controlling

Learning Objectives

• Identify meaning of control

• Explain areas of control

• Explain the control process

• Discuss types of control in organizations

• Discuss control-related challenges

Management Process

• Achieving goals effectively and efficiently:

  • Doing the right things (goal achievement)

  • Doing things correctly (input-output relationship)

What is Controlling?

• Systematic process to regulate activities aligned with plans/targets.

• Indicates performance relative to goals and allows performance adjustments.

Areas of Control

• Physical resources: inventory, quality, equipment control.

• Human resources: selection, training, performance appraisal.

• Information resources: forecasts, analysis, scheduling.

• Financial resources: capital funds, cash flow management.

Features of Controlling

• Achieves goals and optimally utilizes resources.

• Evaluates standards and maintains discipline.

• Boosts employee morale and improves performance.

Purposes of Controlling

1. Records & Reports

2. Diagnoses current and past performance

3. Predicts future trends

Control Characteristics

• Strategic, positive, fair, timely, flexible, understandable, encourages self-control.

Controlling Process Steps

1. Establish performance objectives & standards.

2. Measure actual performance.

3. Compare performance with objectives.

4. Take action: maintain, correct deviations, or change standards.

Types of Controls

• Preliminary: Before activity begins to avoid issues.

• Concurrent: Monitor processes in real-time.

• Post-action: Analyze outcomes after activities.

Challenges of Control

• Overcontrol can lead to problematic situations.

• Inappropriate focus on non-quantifiable variables.

• Rewards for inefficiency can adversely affect behavior.

Solutions to Control Challenges

• Align controls with organizational goals.

• Create flexible, accurate, and objective controls.

• Avoid overcontrol and reward inefficiencies.

Types of Control

• Internal Control: Self-regulation by motivated individuals.

• External Control: Direct manager oversight through systems (appraisals, compensation).

Learning Objectives

• Identify the meaning of control: Understand how organizations regulate behavior and performance.

• Explain areas of control: Identify the four main resource categories subject to organizational control.

• Explain the control process: Master the four-step loop of monitoring and adjusting.

• Discuss types of control in organizations: Differentiate between timing-based controls (preliminary, concurrent, post-action).

• Discuss control-related challenges: Analyze behavioral and systemic resistances to control.

Management Process

Management involves achieving organizational goals both effectively and efficiently:

• Effectiveness: "Doing the right things." This refers to goal attainment and ensuring the output aligns with market or organizational needs.

• Efficiency: "Doing things correctly." This refers to the input-output relationship, often expressed mathematically as:
  $\text{Efficiency} = \frac{\text{Actual Output}}{\text{Standard Input}}$
  The goal is to minimize resource costs (inputs) while maximizing results (outputs).

What is Controlling?

Controlling is the systematic process through which managers regulate organizational activities to make them consistent with the expectations established in plans, targets, and standards of performance.

• It serves as the "check" in the Plan-Do-Check-Act cycle.

• It indicates performance relative to goals and allows for timely performance adjustments.

Areas of Control

1. Physical Resources: Includes inventory management (e.g., Just-in-Time systems), quality control standards (ISO 9000), and equipment maintenance scheduling.

2. Human Resources: Focuses on employee selection, training programs, and performance appraisal systems to ensure the workforce remains competent.

3. Information Resources: Involves sales forecasts, environmental analysis, and data security to ensure decision-makers have accurate, timely information.

4. Financial Resources: Managing capital funds, debt-to-equity ratios, and cash flow to ensure liquidity and solvency.

Features of Controlling

• Goal Orientation: It is not an end in itself but a means to reach an objective.

• Resource Optimization: Ensures that nothing is wasted and $\text{ROI} (\text{Return on Investment})$ is maximized.

• Universal Application: Required at all levels of management, from the shop floor to the C-suite.

Purposes of Controlling

1. Records & Reports: Creating a historical database for future reference.

2. Diagnosis: Understanding why current performance deviates from the past (e.g., $\text{Actual} - \text{Planned} = \text{Variance}$).

3. Prediction: Using current trends to forecast future performance and resource needs.

Controlling Process Steps

1. Establish Performance Objectives & Standards: These are the benchmarks against which performance is measured. They should be expressed in measurable terms (KPIs - Key Performance Indicators).

2. Measure Actual Performance: Gathering data through reports, observations, or automated tracking systems.

3. Compare Performance with Objectives: Determining the degree of variation. Managers often use "Management by Exception" to focus only on significant deviations.

4. Take Action:

   • Maintain Status Quo: If performance matches standards.

   • Correct Deviations: Implementing training or process improvements.

   • Change Standards: If original goals were too high or too low.

Types of Controls (Timing-Based)

• Preliminary Control (Feedforward): Happens before the work begins. It ensures that the inputs (people, materials, money) are of high quality to prevent problems before they occur (e.g., inspecting raw materials).

• Concurrent Control (Screening): Occurs while an activity is in progress. Monitoring processes in real-time allows for immediate corrective action (e.g., a supervisor watching a manufacturing line).

• Post-action Control (Feedback): Focuses on the outputs after the task is completed. It provides information for future planning (e.g., a final financial audit or customer satisfaction survey).

Challenges and Solutions

• Challenges:

  • Overcontrol: Excessive monitoring can stifle creativity and autonomy.

  • Inappropriate Focus: Focusing only on quantifiable metrics (like speed) while ignoring quality or employee well-being.

  • Rewards for Inefficiency: If budgets are based on "use it or lose it," employees might overspend to satisfy the control system.

• Solutions:

  • Alignment: Ensure control metrics directly support the strategic goals.

  • Accuracy & Objectivity: Use unbiased data for reviews.

  • Flexibility: Controls should adapt to environmental changes (e.g., adjusting sales targets during a recession).

Types of Control (Mechanism)

• Internal Control: Relies on self-discipline and self-regulation by motivated, professional individuals who are committed to the organization.

• External Control: Relies on formal systems of oversight, such as direct supervision, performance appraisals, and compensation systems designed to dictate behavior.