CONTROLLING

DEFINITION AND TASKS

Controlling compares the events or the accomplishments with the original plans and
makes necessary corrections when the events differ from the plans. IT is the process by which
management sees if what happened was what was supposed to happen.
The word control has several meanings: (1) to check or verify; (2) to regulate; (3) to
compare with a given standard; (4) to exercise authority over someone or a group; and (5) to
curb or restrain.
Control, therefore, has three distinct definitions: (1) curbing or restraining; (2) directing
or commanding; (3) checking or verifying.

Elements of Control
Whatever the type of control being used, there are four elements common to all systems:
1. A measurable and controllable characteristic for which there are standards and these
standards are known to all concerned.
2. A means by which one can measure this characteristic or standard.
3. A means of comparing actual results with the standards, and evaluating the differences
between results and standards.
4. A means of making changes in the system so as to adjust to the standards.

Prerequisites of Controlled Systems

Before any manager can put a system of controls, there is:
1. Plans, Controls must be based on plans, the clearer, more complete, and more
integrated the plans are, the more effective the controls can be.

2. Organizational structure, The purpose of control is to measure activities and take action
to make sure that plans are being accomplished. It is also important to know the
responsibility of executives or units deviating from plans and taking actions to make
necessary corrections.

To control activities, one must operate through people, But it is difficult to know
whether the responsibility for mismanagement or malpractice can be traced to any
person or unit, unless the organizational structure is clear and define. The clearer, more
complete, and more integrated the structure is, the more effective the controls can be.
 BASIC CONTROL PROCESS
1. Establishment of standards. The first step in the control process is to establish plans.
But plans vary in detail and complexity. Managers cannot watch everything; therefore,
special standards are needed. Standards refer to criteria of performance. They are the
selected points of comparison and evaluation. Managers, thus have signals to see how
things are going without having to watch every step in the execution of plans. There are
many kinds of standards. Some are quantitative, other are qualitative, and still others
are combination of both.

2. Measurement of performance. The measurement of performance against standards

should be on a forward-looking basis. In this way, the deviations can be discovered in
advance of their actual occurrence. Mistakes can be avoided, and appropriate steps
taken. It is thus important that managers be alert and forward-looking to predict some
possible deviations from standards.

3. Correction of deviations. Deviations can be corrected if the managers know exactly

where the corrective measures must be applied. But this is valid only if the standards
are drawn to reflect the organizational structure. Ways of correcting deviations are by
withdrawing entire plans; modifying objectives; changing organizational functions;
clarifying duties; adding staff; or firing old personnel (Stoner 1978).

TYPES OF CONTROLS
Budgetary control. A budget is a plan presented in financial terms. The organizational activities
are translated into expected results with pesos and centavos as common denominators.
Stressed are the positive or planning aspects of budgetary control rather than strict control or
auditing.
Quality control. This method can result in significant savings in both indirect ways. For example,
the effective control of the quality of raw materials can prevent the processing of defective
products. Time spent in producing a defective part can be used to increase the quality of
production or being identified with a company having a good image.
Feedback. This supplies information for problem-solving. A plan provides the framework for
decision-making over time. As the plan is implemented, the system is monitored or tracked to
ascertain whether or not the performance is on target and the objectives are met. Feedback is
obtained with regard to objectives sought and the means or process of achieving them.
 Control Techniques
1. Break-even chart. This is a technique used by planners and accountants to determine
how the different levels of sales affect the profit of the company.

2. Financial statement analysis. Analysts carefully examine a company’s financial

statements to determine its viability. The most common statements:
a. Income statement.
b. Balance sheet.
c. Cash-flow statement.
d. Financial ratios.