TOPIC 7

CONTROLLING

Nature of Control

Definition:-

- The regulation of organizational activities to facilitate goal attainment.

How does control help the manager?- An effective control system ensures

that activities are completed aligned to organization’s goals.

- Without control, organizations have no indication of how well they are performing in relation to their goals.

Controlling

Definition:-- a process to ensure that actual activities

conform to planned activities.- a process of monitoring performance and

taking action to ensure desired results.

The Importance/Purpose of Control

Adapt to environmental change

Limit the accumulation of error

Control helps the organization

Cope with organizational complexity

Minimize costs

The Importance/Purpose of Control

1. Adapt to environmental change

- changes between the time when goals were set and time for implementation.

- help managers to anticipate, monitor and respond to changes.

2. Limit the accumulation of error

- small mistakes can seriously damage the financial condition of an organization if left/ accumulated without solution.

- control can help reduce small mistakes to recur.

The Importance/Purpose of Control

3. Cope with organizational complexity - control is helpful for organization with complex structure, complicated organizational design.- i.e.: merger of large firms.

4. Minimize costs- when control is practiced effectively, it can

reduce costs and boost output (less mistakes and error)

Controlling Process

Steps in the Control Process

• Step 1: Establish Standard– A control standard is a target against which

subsequent performance will be compared• i.e. Employees at Taco Bell work toward the following

standards:– A min of 95% of all customers will be greeted within 3 min

of their arrival, empty table will be cleaned within 5 min after being vacated

– Standards established for control purposes should be expressed in measurable terms

– Control standard should be consistent with organization’s goals

• i.e. Taco Bell goals involving customer service, food quality and restaurant cleanliness

Steps in the Control Process

• Step 2: Measuring Performance– Performance measurement is a

constant, ongoing activity for most organizations.

– Measurement must be valid i.e.• Daily, weekly, monthly sales figures measure

sales performance• Productivity performance may be expressed in

terms of unit cost, product quality, or volume produced

• Employee’s performance is measured in terms of quality or quantity of output

– Valid performance measurement is vital in maintaining effective control

Steps in the Control Process

• Step 3: Compare Performance Against Standard– Comparing measured performance against

established standards – If performance is lower, therefore analysis

should be conducted and remedial action must be taken

Steps in the Control Process

• Step 4: Determine Need for Corrective Action– The need for corrective action– After comparing performance against

control standard, one of three actions is appropriate:

• Maintaining the status quo (do nothing)• Correct the deviation• Change the standard

Types of Control• Feedforward Control (Pre-Action Control)

– Control that focuses on preventing anticipated problems before they arise– i.e. screening job applicants-view their resume, have several interviews-to

choose highly skilled people- lessens the chances of hiring less skilled people

• Concurrent Control (Steering Control)– A control that takes place while work activity is in progress– i.e. direct supervision-oversees wrong doing of an employee-correct them

immediately-before much damage/waste• Screening Control (Yes or No Control)

– Specify check points that must be successfully passed before an activity proceeds further

– Before proceeding to the next sequence, an activity, product or service must be approved or meet specific conditions

– i.e. cheque clearing (to get confirmation from the person issuing the cheque)

• Post-Action Control (Corrective Control)– Controlling takes place after an action is completed– If there is problem, corrective action is taken and applied to future activities

Characteristics of Effective Control

• Accuracy– Information needed for controlling must be accurate.

• Timeliness– Info must be collected and evaluated quickly to enable

managers to solve problems on time.• Objective and Comprehensive

– Standard must be understandable and measurable.• Strategic & Result Oriented

– Control system should be designed to measure what is important now and in the future

• Flexibility– Leaves room for modification to fit new circumstances

• Consistent with Organization’s Structure– Must be exercised at all level of management and

obtainable by all levels of employees• Corrective Action

– An effective control system should suggest what action to be taken when deviation occurs

• Economy– Economical to operate

• Reasonable Criteria– Logic, reasonable, attainable

Effective Control System

Consistent with org’s structure

Accuracy

CorrectiveAction

Strategic & Result Oriented

ReasonableCriteria

Objectivity

Flexibility

Economy

Timeliness

EFFECTIVE CONTROL

SYSTEM

Barriers to Successful Control

• Game Playing– Managers attempt to improve their standing by

manipulating resources usage.• Over-control

– Organization try to control too many things– Limiting individuals job autonomy.

• Under-control– Granting a lot of autonomy to individuals-

organization losses its ability to direct individuals effort towards achieving organization’s goal.

• Inappropriate focus– Control system may be narrow or focus too

much and leave no room for analysis.• Too much accountability

– People who do not want to be answerable for their mistakes or who do not want to work as hard as their boss might resist control.

How Can Resistance to Control Be Overcome?

• Encourage Employee Participation– When employees are involved

with planning and implementing the control system, they are less likely to resist.

• Develop verification Procedures– Verification procedures need

to be developed to provide checks and balances in order for managers to verify the accuracy of performance indicators.

© 2007 Prentice Hall, Inc. All rights reserved. 18–17

Characteristics of Effective Control System

1. Accuracy (information)• A control system that generates inaccurate

information can result in management’s neglecting to take action when it should or responding to a problem that does not exist. An accurate control system is reliable and produces valid data

2. Timely• Must provide timely information. Information must be

collected and evaluated quickly to enable managers to solve problems on time. The best information has little value if is dated

© 2007 Prentice Hall, Inc. All rights reserved. 18–18

Characteristics of Effective Control System

3. Flexibility • Must be flexible enough to adjust to adverse

change or to take advantage of new opportunities

4. Objective & Comprehensive• The control system should provide

information that is as objective and comprehensive as possible

© 2007 Prentice Hall, Inc. All rights reserved. 18–19

Characteristics of Effective Control System

5. Understandable & reasonable• Standard set in the control system must be

understood by all members of the organization. A control system that is difficult to understand can cause unnecessary mistakes, frustrate employees, and eventually be ignored

• Control standard must be reasonable and attainable. If they are too high or unreasonable, they no longer motivate.

© 2007 Prentice Hall, Inc. All rights reserved. 18–20

Characteristics of Effective Control System

6. Acceptable by organizational members• Should be able to motivate workers to recognize

the importance of standards and engage themselves in an appropriate behavior to achieve them. The more committed the employees to the control system the more successful the organization will be

7. Consistent with organization’s structure

• Controlling must be exercised at all levels of management and must be obtainable by all levels of employees who work within the organization

© 2007 Prentice Hall, Inc. All rights reserved. 18–21

Characteristics of Effective Control System

8. Focused on strategic control points• The control system should be designed to

measure what is important now and what will be important in the future and not what was important in the past

9. Utilize all steps of the control process• An effective control system should not ignore any

one step of the controlling process. Omitting any of these steps will fracture the overall control system and the future of the organization will be doubtful

© 2007 Prentice Hall, Inc. All rights reserved. 18–22

Characteristics of Effective Control System

10.Corrective action• An effective control system should be able

to suggest what action to be taken to correct deviations and also indicates when a deviation from standard occurs. Any problem detected should come up with appropriate solutions

EXTRA NOTES

• Reliability of a control tool, or system, is the same thing as the reliability of a test used to select the best candidate for a job.