CONTROLLING

BSP 150
Learning Outcomes
 Define controlling
 Discuss the importance of controlling
 Describe the steps in the control process
 Identify common managerial control techniques.
Controlling As A Management
Function
 Controlling is a process of monitoring performance and taking action to ensure
desired results.
 The process of monitoring activities to ensure that they are being accomplished as
planned and of correcting any significant deviations
 It ensures that the right thing happen, in the right ways and at the right time.
 The Purpose of Control
 To ensure activities are completed in ways that lead to accomplishment of
organizational goals.
 Without this regulation, organizations have no indication of how well they are
performing in relation to their goals. Control, like a ship’s rudder, keeps the
organization moving in the proper direction.
 At any point in time, it compares where the organization is in terms of performance
(financial, productive, or otherwise) to where it is supposed to be.
Importance of controlling

 As the final link in management functions:

 Planning
 Controls let managers know whether their goals and
plans are on target and what future actions to take.
 Empowering employees
 Control systems provide managers with information
and feedback on employee performance.
 Protecting the workplace
 Controls enhance physical security and help minimize
workplace disruptions
Sources of Control

 Stakeholder control – refers to pressure from outside sources, such as

customers, governmental agencies, stockholder, or banks, on
organizations to change their behaviours.
 Organisational control – refers to a company’s formal strategies and
mechanisms for pursuing its objectives. Examples include rules,
standards, budgets and audits.
 Group control – refers to the norms and values that group members
share and maintain through rewards and punishments.
 Individual self-control - consists of control mechanisms operating
consciously or unconsciously within each person.
Types of Control
Types of Control

Feedforward Control
 Are employed before a work activity begins
 The purpose is to ensure that objectives are clear, proper directions are
established and right resources are available
Concurrent Control
 A control that takes place while the monitored activity is in progress.
 Focus on what happens during work
 Monitor on going operation to ensure they are being done according to
plan
 This type of control can reduce waste in unacceptable finished products or
services.
 Types of Control

Feedback controls
 Occur after work is completed
 Focus on quality of end results
 provide useful information for future operations

Advantages of feedback controls:

 Provide managers with information on the
effectiveness of their planning efforts.
 Enhance employee motivation by providing them
with information on how well they are doing
Steps in the Control Process
Steps in the Control Process

 Establishing Standards- The first step in the control process is

establishing standards. A control standard is a target against which
subsequent performance will be compared. Standards established for
control purposes should be expressed in measurable terms.
 Measuring Performance -The second step in the control process is
measuring performance. Performance measurement is a constant,
ongoing activity for most organizations. For control to be effective,
performance measures must be valid. Daily, weekly, and monthly sales
figures measure sales performance, and production performance may be
expressed in terms of unit cost, product quality, or volume produced.
Employees’ performance is often measured in terms of quality or
quantity of output, but for many jobs, measuring performance is not so
straightforward.
Steps in the Control Process

 Comparing Performance Against Standards- The third step in the

control process is comparing measured performance against established
standards. Performance may be higher than, lower than, or identical to
the standard. The timetable for comparing performance to standards
depends on a variety of factors, including the importance and
complexity of what is being controlled. For longer-run and higher-level
standards, annual comparisons may be appropriate. In other
circumstances, more frequent comparisons are necessary. For example,
a business with a severe cash shortage may need to monitor its on-hand
cash reserves daily.
Steps in the Control Process

 Take Corrective Action-The final step in the control process is

determining the need for corrective action. Decisions regarding
corrective action draw heavily on a manager’s analytic and diagnostic
skills. After comparing performance against control standards, one of
three actions is appropriate: maintain the status quo (do nothing),
correct the deviation, or change the standards.
 Maintaining the status quo is preferable when performance essentially
matches the standards, but it is more likely that some action will be
needed to correct a deviation from the standards.
Common Managerial Control
Techniques
 Managerial Controls- Corrective control methods are tools that help managers
assess how well their departments are doing. There are five categories of
managerial control.
 Market Control
 Emphasizes the use of external market mechanisms to establish the standards used in
the control system.
 External measures: price competition and relative market share
 Bureaucratic Control
 Emphasizes organizational authority and relies on rules, regulations, procedures, and
policies.
 Clan Control/organic
 Regulates behaviour by shared values, norms, traditions, rituals, and beliefs of the
firm’s culture.
Common Managerial Control
Techniques
 Financial Controls-Financial controls include a wide range of methods, prevent the misallocation of
financial resources and provide timely financial information so that corrective action can be taken if
needed. Some of the methods for financial control include:
 (i) Comparative financial analysis.
 (ii) Budgeting
 Machine Controls
 Machine controls are methods that use instruments or devices to prevent and correct deviations from
desired results.
Characteristics of Effective
Control System
 Integration with Planning - Control should be linked with planning. The
more explicit and precise this linkage, the more effective the control
system is. The best way to integrate planning and control is to account for
control as plans develop. In other words, as goals are set during the
planning process, attention should be paid to developing standards that
will reflect how well the plan is realized.
 Flexibility- The control system itself must be flexible enough to
accommodate change. Consider, for example, an organization whose
diverse product line requires 75 different raw materials. The company’s
inventory control system must be able to manage and monitor current
levels of inventory for all 75 materials. When a change in product line
changes the number of raw materials needed, or when the required
quantities of the existing materials change, the control system should be
flexible enough to handle the revised requirements.
Characteristics of Effective
Control System
 Accuracy- Managers make a surprisingly large number of decisions
based on inaccurate information. Field representatives may hedge their
sales estimates to make themselves look better. Production managers
may hide costs to meet their targets. Human resource managers may
overestimate their minority recruiting prospects to meet affirmative
action goals. In each case, the information that other managers receive
is inaccurate, and the results of inaccurate information may be quite
dramatic. If sales projections are inflated, a manager might cut
advertising (thinking it is no longer needed) or increase advertising (to
further build momentum). Similarly, a production manager unaware of
hidden costs may quote a sales price much lower than desirable.
Characteristics of Effective
Control System
 Timeliness- timeliness does not necessarily mean quickness. Rather, it
describes a control system that provides information as often as is
necessary.
 Controls should be objective - effective control requires objective,
accurate and suitable standards. Objective standards can be
quantitative, such as costs or labour hours per unit or date of job
completion; they can also be qualitative, as in the case of a training
program that is designed to accomplish a specific kinds or upgrading o f
the quality of personnel. In either case, the standard is determinable
and verifiable.
END