CONTROLLING

Controlling

CONTROLLING
Controlling is the managerial function of measuring and correcting
performance in order to make sure that organizational objectives and plans
that were deliberately devised to be attained are being accomplished.
Planning and controlling are so closely related that some writers and
management practitioners think that their functions are also closely related.
Planning and controlling is viewed as the blade of a pair of scissors; the
scissors cannot function unless there are two blades.Objectives and plans are
very important and control is not possible, because performance has to be
measured against some established criteria.Controlling, as a management
tool, is the function of every manager from president to supervisor. While the
range of control varies among managers, those at all levels have the
responsibility for the effective implementation of plans.
THE CONTROL PROCESS

• The Control ProcessControl is the process of assuring management that

organizational plans, objectives, programs, and other specific tasks are carried
out efficiently and effectively. The basic control process involves three steps:
• (1) establishing standards,
• (2) measuring performance against these standards,
• (3) remedies for deviation from standards and plans.
• Plans are the yardsticks against which managers devise controls; however,
since plans vary in detail and degree of complexity, usually, managers cannot
watch everything; therefore, special standards are established. Standards
serve as criteria of performance. They are the selected points in the entire
planning program in which measures of performance are made so that
managers can receive signals about how things are going.
• Establishment of Standards.
• The establishment of standards is a process by which
criteria are set against which actual performance can be
measured. When a formal control system is in place, the
most common tool used by management as a criterion is
the budget. The budget is a quantitative expression of a
plan of action. It is important that the master budget
integrates the quantitative targets of the different units
within the organization and
• Measurement of Performance.
• Palpably, the control system is not better than the
information on which it operates and, to a great extent, this
information is accumulated from the monitoring process.
Monitoring performance is considered to be synonymous
with control. The paramount purpose of monitoring is to
collect data and perceive problem areas. The main problem
in monitoring performance is determining where, when,
and how often to inspect or check this. Check must be95
• Remedies of Deviation.
• Managers set standards and study results but do noi follow these with
action. The first two steps are of little value if accurate action is not
taken. The action required may be uncomplicated to keep up the status
quo.Actions of this kind would rely on standards being met in a tolerable
manner. I standards are not being met, the manager must identify the
cause of the deviation and correct it. It is not adequate simply to treat
only the signs of the existence of a condition. This action can be
compared to replacing a car spare plugs when the real problem is a
defective gasoline line. It is likewise possible that a systematic analysis of
the deviation will need a change in the standard. The standard may not
have been met or conditions may have altered so that there is a need for
change.
• Capital standards. There are a number of capital
standards arising from the application of monetary
measurements to physical items. These have to do with the
capital investments in the organization. They are primarily
related to the balance sheet rather than to the income
statements. The balance sheet discloses other capital
standards. These are ratios of current assets to current
liabilities, debt to net worth, fixed investment to total
investment, cash and receivables to payables, and bonds of
stocks and size of turnover inventories.
• Intangible standards. The difficulty to set are standards that are
not expressed in either physical or monetary measurements. It is
observed that many intangible standards exist in business, due to
adequate research. Perhaps one of the important reasons is that
where human relationships count in performance, as they do
above the basic operating levels, it is very difficult to measure
what is "good," "effective," or"efficient." Various tests and surveys
and sampling techniques developed by psychologists have made
it possible to probe human attitudes and drives, although a lot of
managerial controls over interpersonal relationships must
continue to be based on intangible standards, trial and error, and
even sheer hunch.
• Program standards. A budget program is one of the
assigned tasks of managers to follow the development of
new products for improving the quality of a sales
team.While it may be inferred that some subjective
judgments may have to be applied in appraising program
performance, timing and other factors can be used as
objective standards.
• Revenue standards. The revenue standards stem from
monetary values to sales.These include standards like bus
passenger-per-mile, average sale per customer, and sales
per capita in a given market place.
• Control as a Feedback Systeminformation fedback,
• which shows deviations from standards and initiate sone
changes. Systems use some of their vigor and potency to
feedback information thacompares performance with standards
and initiated remedial action.
• Management control is basically perceived as a feedback
system that is very similar to the operation of a typical
thermostate. These types of management control system place
control in a more realistic light that, by merely establishing
standards measuring performance and correcting deviations, a
manager who is sensitive abow! feedback, can detect actual
performance; compare measurements against standards; and
identify and analyze deviations. Through these, he can make the
appropriate corrections to arrive at the performance desired.
• Goals as standards. The contemporary tendency for better-
managed organizations is to establish a network of
verifiable qualitative and quantitative goals in every level
of management. The use of intangible standards, while still
important, is decreasing.In large organizations where
program operations are very complex, modern managers
are finding that, through research, it is possible to define
goals that can be used as performance standards.
• Strategic plans as control points for strategic control. There has been
a lot of literature written about strategic planning, but little is known
about strategic control. Management exports and practitioners
define strategic control as a systematic monitoring at strategic
control points, as well as modifying the organization's strategy on
the basis of this evaluation. Strategic plans require strategic control.
Since controls facilitate comparisons of intended goals with actual
performance, by the same token, they also provide opportunities for
learning, which, in effect, may be the basis for organizational
change. It may be assumed that, with the use of strategic control, a
manager gains insights not only about organizational performance
but also about the changing environment by monitoring it.97
• Feedforward versus feedback system. Feedback systems
monitor inputs into a process to ascertain whether the inputs
are as planned; if they are not, the inputs are changed in order
to obtain the desired results. It is observed that, for most
management problems, because of time lags which are always
inevitable in the correction process, this may not be good all
the time.Feedforward in management. This concept is also
referred to as preliminary control. The system of feedforward is
likely to appear complex because it is difficult to identify
system input variables. There are certain requirements for a
workable feedback control system to be effective.
• Techniques of future-directed control. One way, some
managers have practiced is through careful and repeated
utilization of forecasts based on the latest objective
information. Managers should compare what is desired with
the forecasts, so that they can introduce program changes
that will make the forecast more promising. To illustrate, if
a company makes a sales forecast by indicating that the
sales will be at a lower level than desirable, managers may
develop new plans for advertising, sales promotion, or the
introduction of new products in order to improve the sales
forecast.
• 1. Make a thorough and careful analysis of planning and control system.
• 2. Develop a working model of the system.
• 3. Take care to keep the model up-to-date. The model should be reviewed
regularly to find out whether the input variables are identified and their
interrelationships continue to represent realities.
• 4. Collect data or input variables regularly, and put them into the system.
• 5. Make a regular assessment of the variations of actual input data from
planned- for inputs and evaluate the impact on the expected end-result.
• 6 Take appropriate action. Loke any other technique of planning and
control all the system can do is indicate problems and apparenlty people
take action to solve the problem.
• Control as a Device for Overall PerformanceControls are deliberately
designed for specific purposchce qualicies, employe solection, ret
are deline training, salaries and vales, prod and outta, coss, pricing
sapiation penditures, ash flows, research and development ase our
areas of concen waneane wishes performance to conform to set
plans. These controls are parial in the sense witey apry to a
segment of an organ macion hat ma no maste roaaccomplishments
against goals. It is interesting to note that many of the controls are
onsion ends ack by identifying and measuring certain deviations
from the plans.The traditional approach is to find out who is
responsible for the undesirable deviation and tell that person to
correct it. This is what is called direct control.
• There are various reasons for control of overall
performance:
• 1. The overall planning must apply to the organization's
goals.
• 2. The decentralization of authority must be in place -
especially in product division to avoid chaos of complete
dependence.
• 3. Overall controls permit measuring an integrated area of
the manager's total effort, rather than parts of it.
• There are certain causes of negative deviations from
standards, such aswho make decisions.uncertainty and lack
of
• Uncertainty. There are certain elements affecting a given
plan. These are grouped into facts, risks, and uncertainty,
The risks arise from uncertainty. An illustration of this, is
that the success of a plan to manufacture aluminum
pistons will depend, to a large extent, not only on known
facts and risks but also in such uncertainties regarding
future world conditions about its use. Managerial errors
caused by unforeseeable events cannot be avoided.
• Direct ControlDirect control is a control technique designed
to identify and correct deviations incompare the actual
output ofplans. In every organization, there are hundreds of
standards that are developed logaS and services - in terms
of quantity, time, and.costs with plans. A negaive deviation
indicates, in terms, of goal achievemen. that the results do
not conform to plans.cost, price, personnel, labor hours,
that performance is less than good or normal ana.
• Lack of knowledge, experience, and sound judgment. Plans
may have negative deviations and these normally occur
when people appointed to managerial positions lack the
necessary background. The higher in the organizational
structure managers are placed, the broader the knowledge
and experience they need. Having a number of fruitful
years as an engineer, a topnotch sales manager or a
controller is not a guarantee for the success of a top
manager in the organization.
• The assumption that time is warranted. When man bring ung erake
inquiny them esses or assign it to others, executive time is spent
in bringing out causes of poor resul arge scrap losses may call for
meetings attendea by employees representing quality control,
production planning, engineering, purchasing, and manufacturing.
• The assumption that personal responsibility exists. Experience will
attest that, in most cases, no manager will accept the sole
responsibility for poor results. In cases where an increase in
interest rates or inflation may cause the costs of many activities to
rise abruptly, scarcity of a particular fuel may necessitate the use
of less economic sources of power.
• The assumption that personal responsibility exists. Experience will attest
that, in most cases, no manager will accept the sole responsibility for
poor results. In cases where an increase in interest rates or inflation may
cause the costs of many activities to rise abruptly, scarcity of a particular
fuel may necessitate the use of less economic sources of power.
• The assumption that mistakes can be discovered in time. Discovery of
any deviation from plans, in most cases, often comes a bit late for
appropriate action.While it is true that control can be applied only to
future action, most controls depend on some historical data and
information that most managers have available.Managers should
interpret available data and information in terms of their implications for
the future.
• The assumption that the person responsible will take
corrective steps.. Fixing the responsibility may not lead to
correction. For instance, high production costs might be
traced to a marketing manager's idea that "slight"
modification may make selling easier and that this involves
"really" in-change in production run. If the marketing
manager is a member of the top management, a
subordinate investigating the case may be intimidated.
Although great effort may be made to correct subordinate
managers, most often, it is difficult to correct a top
executive to whom one reports.
• The Principle of Preventive ControlThe principle of
preventive control embodies the idea that most
responsibility for negative deviations from standards can be
fixed by applying some fundamentals of management, It
draws the difference between analyzing performance
reports, essential in any case, and determining whether
managers act in accordance with established principles in
their duties and responsibilities. The principle of preventive
control. less will be the need for direct controls.simply
illustrates that the higher the quality of managers
• The Assumptions of the Principle of Preventive ControlThere
are three assumptions to which the application and
desirability of preventive control hinges; e.g., (1) qualified
managers commit a minimum of errors;(2) managerial
performance can be measured, and management concepts,
principles, and techniques are useful diagnostic standards
in measuring performance; and (3) the application of
management fundamentals can be readily evaluated.
• The assumption that qualified managers commit a
minimum of errors. According to J.P. Morgan, the decisions
of good managers are right two-thirds of the time;
nevertheless, an accurate analysis of the quality of
decision-making should not rely on the quality of errors, It
should be concerned with the nature of the errors.
Managers are naturally held accountable for the
performance of their duties and responsibilities because
these functions should be undertaken in accordance with
the basic principles of management.
• The assumption that the application of management
fundamentals can be evaluated. Evaluation provides for
periodic measurement of the skill with which managers
apply management fundamentals. This is done not only by
judging performance against management principles but
also by casting them into a series of objectives is one
measure of a manager's performance, but much depends
on being able to evaluate the performance of a manager as
a manager.
• The assumptionthat management fundamentals can be used tomeasure performance. It may be
inferred that the primary purpose of any book on management has been to draw together
concepts, principles, theories, and basic techniques of management and relate them to a system
of managerial functions
• . Advantages of Preventive ControlThere are various advantages that controlling the quality of
managers can minimize errors to a certain degree:1. The greater accuracy is achieved in
assigning personal responsibility. The pe
• riodic evaluation of managers will certainly uncover deficiencies and provide a basis for specific
training to eliminate them.
• 2. Preventive control should hasten corrective action and make it more effective.It encourages
control by the imposition of self-control. Cognizant of the fact that errors will be uncovered in an
evaluation, managers will try to determine their avowed responsibility and make voluntary
corrections. For example, the purchasing agent will have to check the materials purchased
against engineering specifications, and the engineers to determine whether appropriate
• materials were spectied. All these actions cat be voluntarir
anagers vio concil pre py that they were in tor are likely to
do ineir best to provetrecurrence, for they realize their
responsibility.3. Prevenive conrol may lighten the
managerial buden tow caused by dioncontrols.4. The
psychological advantages of preventive control is
impressive. Many subordinates feel that superiors rate
them arbitrarily. They only rely on shoo hunch and
personality, and the measuring instrument
• Major Principles for Management ControlFrom the substantive literature that
have been presented and discussed on management control, basic principles
have emerged. These principles are designed to highlight aspects of control
that are regarded as very fundamental and important, Control, even though
representing a system itself, is a subsystem of the larger arca of management
which have been identified and discussed.The purpose and nature of control
may be summarized in the following principles:1. The principle of the purpose
of control. The primary function of control is to ensure that plans succeed by
detecting deviations from plans and furnishing a basis for taking action to
correct potential or actual existing undesirable deviations.2. The principle of
future-directed control. For time lags in the total system of control, the more
control system is based on feedforward rather than simple feedback of
information, the more managers have the opportunity to perceive deviations
from plans before they occur and to take action in time to prevent them.
• Requisites for Effective ControlsGenerally, all keen and
attentive managers want to have an adequate and
effective system of controls in order to assist them in
making sure that anything that might happen, especially
one that is important, should conform to plans. It is
necessary that the controls that managers use must be
designed for the specific task and the persons they are
intended to serve.
• The principle of control responsibility. The fundamental responsibility for the
exercise of control ultimately rests in the manager charged with the
performance of the particular plans involved. Inasmuch as delegation of
authority, assignment of tasks and other related responsibility for certain
objectives rest in the individual organization set up.manager, the
responsibility of a manager cannot be waived without restructuring theThe
principle of preventive control. The higher the position and the quality of
managers in a managerial system are, the less will be the need for direct
controls.Most controls are based on the larger part on the human beings
because of the fact that they are the ones that often commit mistakes; and,
in some cases, they do not react to problems by undertaking their
corrections adequately and promptly. The more qualified managers are, the
more they will perceive deviations from plans and take prompt action to
prevent them.
• These two principles for controlling clearly emphasize that the
purpose of control in any system of managerial action is to ensure
that the desired objectives are achieved through detecting
deviations and taking actions designed to prevent or correct
them. It will be noted that this principle is often disregarded in
practice, due to the present state of the art in managing that has
not provided for systems of feedforeward control. Managers
haveeffective control.been dependent on historical data and
information which may be adequate forThe principle of efficiency
of controls. Control techniques and strategies are said to be
efficient if they detect the nature and causes of deviations from
plans. with a minimum of costs.
• Tailoring controls to plans and positions. Every plan, kind,
and stage of an operation has certain characteristics. It is,
therefore, necessary that all control techniques and
systems should reflect the plan they are designed to follow.
The managers should have the necessary information that
will guide them on how the plans are to be implemented.

• Tailoring controls to individual managers. Controls should

be tailored to shov tund man i a hai that out on on thoma in
to bc meaning thinthe operation of the organization.
• Searching objectively of controls. Management has many.
subjective components. It is in this premise that whether a
subordinate is doing a good job should ideally not to be a matter
for subjective determination. If controls are subjective, a
manager's 'personality may influence judgments of performance
and consequently, make him less accurate.
• Adapting the control system to organizational culture. If the control
system is to be effective, it must be adapted to the organizational
culture. If people in the organization have been given a wide range
of freedom and participation, a tight control system may go
against the intended design and might result in virtual failure.
• Adapting the control system to organizational culture. If the control
system is to be effective, it must be adapted to the organizational
culture. If people in the organization have been given a wide range of
freedom and participation, a tight control system may go against the
intended design and might result in virtual failure.
• Installing controls that lead to corrective action. An adequate and
systematic system will determine where failures of the control
system are occurring and who is likely responsible for them; and
consequently, it will ensure that some corrective actions may be
instituted. Indeed, control is only justified if deviations from plans are
corrected through appropriate planning, organizing, staffing,
coordinating, and leading.
• Ensuring flexibility of controls. Controls should have a certain degree of
flexibility to remain effective despite failures and unexpected changes
of plans and techniques. The need for flexible control is often
illustrated in budget preparation and labor and purchase
materials.allocation of funds. A budget system may project a certain
level of expenses to hite

• Achieving economy of controls. As the general rule, controls must be

worth their costs. While this requirement seems very simple, it is often
difficult to accomplish this in practice. This is true because a manager
may have difficulty in
The Structure of ControlThe following principles are aimed at identifying how
control systems andtechniques can be designed to enhance the quality of
managerial control.The principle of organizational suitability. This principle states
that the more an organizational structure is clear, complete, and integrated, and
the more controls are designed to reflect the place in the organizational structure
where responsibility for actions lies, the more the controls will facilitate correction
of deviations from plans.
The principle of individuality of controls. This principle relates that the more
control techniques and information are understandable to managers who will use
them, the more they will actually be used and the more they will result in effective
control. As a general rule, controls should be tailored to meet the individual needs
of managers. The aspect of individuality is the tailoring of controls to the specific
kind and level of a manager's understanding. Control information that a manager
cannot use has little practical value.
• The Process of ControlThe control process,which involves
establishing standards, measuringperformance against standards,
and correcting the undesirable deviations rests heavily on the art
of managing and on know-how in given circumstances. However,
there are certain principles that have a wide range of applicability.

• The principle of critical-point control. This principle purports to

emphasize that effective control requires attention to those
factors that are critical when valu ine orat of a implane l would be
aster and meccary onthe salient factors of performance that will
indicate any significant deviations from plans.
• The principle of standard. Effective control requires
objective, accurate, and suitable standards. The design
should be simple and there should be a specific and
• The exception principle. This principle states that the more
managers concentrate control efforts on significant
exceptions, the more effective will be the results of their
control. This principle holds that managers should concem
themselves with significant deviations, whether good or
bad.
• The principle of flexibility of control. This principle holds
that, if controls are to remain effective despite failure or
unforeseen changes of plans, flexibility is required in their
design. In this principle, controls must not be so inflexibility
tied in with a plan as to be useless if the entire plan
virtually fails or is suddenly revised. It is to be noted that
this principle clearly applies to failure of plans and not the
failures of people operating under plans.
• The principle of action. This principle states that control is
justified only if indicated deviation from plans are corrected
through appropriate planning, organizing, staffing, and
leading. There are instances in practice and experience in
which this simple truth is forgotten.
• Controlling in the United States. Control in the United
States simply means measuring performance against pre-
established precise standards. Management by objectives,
an approach used for performance appraisal against
verifiable objectives, is widely practiced in the United
States.
• Controlling in Japan. It will be noted in the discussion of
decision-making that the group — its dynamics and its
pressure has a profound impact on the managerial process.
In an office setting of a work environment, when there are
no dividing walls, peers are well aware of the performance
of their colleagues. Besides, managers are a part of the
work group, rather than being separated from the rank and
file employees by an office door..
• Controlling in China. In China, control is exercised primarily
by group leaders. The control focus is not only on groups
but also on individuals. Factory managers, for instance, are
expected to meet their annual quota of production. Thus,
Chinese control practices are a mixture of U.S. and
Japanese managerial practices. In identifying deviations
from standards, there is a tendency to let the persons
responsible for sub-performance save face which is similar
to the Japanese practice.There are some uses of quality
circles; although these are commonly practiced.