Traditional And Modern Techniques of Controlling
After the management has completed the task of recruiting the right candidates for the right job, training and development start according to the requirement. The employees are on their job given. The next step is controlling. Controlling is a process of controlling the difference between planned output and actual output.
The right performance of the process of control is very critical to the success of any organization. Controlling is most important as it ensures the effective and efficient utilization of a company's resources so that it achieves the planned or desired goals.
According to Brech, “Controlling is the systematic approach which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to future needs.”
Methods and Techniques of Controlling
There are many controlling techniques that are commonly referred to as controlling aids.
These controlling types are categorized into two -
A Traditional type of control
A Modern type of control
Traditional Types of Controlling Techniques
Under this, we have about a few types of traditional techniques of control as mentioned below:
Direct Supervision and Observation
This is one of the oldest techniques of controlling. As the name suggests, the supervisor directly observes the worker at his workplace during the working hours. This technique is very useful in small scale business or industries. A lot of issues can be sorted as the supervisor gets first-hand information about what's happening and what needs to be done. The worker is also aware that he or she is being watched, hence works with diligence and alertness.
Financial Statements
Maintaining a profit and loss account along with the balance sheet makes it possible to control the issues that can be the reason for the decline in losses. The management can compare the profits and losses with the previous year’s accounts or with a similar organization, and take necessary steps to increase the profits of the organization.
Budgetary Control
A budget is a planning and controlling strategy. Budgetary control is a process of planning and preparing estimated figures for the organization for future needs and then comparing it with actual performance. This comparison will draw variances between the two and help the organization to take corrective actions at the proper time. Hence, the budget is a means and budgetary control is the result.
Break-Even Analysis
This process is a simple control tool where the management analyzes their break-even point to take corrective measures to improve their future performances. Break-even point is a point where there is no loss, no profit. For instance, if the business sells 5000 products, it will be at a break-even point. So anything below is loss and anything above this is a profit.
Modern Techniques
Return on Investment
The reward of risk-taking is profit on investment. If the return on investment is high, then the organization is doing well and vice-versa. This tool of controlling helps the management to compare the ROI with the previous year’s profit and with other similar organizations and help them to take corrective measures.
Management Audit
Evaluating management and its performance is a management audit. It meticulously and critically examines and analyzes the complete management process starting from planning, organization, directing, accounting, controlling, etc. Management audit is conducted by a team of experts who collect data from different departments, processes, and members of the organization. The data is thoroughly analyzed and conclusions are drawn about the management’s performance and efficiency.
PERT and CPM Techniques
The USA in the late 50s developed two important methods that were Program evaluation and review technique(PERT) and Critical path method(CPM). Under these techniques, the tasks or jobs are divided into various parts. Then, critical tasks are identified. Focus is given to the completion of these critical tasks. So, controlling the time to complete these critical tasks will minimize the total cost and total time taken to do the complete job.
Self Control
It is as simple as it sounds. Self-control is a tool best suited for entrepreneurs who set their own targets, own deadlines, evaluate their performance and quality, and then take correction steps to improve their performances. This tool is required and exercised by the top-level managers too as they do not like external control. This tool must be encouraged to be exercised by everyone in the company. This will help the management to control each and everything in a better manner. The cost and time taken to control through other ways can be minimized if self-control is conducted effectively by each member of the organization.
Responsibility Accounting
Various departments of an organization are converted into responsibility centres. The head of each centre is responsible for accomplishing the target of the centre.
Though modern techniques are used to improve the effectiveness of controlling processes even today these traditional techniques are used extensively by the organization.
FAQs on Traditional Control Techniques: Types and Uses
1. What are the main traditional techniques of controlling used in business management?
The primary traditional techniques of controlling, as per the CBSE syllabus for the 2025-26 session, are methods that have been used by organisations for a long time. The most common types include:
- Personal Observation: Directly observing employees' performance.
- Budgetary Control: Setting financial and operational budgets and comparing them with actual results.
- Break-Even Analysis: Studying the relationship between costs, volume, and profits to find the point of no-profit, no-loss.
- Return on Investment (ROI): Measuring the profitability and efficiency of capital invested in the business.
- Statistical Reports: Using analysis of averages, percentages, ratios, and correlations from various business areas.
- Management Audit: Systematically reviewing the overall performance and efficiency of the management.
2. How does budgetary control work as a traditional controlling technique?
Budgetary control is a system where a business first creates a detailed budget, which is a quantitative plan for a future period. Management then uses this budget as a standard to measure and compare against the actual performance. By analysing any significant differences, known as 'variances', managers can identify problem areas and take timely corrective actions to ensure organisational goals are met efficiently.
3. What is the fundamental difference between traditional and modern controlling techniques?
The fundamental difference lies in their approach and focus. Traditional techniques, like budgetary control, are primarily concerned with past performance. They are often corrective, focusing on comparing past results to standards and fixing deviations. In contrast, modern techniques, such as Management Information Systems (MIS), are more forward-looking and preventive. They focus on real-time data and predictive analysis to anticipate and prevent problems before they occur.
4. Why is 'Personal Observation' still considered a useful control technique despite its limitations?
While it can be time-consuming and subjective, Personal Observation remains a useful control technique because it provides valuable qualitative insights that numbers-based reports cannot. It allows a manager to gather first-hand information, detect issues like low morale or workplace inefficiencies, and provide on-the-spot feedback or guidance. This direct interaction can also build better relationships between supervisors and employees, which is crucial for organisational harmony.
5. How do Break-Even Analysis and Return on Investment (ROI) differ as control tools?
Break-Even Analysis and Return on Investment (ROI) are both crucial traditional tools, but they control different aspects of the business. Break-Even Analysis is an operational tool used to determine the sales volume at which a company covers its costs (the 'no-profit, no-loss' point). It helps in setting prices and sales targets. On the other hand, ROI is a strategic tool that measures the overall efficiency and profitability of the business by comparing the net profit to the capital invested. It helps assess whether the firm's resources are being used effectively to generate adequate returns.
6. Can a company rely solely on traditional techniques for effective control in the 2025-26 business environment? Why or why not?
No, a company cannot achieve effective control in the current business environment by relying solely on traditional techniques. While methods like budgeting and statistical reports are essential for financial discipline, they are often rigid and look backward at past data. The modern business environment is dynamic and complex, requiring proactive and flexible controls. Companies must integrate traditional methods with modern techniques like Responsibility Accounting and Management Information Systems (MIS) to manage qualitative aspects, empower employees, and adapt quickly to market changes.
7. What is a Management Audit and how does it act as a traditional control technique?
A Management Audit is a comprehensive and systematic appraisal of the overall performance and quality of a company's management. It functions as a control technique by evaluating the efficiency and effectiveness of all management processes, from planning and organising to directing and controlling. By identifying deficiencies in management practices and suggesting improvements, it helps ensure that the entire organisation is functioning optimally to achieve its objectives.
