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Controlling – Class 12 Business Studies notes, important questions and MCQs

NCERT Class 12 Business Studies, chapter 8. Notes, key terms, important questions with answers and MCQs.

Chapter overview

Controlling is the process of ensuring that actual performance matches planned performance and taking corrective action where it does not. It is goal-oriented, pervasive, both backward-looking and forward-looking, and closely linked with planning. Controlling helps achieve objectives, use resources efficiently, improve employee motivation, ensure order and discipline, and coordinate action.

Importance and limitations

Importance: accomplishing organisational goals, judging the accuracy of standards, efficient use of resources, improving employee motivation, ensuring order and discipline, and facilitating coordination.
Limitations: difficulty in setting quantitative standards for some activities, little control over external factors, resistance from employees and high costs.

Controlling process

Setting performance standards, which may be quantitative (units, cost) or qualitative (goodwill, motivation).
Measuring actual performance; comparing actual performance with standards; analysing deviations.
Taking corrective action, such as revising standards, training employees, improving methods or changing plans.
Critical point control focuses on key result areas; management by exception means only significant deviations are reported to management.

Planning and controlling

Planning and controlling are inseparable twins: planning sets standards, and controlling checks whether they are met.
Planning without controlling is meaningless, and controlling without planning is blind.
Planning is forward-looking; controlling is backward-looking because it reviews past performance, but it is also forward-looking because it aims to improve future performance.

Key terms

Controlling: ensuring that actual performance conforms to planned performance
Standard: a criterion against which actual performance is measured
Deviation: the difference between actual performance and the standard
Critical point control: focusing control on key result areas that are critical to success
Management by exception: the principle that only significant deviations from standards are brought to management's attention

Important questions with answers

State the steps in the controlling process.2 marks

The steps are setting performance standards, measuring actual performance, comparing actual performance with the standards, analysing deviations to find their causes and importance, and taking corrective action to remove deviations or revise standards.

Explain management by exception.3 marks

Management by exception is the principle that managers should not try to control everything. Only significant deviations from standards, beyond acceptable limits, should be brought to the attention of higher management, while minor deviations are handled at lower levels. It saves time and effort and focuses attention on important problems.

Explain the relationship between planning and controlling.5 marks

Planning and controlling are closely related and are often called the inseparable twins of management. Planning involves setting objectives and deciding in advance the course of action, and it provides the standards of performance. Controlling involves measuring actual performance, comparing it with these standards and taking corrective action. Without planning, controlling has no standards to compare against, so controlling without planning is blind. Without controlling, there is no way to know whether plans are being followed, so planning without controlling is meaningless. Planning is a prescriptive process that looks ahead, while controlling is evaluative and looks back at what has been achieved. However, controlling is also forward-looking because its findings are used to improve future plans and performance, and planning is also backward-looking because it is guided by past experience. Thus both functions reinforce each other and form a continuous cycle: plans set standards, controlling checks performance, and the results lead to revised plans.

Quick revision

Controlling: goal-oriented, pervasive, backward- and forward-looking.
Process: set standards → measure → compare → analyse deviations → correct.
Critical point control; management by exception.
Planning and controlling are inseparable twins.

Exam tips

Remember the five steps of controlling in order.
Use the phrase 'planning and controlling are inseparable twins' in answers on their relationship.

Practice MCQs

The management function that compares actual performance with standards is
1. controlling
2. planning
3. staffing
4. organising
Show answer
Answer: (a) controlling. It ensures plans are followed.
The first step in the controlling process is
1. setting performance standards
2. taking corrective action
3. measuring performance
4. analysing deviations
Show answer
Answer: (a) setting performance standards. Standards are the basis of comparison.
The difference between actual and standard performance is called
1. target
2. policy
3. budget
4. deviation
Show answer
Answer: (d) deviation. It may be positive or negative.
Reporting only significant deviations to top management is
1. management by exception
2. critical point control
3. feedback only
4. planning
Show answer
Answer: (a) management by exception. It saves management time.
Focusing on key result areas that affect the whole organisation is
1. critical point control
2. management by exception
3. decentralisation
4. coordination
Show answer
Answer: (a) critical point control. Not every activity needs equal control.
Planning and controlling are described as
1. inseparable twins
2. unrelated
3. opposite functions
4. optional functions
Show answer
Answer: (a) inseparable twins. Each depends on the other.
Controlling is said to be both backward-looking and forward-looking because it
1. ignores the past
2. only sets targets
3. reviews past performance and aims to improve future performance
4. only punishes workers
Show answer
Answer: (c) reviews past performance and aims to improve future performance. It looks at results and guides future action.
Which is a limitation of controlling
1. it has little control over external factors such as government policy
2. it ensures discipline
3. it improves motivation
4. it helps coordination
Show answer
Answer: (a) it has little control over external factors such as government policy. The environment cannot be controlled.

All chapters of Class 12 Business Studies

Written by Kundali IQ from standard, well-established facts to help with revision. This is not an official NCERT publication; always read your textbook too.