What is controlling?

It’s the process of monitoring, comparing, and correcting work performance.

Effective controls ensure that activities are completed in ways that lead to the attainment of
goals.Whether controls are effective, then, is determined by how well they help employees and
managers achieve their goals.

Why is control so important? Explain the nature and

importance of control.
There’s no assurance that activities are going as planned and that the goals employees and
managers are working toward are, in fact, being attained.

Control is important, therefore, because it’s the only way that managers know whether

organizational goals are being met and if not, the reasons why.

The value of the control function can be seen in three specific areas:

1. planning,
2. empowering employees,
3. and protecting the workplace.

1.Goals, which provide specific direction to employees and managers, as the foundation of

planning.

However, just stating goals or having employees accept goals doesn’t guarantee that the

necessary actions to accomplish those goals have been taken.

The effective manager follows up to ensure that what employees are supposed to do is, in

fact, being done and goals are being achieved.

2.The second reason controlling is important is because of employee empowerment.

Many managers are reluctant to empower their employees because they fear something will go
wrong for which they would be held responsible.But an effective control system can provide
information and feedback on employee performance and minimize the chance of potential
problems.
3.The final reason that managers control is to protect the organization and its assets. Today’s

environment brings heightened threats from natural disasters, financial scandals, workplace

violence, supply chain disruptions, security breaches, and even possible terrorist attacks.

Managers must protect organizational assets in the event that any of these things should

happen.Comprehensive controls and backup plans will help assure minimal work disruptions.

(if work standard that had been set during planning are met , the organization is said to
have good controlling and thus controlling is important when it comes to planning)

Again for employee empowerment ,controlling is important too.if control system is effective
frequent information exchange and feedback canbe achieved and thus possibility of
potential mistakes from employees and reduces to a great extend.In this way empowerment
and controlling both are existing at the same time .

Effective controlling system consist of backup plans to protect the company thus there will
be minimal negative impact on the company.( disastar can not be fully eliminated from
within company )if proper backup is maintained thus a company is said to have effective
controlling.

The Control Process or Describe the three steps in the control process
The control process is a three-step process of measuring actual performance, comparing actual
performance against a standard, and taking managerial action to correct deviations or to address
inadequate standards. The control process assumes that performance standards already exist, and
they do. They’re the specific goals created during the planning process.
Step 1. Measuring Actual Performance

To determine what actual performance is, a manager must first get information about it.

Thus, the first step in control is measuring.

HOW WE MEASURE:

Four approaches used by managers to measure and report actual performance are:

1. personal observations
2. statistical reports,
3. oral reports
4. written reports.

Exhibit 18-3 summarizes the advantages and drawbacks of each approach. Most managers

use a combination of these approaches.

 WHAT WE MEASURE.
 What is measured is probably more critical to the control process than how it’s
measured.
 Why? Because selecting the wrong criteria can create serious problems.
Step 2. Comparing Actual Performance Against the Standard

The comparing step determines the variation between actual performance and the standard.

Although some variation in performance can be expected in all activities, it’s critical to
determine an acceptable range of variation (see Exhibit 18-4).

 Chris Tanner is a sales manager for Green Earth Gardening Supply, a distributor of
specialty plants and seeds in the Pacific Northwest.

 Chris prepares a report during the first week of each month that describes sales for the
previous month, classified by product line.

 Exhibit 18-5 displays both the sales goals (standard) and actual sales figures for the
month of June.

 After looking at the numbers, should Chris be concerned? Sales were a bit higher than
originally targeted, but does that mean there were no significant deviations?
 That depends on what Chris thinks is significant; that is, outside the acceptable range of
variation. Even though overall performance was generally quite favorable, some product lines
need closer scrutiny.

For instance, if sales of heirloom seeds, flowering bulbs, and annual flowers continue to be
over what was expected, Chris might need to order more product from nurseries to meet
customer demand. Because sales of vegetable plants were 15 percent below goal, Chris may
need to run a special on them.As this example shows, both overvariance and undervariance
may require managerial attention, which is the third step in the control process.

Step 3. Taking Managerial Action

Managers can choose among three possible courses of action: do nothing, correct the actual

performance, or revise the standards. Because “do nothing” is self-explanatory, let’s look at
the other two.

CORRECT ACTUAL PERFORMANCE: One decision that a manager must make is

whether to take immediate corrective action, which corrects problems at once to get
performance back on track, or to use basic corrective action, which looks at how and why
performance deviated before correcting the source of deviation.It’s not unusual for managers
to rationalize that they don’t have time to find the source of a problem (basic corrective
action) and continue to perpetually “put out fires” with immediate corrective action.Effective
managers analyze deviations and if the benefits justify it, take the time to pinpoint and correct
the causes of variance.

REVISE THE STANDARD: It’s possible that the variance was a result of an unrealistic
standard—too low or too high a goal.In that situation, the standard needs the corrective action,
not the performance. If performance consistently exceeds the goal, then a manager should look at
whether the goal is too easy and needs to be raised.

On the other hand, managers must be cautious about revising a standard downward. It’s natural
to blame the goal when an employee or a team falls short. For instance, students who get a low
score on a test often attack the grade cutoff standards as too high.Rather than accept the fact that
their performance was inadequate, they will argue that the standards are unreasonable.

The point is that when performance isn’t up to par, don’t immediately blame the goal or
standard. If you believe the standard is realistic, fair, and achievable, tell employees that you
expect future work to improve, and then take the necessary corrective action to help make
happen.

Types of Control
Feedforward/Concurrent/Feedback Controls:

FEEDFORWARD CONTROL:

The most desirable type of control—feedforward control—prevents problems because it

takes place before the actual activity.

The key to feedforward controls is taking managerial action before a problem occurs.

That way, problems can be prevented rather than having to correct them after any
damage(poor-quality products, lost customers, lost revenue, etc.) has already been done.
However, these controls require timely and accurate information that isn’t always easy to get.

 Thus, managers frequently end up using the other two types of control

CONCURRENT CONTROL:

Concurrent control, as its name implies, takes place while

a work activity is in progress.

 The best-known form of concurrent control is direct supervision. Another term for it is
management by walking around, which is when a manager is in the work area
interacting directly with employees. All managers can benefit from using concurrent
control because they can correct problems before they become too costly.

FEEDBACK CONTROL:

In feedback control, the control takes place after the activity is done. This is the major
problem with this type of control. By the time a manager has the information, the problems
have already occurred, leading to waste or damage.
 Feedback controls do have two advantages.

 First, feedback gives managers meaningful information on how effective their

planning efforts were.Feedback that shows little variance between standard and
actual performance indicates that the planning was generally on target. If the
deviation is significant, a manager can use that information to formulate new plans.

 Second, feedback can enhance motivation. People want to know how well they’re
doing and feedback provides that information.

Financial Controls:
 Every business wants to earn a profit. To achieve this goal, managers need financial
controls. For instance, they might analyze quarterly income statements for excessive
expenses. They might also calculate financial ratios to ensure that sufficient cash is
available to pay ongoing expenses, that debt levels haven’t become too high, or that
assets are being used productively.

 Managers might use traditional financial measures such as ratio analysis and budget
analysis.

 Liquidity ratios measure an organization’s ability to meet its current debt obligations.

 Activity ratios assess how efficiently a company is using its assets.

 These ratios are calculated using selected information from the organization’s two
primary financial statements (the balance sheet and the income statement), which
are then expressed as a percentage or ratio.

 Budgets are planning and controlling tools: When a budget is formulated, it’s a
planning tool because it indicates which work activities are important and what and
how much resources should be allocated to those activities.

 But budgets are also used for controlling because they provide managers with
quantitative standards against which to measure and compare resource consumption.

 If deviations are significant enough to require action, the manager examines what has
happened and tries to uncover why.

 With this information, necessary action can be taken. For example, if you use a
personal budget for monitoring and controlling your monthly expenses, you might find
that one month your miscellaneous expenses were higher than you had budgeted for.
 At that point, you might cut back spending in another area or work extra hours to get
more income.

Information Controls:

In measuring actual performance, managers need information about what is happening

within their area of responsibility and about the standards in order to be able to
compare actual performance with the standard.

 Finally, they rely on information to help them develop appropriate courses of action.

 Information is important! Most of the information tools that managers use come from
the organization’s management information system.

 A management information system (MIS) is a system used to provide managers

with needed information on a regular basis.

 CONTROLLING INFORMATION. It seems that every week, there’s another news story
about information security breaches.

 Because information is critically important to everything an organization does,

managers must have comprehensive and secure controls in place to protect that
information.

 Exercise: Describe tools used to control organizational performance.