Electronics manufacturer, Electro Ltd. reports 37% decline in its profits in the 4th quarter, ended 31st march, 2023, which is beyond the acceptable range i.e. 20% decided by the company. This was due to wastage of resources and high electricity usage.

Name the step of controlling discussed above.

Analyzing deviations

The correct answer is option 1- Analyzing deviations.

The step of controlling discussed is "Analyzing deviations."

Electro Ltd. reported a 37% decline in profits, which exceeded the acceptable range of 20% set by the company. This situation involves examining the extent of the deviation from the expected performance (profit levels) and understanding the reasons behind it, such as wastage of resources and high electricity usage.

Analyzing deviations is crucial for identifying discrepancies between actual performance and desired performance, which then leads to further actions such as setting new standards or taking corrective measures.

After identifying the deviations that demand managerial attention, these deviations need to be analysed for their causes. Deviations may have multiple causes for their origin. These include unrealistic standards, defective process, inadequacy of resources, structural drawbacks, organisational constraints and environmental factors beyond the control of the organisation. It is necessary to identify the exact cause of deviations, failing which, an appropriate corrective action might not be possible. The deviations and their causes are then reported and corrective action taken at appropriate level.