In the list of management functions, planning comes at the top, and controlling is at the bottom. But the two are closely connected to each other. In this blog, we have discussed the inter-relationship between planning & controlling.
Planning and controlling defined
Planning is concerned with setting objectives and a course of action to achieve those objectives. It is one of the primary functions in business management. It involves, deciding beforehand, what is to be done, how it is to be done, and who is to do it.
Controlling, on the other hand, is a function of management that seeks to ensure that activities in an organization are performed as per the predetermined plans. Actual performance is compared with standards, deviations if any are identified and corrective actions are taken to improve the performance.
What is the relationship between planning and controlling?
Without a plan, there can be no control and in the absence of controls, the plans cannot be successfully implemented. Controls give a means of checking the progress of the plans and help to correct any deviations that may occur along the way. If good controls are not formulated, you would not be able to measure the achievements in what you had planned to do.
To take a simple example, when a worker enters the factory in the morning, his time of entry is recorded manually or electronically through punch machines. And so is his evening time of departure recorded. This small control helps to keep a check on the time spent by workers in the factory and influences their wages/overtime for the complete month. It also makes each worker conscious of his late arrival and acts as a self-check on in and out time. Just like this simple control, the annual budget of a department in a multinational company requires a far more robust system of control processes for having a check on its diverse activities. Thus, without control, it is almost impossible to track the performance of your plans, be they small or large.
Let us now understand the relationship between planning and controlling in detail:
The following points will give you a clear idea about the relationship between planning and controlling:
1. Establishment of standards is the basis of control:
Controls are formulated on the basis of plans, so the first step is to have clear plans, which then become the standards for controlling. For example, the sales projection plan, which establishes sales targets for an entire year, becomes the benchmark against which actual sales are evaluated.
In other words, planning is an essential prerequisite for controlling. If there are no plans, there can’t be a clear understanding of the desired level of performance, and without such understanding, controlling becomes ineffective. If you don’t even know the desired level of sales to be achieved in the next month, what controls would you implement to ensure that your sales are on track? Obviously, you won’t be able to exercise effective controls on sales performance if targets are not set in advance.
2. Planning without controlling is meaningless:
Once a plan is operational, control is required to monitor the progress, measure it, identify deviations, and implement corrective measures to ensure that events correspond to the plan. As a result, planning without control is pointless.
3. Controlling improves future planning:
By providing information derived from past experience, controlling helps to improve future plans. For example, from deviations noted in the achievement of the previous quarter’s sales targets, the sales managers will delve into the reasons for such deviations and implement steps to improve the performance in the future. Thus, sales targets for the upcoming quarter will be based on the shortcomings identified in the previous quarter. If the manager is hopeful to fix the current issues and expects to increase manpower, he will plan the sales targets for the next quarter accordingly.
4. Both are backward-looking as well as forward-looking:
It is frequently stated that planning is forward-looking, whereas controlling is backward-looking. The statement, however, is only partially true. Plans are made for the future and are based on projections of future conditions. As a result, planning is referred to as a forward-looking function. On the contrary, controlling is like a retrospective review of past activities to identify deviations from standards. Controlling is, in that sense, a backward-looking function. It should be understood, however, that planning is influenced by past experiences, and the corrective action established by the control function strives to improve future performance. Therefore, planning and controlling are both backward as well as forward-looking functions.
To conclude, it can be said that “The effectiveness of planning is measured through controlling.”
The very first managerial function is planning. Other functions such as organizing, staffing, directing, and controlling, among others, are designed to carry out the plans. Controlling keeps a track of actual performance and compares it to the predetermined standards. If the performance falls short of the standards specified, deviations are identified and remedial steps are implemented to improve the performance in the future.
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