Controlling

Business Studies — Grade 12 | Chapter 6 | NEB Nepal

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Introduction

Planning sets the destination; organizing builds the vehicle; leading drives it. But without controlling — the function that monitors whether the journey is on course and takes corrective action when it is not — the organization may arrive somewhere entirely different from where it intended. Controlling closes the management loop: it measures actual performance against planned standards, identifies deviations, and initiates corrective action. Without control, management is blind — operating on hope rather than evidence. Chapter 6 covers the meaning and importance of controlling, its process, the types of control (pre-control, concurrent, and post-control), and the essentials of an effective control system.

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1. Concept and Meaning of Controlling

According to Henri Fayol, “Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and the principles established. It has for its object to point out weaknesses and errors in order to rectify them and prevent recurrence.”

According to Koontz and O’Donnell, “Controlling is the measuring and correcting of activities of subordinates to ensure that events conform to plans. It measures performance against goals and plans, shows where negative deviations exist, and, by putting in motion actions to correct deviations, helps ensure accomplishment of plans.”

According to George R. Terry, “Controlling is determining what is being accomplished — that is, evaluating performance — and, if necessary, applying corrective measures so that the performance takes place according to plans.”

According to Robert J. Mockler, “Management control is a systematic effort by business management to compare performance to predetermined standards, plans, or objectives in order to determine whether performance is in line with these standards and presumably to take any remedial action required to see that human and other corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives.”

According to Ernest Dale, “Control is checking current performance against predetermined standards contained in the plans, with a view to ensuring adequate progress and satisfactory performance, and also recording experience gained from working of these plans as a guide to possible future operations.”

Controlling is not about surveillance or punishment — it is a constructive, forward-looking function whose purpose is to ensure that organizational resources are used effectively to achieve objectives. It is the feedback mechanism of management.

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2. Importance of Controlling

i. Basis for Future Planning: Control generates information about what worked and what did not — this experience directly improves the quality of future planning. According to Peter Drucker, “Control without planning is purposeless; planning without control is powerless.”

ii. Ensures Goal Achievement: Without control, there is no way to know whether the organization is moving toward its objectives or drifting away. According to Koontz and O’Donnell, “Control is the function of every manager — from top executive to supervisor — because without it, organizational performance cannot be assured.”

iii. Efficient Use of Resources: Control identifies waste, redundancy, and inefficiency — enabling management to reallocate resources to their most productive use. In Nepal’s resource-constrained economy, this function is particularly critical.

iv. Improves Employee Performance: Clear standards combined with regular feedback improve employee performance by making expectations explicit and providing guidance for improvement. According to Frederick Taylor, scientific management’s most powerful tool is the measurement of performance against scientifically determined standards.

v. Facilitates Coordination: Control monitors the performance of all organizational units simultaneously — enabling management to identify where coordination is breaking down and take corrective action before problems escalate.

vi. Builds Accountability: Control systems establish clear accountability — everyone knows what is expected of them and how their performance will be measured. This accountability motivates effort and deters negligence.

vii. Adapts to Change: By continuously monitoring the environment and organizational performance, control systems enable management to detect changes early and adapt plans accordingly. According to Peter Drucker, “The most important task of an organization’s leader is to anticipate crisis — to take the actions required while there is still time to act.”

viii. Supports Delegation: Without control, managers cannot delegate effectively — they have no way to verify that delegated tasks are being performed correctly. Control makes delegation possible and safe.

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3. Process of Control

The control process follows a systematic sequence of four steps:

Step 1 — Establishing Performance Standards Standards are the benchmarks against which actual performance will be measured. They should be specific, measurable, and derived directly from the plans and objectives established during the planning function.

According to Koontz and O’Donnell, “Standards should be expressed in quantitative terms wherever possible — units of output, revenue, cost, time, quality scores — because quantitative standards are unambiguous and easier to measure objectively.”

Types of standards:

• Quantitative standards: Units produced per day, revenue per quarter, error rate, cost per unit
• Qualitative standards: Customer satisfaction levels, employee morale, product quality perceptions
• Time standards: Deadlines, project milestones, delivery schedules
• Cost standards: Budgets, expense limits, cost-per-unit targets

Step 2 — Measuring Actual Performance Performance data must be collected systematically — through reports, direct observation, statistical sampling, audits, and management information systems. The measurement must be timely (available when decisions need to be made), accurate (reliable enough to guide action), and relevant (focused on the performance dimensions that matter most).

According to George Terry, “Performance measurement is the factual basis of control — without accurate measurement, the comparison step cannot be performed and control is impossible.”

Step 3 — Comparing Actual Performance with Standards Measured performance is compared with established standards to identify deviations — both negative (performance below standard) and positive (performance above standard). Not all deviations require action — managers apply the principle of management by exception, focusing attention on significant deviations.

According to Frederick Taylor, “Management by exception means that managers should only be concerned with significant deviations from standard — either exceptionally good or exceptionally bad performance — and leave routine performance to take care of itself.”

Step 4 — Taking Corrective Action When significant deviations are identified, management must take corrective action. Three types of response are possible:

• Correct the performance: Take action to bring actual performance back to the standard — more training, better supervision, resource reallocation, process improvement
• Revise the standard: If investigation shows the standard was unrealistic, it should be revised — but this must be done honestly, not as an excuse for poor performance
• Do nothing: If the deviation is within acceptable limits or is self-correcting, no action may be required

According to Robert Mockler, “Corrective action is the point at which control connects back to planning — the information generated by control either confirms that plans are being executed correctly or triggers revision of plans, processes, or standards.”

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4. Types of Control: Pre-Control, Concurrent Control, and Post-Control

Control can be exercised at three different points in the operational cycle — before work begins, while work is in progress, and after work is completed. These correspond to the three types of control identified in the NEB syllabus.

4.1 Pre-Control (Feed-Forward Control / Preventive Control)

Pre-control involves taking action before operations begin to prevent problems from occurring — rather than detecting and correcting them after they arise.

According to Koontz and O’Donnell, “Feed-forward control, or pre-control, is directed toward the future — it is designed to prevent anticipated problems before they occur.”

According to Ricky W. Griffin, “Pre-control focuses on inputs — ensuring that the human, financial, and physical resources available to the organization meet the standards necessary for planned performance.”

Examples of pre-control:

• Selecting qualified employees through rigorous recruitment before they are hired (rather than correcting performance problems after)
• Inspecting raw materials before they enter the production process (rather than rejecting finished goods later)
• Testing a new product concept with target customers before full-scale production
• Requiring drivers to have valid licences before operating company vehicles
• Completing environmental impact assessments before starting a construction project in Nepal

Advantages: Prevents problems rather than correcting them — saves cost, time, and reputational damage. Prevention is always cheaper than cure.

Disadvantages: Requires accurate prediction of what could go wrong — difficult in highly uncertain environments. Can be expensive to implement comprehensively.

4.2 Concurrent Control (Real-Time Control / Steering Control)

Concurrent control involves monitoring operations while they are in progress — detecting and correcting deviations in real time, before they produce significant negative outcomes.

According to Ricky W. Griffin, “Concurrent control monitors ongoing activity to ensure that it conforms to established standards. It is taking place at the same time as the activity being monitored.”

According to Koontz and O’Donnell, “Concurrent control, sometimes called steering control, involves the continuous monitoring of work in progress and the immediate correction of deviations as they arise.”

Examples of concurrent control:

• A production supervisor walking the factory floor and correcting workers’ technique in real time
• A bank manager reviewing daily transaction reports and immediately investigating unusual patterns
• Air traffic controllers continuously monitoring aircraft positions and issuing real-time course corrections
• Quality control inspectors checking products at each stage of the production line
• A Nepal Electricity Authority engineer monitoring power grid performance in real time

Advantages: Catches problems while they can still be corrected — before they become permanent or escalate. Provides immediate feedback to employees.

Disadvantages: Requires continuous monitoring, which is resource-intensive. Depends on the speed with which performance data can be gathered and analyzed.

4.3 Post-Control (Feed-Back Control / Corrective Control)

Post-control involves reviewing performance after operations are completed — evaluating outcomes, identifying what went wrong, and applying lessons to future operations.

According to Ricky W. Griffin, “Post-control, or feedback control, focuses on the results of a completed activity. It tells managers how well they performed and provides information for improving future performance.”

According to George Terry, “Post-control is the most common form of control in organizations — managers review completed performance reports and financial statements to assess whether objectives have been achieved.”

Examples of post-control:

• Annual financial statements showing whether the year’s profit targets were achieved
• Performance appraisals evaluating an employee’s contribution over the past year
• Post-project reviews identifying what worked and what should be done differently next time
• NEB examination results revealing whether educational objectives were achieved
• A bank’s annual audit report assessing whether internal control systems functioned effectively

Advantages: Provides comprehensive, definitive information about outcomes. Generates lessons for future planning. Establishes clear accountability for results.

Disadvantages: Reactive — problems have already occurred and their consequences have already been experienced. Cannot prevent the harm already done. According to Koontz, “Feedback control is like closing the stable door after the horse has bolted — the damage is done.”

4.4 Comparison of Types of Control

Basis	Pre-Control	Concurrent Control	Post-Control
Timing	Before operations	During operations	After operations
Focus	Inputs	Processes	Outputs/Results
Purpose	Prevent problems	Detect and correct in real time	Learn from outcomes
Example	Staff selection; raw material inspection	Supervisor observation; real-time reporting	Annual audit; performance appraisal
Advantage	Prevents harm	Limits harm	Generates lessons
Limitation	Requires prediction	Resource-intensive	Cannot undo past harm

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5. Essentials of Effective Control

A control system that is theoretically sound but practically ineffective serves no purpose. According to Koontz and O’Donnell, an effective control system must possess the following characteristics:

i. Suitability: The control system must be tailored to the specific plans, activities, and organizational context it is designed to monitor. According to George Terry, “A control that works perfectly in one organization may be entirely unsuitable in another — controls must be designed for the plans they are meant to monitor.”

ii. Promptness: Control information must be available quickly enough to enable timely corrective action. A financial report that takes six months to produce is of little operational value — by the time managers see it, the situation has changed beyond recognition.

iii. Forward-Looking: Effective controls anticipate problems and deviations — they are proactive rather than purely reactive. According to Koontz, “The ideal control system would tell managers in advance — before problems occur — where and why deviations are likely.”

iv. Highlighting Critical Deviations: Controls should apply the principle of exception — focusing management attention on significant deviations rather than drowning managers in routine data. According to Taylor, management by exception ensures that managerial attention — the scarcest organizational resource — is directed where it adds the most value.

v. Objectivity: Standards and measurements must be factual, not based on personal bias or political considerations. According to Koontz and O’Donnell, “Controls must be objective — they must be based on facts and impersonal analysis, not opinions, emotions, or relationships.”

vi. Flexibility: Control systems must be able to adjust when plans change or unexpected events occur. Rigid controls that cannot adapt to change quickly become useless obstacles.

vii. Economy: The cost of operating the control system must be justified by the value of the information and corrections it produces. An elaborate control system that costs more than the losses it prevents is a net liability.

viii. Clarity and Simplicity: Controls must be understood by those who use them. Complex systems that only specialists can interpret create dependency and reduce the effectiveness of the control function.

ix. Action-Oriented: Controls must be designed to trigger corrective action — not merely to generate reports. A control system that identifies deviations but provides no mechanism for responding to them is incomplete.

x. Acceptance by Employees: According to Rensis Likert, employees who perceive control systems as fair, transparent, and oriented toward organizational improvement — rather than surveillance and punishment — are more likely to support them and less likely to game or subvert them.

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6. Relationship Between Planning and Controlling

Planning and controlling are the two most closely interdependent management functions — each is meaningless without the other.

According to Koontz and O’Donnell, “Planning and controlling are inseparable twins of management. Plans give controlling its purpose and standards; controlling gives planning its feedback and reality check.”

• Plans establish the standards against which control compares performance
• Control provides the feedback that reveals whether plans are being executed correctly
• Control generates the information needed to revise and improve future plans
• Without plans, control has no standards to compare performance against
• Without control, plans have no mechanism to ensure they are executed

This circular relationship is why management is described as a continuous cycle rather than a linear sequence.

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7. Controlling in the Nepali Context

i. Public Sector Accountability: Nepal’s Auditor General (Mahalekha Parikshak) conducts annual audits of all government entities — the primary post-control mechanism for public sector financial performance. The Office of the Auditor General’s annual reports consistently identify significant control weaknesses in Nepal’s public institutions.

ii. Financial Sector Controls: Nepal Rastra Bank (NRB) operates as the supervisory and regulatory authority for all banks and financial institutions — requiring regular financial reporting, on-site inspections, and compliance monitoring that constitute a comprehensive concurrent and post-control system.

iii. Tax Administration: The Inland Revenue Department’s audit program — selecting taxpayers for detailed examination of their tax returns — is a post-control mechanism designed to detect and deter tax evasion.

iv. Corporate Governance: Nepal’s Companies Act, 2063 BS requires all public companies to appoint independent auditors and submit audited financial statements annually — mandatory post-control mechanisms for shareholder accountability.

v. SME Control Challenges: Nepal’s large small-and-medium enterprise sector typically lacks formal control systems — operating without written budgets, performance standards, or systematic reporting. This absence of control is a significant contributor to the high failure rate of small businesses in Nepal.

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Conclusion

Controlling is the management function that ensures accountability, enables learning, and maintains organizational integrity. Without control, plans are merely wishes; with it, they become commitments backed by evidence and action.

As Peter Drucker observed, “What gets measured gets managed.” This principle captures the essential power of control — by defining what will be measured and holding people accountable for the results, control systems shape organizational behaviour and drive performance toward planned objectives.

According to Henri Fayol, “Without control, nothing is assured.” For Nepal’s organizations — public and private, large and small — building robust, fair, and effective control systems is not an administrative luxury but a governance necessity. It is the foundation on which organizational accountability, resource efficiency, and sustainable performance are built.

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Prepared for NEB Grade 12 Business Studies — Chapter 6: Controlling Aligned with the National Curriculum Framework 2076, Curriculum Development Centre, Sanothimi, Bhaktapur