Unit - 5
Controlling
Concept
Ernest Dale in his book “Theory and Practice of Management” has stated that –
“The modern concept of managerial control envisages a system that not only provides a historical record of what has happened to the business as a whole but also pin points the reasons why it has happened and provides data that enable the chief executive or the departmental head to take corrective steps if he finds he is on the wrong track.”
Further, Koontz, O’Donnell and Weihrich have said- “Controlling is the measurement and correction of the performance of activities of sub-ordinates in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished.”
Therefore, the managerial function of control implies measurement of actual performance comparing it with the standards set by plans and correction of deviations to ensure attainment of objectives according to plans.
Thus, control is an important function of management. It is an essential feature of scientific management. In fact, much of the precision of managerial education is focused on the improvement of control techniques. It is generally used for putting restrains over the elements being controlled. In managerial terminology, control is ensuring work accomplishment according to plans. It is a process that guides activity towards some predetermined goals.
Definition:
(1) According to F. E. L. Brech, “Managerial control is checking current performance against pre-determined standards contained in the plans, with a view to ensuring adequate progress and satisfactory performances.”
(2) According to Henri Fayol - “In an undertaking control consists in verifying whether everything occurs in conformity with the plans adopted, the instruction issued and the principle established. Its object is to point out the weakness and error in order to rectify them and prevent occurrence. It operates on everything i.e., things, people and action.”
(3) Dalton E. McFarland has said - “Control in its managerial sense is the presence in a business of that force which guides it to a pre-determined objective by means of pre-determined policies and decision.”
Thus, we see that managerial control is fundamental management function that ensures work accomplishment according to plans. It is concerned with measuring and evaluating performance so as to secure the best results of managerial efforts.
Steps
The top management initially must decide what elements of the environment and the organisation need to be monitored, evaluated and controlled. The four key areas to be monitored and controlled are – the macro environment, mission and objectives, the industry environment and internal operations.
Step # 1. Key Areas to be Monitored:
I. Macro-Environment:
One of the key areas to be monitored is the macro-environment of the company. This area should be focused first. Normally individual companies cannot influence the environment significantly. But the external environmental forces must be continuously- monitored as the changes in the environment influence the implementation of the plans of the company.
II. Mission and Objectives:
This includes modifying any one or more of the areas like company’s mission, objectives, plans, goals, strategy formulation and implementation. The modification depends upon the nature and degree of changes and shifts in the environment.
III. Industry Environment:
The manager also monitors and controls the industry related environment. The environmental forces may not be as they were planned. The changes in the environment may provide new opportunities or pose new threats. The plan, therefore, should be modified accordingly.
The industry environment of the future should be considered by the top management for the purpose of evaluation and control.
IV. Internal Operations:
The manager has to evaluate the internal operations continuously in view of the changes in the macro-environment and industry environment. The manager has to introduce changes in internal operations when changes in the environment affect the plans.
Step # 2. Establishing Standards:
Evaluating an organisational performance is normally based on certain standards. These standards may be the previous year’s achievements or the competitor’s records or the fresh standards established by the management. Qualitative judgements like the qualitative features of the product or service in the last year may be used.
Quantitative measures like Return on Investment (ROI), Return on sales may also be used for judging the performance. Companies should establish the standards for evaluating the performance of the strategies taking several factors into consideration.
The standards may include:
1. Quality of Products/Services.
2. Quantity of Products to be Produced.
3. Quality of Management.
4. Innovativeness/Creativity.
5. Long-term investment value.
6. Volume of sales and/or market share.
7. Financial soundness in terms of return on investment, return on equity capital, market price of the share, earning per share etc.
8. Community and environmental responsibility in terms of amount spent on community development, variety of facilities provided to the community, programmes undertaken for environmental protection and ecological balance etc.
9. Soundness of human resources management in terms of percentage of employee grievances redressed, employee satisfaction rate, employee turnover rate, industrial relations situation etc.
10. Ability to attract, develop and retain competent and skilled people.
11. Use of company’s assets.
12. Production targets, rate of capacity utilisation, design of new products, new uses of existing products, rate of customer complaints about the product quality, suitability of ingredients etc.
13. Corporate image among the customers and general public.
14. Market place performance.
15. Standards relating to the organisational variables include freedom and autonomy, level of control, responsibility, formal organisation and degree of formality and informal organisation scope for innovation and creativity.
Step # 3. Measuring Performance:
The manager has to measure the performance of various areas of the organisation before taking an action. Performance may be measured through quantitative terms or qualitative terms. Reports and statements help to measure the actual performance through quantitative terms and managerial observations help to measure performance through qualitative terms.
Production, sales, profitability, staff cost etc. can be measured through quantitative terms and quality of the product, employee’s performance, attitude etc. can be measured through qualitative terms.
Step # 4. Compare Performance with Standards:
Once the performance of different aspects of the organisation is measured, it should be compared with the predetermined standards. Standards are set to achieve the already formulated organisational goals and plans. Organisational standards are yardsticks and benchmarks that place organisational performance in perspective.
The manager should set standards for all performance areas of the organisation based on organisational goals and strategies. Normally, the standards vary from one company to the other company. Further, they also vary from time to time in the same company. The standards developed by General Electric Company can be used as model standards.
These standards include:
i. Profitability Standards:
They include how much gross profit, net profit, return on investment, earning per share, percentage of profit to sales, the company should earn in a given time period.
Ii. Market Position Standards:
These standards include total sales, sales region-wise and product-wise, market share, marketing costs, customer service, customer satisfaction, price, customer loyalty shifts from or to other organisation’s products etc.
Iii. Productivity Standards:
These standards indicate the performance of the organisation in terms of conversion of inputs into output. These standards include capital productivity, labour productivity, material productivity etc.
Iv. Product Leadership Standards:
They include the innovations and modifications in products to increase the new uses of the existing product, developing new products with new uses etc.
v. Human Resources Standards:
These standards include providing competitive salaries, benefits and different aspects of quality of work life. They also include human resources performance, productivity, turnover rates, absenteeism rates providing challenging and creative jobs etc.
Vi. Employee Attitude Standards:
They include employees’ favourable attitude towards the nature of work, organisation, salaries, benefits, working environment, quality of work life, treatment by superiors etc.
Vii. Social Responsibility Standards:
All organisations discharge their responsibilities towards different sections of the society. These standards are related to the services of organisations towards community, government, employees, suppliers, creditors etc.
Viii. Standards Reflecting Balance between Short-Range and Long-Range Goals:
Short- range and long-range strategies should be balanced successfully. Standards in these areas should bring balance between these two goals.
Step # 5. Take No Action, if Performance is in Harmony with Standards:
If the performances of various organisational areas match with the standards, the manager need not take any action. He should just allow the process to continue. However, he can try to improve the performance above the standards, if it would be possible, without having any negative impact on the existing process.
Step # 6. Take Corrective Action, if Necessary:
Managers should take necessary corrective action, if performance is not in harmony with standards. If the deviation is positive i.e. performance is above the standards continuously, revises the standards. On the contrary, if performance is below standard, take steps to improve the performance.
The managers compare the performance with standards. If they find any deviation between the standards and performance, they should take corrective action to bridge the gap between the standards and performance.
Causes of Deviations:
It is very easy to conclude that someone made a mistake, when deviations are identified. But the deviations maybe the result of an unexpected move by a competitor, or changes in external environment.
Therefore, the manager should consider the following before making a decision, in this regard:
1. Was the cause of deviation internal or external?
2. Was the cause random, or should it have been anticipated?
3. Is the change temporary or permanent?
4. Are the present plans still appropriate?
5. Does the organisation have the capacity to respond to the change needed?
Corrective Action:
Corrective action may be defined as change in a company’s operations to ensure that it can more effectively and efficiently reach its goals and perform its established standards.
Plans that do not achieve standards produce three possible responses viz.:
(i) To revise plans,
(ii) To change standards and
(iii) To take corrective action in the existing process without changing standards and plans.
Change in plans may require a ‘fine tuning’ of the existing strategy or complete changes in plans. If it is realised that the existing standards are unrealistic under the present conditions, the manager should reset the standards taking the existing conditions into consideration.
Corrective action may be as simple as to increase the price or may be as complex as change the chief executive officer. Deviations require re-examination of the company’s mission, objectives, and relationship to its environment, internal strengths, weaknesses and plans. After having an idea of the process of control, now we shall study the types of control. Now, we shall discuss the control techniques.
Essentials of Good Control System
If control is to be effective and adequate, it must satisfy the following requirements:
1. Perfect Plan: Control should reflect the plan designed to be followed. Managers should have information with regard to the plans for which they are responsible for working.
2. Point out Exceptions: Management by exception is a system of warning the management when the situation is likely to become out of control and the intervention of management is needed. Its main object is to make the task of managing simpler and more effective. If control is based on exception principle, it will allow the managers to concentrate on important issues. Hence, control should point out exceptions.
3. Objective: Control should be objective rather then subjective because an individual’s job is not a matter of subjective determination. Hence, objective standards are to be established.
4. Flexible: An effective control system should be flexible. It should be capable of adjusting itself to unforeseen changes of plans. It must be adaptable to new developments.
5. Economical: The control system should be economical to operate. The expenditure on control must correspond with the benefits derived from them. The question of economy should be decided by considering the factors like importance of activity, the size of the operation, the expense which might be spent in the absence of control and the utility derived from the control system.
6. Remedial Action: An effective control system should point out the deviations, the persons responsible for such deviations and make sure that remedial action is taken. The main purpose of control is taking remedial action to set right the deviations. If no remedial action is taken, controls are not necessary.
7. Simple: A control system to be effective, should be simple to adopt. It should be easily understandable by the parties concerned so that the smooth working of the system can be ensured.
8. Suggestive of Corrective Action: An adequate and effective control system should be suggestive of corrective action. It should not stop merely with pointing out deviations. It should go further and try to generate solutions to the problem responsible for deviation from the predetermined standards.
Key Takeaways:
- Controlling is the measurement and correction of the performance of activities of sub-ordinates in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished.
- The top management initially must decide what elements of the environment and the organisation need to be monitored, evaluated and controlled.
System of controlling
A combination of various elements connected as a unit to direct or regulate itself or any other system in order to provide a specific output is known as a Control system. We know controlling is basically known as the act of regulating or directing.
So, control system is used to direct the functioning of a physical system to carry out the desired objective.
For example, from a television system, refrigerator, air conditioner, to automobiles and satellites everything needs a proper controlling to provide the output for which it is designed. Thus, all these are control systems.
Need for a Control System
Control systems are considered as one of the major aspects of our growing technology. Every sector of the industry is linked with the control system in some or the other way.
Like in space technology, power system, transportation system, robotics, machine tool controlling etc., everything needs controlling. So, these are basically control systems.
These basically provide the desired responses or application when proper controlling is provided to them.
It is noteworthy here that the input and output of a control system must have appropriate mathematical relationship between them. When there exists linear proportionality between input and output of the system then it is known as a linear control system, otherwise a non-linear system.
Components of a Control System
Majorly the control system is divided into two major domains:
- Controlled process: The part of the system which requires controlling is known as a controlled process or plant.
- Controller: The internal or external element of the system that controls the process is known as the controller.
Further, some other aspects are as follows:
- Input: For every system to provide a specific result, some excitation signal must be provided. This signal is usually given through an external source. So, the externally provided signal for the desired operation is known as input.
- Output: The overall response of the system achieved after application of the input is known as output.
- Disturbances: Sometimes even on providing required input, the system fails to generate the desired output. So, the signal that causes variation in the desired output is known as disturbances.
Now, disturbances can be of two types depending on its origin. If the disturbance is generated from the system itself then it is known as internal disturbances.
While if the disturbance is generated from somewhere outside the system and unknowingly acting as another input to the system causing an adverse effect on the output. Then it is known as external disturbances.
Process of controlling
Control process involves the following steps as shown in the figure:
- Establishing standards: This means setting up of the target which needs to be achieved to meet organisational goals eventually. Standards indicate the criteria of performance. Control standards are categorized as quantitative and qualitative standards. Quantitative standards are expressed in terms of money. Qualitative standards, on the other hand, includes intangible items.
- Measurement of actual performance: The actual performance of the employee is measured against the target. With the increasing levels of management, the measurement of performance becomes difficult.
- Comparison of actual performance with the standard: This compares the degree of difference between the actual performance and the standard.
- Taking corrective actions: It is initiated by the manager who corrects any defects in actual performance. Controlling process thus regulates companies’ activities so that actual performance conforms to the standard plan. An effective control system enables managers to avoid circumstances which cause the company’s loss.
Key Takeaways
- Controlling function involves establishment of standards of performance, measurement of actual performance, comparison of actual performance with set standards and taking corrective measures, if required.
Budgetary control techniques
Techniques of Controlling – PERT, CPM, Budgetary Control, Management Audit
Control is a fundamental managerial function. Managerial control regulates the organizational activities. It compares the actual performance and expected organizational standards and goals. For deviation in performance between the actual and expected performance, it ensures that necessary corrective action is taken.
There are various techniques of managerial control which can be classified into two broad categories namely-
- Traditional techniques
- Modern techniques
Traditional Techniques of Managerial Control
Traditional techniques are those which have been used by the companies for a long time now. These include:
- Personal observation,
- Statistical reports,
- Break-even analysis,
- Budgetary control.
1. Personal Observation
This is the most traditional method of control. Personal observation is one of those techniques which enables the manager to collect the information as first-hand information.
It also creates a phenomenon of psychological pressure on the employees to perform in such a manner so as to achieve well their objectives as they are aware that they are being observed personally on their job. However, it is a very time-consuming exercise & cannot effectively be used for all kinds of jobs.
2. Statistical Reports
Statistical reports can be defined as an overall analysis of reports and data which is used in the form of averages, percentage, ratios, correlation, etc., present useful information to the managers regarding the performance of the organization in various areas.
This type of useful information when presented in the various forms like charts, graphs, tables, etc., enables the managers to read them more easily & allow a comparison to be made with performance in previous periods & also with the benchmarks.
3. Break-even Analysis
Breakeven analysis is a technique used by managers to study the relationship between costs, volume & profits. It determines the overall picture of probable profit & losses at different levels of activity while analysing the overall position.
The sales volume at which there is no profit, no loss is known as the breakeven point. There is no profit or no loss. Breakeven point can be calculated with the help of the following formula:
Breakeven point = Fixed Costs/Selling price per unit – variable costs per unit
4. Budgetary Control
Budgetary control can be defined as such technique of managerial control in which all operations which are necessary to be performed are executed in such a manner so as to perform and plan in advance in the form of budgets & actual results are compared with budgetary standards.
Therefore, the budget can be defined as a quantitative statement prepared for a definite future period of time for the purpose of obtaining a given objective. It is also a statement which reflects the policy of that particular period. The common types of budgets used by an organization.
Some of the types of budgets prepared by an organisation are as follows,
- Sales budget: A statement of what an organization expects to sell in terms of quantity as well as value.
- Production budget: A statement of what an organization plans to produce in the budgeted period.
- Material budget: A statement of estimated quantity & cost of materials required for production.
- Cash budget: Anticipated cash inflows & outflows for the budgeted period.
- Capital budget: Estimated spending on major long-term assets like a new factory or major equipment.
- Research & development budget: Estimated spending for the development or refinement of products & processes.
Modern Techniques of Managerial Control
Modern techniques of controlling are those which are of recent origin & are comparatively new in management literature. These techniques provide a refreshingly new thinking on the ways in which various aspects of an organization can be controlled. These include:
- Return on investment,
- Ratio analysis,
- Responsibility accounting,
- Management audit.
- PERT & CPM
1. Return on Investment
Return on investment (ROI) can be defined as one of the important and useful techniques. It provides the basics and guides for measuring whether or not invested capital has been used effectively for generating a reasonable amount of return. ROI can be used to measure the overall performance of an organization or of its individual departments or divisions. It can be calculated as under-
Net income before or after tax may be used for making comparisons. Total investment includes both working as well as fixed capital invested in the business.
2. Ratio Analysis
The most commonly used ratios used by organizations can be classified into the following categories:
- Liquidity ratios,
- Solvency ratios,
- Profitability ratios,
- Turnover ratios.
3. Responsibility Accounting
Responsibility accounting can be defined as a system of accounting in which overall involvement of different sections, divisions & departments of an organization are set up as ‘Responsibility centres. The head of the centre is responsible for achieving the target set for his centre. Responsibility centres may be of the following types:
- Cost centre,
- Revenue centre,
- Profit centre,
- Investment centre.
4. Management Audit
Management audit refers to a systematic appraisal of the overall performance of the management of an organization. The purpose is to review the efficiency &n effectiveness of management & to improve its performance in future periods.
5. PERT & CPM
PERT (programmed evaluation & review technique) & CPM (critical path method) are important network techniques useful in planning & controlling. These techniques, therefore, help in performing various functions of management like planning; scheduling & implementing time-bound projects involving the performance of a variety of complex, diverse & interrelated activities.
Therefore, these techniques are so interrelated and deal with such factors as time scheduling & resources allocation for these activities.
Non-budgetary control techniques
There are, of course, many traditional control devices not connected with budgets, although some may be related to, and used with, budgetary controls. Among the most important of these are statistical data, special reports and analysis, analysis of break- even points, the operational audit, and the personal observation.
1. Statistical data-
All needed and available data are collected and presented in tables, charts and graphs. Through them performances are assessed.
2. Special Reports and Analysis:
To analyse particular problem areas, special staff are appointed to collect information’s.
3. Break-even Analysis: This analysis shows the relationship of sales and expenses and the stage at what volumes of revenues cover expenses. If the ratio falls there would be loss.
4. Internal Audit:
This is one of the traditional non-budgetary control devices in vogue. Through internal audit various operations are appraised and deviations are detected.
5. Time-event, Network Analysis:
This is otherwise called as Programme Evaluation and Review Technique (PERT). Under this technique a project is divided into various units in a time sequence. For each event the ‘critical path’ is found, which is a sequence of events which takes the longest time and which involves the least slack time. Summarised events are given for top-management’s perusal.
6. Standard Costs:
Standard costs are prepared working out the cost of materials and labour for each unit of the product adding a standard overhead rate. Variations in costs could be found comparing the standard costs.
7. Ratio Analysis:
Ratio analysis shows the relationship or proper mix up of one factor to the other. There are various relations used in financial analysis. They are net sales to working capital, net sales to inventory, quick ratio, current ratio, administrative expenses to sales, breakeven point etc.
Use of computers
In virtually every business, a computer is an essential tool for running the day-to-day operations, enhancing productivity and communicating with customers, suppliers and the public. Managers use computers for a variety of reasons, including keeping their teams on track, budgeting and planning projects, monitoring inventory and preparing documents, proposals and presentations. Managers need to understand not only the basic functions of the corporate software tools used in the office but also the Internet and other external computing tools that can improve the way they manage their departments.
Business Planning
Business planning can take up a lot of a manager's time, but computer programs make it easier. From using email programs like Outlook or Google Mail to set appointments, tasks and deadlines to using financial tools to develop budgets and project proposals, using computers to plan the day-to-day activities of a business is essential. Managers also use the Internet to research their industries, the competition and to look for ideas to help them create plans to engage customers, win more business and succeed in the competitive world of business.
Record Keeping
Managers keep track of a lot of information that is vital to the company's success. From customer records to financial records to employee records, the data a company has to store are seemingly endless. Using computers to store and manage documents, files and records reduces the amount of physical storage a company needs and also allows managers to have easy access to their files using simple document search methods. Additionally, by keeping records, managers can easily share information about an employee's history and job performance with other managers in the company.
Communication
One of the most common uses for computers in business is communication. Communication is essential not only between employees but with customers as well. Many customer service departments use computers to log service issues and make a record of their resolutions. Using email and instant messaging programs allows employees to gather information from one another that they need to complete their jobs. It also allows managers to delegate work tasks and follow up on projects.
Document Preparation
For creating spreadsheets, presentations, memos and other corporate documents, computers are essential in business. Managers need to have a basic understanding of common workplace productivity software such as Microsoft Office, but specialized industries such as advertising and marketing also require managers to work with more advanced programs like Adobe Photoshop and Illustrator to create visual materials for clients.
Use of IT
By using computer models to test various assumptions, managers can think more carefully about plans and expenditures associated with them, and they follow these ideas through to their logical conclusions. In this way, the technology drives management to better anticipate and prepare for future contingencies. Also, since individual unit budgets can be almost immediately consolidated into overall corporate financial plans, the process helps companies to coordinate diverse activities.
In addition, the new technology lets managers continuously update budgets based on actual performance. Organizations are no longer wed to documents that are immediately out-of-date. They can quickly change plans in midstream based on performance data. For instance, a telecommunications network can quickly notify manufacturing to beef up inventory as actual sales exceed the forecast. Similarly, the effect of cost overruns on end-of-month profits can be projected as soon as they occur.
Information technology turns the budget into a meaningful set of instructions that optimizes the company’s performance under changing conditions. One controller of a large U.S. Corporation claims that quickly consolidated on-line spreadsheets for each department and business unit have improved tenfold his company’s ability to coordinate action under various alternatives. Moreover, he needs less staff to meet budget deadlines.
Here are six examples of workplace issues that could be affecting employee productivity and how employers can solve them.
1. No Direction
It's reasonable to expect employees to have a certain level of autonomy, but if supervisors fail to give them any guidance whatsoever, staff members will find it difficult to manage their time and prioritize tasks appropriately.
Solution
Managers should clearly communicate expectations to their associates regularly. Scheduling recurring check-ins to discuss short-term and long-term goals can help employees stay on target and ahead of their to-do lists.
2. Inadequate Training
Companies won't hire candidates without the requisite skills for the position, but each business has their own unique standards and processes. Insufficient training leads to (sometimes costly) errors, errors lead to anxious employees and anxious employees make more errors--a vicious cycle.
Solution
Have an established system for onboarding and training new employees. Teaching them the ins and outs of the company can make them feel more confident and help prevent avoidable mistakes.
3. Poor Work-Life Balance
A standard workweek is 40 to 45 hours, but how the remaining 123 hours are spent is up to the employees. Sometimes working late or on the weekends is necessary, but when staff members must constantly sacrifice their personal time, they're more likely to get burned out and look for opportunities elsewhere.
Solution
Employees work to live, not the other way around. Businesses that offer technology solutions that automate menial tasks and streamline communication will have a happier, more motivated staff.
4. A Lack of Quiet Spaces
Even the most enthusiastic supporters of open floor plans need an occasional break from the noise. If there's nowhere in the office for employees to escape the commotion, they'll likely become distracted and lose focus on the tasks at hand.
Solution
Space may be limited, but it's in the best interest of managers to dedicate an area as a quiet retreat for employees to work without interruptions. Set up a process for room reservations so employees can claim quiet space when they need it most.
5. Unrealistic Expectations
Staring at a to-do list and knowing, without a doubt, it isn't humanly possible to complete every task by its assigned deadline is disheartening. How can an employee be motivated and productive when they're facing an insurmountable mountain of work?
Solution
Rarely will an employee proactively approach their manager when they're feeling overwhelmed for fear of appearing inefficient. Therefore, the onus is on supervisors to ensure their associates workloads are manageable and make adjustments when necessary. Set aside 15 minutes every month to meet with each team member and make sure they don't feel swamped.
6. Zero Feedback
It's discouraging for an employee to walk into their performance review and learn for the first time that their work isn't satisfactory. If a supervisor doesn't inform their staff of opportunities for improvement as they arise, the employee will assume their work is acceptable, even if it isn't. Conversely, staff members benefit from hearing about the areas in which they're excelling.
Solution
The ability to give constructive criticism is a must-have management skill. Supervisors shouldn't wait until reviews to provide feedback. Instead, they should acknowledge superior work and address performance issues promptly.
Just as the management team expects an employee to take responsibility for his or her actions, managers must acknowledge the part they play in workplace efficiency. While some employees might simply be bad hires, there are certainly plenty of team members who just need a supportive work environment and encouragement from their supervisors to be highly productive.
The proper performance of the management control function is critical to the success of an organization. After plans are set in place, management must execute a series of steps to ensure that the plans are carried out. The steps in the basic control process can be followed for almost any application, such as improving product quality, reducing waste, and increasing sales. The basic control process includes the following steps:
- Setting performance standards: Managers must translate plans into performance standards. These performance standards can be in the form of goals, such as revenue from sales over a period of time. The standards should be attainable, measurable, and clear.
- Measuring actual performance: If performance is not measured, it cannot be ascertained whether standards have been met.
- Comparing actual performance with standards or goals: Accept or reject the product or outcome.
- Analysing deviations: Managers must determine why standards were not met. This step also involves determining whether more control is necessary or if the standard should be changed.
- Taking corrective action: After the reasons for deviations have been determined, managers can then develop solutions for issues with meeting the standards and make changes to processes or behaviours.
Direct control- In this organization some employee's performance is poor. To find out the employees and then correct their performance and achieve the organization goals. This is called direct control. Factors influencing the direct control: The following factors influence the direct control.
- Uncertainty
- Lack of knowledge experience
- Lack of communication
- Lack of coordination.
Effective steps for direct control Success of direct control in an organization depends upon the following factors.
- Performance can be measured Effectively utilizes time
- Errors can be discovered in time
- Participation
- Coordination
Preventive Control- The principle of preventive control embraces the idea that most of the responsibility for negative deviations from standards can be fixed by applying fundamentals of management. It draws a sharp distinction between analysing performance reports, essential in any case, and determining whether managers act in accordance with established principles in carrying out their functions. The principle of preventive control, then, can be stated as follows: The higher the quality of managers and their subordinates, the less will be the need for direct controls. The extensive adoption of preventive control should await a wider understanding of managerial principles, functions, and techniques as well as management philosophy. While such an understanding is not achieved easily, it can be gained through university training, on-the-job experience, coaching by a knowledgeable superior, and constant self-education. Moreover, as progress is made in appraising managers as managers, preventive control can be expected to have more practical meaning and effectiveness.
The desirability of preventive control rests upon the following three assumptions:
1. Qualified managers make a minimum number of errors.
2. Managerial performance can be measured and management concepts, principles, and techniques are useful diagnostic standards in measuring managerial performance.
3. The application of management fundamentals can be evaluated. Controlling the quality of managers and thus minimizing errors has several advantages.
First, greater accuracy is achieved in assigning personal responsibility. The ongoing evaluation of managers is practically certain to uncover deficiencies and should provide a basis for specific training to eliminate them.
Second, preventive control should hasten corrective action and make it more effective. It encourages control by self-control. Knowing that errors will be uncovered in an evaluation, managers will themselves try to determine their responsibility and make voluntary corrections.
Third, preventive control may lighten the managerial burden now caused by direct controls. Preventing problems from occurring often requires less effort than correcting them after deviations have been detected.
Fourth, the psychological advantage of preventive control is impressive. Subordinate managers know what is expected of them, understand the nature of managing, and feel a close relationship between performance and measurement.
Managerial reporting is the collection of data that informs managers on how to efficiently run their department. A successful business implements managerial reports not only to track a department's key performance indicators (KPIs) but also to help guide its managers toward making accurate, data-driven decisions. These decisions can range from cutting costs to determining how many employees should be on staff.
Managerial reports can include a wide variety of data and should be tailored to the recipient. For example, while there may be some crossover information, a floor manager at a clothing store should receive different data than the marketing manager. A floor manager needs figures such as employee hours and sales numbers, while a marketing manager needs information regarding sign-ups through email and social media engagement.
What are the purposes of managerial reporting?
Managerial reports reflect the status and health of a business and remove the guesswork from implementing strategies. With hard data compiled specifically for certain departments, department managers can evaluate what strategies have worked and which need improvement. Managerial reporting is important in:
- Monitoring and tracking KPIs and other performance metrics
- Setting goals and milestones
- Determining the profitability of a product, service or client
- Deciding where money is best spent
- Pricing products or services accurately
- Hiring the correct type and amount of employees
- Creating cohesive communication regarding the data collected
Having access to this type of data allows managers to be able to shape the future of a business. They can confidently make decisions that affect the growth of their company.
References:
1. Robins S.P. And Couiter M., Management, Prentice Hall India, 10th ed.,2009.
2. Stoner JAF, Freeman RE and Gilbert DR, Management, 6th ed., Pearson Education,2004.
3. Tripathy PC & Reddy PN, Principles of Management, Tata McGraw Hill,1999.
