CHAPTER SEVEN

THE CONTROLLIGN FUNCTION

MEANING
 Controlling is the process through which managers assure that actual activities
conform to planned activities.
 Controlling is the process of regulating organizational activities so that actual
performance conforms to expected organizational standards and goals.
 It is checking current performance against predetermined standards contained in
the plans.
IMPORTANCE OF CONTROLLING
All the good planning efforts and brilliant ideas in the world do little good if a firm has
no system of managing control. Control, therefore, is an essential part of effective
organizational management. Specifically, control helps an organization adapt to changing
conditions, limit magnification of errors and provide the means to monitor performance.
Adapting to changing conditions: in today’s dynamic and unpredictable business
environment, control plays a crucial role than ever. A properly designed control
system allows managers to effectively anticipate, monitor, and respond to often
constantly changing conditions.
 Limiting the magnification of errors: generally, a small error or mistake does not
adversely affect organizational operation. However, a small error/mistake left
uncorrected (perhaps one undetected as a result of a lack of control) may be
magnified with the progress of time, eventually harming the whole organization.
Another purpose of controlling is to determine whether people and the various parts of an
organization are on target, achieving the progress toward their objectives that they
planned to achieve. Planning chooses goals and maps out the necessary strategy and
tactics. Controlling attempts to prevent failure (and to promote success) by providing the
means to monitor the performances of individuals, departments, divisions, and the entire
organization.
The controlling process is closely associated with the other three functions of
management: planning, organizing and leading. It builds most directly on the planning
function by providing the means for monitoring and making adjustment in performance
so that plan can be realized. Still, controlling also supports the organizing and leading
functions by helping ensure those resources are channeled toward organizational
objectives. A combination of well-planned objectives, strong organization, capable
direction and motivation has little probability of success unless there exists an adequate
system of control. Planning, organizing, staffing and directing must be monitored to
maintain their effectiveness and efficiency.
THE CONTROLLING PROCESS
Although control systems must be tailored to specific situations, such systems generally
follow the same basic process. The controlling process has five major steps.
1. Determine Areas to Control
The first major step in the control process is determining the major areas to control, i.e.
identify critical control points. Critical control points include all the areas of an
organization's operations that directly affect the success of its key operations, areas where
failures can not be tolerated, and costs in time and money are greatest. Managers must

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make choices because it is expensive and virtually impossible to control every aspect of
an organization’s activities. In addition, employees often resent having their every move
controlled. Managers usually base their major controls on the organizational goals and
objectives developed during the planning process.
2. Establishing Standards
Standards are units of measurements established by management to serve as benchmarks
for comparing performance levels. They spell out specific criteria for evaluating
performance and related employee behaviors. The exact nature of the standards to be
used depends on what is being monitored.
Standards, if possible, must be
 Specific and quantitative as much as possible.
 Flexible to adopt the changes that may occur over the future.
 Challenging and should aim for improvement over past performance.
Generally, standards serve three major purposes related to employee behavior. For one
thing, standards enable employees to understand what is expected and how their work
will be evaluated. This helps employees do an effective job. For another, standards
provide a basis for detecting job difficulties related to personal limitations of organization
members. Such limitation can be based on a lack of ability, training, or experience or on
any other job-related deficiency that prevents an individual from performing properly on
the job. Timely identification of deficiencies makes it possible to take corrective action
before the difficulties become serious and possibly irresolvable. Finally, standards help
reduce the potential negative effects of goal incongruence. Goal incongruence is a
condition in which there are major incompatibilities between goals of an organization
member and those of the organization. Such incompatibilities can occur for a variety of
reasons, such as lack of support for organizational objectives (e.g. an employee views the
job as temporary and attempts to do the minimum), and often result in behaviors that are
incompatible with reaching organizational goals. One common manifestation of goal
incongruence is employee theft, which includes wasting an organization's resources, as
well as taking equipment, materials and money.
There are three types of standards: performance standards, corollary standards and
standards of conduct.
 Performance standards deal with quality, quantity, cost and time.
 Corollary standards support a given level of performance. These include minimum
personnel requirements and adequate physical resources, such as when a company
knows it will need at least five hundred workers and well-equipped factory to
produce a certain number of terminals.
 Standards of conduct are moral and ethical criteria that shape the behavioral climate
of the work place. They originate from law, custom and religious beliefs.
Examples of standards: Producing 800,000 units per year, increasing market share by
20%, cutting costs by 15%, answering all customer complaints within 24 hours.
3. Measuring Actual Performance
Once standards are determined, the next step is measuring performance. For a given
standard, a manager must decide both how to measure actual performance and how often
to do so.
4. Comparing Performance against Standards

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This is a step where comparison is made between the “what is” and the “what should be.”
Managers often base their comparisons on information provided in reports (oral and
written) that summarize planned versus actual results, and by working around work areas
and observing conditions, a practice sometimes referred to as Management by Wondering
Around (MBWA). The purpose of comparing actual performance against intended
performance is, of course, to determine if corrective action is needed.
Consequently, the comparison result may show that the actual performance exceeds
(positive deviation), meets (zero deviation), or falls below (negative deviation)
expectations (standards). Accordingly, if performance fulfills expectations (meets
standards), no control problem exists. However, if performance exceeds or fails to meet
expectations, further investigation is required to determine the cause. Performance that
exceeds expectations may mean either superior talent or inappropriately set standards.
Performance that fails to meet expectation may likely mean inappropriately set standards,
poor talent or improper use of resources. The key question in both cases will be, “How
much variation from standards is acceptable before action is taken?” The answer to this
question will lead to the development of ranges defining upper and lower limits. And
performance outside of acceptable range servers as a red flag calling for taking the
necessary corrective action.
The managerial principle of exception states that control is enhanced by concentrating on
exceptions, or significant deviations from the expected result or standard. Therefore, in
comparing performance with standards managers need to direct attention to the
exception, and by doing so, managers can save time and effort.
5. Taking Corrective Action (on time)
The corrective action to be taken depends up on the type of deviation that exists. When
performance exactly meets (deviation of zero) or exceeds (positive deviation) the
standards set, usually no corrective action is necessary. However, managers do need to
consider recognizing the positive performance. The type of recognition given can vary
from a verbal “well done” for a routine achievement to more substantial rewards, such as
bonuses, training opportunities, or pay raises, for major achievements or consistently
good work. Yet, favorable deviations should be examined to understand such success.
When standards are not meet, managers must carefully assess the reason why and take
corrective action. During this evaluation, managers often personally check the standards
and the related performance measures to determine whether these are still realistic.
Sometimes, managers may conclude that the standards are, in fact, inappropriate-usually
because of changing conditions-and that corrective action to meet standards is therefore
not desirable. More often, though, corrective actions are needed to reach standards. The
standards may have been based on historical data which may be inappropriate to current
conditions. In such instances, the past is a poor basis on which to predict the future.
Similarly, the use of comparative standards may prove to be problematic since no two
organizations are alike.
In taking corrective actions, managers must carefully avoid two types of errors: taking
corrective action when no action is warranted and failing to take corrective action when it
is clearly needed.
TYPES OF CONTROLLING
In addition to determining the areas they want to control, managers need to consider the
types of controls that they wish to use. Based on the time period in which control is

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applied in relation to the operation being performed, or the stage of productive cycle in
which controlling is carried out, there are three basic types of controls: preventive,
concurrent, and feedback. Thus, an organization’s performance can be monitored and
controlled at three points: before, during, or after an activity is completed.
1. Preventive/Steering/ Preliminary / Input Control
Preventive control focuses on the regulation of inputs to ensure that they meet the
standards necessary for the transformation process. It attempts to monitor the quality
and/or quantity of resources (financial, physical, human and information) before they
become part of the system. Preventive control is future oriented and takes place before
the operation begins. It focuses on prevention in order to preclude later serious
difficulties in the production process - its aim is to prevent problems before they arise.
Nevertheless, since preventive control can’t cover every possible contingency, other type
of controls may also be needed.
E.g. Entrance exams for colleges and universities, policies, rules, procedures, proper
selection and training of employees, inspecting raw materials, the implementation of
induction and orientation programs-save trial and error cost, frustration of employee.
Preventive control comes from an old saying “A gram of prevention is worth a kg of
cure.”
2. Concurrent/Screening/ Yes-No/Checking Control
Concurrent control involves the regulation of ongoing activities that are part of the
transformational process to ensure that they conform to organizational standards. It is
designed to detect and anticipate deviations from standards at various points throughout
the processes, i.e. the controlling is carried out during the actual transformation process.
The emphasis here is on identifying difficulties in the productive process that could result
in faulty outputs.
Because concurrent controls involve the monitoring of ongoing activities, they are the
only controls that can cope with contingencies (unexpected events) that cannot be
anticipated. When contingencies arise involving activities in a transformation process, a
yes/no decision is required. That is, decision must be made whether to continue as before
or follow an alternative course, or take corrective action, or stop work altogether. In this
way, concurrent controls allow adjustments to be made while work is being done.
E.g. On the job training, on the spot observation, exams, tests, quizzes.
3. Feedback/Post-Action/ Output Control
As the name indicates post action control focuses on the end results of the process. It is
regulation exercised after the product (goods or services) has been completed in order to
ensure that the final output meets organizational goals and standards. The information
derived is not used for corrective action on a project because it has been completed.
The feedback control provides information for a manager to examine and apply to future
activities that are similar to the present one. That is why it is called “historical results
guide future actions.” The purpose of feedback control is to help prevent mistakes in the
future and also it can be used as a base for reward; and in cases where other (preliminary
& concurrent) controls are too costly.

E.g. Performance evaluation, financial statement analysis, final exams

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 Fig 6.2 Major Control Types by Timing

Controls Controls Control

INPUTS TRANSFORMATION OUTPUTS

Controls Controls Controls

Preventive Control Concurrent Feedback Control

Cybernetic and Non-cybernetic Controls

A basic control process can be either cybernetic or non-cybernetic, depending on the
degree to which human discretion is part of the system. A cybernetic control system is a
self-regulating control system that, once it is put into operation, can automatically
monitor the situation and take corrective action when necessary. E.g. computerized
inventory system, a heating system controlled by a thermostat
A non-cybernetic control system is a control system that relies on human discretion as a
basic part of its process.
CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM
Controls may have many different characteristics, but some of the most important are:
Future–Oriented
To be effective, control systems need to help regulate future events, rather than fix blame
for past events. A well designed control system focuses on letting managers know how
work is progressing toward unit objectives, pinpointing unforeseen opportunities that
might be developed – all aids to future action
Multidimensional
In most cases, control systems need to be multidimensional in order to capture the major
relevant performance factors, such as, quality, quantity, overhead, etc.
Economically Realistic/ Cost Effective
The cost of implementing a control system should be less, or at most, equal to the
benefits derived from the control system. The benefits received from controls should off-
set their expenses.
Accurate
Since control systems provide the basis for future actions, accuracy is vital. Control data
that are inaccurate may be worse than no control at all, since managers may make poor
decisions on the basis of faulty data they believe to be accurate. An inaccurate data from
a control system can cause the organization to take action that will either fail to correct a
problem or create a problem when none existent. Evaluating the accuracy of the
information they receive is one of the most important control tasks that managers face.
Acceptable to Organization Members
Control systems operate best when they are accepted by the organization members who
are affected by them. Otherwise, members may take actions to override and undermine
controls; i.e. controls will not work unless people want them to. Too many, arbitrary, too

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few and too rigid controls often cause the satisfaction and motivation of employees to
decline.
Timely
Control systems are designed to provide data on the state of a given production cycle or
process as of a specific time. In order for managers and employees to respond promptly
to irregularities, control systems must provide relevant information soon enough to allow
corrective action before there are serious repercussions or consequences.
Reliability and Validity
Controls not only must be dependable (reliable), but also must measure what they intend
to measure (must be valid). When controls can’t be relied on and are invalid, they are
unlikely to be trusted and can lead to very bad consequences.
Monitor able
Another desirable characteristic of control system is that they can be monitored to ensure
that they are performing as expected. One way of checking a control system is to
deliberately insert an imperfection, such as a defective part, and then observe how long it
takes the system to detect and report it to the correct individual.
Organizationally Realistic
The control system has to be compatible with organizational realities. All standards for
performance must be realistic. Status differences between individuals have to be
recognized. Individuals have to be able to see a relationship between performance levels
they are asked to achieve and rewards that will follow.
Flexible
Just as organizations must be flexible to respond rapidly to changing environments,
control systems need to be flexible enough to meet new or revised requirements.
Accordingly, they should be designed so that they can be changed quickly to measure and
report new information and track new endeavors.
Focus on Critical Control Points
Critical control points include all the areas of an organization’s operations that directly
affect the success of its key operations. The focus should be on those areas where failures
cannot be tolerated and where that costs in time and money are the greatest.
Easy to Understand
Complexity often means lack of understanding. The simpler the control, the easier it will
be to understand and apply. Controls often become complex because more than one
person is responsible for creating, implementing or interpreting them.
Emphasis on Exception
A good system of control should work on the exception principle, so that only important
deviations are brought to the attention of management. In other words management does
not have to bother with activities that are running smoothly. This will ensure that
managerial attention is directed towards error and not towards conformity. This would
eliminate unnecessary and uneconomic supervision, marginally beneficial reporting and
waste of managerial time.
Over control versus Under control
Since excessive amount of control can make the occurrence of dysfunctional aspects of
control systems more likely, managers need to avoid over control. Overcontrol is the
limiting of individual job autonomy to such a point that it seriously inhibits effective job
performance. At the same time, managers need to avoid going too far in the other

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direction, which results in a situation of undercontrol. Undercontrol is the granting of
autonomy to an employee to such a point that the organization loses its ability to direct
the individual's efforts toward achieving organizational goals.
Determining the appropriate amount of control that should exist in organizations is a
significant management decision. With the appropriate amount of control, a manager can
be reasonably certain that no major unpleasant surprises will occur and that employees
will achieve organizational goals.

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