Techniques of Control

Techniques of control provide managers with the type and amount of information they need to measure and monitor performance. Such techniques help managers pinpoint the organizational strengths and weaknesses. Techniques of control implements managers to understand what a given control technique can and cannot do.

Some of the measure Techniques of Control are as follows:

1. Direct Supervision and Observation

‘Direct Supervision and Observation’ is the oldest technique of control. The supervisor himself observes the employees and their work. This brings him in direct contact with the workers. So, many problems are solved during supervision. The supervisor gets first-hand information, and he has a better understanding of the workers. This technique is most suitable for small-sized businesses.

2. Financial Statements

All business organizations prepare Profit and Loss Account. It gives a summary of the income and expenses for a specified period. They also prepare the Balance Sheet, which shows the financial position of the organization at the end of the specified period.

3. Budgetary Control

A budget is a planning and controlling device. Budgetary control is a technique of managerial control through budgets. It is the essence of financial control. Budgetary control is done for all aspects of a business such as income, expenditure, production, capital, and revenue.

4. Break-Even Analysis

Break-Even Analysis or Break-Even Point is the point of no profit, no loss. For e.g. When an organization sells 50K cars it will break even. It means that any sale below this point will cause losses and any sale above this point will earn profits. So the company can take collective action to improve its performance in the future. Break-even analysis is a simple control tool.

5. Return on Investment (ROI)

The investment consists of fixed assets and working capital used in business. It helps to show the areas. ROI is a tool to improve financial performance. It helps the business to compare its present performance with that of previous years’ performance. It helps to conduct inter-firm comparisons. It also shows the areas where corrective actions are needed.