Chapter Seven

Controlling
7.1 Meaning and Need for Control
7.1.1 Meaning of controlling
• 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.
7.1.2 Importance of Controlling

a. Adapting 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.
b. Limiting the magnification of errors
• 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.
c. To prevent failure
• 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.
7.2 The Controlling Process
a. 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; quality improvement, cost
reduction

• 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
b. Establishing Standards
• Standards are units of measurements
established
• They spell out specific criteria for evaluating
performance and related employee behaviors
• 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.
• There are three types of standards:

i. Performance standards deal with quality, quantity,

cost and time.
ii. 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
iii. 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
c. Measuring Actual Performance
• For a given standard, a manager must decide both how to measure
actual performance and how often to do so.

d. Comparing Performance against Standards

• This is a step where comparison is made between the “what is” and the
“what should be.”
• The purpose of comparing actual performance against intended
performance is, of course, to determine if corrective action is needed

e. 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
7.3 Types of Controlling

a. 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.
• its aim is to prevent problems before they arise

• 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.”
b. 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.
• Decision must be made whether to continue as before or follow an
alternative course, or take corrective action, or stop 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, mid term exams,
tests, quizzes
c. 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 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
7.4 Cybernetic and Non-cybernetic Controls
• 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.
7.5 Characteristics of Effective Control System

• Future–Oriented: 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 consequences.

• Reliability and Validity: Controls not only must be dependable

(reliable/trustable), 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: 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.
o 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.

o 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.

o 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.
7.6 Over-controls versus Under-control

• Since excessive amount of control can make the occurrence of

dysfunctional aspects of control systems more likely, managers need to
avoid over control. Over-control 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 in the other
direction, which results in a situation of under-control. Under-control 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.