AIMS AND PURPOSES - Management Hotel

Controls are intended to serve several purposes. However, the basic purpose is to ensure actions and behaviour in line with the desired results. Briefly, the principal objectives of control are as follows:

  1. To direct the activities according to plans.
  2. To establish coordination between objects, means and efforts of the organisation.
  3. To know the progress of the activities on the basis of standards fixed.
  4. To find out deviations and try to remove these deviations.
  5. To get the knowledge regarding quality cost and time of work performed.
  6. To regularise actions and behaviour.
  7. To prevent dishonesty and establish order and discipline.
  8. To maintain flow in activities of the business.
  9. To stop wastage and to minimize the cost.
  10. To make decentralisation and delegation of authority successful.
  11. To motivate employees.
  12. To ensure efficient and effective use of organisational resources.

Control is an important element of the management process. Without control, manager cannot complete the process of management. He cannot get the things done and achieve desired goals results. Robbing and Coulter state, “Control is important because it is the final link in the functional chain of management activities. It is the only way managers know whether or not organisational goals are being met and why or why not.” Briefly, the importance of control is described in the following subheads.

According to Peter Drucker, “Control maintains the equilibrium between ends and means, output and effort.” When there is such an equilibrium, enterprise functions smoothly. In other words, a sound control system ensures smooth functioning of the enterprise. It ensures achievement of long- term and shortterm goals by maintaining equilibrium between ends and means and output and effort.

Modern large organisations have got a lot of complexities. They produce large variety of goods and services. They use automatic and computerised techniques of production. They cover vast geographical market area and use complex distribution network. Thus, their working is influenced by many factors simultaneously. In such a situation, uniformity of actions and behaviour in entire organisation can be ensured only through effective control system.

To become competitive is one thing. But to remain competitive over a long period of time is a big challenge. Maintaining competitiveness requires effective control. Through effective control, managers may use their available resources judiciously and remain competitive.

Control is essential in order to attain organisation goals. An effective control system ensures that activities are completed in ways that lead to the attainment of organisation goals. [Robbing and Coulter]

Control is the function intended to ensure that everything occurs in conformity with the plans. Thus, control is the essential to the success of planning. Without effective control, no plan can be successful. Terry and Franklin have rightly pointed out that “failure of controlling means sooner or later failure of planning and success of planning means success of controlling.”

It has been rightly said that executive decisions are primarily control decisions. Control system finds deviations in actual performance from the standard. Managers have to decide how to correct the deviations. Thus, control system facilitates managers to decide about follow up actions. Control system is essential for the success of delegation and decentralisation of authority. No delegation or decentralisation of authority can produce desired results without proper control system. Moreover, a manager remains responsible even after delegation. Hence for meeting this responsibility, he has to control the actions of the delegate.

According to Peter Drucker, ”The synonymous to control is direction.” It means, effective control means effective direction. Through control process management can ensure that actions are efficiently and effectively directed towards objectives of the organisation.

Effective control system ensures unity of direction. This, in turn, ensures unity and uniformity of actions and behaviour. These develop spirit of cooperation among the employees. This ultimately promotes coordination of efforts among all employees and departments.

An effective control system is vital to the employee motivation and morale. Controlling helps employees to do their work better, to win respect. It serves, as challenge and opportunity to improve performance. Employees never like a situation that is out of control because in such a situation they cannot predict what will happen to them. They become victims of caprice of managers rather than the beneficiaries. [McFarland]

On the other hand, effective control system ensures judicious evaluation of the employee efforts and adequate rewards. It safeguards them against raw-deal. Consequently it enhances employer the motivation and morale.

Effective control system causes every organisation member to comply the norms, rules and other standards of behaviour and action. Members are not under the temptation of greed of monetary and other gain for doing things violating the norms, rules etc. Thus, the disciple and honesty can be ensured to a reasonable extent. However, it should be noted that control cannot cure habitual dishonesty in all the cases. But management shall be regarded irresponsible if it does not make a reasonable effort to main disciple and honesty among its employees through effective control system. [McFarland]

Control system also contributes to timely performance of activities. Predecided work schedules programmes, time-tables etc. are the controlling techniques that ensure timely performance of the activities.

Through control system every action and activity is evaluated against the set standards or rules or plans. Hence, mistakes or irregularities can be detected and corrected at early stages. A Sound Control System can ensure economy in operation. It can help in reducing and controlling overall and per unit cost of production. It is possible because control system ensure efficient and effective use and elimination of wastage of resources.

Sound control system plays vital role in ensuring organisational stability. The techniques of control such as plans, policies, rules, budgets, standards or norms of behaviour can greatly contribute to the organisational stability. These can give sound foundation to the organisation and create its own work, culture and build image and goodwill in the society.

Modern business organisations work in an ever-changing environment. Products, competition, technology, consumer likings, government policies, corporate and industrial laws, employee behaviour, social and religious beliefs etc. are changing. Such a changing situation can be managed through adaptive controls. Adaptive controls enable organisations to make adjustments in their objectives, structure, functioning and means in accordance with the needs of the situation.

Control is a continuous or ongoing dynamic process. It may involve many steps. Usually a control process consists of the following steps :

  1. Establishment of standards.
  2. Measurement of performance.
  3. Comparison of performance with standards.
  4. Taking corrective action.

The first step in the process of control is the establishment of standards of performance. It may be noted that standards are the objectives or plans against which actual performance can be measured.

Standards may be in several forms. But they should be tangible, verifiable, and measurable. More specifically, standards should be in quantitative as well as in qualitative terms. The performance standards are generally classified into four categories :

These standards state the amount/number of product or service to be produced during a given time period. These standards state the length of time to be allowed to make a certain product or perform a certain service. These standards state the cost associated with producing a product or service.

These standards set the level of perfection desired. These standards prescribe the desired type of behaviour of employees in an organisation. Standards to be effective, should satisfy the following conditions :

  1. Standards should be fixed in all the key areas of business.
  2. They should be consistent with the goals and policies of the organisation.
  3. They should be, as far as possible, expressed in quantitative terms. Such standards can reduce subjectivity.
  4. They should be precise and tangible so that everyone can understand them easily.
  5. They should focus on achievement of results and not on procedures.
  6. They should be capable of achieving with reasonable effort, cost and time.
  7. They should be flexible and capable of being adapted to changing circumstances.
  8. hey should be set in consultation with the employees.
  9. They should be objective and based on facts.
  10. They should include the tolerance limits i.e. permitted limits of deviation.
  11. They should be revised from to time.

The next step in the control process is the measurement of actual performance. Actual performance may be measured through personal observation, samples, reports, accounting statements etc. But managers should carefully select the methods and time measurement. Measurement methods may be quantitative as well as qualitative or a combination both.

Again the time of measurement should also be fixed with the most care. Managers should also decide a reasonable time interval for measurement of performance. It should not be so short nor so long. Too short time interval may involve too much expenses whereas too long interval may not detect deviations in performance in time.

To make measurement of performance worthwhile, it should be clear complete, precise and objective.

The third step in the control process is the comparison of actual performance with the standards. At this step, manager finds out the degree of variation or deviation between actual performance and the standard. Where manager finds no deviation, no further action is required.

Then the control process is deemed to have completed. When deviation is found in the performance, manager has to find out the extent of deviation. If the deviation is within the tolerance limits, manager need not bother. However, if the deviation exceeds the tolerance limits, the manager’s attention is needed. In such a case, manager has to take some corrective action.

The fourth and final step in the control process is to take correction. At this point, manager should find out the cause of deviation. If the cause is beyond the control, manager can do nothing. If the cause is controllable, manager may either :

  1. correct actual performance, or
  2. revise the standards.

Manager may correct actual performance by :

  1. providing training,
  2. revising compensation plan,
  3. redesigning job,
  4. changing the strategy,
  5. changing the organisation structure and so on.

When he decides to take corrective action, he should take it immediately. Immediate action corrects problems at once and gets performance on track. Where the deviation has been the result of faulty and unrealistic standard, manager should revise the stand. The above stated four steps constitute an effective control process. This control process is basic and universal. It essentially remains the same regardless of the activity involved at the level of manager.

Late Profs. Koontz & O’Donnell and many other experts have laid down certain principles of control.

Some of the basic principles of control are summarised as follows:

This principle states that control must contribute to the achievement of objectives. In other words, control must facilitate the accomplishment of organisational objectives.

This principle requires that for ensuring effective control, accurate and objective standards should be established. These standards should be specific and capable of being measured. Good standards will generally be accepted as fair and reasonable by the workers being measured.

This principle states that for effective control manager’s focus should be on strategic or key points of performance. Effective and efficient control requires focus on those crucial activities or operations where variation from standards would cause greatest harm.

This principle states that control system should be able to detect deviations quickly and to take corrective action immediately with minimum of cost. The results of the control should be worth their cost-both in monetary and human term. This principle holds that control should be exercised only by the manager responsible for the execution of the particular plan.

This principle states that effective control system should aim at preventing present as well as future deviations from the standards.

This principle states that control system should be designed to maintain direct contact between the controller and the controlled. Such a control system will ensure high quality of managerial actions and behaviour.

This principle requires that control system must be so designed to reflect the character and structure of plans. It will help in implementing the plans effectively.

This principle states that controls should be tailored to fit the organisation structure. Responsibility for execution of plans and for correction of deviations should clearly point out in the organisation structure. Deviations from plans can best be corrected when they are associated with specific managerial positions having responsibility and accountability for action.

This principle states that controls must be designed to meet the needs of the individual manager. More specifically, control system should be tailored to suit the personality, quality and authority of the manager. This principle holds that a manager should be concerned with and concentrate only on exceptional deviations i.e. significant deviations and ignore others.

This principle prescribes that controls should be flexible enough to meet the needs of changing conditions. This principle holds that control system should be reviewed periodically.

This principle states that control should be followed by appropriate action. Any control is justifiable if measures are undertaken to correct the potential or actual deviation from the standards or plans. An effective control system should meet the following requirements :

A control system is effective only when it is goaloriented. Therefore, before formulating a control8/ system, its goals should be set and properly understood by all concerned. Moreover, everyone should be made known what is his role and expected of him to contribute to the system.

A control system should be accurate. It must generate accurate and reliable information. Inaccurate information from a control system may cause the managers to take inappropriate action or no action.

Control system should be able to provide timely information. The best information has little value if it is delayed. Hence, control system should be able to receive and evacuate information quickly and timely for timely corrective action.

An effective control should be as objective as possible and not biased. It should be fair and reasonable to those about whom information is being received and evaluated.

A control system may fail if it cannot be understood by the users i.e. employees. A control system that is difficult to understand can cause unnecessary mistakes and confuse or frustrate employees. [Gray and Smetaser]

Difficult system may even be ignored by the employees and very purpose of the system may be defeated. Hence, a control system should be easy to understand.

The modern organisation operates in a dynamic environment where change is inevitable. Hence, control system should be flexible and forward looking. It should be flexible enough to adjust the changing circumstances. It should be able to take advantages of new opportunities and face challenges successfully. It must also keep pace with the ever-changing pattern of dynamic business world. [Haimann]

A control system must be economical to operate. The cost of control system should not exceed the value of its benefits. But the economy need not be exercised at the cost of effectiveness of the system. However, to minimize the cost, management should try to impose the least possible controls. It should be remembered that control should not become the end, rather control should be used as a means to achieve the objective. [Grayson Jr.]

A control system should use reasonable and attainable control standards. If they are too high or unrealistic they will not be achieved and hence will not motivate employees. Some employees may even be forced to attain the standards. In such a case, they may resort to unethical or illegal short cuts. Therefore, the control system should enforce the standards that challenge and induce people to reach higher performance levels. They should never be demotivating or encouraging deception. [Robbins and Coulter]

Management cannot control everything that happens in an organisation. Hence, managers should focus on those points or factors that are strategic or key ten the organisation’s performance. They should focus on those crucial activities and operations where variation from standards would cause the greatest harm. [Robbins Coulter]

A control system should be consistent with the organisation structure. It should be consistent with organisation’s activity relationship as well as with the authority relationships. In other words, flow of information for control system should correspond with the organisational relationships. Only such a system can determine who controls what, who provides information, who will control whom and so on.

A control system should be based on exception principle. This principle states that managers should concentrate on exceptional deviations from the standard. It is due to the fact that managers cannot control all the activities. Hence, managers should concentrate on the exceptional deviations or the significant deviations in performance from the standards.

A control system should contain multiple criteria of control. It means that it should include quantitative as well as qualitative criteria of control. Such criteria are more logical and objective. They are more difficult to manipulate. They promote more accurate evaluation of performance.

An effective control system not only helps to detect deviation from the standard but also suggests the actions to be taken to correct the deviation. Thus, an effective control should be able to point out the defect and specify the corrective act. In order to formulate an effective control system, participation of all concerned should be ensured. In other words, control system should be a joint effort of the manager and his subordinates. Proper participation can greatly influence the success of control system.

It is a matter of fact that every organisation is different in its size, operations and needs. Hence, the system and techniques of control will differ from organisation to organisation. Moreover, the system and techniques will also differ from level to level in the organisation. Hence, control system should be designed and tailored to suit the needs of a particular organisation.

A control system should within it have a self-control system for each sub system or department. If a department can have its own control system, much of the detailed controls can be handled within the department. These departments with selfcontrol can then be tied together by the overall control system. [Joseph L. Massie]

A control system should be designed to maintain direct contact between the controller and the controlled. Even when there are number of control systems provided by staff specialists, the supervisor at the first level is still important because he has direct knowledge of performance. [Joseph L. Massie]

Every control system involves human beings and hence affected by human factors. Hence, a technically well designed control system may fail if human and psychological factors are ignored. Hence, the physiological and psychological factors of human beings (i.e. needs of human beings) should be considered while formulating a control system.

It should consider and give allowance to the factors which cannot be controlled.

The system should watch the means used to achieve the ends.

The control factor should be an effective feedback mechanism.

A plethora of techniques are used in controlling operations of in organisation. A few important techniques are as follows :

GLOBAL APPROACH

  1. Personal observation,
  2. Setting examples,
  3. Plans and policies,
  4. Organisation-charts and manuals,
  5. Disciplinary system,
  6. Written instructions,
  7. Statistical data,
  8. Special reports and records,
  9. Financial statements,
  10. Operational audit,
  11. Break-even analysis,
  12. Standard costing, and
  13. Budgets/Budgetary Control.

Modern Techniques

  1. Return on investment,
  2. Management audit,
  3. Management information system,
  4. Zero-base budgeting, and
  5. PERT/CPM.

Personal observation technique is the oldest and most important technique of control. Under this technique, managers occasionally visit personally the subordinates at work place and observes their performance. If they find any deviation, give instructions on the spot. Personal observation is important because it permits first-hand evaluation of work. But control through personal observation is time consuming and busy managers cannot find enough time to inspect personally. However, it should be noted that there is no substitute for direct personal observation and contact. [Haimann]

It is the old saying that “example is better than precepts.’’ Some managers follow this saying and put good examples of performance before subordinates and expect the same from them. Examples set by managers become the norm of behaviour for the subordinates.

For instance, if a manager sets the example of punctuality, his subordinates tend to follow the same easily. Thus, behaviour and actions of subordinates can be controlled through exemplary behaviour of the manager.

Organisational plans include strategies, policies, procedures, methods, rules, programmes etc. These all are important tools that guide and control the actions of all the organisation members. These prevent deviations in actions and behaviour and ensure uniformity of actions and decisions. Thus, they play crucial role in controlling activities.

Organisation charts and manuals are the documents that provide a clear picture of relationships, duties and responsibilities of organisation members. These can be used to compare performance of the members. Thus, these can serve as important control techniques.

Disciplinary system provides for reprimand, censures, criticism, disciplinary action, punishment etc. Thus, it is a negative technique of control. For minor but regular lapses on the part of an employee, reprimand is issued. Where employee repeatedly makes mistakes or where mistakes are grave, strict disciplinary action is taken. Disciplinary system can ensure control but through negative means. It is through fear and pain. It is demoralising. Hence, it does not create congenial work climate. Managers should, therefore, be judicious in making use of this technique of control.

Written instructions are issued from time to time to the organisation members. These provide latest information and instructions in the light of changing rules and conditions. These may provide additional knowledge and even remove misconceptions of the members. Instructions may be issued through personal/ individual letters, circular letters, bulletin, notes etc. These are the supplementary control techniques.

Statistical data are important source of control. Statistical data are collected and presented in the form of tables, charts and graphs. They are analysed in numerous ways such as mean, mode, standard deviations, regression, correlation. These data serve important role in the areas of production control, quality control, inventory control and so on.

Special operational reports and records are also prepared in addition to normal reports and records. These are non-routine reports prepared by experts. They contain much deeper information. They are actually investigative reports. They, therefore, indicate the depth of the problem and suggest the means of correcting/solving the problem.

Financial statements include the ‘profit and loss account’ and ‘balance sheet’. These show the working and financial position of a business. These are used as techniques of control. For this purpose, financial statements of different time-periods are compared and analysed. Moreover, comparison and analysis of financial statements of different firms are also made. The conclusions drawn from such comparison and analysis are used for controlling financial performance of the firm.

The audit is an effective tool of control. Operational audit relates to the internal operations of the firm. Statutory audit is more of a nature of financial operations. Some firms use internal audit with the help of special internal staff or external audit team. It provides an overall review of working of the entire organisation. It can reveal to what extent established policies, procedures, rules, work standards and methods have been followed in the day-to-day working of the organisation. These information can be used to control the operations of the organisation.

Break-even analysis is a graphical technique of control. It is a technique of identifying the number of units of a product that must be sold in order to generate enough revenue to cover costs. Thus, it is a technique of finding out a point of break-even where total cost equals to the total revenue. Thus, this technique is useful in controlling production and sales volume in order to avoid loss.

Standard costing is a technique of cost control. Under this technique, standard costs of material, labour, overheads etc. are determined. Then, actual costs are recorded and compared with the standard costs and variances are found out. Then causes of variance are found out. Finally, measures are taken to prevent variances in future.

Budgets are used as a control device by almost all the managers. A budget is a numerical statement showing the allotment of resources to specific activities. Managers prepare various types of budgets for various activities. They include revenue budget, capital budget, expenditure budget, production budget, sales budget, master budget and so on. Budgets are used as a technique to control the concerned activity. When budgets are used as a technique of control, it is called the budgetary control. It is a process of finding out what is being done and comparing the actual results with the related budget data and finding out the deviations and correcting the deviation. Thus, budgetary control helps managers to control the cost or use of resources as planned.

The modern techniques of control are as follows :

  1. Return on Investment or ROI : Return of investment (ROI) is a technique of control of overall performance. It measures the rate of return on investment i.e. capital employed. This technique is based on the assumption that goal of business is not to maximise profits but to optimise return on capital employed. Therefore, in this technique profit of the organisation is not taken in absolute terms but is considered in terms of capital employed. The ROI is calculated as under :
  2. Managers compare rate of return between two or more periods of the organisation or of the two or more other organisations and try to reach certain conclusion. On the basis of such conclusion, managers control the activities and operations of their own organisation.

  3. Management Audit : Management audit is yet another new technique of control. Management audit is a systematic technique of evaluation of the working, and effectiveness of management of an organisation. It is designed to make an assessment for the effectiveness of entire management process. This audit is conducted by an independent team of expert from relevant areas. This audit is a periodic event.
  4. The audit team collects many facts and information from office records, personal interviews with the members of organisation. It also gathers information through questionnaires circulated among the members and clients or customers of the organisation. The audit team then makes certain recommendations for future guidance of management. Management uses these recommendations for controlling the working and performance of the organisation.

  5. Management Information System or MIS : Management information system (MIS) is a system of collecting, processing and transmitting information needed by managers. More specifically, this system is a centre of facilities and personnel for collecting, processing, storing, transmitting information needed for managing an organisation. Managers use these information for planning, decision-making as well as for controlling the activities of the organisation. In this way MIS is a technique of control.
  6. Zero-base Budgeting or ZBB : Zero-base budgeting is a new approach to budgeting and used as control technique. It is a budgeting technique which does not consider figures of previous period or year while preparing a budget. It prepares budget afresh without considering the figures of earlier year or period. It takes into account the needs of the activity. Therefore, manager has to justify his entire budget on the basis of facts of the prevailing situations. Such a budget can control the activities in the light of current situations or conditions.
  7. PERT/CPM-PERT and CPM : are network techniques that are also used in controlling the actions and performance. PERT stands for “Programme Evaluation and Review Technique” and CPM stands for “Critical Path Method”.

Though these techniques differ slightly, they are based on the same principle. PERT/CPM is technique of scheduling complex projects involving many activities. In this technique, a network diagram is prepared that displays the sequence of activities needed to complete a project and time and cost associated with each activity. Thus, PERT not helps in planning the schedule of a project but also helps managers to monitor and control progress of the project, identify possible obstacles, and shift resources as necessary to keep the project on schedule. Thus, with a PERT/CPM a manager can ensure control of complex projects. Though control is essential for better performance and maintenance of good standards, there are certain limitations also. Some of the limitations are discussed below :

  1. Difficulty in Setting Standards : There are many areas in the context of a business where measurable standards of performance just cannot be set. Importance among such areas are employee morale, customer reaction, and research and development. In the absence of these, control function becomes less effective.
  2. Difficulty in Qualification : Sometimes standards cannot be fixed in terms of quantity. Hence, control becomes even more difficult.
  3. Influence of External Factors : There may be an effective control system but external factors which are not in the ambit of management may have adverse effect on the working. These factors may be government policy, technological changes, change in fashion, etc. The influence of these factors cannot be checked by the control system in the organisation.
  4. Expensive : The control system involves huge expenditure on its exercise. The performance of each and every person in the organisation will have to be measured and reported to higher authorities. This requires a number of persons to be employed for this purpose. If the performance cannot be quantitatively measured then it will be observed by the superiors. The exercise of control requires both time and effort.
  5. Opposition from Subordinates : The effectiveness of control process will depend upon its acceptability by subordinates. Since control interferes with the individual actions and thinking of subordinates they will oppose it. It may also increase the pressure of work on subordinates because their performance is regularly monitored and evaluated. The factors are responsible for the opposition of controls by subordinates.
  6. Difficulty in Pin-pointing Responsibility : Control process is concerned with identifying the factors responsible for deviations. But, in modern times, it is difficult to do so, because a number of persons are concerned with the performance of a single job. To the extent it is so, control is weakened.
  7. Time Consuming : There are cases when control becomes time consuming exercise. It is due to the nature of techniques used and the work itself.
  8. Limits of Corrective Action : Sometimes deviations are found but no corrective action is possible. Sometimes, corrective action cannot be taken quickly and damages cannot be controlled.

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