The Controlling Function in Management

1. Control is a primary goal-oriented function of

management in an organization.
2. It is a process of comparing the actual
performance with the set standards of the company
to ensure that activities are performed according to
the plans and if not then taking corrective action.
3. The management function of implementation of
strategies is termed as ‘Management Control’. It is
defined as “the process by which managers influence
the members of the organization to implement the
organization strategies”.
 The Controlling Function in Management
4. In a general sense, control systems are put in place
so that an organization is sure to be consistently
checking on its performance and goal alignment.
5. A management control system (MCS) is a
system which gathers and uses information to
evaluate the performance of different
organizational resources like human, physical,
financial and also the organization as a whole
in light of the organizational strategies pursued.
 The Controlling Function in Management
Building An Effective Management Control System
Understanding the value of an MCS is one thing, but putting it into
action is quite another challenge altogether.
 
The Basic Principles:
What we intend to do;
How we are going to do it;
Performance how this is managed;
Problems how these are identified and solved.
 
For areas of opportunity to be identified, informed decisions made
and put into action – information needs to flow through all levels of
your organization.
The right information should get to the right person at the right time.
 The Controlling Function in Management
1. Controlling is performed at the lower, middle
and upper levels of the management for
saving time cost and resources and
performing in according to the Plan &
Strategy.
2. One of the main benefits of having control
systems is communicating goals and
objectives to the business and ensuring that
managers in the business understand their
role in achieving them.
 Characteristics of Control
Following characteristics of control can be identified:
1. Control is a Managerial Process:
Management process comprises of five functions,
viz., planning, organizing, staffing, directing and
controlling. Thus, control is part of the process of
management.
2. Control is forward looking:
Whatever has happened has happened, and the
manager can take corrective action only of the
future operations. Past is relevant to suggest what
has gone wrong and how to correct the future.
 Characteristics of Control
3. Control exists at each level of Organization:
Anyone who is a manager, has to involve into control –
may be Chairman, Managing Director, CEO, Departmental
head, or first line manager. However, at every level the
control will differ – top management would be involved in
strategic control, middle management into tactical control
and lower level into operational control.
4. Control is a Continuous Process:
Controlling is not the last function of management but it is
a continuous process. Control is not a one-time activity, but
a continuous process. The process of setting the standards
needs constant analysis and revision depending upon
external forces, plans, and internal performance.
 Characteristics of Control
5. Control is closely linked with Planning:
Planning and controlling are closely linked. The two are rightly called
as ‘Siamese twins’ of management. “Every objective, every goal,
every policy, every procedure and every budget become standard
against which actual performance is compared.
Planning sets the ship’s course and controlling keeps it on course.
When the ship begins to veer off the course, the navigator notices it
and recommends a new heading designed to return the ship to its
proper course. Once control process is over its findings are integrated
into planning to prescribe new standards for control.
6. Purpose of Controlling is Goal Oriented and hence Positive:
Control is there because without it the business may go off the track.
The controlling has positive purpose both for the organization (to
make things happen) and individuals (to give up a part of their
independence for the attainment of organizational goals).
 Importance of Control
1. Guides the Management in Achieving Pre-determined Goals:
The continuous flow of information about projects keeps the long
range of planning on the right track. It helps in taking corrective
actions in future if the performance is not up to the mark.
2. Ensures Effective Use of Scarce and Valuable Resources:
The control system helps in improving organizational efficiency.
Various control devices act as motivators to managers. The
performance of every person is regularly monitored and any
deficiency if present is corrected at the earliest.
Controls put psychological pressure on persons in the organization.
On the other hand control also enables management to decide
whether employees are doing right things.
 Importance of Control
3. Facilitates Coordination:
Control helps in coordination of activities through unity of action.
Every manager will try to coordinate the activities of his
subordinates in order to achieve departmental goals.
Similarly the chief executive also coordinates the functioning of
various departments. The control acts as a check on the performance
and proper results are achieved only when activities are coordinated.
4. Leads to Delegation and Decentralization of Authority:
A decision about follow-up action is also facilitated. Control makes
delegation easier/better. Decentralization of authority is necessary in
big enterprises. The management cannot delegate authority without
ensuring proper control.
The targets or goals of various departments are used as a control technique.
Various control techniques like budgeting, cost control; pre action approvals etc.
allow decentralization without losing control over activities.
 Importance of Control
5. Spares Top Management to Concentrate on Policy
Making:
For control processes management’s attention is not
required every now and then. The management by
exception enables top management to concentrate on
policy formulation.
 Why do people Oppose Control?
Many people are averse to the concept of control for the
following reasons:
(i) New, more “organic” forms of organizations (self-
organizing organizations, self- managed teams, network
organizations, etc.) allow organizations to be more
responsive and adaptable in today’s rapidly changing
world. These forms also cultivate empowerment among employees,
much more than the hierarchical, rigidly structured organizations of
the past.
(ii) Many people assert that as the nature of organizations
has changed so must the nature of management control.
Some people go so far as to claim that management
shouldn’t exercise any form of control whatsoever.
 Why do people Oppose Control?
They claim that management should exist to support employee’s
efforts to be fully productive members of organizations and
communities – therefore, any form of control is completely
counterproductive to management and employees.
(iii) Some people even react strongly against the phrase
“management control”. The word itself has a negative connotation,
e.g., it can sound dominating, coercive and heavy-handed. It seems
that writers of management literature now prefer use of the term
“coordinating” rather than “controlling”.
(iv) People also oppose controls as they are thought of decreasing
autonomy, stifling creativity, threatening security, and perpetuating
oppression. This may lead to change in expertise and power
structure, and social structure in the organisation
 Types of Controlling Process
Controls can be numerous in kind. These may be
classified on the basis of (a) timing, (b) designing
systems, (c) management levels, and (d)
Responsibility
On the basis of timing:
Control can focus on events before, during, or
after a process. For example, a local automobile
dealer can focus on activities before, during, or
after sales of new cars. Such controls may be
respectively called as Preventive, Detective, and
Corrective.
 The Controlling Process
The control process consists of the following
basic elements and steps:
1. Establishing goals and standards
2. Measuring actual performance against goals
and standards
3. Compare Performance with the Standards:
4. Take Corrective Action and Reinforcement
of Successes:
 The Controlling Process
1. Establish the Standards:
Within an organization’s overall strategic plan, managers define goals
for organizational departments in specific, precise, operational terms
that include standards of performance to compare with organizational
activities. However, for some of the activities the standards cannot be
specific and precise.
Standards, against which actual performance will be compared, may
be derived from past experience, statistical methods and
benchmarking (based upon best industry practices). As far as possible,
the standards are developed bilaterally rather than top management
deciding unilaterally, keeping in view the organization’s goals.
Standards may be tangible (clear, concrete, specific, and generally
measurable) – numerical standards, monetary, physical, and time
standards; and intangible (relating to human characteristics) –
desirable attitudes, high morale, ethics, and cooperation.
 The Controlling Process
2. Measure Actual Performance:
Most organizations prepare formal reports of performance
measurements both quantitative and qualitative (where
quantification is not possible) that the managers review regularly.
These measurements should be related to the standards set in the
first step of the control process.
For example, if sales growth is a target, the organization should
have a means of gathering and reporting sales data. Data can be
collected through personal observation (through management by
walking around the place where things are happening), statistical
reports (made possible by computers), oral reporting (through
conferencing, one-to-one meeting, or telephone calls), written
reporting (comprehensive and concise, accounting information –
normally a combination of all. To be of use, the information flow
should be regular and timely.
 The Controlling Process
3. Compare Performance with the Standards:
This step compares actual activities to performance standards. When
managers read computer reports or walk through their plants, they
identify whether actual performance meets, exceeds, or falls short of
standards.
Typically, performance reports simplify such comparison by placing
the performance standards for the reporting period alongside the
actual performance for the same period and by computing the
variance—that is, the difference between each actual amount and the
associated standard.
The manager must know of the standard permitted variation (both
positive and negative). Management by exception is most appropriate
and practical to keep insignificant deviations away. Timetable for the
comparison depends upon many factors including importance and
complexity attached with importance and complexity.
 The Controlling Process
4. Take Corrective Action and Reinforcement of Successes:
When performance deviates from standards, managers must
determine what changes, if any, are necessary and how to apply
them. In the productivity and quality-centered environment,
workers and managers are often empowered to evaluate their
own work. After the evaluator determines the cause or causes
of deviation, he or she can take the fourth step— corrective
action.
The corrective action may be to maintain status quo
(reinforcing successes), correcting the deviation, or changing
standards. The most effective course may be prescribed by
policies or may be best left up to employees’ judgment and
initiative. The corrective action may be immediate or basic
(modifying the standards themselves).
 The Controlling Process
Process of Controlling
Control process involves the following steps as
shown in the figure:
The Controlling Process
 Types of Controlling Process
On this basis the control may be:
(i) Feed forward Control
(ii) Concurrent Control
(iii) Feedback Control
1. Feed forward Control:
The objective of feed forward control or preliminary control is to
anticipate the likely problems and to exercise control even before
the activity has started or problem has occurred or been reported.
It is future directed.
This kind of control is very popular in airlines. They go in for
preventive maintenance activities to detect and prevent structural
damage, which may result in disaster. These controls are evident in
the selection and hiring of new employees. It helps in taking action
beforehand.
 Types of Controlling Process
In case of feedback control, one relies on historical data, which will
come after the activity has been performed. This means information
is late and the rectification is not possible. One can make correction
only for future activities.
That means whatever wrong has been done is done, and it cannot be
undone. Though, future-directed control is largely disregarded in
practice, because managers have been excessively dependent on
accounting and statistical data for the purpose of control. In the
absence of any means of looking forward, reference to history is
considered better than no reference at all.
However, the concept of feed forwarding has been applied now and
then. One common way managers have practised it is through
careful and repeated forecasts using the latest available information,
comparing what is desired with the forecasts, and introducing
program changes so that forecasts can be made more promising.
 Types of Controlling Process
(ii) Concurrent Control
Concurrent control monitors ongoing employee activity to ensure
consistency with quality standards takes place while an activity is
on or in progress. It involves the regulation of ongoing activities
that are part of transformation process to ensure that they conform
to organizational standards.
The technique of direct supervision is the best-known form of
concurrent control. Concurrent control is designed to ensure that
employees’ activities produce the correct results and to correct the
problems, if any, before they become costly.
In case of computer typing, if the spelling is wrong or construction
is incorrect, the programme immediately alerts the user. Many
manufacturing operations include devices that measure whether the
items being produced meet quality standards.
 Types of Controlling Process
Since concurrent control involves regulating
ongoing tasks, it requires a complete
understanding of the specific tasks involved and
their relationship to the desired and product.
Concurrent control sometimes is called steering,
screening or yes-no control, because it often
involves checkpoints at which decisions are made
about whether to continue progress, take corrective
action, or stop work altogether on products or
services.
 Types of Controlling Process
(iii) Feedback Control:
The control takes place after the job is over. Corrective action is
taken after analysing variances with the planned standards at the
end of the activity. It is also known as ‘post action control’, because
feedback control is exercised after the event has taken place.
Such control is used when feed forward or concurrent is not
possible or very costly; or when exact processes involved in
performing a work is difficult to specify in advance.
The twin advantages of feedback control are that meaningful
information is received with regard to planning efforts, and
feedback control enhances employee motivation.
Types of Controlling Process
 The Controlling Function in Management
Feedback-based control systems have the
advantage of being simple. The system measures a
variable and uses the state of the variable to make
decisions.
Feed forward systems, on the other hand, can
anticipate changes in the variable. They work
proactively rather than reactively
Diff. between Feedback and Feed Forward Controls
Point of Feed Forward Control
Feedback control system
Difference system
Systems in which corrective
Systems in which corrective
action is taken after
Definition action is taken before
disturbances affect the disturbances affect the output
output
Necessary Measurable Disturbance
Not required
requirement or noise
Corrective action taken
Corrective Corrective action taken after the
before the actual disturbance
action disturbance occurs on the output.
occurs on the output.
Variables are adjusted
Control
Variables are adjusted based on prior
Variable
depending on errors. knowledge and
adjustment
predictions.
 Types of Controlling Process
A. On the basis of designing Control Systems:
Three approaches may be followed while designing
control systems, viz., Market Control, Bureaucratic
Control, and Clan Control. However, most organisations
do not depend only on just one of them.
1. Market Control:
Control is based upon market mechanisms of competitive
activities in terms of price and market share. Different
divisions are converted into profit centres and their
performance is evaluated by segmental top line (turnover),
bottom line (profit) and the market share.
Using market control will mean that the managers in
future will allocate resources or create departments or
other activities in line with the market forces.
 Types of Controlling Process
2. Bureaucratic Control:
Bureaucratic control focuses on authority, rule and regulations,
procedures and policies. Most of the public sector units in India go in
for bureaucratic control.
If they do not go by the rulebook, the legislative committees and the
ministries under whom they work will reprimand them. In a hospital
no medicine can be used unless the prescription is there and it is
recorded in the issue register, even if the patient may die in between.
3. Clan Control:
The control systems are designed in a way that give way to shared
vision, shared values, norms, traditions and beliefs, etc., part of the
organisational culture.
It is not based upon hierarchical mechanisms, but work-related and
performance measures. This kind of control is most suitable for the
organisations which use team style of work groups and where
technology changes very fast.
 Types of Controlling Process
B. On the basis of Levels:
People at different level have different planning
responsibilities, so do they undertake controlling. On
the basis of levels controls, can be categorised as
Operational, Structural, Tactical, and Strategic.
1. Operational Control:
Its focus remains upon the processes used by the
organisation for transforming the inputs (resources)
into outputs (products/services). Operational controls
are used at the lower management. It is exercised
almost every day. Quality control, financial controls
are part of operational controls.
 Types of Controlling Process
2. Structural Control:
Are the different elements of organisation structure serving their
intended aims? Is there overstaffing? Is the ratio of staff to line
increasing? Necessary action is to be undertaken.
Two important forms of structural control can be bureaucratic
control and clan control, about which we have already talked.
Structural control is exercised by top and middle management.
3. Tactical Control:
Since tactical control deals with the departmental objectives, the
controls are largely exercised by middle management levels.
4. Strategic Control:
Strategic controls are early warning systems. Strategic control is
the process to determine whether the effectiveness of a corporate,
business and functional strategies are successful in helping
organisations to meet its goals. Strategic controls are exercised by
top level management.
 Types of Controlling Process
At which level of the organization Control should be done?
 Types of Controlling Process
C. On the basis of Responsibility:
Who has the responsibility of controlling? The
responsibility may rest with the person executing
the things or with the supervisor or manager. This
way control may be internal and external.
Internal control permits highly motivated people
to exercise self-discipline. External control means
that the thread of control is in the hands of
supervisor or manager and control is exercised
through formal systems.
 Requirements of Effective Control System:
A control system is not an automatic phenomenon but deliberately
created. Though different organizations may design their control
systems according to their unique and special characteristics or
conditions, yet in designing a good and effective control system
the following basic requirements must be kept in view:
1. Focus on Objectives and Needs:
The effective control system should emphasize on attainment of
organizational objectives. It should function in harmony with the
needs of the enterprise. For example, the personnel department
may use feed forward control for recruiting a new employee, and
concurrent control for training.
At the shop level, control has to be easy, but more sophisticated
and broad ranging controls may be developed for higher level
managers. Thus, controls should be tailored to plans and positions.
 Requirements of Effective Control System:
2. Immediate Warning and Timely Action:
Rapid reporting of variations is at the core of control. An ideal
control system could detect, not create bottlenecks and report
significant deviation as promptly as possible so that necessary
corrective action may be taken well in time. This needs an efficient
system of appraisal and timely flow of information.
3. Indicative, Suggestive as well as corrective:
Controls should not only be able to point to the deviations, but
they should also suggest corrective action that is supposed to
check the recurrence of variations or problems in future.
Control is justified only if indicated or experienced deviations
from plans are corrected through appropriate planning, organizing,
staffing and directing. Control should also lead to making valuable
forecasts to the managers so that they become aware of the
problems likely to confront them in the future.
 Requirements of Effective Control System:
4. Understandable, Objective, and Economical:
Controls should be simple and easy to understand, standards of
performance are quantified to appear unbiased, and specific tools and
techniques should be comprehensive, understandable, and economical
for the managers.
They must know all the details and critical points in the control device
as well as its usefulness. If developed and complex statistical and
mathematical techniques are adopted, then proper training has to be
imparted to managers.
Standards should be determined based on facts and participation.
Effective control systems must answer questions such as, “How much
does it cost?” “What will it save?” or “What are the returns on the
investment?”
The benefits of controls should outweigh the costs. Expensive and
elaborate control systems will not suit, for example to small enterprise.
 Requirements of Effective Control System:
5. Focus on Functions and Factors:
Control should emphasise the functions, such as production, marketing,
finance, human resources, etc and focus on four factors – quality, quantity,
timely use and costs. Not one, but multiple controls should be adopted.
6. Strategic Points Control:
Control should be selective and concentrate on key result areas of the
company. Every detail or thing cannot and is not to be controlled in order
to save time, cost and effort.
Certain strategic, critical or vital points must be identified along with the
expectations at those points where failures cannot be tolerated and
appropriate control devices should be designed and imposed at those
stages.
Controls are applied where failure cannot be tolerated or where costs
cannot exceed a certain amount. The critical points include all the areas of
an organization’s operations that directly affect the success of its key
operations.
 Requirements of Effective Control System:
7. Flexibility:
Control must not become ends in themselves. It must be
environment friendly and be able to make modifications or
revisions necessitated by the rapidly changing and complex
business environment. Flexibility in control system is
generally achieved by the use of alternative plans or flexible
budgets.
8. Attention to Human Factor:
Excess control causes corruption. It should not arouse negative
reactions but positive feelings among people through focus on
work, not on people. The aim of control should be to create
self-control and creativity among members through enmeshing
it in the organisational culture. Employee involvement in the
design of controls can increase acceptance.
 Requirements of Effective Control System:
9. Suitability:
Controls have to be consistent with the
organization structure, where the responsibility
for action lies, position, competence, and needs
of the individuals who have to interpret the
control measures and exercise control. The
higher the quality of managers and their
subordinates, the less will be the need for
indirect controls.
 Control Techniques:

Many techniques have been developed to control

the activities in management. The list is very
long, and it is difficult to describe them all.
Some of the important techniques are:
1. Financial Statements:
Income statement (telling about expenses,
segmental incomes, overall income and
expenses, and the net profit/loss), and Balance
Sheet (shows the net worth at a single point of
time and the extent to which the debt or equity
finance the assets)
 Control Techniques:
2. Financial Audits:
Financial audits, either internal or external are conducted to ensure that the
financial management is done in line with the generally accepted policies,
procedures, laws, and ethical guidelines. Audits may be internal (by
Organisation’s own staff), external (statutory audit by chartered
accountants), and management audit (by experts).
3. Ratio Analysis:
Ratio analysis monitors liquidity, profitability, debt, and activity related
aspects.
4. Budgetary Controls:
Budgetary control is the process of constructing budgets, comparing actual
performance with the budget one and revising budgets or activities in the
light of changed conditions.
Budgetary control is as such not related only to finance area, but all
functional areas do take help of budgetary control. Budgets help not only
in planning but also help to keep a tab on overall spending.
 Control Techniques:
Budgeting may be top-down (managers prepare the budget
and ask subordinates to use); bottom-up (figures come
from lower levels and adjusted at upper levels); zero-
based (justifying allocation of funds on the basis of
activities or goals); and flexible budgeting (varying
standards and varying allocations).
5. Break-even Analysis:
It is a tool of profit planning and deals with cost-volume-
profit relationships.
6. Accounting:
Accounting includes responsibility accounting, cost
accounting, standard cost approach, direct costing, and
marginal costing.
 Control Techniques:
Marketing Control:
In the field of marketing, to see that customer gets right product
at the right price at the right place and through right
communication, the control is exercised through the following:
Market Research:
It is to assess customers’ needs, expectations and the delivery;
and the competitive scenario.
Test Marketing:
To assess consumer acceptance of a new product, a small-scale
marketing is done. HUL uses Chennai for most of its test
marketing.
Marketing Statistics:
Marketing managers control through marketing ratios and other
statistics.
 Control Techniques:
Human resource control:
Human resource control is required to have a
check on the quality of new personnel and also
to monitor performances of existing employees
so as to determine firm’s overall effectiveness.
Goal setting, instituting policies and procedures
to guide them are to help them. Common
controls include performance appraisals,
disciplinary programs, observations, and
development assessments.
 Control Techniques:
Information Control:
All organizations have confidential and sensitive information to be kept
secret. How to control access to computer databases is very important. This
has become a key contemporary issue in control. Organizations keep a
watch on employee’s computer usage in general and internet in particular.
Production Control:
To ensure quality production in right quantity at right time economically
production controls are required. Two of the important techniques include:
Inventory control (ABC Analysis, Economic Order Quantity, Just-in time
inventory control), and quality control (through inspection, statistical
quality control).
Project Control:
Network analysis is most suitable for the projects which are not routine in
minimizing cost and completing project well in time. Network analysis
makes use of two techniques – Programme Evaluation and Review
Technique (PERT), and Critical Path Method (CPM).
 Relationship between planning and controlling
Planning and controlling are two separate functions
of management, yet they are closely related.
The scope of activities if both are overlapping to each
other. Without the basis of planning, controlling
activities becomes baseless and without controlling,
planning becomes a meaningless exercise.
In absence of controlling, no purpose can be served
by. Therefore, planning and controlling reinforce each
other. According to Billy Goetz, " Relationship
between the two can be summarized in the following
points:
 Relationship between planning and controlling
1. Planning preceeds controlling and controlling succeeds
planning.
2. Planning and controlling are inseperable functions of
management.
3. Activities are put on rails by planning and they are kept at
right place through controlling.
4. The process of planning and controlling works on Systems
Approach which is as follows :
Planning    →    Results    →    Corrective Action
5. Planning and controlling are integral parts of an organization
as both are important for smooth running of an enterprise.
6. Planning and controlling reinforce each other. Each drives
the other function of management.
 The Controlling Function in Management
Every manager needs to monitor and evaluate the
activities of his subordinates. It helps in taking
corrective actions by the manager in the given
timeline to avoid contingency or company’s loss.
Controlling and planning are interrelated for
controlling gives an important input into the next
planning cycle. Controlling is a backwards-
looking function which brings the management
cycle back to the planning function. Planning is a
forward-looking process as it deals with the
forecasts about the future conditions.
 Relationship between planning and controlling
In the present dynamic environment which affects
the organization, the strong relationship
between the two is very critical and important.
In the present day environment, it is quite likely
that planning fails due to some unforeseen
events.
There controlling comes to the rescue. Once
controlling is done effectively, it give us
stimulus to make better plans.
Therefore, planning and controlling are
inseparable functions of a business enterprise.