Tuesday, September 03, 2019

Management Control - Meaning, Nature and Process


Introduction to Management Control
Control is one of the managerial functions. These functions start with planning and end at controlling. The other functions like organising, staffing, directing act as the connecting like between planning and controlling. Planning will be successful only if the progress planning and controlled, Planning involves setting up of goals and objectives while controlling seeks to ensure.
In the words of Koontz and O'Donnel, “The measurement and correction of the performance of activities of subordinates in order to make sure that enterprise objectives and plan devised to attain them are being accomplished." The accomplishment of organisational goals is the main aim of every management. The performance of subordinates should be constantly watched to ensure proper implementation of plans. Co-ordination is the channel through which goals can be achieved and necessary.
According to Henry Fayol, “In an undertaking, control consists in verifying whether everything occurs in conformity with the plan adopted, the instructions issued and principles established. It has to point out weakness and errors in order to rectify them and prevent recurrence”.
Thus, controlling implies determining and stating specifically what is to be accomplished, then checking performance against such standards prescribed with a view to supplying the corrective action required to achieve the planned objectives. The end objective of controlling is, therefore, to ensure that the people’s   effort   in   the   organisation   is   continuously   directed   towards   the attainment of the predetermined objectives.

Nature or Characteristics of Control
1)      Control is a function of management: It is, in fact, a follow-up action to the other functions of management. All the managers in the organisation to control the activities assigned to them perform this function.
2)      Control is a dynamic process: It involves continuous review of standards of performance and results in corrective action, which may lead to changes in other functions of management.
3)      Control is a continuous activity: It does not stop anywhere. According to : Koontz and O’Donnell, “Just as the navigator continually takes reading to a planned action, so should so should be the business s manager continually take reading to assure himself that his enterprise or : department is on course”.
4)      Control is forward looking: It is related to future, as past cannot be controlled. It is usually preventive as the presence of control systems leads to minimize wastages, losses, and deviations from standards. It should be noted that control does not curtail the rights of the individuals. It simply keeps a check on the performance of individuals.
5)      Planning and Controlling are closely related with each other: Managerial planning seeks consistent and integrated while managerial control seeks to compel events to conform to plans. As a matter of fact, planning is based on control and control is based on planning. The process of control uses certain standards for measuring performance, which are laid down by planning. The control process, in turn, may reveal the deficiency of planning and may lead to the revision of planning. It may also lead to setting of new goals, changing the organisational structure, improving staffing and making major changes in the techniques of directing.
Advantages (Importance) of Controlling:
(i) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action.
(ii) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate or not. An efficient control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards in light of such changes.
(iii) Making efficient use of resources: By exercising control, a manager seeks to reduce wastage and spoilage of resources. This ensures that resources are used in the most effective and efficient manner.
(iv) Improving employee motivation: A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appreciated.
(v) Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimize dishonest behaviors on the part of the employees by keeping a close check on their activities.
(vi) Facilitating coordination in action: Controlling provides direction to all activities and efforts for achieving organisational goals.
Limitations of Controlling:
(i) Difficulty in setting quantitative standards: Control system loses some of its effectiveness when standards cannot be defined in quantitative terms. Employee morale, job satisfaction and human behaviors are such areas where this problem might arise.
(ii) Little control on external factors: Generally an enterprise cannot control external factors such as government policies, technological changes, competition etc.
(iii) Resistance from employees: Control is often resisted by employees. They see it as restriction on their freedom.
(iv) Costly affairs: Control is a costly affair as it involves a lot of expenditure, time and efforts.
Steps in Controlling Process
In order to perform his control functions, a manager follows three basic steps. First of all, he establishes the standards of performance to ensure that performance is in accordance with me plan. After this, the manager will appraise the performance and compare it with predetermined standards. This step will lead the manager to know whether the performance has come up to the expected standard or if there is any deviation. If the standards are not being met, the manager will take corrective actions, which is the final step in controlling.
controllingprocess
1)      Establishing standards: A standard acts as a reference line or basic of comparison of actual performance. Standards should be set precisely and preferably in quantitative terms. It should be noted that setting standards is also closely linked with and is an integral part of the planning process. Different standards of performance are set up for various operations at the planning stage, which serve as the basis of any control system. Establishment of standards in terms of quantity, quality or time is necessary for effective control. Standards should be accurate, precise, acceptable and workable. Standards should be flexible, i.e., capable of being changed when the circumstances require so.
2)      Measurement of performance: This step involves measuring of actual performance of various individuals, groups or units and then comparing it with the standards, which have already been set up at the planning stage. The quantitative measurement should be done in cases where standards have been set in quantitative terms. In other cases, performance should be measured in terms of quantitative factors as in case of performance of industrial relations manager. Comparison of performance with standards is comparatively easier when the standards are expressed in quantitative terms.
3)      Comparison: This is the core of the control process. This phase of control process involves checking to determine whether the actual performance meets the predetermined or planned performance. Manager must constantly seek to answer, “How well are we doing?” When a production supervisor checks the actual output or performance of his department with the production schedule, he is performing comparison aspect of control. When-an executive calculates the performance of his subordinates once in six months or   annuity, he is performing comparison aspect of control. Checking return on in investment is a comparison phase of control.
4)      Taking corrective action: The final step in the control process is taking corrective actions so that deviations may not occur again and the objectives of the organisation are achieved. This will involve taking certain decision by the management like re-planning or redrawing of goals or standards, assignment of clarification of duties. It may also necessitate reforming the process of selection and the training of workers. Thus, control function may require change in all other managerial functions. If the standards are found to be defective, they will be modified in the light of the observations.
Essentials of an Effective control system:
The following are the essentials or basic requirements of an effectively control system:
1)      Suitable: The control system must be suitable for the kind of activity intended to serve. Apart from differences in the systems of control in different business, they also vary from department to department and from one level in the organisation to the other. The manager must be sure that he is using the technique appropriate for control of the specific activity involved.
2)      Understandable: The system must be understandable, i.e., the control information supplied should be capable of being understood by those who use it. A control system that a manager cannot understand is bound to remain ineffective. The control information supplied should be such as will be used by the managers concerned. It is, therefore, the duty of the manager concerned to make sure that the control information supplied to him is of a nature that will serve his purpose.
3)      Economical: The system must be economical in operation, i.e., the cost of a control system should not exceed the possible savings from its use. The extent of control necessary should be decided by the standard of accuracy or quality required. A very high degree or standard of accuracy or quality may not really be-necessary.
4)      Flexible: The system of control must be flexible, i.e. workable even if the plans have to be changed. In case the control systems can work only on the basis of one specific plan, it becomes useless if the plan breaks down and another has to be substituted. A good control system would be sufficiently flexible to permit the changes so necessitated.
5)      Expeditious: Nothing can be done to correct deviations, which have already occurred. It is, therefore, important that the control system should report deviations from plans expeditious. The objective of the control system should be to correct deviations in the immediate future.
6)      Forward Looking: The control system must be forward looking, as the manager cannot control the past. In fact, the control system should be so designed so as to anticipate possible deviations, or problems. Thus deviations can be forecast so that corrections can be incorporated even before the problem occurs.
7)      Organisational Conformity: Since people carry on activities, and events must be controlled through people, it is necessary that the control data and system must conform to the organisational pattern. The control data must be so prepared that it is possible to fix responsibility for the deviations within the areas of accountability.
8)      Indicative of Exceptions at Critical Points: The management principle of exception should be used to show up not only deviations but the critical areas must also be fixed for most effective control.
9)      Objectivity: As far as possible the measurements used must have objectivity, particularly while appraising a subordinate's performance, the subjective element cannot be entirely removed.
10)   Suggestive Of Corrective Action: Finally, an adequate control system should not only detect failures must also disclose where they are occurring, who is responsible for them and what should be done to correct them. Overall summary information can cover up certain fault areas.
Barriers in Effective Controlling
(i) Difficulty in setting quantitative standards: Control system loses some of its effectiveness when standards cannot be defined in quantitative terms. Employee morale, job satisfaction and human behaviors are such areas where this problem might arise.
(ii) Little control on external factors: Generally an enterprise cannot control external factors such as government policies, technological changes, competition etc.
(iii) Resistance from employees: Control is often resisted by employees. They see it as restriction on their freedom.
(iv) Costly affairs: Control is a costly affair as it involves a lot of expenditure, time and efforts.
Relationship between Planning and Controlling
The relationship between planning and controlling can be divided into the following two parts.
(i) Interdependence between Planning and Controlling.
(ii) Difference between Planning and Controlling.
(i) Interdependence between Planning and Controlling. Planning is meaningless without controlling and controlling is blind without Planning. Both the aspects of the interdependence of planning and control have been discussed below:
(a) Planning is meaningless without Controlling: if the process of controlling is taken away from management no person working in the enterprise will take it seriously to work according to the plans and consequently, the plans will fail.
(b) Controlling is blind without Planning: Under the system of controlling actual work performance is compared with the standards. Hence, if the standards are not determined there is no justification left for control and the standards are determined under planning.
(ii) Difference between Planning and Controlling: Yes, planning and controlling are incomplete and ineffective without each other but it doesn’t mean that both are not independent. Reasons are:
(a) Planning is looking Ahead whereas Controlling is Looking Back: Plans are always formulated for future and determined the future course of action for the achievement of objectives laid down. On the contrary, controlling is looking back because under it a manager tries to find out, after the work is completed, whether it has been done according to the standards or not.
(b) Planning is the first function and Controlling is the last function of Managerial Process: the managerial process moves in a definite sequence- like planning, organising, staffing, directing and controlling happens to be the last step.

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