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 function of management discussed in this case is Controlling. Controlling is a key function of management that involves monitoring and evaluating the progress of activities to ensure that the organization is on track to meet its objectives. It includes the processes of setting performance standards, measuring actual performance, identifying deviations from the standards, and taking corrective actions. In this case, Piyush, the Production Manager, noticed that the production cost for one pair of shoes exceeded the estimated cost. Upon investigation by Abhay, it was found that there was overmanning in the production process, meaning that more workers were involved than necessary to complete the task. The result was higher labor costs and inefficiency in resource utilization. The controlling function is crucial in identifying such discrepancies and providing a foundation for corrective actions. By using controlling techniques, Abhay was able to identify the problem, allowing the organization to adjust its labor usage, thereby reducing costs and improving efficiency in future projects. The key steps in controlling include: 1. Setting performance standards: In this case, the initial cost estimation and labor requirements would have been set as the performance standard. 2. Measuring actual performance: The actual labor used and the cost of production were monitored, revealing discrepancies between the expected and actual performance. 3. Identifying deviations: It was identified that the production process was using more workers than necessary, leading to higher labor costs. 4. Taking corrective action: After the issue was identified, the corrective action would involve optimizing the number of workers required and making the necessary adjustments to ensure that future production is more efficient. Controlling is a fundamental part of the management process because it ensures that resources are used efficiently, performance is aligned with objectives, and the organization can quickly address any inefficiencies or issues that arise.