Chapt er
Nature and Process of Controlling
26
It is only through the process of control that management is able to maintain the "equilibrium between ends and means, output and effort." A properly designed system of control alerts managers of the existence of potential problems and allows them to take corrective actions, when necessary. The basic purpose of a well-designed control system is to ensure that results are achieved according to plan. Control is not just score-keeping. It is not just plotting the course and getting locations reports. It is, rather, steering the ship.
Controlling
Controlling means that managers develop (i) appropriate standards (ii) compare ongoing performance against those standards and (iii) take steps to ensure that corrective actions are taken when necessary. A good controlling system is generally designed to keep things from going wrong, not just to correct them afterwards.
Features
The following are the features of controlling:
Control is a positive force
Control is a continous process Control is forward looking Control process is universal Control process is dynamic Control is goal-oriented Delegation is the key to control Control is based on planning
Importance of Control
The management process is incomplete and, sometimes, meaningless without control function. Targets remain on paper, people tend to use resources recklessly and managers find everything chaotic. The absence of control could be very costly and unproductive. A good system of control, however, puts an end to all of these and offers the following advantages: 1. Achievement of goals
2.
3. 4. 5. 6.
Execution and revision of plans
Brings order and discipline Facilitates decentralisation of authority Promotes coordination Cope with uncertainty and change
The Control Process
The process of control involves the following steps: Establishment of standards
Measurement of actual performance
Comparison of actual performance with standard Taking corrective action
Characteristics of an Effective Control System
Effective control systems tend to have certain qualities in common. These can be stated thus:
1.
2. 3. 4. 5. 6. 7.
Suitable
Simple Selective Sound and economical Flexible Forward-looking Reasonable
8.
9.
Objective
Responsibility for failures
10. Acceptable
Types of Control
Depending on the time at which control is applied, controls are of three types:
Feedback control (Historical or Post-control)
Concurrent control Predictive or Feedforward control
Techniques of Managerial Control
a) b) c) d) e) Traditional Techniques Personal observations Good organisation structure Statistical reports and analysis Break-Even Analysis Budgetary Control
Techniques of Managerial Control
a) b) c) d) e) Modern Techniques Management audit Return on investment Responsibility Accounting PERT and CPM Management Information System
Management Audit
Management audit is the systematic appraisal of the overall performance of the management. It is a systematic and indepth review of the effectiveness and efficiency of management. It is a critical examination of the entire management process as a whole. The purpose is to identify deficiencies in the performance of management functions. Here, the total job management is evaluated and therefore an adhoc staff or outside experts are called on to conduct the audit. The primary focus, is on appraisal of the general performance of management functions as well on specific organisational areas. Management audit is a periodic and diagnostic activity that is undertaken on a regular basis in order to appraise the effectiveness of operating and managerial functions.
Return on Investment
It is a useful technique of controlling overall performance . The essence in this is that profit is taken not as an absolute figure but is considered in relation to the invested capital. ROI is calculated by dividing net profits with the total investment
Responsibility Accounting
It is a system of accounting where performance of various people is judged by assessing how far they have achieved the targets set for divisions, dept. Cost are assigned to responsiblity centres rather than to products. Cost incurred are divided into 2 categories: Controllable Uncontrollable There are three types of Centres: Cost Profit Investment
a) b) a) b) c)
Pert and CPM (Network Techniques)
PERT and CPM represent two most popular catch phrases in management parlance.
PERT (Programme Evaluation and Review Technique): It is a scheduling tool that is essentially a network of project activities showing estimates of time necessary to complete each activity and the sequential relationship of activities that must be followed to complete the project.
CPM (Critical Path Method): It shows the sequence of events and activities within a programme evaluation and review technique network that requires the longest period of time to complete.
Management Information System
MIS is an integrated technique for gathering relevant information from whatever source it originates, and transferring it into usable form for the decision-makers in management. It is a system of communications primarily designed to keep all levels of organisational personnel abreast of the developments in the enterprise that affect them. MIS provides working tools for all the management personnel in order to take the best possible action at the right time with respect to the operations and functions of the enterprise for which they are largely responsible. The emphasis of MIS is on information for decision-making. MIS and its role can be summarised thus:
(a) Three-pronged service (b) Facilitates total performance (of the total management process) (c) Takes into account several critical dimensions (d) Reduces overload of information