Question

Piyush is the Production Manager of a shoe company ’Comforty’. He has 1000 workers under him in his department. Piyush booked a special order for 300 pairs of gents shoes at an estimated cost price of |500 per pair plus a 20% profit margin. This order is to be completed within 10 days. After completion of the order, Piyush found out that the production cost of one pair of shoes was |700. He tried to find out the reason but he couldn’t. He reported it to the Chief Executive Officer. For this the Chief Executive Officer appointed Abhay, who was not only a specialized Cost Accountant, but also a qualified Human Resource Manager. After two days, Abhay reported that the set target could have been completed by only 800 workers. This revealed that there was overmanning in the organization, The organization was not utilizing the human resources optimally which had led to high labour cost. The above case highlights an important function of management.
(i) Identify the function of management discussed above.

Hint:

Controlling ensures that performance aligns with goals, helping to identify deviations and take corrective actions to improve efficiency and resource utilization.

Answer 1

(i) The management function illustrated is Controlling. Controlling ensures that organizational objectives are met by monitoring and evaluating progress. This involves setting standards, measuring actual performance, identifying deviations, and implementing corrective measures. In this scenario, the Production Manager, Piyush, noted that shoe production costs exceeded estimates. Abhay's investigation revealed overmanning in the production process, leading to increased labor costs and inefficient resource use. The controlling function is vital for identifying such discrepancies and initiating corrective actions. Abhay's use of controlling techniques pinpointed the problem, enabling the organization to optimize labor allocation, reduce costs, and enhance future project efficiency. The key steps in controlling are: 1. Setting performance standards: The initial cost estimates and labor requirements served as the performance standards. 2. Measuring actual performance: Actual labor utilized and production costs were tracked, revealing variances from expected performance. 3. Identifying deviations: It was determined that excess workers were employed, causing higher labor expenses. 4. Taking corrective action: Following identification, the corrective action entails optimizing worker numbers and making adjustments for improved future production efficiency. Controlling is fundamental to management, ensuring efficient resource utilization, alignment of performance with objectives, and prompt resolution of inefficiencies or issues.