MANAGEMENT CONTROL

WHAT IS CONTROL

Control is checking current performance against pre-determined

standards contained in the plans, with a view to ensure adequate
progress and satisfactory performance.

CONTROL PROCESS

 Setting performance standards: Managers must translate plans

into performance standards. These performance standards can be
in the form of goals, such as revenue from sales over a period of
time. The standards should be attainable, measurable, and clear.
 Measuring actual performance: If performance is not measured,
it cannot be ascertained whether standards have been met.
 Comparing actual performance with standards or goals: Accept
or reject the product or outcome.
 Analyzing deviations: Managers must determine why standards
were not met. This step also involves determining whether more
control is necessary or if the standard should be changed.
 Taking corrective action: After the reasons for deviations have
been determined, managers can then develop solutions for issues
with meeting the standards and make changes to processes or
behaviors.

CONTROLLING FOR ORGANIZATIONAL PERFORMANCE

Organizational Performance-Performance is the end result of an

activity. Managers are concerned with organizational performance the
accumulated end results of all the organization’s work processes and
activities.
Measures of Organizational Performance

1. Organizational productivity is the overall output of goods or services

produced divided by the inputs needed to generate that output. It’s the
management’s job to increase this ratio.

2. Organizational effectiveness is a measure of how appropriate

organizational goals are and how well an organization is achieving those
goals.

TOOLS FOR MONITORING AND MEASURING ORGANIZATIONAL

PERFORMANCE

A. Financial Controls.

1. Traditional Financial Control Measures.

a. Financial ratios are calculated by taking numbers from the

organization’s primary financial statements—the income statement and
the balance sheet.

b. We have also discussed budgets as a planning tool. However,

budgets are also control tools. They provide managers with quantitative
standards against which to measure and compare actual performance
and resource consumption.

2. Other Financial Control Measures. Managers are using measures

such as EVA (economic value added) and MVA (market value added).

 Economic value added is a tool for measuring corporate and

divisional performance by calculating after-tax operating profit
minus the total annual cost of capital.
 Market value added adds a market dimension by measuring the
stock market’s estimate of the value of a firm’s past and expected
capital investment projects.

B. Information Controls.

Controlling information can be vital to an organization’s success. We

need to look at the development and use of management information
systems.

 A management information system is a system that provides

managers with needed and usable information on a regular basis.
 Information can help managers control the various organizational
areas efficiently and effectively. It plays a vital role in the
controlling process.

C. Balanced Scorecard Approach.

 The balanced scorecard is a performance measurement tool that

looks at four areas—financial, customer, internal processes, and
people/innovation/growth assets—that contribute to a
company’s performance.
  The intent of the balanced scorecard is to emphasize that all of
these areas are important to an organization’s success.

D. Benchmarking of Best Practices

 Benchmarking is the search for the best practices among

competitors or non-competitors that lead to their superior
performance.
 Research shows that best practices frequently already exist within
an organization, but usually go unidentified and unused. Internal
benchmarking best practices program.

CONTROL SYSTEM

Definition: A combination of various elements connected as a unit to

direct or regulate itself or any other system in order to provide a
specific output is known as a Control system. We know controlling is
basically known as the act of regulating or directing.

Components of a Control System

Majorly the control system is divided into two major domains:

Controlled process: The part of the system which requires controlling is

known as a controlled process or plant.

Controller: The internal or external element of the system that controls

the process is known as the controller.

Types of Control System

These are majorly classified on the basis of whether the output is

involved in controlling action or not.
1. Open Loop Control System

In the open-loop system, the applied input or the controlling factor is

independent of the system output.

Open-loop control system is sometimes termed as a non-feedback

system. This is so because no comparison is done between input and
output of the system for controlling actions.

2. Closed-Loop Control System

In a closed-loop system, the applied input or controlling factor depends

on the output of the system. It is also known as feedback control
system because in such systems comparison between input and
achieved output is done to get the desired output signal.

Air conditioners are used for regulating the temperature of a room. So

these control systems make use of thermostats as a feedback unit.

The actual temperature of the room is first measured and accordingly

the temperature is adjusted to get the desired value of room
temperature.

ESTABLISH STANDARDS

The second step in the control process is establishing standards. A

control standards is a target against which subsequent performance
will be compared.

 Standards are the criteria that enable managers to evaluate

future, current, or past actions. They are measured in a variety of
ways, including physical, quantitative, and qualitative terms. Five
aspects of the performance can be managed and controlled:
 quantity, quality, time cost, and behavior. Each aspect of control
may need additional categorizing.
 An organization must identify the targets, determine the
tolerances those targets, and specify the timing of consistent with
the organization's goals defined in the first step of determining
what to control. For example, standards might indicate how well a
product is made or how effectively a service is to be delivered.
 Standards may also reflect specific activities or behaviors that are
necessary to achieve organizational goals. Goals are translated
into performance standards by making them measurable. An
organizational goal to increase market share, for example, may be
translated into a top-management performance standard to
increase market share by 10 percent within a twelve-month
period. Helpful measures of strategic performance include: sales
(total, and by division, product category, and region), sales
growth, net profits, return on sales, assets, equity, and
investment cost of sales, cash flow, market share, product quality,
valued added, and employees productivity.
 Quantification of the objective standard is sometimes difficult. For
example, consider the goal of product leadership. An organization
compares its product with those of competitors and determines
the extent to which it pioneers in the introduction of basis
product and product improvements. Such standards may exist
even though they are not formally and explicitly stated.
 Setting the timing associated with the standards is also a problem
for many organizations. It is not unusual for short-term objectives
to be met at the expense of long-term objectives.
  Management must develop standards in all performance areas
touched on by established organizational goals. The various forms
standards are depend on what is being measured and on the
managerial level responsible for taking corrective action.

METHODS OF CONTROL

Control techniques or methods are generally described as either

quantitative or nonquantitative.

Quantitative Methods

Quantitative methods use data and various quantitative tools to

monitor and control production output. Two common quantitative
tools are budgets and audits. By far the most widely recognized
quantitative tool is the chart. Charts used as control tools normally
contrast time and performance. The visual impact of a chart often
provides the quickest method of relating data. A difference in numbers
is much more noticeable when displayed graphically. Most charts are
versions of either the Gantt chart or the Program Evaluation and
Review Technique (PERT).

Budgets

A budget is an instrument of planning, management, and control. We

use budgets in two ways. First, we use them as established facts that
must be factored into our operational planning. Second, we use them
to prepare narrative descriptions and financial information that our
chain of command uses in its annual request and management of its
funds

Audits 
Internal auditing provides an independent review and appraisal of
accounting, financial, and other non-tactical operations. As a
management tool, the audit measures and evaluates the effectiveness
of management controls. The Naval Audit Service provides an
independent audit of programs, activities, systems, and procedures. It
also provides an independent audit of other operations involving the
use of funds and resources and the accomplishment of management
goals.

Nonquantitative Methods

Nonquantitative methods refer to total or overall control of

performance rather than specific processes. These methods use tools
such as inspections, reports, direct supervision, and performance
evaluation/counseling to accomplish goals.

REFERENCES

1. Mohd Sarwar MirI ,(2021) MANAGEMENT THEORY AND PRACTICE

2. Principles of management. Harold Koontz.
3. The Practice of Management. Peter F. Drucker (1954)