INTRODUCTION TO MANAGEMENT

CHAPTER SEVEN

CONTROLLING

7.1 Meaning and definition of controlling

Definition: controlling: is the process through which standards for the performance of people and
processes are set, communication, and applied

Standard: is any established rule of comparison used to measure capacity, quality, content, value, cost,
quality, or performance.

In another term management control is a systematic effort to set performance standards with planning
objectives, to design information feed back system, to compare actual performance with these
predetermined standard to determine whether there are any deviations and to measure their
significance to take any action required to assure that all organizational resources are being used in the
most effective and efficient way possible in achieving organizational objectives.

7.2 The Controlling Process

Control process is a four step process that consists of establishing performance standard, measuring
performance, comparing measured performance to established standards and taking corrective action.

But is some book the controlling process is indicated as it has only three steps as: establishing standards,
measure performance against standards and taking necessary action to correct deviations from
standards. And for the sake of convenience we will take the four steps of the controlling process.

Step 1. Establishing performance standards

Step 2. Measuring performance

Step 3. Comparing measured performance to establish standards and

Step 4. Taking corrective action

The above four steps for controlling process are applicable to any person’s items, or processes being
controlled.

7.2.1. Establishing Performance Standards

A standard quantitative or qualitative measuring device designed to help monitor the performance of
people, capital, goods, or processes. The exact nature of the standards to be used depends on what is
being monitored. Standard can be either managerial or technical.

I. Managerial standards: includes such things as reports, regulations, and performance

evaluations. It should focus only on the key areas and the kind of performance required to reach
specific goals, should be simple to understand, reviewed for appropriateness on a regular basic,

JJU FBE Page 1

INTRODUCTION TO MANAGEMENT

and kept to a minimum. Managerial standards state who, when, and why, of the business. Input
from those who will use them is desirable when the managerial standards are being developed.
An example of managerial standard is the sales manager’s requirement of a monthly report
from all sales persons; the report shows monthly progress on the key areas being monitored.
With this report, a manager is able “control” the efforts of the sales force. An analysis of all the
report will show the sales manager who is performing as planned, when the performance is
taking place ( on schedule or not on schedule) , and why the result are being achieved or not
achieved.
II. Technical standard: specify what and how of the business. They apply to production methods
and processes, to materials, machinery, safety equipment, parts and supplies.
They can come from internal and external sources:
A. Internal source: example: a technical standard supplied by production department.
B. External source: example: safety standards dedicated by government regulation or
manufacturer’s specifications for their equipment.

7.2.2 Measuring Performance

After standard are established, managers must measure actual performance to determine
variation from standard. The mechanisms for this purpose can be extremely sensitive, particularly in
high – tech environment. Now days, computer are becoming increasing important as tools for measuring
performance. They can monitor people and operations they occur and they can store data to be used
later.

Computerized system of all kind gives managers the up- to- the minute information they need to
make sound decision.

7.2.3 Comparing measured performance to established standard

The next step in the controlling process is to compare actual performance to standards set for
the performance. If deviations from the standard exist, the evaluator must decide if they are significant-
if they require corrective action. If so, the evaluator must determine what is causing the variance.

7.4.2. Taking corrective action

When an employee determine the cause, or causes, of a significant deviation from a standard
he/she must take corrective action to avoid repetition of the problem or defect.

7.3 Types of controls

There are three basic type of controls: prevention, feed, and feedback. Each focuses on a
different point of a process- before the process begins, during the process, or after it ceases. Most
experts agree that controls are most economic and effective when applied selectively at the crucial
points most likely to determine the success or failure of an operation or activity. A restaurant must focus
on controlling the quality of its ingredients, their proportion, and their presentation. All these control
points are crucial to the restaurant safe and effective operation.

JJU FBE Page 2

INTRODUCTION TO MANAGEMENT

7.3.1. Prevention Controls

Prevention controls focus on establishing conditions that will make it difficult or impossible for
deviations from norms to occur. This type of control focus on operations before they begin. Prevention
controls are intended to prevent defects and deviations from standards.

Example: locks on doors and bars on windows, safety equipment and guide lines, employee-
selection procedures, employee- training programs, and budgets.

When a manufacturer works closely with its suppliers to ensure that suppliers deliver goods and
services that meet standard, the manufacturer is implementing a preventive control.

7.3.2. Feed Forward Controls

Feed forward controls are designed to detect and anticipate deviations from standards at
various points through out the process. They are in- process controls. Feed forward controls are often
called steering control, b/c they allow people to act on a process or activity wile proceeding not after it
is completed. Corrections and adjustments can be made as the need arise. There are two kinds of feed
forward control devices: diagnostic and therapeutic.

 Diagnostic controls: attempt to determine what deviation is taking or has taken place.
They tell you what is wrong- not why.
 Therapeutic controls: sense the and the why, and then they take corrective action.
Example: giving training by coaching.

7.3.3. Feed back controls

Controls that focus on the results of operations are called feedback controls. They after- the-
fact or post performance controls. The information derived is not used for corrective action on a project
b/c it has been completed. The feedback control provides for manager to examine and apply to future
activities that are similar to the present one. The purpose is to help prevent mistakes in the future.

Example: At the end of the year a manager should carefully review the analysis of the budget
control report.

7.4. Control Characteristics

In the final analysis, for a control system to be effective, it requires the participation of the
various company departments. The support of senior management, and the allocation of sufficient
resources. The best controls are those formed around the input from the various people and
departments that will be affected by them.

1. Acceptance by the members of the organization: doing the right ting and doing things right
both require people. So acceptance by the organization’s members is crucial to a control’s
effectiveness and efficiency.

JJU FBE Page 3

INTRODUCTION TO MANAGEMENT

2. Focus on critical control points: Critical control points are all the operations that directly affect
the survival of an organization and success of its most essential activities. Critical control points
exist in many areas of business activity- production, sales, customer service, finance, etc
3. Economic feasibility: the cost of the control or a control system must be weighed against the
benefits it can return.
4. Accuracy: information must be accurate if it is to be useful. Accuracy relates particularly to feed
forward controls used in diagnosing deviation.
For example : when a project manager report that production is two weeks behind schedule b/c
of poor team attendance, he/she boss begins an investigation. It turns out that, thought several
people have been absent, they were not key to production. The delay was actually caused by
the failure to properly plan the flow of work and set meaning full deadlines.
5. Time lines: timely information like accurate information must be given to those in charge if
meaning full responses are to follow.
6. Ease of understanding / comprehensibility: complexity often means lack of understanding. The
simpler the control, the easier it will be to understand and apply.

7.5 Making controls effective

Controls are effective as long as they:

a) Do what they are intended for- prevent deviations, diagnose deviations, treat
deviations, or provide information for future planning.
b) Do not create organizational problems that result in costs greater than the benefits of
the control device

So we can make controls effective by:

1. Updating the controls: instance changes may be planned or occurred in operations, so

managers should begin to examine how adequate the present controls will be for the
changes that are planned or already exist. Control need to be current.
2. Monitor the organizational impact: a second critical area for managers to monitor in
making controls effective is the degree of organizational impact, both on people and on
systems that controls have. It should be expected that controls systems will affect
employees and organizational operation, but extreme change should be avoid.
In addition, controls should be realistic in terms of the standard of performance and the
number of standard set. Standards should be attainable, not arbitrary. And managers
must not over control by setting more and more controls.

7.6 Summary of Major Principles or Guides of controlling

1. Principle of the purpose of control: the task of control is to ensure that plans succeed by detecting
deviations from plans and furnishing a basis for taking action to correct potential or actual undesired
deviations.

JJU FBE Page 4

INTRODUCTION TO MANAGEMENT

2. Principle of future- directed control: b/c of time lags in the total system of control the more a control
system is based on feed forward rather than simple feed back of information the managers have the
opportunity to perceive undesirable deviations from plans before they occur and to take action in time
to prevent them.

3. Principle of control responsibility: the primary responsibility for the exercise of control rests in the
manager charged with the performance of the particular plans involved.

4. Principle of efficiency of controls: control techniques and approaches are efficient if they detect and
illuminate the nature and causes of deviations from plans with minimum of costs or other unsought
consequences.

5. Principle of preventive control: the higher the quality of managers in a managerial system, the less
will be the need for the direct controls.

6. Principle of reflections of plans: the more that plans are clear, complete and integrated and the more
that controls are designed to reflect such plans, the more effectively controls will serve the needs of
managers.

7. Principle of organization suitability: the more that an organizational structure is clear, complete and
integrated and the more that controls are designed to reflect the place in the organization structure
where responsibility for action lies, the more they will facilitate correction of deviations from plans.

8. Principle of individuality of controls: the more that control techniques and information are
understandable to individual managers who must utilize them, the more they will actually be used in the
more they will result in effective control.

9. Principle of standard: effective control requires objective, accurate, and suitable standards.

10. Principle of critical- point control: effective control requires special attention to those factor critical
to evaluating performance against plans.

11. The exception principle: the more that managers concentrate control efforts on significant
exceptions, the more efficient will be the result of their control.

12. Principle of flexibility of control: if controls are to remain effective despite failure or unforeseen
changes of plans, flexibility is required in their design

13. Principle of action: control is justified only if indicated or experienced deviations from plans are
corrected through appropriate planning, organizing, staffing, and leading.

JJU FBE Page 5