For any business, control mechanisms are crucial. Control is very essential with respect to the role played by the manager, and for achieving the goals as desired and planned. The goals are being achieved as the decision-making process and performance of the organization is influenced by the instruments being provided by the control mechanisms. For all the organizational activities in attaining the expected results, certain regulations are applied, which is known as control.
With respect to the functions, attributes of the product and geographic, and strategic and financial objectives, control mechanisms can be set.
The main objectives behind incorporating a control mechanism are as follows -
Management Control defined in the words of Henri Fayol is –
Monitoring of the activities to ensure that the activities are as planned and the orders are properly given according to the laid out principles. The main objective of management control is to identify the mistakes if any and rectify and also prevent the recurrence of the mistakes.
The control can be performed by using various modes. Some of the most effective methods of control are as follows -
By maintaining personal relations with the subordinates, the person control mechanism can be practices. Mostly small business practice these personal controls such that the operations of the employees can be managed by direct supervision. In Multinational companies, personal controls help in building the relationships between managers with other employees of the organization. The way in which the subordinates behave can be influenced by setting up the personal control policies.
The international businesses which are inbuilt with bureaucracy usually follow the bureaucratic controls. The functioning and actions of the sub-units are being influenced by some of the rules and procedures laid out by this mechanism.
For spending of capital, certain rules have been formulated which requires the prior approval of the top management for the capital to be spent.
Certain goals have been formulated with respect to the subordinates in such a manner that subordinates working in different departments achieve the output as targeted. These goals set are known as output controls.
The output controls are measured on the basis of some of the parameters such as productivity, profitability, market share, product quality etc.
The output and profitability can be achieved by maintaining a proper corporate culture. Therefore it becomes very essential to measure the efficiency of the business and hence cultural controls become important.
The cultural control rules that are being set enable an employee to self-control the behaviour thus the work of the superiors with regard to supervision is reduced, thus reducing the requirement of other control mechanisms.
A business can be controlled by following different approaches. Some of such approaches to control the business are as follows -
The control mechanism is formed and the management behaviour depends on the external market forces. The business organizations which have a decentralized culture usually practice the market approach. Market approach facilitates in easy negotiations for the transfer prices. The different market forces direct and govern the decision-making process in this approach.
The organization that is rules-oriented where the rules and procedures are followed for the purpose of decision-making applies this rules approach. This approach requires a developed plan along with a budget system. The combination of both the input and output controls are used by this rules approach.
A set of values are being built for the employees to achieve the goals internationally by the business that follow the corporate culture approach. The operations of the business are mostly influenced by this corporate culture approach. Some of the organizations tend to be more informal and lack explicit in spite of practicing the corporate culture approach. The corporate culture approach does not accept the change quickly.
One of the most powerful control mechanisms is reporting culture. When the resources are distributed and when the performance of the business and employees has to be monitored and reviewed by the top management, reporting culture is used. This control mechanism usually involves rewards for the employees. But this control mechanism tends to be more successful only when the reports have correct and accurate information.
By visiting to subsidiaries, the control can be done but one major disadvantage is that all the required information cannot be exchanged y this control mechanism. In order to better under the local management the corporate staff usually practice this approach. By visiting, information about the business can be gathered and accordingly can be advised.
The subsidiary managers are evaluated on their levels of performance by the management performance evaluation approach. The mina limitation of this approach is that only some of the aspects can be controlled and not all the aspects. This kind of approach is best suited for the economic and political environment which is more risky.
As different units differ in their pattern of expenditure, the cost and accounting comparison approach is being practiced. In order to meet with the local reporting requirements, the rules are set that are applicable to the home country.
The different mechanisms lack uniformity in different countries. The business that is going global need to modify the control mechanisms that best suits that particular country. Some of the major constraints which are being faced by the organizations by setting different control mechanisms are as follows -
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