Controlling Function of Management PDF

Controlling Function of Management Dr. Juanito C. Leabres Jr. Professor What is Controlling? Controlling consists of verifying whether everything occurs in confirmities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and e...

Controlling Function of Management Dr. Juanito C. Leabres Jr. Professor What is Controlling? Controlling consists of verifying whether everything occurs in confirmities with the plans adopted, instructions issued and principles established. Controlling ensures that there is effective and efficient utilization of organizational resources so as to achieve the planned goals. Controlling measures the deviation of actual performance from the standard performance, discovers the causes of such deviations and helps in taking corrective actions  According to Brech, “Controlling is a systematic exercise which is called as a process of checking actual performance against the standards or plans with a view to ensure adequate progress and also recording such experience as is gained as a contribution to possible future needs.” According to Donnell, “Just as a navigator continually takes reading to ensure whether he is relative to a planned action, so should a business manager continually take reading to assure himself that his enterprise is on right course.” Controlling has got two basic purposes 1. It facilitates co-ordination 2. It helps in planning Features of Controlling Function 1.Controlling is an end function- A function which comes once the performances are made in confirmities with plans. 2.Controlling is a pervasive function- which means it is performed by managers at all levels and in all type of concerns. 3.Controlling is forward looking- because effective control is not possible without past being controlled. Controlling always look to future so that follow-up can be made whenever required. 4.Controlling is a dynamic process- since controlling requires taking reviewal methods, changes have to be made wherever possible. 5.Controlling is related with planning- Planning and Controlling are two inseperable functions of management. Without planning, controlling is a meaningless exercise and without controlling, planning is useless. Planning presupposes controlling and controlling succeeds planning. Process of Controlling 1.Establishment of standards- Standards are the plans or the targets which have to be achieved in the course of business function. They can also be called as the criterions for judging the performance. Standards generally are classified into two- 1. Measurable or tangible - Those standards which can be measured and expressed are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc. 2. Non-measurable or intangible- There are standards which cannot be measured monetarily. For example- performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible standards. Controlling becomes easy through establishment of these standards because controlling is exercised on the basis of these standards. 2.Measurement of performance- The second major step in controlling is to measure the performance. Finding out deviations becomes easy through measuring the actual performance. Performance levels are sometimes easy to measure and sometimes difficult. Measurement of tangible standards is easy as it can be expressed in units, cost, money terms, etc. Quantitative measurement becomes difficult when performance of manager has to be measured. Performance of a manager cannot be measured in quantities. It can be measured only by- a. Attitude of the workers, b. Their morale to work, c. The development in the attitudes regarding the physical environment, and d. Their communication with the superiors. It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports. 3. Comparison of actual and standard performance- Comparison of actual performance with the planned targets is very important. Deviation can be defined as the gap between actual performance and the planned targets. The manager has to find out two things here- extent of deviation and cause of deviation. Extent of deviation means that the manager has to find out whether the deviation is positive or negative or whether the actual performance is in conformity with the planned performance. The managers have to exercise control by exception. He has to find out those deviations which are critical and important for business. Minor deviations have to be ignored. Major deviations like replacement of machinery, appointment of workers, quality of raw material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a manager controls everything, he ends up controlling nothing.” Once the deviation is identified, a manager has to think about various cause which has led to deviation. The causes can be- a. Erroneous planning, b. Co-ordination loosens, c. Implementation of plans is defective, and d. Supervision and communication is ineffective, etc. 4. Taking remedial actions- Once the causes and extent of deviations are known, the manager has to detect those errors and take remedial measures for it. There are two alternatives here: a. Taking corrective measures for deviations which have occurred; and b.After taking the corrective measures, if the actual performance is not in conformity with plans, the manager can revise the targets. It is here the controlling process comes to an end. Follow up is an important step because it is only through taking corrective measures, a manager can exercise controlling. Relationship between planning and controlling 1. Planning preceeds controlling and controlling succeeds planning. 2. Planning and controlling are inseperable functions of management. 3. Activities are put on rails by planning and they are kept at right place through controlling. 4. The process of planning and controlling works on Systems Approach which is as follows : Planning → Results → Corrective Action 5. Planning and controlling are integral parts of an organization as both are important for smooth running of an enterprise. 6. Planning and controlling reinforce each other. Each drives the other function of management. Importance of Controlling 1. Coping with Uncertainty: The pace at which environment and other factors changes creates a lot of uncertainty. Therefore, an organization must cope with Change. A constant evaluation of the organization’s strategic and tactical plans is necessary to keep up with changes and cope with uncertainty. A properly designed system of controlling can help mangers anticipate, monitor and react quickly to change in the environment. 2. Detecting Irregularities: Control system help managers detect undesirable irregularities like product defects, cost overruns, rising personnel turnover, etc. Detection of such irregularities can prevent minor problems from mushrooming into major ones and often save a great deal of time and money for the organization. Problems such as missing important deadlines or selling faulty merchandise to customers are difficult to rectify. Identifying aberrations in the early stages helps organizations avoid such problems. 3. Identifying Opportunities: Controlling helps mangers to identify areas in which things are going better than expected, thereby altering management to possible future opportunities. 4. Handling Complex Situations: As organization grows and operates in a large market, efficient and effective coordination becomes necessary. In such a situation, manager must keep track of all activities to make sure that they are well synchronized. A sophisticated control system is necessary to maintain adequate control in large and complex organizations. 5. Decentralizing Authority: Control helps mangers decentralize authority. A manger can allow his subordinates to take decisions ensuring that ultimate authority remains in his hands. 6. Minimizing Costs: When implemented effectively, control helps to reduce the costs and boost the output of an organization. It identifies and eliminates waste. 7. Insurance Value of Control: Control eliminates the risk of non-conformity of actual performance with the main goals of the organization. Control is the function which regulates the operation to ensure the attainment of the set objectives. 8. Basic for Future Action: It would be better to say that long term planning for future is not possible unless and until control information is available in time to the managers for the operation of the work. Control provides the information and facts to the management for planning and organizing when the work is completed and the result is evaluated. In fact, evaluation of results helps the management to re-plan for non-repetitive operations. Significance of Sound Control System 1. Helps in Detecting Mistakes: A continuous control mechanism helps in detecting mistakes at early stages of performance. It saves time, effort and money by not allowing the problems turn into major deviations at later stages. Increasing costs, labour absenteeism and turnover, defective product samples are few of the indications that managers note at the early stage so that production schedule is not disturbed subsequently. 2. Helps in Managing Complex Situations: In a small-sized organisation, managers can personally control various organisational activities but as organisations grow in size, they become complex and managers cannot personally monitor all the activities. Various product lines, markets (domestic and international), retail and wholesale outlets become so diverse that organisational activities can be coordinated only through a formally designed control system. 3. Helps Managers Face Change and Uncertainty: Past policies help managers make plans for future. Future being uncertain, planned objectives may not be achieved. Changes in consumer preferences and demand, technological factors, Government regulations, policies of suppliers and competitors can make the plans ineffective. Well-developed control systems help managers forecast these changes and face them when they occur rather than declare the plans redundant in the changed circumstances. 4. Helps in Monitoring the Actions of Employees: If employees are sure of not making mistakes, actual results will always be as expected and there will be no need for managers to monitor their activities; but it does not happen. Mistakes do occur, actions do get diverted, wrong diagnosis of the problem and wrong decisions are also made and, therefore, control is necessary so that mistakes do not affect the efficiency of plans and goals of the organisation. 5. Helps in Identifying Potential of the Organisations: Control system enables the organisation to face challenges and changes as they occur and helps to explore future opportunities which the organisations can venture into. 6. Facilitates Delegation: Managers delegate authority down the scalar chain as organisational workload cannot be handled by them alone. However, the accountability continues to vest with managers. Managers ensure that delegated tasks are effectively accomplished by the subordinates. An effectively designed control system helps managers in this regard. 7. Facilitates Decentralization: Increasingly complex organisations decentralise the activities to effectively achieve their goals. Wide geographical dispersions with respect to production, marketing and research activities make it impossible for the control mechanism to be initiated from the head office. A well- devised control system facilitates control of decentralised units at the operational level. 8. Coordination: Control provides unity of direction to various organisational activities. It ensures that actions conform to plans and there is complete synchronisation between physical, financial and human resources; internal and external environment; and goals at various levels. 9. Psychological Impact: When employees know their actions are being watched, that is, when there is control system in the organisation, they perform better than they would in the absence of a control system. A control system related to rewards where good performance is rewarded and poor performance is not punished creates a positive psychological impact amongst employees and increases organisational productivity. Advantages of Controlling 1. Achievement of Goals: Controlling is a goal oriented process. It keeps activities on the right track. Whenever things go off the rails, remedial steps are undertaken immediately. Every attempt is made to conform events, to set targets and thereby achieve results efficiently and effectively. 2. Execution and Revision of Plans: It is through controlling appropriate steps are taken to ensure that each plan is implemented in a predetermined way. Controlling measures progress, uncovers deviations, indicates corrective steps and thus keeps everything on track. Of course, when conditions change dramatically, controlling helps to review, revise and update the plans. It offers valuable feedback information, reveals short- comings in plans and thereby helps in preparing other plans for future use. 3. Brings Order and Discipline: In an organisation, while pursuing goals managers and their subordinates often commit mistakes. For example, problems are diagnosed incorrectly, lesser quality inputs are ordered, wrong products are introduced, and poor designs are followed, and so on. A control system helps check such tendencies before they turn into serious problems. It has a healthy impact on the behaviour of subordinates. They become cautious while discharging their duties since they are aware that their actions are observed at every stage. 4. Facilitates Decentralisation of Authority: When managers delegate work to lower levels, they must also ensure that the subordinates do not deviate from a predetermined course of action. A system of control ensures this by forcing subordinates to conform to plans. The feedback information helps managers check whether actions taken at lower levels are in line with what-has been planned or not. It helps to measure progress, check deviations and adjust operations from time to time. 5. Promotes Coordination: Control facilitates coordination between different departments and divisions by providing them unity of direction. Individuals and their activities are tied to a set of common objectives. Such a unified focus ensures accomplishment of results efficiently and effectively. 6. Cope with Uncertainty and Change: The environment in which organizations operate is complex and ever changing. New products emerge, innovations come up, and new regulations are passed, and so on. The organisation needs to keep a watchful eye on such developments and respond intelligently. A control system helps in checking whether the diversified product lines are giving healthy margins, the sales from each region are improving, the products are accepted in the market place or not. Constant monitoring of key areas helps management encash opportunities that are thrown open from time to time. Timely actions can also be initiated to prevent mistakes from becoming serious threats. S ix (6) Important Processes in Controlling 1. Control is Basis of Planning: Control is the process that guides activity towards some pre-determined goal. The essence of the concept of control is the adherence to the plan. It is a basis for the adoption of long range planning. Long range planning will be impossible unless a flood of control information flows from the appraisal of end results of current operation to keep such plans in proper track. 2. Co-Ordination is Facilitated: Control helps to maintain an equilibrium between ends and means. Controls are designed in such a way that they focus not only on the operating responsibility of a manager, but also on this ultimate responsibility. So these forces a manager to coordinate the activities of his sub-ordinates in such a way that each of them contributes positively towards the objectives. This facilitates coordination throughout the organization as a whole. 3. Psychological Pressure: A sound control system in a organization motivates employees to work hard and give better results. When they know that their performance is being judged and their rewards are linked to such appraisal, they try to contribute their best efforts. 4. Organizational Efficiency and Effectiveness: If a sound control system is established in an organization, it results in organizational efficiency and effectiveness. By making manager responsible, motivating them for higher performance and achieving co-ordination in their performance, control ensures that the organization works efficiently. As regards effectiveness, the organization is effective if it is able to achieve its objectives. Since, control focuses on the achievement of organizational objectives; it necessary leads to organizational effectiveness. 5. Managerial Responsibility: When a manager entrusts some activities and delegate authority to his sub-ordinates he remains responsible for ultimate performance. Therefore, a manager should check-up the performance of sub- ordinates to ensure that they are utilizing the delegated authority in the desired manners. In this way control enables managers to discharge their responsibilities. 6. Policy Verification: Control enables management to verify the quality of various plans. It helps to review, revise and update the plans. Thank You!