CONTROLLING

1. Definition

In 1916, Henri Fayol formulated one of the first definitions of control as it pertains
to management:

"Control consists of verifying whether everything occurs in conformity with the plan
adopted, the instructions issued, and principles established. It('s) object (is) to
point out weaknesses and errors in order to rectify (them) and prevent recurrence."

Control can, thus, be defined as a systematic effort by business management to

tally performance to predetermined standards, plans, or objectives and to take
remedial actions in the event of deviation.

The following features may be identified within the control process, namely,

a) Control is forward looking. One can control future happenings, but not the past.
However, with reference to the control process, only the past performance can
be measured.
b) Control is an executive process which points to an end result. As an executive
process, each manager has to perform the control function. It is true that the
nature, scope, and limit of the control function may vary according to the level
of management.
c) Control is a continuous management process. Managerial control follows a
definite pattern and timetable, and is applied month after month and year after
year on a continuous basis.
d) A control system is an integrated system embedded within a hierarchy of needs.
This emphasizes that, although data collected for one purpose may differ from
those with another purpose, these data must be reconciled. In a sense, a control
system is a single system, but it is more accurate to think of it as a set of
interlocking sub-systems.

2. Approaches to control
There are three approaches to the design of a control system- the market, the
bureaucratic and the clan approach.

Market control is an approach that emphasizes the use of external market

mechanisms, such as price competition and relative market share, to establish the
standards used in the system. This approach is used where there is considerable
marketplace competition. Since the main focus is on profits, managers rely on
human resource allocation, strategic changes and work activities that require
specific attention.
The bureaucratic control emphasizes administrative rules and regulations and
procedures and policies. This type of control depends on standardization of
activities, well defined job descriptions and well- balanced budgets to ensure job
and customer satisfaction.

Under clan control, employee behaviour is regulated by the shared values,

norms, traditions, beliefs and other aspects of the organizational culture. For
example, an end of the year dinner plays a significant part in controlling the
behavior of an employee within an organization.

3. Importance of control and its link with planning

Control is an integrated action of an organization. With respect to control, very
often it is said that planning is the basis, action is the essence, delegation is the
key, and information is the guide. The relationship of control with other managerial
functions can be described as follows:

a) Planning as the basis: Planning provides the entire spectrum on which control
function is based. The planning process provides goals and control is the result
of particular plans, goals, or policies.
b) Action as the essence: Control basically emphasizes what actions can be
taken to correct the deviation that may be found between standards and
actual results.
c) Delegation as the key: Delegation is the key for control. A manager in the
organization gets authority through delegation. In the absence of adequate
authority, a manager is unlikely to take effective steps for correcting the
various deviations located in the process of analysis.
d) Information as the guide: Control action is guided by adequate information
from beginning to the end. Management information and management control
systems are closely interrelated.

When control exists in the organization, people know what targets they are striving
for, how they are doing in relation to the targets, and what changes are needed to
keep their performance at a satisfactory level. Moreover, a control system offers
help in the following directions:

a) Adjustments in operations: A control system acts as an adjustment in

organizational operations. Every organization has certain objectives to achieve
which becomes the basis for control. It is not only sufficient to have objectives but
also to ensure that these objectives are being achieved by various functions.
Control provides this clue by finding out whether plans are being observed and
suitable progress towards the objectives is being made, and acting, if necessary, to
correct any-deviation. This may result into taking actions more suitable for the
achievement of organizational objectives.
b) Policy verification: Various policies on the organization generate the need
for control. For organizational functioning, managers set certain policies and other
planning elements, which later become the basis and reason for control. They
 become basis in the sense that organizational performance is reviewed in these
lights.
c) Managerial responsibility: In every organization, managerial
responsibility is created through assignment of activities to various individuals.
This process starts at the top level and goes to the lower levels. However, when a
manager assigns some activities to his subordinates, he remains responsible for
that portion of activities for their ultimate performance. It is quite natural that
when a person is responsible for the performance of his subordinates, he must
exercise some control over them.
d) Psychological pressure: Control process puts a psychological pressure on
the individuals for better performance. The performance of the individuals is
evaluated in the light of targets set for them. A person is likely to put better
performance if he is aware that his performance will be evaluated.
e) Organizational efficiency and effectiveness: Proper control ensures
organizational efficiency and effectiveness. Various factors of control, namely,
making managers responsible, motivating them for higher performance, and
achieving coordination in their performance, control ensures that the organization
works efficiently. The organization also moves towards effectiveness because of
control system. The organization is effective if it is able to achieve its objectives.

4. The main steps in the control process

The control process may be classified into four steps, namely,

(a) establishment of control standards;

(b) measurement of performance,
(c) comparison between performance and standards , and
(d) correction of deviations from standards.

(a) Establishment of control standards: Every function in the organization

begins with plans, goals, or targets. In the light of these, standards are established
so that clear results may be measured. After setting the standards, it is also
important to decide about the level of achievement or performance, which will be
regarded as good or satisfactory.
There are several characteristics of a particular work that determine good
performance. There are important characteristics, which should be considered while
determining any level of performance as good for some operations and these are:
(i) output,
(ii) expense and,
(iii) resources.

(b) Measurement of performance: The second major step in control process is

the measurement of performance. The step involves measuring the performance in
respect of a work in terms of control standards. Appraisal of actual or expected
performance becomes an easy task, if standards are properly determined.
A performance, which is qualitative and intangible, such as relations, employee
morale, etc., cannot be measured precisely. For such purposes, techniques like
psychological tests, opinion surveys, personal observation may be applied.
For measuring tangible and intangible performance, measurement must be
(i) clear, simple, and rational,
(ii) relevant,
(iii) direct attention and efforts, and
(iv)reliable and understandable without complicated interpretation.

(c) Comparing actual, and standard performance: The third major step in
control process is the comparison of actual and standard performance. It involves
two steps: (i) finding out the extent of deviations, and (ii) identifying the causes of
such deviations.

Measurement of performance, analysis of deviations and their causes may be of no

use unless these are communicated to the person who can take corrective action.
Such communication is presented generally in the form of a report showing
performance standard, actual performance, deviations between those two tolerance
limits, and causes for deviations.

A summary of the control report should be given to the superior concerned because
the person on the job may either need help of his superior in improving the
performance or may need warning for his failure. In addition, other people who
may be interested in control reports are (i) executives engaged in formulating new
plans; and (ii) staff personnel who are expected to be familiar with control
information for giving any advice about the activity under control when approached.

(d) Correction of deviations: This is the last step in the control process, which
requires that actions should be taken to maintain the desired degree of control in
the system or operation. An organization is not a self-regulating system within a
state of equilibrium. In a business organization automatic control cannot be
established because the state of affairs is the result of various factors in the total
environment.

Thus, some additional actions are required to maintain the control. Such control
action may be (i) review of plans and goals and concomitant changes thereof; (ii)
change in the assignment of tasks; (iii) change in organization structure and
provision for new facilities, etc.

5. Types of control
(i)Feed forward control
Control that attempts to identify and prevent deviations before they occur is called
feed forward control (sometimes called preliminary or preventive control).
It focuses on human, material, and financial resources that flow into the
organization. Its purpose is to ensure that input quality is high enough to prevent
problems when the organization performs its tasks.
For example, managers in an organization may hire additional personnel as soon as
they obtain a major contract. Feed forward control is future directed. It allows
management to prevent problems rather than having to cure them later. Feed
forward controls require timely and accurate information.
Feed forward controls are evident in the selection and hiring of new employees.
Organizations attempt to improve the likelihood that employees will perform up to
standards by identifying the necessary skills and using tests and other screening
devices to hire people who have those skills.

Another type of feed forward control is to identify and manage risks. The large
accounting firms today recognize that they can offer value to their clients by
looking for risks the clients have knowingly or unknowingly taken on, rather than
merely evaluating their financial performance.

(ii) Concurrent control

Concurrent control is one that monitors ongoing employee activities to ensure they
are consistent with quality standards.
When control is enacted while the work is being performed, management can
correct problems before they become too costly.
Concurrent control assesses current work activities, relies on performance
standards, and includes rules and regulations for guiding employee tasks and
behaviors.
(iii) Feedback control- This is the most popular type of control. In this case, the
control takes place after the action. Sometimes called post-action or output control,
feedback control focuses on the organization’s outputs in particular, the quality of
an end product or service.

The major drawback of this type of control is that by the time the manager has the
information the damage has already been done. But, for many activities, feedback
is the only viable type of control available. An example of feedback control in a
manufacturing department is the intensive final inspection of a product.

Besides producing high-quality products and services, businesses tend to earn a

profit, and even nonprofit organizations need to operate efficiently to carry out their
mission. Therefore, many feedback controls focus on financial measurements.
Managers evaluate whether they have operated within their budget targets,
whether they have generated sufficient sales and profits, and so on. Feedback has
two advantages over feed forward and concurrent control:

i. Feedback provides managers with meaningful information on how effective their

planning effort was.
ii. Feedback control can enhance employee motivation. People want information on
how well they have performed. Feedback control provides that information.
6. SCOPE OF CONTROL
For effective control, it is important to know the critical areas of control. The
identification of these areas enables the management to (i) delegate authority and
allocate responsibility (ii) reduce burden of supervising each activity in detail
and(iii) have means of securing satisfactory results.

The following discussion points out the problems and methods of control in each
major area.
a. Controls over policies: Policies are formulated to govern the behavior and
action of personnel in the organization. These may be written or otherwise,
policies are generally controlled through policy manuals, which are generally
prepared by top management. Each individual in the zis expected to function
according to policy manuals.
b. Control over organization: Organization charts and manuals are used to keep
control over organization structure. Organization manuals attempt at solving
organizational problems and conflicts, making long-range organizational
planning possible, enabling rationalization of the organization structure, helping
in proper designing and clarification of each part of the z and conducting periodic
check of facts about organization practice.
c. Control over personnel: Generally, personnel manager or head of the
personnel department, whatever his designation may be, keeps control over
personnel in the organization. Sometimes, a personnel committee is constituted
to act as ail instrument of control over key personnel.
Control on wages and salaries: Control over wages and salaries are done by
having program of job evaluation, and wage and salary analysis. The functions are
carried on by personnel and industrial engineering departments.
d. Often wage and salary committee is constituted to provide help to these
departments.
e. Control over costs: Control over costs is exercised through making comparison
between standard costs and actual costs. Standard costs are set in respect of
different elements of costs. Cost control is also supplemented by budgetary
control system, which includes different types of budgets. Controller's
department provides information for setting standard costs, calculating actual
costs, and pointing out differences between these two.
f. Control over methods and manpower: Control over methods and manpower
is keep to ensure that each individual is working properly and timely. For this
purpose, periodic analysis of activities of each department is conducted. The
functions performed, methods adopted, and time consumed by every individual
is studied to eliminate nonessential functions, methods, and time. Many
organizations create separate department or section known as organization and
methods' to keep control over methods and manpower.
g. Control over capital expenditure: Control over capital expenditure is
exercised through the system of evaluation of projects, ranking of projects on
the basis of their importance, generally on the basis of their earning capacity. A
capital budget is prepared for the business as a whole. The budget committee or
appropriation committee reviews the budget. For effective control over capital
expenditure, there should be a plan to identify the realization of benefits from
capital expenditure and to make comparison with anticipated results. Such
comparison is important in the sense that it serves as an important guide for
future capital budgeting activities.
h. Control over service departments: Control over service departments is
effected either
(i) through budgetary control within operating departments, or
(ii) through putting the limits upon the amount of service an individual
department can ask, or
(iii) through authorizing the head of service department to evaluate the request
for service made by other departments and to use his discretion about the
quantum of service to be rendered to a particular department.

7. QUESTIONS
1. “Control is a fundamental management function that ensures work
accomplishment according to plans." Analyze this statement and outline the various
steps in control process.
2. Explain the importance of control in a business organization. What are the
requirements of an effective control system?
3. In what way are planning and control related to each other? Explain clearly the
essential steps in control process.
5. Planning is the basis, delegation is the key, information is the guide, and action
is the essence of control." Discuss.