CHAPTER SEVEN

THE CONTROLLIGN FUNCTION

7.1 MEANING
 Controlling is the process through which managers assure that
actual activities conform to planned activities.
 Controlling is the process of regulating organizational activities
so that actual performance conforms to expected organizational
standards and goals.
 It is checking current performance against predetermined
standards contained in the plans.

IMPORTANCE OF CONTROLLING
All the good planning efforts and brilliant ideas in the world do little
good if a firm has no system of managing control. Control, therefore, is
an essential part of effective organizational management. Specifically,
control helps an organization to:
Adapt to changing conditions: in today’s dynamic and
unpredictable business environment, control plays a crucial role than
ever. A properly designed control system allows managers to
effectively anticipate, monitor, and respond to often constantly
changing conditions.
Limit the magnification of errors: generally, a small error or
mistake does not adversely affect organizational operation. However, a
small error/mistake left uncorrected (perhaps one undetected as a
result of a lack of control) may be magnified with the progress of time,
eventually harming the whole organization.
Determine whether people and the various parts of an
organization are on target, achieving the progress toward their
objectives that they planned to achieve. Planning chooses goals and
maps out the necessary strategy and tactics. Controlling attempts to
prevent failure (and to promote success) by providing the means to
monitor the performances of individuals, departments, divisions, and
the entire organization.
It builds most directly on the planning function by providing the means
for monitoring and making adjustment in performance so that plan can
be realized. Still, controlling also supports the organizing and leading
functions by helping ensure those resources are channeled toward
organizational objectives. A combination of well-planned objectives,
strong organization, capable direction and motivation has little
probability of success unless there exists an adequate system of
control. Planning, organizing, staffing and directing must be monitored
to maintain their effectiveness and efficiency.

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7.2 THE CONTROLLING PROCESS
Although control systems must be tailored to specific situations, such
systems generally follow the same basic process. The controlling
process has five major steps.
1. Determine Areas to Control
The first major step in the control process is determining the major
areas to control, i.e. identify critical control points. Critical control
points include all the areas of an organization's operations that directly
affect the success of its key operations, areas where failures can not
be tolerated, and costs in time and money are greatest. Managers
must make choices because it is expensive and virtually impossible to
control every aspect of an organization’s activities. In addition,
employees often resent having their every move controlled. Managers
usually base their major controls on the organizational goals and
objectives developed during the planning process.
2. Establishing Standards
Standards are units of measurements established by management to
serve as benchmarks for comparing performance levels. They spell out
specific criteria for evaluating performance and related employee
behaviors. The exact nature of the standards to be used depends on
what is being monitored.
Standards, if possible, must be
- Specific and quantitative as much as possible.
- Flexible to adopt the changes that may occur over the future.
- Challenging and should aim for improvement over past
performance.
Generally, standards serve three major purposes related to employee
behavior. For one thing, standards enable employees to understand
what is expected and how their work will be evaluated. This helps
employees do an effective job. For another, standards provide a basis
for detecting job difficulties related to personal limitations of
organization members. Such limitation can be based on a lack of
ability, training, or experience or on any other job-related deficiency
that prevents an individual from performing properly on the job. Timely
identification of deficiencies makes it possible to take corrective action
before the difficulties become serious and possibly irresolvable. Finally,
standards help reduce the potential negative effects of goal
incongruence. Goal incongruence is a condition in which there are
major incompatibilities between goals of an organization member and
those of the organization. Such incompatibilities can occur for a variety
of reasons, such as lack of support for organizational objectives (e.g.
an employee views the job as temporary and attempts to do the

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minimum), and often result in behaviors that are incompatible with
reaching organizational goals. One common manifestation of goal
incongruence is employee theft, which includes wasting an
organization's resources, as well as taking equipment, materials and
money.
There are three types of standards: performance standards, corollary
standards and standards of conduct.
Performance standards deal with quality, quantity, cost and time.
Corollary standards support a given level of performance. These
include minimum personnel requirements and adequate physical
resources, such as when a company knows it will need at least five
hundred workers and well-equipped factory to produce a certain
number of terminals.
Standards of conduct are moral and ethical criteria that shape the
behavioral climate of the work place. They originate from law, custom
and religious beliefs.
Examples of standards: Producing 800,000 units per year, increasing
market share by 20%, cutting costs by 15%, answering all customer
complaints within 24 hours.
3. Measuring Actual Performance
Once standards are determined, the next step is measuring
performance. For a given standard, a manager must decide both how
to1 measure actual performance and how often2 to do so.
4. Comparing Performance against Standards
This is a step where comparison is made between the “what is” and
the “what should be.” Managers often base their comparisons on
information provided in reports (oral and written) that summarize
planned versus actual results, and by working around work areas and
observing conditions, a practice sometimes referred to as Management
by Wondering Around (MBWA). The purpose of comparing actual
performance against intended performance is, of course, to determine
if corrective action is needed.
Consequently, the comparison result may show that the actual
performance exceeds (positive deviation), meets (zero deviation), or
falls below (negative deviation) expectations (standards). Accordingly,
if performance fulfills expectations (meets standards), no control
problem exists. However, if performance exceeds or fails to meet
expectations, further investigation is required to determine the cause.
1
1 The means of measuring performance will depend on the standards that have been set.
2 The period of measurement generally depends upon the importance of the goal to the
organization, how quickly the situation is likely to change, and the difficulty and
expense of rectifying a problem if one were to occur.

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Performance that exceeds expectations may mean either superior
talent or inappropriately set standards. Performance that fails to meet
expectation may likely mean inappropriately set standards, poor talent
or improper use of resources. The key question in both cases will be,
“How much variation from standards is acceptable before action is
taken?” The answer to this question will lead to the development of
ranges defining upper and lower limits. And performance outside of
acceptable range serves as a red flag calling for taking the necessary
corrective action.
The managerial principle of exception states that control is enhanced
by concentrating on exceptions, or significant deviations from the
expected result or standard. Therefore, in comparing performance with
standards managers need to direct attention to the exception, and by
doing so, managers can save time and effort.

5. Taking Corrective Action (on time)

The corrective action to be taken depends up on the type of deviation
that exists. When performance exactly meets (deviation of zero) or
exceeds (positive deviation) the standards set, usually no corrective
action is necessary. However, managers do need to consider
recognizing the positive performance. The type of recognition given
can vary from a verbal “well done” for a routine achievement to more
substantial rewards, such as bonuses, training opportunities, or pay
raises, for major achievements or consistently good work. Yet,
favorable deviations should be examined to understand such success.
When standards are not meet, managers must carefully assess the
reason why and take corrective action. During this evaluation,
managers often personally check the standards and the related
performance measures to determine whether these are still realistic.
Sometimes, managers may conclude that the standards are, in fact,
inappropriate-usually because of changing conditions-and that
corrective action to meet standards is therefore not desirable. More
often, though, corrective actions are needed to reach standards. The
standards may have been based on historical data which may be
inappropriate to current conditions. In such instances, the past is a
poor basis on which to predict the future. Similarly, the use of
comparative standards may prove to be problematic since no two
organizations are alike.
In taking corrective actions, managers must carefully avoid two types
of errors: taking corrective action when no action is warranted and
failing to take corrective action when it is clearly needed.

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7.3 TYPES OF CONTROLLING
In addition to determining the areas they want to control, managers
need to consider the types of controls that they wish to use. Based on
the time period in which control is applied in relation to the operation
being performed, or the stage of productive cycle in which controlling
is carried out, there are three basic types of controls: preventive,
concurrent, and feedback. Thus, an organization’s performance can be
monitored and controlled at three points: before, during, or after an
activity is completed.
1. Preventive/Steering/ Preliminary / Input Control
Preventive control focuses on the regulation of inputs to ensure that
they meet the standards necessary for the transformation process. It
attempts to monitor the quality and/or quantity of resources (financial,
physical, human and information) before they become part of the
system. Preventive control is future oriented and takes place before
the operation begins. It focuses on prevention in order to preclude
later serious difficulties in the production process - its aim is to prevent
problems before they arise. Nevertheless, since preventive control
can’t cover every possible contingency, other type of controls may also
be needed.
E.g. Entrance exams for colleges and universities, policies, rules,
procedures, proper selection and training of employees, inspecting raw
materials, the implementation of induction and orientation programs-
save trial and error cost, frustration of employee. Preventive control
comes from an old saying “A gram of prevention is worth a kg of cure.”
2. Concurrent/Screening/ Yes-No/Checking Control
Concurrent control involves the regulation of ongoing activities that are
part of the transformational process to ensure that they conform to
organizational standards. It is designed to detect and anticipate
deviations from standards at various points throughout the processes,
i.e. the controlling is carried out during the actual transformation
process. The emphasis here is on identifying difficulties in the
productive process that could result in faulty outputs.
Because concurrent controls involve the monitoring of ongoing
activities, they are the only controls that can cope with contingencies
(unexpected events) that cannot be anticipated. When contingencies
arise involving activities in a transformation process, a yes/no decision
is required. That is, decision must be made whether to continue as
before or follow an alternative course, or take corrective action, or stop

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 work altogether. In this way, concurrent controls allow adjustments to
be made while work is being done.
E.g. On the job training, on the spot observation, exams, tests, quizzes

3. Feedback/Post-Action/ Output Control

As the name indicates post action control focuses on the end results of
the process. It is regulation exercised after the product (goods or
services) has been completed in order to ensure that the final output
meets organizational goals and standards. The information derived is
not used for corrective action on a project because it has been
completed.
The feedback control provides information for a manager to examine
and apply to future activities that are similar to the present one. That
is why it is called “historical results guide future actions.” The purpose
of feedback control is to help prevent mistakes in the future and also it
can be used as a base for reward; and in cases where other
(preliminary & concurrent) controls are too costly.
E.g. Performance evaluation, financial statement analysis, final exams
Fig 6.2 Major Control Types by Timing

Controls Controls Control

INPUTS TRANSFORMATION OUTPUTS

Controls Controls Controls

Preventive Control Concurrent Feedback Control

Cybernetic and Non-cybernetic Controls

A basic control process can be either cybernetic or non-cybernetic,
depending on the degree to which human discretion is part of the
system. A cybernetic control system is a self-regulating control system
that, once it is put into operation, can automatically monitor the
situation and take corrective action when necessary. E.g. computerized
inventory system, a heating system controlled by a thermostat
A non-cybernetic control system is a control system that relies on
human discretion as a basic part of its process.

7.4 CHARACTERISTICS OF AN EFFECTIVE CONTROL SYSTEM

Controls may have many different characteristics, but some of the
most important are:
Future–Oriented

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To be effective, control systems need to help regulate future events,
rather than fix blame for past events. A well designed control system
focuses on letting managers know how work is progressing toward unit
objectives, pinpointing unforeseen opportunities that might be
developed – all aids to future action
Multidimensional
In most cases, control systems need to be multidimensional in order to
capture the major relevant performance factors, such as, quality,
quantity, overhead, etc.

Economically Realistic/ Cost Effective

The cost of implementing a control system should be less, or at most,
equal to the benefits derived from the control system. The benefits
received from controls should off-set their expenses.
Accurate
Since control systems provide the basis for future actions, accuracy is
vital. Control data that are inaccurate may be worse than no control at
all, since managers may make poor decisions on the basis of faulty
data they believe to be accurate. An inaccurate data from a control
system can cause the organization to take action that will either fail to
correct a problem or create a problem when none existent. Evaluating
the accuracy of the information they receive is one of the most
important control tasks that managers face.
Acceptable to Organization Members
Control systems operate best when they are accepted by the
organization members who are affected by them. Otherwise, members
may take actions to override and undermine controls; i.e. controls will
not work unless people want them to. Too many, arbitrary, too few and
too rigid controls often cause the satisfaction and motivation of
employees to decline.
Timely
Control systems are designed to provide data on the state of a given
production cycle or process as of a specific time. In order for managers
and employees to respond promptly to irregularities, control systems
must provide relevant information soon enough to allow corrective
action before there are serious repercussions or consequences.

Reliability and Validity

Controls not only must be dependable (reliable), but also must
measure what they intend to measure (must be valid). When controls
can’t be relied on and are invalid, they are unlikely to be trusted and
can lead to very bad consequences.

Monitor able

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Another desirable characteristic of control system is that they can be
monitored to ensure that they are performing as expected. One way of
checking a control system is to deliberately insert an imperfection,
such as a defective part, and then observe how long it takes the
system to detect and report it to the correct individual.
Organizationally Realistic
The control system has to be compatible with organizational realities.
All standards for performance must be realistic. Status differences
between individuals have to be recognized. Individuals have to be able
to see a relationship between performance levels they are asked to
achieve and rewards that will follow.
Flexible
Just as organizations must be flexible to respond rapidly to changing
environments, control systems need to be flexible enough to meet new
or revised requirements. Accordingly, they should be designed so that
they can be changed quickly to measure and report new information
and track new endeavors.
Focus on Critical Control Points
Critical control points include all the areas of an organization’s
operations that directly affect the success of its key operations. The
focus should be on those areas where failures cannot be tolerated and
where that costs in time and money are the greatest.
Easy to Understand
Complexity often means lack of understanding. The simpler the
control, the easier it will be to understand and apply. Controls often
become complex because more than one person is responsible for
creating, implementing or interpreting them.
Emphasis on Exception
A good system of control should work on the exception principle, so
that only important deviations are brought to the attention of
management. In other words management does not have to bother
with activities that are running smoothly. This will ensure that
managerial attention is directed towards error and not towards
conformity. This would eliminate unnecessary and uneconomic
supervision, marginally beneficial reporting and waste of managerial
time.

Overcontrol versus Undercontrol

Since excessive amount of control can make the occurrence of
dysfunctional aspects of control systems more likely, managers need
to avoid over control. Overcontrol is the limiting of individual job
autonomy to such a point that it seriously inhibits effective job
performance. At the same time, managers need to avoid going too far

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in the other direction, which results in a situation of undercontrol.
Undercontrol is the granting of autonomy to an employee to such a
point that the organization loses its ability to direct the individual's
efforts toward achieving organizational goals.
Determining the appropriate amount of control that should exist in
organizations is a significant management decision. With the
appropriate amount of control, a manager can be reasonably certain
that no major unpleasant surprises will occur and that employees will
achieve organizational goals.

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