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Module 7
CONTROLLING
Controlling
The Control function is closely related with all other functions of management. The
management control is the process of ensuring that the actual plan implementation matches
with the original plan. It is an ongoing and dynamic function and linked with other function
of the management in a circular relationship.
According to Koonts O’Donnel, “Controlling is the measurement of accomplishment against
the standards and the correction of deviation to assure attainment of objectives according to
plan.”
Steps in Control Process
The control process involves four basic steps as mentioned below:-
1. Establishing standards:- Standard represents criteria of performance. This implies the
statement of goals and objective envisaged under the planning process are stated in clear
and measurable terms along with specific milestones. The standard should have some
characteristics to produce effective performance.
2. Measurement of performance against standards: The measurement of performance is
an ongoing process. Several techniques are used by the management to measure the
performance.
3. Comparing the actual performances with standards: The measured results are
compared with the project and standards. In case the performance meets the standards,
then it would mean that the performance or activity is progressing in the desired direction.
4. Taking corrective action: In the situations when performance does not confirm to the
specified criteria of the standards, then it is necessary to take corrective measures to deal
with the observed deviations in the performance.
Characteristics of Control
Following characteristics of control can be identified:
1. Control is a Managerial Process:
Management process comprises of five functions, viz., planning, organizing, staffing,
directing and controlling. Thus, control is part of the process of management.
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2. Control is forward looking:
Whatever has happened has happened, and the manager can take corrective action only of the
future operations. Past is relevant to suggest what has gone wrong and how to correct the
future.
3. Control exists at each level of Organization:
Anyone who is a manager, has to involve into control – may be Chairman, Managing Director,
CEO, Departmental head, or first line manager. However, at every level the control will differ
– top management would be involved in strategic control, middle management into tactical
control and lower level into operational control.
4. Control is a Continuous Process:
Controlling is not the last function of management but it is a continuous process. Control is
not a one-time activity, but a continuous process. The process of setting the standards needs
constant analysis and revision depending upon external forces, plans, and internal
performance.
5. Control is closely linked with Planning:
Planning and controlling are closely linked. The two are rightly called as ‘Siamese twins’ of
management. “Every objective, every goal, every policy, every procedure and every budget
become standard against which actual performance is compared.
Planning sets the ship’s course and controlling keeps it on course. When the ship begins to
veer off the course, the navigator notices it and recommends a new heading designed to return
the ship to its proper course. Once control process is over its findings are integrated into
planning to prescribe new standards for control.
6. Purpose of Controlling is Goal Oriented and hence Positive:
Control is there because without it the business may go off the track. The controlling has
positive purpose both for the organization (to make things happen) and individuals (to give up
a part of their independence for the attainment of organizational goals).
Types of Control
Controls can be numerous in kind. These may be classified on the basis of (a) timing, (b)
designing systems, (c) management levels, and (d) Responsibility
On the basis of timing:
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Control can focus on events before, during, or after a process. For example, a local automobile
dealer can focus on activities before, during, or after sales of new cars. Such controls may be
respectively called as Preventive, Detective, and Corrective.
On this basis the control may be:
(i) Feed forward Control
(ii) Concurrent Control
(iii) Feedback Control
1. Feed forward Control:
The objective of feed forward control or preliminary control is to anticipate the likely problems
and to exercise control even before the activity has started or problem has occurred or been
reported. It is future directed.
This kind of control is very popular in airlines. They go in for preventive maintenance
activities to detect and prevent structural damage, which may result in disaster. These controls
are evident in the selection and hiring of new employees. It helps in taking action beforehand.
In case of feedback control, one relies on historical data, which will come after the activity
has been performed. This means information is late and the rectification is not possible. One
can make correction only for future activities.
That means whatever wrong has been done is done, and it cannot be undone. Though, future-
directed control is largely disregarded in practice, because managers have been excessively
dependent on accounting and statistical data for the purpose of control. In the absence of any
means of looking forward, reference to history is considered better than no reference at all.
However, the concept of feed forwarding has been applied now and then. One common way
managers have practised it is through careful and repeated forecasts using the latest available
information, comparing what is desired with the forecasts, and introducing program changes
so that forecasts can be made more promising.
2. Concurrent Control:
Concurrent control monitors ongoing employee activity to ensure consistency with quality
standards takes place while an activity is on or in progress. It involves the regulation of
ongoing activities that are part of transformation process to ensure that they conform to
organizational standards.
The technique of direct supervision is the best-known form of concurrent control.
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Concurrent control is designed to ensure that employees’ activities produce the correct results
and to correct the problems, if any, before they become costly.
In case of computer typing, if the spelling is wrong or construction is incorrect, the programme
immediately alerts the user. Many manufacturing operations include devices that measure
whether the items being produced meet quality standards.
Since concurrent control involves regulating ongoing tasks, it requires a complete
understanding of the specific tasks involved and their relationship to the desired and product.
Concurrent control sometimes is called steering, screening or yes-no control, because it often
involves checkpoints at which decisions are made about whether to continue progress, take
corrective action, or stop work altogether on products or services.
3. Feedback Control:
The control takes place after the job is over. Corrective action is taken after analysing variances
with the planned standards at the end of the activity. It is also known as ‘post action control’,
because feedback control is exercised after the event has taken place. Such control is used
when feed forward or concurrent is not possible or very costly; or when exact processes
involved in performing a work is difficult to specify in advance.
The twin advantages of feedback control are that meaningful information is received with
regard to planning efforts, and feedback control enhances employee motivation.
On the basis of designing Control Systems:
Three approaches may be followed while designing control systems, viz., Market Control,
Bureaucratic Control, and Clan Control. However, most organisations do not depend only on
just one of them.
1. Market Control:
Control is based upon market mechanisms of competitive activities in terms of price and
market share. Different divisions are converted into profit centres and their performance is
evaluated by segmental top line (turnover), bottom line (profit) and the market share. Using
market control will mean that the managers in future will allocate resources or create
departments or other activities in line with the market forces.
2. Bureaucratic Control:
Bureaucratic control focuses on authority, rule and regulations, procedures and policies. Most
of the public sector units in India go in for bureaucratic control.
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If they do not go by the rulebook, the legislative committees and the ministries under whom
they work will reprimand them. In a hospital no medicine can be used unless the prescription
is there and it is recorded in the issue register, even if the patient may die in between. 3. Clan
Control:
The control systems are designed in a way that give way to shared vision, shared values,
norms, traditions and beliefs, etc., part of the organisational culture. It is not based upon
hierarchical mechanisms, but work-related and performance measures. This kind of control is
most suitable for the organisations which use team style of work groups and where technology
changes very fast.
On the basis of Levels:
People at different level have different planning responsibilities, so do they undertake
controlling. On the basis of levels controls, can be categorised as Operational, Structural,
Tactical, and Strategic.
1. Operational Control:
Its focus remains upon the processes used by the organisation for transforming the inputs
(resources) into outputs (products/services). Operational controls are used at the lower
management. It is exercised almost every day. Quality control, financial controls are part of
operational controls.
2. Structural Control:
Are the different elements of organisation structure serving their intended aims? Is there
overstaffing? Is the ratio of staff to line increasing? Necessary action is to be undertaken.
Two important forms of structural control can be bureaucratic control and clan control, about
which we have already talked. Structural control is exercised by top and middle management.
3. Tactical Control:
Since tactical control deals with the departmental objectives, the controls are largely exercised
by middle management levels.
4. Strategic Control:
Strategic controls are early warning systems. Strategic control is the process to determine
whether the effectiveness of a corporate, business and functional strategies are successful in
helping organisations to meet its goals. Strategic controls are exercised by top level
management.
On the basis of Responsibility:
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Who has the responsibility of controlling? The responsibility may rest with the person
executing the things or with the supervisor or manager. This way control may be internal and
external.
Internal control permits highly motivated people to exercise self-discipline. External control
means that the thread of control is in the hands of supervisor or manager and control is
exercised through formal systems.
Control Techniques
Many techniques have been developed to control the activities in management. The list is very
long, and it is difficult to describe them all.
Some of the important techniques are:
Financial Control:
Finance is related with mobilization of funds and their utilization and the return on them.
Financial control is exercised through the following:
1. Financial Statements:
Income statement (telling about expenses, segmental incomes, overall income and expenses,
and the net profit/loss), and Balance Sheet (shows the net worth at a single point of time and
the extent to which the debt or equity finance the assets)
2. Financial Audits:
Financial audits, either internal or external are conducted to ensure that the financial
management is done in line with the generally accepted policies, procedures, laws, and ethical
guidelines. Audits may be internal (by Organisation’s own staff), external (statutory audit by
chartered accountants), and management audit (by experts).
3. Ratio Analysis:
Ratio analysis monitors liquidity, profitability, debt, and activity related aspects.
4. Budgetary Controls:
Budgetary control is the process of constructing budgets, comparing actual performance with
the budget one and revising budgets or activities in the light of changed conditions. Budgetary
control is as such not related only to finance area, but all functional areas do take help of
budgetary control. Budgets help not only in planning but also help to keep a tab on overall
spending.
Budgeting may be top-down (managers prepare the budget and ask subordinates to use);
bottom-up (figures come from lower levels and adjusted at upper levels); zero-based
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(justifying allocation of funds on the basis of activities or goals); and flexible budgeting
(varying standards and varying allocations).
5. Break-even Analysis:
It is a tool of profit planning and deals with cost-volume-profit relationships.
6. Accounting:
Accounting includes responsibility accounting, cost accounting, standard cost approach, direct
costing, and marginal costing.
Marketing Control:
In the field of marketing, to see that customer gets right product at the right price at the right
place and through right communication, the control is exercised through the following:
Market Research:
It is to assess customers’ needs, expectations and the delivery; and the competitive scenario.
Test Marketing:
To assess consumer acceptance of a new product, a small-scale marketing is done. HUL uses
Chennai for most of its test marketing.
Marketing Statistics:
Marketing managers control through marketing ratios and other statistics.
Human resource control:
Human resource control is required to have a check on the quality of new personnel and also
to monitor performances of existing employees so as to determine firm’s overall effectiveness.
Goal setting, instituting policies and procedures to guide them are to help them. Common
controls include performance appraisals, disciplinary programmes, observations, and
development assessments.
Information Control:
All organizations have confidential and sensitive information to be kept secret. How to control
access to computer databases is very important. This has become a key contemporary issue in
control. Organizations keep a watch on employee’s computer usage in general and internet in
particular.
Production Control:
To ensure quality production in right quantity at right time economically production controls
are required. Two of the important techniques include: Inventory control (ABC Analysis,
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Economic Order Quantity, Just-in time inventory control), and quality control (through
inspection, statistical quality control).
Project Control:
Network analysis is most suitable for the projects which are not routine in minimizing cost
and completing project well in time. Network analysis makes use of two techniques –
Programme Evaluation and Review Technique (PERT), and Critical Path Method (CPM).
Organizational management Module 7 Controlling