machine breakdown, shortage of raw material or labour problems.
Q9. What is corrective action?
Answer:
Corrective action means taking necessary steps to remove the causes of significant deviations and bring actual performance closer to the planned standards.
Example:
If production is low due to machine breakdown, repairing or replacing the machine can be corrective action.
Important 3-Mark Question
Q10. Explain any three points showing the importance of controlling.
Answer:
1. Accomplishing Organisational Goals
Controlling ensures that organisational activities are moving according to planned objectives.
2. Making Efficient Use of Resources
It helps identify wastage and ensures proper utilisation of organisational resources.
3. Improving Employee Motivation
Employees are motivated when their performance is measured against clear standards and good performance is recognised.
Important 4-Mark Question
Q11. Explain the relationship between planning and controlling.
Answer:
Planning and controlling are interdependent functions.
Planning sets standards: It determines objectives and performance standards.
Controlling measures performance: Actual performance is measured against these standards.
Controlling identifies deviations: It helps find differences between planned and actual performance.
Controlling improves planning: The information obtained through controlling helps management prepare better future plans.
Thus, planning and controlling are closely connected and are considered two sides of the same coin.
Important 6-Mark Question
Q12. Explain the process of controlling.
Answer:
The process of controlling consists of the following steps:
1. Setting Performance Standards
The first step is to establish standards or targets against which actual performance will be measured.
2. Measurement of Actual Performance
Actual performance is measured using appropriate methods and reliable information.
3. Comparing Actual Performance with Standards
Actual performance is compared with predetermined standards to identify deviations.
4. Analysing Deviations
The manager identifies the causes and significance of deviations.
5. Taking Corrective Action
Necessary corrective measures are taken to remove the causes of significant deviations.
Therefore, controlling ensures that organisational activities remain on the right path and objectives are achieved.
Case Study Based Question
Question:
A company sets a target of producing 50,000 units in a month. At the end of the month, actual production is found to be 45,000 units. The manager investigates the situation and discovers that frequent machine breakdowns caused the shortfall. The company decides to repair the machines and increase maintenance.
Answer the following:
(a) Identify the standard.
Answer:
The standard is 50,000 units of production.
(b) Identify the actual performance.
Answer:
Actual performance is 45,000 units.
(c) What is the deviation?
Answer:
Deviation = 50,000 − 45,000 = 5,000 units
(d) Which step involves finding the reason for the deviation?
Answer:
Analysing deviations.
(e) Identify the corrective action.
Answer:
Repairing the machines and increasing maintenance is the corrective action.
Case Study Based Question 2
A school sets a target that students should achieve an average of 75% in the annual examination. After the examination, the average score is found to be 69%. The school analyses the reasons and finds that students need more practice in numerical questions. The school introduces additional practice sessions.
Answer:
Standard: 75% average
Actual performance: 69% average
Deviation: 6 percentage points
Analysis: Students need more practice in numerical questions
Corrective action: Additional practice sessions
Quick Revision Notes
Controlling
Meaning:
Comparing actual performance with planned standards and taking corrective action.
Importance
Remember:
G – R – M – D – C
G – Goal accomplishment
R – Resource utilisation
M – Motivation
D – Discipline
C – Coordination
Relationship Between Planning & Controlling
Planning → Standards → Controlling → Comparison → Corrective Action → Better Future Planning
Controlling Process
1. Setting Standards
↓
2. Measuring Actual Performance
↓
3. Comparing Performance
↓
4. Analysing Deviations
↓
5. Taking Corrective Action
Exam Tip for Students
For a 6-mark question on the process of controlling, write all five steps in correct sequence and explain each step with a short example wherever possible.
Do not simply write the names of the steps. Underline the key terms such as:
Setting Standards → Measurement → Comparison → Analysing Deviations → Corrective Action
This makes your answer more organised and easier to evaluate.
Conclusion
Controlling is an essential function of management. It helps an organisation check actual performance, identify deviations and take corrective action. It is closely connected with planning because planning sets the standards and controlling checks their achievement.
For CBSE examination preparation, remember the basic idea:
Planning decides the destination, while controlling checks whether the organisation is moving towards that destination.
One-Minute Revision
Controlling = Compare + Analyse + Correct
Process = Standards → Measurement → Comparison → Analysis → Corrective Action
Planning + Controlling = Closely Related Functions
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