FOUNDATION IN BUSINESS MGT1210: FUNDAMENTAL OF MANAGEMENT
TOPIC 11: CONTROL MANAGEMENT
What is controlling?
It is the process of monitoring, comparing and correcting work performance. Control is the
process by which organization ensures that the plans which have been made for its
operations are being effectively carried out.
Control in organization
Management control enables managers to ensure that the actual activities of the
organization conform to the planned activities. Planning enables the fundamental goals and
objectives, and the methods of attaining them to be established. The control process
measures what has been done towards the attainment of the goals.
Controls are important for a number of reasons:
1. Change
Control systems help managers detect changes in the external and internal
environments. For example, a slow decline in sales and an accumulation of stocks
may signal more than a fall in productivity of the sales force; it may be that an
economic recession has set in. On the other hand, high levels of absenteeism may be
signs of low morale. Once changes have been detected managers can take corrective
action. Early action is advantageous.
2. Complexity
The very size of large organizations makes it necessary for them to monitor
diversified product lines to ensure that quality and profit ability are maintained.
Controls are needed to ensure that sales are recorded accurately and analyzed, and
that markets are watched closely for fundamental changes.
3. Mistakes
A control system allows managers to detect mistakes before they become crucial,
e.g. the procedure for buying raw materials may be incorrect and this may lead to
the firm accumulating high levels of stock. Controls alert top management to this
situation and so management may take the option of stop-loss selling as corrective
action.
4. Delegation
The size of most organization necessitates that mangers delegate part of their work
to subordinates. The only way they can determine if their subordinates are
accomplishing the tasks they have delegated is by implementing a system of control.
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FOUNDATION IN BUSINESS MGT1210: FUNDAMENTAL OF MANAGEMENT
The Control Process:
Step 1: Measuring
To determine what actual performance is, a manager must first get information about it.
Thus, the first step in control is measuring.
How we measure
Four approaches manager’s use to measure and report actual performance:
i. Personal observation
ii. Statistical reports
iii. Oral reports
iv. Written reports.
Most managers use a combination of these approaches.
What we measure
What is measured is probably more critical to the control process than how it’s measured.
Why? Because selecting the wrong criteria can create serious problems. Besides, what is
measured often determined what employees will do? What control criteria might managers
use?
Some control criteria can be used for any management situation. For instance, all managers
deal with people, so criteria such as employee satisfaction or turnover and absenteeism
rates can be measured. Keeping costs within budget is also a fairly common control
measure.
Step 2: Comparing
The comparing step determines the variation between actual performance and a standard.
Although some variation in performance can be expected in all activities, it’s critical to
determine an acceptable range of variation. Deviations outside this range need attention.
Step 3: Taking managerial action
Managers can choose among three possible courses of action: do nothing, correct the actual
performance, or revise the standard. Do nothing is self-explanatory, so let’s look at the
other two.
i. Correct actual performance.
Depending on what the problem is, a manager could take different corrective
actions. For instance, if unsatisfactory work is the reason for performance
variations, the manage could correct it by implementing training programs,
taking disciplinary action, making changes in compensation practices, and so
forth. One decision that a manger must make is whether to take immediate
corrective action, which corrects problems at once to get performance back on
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FOUNDATION IN BUSINESS MGT1210: FUNDAMENTAL OF MANAGEMENT
track, or use basic corrective action, which looks at how and why performance
deviated before correcting the source of deviation. It’s not unusual for managers
to rationalize that they don’t have time to find the source of a problem and
continue to perpetually put out fires with immediate corrective action. Effective
managers analyze deviations, and if the benefits justify it, they take the time to
pinpoint and correct the causes of variance.
ii. Revise the standard.
In some cases, variance may be a result of an unrealistic standard – goal that’s
too low or too high. In this case, the standard – not the performance – needs
corrective action. If performance consistently exceeds the goal, then manager
should look at whether the goal is too easy and needs to be raised. The point is
that when performance isn’t up to par, you shouldn’t immediately blame the
goal or standard. If you believe the standard is realistic, fair, and achievable, tell
employees that you expect future work to improve and then take the necessary
corrective action to help make that happen.
Types of controls
There are three basic types of controls.
1. Steering controls are designed to detect deviation from standards and to allow
corrections to be made before a particular sequence of events can be completed.
Steering controls are only valid if the manager has relevant and timely information.
2. Screening controls refer to specific aspects of a procedure that must be approved or
specific conditions that must be met before work can continue. Screening controls
`double check’ specific areas that management has to pay special attention to.
3. Post-mortem controls refer to the examination of the causes of deviations from
standards after the activity has been completed. The findings are applied to similar
activities in the future.
Characteristics of effective control
Understandability. Controls that cannot be understood have no value. A control
system that is difficult to understand can cause unnecessary mistakes, frustrate
employees, and eventually be ignored.
Accuracy. A control system that generates inaccurate information can result in
management’s failing to take action when it should or responding to a problem that
doesn’t exist. An accurate control system is reliable and produces valid data.
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FOUNDATION IN BUSINESS MGT1210: FUNDAMENTAL OF MANAGEMENT
Timeliness. Controls should call management’s attention to variations of time to
prevent serious infringement on a unit’s performance. The best information has little
value if it is dated. Therefore, an effective control system must provide timely
information.
Economy. A control system must be economically reasonable. Any system of control
has to justify the benefits that it gives in relation to the costs it incurs. To minimize
costs, management should try to impose the least amount of control necessary to
produce the desired results.
Flexibility. Controls must be flexible enough to adjust to problems or to take
advantage of new opportunities. Few organizations face environments so stable that
there is no need for flexibility. Even highly mechanistic structures require controls
that can be adjusted as times and condition change.
Reasonable criteria. Control standards must be reasonable and attainable. If they are
too high or unreasonable, they no longer motivate. Controls should, therefore,
enforce standards that challenge and stretch people to reach higher performance
levels without de-motivating them or encouraging deception.
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